BASE PROSPECTUS

ALPHA BANK ROMANIA S.A.

€1 billion Global Covered Bond Programme

Under this EUR1 billion global covered bond programme (the Programme), Alpha Bank Romania S.A. (the Issuer) may from time to time issue
bonds (the Covered Bonds) denominated in any currency agreed between the Issuer and the relevant Dealer(s) (as defined below). Covered Bonds
may be issued in bearer or registered form.
Application has been made to the Commission de Surveillance du Secteur Financier (the CSSF) in its capacity as a competent authority under the
Luxembourg Act dated 10 July 2005 on prospectuses for securities (the Prospectus Act 2005) to approve this document as a base prospectus (the
Base Prospectus). The CSSF assumes no responsibility for the economic and financial soundness of the transactions contemplated by this Base
Prospectus or the quality or solvency of the Issuer in accordance with Article 7(7) of the Prospectus Act 2005. Application has also been made to the
Luxembourg Stock Exchange for Covered Bonds issued under the Programme to be admitted to trading on the Luxembourg Stock Exchange’s
regulated market (the Luxembourg Stock Exchange) and to be listed on the Official List of the Luxembourg Stock Exchange (the Official List).
This document comprises a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC as amended (which includes the amendments
made by Directive 2010/73/EU to the extent that such amendments have been implemented in a relevant Member State of the European Economic
Area) (the Prospectus Directive) but is not a base prospectus for the purposes of Section 12(a)(2) or any other provision of or rule under the
Securities Act.
References in this Base Prospectus to Covered Bonds being listed and all related references shall mean that such Covered Bonds have been admitted
to trading on the Luxembourg Stock Exchange’s regulated market and are intended to be listed on the Official List of the Luxembourg Stock
Exchange’s regulated market. The Luxembourg Stock Exchange’s regulated market is a regulated market for the purposes of the Markets in Financial
Instruments Directive 2014/65/EU (as amended, MiFID II).
In addition, in accordance with Article 25(2) of the Romanian Covered Bond Law, the Issuer must apply for admission of the Covered Bonds to
trading on the spot regulated market operated by Bursa de Valori Bucuresti S.A. (in English, the Bucharest Stock Exchange) to the extent that the
technical conditions for trading and settling covered bonds denominated in a non-leu currency are in place at the time of issuance of such covered
bonds. To this end, application will be made to the Bucharest Stock Exchange for the admission of Covered Bonds issued under the Programme to
trading on the regulated market of the Bucharest Stock Exchange. There is no assurance that, when made, such application for admission of the
Covered Bonds to trading on the regulated market of the Bucharest Stock Exchange will be accepted. The regulated market of the Bucharest Stock
Exchange is a regulated market for the purposes of MiFID II.
Approval from the National Bank of Romania (NBR or alternatively the National Bank of Romania) pursuant to the provisions of, inter alia, Article
4(1) of the Romanian Covered Bond Law was obtained and communicated to the Issuer pursuant to the letter No. G/34 issued by the NBR on 26
February 2019, pursuant to which and in accordance with, inter alia, Article 7(2) of the Romanian Covered Bond Regulation, the Issuer may issue
covered bonds during the period of 15 months following the date of such approval up to an amount of EUR 200,000,000. The Issuer will apply for
further approvals from the NBR if the foregoing time period lapses or the approved amount is reached.
The Programme also permits Covered Bonds to be issued on the basis that they will be admitted to listing, trading and/or quotation by any competent
authority, stock exchange and/or quotation system or to be admitted to listing, trading and/or quotation by such other or further competent authorities,
stock exchanges and/or quotation systems as may be agreed between the Issuer, the Covered Bondholders Representative (as defined below), the
Arranger (as defined below) and the relevant Dealer(s). The Issuer may also issue unlisted Covered Bonds and/or Covered Bonds not admitted to
trading on any regulated or unregulated market.
The maximum aggregate nominal amount of all Covered Bonds from time to time outstanding under the Programme will not exceed EUR 1 billion
(or its equivalent in other currencies calculated as described in the Programme Agreement), subject to increase as described herein. The payment of
all amounts due in respect of the Covered Bonds will constitute direct and unconditional obligations of the Issuer, in addition to having recourse to
assets comprising the Cover Pool (as defined herein). References in this Base Prospectus to the Cover Pool shall mean the pool comprising (to the
extent they meet the eligibility requirements under the Romanian Covered Bond Legislation, the Servicing and Cash Management Agreement and this
Base Prospectus (as updated or supplemented from time to time), Cover Pool Assets (each defined below), over which assets the Issuer has created a
movable mortgage pursuant to the Movable Mortgage over the Cover Pool and Collection Accounts Agreement (defined below).
The Covered Bonds may be issued on a continuing basis to one or more of the Dealers specified under “General Description of the Programme” and
any additional Dealer appointed under the Programme from time to time, which appointment may be for a specific issue or on an ongoing basis (each
a Dealer and together the Dealers). References in this Base Prospectus to the relevant Dealer shall, in the case of an issue of Covered Bonds being
(or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe such Covered Bonds.

Notice of the aggregate nominal amount of Covered Bonds, interest (if any) payable in respect of Covered Bonds, the issue price of Covered Bonds
and certain other information which is applicable to each Tranche (as defined under “Terms and Conditions of the Covered Bonds”) of Covered
Bonds will be set out in a final terms document (the Final Terms) which will be filed with the CSSF and the Bucharest Stock Exchange. Copies of
the Final Terms in relation to Covered Bonds to be listed on the Luxembourg Stock Exchange and the Bucharest Stock Exchange will also be
published on the website of the Luxembourg Stock Exchange (www.bourse.lu) and of the Bucharest Stock Exchange (www.bvb.ro), respectively. The
Issuer has been rated Ba2 (long-term local and foreign currency deposits) and Ba1(cr)/Not Prime(cr) (counterparty risk assessment) by Moody’s
Investors Service (Moody’s). Moody’s is established in the European Union (the EU) and is registered under the Regulation (EC) No. 1060/2009 (as
amended) (the CRA Regulation). As such, Moody’s is included in the list of credit rating agencies published by the European Securities and Markets
Authority (ESMA) on its website (at http://www.esma.europa.eu/page/List-registered-and-certified-CRAs) in accordance with the CRA Regulation.
Series of Covered Bonds issued under the Programme may be rated by Moody’s or unrated. Where a Tranche of Covered Bonds is rated (other than
unsolicited ratings), the initial rating will be disclosed in the Final Terms for such Tranche and will not necessarily be the same as the rating assigned
to the Covered Bonds of other Series. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension,
reduction or withdrawal at any time by the assigning rating agency.
Amounts payable on Floating Rate Covered Bonds will be calculated by reference to one of LIBOR, EURIBOR and ROBOR as specified in the
relevant Final Terms. As at the date of this Base Prospectus, the administrator of the European Money Markets Institute and the NBR are not included
in ESMA’s register of administrators under Article 36 of the Regulation (EU) No. 2016/1011 (the Benchmarks Regulation). As far as the Issuer is
aware, the transitional provisions in Article 51 of the Benchmarks Regulation apply, such that European Money Markets Institute and the NBR are
not currently required to obtain authorisation/registration (or, if located outside the EU, recognition, endorsement or equivalence).
Investing in Covered Bonds issued under the Programme involves certain risks. The principal risk factors that may affect the abilities of the Issuer to
fulfil its obligations in respect of the Covered Bonds are discussed under “Risk Factors”. Please review and consider the risk factors beginning on
page 10 of this Base Prospectus carefully before you purchase any Covered Bonds.

Arranger and Dealer

Barclays

(and/or such other Dealers to be selected from time to time in accordance with the terms of the
Programme Agreement)

The date of this Base Prospectus is 8 April 2019

2
The Issuer accepts responsibility for the information contained in this Base Prospectus and the Final Terms
for each Tranche of Covered Bonds issued under the Programme and declares that, having taken all
reasonable care to ensure that such is the case, the information contained in this Base Prospectus is, to the
best of its knowledge, in accordance with the facts and contains no omission likely to affect its import.

Copies of each Final Terms (in the case of Covered Bonds to be admitted to the Luxembourg Stock
Exchange and the Bucharest Stock Exchange) will be available from the registered office of the Issuer and
from the specified office of the Paying Agents for the time being in London or, in Luxembourg, at the office
of the Luxembourg Listing Agent or in Bucharest, at the office of the Bucharest Listing Agent.

Each Series (as defined herein) of Covered Bonds may be issued without the prior consent of the holders of
any outstanding Covered Bonds (the Covered Bondholders) subject to the terms and conditions set out
herein under “Terms and Conditions of the Covered Bonds” (the Conditions) as completed by the Final
Terms. This Base Prospectus must be read and construed together with any supplements hereto and with any
information incorporated by reference herein and, in relation to any Series of Covered Bonds which is the
subject of Final Terms, must be read and construed together with the relevant Final Terms. All Covered
Bonds will rank pari passu and pro rata without any preference or priority among themselves, irrespective
of their Series, except for the timing of repayment of principal, and the timing and amount of interest
payable.

The Issuer confirmed to the Dealer named under “General Description of the Programme” that this Base
Prospectus contains all information which is (in the context of the Programme, the issue, offering and sale of
the Covered Bonds) material; that such information is true and accurate in all material respects and is not
misleading in any material respect; that any opinions, predictions or intentions expressed herein are honestly
held or made and are not misleading in any material respect; that this Base Prospectus does not omit to state
any material fact necessary to make such information, opinions, predictions or intentions (in the context of
the Programme, the issue and the offering and sale of the Covered Bonds) not misleading in any material
respect; and that all proper inquiries have been made to verify the foregoing.

No person has been authorised to give any information or to make any representation not contained in or not
consistent with this Base Prospectus or any other document entered into in relation to the Programme or any
information supplied by the Issuer or such other information as is in the public domain and, if given or made,
such information or representation should not be relied upon as having been authorised by the Issuer or the
Arranger or Dealer.

Neither the Arranger, the Dealer nor any of their respective affiliates have authorised the whole or any part
of this Base Prospectus and none of them makes any representation or warranty or accepts any responsibility
as to the accuracy or completeness of the information contained in this Base Prospectus. In particular, neither
the Arranger, the Dealer nor any of their respective affiliates have independently verified the information
contained herein and neither the Arranger, the Dealer nor any of their respective affiliates accepts any
liability in relation to the information contained or incorporated by reference in this Base Prospectus or any
other information provided by the Issuer in connection with the Programme. Neither the delivery of this Base
Prospectus or any Final Terms nor the offering, sale or delivery of any Covered Bond shall, in any
circumstances, create any implication that the information contained in this Base Prospectus is true at any
time subsequent to the date hereof or the date upon which this Base Prospectus has been most recently
supplemented or that there has been no adverse change, or any event reasonably likely to involve any
adverse change, in the prospects or financial or trading position of the Issuer since the date thereof or, if
later, the date upon which this Base Prospectus has been most recently supplemented, or that any other
information supplied in connection with the Programme is correct at any time subsequent to the date on
which it is supplied or, if different, the date indicated in the document containing the same. The Arranger
and the Dealer expressly do not undertake to review the financial condition or affairs of the Issuer during the
life of the Programme or to advise any investor in the Covered Bonds issued under the Programme of any
information coming to their attention.

3
This Base Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Covered
Bonds in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such
jurisdiction. The distribution of this Base Prospectus and any Final Terms and the offering, sale and delivery
of the Covered Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this
Base Prospectus or any Final Terms comes are required by the Issuer, and the Dealer, to inform themselves
about and to observe any such restrictions. The Issuer, the Arranger and the Dealer do not represent that this
Base Prospectus may be lawfully distributed, or that any Covered Bonds may be lawfully offered, in
compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an
exemption available thereunder, or assume any responsibility for facilitating any such distribution or
offering. In particular, no action has been taken by the Arranger, the Dealer or the Issuer which is intended to
permit a public offering of any Covered Bonds or distribution of the Base Prospectus in any jurisdiction
where action for that purpose is required. For a description of certain restrictions on offers, sales and
deliveries of Covered Bonds and on the distribution of this Base Prospectus or any Final Terms and other
offering material relating to the Covered Bonds, see “Subscription and Sale”. In particular, Covered Bonds
have not been and will not be registered under the United States Securities Act of 1933 (as amended) (the
Securities Act) and are subject to U.S. tax law requirements. Subject to certain exceptions, Covered Bonds
may not be offered, sold or delivered within the United States or to U.S. persons. Covered Bonds may be
offered and sold outside the United States in reliance on Regulation S under the Securities Act (Regulation
S).

IMPORTANT – EEA RETAIL INVESTORS – If the Final Terms in respect of any Covered Bonds
include a legend entitled “Prohibition of Sales to EEA Retail Investors”, the Covered Bonds are not intended
to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made
available to any retail investor in the European Economic Area (EEA). For these purposes, a retail investor
means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II;
or (ii) a customer within the meaning of Directive 2002/92/EC (as amended or superseded, the Insurance
Mediation Directive), where that customer would not qualify as a professional client as defined in point
(10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC (as
amended or superseded, the Prospectus Directive). Consequently no key information document required by
Regulation (EU) No 1286/2014 (as amended, the PRIIPs Regulation) for offering or selling the Covered
Bonds or otherwise making them available to retail investors in the EEA has been prepared, and therefore
offering or selling the Covered Bonds or otherwise making them available to any retail investor in the EEA
may be unlawful under the PRIIPs Regulation.

MIFID II PRODUCT GOVERNANCE/TARGET MARKET – The Final Terms in respect of any

Covered Bonds will include a legend entitled “MiFID II Product Governance” which will outline the target
market assessment in respect of the Covered Bonds and which channels for distribution of the Covered
Bonds are appropriate. Any person subsequently offering, selling or recommending the Covered Bonds (a
distributor) should take into consideration the target market assessment; however, a distributor subject to
MiFID II is responsible for undertaking its own target market assessment in respect of the Covered Bonds
(by either adopting or refining the target market assessment) and determining appropriate distribution
channels.

A determination will be made in relation to each issue about whether, for the purpose of the MiFID Product
Governance rules under EU Delegated Directive 2017/593 (the MiFID Product Governance Rules), any
Dealer subscribing for any Covered Bonds is a manufacturer in respect of such Covered Bonds, but
otherwise neither the Arranger nor the Dealer nor any of their respective affiliates will be a manufacturer for
the purpose of the MiFID Product Governance Rules.

Neither this Base Prospectus nor any Final Terms constitutes an offer or an invitation to subscribe for or
purchase any Covered Bonds and should not be considered as a recommendation by the Issuer, the Arranger,
the Dealer or any of them that any recipient of this Base Prospectus or any Final Terms should subscribe for
or purchase any Covered Bonds. Each recipient of this Base Prospectus or any Final Terms shall be taken to
have made its own investigation and appraisal of the condition (financial or otherwise) of the Issuer.

4
None of the Dealer, the Arranger or the Issuer makes any representation to any investor in the Covered
Bonds regarding the legality of its investment under any applicable laws. Any investor in the Covered Bonds
should be able to bear the economic risk of an investment in the Covered Bonds for an indefinite period of
time.

The maximum aggregate principal amount of Covered Bonds outstanding at any one time under the
Programme will not exceed EUR 1 billion (and for this purpose, the principal amount outstanding of any
Covered Bonds denominated in another currency shall be converted into Euro at the date of the agreement to
issue such Covered Bonds (calculated in accordance with the provisions of the Programme Agreement)). The
maximum aggregate principal amount of Covered Bonds which may be outstanding at any one time under
the Programme may be increased from time to time, subject to compliance with the relevant provisions of
the Programme Agreement (as defined under “Subscription and Sale”).

In this Base Prospectus, unless otherwise specified, references to a Member State are references to a
Member State of the European Economic Area, references to €, EUR or Euro means the single, unified,
lawful currency of those member states of the European Union participating in the Economic and Monetary
Union, references to leu or RON are to the lawful currency of Romania and references to USD and U.S.
Dollars are to lawful currency of the United States of America.

In this Base Prospectus, all references to the State are to the Romanian State and all references to the Group
are to Alpha Bank A.E. together with its subsidiaries.

This Base Prospectus has been prepared on the basis that any offer of Covered Bonds in any Member State
of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant
Member State) must be made pursuant to an exemption under the Prospectus Directive, as implemented in
that Relevant Member State, from the requirement to publish a prospectus for offers of Covered Bonds.
Accordingly any person making or intending to make an offer to the public of Covered Bonds in that
Relevant Member State, may only do so in circumstances in which no obligation arises for the Issuer, the
Arranger or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or
supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such
offer to the public. Neither the Issuer, the Arranger, nor any Dealer has authorised, nor do they authorise, the
making of any offer of Covered Bonds in circumstances in which an obligation arises for the Issuer, the
Arranger or any Dealer to publish or supplement a prospectus for such offer to the public.

Following the publication of this Base Prospectus, a supplement to this Base Prospectus may be prepared by
the Issuer and approved by the CSSF in accordance with Article 16 of the Prospectus Directive. Statements
contained in any such supplement (or contained in any document incorporated by reference therein) shall, to
the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede
statements contained in this Base Prospectus. Any statement so modified or superseded shall not, except as
so modified or superseded, constitute a part of this Base Prospectus.

The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to
information included in this Base Prospectus which is capable of affecting the assessment of any Covered
Bonds, prepare a supplement to this Base Prospectus or publish a new Base Prospectus for use in connection
with any subsequent issue of Covered Bonds.

STABILISATION

In connection with the issue of any Tranche of Covered Bonds, the Dealer or Dealers (if any) named as
the stabilisation manager(s) (or persons acting on behalf of any stabilisation manager(s)) in the
applicable Final Terms may over-allot Covered Bonds or effect transactions with a view to supporting
the market price of the Covered Bonds at a level higher than that which might otherwise prevail.
However, stabilisation may not necessarily occur. Any stabilisation action may begin on or after the
date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Covered
Bonds is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days

5
after the issue date of the relevant Tranche of Covered Bonds and 60 days after the date of the
allotment of the relevant Tranche of covered bonds. Any stabilisation or over-allotment must be
conducted by the relevant stabilisation manager(s) (or person(s) acting on behalf of any stabilisation
manager(s)) in accordance with all applicable laws and rules.

Forward-Looking Statements

Certain information contained in this Base Prospectus, including any information as to the Issuer’s strategy,
market position, plans or future financial or operating performance, constitutes “forward-looking
statements”. All statements, other than statements of historical fact, are forward-looking statements. These
forward-looking statements may be identified by the use of forward-looking terminology, including the
terms “believe”, “expect”, “anticipate”, “contemplate”, “target”, “plan”, “intend”, “continue”, “budget”,
“project”, “aim”, “estimate”, “may”, “will”, “could”, “should”, “seeks”, “predicts”, “schedule” or, in each
case, their negative or other variations or comparable terminology, or by discussions of strategy, plan,
objectives, goals, future events or intentions. These forward-looking statements include all matters that are
not historical facts. They appear in a number of places throughout this document and include statements
regarding the intentions, beliefs or current expectations of the Issuer concerning, among other things, the
results of operations, financial condition, liquidity, prospects, growth and strategies of the Group and the
industry in which it operates. In particular, the statements under the headings “Risk Factors”, "The Issuer
and the Group", "Business of the Issuer" and "Risk Management" regarding the Issuer’s strategy and other
future events or prospects are forward-looking statements.

Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while
considered reasonable by the Issuer, are inherently subject to significant business, economic and competitive
uncertainties and contingencies.

Investors are cautioned that forward-looking statements are not guarantees of future performance. Forward-
looking statements may, and often do, differ materially from actual results. Any forward-looking statements
in this Base Prospectus speak only as of the date they are made, reflect the view of the Issuer as of the date
they are made with respect to future events and are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Issuer’s operations, results of operations and strategy. Investors
should specifically consider the factors identified in this Base Prospectus that could cause actual results to
differ before making an investment decision. All of the forward-looking statements made in this Base
Prospectus are qualified by these cautionary statements.

PRESENTATION OF FINANCIAL INFORMATION

The financial information in this document has been prepared in accordance with the International Financial
Reporting Standards issued by the International Accounting Standards Board, as adopted by the European
Union (IFRS). The significant IFRS accounting policies applied in the financial information of the Issuer are
applied consistently in the financial information in this document.

Financial information

Unless otherwise indicated, the financial information in this Base Prospectus consists of the historical
financial information of the Issuer. The Issuer’s financial year runs from 1 January to 31 December.

Included herein are the following financial statements:

 audited separate financial statements of the Issuer as at and for the year ended 31 December 2016,
audited financial statements of the Issuer for the year ended 31 December 2017, in each case
accompanied by the respective independent auditors’ reports attached therein and prepared in
accordance with IFRS as adopted by the European Union (the Annual Financial Statements); and

6
 interim financial statements of the Issuer for the period ended 30 June 2018 (prepared in accordance
with IFRS as adopted by the European Union, unaudited and not reviewed) (the Interim Financial
Statements and, together with the Annual Financial Statements, the Financial Statements).

Certain financial figures for the year ended 31 December 2016 (as indicated in the relevant tables set out in
“Selected Financial Information of the Issuer”) have been extracted from the Issuer’s separate financial
statements for the year ended 31 December 2016 as restated and presented in the Issuer’s financial
statements for the year ended 31 December 2017. For more information, please refer to “Selected Financial
Information of the Issuer”. The Issuer’s presentation currency is RON. Accordingly, the Financial
Statements included herein are presented in RON, unless otherwise indicated.

Currency presentation

The Issuer prepares its Financial Statements in RON. No representation is made that any specific currency
amount in this Base Prospectus could have been converted into any of the other currencies presented in this
Base Prospectus at any particular rate or at all. There are limited markets for the Romanian leu outside
Romania. The limited availability of such currencies may lead to volatility of exchange rates.

The following table sets out the period end, high, average and low exchange rates, for the periods and dates
indicated, of the Romanian leu against the Euro and the U.S. Dollar, in each case as published by the
National Bank of Romania for the relevant periods.

Average rate against the RON

Year Euro
Period
High Low Average End
2016 .............................................................................................. 4.5411 4.4444 4.4908 4.5411
2017 ............................................................................................. 4.6597 4.4888 4.5681 4.6597
2018 .............................................................................................. 4.6695 4.6206 4.6535 4.6639
2019 (through to March 2019) 4.7648 4.6634 4.7351 4.7628
_________________________
Source: The National Bank of Romania

Year U.S. dollar

Period
High Low Average End
2016 .............................................................................................. 4.3504 3.8697 4.0592 4.3033
2017 ............................................................................................. 4.3408 3.8116 4.0525 3.8915
2018 .............................................................................................. 4.1469 3.7170 3.9416 4.0736
2019 (through to March 2019) 4.2034 4.0573 4.1681 4.2434
_________________________
Source: The National Bank of Romania

Roundings

Certain data in this document, including financial, statistical, and operating information has been rounded.
As a result of the rounding, the totals of data presented in this document may vary slightly from the actual
arithmetic totals of such data. Percentages in tables have been rounded and accordingly may not add up to
100%. The calculations, variations and other percentages may differ slightly from their actual calculations
due to roundings of underlying financial, statistical and operating information.

7
Market, economic and industry data

Information regarding macroeconomic trends, market position and other industry data pertaining to the
Issuer’s business contained in this Base Prospectus under the captions “Risk Factors”, “The Issuer and the
Group”, “Business of the Issuer” and “Overview of the Banking Services Sector in Romania”, “The
Mortgage and Housing Market in Romania” has been extracted from official and industry sources, data
compiled by professional organisations and analysts, data from other external sources and the Issuer’s
knowledge of its market. Sources of such information, data and statistics include independent industry
publications (including the National Bank of Romania reports and statistics), market research, internal
surveys, reports and estimates, and other publicly available information. These data are subject to change
and cannot be verified with complete certainty due to limits on the availability and reliability of the raw data
and other limitations and uncertainties inherent in any statistical survey.

While the Issuer believes the third party information included herein is reliable, it has not independently
verified such third party information, and none of the Issuer, the Arranger or the Dealer makes any
representation or warranty as to the accuracy or completeness of such information as set forth in this Base
Prospectus. The Issuer confirms that all third party data contained in this Base Prospectus has been
accurately reproduced and, so far as it is aware and able to ascertain from information published by that third
party, no facts have been omitted that would render the reproduced information inaccurate or misleading.

Where third party information has been used in this Base Prospectus, the source of such information has
been identified.

Independent Auditor

The statutory auditors of the Issuer are Deloitte Audit S.R.L., of 4-8 Sos. Nicolae Titulescu, East Entrance,
2nd Floor – Deloitte area and 3rd Floor, Bucharest, 011141, Romania (the Auditor). The Auditor was
appointed for the first time on 6 July 2017. The Auditor is a member of the Chamber of Financial Auditors
of Romania.

The financial statements of the Issuer for the financial year ended 31 December 2017 have been prepared in
accordance with IFRS as adopted by the European Union and have been audited by the Auditor, resulting in
the unqualified report referenced herein.

The separate financial statements of the Issuer as of and for the year ended 31 December 2016 included in
this Base Prospectus have been prepared in accordance with IFRS as adopted by the European Union and
have been audited by KPMG Audit S.R.L., of Victoria Business Park DN1, 69-71 Sos. Bucuresti-Ploiesti,
Sector 1, Bucharest, 013685, Romania, P.O. Box 18-191 (KPMG), independent auditors, as stated in the
report appearing herein. KPMG is a member of the Chamber of Financial Auditors of Romania. Each of the
Auditor and KPMG has no material interest in the Issuer.

8
 TABLE OF CONTENTS

Page

Risk Factors ...................................................................................................................................................... 10

General Description of the Programme ............................................................................................................ 49
Terms and Conditions of the Covered Bonds................................................................................................... 79
Forms of the Covered Bonds .......................................................................................................................... 120
Bankruptcy of the Issuer................................................................................................................................. 136
Use of Proceeds .............................................................................................................................................. 139
Overview of the Romanian Covered Bond Legislation.................................................................................. 140
The Issuer and the Group ............................................................................................................................... 147
Business of the Issuer ..................................................................................................................................... 151
Risk Management ........................................................................................................................................... 169
Directors and Management ............................................................................................................................ 181
Selected Financial Information of the Issuer .................................................................................................. 188
Overview of the Banking Services Sector in Romania .................................................................................. 194
The Mortgage and Housing Market in Romania ............................................................................................ 197
Regulation and Supervision of Banks in Romania ......................................................................................... 201
Description of the Transaction Documents .................................................................................................... 215
Taxation .......................................................................................................................................................... 232
Subscription and Sale ..................................................................................................................................... 239
General Information ....................................................................................................................................... 243
Index ............................................................................................................................................................... 246
Annex Covered Bondholders Representative Agreement and Movable Mortgage over the Cover Pool and
Collection Accounts Agreement..................................................................................................................... A-1
Financial Statements and Auditors’ Reports .................................................................................................. F-1

9
 RISK FACTORS

In purchasing Covered Bonds, investors assume the risk that the Issuer may become insolvent or otherwise
be unable to make all payments due in respect of the Covered Bonds. There is a wide range of factors which
individually or together could result in the Issuer becoming unable to make all payments due in respect of
the Covered Bonds. It is not possible to identify all such factors or to determine which factors are most likely
to occur, as the Issuer may not be aware of all relevant factors and certain factors which it currently deems
not to be material may become material as a result of the occurrence of events outside the Issuer’s control.
The Issuer has identified in this Base Prospectus a number of factors which could materially adversely affect
its business and ability to make payments due under the Covered Bonds.

In addition, factors which are material for the purpose of assessing the market risks associated with Covered
Bonds issued under the Programme are also described below.

Prospective investors should also read the detailed information set out elsewhere in this Base Prospectus
and reach their own views prior to making an investment decision. Words and expressions defined in the
“Terms and Conditions of the Covered Bonds” or elsewhere in this Base Prospectus have the same meanings
in this section. Investing in the Covered Bonds involves certain risks. Prospective investors should consider,
among other things, the following:

Factors that may affect the Issuer’s ability to fulfil its obligations under Covered Bonds issued under
the Programme

Risks related to investments in Romania as an emerging market

The economy of Romania is more vulnerable to fluctuations in the global economy than developed
markets and is affected by political instability.

The economy of Romania is more vulnerable to market downturns and economic slowdowns than more
developed countries. The impact of global economic developments is often felt more strongly in emerging
markets, such as Romania, than it is in more mature markets. As has happened in the past, financial problems
or an increase in the perceived risks associated with investing in emerging economies could dampen foreign
investment and the Romanian economy could thus face severe liquidity constraints, causing it to, among
other things, raise tax rates or impose new taxes, with a significant impact on the Issuer.

Romania has undergone substantial political, economic and social change in recent years. As is typical of
emerging markets, Romania does not possess the full business, legal and regulatory infrastructures that
would generally exist in more mature free market economies. In addition, the tax, currency and customs
legislation in Romania is subject to varying interpretations and changes, which can occur frequently. These
issues continue to result in relatively high poverty rates and low wages.

Moreover, Romania has experienced periods with significant political instability. In particular, in the past
four years, the political environment in Romania has been unstable, dominated by political conflict and
significant pressure from mass street protests. Such protests were triggered in 2014 by the organisation of the
voting process abroad during the presidential elections, and in 2015 by the outbreak of a fire at a Bucharest
night club in October 2015 which ended in the death of over 60 people. The latter wave of protests led to the
replacement of the entire social democrat cabinet with a technocratic cabinet entrusted with a one-year
mandate which expired after the parliamentary elections of 2016. The parliamentary elections of December
2016 at which there was a relatively low vote turn-out were won by the Social Democratic Party which
resulted in a new social democratic cabinet taking office as of 4 January 2017. In January 2017, protests
erupted in connection with an emergency decree adopted by the government, which decriminalised certain
offenses, such as certain types of official misconduct, and which would have resulted in a de facto amnesty
for thousands of corruption cases and threatened the anti-corruption effort which had intensified over the

10
recent years. Due to the large-scale protests, the emergency decree was repealed on 5 February 2017. The
street protests continued throughout 2017 and 2018, this time triggered by new amendments to the judicial
laws which were considered to jeopardize the fight against corruption and the independence of the judiciary
system and ultimately undermine the rule of law. Furthermore, since the parliamentary elections in
December 2016 and up to the date of this Base Prospectus, three social-democrat governments were
successively appointed.

The future economic direction of Romania remains largely dependent upon the effectiveness of the
economic, financial and monetary measures undertaken by its government, together with tax, legal,
regulatory and political developments. Any potential failure by the Issuer to manage the risks associated with
its operations in an emerging market country could have a material adverse effect on its results of operations,
business, reputation and financial condition.

Corruption could create a difficult business climate in Romania.

Corruption is one of the main risks confronting companies with business operations in Romania.
International and local media, as well as international organisations, have issued numerous alerting reports
on the levels of corruption in Romania. For example, the 2018 Transparency International Corruption
Perceptions Index, which evaluates data on corruption in countries throughout the world and ranks countries
from 1 (least corrupt) to 180 (most corrupt), ranked Romania in the 61st position (2016: 57, 2017: 59).

Corruption has been reported to affect the judicial system and some of the regulatory and administrative
bodies in Romania, which may be relevant for the Issuer’s business and could have an adverse effect on the
Issuer’s business, prospects, results of operations and financial condition.

Any downgrade of Romania’s credit ratings by an international rating agency could have a negative
impact on the Issuer’s business.

In November 2018, Fitch Ratings Limited (Fitch) affirmed Romania’s long-term foreign and local currency
ratings at “BBB-” with a stable outlook. On 22 January 2019, Moody’s regular update on Romania
maintained Romania at a “Baa3” rating with a stable outlook. In March 2019, Standard & Poor’s Global
Ratings Europe Limited (Standard & Poor’s) maintained Romania at “BBB-” with a stable outlook. The
report noted that the ratings continue to be supported by the country’s moderate external private and public
debt levels, and still sound growth prospects, but at the same time are constrained by weak institutional
effectiveness. The report also states that Romania continues to benefit from solid fiscal and external stock
positions, but notably widening fiscal and external deficits could over time eat into these buffers and make
the Romanian economy increasingly vulnerable to slowing growth momentum. Any adverse revisions to
Romania’s credit ratings for domestic or international debt by these or similar international rating agencies
may materially adversely impact the Issuer’s ability to raise additional financing and the interest rates and
other commercial terms under which such additional financing is available. This could hamper the Issuer’s
ability to obtain financing and to service its indebtedness which could have a material adverse effect on its
business, prospects, results of operations and financial condition.

Romania’s difficulties related to its integration with the European Union may adversely affect the Issuer’s
business.

Romania became a member of the European Union in January 2007 and continues to undergo legislative
changes due to its accession to, and its continued integration with, the EU. As part of the accession process,
the European Union has established a series of measures for Romania in order to fulfil basic EU membership
requirements. The European Commission was tasked with monitoring Romania’s progress, which it does by
issuing annual compliance reports. In January 2017, the European Commission undertook a comprehensive
assessment of the progress made by Romania over the ten years since the establishment of the Cooperation
and Verification Mechanism (CVM) in 2007 and outlined 12 key recommendations (including the need for a

11
robust and independent system for appointing top prosecutors, respect for judges and the judicial process,
outstanding legislative irregularities, certain inconsistencies with law enforcement, etc.) that, if implemented,
would end the CVM process. The January 2017 recommendations were therefore considered as sufficient to
close the CVM – except if developments were to clearly reverse the course of progress. Although the
European Commission’s latest progress report on the CVM with Romania published on 13 November 2018
outlined that Romania has taken some steps to implement the recommendations set out in the January 2017
report, it also states that the steps undermining the fight against corruption have either reversed or called into
question the irreversibility of progress and therefore concludes the January 2017 recommendations are no
longer sufficient to close the CVM.

The report highlighted a number of additional measures that need to be immediately implemented in order
for the reform process to be put back on track (e.g. suspension on the appointment and dismissal of senior
prosecutors, suspension of the implementation of judicial laws and a pause on the entry into force of changes
to the criminal code and criminal procedure code and a revision to such laws taking into account the CVM
recommendations etc.). If Romania fails to fulfil its membership obligations, it could face EU sanctions
which could negatively affect the Romanian economy which consequently may have an adverse effect on the
Issuer’s operations.

The legal and judicial system in Romania is less familiar with financing arrangements such as those
proposed under the Programme than other European countries, which makes an investment in the
Covered Bonds riskier than investments in securities of an issuer that operates in a more developed legal
and judicial system.

The legal and judicial system in Romania may be less familiar with transactions of a nature similar to the
Programme than those of other European countries. Securities law, bankruptcy law and covered bond-related
areas of law are relatively new to local judges and in addition such related legal provisions have been and
continue to be subject to constant changes as new laws are being adopted in order to keep pace with the
transition to a market economy and EU legislation. Existing laws and regulations in Romania may be applied
inconsistently or may be interpreted in a manner that is restrictive and non-commercial. It may not be
possible, in certain circumstances, to obtain legal remedies in a timely manner in Romania. Moreover, since
the Covered Bonds legislative framework was only enacted in 2015 and, as at the date of this Base
Prospectus no covered bonds have been issued under the new legislative framework, there are no precedents
of such transactions in Romania or official interpretation of the Covered Bonds legislative framework by the
relevant authorities or case law related to such legislative framework. Furthermore, the relatively limited
experience of a significant number of the magistrates practising in these markets, specifically with regard to
capital markets issues, and the existence of a number of issues relating to the independence of the judiciary
system in Romania may lead to ungrounded decisions.

In addition to the foregoing, resolving cases may at times involve very considerable delays. The enforcement
of judgments may also prove difficult, which means that the enforcement of rights through court systems
may be laborious, especially where such judgments may lead to closure of businesses or job losses. This lack
of legal certainty and the inability to obtain effective legal remedies in a timely manner may adversely affect
the Issuer’s business, and may also make it difficult for investors in the Covered Bonds to address any claims
that they may have.

Risks related to the business of the Issuer

The Issuer may be adversely affected by continued uncertainties, challenging conditions in the global
economy or volatile equity and credit markets.

Since the 2008 global economic crisis, concerns about the potential economic slowdown and recession in
Europe, the availability and cost of credit, diminished business and consumer confidence, inflation and
increased unemployment have continued to contribute to increased market volatility and diminished

12
expectations for European and emerging economies, including Romania. This instability was further
exacerbated on 23 June 2016 when the United Kingdom voted to leave the European Union, which has
increased volatility in the global financial markets and is likely to continue to adversely affect European and
worldwide economic conditions. The United Kingdom’s vote to leave could contribute to greater instability
in the global financial markets before and after the terms of the United Kingdom’s future relationship with
the European Union are settled, and has increased the concern that certain other European Union members
may also hold referendums and vote to leave the European Union.

Until more clarity is available around the legal, political and economic realities and requirements for the
United Kingdom’s exit from the European Union, political and economic uncertainty, notably in European
markets, may occur, which could lead to a downturn in the markets in which the Issuer operates and a
decrease in spending and investment. Additionally, this uncertainty can lead to an increase in costs for the
Issuer due to legal and regulatory changes as well as currency exchange rate fluctuations between the euro,
the U.S. dollar and the Romanian leu. These factors could increase the Issuer’s operating costs, delay capital
expenditure programs or place additional regulatory burdens on the Issuer that could have a material adverse
effect on the Issuer’s business, prospects, results of operations and financial condition. Furthermore, as a
result of this uncertainty, financial markets could experience significant volatility, which could adversely
affect the Issuer’s business, prospects, results of operations and financial condition.

In addition to the foregoing, some of the effects of the continued instability in global markets, including the
risk of deflation, re-pricing of credit risk and the instability of the RON and the euro, created difficult
conditions in financial markets (e.g. persistence of historically low interest rates) and continue to have
considerable effects on these markets. These conditions also significantly reduced the availability of private
financing for both financial institutions and their customers, leading to increased unemployment and a
decrease in income, and government responses to the economic crisis, such as austerity measures, imposition
of higher capital and other regulatory requirements and increases in tax rates. This has further led many
financial institutions to seek additional capital, to merge or be merged with larger and stronger institutions, to
be nationalised and, in some cases, to fail.

Unfavourable economic conditions, continued instability of the Romanian fiscal regime, special regulations
and other effects of a continued economic downturn that the Issuer may fail to predict, could have a material
adverse effect on the Issuer’s business, prospects, results of operations and financial condition.

Uncertainty resulting from the Hellenic Republic’s prolonged financial and economic crisis has had and
is likely to continue to have a significant adverse impact on the Group’s and, respectively, the Issuer’s
business, prospects, results of operations and financial condition.

The principal shareholder of the Issuer is Alpha Bank A.E. (the Parent), which controls the Issuer and the
Issuer’s decisions, to the extent such decisions fall under the category of reserved matters for the general
meeting of shareholders. From this perspective, any potential impairment of the legal, financial or economic
situation of the Parent may affect the Issuer’s situation. As an example, if the financial situation of the Parent
deteriorates, the Parent may become unable to provide capital to the Issuer, which may restrict or make more
difficult the Issuer’s access to funding, which could in its turn have a material adverse effect on the Issuer’s
business, prospects, results of operations and financial condition.

The development of the Parent’s and, consequently, the Group’s assets, business, results of operations,
financial condition and prospects depends on the macroeconomic and political conditions in Greece. Over
the last eight years, the Hellenic Republic has faced significant pressure on its public finances and has
committed to certain substantial structural measures intended to restore competitiveness and promote
economic growth in the country, as part of the adjustment programmes agreed initially with the International
Monetary Fund (the IMF), the European Union and the European Central Bank (the ECB) (IMF, EU and
ECB are hereinafter collectively referred to as the Institutions) and in 2015 with the Institutions and the
European Stability Mechanism (the ESM) under the financial support programmes (particularly the EUR86

13
billion granted by the ESM in August 2015, hereinafter referred to as the ESM Programme). As of August
2018, Greece has successfully exited the ESM Programme, with no more follow-up rescue programmes,
through the disbursement of €61.9 billion by the ESM over three years in support of macroeconomic
adjustment and bank recapitalisation in Greece (the remaining €24.1 billion available under the maximum
€86 billion programme volume not being needed). However, the ESM will continue to cooperate with the
Greek authorities under the ESM’s Early Warning System, designed to ensure that beneficiary countries are
able to repay the ESM as agreed.

Further, a downgrade in the credit rating of the Parent could adversely affect the credit rating of the Issuer. In
its credit opinion dated 10 July 2018, Moody’s states that (a) it will permit the Issuer’s baseline credit
assessment (BCA) to be a maximum of three notches above the BCA of the Parent (also reiterated in the
March 2019 rating update report) and (b) a downgrade of the BCA of the Issuer (which could occur as a
result of a downgrade of the Parent’s BCA) could trigger a downgrade of the Issuer’s credit rating.

Even if the Hellenic Republic successfully implemented the arrangements undertaken by it under the ESM
Programme, the Greek economy may not achieve the sustained and robust growth that is necessary to
improve conditions for foreign direct investment and the availability of funding from the capital markets,
which may contribute to continuing investor fears regarding Greece’s capacity to honour its financial
commitments. A continued depression in the Greek economy could have a significant material adverse effect
on the Group’s business, financial condition, results of operations and prospects, which may reduce or
eliminate the Parent’s ability to continue its funding support for the Issuer and/or may lead to a loss of trust
in the Issuer by its customers, leading to massive withdrawals of deposits, loss of business, tougher
regulatory scrutiny and other material adverse effects on the Issuer’s business, financial condition, results of
operations and prospects.

The Issuer faces intense competition, which could result in decreases in the number of current and
potential customers.

The Issuer is in competition with a large number of financial institutions, of both international and local
calibre (banks with retail and business clients, mortgage banks, investment banks, as well as other
non-banking financial institutions which are active in the Romanian financial services sector), competition
that is expected to intensify further. Increased competition may encourage the Issuer’s current clients, as well
as prospective clients, to use the services and products of the Issuer’s competitors and, consequently,
adversely affect the Issuer’s revenues and profitability.

These competitors, as well as other competitors that may enter the market in the future, may enjoy certain
competitive advantages that the Issuer does not, such as having greater economies of scale, larger financial
and non-financial resources and portfolios, access to advanced technological and operational resources, more
comprehensive product offerings in certain business lines, greater personnel resources, greater brand name
recognition and more experience or longer-established relationships with regulatory authorities and clients.
In particular, the majority of the Issuer’s principal competitors in the Romanian banking sector are part of
much larger international financial groups, such as the local subsidiaries of Erste Group (Banca Comercială
Română S.A.), Société Générale (BRD – Groupe Société Générale S.A.), Raiffeisen (Raiffeisen Bank S.A.),
UniCredit (UniCredit Bank S.A.), and ING (ING Bank N.V. Amsterdam Sucursala Bucureşti). Due to their
global presence, such competitors might seem more attractive for clients, particularly for institutional clients
with an international presence. In addition, in the context of the development of the Romanian financial
services market in recent years, according to NBR data, local financial institutions (e.g. Banca Transilvania
S.A.) have gained market share.

Strong competition may lead to increased pressure on the Issuer in connection with prices for products and
services offered to clients, which may have an impact on the Issuer’s capacity to maintain or increase its
profitability. The competitiveness of the Issuer in the current competitive environment will depend largely on
its capacity to adapt quickly to the market’s new developments and tendencies. To the extent that the Issuer

14
will not be able to effectively compete with its competitors, whether local or part of international groups, this
factor may have an adverse effect on the Issuer’s business, financial condition, results of operations and
prospects.

The Issuer may be adversely affected by changes in interest rates.

The Issuer derives the majority of its operating income from net interest income. Interest rates are sensitive
to many factors beyond the Issuer’s control, such as inflation, monetary policies set by the National Bank of
Romania and by the Romanian government, monetary policy decisions of the ECB in connection with the
EUR, the liberalisation of financial services, increased competition, as well as domestic and international
economic and political conditions. Changes in the absolute level of interest rates can affect the spread
between the rate of interest that a financial institution pays to borrow funds from its depositors and other
lenders, and the rate of interest that it charges on the loans that it extends to its customers. To the extent that
the interest margin decreases, net interest income will also decrease, unless the Issuer is able to compensate
such decrease by increasing the total amount of funds it lends to its customers. Low interest rate monetary
policy accompanied by quantitative easing brings additional challenges to interest margin stability as the
potential to re-price customers’ deposits might be exhausted sooner than lending rates find their new
equilibrium. Additionally, in a very low or negative interest rate environment, the Issuer will have increased
costs of maintaining the regulatory and prudential liquidity buffers held in cash and low-yield highly liquid
assets. An increase in rates charged to customers can also negatively impact interest income if it reduces the
amount of customer borrowings. For competitive reasons, the Issuer may choose to raise the rates of interest
it pays on deposits without being able to make a corresponding increase in the interest rates it charges to its
customers.

Finally, a mismatch in the structure of interest-bearing assets and interest-bearing liabilities in any given
period could, in the event of changes in interest rates, reduce the Issuer’s net interest margin and have a
material adverse effect on its net interest income and, consequently, its business, financial condition, results
of operations, liquidity or prospects.

The Issuer has experienced, and may in the future experience, a deterioration in credit quality,
particularly as a result of financial crises or economic downturns.

The Issuer is, and may in the future continue to be, exposed to the risk that borrowers may not repay their
loans according to their contractual terms, that the collateral or income stream securing the payment of these
loans may be insufficient, or that legislation is imposed setting fixed exchange rates for loans in foreign
currencies.

The effects of the global economic and financial crisis, such as stagnating or declining growth rates or
negative gross domestic product (GDP) development, significantly reduced private consumption and
corporate investment, rising unemployment rates, and decreasing private and commercial property values in
certain regions, have had in recent years a particularly negative effect on the credit quality of the Issuer’s
loan portfolio. This is particularly true for customer loans in currencies other than the local currency of the
customer’s jurisdiction, i.e. certain retail and corporate clients of the Issuer have taken out loans which are
denominated in currencies other than their relevant local currencies (only EUR and USD) (FX loans). As the
value of the local currency declines versus the foreign currencies of such loans, as occurred in certain Central
and Eastern European (CEE) countries during the economic downturn, the effective cost of the foreign
currency denominated loan to the local customer may increase substantially, which can lead to delinquent
payments on customer loans, migration of previously highly rated loans into lower-rated categories and,
ultimately, increases in non-performing loans (NPLs) and impairment charges.

Deterioration in the quality of the Issuer’s credit portfolio and increases in NPEs (as defined in the section
Risk Management of this Base Prospectus) may result in increased risk costs for the Issuer. The Issuer’s risk
costs are based on, among other things, its analysis of current and historical probabilities of default and loan

15
management methods and the valuation of underlying assets and expected available income of clients, as
well as other management assumptions. The Issuer’s analyses and assumptions may prove to be inadequate
and might result in inaccurate predictions of credit performance.

In line with regulatory requirements and accounting standards, the Issuer evaluates the need and allocates
credit risk provisions on its balance sheet to cover expected losses on its loan portfolio.

A key target for the Issuer in recent years has been to reduce the size of the NPEs and improve the
performance of the loan book through a balance sheet clean up, including NPE sales. As a result of these
sustained efforts, the Issuer’s NPE ratio (computed as non-performing exposures divided by gross loans and
advances as per EBA Methodological Guide for FINREP report F18) has decreased from 10.64% as at
31 December 2016 to 4.65% as at 31 December 2017. The Issuer will continue its efforts to reduce the size
of NPEs and improve the quality of its assets.

The Issuer seeks to maintain an NPE coverage ratio that, in management’s judgement, is appropriate to cover
potential credit losses. However, there can be no assurances that the current NPE coverage ratio will not
increase in the future, that annual risk costs will not increase, that the NPE coverage ratio will prove to be
sufficient or that the Issuer will be successful in its efforts to estimate the financial effects of any NPE
portfolio disposals on its business.

Each of the above factors has had in the past, and could have in future periods, a material adverse effect on
the Issuer’s results of operations, financial condition and capital base.

The Issuer is subject to a counterparty risk, and defaults by counterparties may lead to losses that exceed
the Issuer’s provisions.

In the ordinary course of its business, the Issuer is exposed to the risk that third parties who owe it money,
securities or other assets will not perform their obligations due to insolvency, bankruptcy, lack of liquidity,
global or local economic issues, operational failure, political developments or other reasons. This exposes the
Issuer to the risk of counterparty defaults, which have historically been higher during periods of economic
downturn.

In the ordinary course of its business, counterparties in the financial services industry expose the Issuer to a
risk of non-performance. This exposure can arise through trading, lending, taking of deposits, clearance and
settlement, as well as other such activities and relationships. These counterparties include brokers and
dealers, custodians, commercial banks, investment banks, mutual and hedge funds, and other institutional
clients. Many of these relationships expose the Issuer to credit risk in the event of counterparty default. In
addition, the Issuer’s credit risk may be exacerbated when the collateral it holds cannot be realised or is
liquidated at prices below the level necessary to recover the full amount of the loan or cover the full amount
of derivative exposure. Many of the hedging and other risk management strategies utilised by the Issuer also
involve transactions with financial services counterparties. A weakness or insolvency of these counterparties
may impair the effectiveness of the Issuer’s hedging and other risk management strategies. The Issuer will
incur losses if its counterparties default on their obligations. If a higher than expected proportion of the
Issuer’s counterparties default, or if the average amount lost as a result of defaults is higher than expected,
actual losses due to counterparty defaults will exceed the amount of provisions already taken and results of
operation will be adversely affected. If losses due to counterparty defaults significantly exceed the amounts
of the Issuer’s provisions or require an increase in provisions, this could have a material adverse effect on the
Issuer’s business, financial condition and results of operations.

Counterparty risk between financial institutions has increased in recent years as a result of volatility in the
financial markets and may increase in the future if the challenging economic and/or political environment
continues, especially in core markets where the Issuer and its Group or its main competitors operate.
Concerns about potential defaults by one financial institution can lead to significant liquidity problems,

16
losses or defaults by other financial institutions as the commercial and financial soundness of many financial
institutions is interrelated due to credit, trading and other relationships. Even a perceived lack of
creditworthiness may lead to market-wide liquidity problems. This risk is often referred to as “systemic
risk”, and it affects banks and all other types of intermediaries in the financial services industry. Systemic
risk could lead to a need for the Issuer, as well as other banks in the market in which the Issuer operates, to
raise additional capital, while at the same time making it more difficult to do so. Systemic risk could
therefore have a material adverse effect on the Issuer’s business, financial condition and results of
operations, liquidity or prospects.

Fluctuations in exchange rates could adversely affect the Issuer’s results of operations.

Although the Issuer’s strategy aims at increasing RON exposures, 58.0% of the Issuer’s assets and 64.3% of
the Issuer’s liabilities are denominated in foreign currencies, particularly in EUR, at the end of December
2017. The Issuer translates such assets and liabilities, as well as interest earned or paid on such assets and
liabilities, and gains/losses realised upon the sale of such assets, to RON in preparing its financial statements.
Although the Issuer complies with appropriate limits and performs measures aimed at reducing exchange
rate risk, fluctuations in the rate of exchange of such currencies into RON may have a negative impact on the
Issuer’s reported results of operations, financial position and yearly cash flows.

The Issuer is subject to the risk that liquidity may not be readily available.

The Issuer, similarly to other credit institutions in the Romanian market, relies on customer deposits to meet
a substantial portion of its funding requirements. Although an important part of the Issuer’s deposits are
(predominantly term) retail deposits, customer deposits are subject to fluctuation due to factors outside of the
Issuer’s control, and the Issuer can provide no assurances that it will not experience a significant outflow of
deposits within a short period of time. Because a significant portion of the Issuer’s funding comes from its
deposit base, any material decrease in deposits could have a negative impact on the Issuer’s liquidity unless
corresponding actions are taken to improve the liquidity profile of other deposits or to reduce liquid assets,
which may not be possible on economically beneficial terms, if at all.

As a credit provider, the Issuer is exposed to market liquidity risk, which arises from an inability to easily
sell an asset because there is inadequate market liquidity or market disruption. The Issuer is also exposed to
funding liquidity risk, which is an exposure to losses arising out of a change in the cost of refinancing, or
from a spread over a certain horizon and confidence level, or from insolvency of counterparties, which may
result in difficulties in meeting future payment obligations, either in full, on time or on economically
beneficial terms.

Credit and money markets worldwide have experienced and continue to experience a reluctance of banks to
lend to each other because of uncertainty as to the creditworthiness of the borrowing bank. Even a perception
among market participants that a financial institution is experiencing greater liquidity risk may cause
significant damage to the institution, since potential lenders may require additional collateral or other
measures that further reduce the financial institution’s ability to secure funding. This increase in perceived
counterparty risk has led to further reductions in the access of the Issuer, along with other banks, to
traditional sources of liquidity, and may be compounded by further regulatory restrictions on funding and
capital structures as well as calculation of regulatory capital and liquidity ratios. Moreover, any change in the
NBR collateral standards or the related regulatory requirements may have a material adverse effect on the
funding of the Issuer and its access to liquidity.

If the Issuer has difficulty in securing adequate sources of short and long-term liquidity or if it were subject
to material deposit outflows, this would have a material adverse effect on its business, financial condition
and results of operations.

17
The Issuer is subject to operational risks.

The Issuer’s businesses are dependent on the ability to process a very large number of transactions efficiently
and accurately. Operational risk and losses can result from fraud, errors by employees, technological and
equipment failure, failure to document transactions properly or to obtain proper internal authorisation, failure
to comply with regulatory requirements and conduct of business rules, natural disasters or the failure of
external systems, for example, those of the Issuer’s suppliers or counterparties.

Although the Issuer has implemented risk controls and loss mitigation actions, and substantial resources are
devoted to developing efficient procedures and to staff training, such procedures may not be fully effective in
controlling each of the operational risks. The Issuer may also suffer service interruptions from time to time
due to failures by third party service providers and natural disasters, which are beyond its control. Such
interruptions may result in interruptions in services to the Issuer’s working units and may impact customer
service.

The Issuer may not be able to preserve its customer base.

The Issuer’s success depends on its capacity to maintain high levels of loyalty among its customer base and
to offer a wide range of competitive and high quality products and services to its customers. In order to
pursue these objectives, the Issuer has adopted a strategy of segmentation of its customer base, aimed at
serving the various needs of each segment in the most suitable manner. Moreover, the Issuer seeks to
maintain long-term financial relations with its customers through the sale of anchor products and services,
namely mortgage loans, salary accounts, standing transfers, credit cards and saving products, and bank
assurance products. Nevertheless, high levels of competition and an increased emphasis in cost reduction
may result in an inability to maintain high loyalty levels of the Issuer’s customer base, in providing
competitive products and services, or of maintaining high customer service standards, each of which may
adversely affect the Issuer’s business, financial condition, results of operations and prospects.

If the Issuer does not maintain or improve its reputation for the quality of its service, its ability to attract
new customers and retain existing customers may be harmed, which could adversely affect its business,
financial condition, results of operation and prospects.

Reputational risk is inherent to the Issuer’s business activity. The ability to retain customers and to attract
new customers depends in part on the Issuer’s brand recognition and its reputation for the quality of service.
Negative public opinion towards the Issuer or the financial services sector as a whole could result from real
or perceived practices in the banking sector in general, such as money laundering, negligence during the
provision of financial products or services, representatives’ or employees’ misconduct or even from the way
that the Issuer conducts, or is perceived to conduct, its business.

In addition, the Issuer’s reputation is strongly linked to the reputation of its Parent, meaning that any
objective or perceived negative aspects of the Parent’s business, financial condition, results of operations and
prospects, including in the context of the continued financial and economic crisis of the Hellenic Republic
(see “Uncertainty resulting from the Hellenic Republic’s prolonged financial and economic crisis has had
and is likely to continue to have a significant adverse impact on the Group’s and, respectively, the Issuer’s
business, prospects, results of operations and financial condition” above) could in turn have an adverse
effect on the Issuer’s reputation.

Although the Issuer makes all possible efforts to comply with the regulatory instructions, negative publicity
and negative public opinion could adversely affect the Issuer’s ability to maintain and attract customers, in
particular, institutional and retail depositors, which could have a material adverse effect on the Issuer’s
business, financial condition and prospects.

18
The Issuer is exposed to risk of fraud and illegal activities of other forms which, if they are not dealt with
timely and successfully, could have negative effects on its business, financial condition, results of
operation and prospects.

The Issuer is subject to rules and regulations related to money laundering and terrorism financing.
Compliance with anti-money laundering and anti-terrorist financing rules entails significant cost and effort.
Non-compliance with these rules may have serious consequences, including adverse legal and reputational
consequences. Although the Issuer’s current anti-money laundering and anti-terrorism financing policies and
procedures are adequate to ensure compliance with applicable legislation, it cannot be guaranteed that they
will comply at all times with all rules applicable to money laundering and terrorism financing as extended
and applied to all its workers in all circumstances. A possible violation, or even any suspicion of a violation
of these rules, may have serious legal and financial consequences, which could have a material and adverse
effect on the Issuer’s business, financial condition, results of operations and prospects.

The Issuer may be subject to tax liabilities.

In relation to its business activities, the Issuer is required to pay various taxes and contributions, such as tax
on financial assets, profit tax, value added tax, various social contributions, property taxes and others. While
the Issuer believes it has paid its taxes when due, interpretation of applicable rules by tax authorities may
differ. In practice, tax inspections typically result in tax authorities requiring payment of additional amounts
as well as interest and/or penalties. Recently, the Romanian government has applied significant political
pressure in relation to taxes paid or payable by banks and tax inspections have actually been started in
relation to several banks. Whether as a result of such pressure or in the ordinary course of business, it is
likely that the Issuer will be subject to one or more tax inspections during the term of the Covered Bonds.
The results of such tax inspections may be the imposition of material additional amounts on the Issuer and
this may have a material and adverse effect on the Issuer’s business, financial condition, results of operations
and prospects.

The Issuer’s hedging strategies may not prevent losses.

The Issuer may utilise a range of instruments and strategies to hedge risks. Unforeseen market developments
may have a significant impact on the effectiveness of hedging measures. If any of the variety of instruments
and strategies that are used to economically hedge exposure to market risk is not effective, the Issuer may
incur losses. Many of the Issuer’s strategies are based on historical trading patterns and correlations.
Unexpected market developments therefore may adversely affect the effectiveness of these hedging
strategies.

Transactions in the Issuer’s own portfolio involve risks.

The Issuer may carry out various proprietary activities, including the placement of deposits denominated in
Euro and other currencies in the interbank market. The management of the Issuer’s own portfolio may from
time to time include taking positions in fixed income and equity markets, both through spot and derivative
products and other financial instruments. Trading on account of its own portfolio carries risks, since its
results depend partly on market conditions. Moreover, the Issuer relies on a vast range of reporting and
internal management tools in order to be able to report its exposure to such transactions correctly and in due
time. Future results arising from trading on account of its own portfolio will depend partly on market
conditions, and the Issuer may incur significant losses which could have a material adverse effect on the
Issuer’s business, financial condition, results of operations and prospects.

19
The Issuer’s operational systems and networks have been, and will continue to be, vulnerable to an
increasing risk of continually evolving cyber security or other technological risks which could result in the
disclosure of confidential client or customer information, damage to the Issuer’s reputation, additional
costs to the Issuer, penalties and financial losses.

A significant portion of the Issuer’s operations rely heavily on the secure processing, storage and
transmission of confidential and other information as well as the monitoring of a large number of complex
transactions on a constant basis. The Issuer stores an extensive amount of personal and client-specific
information for its retail, corporate and governmental customers and clients, and must accurately record and
reflect their extensive account transactions. The proper functioning of the Issuer’s payment systems,
financial and sanctions controls, risk management, credit analysis and reporting, accounting, customer
service and other information technology systems, as well as the communication networks between its
branches and main data processing centres, are critical to the Issuer’s operations.

These activities have been, and will continue to be, subject to an increasing risk of cyber-attacks, the nature
of which is continually evolving. The Issuer’s computer systems, software and networks have been and will
continue to be vulnerable to unauthorised access, loss or destruction of data (including confidential client
information), account takeovers, unavailability of service, computer viruses or other malicious code,
cyber-attacks and other events. These threats may derive from human error, fraud or malice on the part of
employees or third parties, or may result from accidental technological failure. If one or more of these events
occurs, it could result in the disclosure of confidential client information, damage to the Issuer’s reputation
with its clients and the market, additional costs to the Issuer (such as repairing systems or adding new
personnel or protection technologies), regulatory penalties and financial losses, to both the Issuer and its
clients. Such events could also cause interruptions or malfunctions in the operations of the Issuer (such as the
lack of availability of the Issuer’s online banking systems), as well as the operations of its clients, customers
or other third parties. Disaster recovery, security and service continuity protection measures that the Issuer
has undertaken or may undertake in the future may be insufficient to prevent losses. Given the volume of
transactions at the Issuer, certain errors or actions may be repeated or compounded before they are
discovered and rectified, which would further increase these costs and consequences.

In addition, third parties with which the Issuer does business under stringent contractual agreements may
also be sources of cyber security or other technological risks. Although the Issuer adopts a range of actions to
eliminate the risks, such as not allowing third party access to the production systems and operating a highly
controlled IT environment, unauthorised access, loss or destruction of data or other cyber incidents could
occur, resulting in similar costs and consequences to the Issuer as those discussed above. While the Issuer
maintains insurance coverage that may, subject to policy terms and conditions cover certain aspects of cyber
risks such as fraud and financial crime, such insurance coverage may be insufficient to cover all losses. For
so long as any such disruption continues, the Issuer’s business, prospects, results of operations and financial
condition could be materially adversely affected. The Issuer may be unable to attract and retain key
personnel, directors, managers, employees and other individuals without whom the Issuer may not be able to
manage its business effectively.

The Issuer depends on the availability and continued service of a relatively small number of key managers,
employees and other individuals. These key individuals are heavily involved in the daily operation of its
Issuer’s business and are, at the same time, required to make strategic decisions, ensure their implementation,
and manage and supervise the Issuer’s development. The loss of any of these key individuals could
significantly impede the Issuer’s financial plans, product development, network expansion, marketing and
other plans. In addition, competition for qualified executives in the Romanian financial services industry is
intense. The Issuer’s future results depend, in a significant part, upon the continued contributions of its
existing management and its ability to expand the senior management team by adding highly skilled new
members, who may be difficult to identify and recruit. If any of the Issuer’s senior executives or other key
individuals ceases their employment or engagement, the Issuer’s business, prospects, results of operations
and financial condition could be materially adversely affected.

20
The Issuer may undertake future acquisitions on an opportunistic basis.

The Issuer may undertake, on an opportunistic basis, additional acquisitions in the future in its existing
business lines or in other businesses complementary to them. However, the Issuer may not be successful in
its efforts to estimate the financial effects of any such transactions on its business, especially as its previous
acquisitions were relatively small in size and there is no guarantee that future acquisitions would not be
larger businesses, which may prove more difficult to integrate. In addition, acquisitions may divert
management attention or financial or other resources away from the Issuer’s existing business or require
additional expenditures. Such developments could have a material adverse effect on the Issuer’s business,
results of operations and financial condition.

The Issuer’s ability to acquire new businesses or assets may be limited by many factors, including
availability of financing, the prevalence of complex ownership structures among potential targets,
government regulation and competition from other potential acquirers. If acquisitions are made, there can be
no assurance that the Issuer will be able to maintain the customer base of businesses it acquires, generate
expected margins or cash flows or realise the anticipated benefits of such acquisitions, including growth or
expected synergies. Although the Issuer analyses acquisition targets, those assessments are subject to a
number of assumptions concerning profitability, growth, interest rates and valuations. There can be no
assurance that the Issuer’s assessments of and assumptions regarding acquisition targets will prove to be
correct, and actual developments may differ significantly from the Issuer’s expectations.

Even if the Issuer is successful in acquiring new businesses, the integration of new businesses may be
difficult for a variety of reasons, including differing management styles and systems, inadequate
infrastructure and poor records or internal controls. In addition, integrating any potential new acquisitions
may require significant initial cash investments and present significant costs, as well as tax liabilities or
regulatory fines. The process of integrating businesses may be disruptive to the Issuer’s operations and may
cause an interruption of, or a loss of momentum in, such businesses or a decrease in the Issuer operating
results as a result of costs, challenges, difficulties or risks, including: realising economies of scale;
eliminating duplicative overhead expenses; integrating personnel, financial and operational systems;
unforeseen legal, regulatory, contractual and other issues; unforeseen challenges from operating in new
geographic areas, as the case may be; and the diversion of management’s attention from the Issuer’s day-to-
day business as a result of the need to deal with the foregoing challenges, disruptions and difficulties.

Furthermore, even if the Issuer is successful in integrating its existing and new businesses, expected
synergies and cost savings may not materialise as anticipated or at all, resulting in lower than expected
margins. There is no assurance that the Issuer will be successful in acquiring new businesses or realising any
of the anticipated benefits of the companies that it may acquire in the future. If the Issuer undertakes
acquisitions, but does not realise these benefits, the Issuer’s business, prospects, results of operations and
financial condition could be materially adversely affected.

Any suspension, downgrade or withdrawal of the Issuer’s credit ratings by an international rating agency
could have a negative impact on its business.

Any adverse revisions to the Issuer’s credit ratings for domestic or international debt by international rating
agencies may adversely impact the credit rating of its indebtedness, the Issuer’s ability to raise additional
financing via debt issuances and the interest rates and other commercial terms under which such additional
financing is available. As the Issuer’s ratings may include assumptions related to potential financial support
by the Parent, international financial institutions and/or national and supra-national entities, changes to such
assumptions may lead to a downgrade of the Issuer’s rating, such downgrade not being directly linked to any
deterioration of the economic situation of the Issuer. Any suspension, downgrade or withdrawal of the
Issuer’s credit ratings by an international rating agency could have a material adverse effect on the Issuer’s
business, prospects, results of operations and financial condition.

21
The Issuer may be subject to restrictive debt covenants that may limit its future financing and operations,
and its ability to pursue business opportunities and activities. In addition, the Issuer may not be able to
refinance maturing debt on terms that are as favourable as those from which it previously benefitted.

The Issuer’s ability to refinance its debt depends on a number of factors, including the liquidity and capital
conditions in the credit markets and it may not be able to do so on satisfactory terms, including in relation to
the covenants, or at all. In the event that the Issuer cannot refinance its debt, it may not to be able to meet its
debt repayment obligations. In addition, the terms of any refinancing indebtedness may be materially more
burdensome than the indebtedness it refinances. Such terms, including in relation to the covenants and
additional restrictions on the Issuer’s operations and higher interest rates, could have an adverse effect on its
results of operations and financial condition.

Furthermore, the Issuer’s inability to meet repayment obligations under the existing agreements could trigger
various cross-default and cross-acceleration provisions, resulting in the acceleration of a substantial portion
(if not all) of the Issuer’s debt and could have a material adverse effect on its business, prospects, results of
operations and financial condition.

Derivative transactions may expose the Issuer to unexpected risk and potential losses.

From time to time, the Issuer may be party to certain derivative transactions, such as interest rate swap
contracts, with financial institutions to hedge against certain financial risks. Changes in the fair value of
these derivative financial instruments that are not cash flow hedges, are reported in profit and loss, and
accordingly could materially affect the Issuer’s reported results in any period. Moreover, the Issuer may be
exposed to the risk that the Issuer’s counterparty in a derivative transaction may be unable to perform its
obligations as a result of being placed in receivership or otherwise. In the event that a counterparty to a
material derivative transaction is unable to perform its obligations thereunder, the Issuer may experience
losses that could have a material adverse effect on its financial condition, financial returns and results of
operations.

The Issuer is subject to substantial regulation and regulatory and governmental oversight.

As a financial institution, the Issuer is subject to extensive regulation, as well as to certain administrative
measures and policies. Moreover, the Issuer holds an authorisation issued by the NBR, and the NBR and
other regulatory authorities supervise its activity. Applicable legal provisions address, inter alia, capital
adequacy, risk management and prevention of money laundering. The fulfilment of these regulations implies
substantial costs and could significantly limit potential operations. Furthermore, regulatory authorities have
substantial discretion in how to regulate banks, and this discretion, and the means available to the regulators,
have been increasing during recent years. Regulation may be imposed on an ad hoc basis by governments
and regulators in response to a crisis, and these may especially affect financial institutions such as the Issuer
that are deemed to be systemically important.

The Issuer is also required to comply with the European Union’s regulations, which are of direct
applicability, and with European directives, which have to be implemented in national legislation. Following
the financial crisis, the European banking sector faced: (i) increasing competitiveness; (ii) increased
centralisation of the regulatory acts; (iii) increasing market transparency; and (iv) a movement to the
establishment of a sole regulation and a sole supervisory mechanism. These factors could, in different ways,
generate a decrease of the profit margins, an increase of financing costs and an increase of administrative
costs, etc.

Moreover, regulatory authorities (particularly the NBR) conduct continuous or periodic analysis regarding
the Issuer’s operations. In the case that regulatory authorities identify a breach of law, whether it is
intentional or not, different sanctions may be applied, including a withdrawal of the banking authorisation.

22
As a rule, the NBR has a range of constraining measures at its disposal in case of failure to comply with
regulation requirements.

Under certain circumstances, Law No. 312 of 4 December 2015 on the recovery and resolution of credit
institutions and investment firms and for amending and supplementing certain normative acts regarding
financial matters, as published in the Official Gazette of Romania No. 920 of 11 December 2015, as such
may be amended at any time (the Romanian BRR Law), transposing the Bank Recovery and Resolution
Directive – Directive 2014/59/EC (the BRRD), empowers the NBR to adopt early intervention measures
(e.g. removal of senior management and management body), as well as providing the NBR with certain
resolution tools (e.g. the sale of business, bridge institution, bail-in and asset separation). Both the early
intervention measures and the resolution tools may be applied by the NBR where certain conditions are met
without requiring the consent of the Covered Bondholders. For more information on the BRRD/Romanian
BRR Law framework, please refer to “Regulation and Supervision of Banks in Romania”. The application of
early intervention measures or resolution tools in respect of the Issuer are likely to affect the Issuer’s results
of operations, business, assets cash flows and financial condition, as well as the Issuer’s funding activities
and the products and services it offers.

Moreover, the Issuer faces substantial legal and operational risks in safeguarding personal data, being subject
to complex regulations governing the privacy and protection of personal data of individuals. The EU General
Data Protection Regulation (GDPR) entered into force on 25 May 2018 and provides unprecedented
penalties for serious breaches including a fine of up to EUR 20 million or 4% of global turnover, whichever
is higher. Ensuring that the collection, use, transfer and storage of personal information by the Issuer
complies with all applicable laws and regulations could increase the Issuer’s operating costs, affect the
development of new products or services and require the Issuer to structure its businesses, operations and
systems in less efficient ways.

Any legislative or regulatory actions and any required changes to the business operations of the Issuer
resulting from such legislation and regulations, as well as any deficiencies in the Issuer’s compliance with
such legislation and regulation, could result in significant loss of revenue, limit the ability of the Issuer to
pursue business opportunities in which it might otherwise consider engaging and provide certain products
and services, affect the value of assets that it holds, require the Issuer to increase its prices and therefore
reduce demand for its products, impose additional compliance and other costs on the Issuer or otherwise
adversely affect its business.

The transposition of the BRRD may, in certain limited circumstances, affect the value of the Covered
Bonds and the rights of the Covered Bondholders.

The Romanian BRR Law, transposing BRRD into Romanian law, provides the NBR with certain resolution
tools, including, inter alia, the bail-in tool. The bail-in tool gives the NBR the power to write down or
convert to equity all or a part of certain claims (i.e. eligible liabilities) of unsecured creditors (the General
Bail-in).

The General Bail-in is not intended to apply to secured debt (such as the Covered Bonds). However, to the
extent that claims in relation to the Covered Bonds are not met out of the assets of the Cover Pool, the
Covered Bonds may be subject to write-down or conversion into equity on any application of the General
Bail-in, which may result in the Covered Bondholders losing some or all of their investment. In the limited
circumstances described above, the exercise of any power under the Romanian BRR Law or any suggestion
of such exercise could, therefore, materially adversely affect the rights of Covered Bondholders, the price or
value of their investment in the Covered Bonds and/or the ability of the Issuer to satisfy its obligations under
the Covered Bonds.

23
Changes to legal and regulatory framework applicable to the banking business.

In June 2011 and January 2013, the Basel Committee on Banking Supervision (BCBS) published its (latest)
international regulatory framework for credit institutions (known as Basel III), which is a comprehensive set
of reform measures to strengthen the regulation, supervision and risk management of the banking sector,
which were implemented in European legislation through Directive 2013/36/EU, Regulation 575/2013 and
relevant implementing measures (the CRD IV package). The CRD IV package introduces a significant
number of requirements applicable to credit institutions, such as higher capital and liquidity requirements,
additional capital buffers, higher risk-weighted assets and higher requirements for minimum capital ratios.
For more details on the requirements imposed by the CRD IV package, please see section “Regulation and
Supervision of Banks in Romania – Regulatory environment”.

The BRRD implemented in Romania through the Romanian BRR Law, also sets the framework for
minimum levels of own funds and eligible liabilities (MREL) that need to be maintained by a bank both on a
stand-alone and consolidated basis for resolution purposes.

In late 2016, the European Commission launched a proposal for amending the BRRD framework with the
view, among other things, to align the BRRD and MREL framework with the Total Loss Absorbing Capacity
Principles that had been announced by the Financial Stability Board, in collaboration with the European
Banking Authority, late in 2015.

In early 2019 political endorsement has been secured in relation to the agreement on the "banking reform
package" reached between the Romanian presidency of the Council of the EU and the Parliament. The
package agreed by the Council and the Parliament comprises two regulations and two directives, relating to:
CRD IV package and the recovery and resolution of banks in difficulty (amendments to BRRD and
Regulation 806/2014 establishing uniform rules and a uniform procedure for the resolution of credit
institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single
Resolution Fund and amending Regulation (EU) No 1093/2010).

As such, it is difficult to anticipate such changes and amendments to the current framework and there can be
no assurance that, once implemented, potential investors will not be adversely affected by actions taken
under it and that the Issuer’s results of operations, business, assets, cash flows and financial condition, as
well as the Issuer’s funding activities and the products and services it offers, would not be affected by the
changes in, and respectively by the elections made, in the implementation of any amendments to the legal
framework.

In addition, as part of the reform of the financial system, several regulations implementing MiFID were
recently enacted in Romania and there are currently several new European regulations under the process of
being transposed in the Romanian legislation, such as the new Payment Services Directive 2015/2366/EU
and the 4th Anti-Money Laundering Directive (Directive 2015/849/EU on the prevention of the use of the
financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No
648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the
European Parliament and of the Council and Commission Directive 2006/70/EC), which will likely impact
the Issuer in terms of implementation costs and increased regulatory requirements. For more details, please
see “Regulation and Supervision of Banks in Romania”.

However, considering that the reform of the financial system is still an ongoing process, where the NBR is
also entitled to prescribe additional prudential requirements, it is currently not possible to predict the nature
and extent of future changes to the regulatory framework applicable to banking business in Romania.
Moreover, in extraordinary circumstances which could affect the banking and monetary system, the NBR is
entitled to adopt certain safeguard measures. Any new regulatory requirements or any changes in existing
rules or in supervision or enforcement practices could impose burdensome new requirements on the Issuer,
especially at the level of the costs generated by the implementation of such changes, which currently cannot

24
be estimated, or cause the Issuer to experience difficulties adjusting to and complying with such regulatory
framework, which could have a certain adverse effect on its business, financial condition and results of
operations. There is a risk that the Issuer may not be able to meet all the regulatory requirements imposed by
the law or by the regulators which could materially adversely affect the Issuer’s business and its obligations
towards the Covered Bondholders.

Recent legislative developments on consumer protection focused on financial and banking regulation that
entails retroactive changes to bank-customer arrangements.

In May 2016, Law no. 77/2016 on the discharge of debt obligations arising from credit agreements by
“payment in kind” through the transfer of certain immovable property entered into force.

The law allows for the discharge in full of any loans contracted by a natural person and secured by a
mortgage arrangement, including any accessories in connection therewith. It applies to credit agreements
concluded both after its entry into force as well as to all outstanding credit agreements, regardless if the
collateral was enforced in full or not. Also, it applies to both performing and non-performing loans, but
exempts the loans granted under the governmental backed programme Prima Casa (as further described in
“The Mortgage and Housing Market in Romania”) and loans exceeding EUR 250,000. Before coming into
force, all international financial institutions and particularly the NBR advised the Romanian authorities to
carefully consider the impact of the law in order to ensure legal certainty and avoid undue interference with
the contractual and property rights of credit institutions. The ECB issued an opinion in December 2015 on
the initial draft of the law, underlining the potential adverse effects on the banking sector, on the financial
stability and on the Romanian economy overall. In March 2016, all credit rating agencies warned that
passing this law would have an impact on Romania’s sovereign rating. The European Commission
mentioned on several occasions that the implementation of the law on debt discharge represents a major
downward risk for macroeconomic developments, the main concerns being the retroactive and wide
applicability, as well as the fact that the law applies independently of the financial status of the debtors.
However, the warnings were based on the initial draft of the law and not the actual law enacted, which
includes significant improvements as compared to the initial drafts. Although the adverse impact of the law
was diminished by the decision of the Constitutional Court according to which the law applies only in case
of hardship under the Civil Code as republished in the Official Gazette of Romania No. 505 of 15 July 2011,
approved by Law No. 287 of 17 July 2009 regarding the Civil Code and Law No. 71 of 3 June 2011
regarding the application of the Civil Code, as such may be amended at any time (the Civil Code ), the law
remains a risk for Romanian banks with a significant exposure to portfolios of retail loan agreements. To
date, no rating agency has changed the outlook or downgraded Romania’s current long-term foreign currency
ratings (on 16 November 2018 Fitch affirmed Romania’s long-term foreign and local currency rating at
“BBB-”; on 22 January 2019, Moody’s update on Romania maintained a “Baa3”, with stable outlook, and in
March 2019, Standard & Poor’s affirmed Romania at “BBB–”, with a stable outlook. In case of a change in
the outlook or a downgrade in Romania’s rating, the public debt financing cost will go up, triggering direct
effects on the general government budget.

Another legislative development aimed at protecting consumers is Law no. 151/2015 on bankruptcy of
individuals (Law no. 151/2015), which entered into force on 1 January 2018, and sets out class proceedings
aimed at facilitating the financial recovery of individual debtors acting in good faith. Law no. 151/2015 was
met by criticism from insolvency professionals, who highlighted the lack of creditor representation, restricted
access to judiciary proceedings and lack of clear procedures for debt enforcement and liquidation.

Moreover, recently the NBR limited the debt-service to income threshold for loans granted to natural persons
(both mortgage loans and consumer loans), in order to limit the level of indebtedness of natural persons. This
recent change may lead to a decrease in the number of loans that credit institutions can provide to consumers.

In addition to the above, the consumer protection legislation is constantly changing and currently, there are
several consumer protection proposals, specifically targeting lending, imposing, inter alia, additional

25
requirements for concluding and enforcing loan agreements or capping the interest rates in consumer credit
agreements. Such changes in consumer protection laws could limit the fees that banks may charge for certain
products and services or may add additional cumbersome measures to be taken by the Issuer. If introduced,
such laws could have a material adverse effect on the Issuer’s business, financial condition, results of
operations and prospects.

Some of these legislative changes may result in significant losses for creditors (and for the Issuer, in
particular) affecting recoveries, profitability and solvency, and may lead to systemic risks. The legislative
uncertainty associated with the banking sector also leads to tighter credit standards and lower financial
intermediation.

Recent tax on financial assets of the credit institutions.

The banking sector has been dramatically impacted by the GEO no. 114/2018, applicable as of 1 January
2019, which had established a progressive quarterly tax on the financial assets of banks that was initially
dependent on the evolution of Romanian Interbank Offer Rate (ROBOR). In March 2019, GEO no.
114/2018 was amended through GEO no. 19/2019 which has brought, inter alia, changes to the tax on the
financial assets of the banks and its computation method. According to GEO no. 19/2019, the tax is 0.4% per
year (for each credit institution with a market share equal to or higher than 1%) and 0.2% per year (for each
credit institution with a market share lower than 1%) and is applied to the net financial assets on the balance
sheet at the end of the semester and the year for which the tax is due, respectively, less certain asset classes
(such as cash, non-performing exposures at net value etc). The tax on financial assets may also be reduced to
zero, based on certain benchmarks regarding the market share, the credit balance and the interest margin
determined for the year for which the tax is owed. Credit institutions which record an accounting loss are not
subject to tax on financial assets. Such a tax may have a negative impact on the Issuer’s business, financial
condition and prospects.

Factors that may affect the realisable value of the Cover Pool or any part thereof.

The realisable value of Loans and their Related Security comprised in the Cover Pool may be reduced by:

(a) default by borrowers (each borrower being, in respect of a Loan Asset, the individual specified as
such in the relevant mortgage terms together with each individual (if any) who assumes from time to
time an obligation to repay such Loan Asset (the Borrower)) in payment of amounts due on their
Loans;

(b) changes to the lending criteria of the Issuer; and

(c) possible regulatory changes by the regulatory authorities.

Each of these factors is considered in more detail below. However, it should be noted that the Statutory Tests
and the Eligibility Criteria are intended to ensure that there will be an adequate amount of Loan Assets in the
Cover Pool to enable the Issuer to repay the Covered Bonds following service of a Notice of Default and
accordingly it is expected (but there is no assurance) that the Loan Assets could be realised for sufficient
value to enable the Issuer to meet its obligations under the Covered Bonds.

Changes to the lending criteria of the Issuer.

Each of the loans originated by the Issuer will have been originated in accordance with its lending criteria at
the time of origination. It is expected that the Issuer’s lending criteria will generally consider, inter alia, type
of property, term of loan, age of applicant, the loan-to-value ratio, status of applicant and credit history. The
Issuer retains the right to revise its lending criteria from time to time but would do so only to the extent that
such a change would be acceptable to a reasonable, prudent mortgage lender. If the lending criteria changes
in a manner that affects the creditworthiness of the loans, that may lead to increased defaults by debtors and

26
may affect the realisable value of the Cover Pool, or part thereof, and the ability of the Issuer to make
payments under the Covered Bonds.

Default by debtors in paying amounts due on their loans.

Debtors may default on their obligations under the loans in the Cover Pool. Defaults may occur for a variety
of reasons. The loans are affected by credit, liquidity and interest rate risks. Various factors influence
mortgage delinquency rates, prepayment rates, repossession frequency and the ultimate payment of interest
and principal, such as changes in the national or international economic climate, regional economic or
housing conditions, changes in tax laws, interest rates, inflation, the availability of financing, yields on
alternative investments, political developments and government policies. Other factors in debtors’ individual,
personal or financial circumstances may affect the ability of the Borrowers to repay the loans. Loss of
earnings, illness, divorce and other similar factors may lead to an increase in delinquencies by and
bankruptcies of debtors, and could ultimately have an adverse impact on the ability of debtors to repay the
loans. In addition, the ability to enforce a loan and sell a property given as security for a loan at a price
sufficient to repay the amounts outstanding under that loan will depend upon a number of factors, including
the availability of buyers for that property, the value of that property and property values in general at the
time.

Applicable Romanian insolvency and bankruptcy laws, as well as other laws and regulations governing
creditors’ rights may limit the Issuer’s ability to obtain payments on defaulted loans and advances.

Romanian bankruptcy and enforcement laws may not offer in all respects the same level of rights, remedies
and protections that creditors enjoy under the legal regimes in other EU jurisdictions. In particular,
Romanian bankruptcy and enforcement laws and practice may make it comparatively more difficult and
time-consuming for the Issuer to recover amounts in respect of its secured and unsecured claims before the
Romanian courts. In recent years, insolvency in Romania witnessed mixed dynamics. The insolvency of
companies, as well as the number of companies reporting net losses, have largely been responsible for the
increase in payment defaults across the economy. Considering that a significant part of the Issuer’s assets is
due from debtors and/or secured by assets that are or are likely to be in the future subject to Romanian
bankruptcy and enforcement laws, the above could adversely affect the Issuer’s business, financial condition,
results of operations, liquidity or prospects. Inability to obtain effective legal remedies in a reasonably timely
manner may adversely affect the Issuer’s business, financial condition, results of operations, liquidity or
prospects.

The governments in CEE countries, including Romania, may react to economic and financial crises with
increased protectionist measures.

The governments in CEE countries, such as Romania, could take various measures to protect their national
economy, currency or fiscal income in response to financial and economic crises, including among other
things:

 requiring that loans denominated in foreign currencies (such as EUR, USD or CHF) be converted
into local currency at set interest and/or exchange rates, in some cases below market rates, or allow
loans to be assumed by government entities, potentially resulting in a reduction in the value of such
loans;

 setting limitations on the repatriation of profits (either through payment of dividends to their parent
companies or otherwise) or export of foreign currency;

 implementing out regulations limiting interest rates and fees that can be charged for services and
other terms and conditions;

27
 prohibiting money transfers abroad by banks receiving state support measures (e.g. loans granted to
banks from sovereigns or covered by sovereign deposit guarantees); and

 introducing or amending laws and regulations, as well as extending measures previously introduced
on a temporary basis or applying additional regulatory obligations on financial institutions or which
are relevant, directly or indirectly, to the banking sector.

Any of these or similar governmental actions could have a material adverse effect on the Issuer’s business,
financial condition, results of operations, liquidity or prospects.

The Issuer may be adversely affected by slower growth or recession in the banking sector.

Banking sector growth in Romania has significantly declined compared to the years prior to 2008. Economic
growth in Romania and the region may be further constrained in the coming years by the continuing effects
of the last financial crisis and recession, as well as a slowing expansion of the Eurozone and the EU and
increasing constraints on the EU budget, which may reduce various subsidies to CEE countries. In addition,
EU legal, fiscal and monetary regulations may limit Romania’s ability to respond to local economic
conditions.

The Issuer may be subject to fines, awards of damages or other penalties arising from legal proceedings,
contractual claims and disputes, as well as negative publicity arising therefrom.

In the context of its day-to-day operations, the Issuer is exposed to litigation risk, among other things, as a
result of changing and developing consumer protection legislation and legislation on the provision of
banking and investment services.

The Issuer may be adversely affected by other contractual claims, complaints and litigation, including from
counterparties with whom it has contractual relationships, customers, competitors or regulatory authorities,
as well as any adverse publicity that it may attract. Any such litigation, complaints, contractual claims, or
adverse publicity could have a material adverse effect on the Issuer’s business, reputation, results of
operations and financial condition. See “Business of the Issuer – Legal and arbitration proceedings” for a
discussion concerning governmental, legal or arbitration proceedings (including any proceedings which are
pending or threatened, of which the Issuer is aware) that the Issuer is involved in.

Risks related to the Programme

First covered bonds issuance out of Romania under a new and untested covered bonds legal framework.

The Romanian Covered Bond Legislation is a new legal framework in Romania, and has not yet been the
subject of any legal proceedings. Moreover, as of the date of this Base Prospectus, no covered bonds have
been issued by a Romanian issuer pursuant to the Romanian Covered Bond Legislation nor pursuant to the
previous legal framework in Romania on covered bonds. Furthermore, the Romanian Covered Bond
Legislation might be amended or supplemented in the future in a manner that affects Covered Bonds that
have already been issued under the Programme. It is not certain how judicial, administrative or other relevant
authorities might construe the provisions of the Romanian Covered Bond Legislation and therefore no
assurance can be given as to the possible impact of any possible judicial decision or change to Romanian
law, including the Romanian Covered Bond Legislation.

Issues under the Programme are subject to obtaining new approvals from the National Bank of Romania
every 15 months or when the amount then approved by the National Bank of Romania is reached.

In accordance with the provisions of the Romanian Covered Bond Regulation, the approval of the National
Bank of Romania (the NBR Approval) is valid for 15 months from the date on which such approval was
communicated to the Issuer in respect of the issuance of one or more Series of Covered Bonds to be issued

28
under the Programme, up to the amount specified in the NBR Approval. Any issue under the Programme to
be made after the expiry date of the then applicable NBR Approval or in excess of the amount specified in
the NBR Approval is subject to a new approval process with the NBR. Refusal of the NBR to grant a new
approval would prohibit the Issuer from raising any additional funds through the issuance of Covered Bonds
and could have a material adverse effect on the Issuer’s business.

Requirement for Covered Bondholders to appoint Covered Bondholders Representative.

The Romanian Covered Bond Legislation expressly regulates the mechanics of the appointment of the first
Covered Bondholders Representative, to be appointed after the first issue of Covered Bonds. The Programme
documentation provides that the Covered Bondholders Representative shall act as a representative of all
Covered Bondholders, irrespective of their Series. As, in accordance with Romanian Covered Bond
Legislation, the appointment of the Covered Bondholders Representative is only possible at the first meeting
of the Covered Bondholders to be held after the first issue of Covered Bonds under the Programme (which,
in accordance with Romanian Covered Bond Legislation will not take place until at least 30 days after the
first issuance of Covered Bonds), prior to such appointment, the Covered Bondholders will not have a
representative through which to take any action with respect to the Issuer and will not be able to take any
action directly against the Issuer.

If the NBR does not agree to the continuation in the role of the entity appointed by the Covered Bondholders
to act as the Covered Bondholders Representative at the time of providing any subsequent NBR Approval
after the first issuance of Covered Bonds under the Programme, the Issuer will be required to convene a
further meeting of Covered Bondholders to approve the appointment of a replacement Covered Bondholders
Representative. There is no assurance that there will be a suitable corporate entity willing to act as Covered
Bondholders Representative in such circumstances.

Covered Bondholders may not be able to call a Covered Bondholders’ meeting and, where a meeting is
called and a Covered Bondholder does not attend or votes against a motion that is passed will still be
bound by the resolution of the other Covered Bondholders if such resolution is passed.

Except for the first meeting, the meetings of the Covered Bondholders will be convened by the Covered
Bondholders Representative at the request of the Covered Bondholders holding at least 25% of the total
principal amount outstanding of all Covered Bonds issued under the Programme or at the request of the
Cover Pool Administrator (if appointed). The Covered Bondholders holding in aggregate less than the
required threshold to request the Covered Bondholders Representative to convene a meeting would not be
able to require the Covered Bondholders Representative to convene a meeting. Furthermore, the Covered
Bondholders Representative is not entitled to convene a meeting on behalf of the Covered Bondholders
without receiving an instruction from Covered Bondholders holding at least 25% of the total principal
amount outstanding of all Covered Bonds issued under the Programme. This could result in the Covered
Bondholders not being able to provide an instruction to the Covered Bondholders Representative in respect
of a matter affecting them where it has not been possible to establish the required number of Covered
Bondholders to convene a meeting. This may particularly be the case where the matter concerns only one
Series of Covered Bondholders in particular, as described further below.

Where a resolution is passed at a meeting of the Covered Bondholders which has been duly convened, those
Covered Bondholders who did not attend the meeting or who voted against such resolution will,
nevertheless, be bound by such resolution.

The Romanian Covered Bond Legislation does not provide for Covered Bondholders to convene a meeting
of Covered Bondholders on a Series by Series basis even where the matter to be considered at the relevant
meeting is only relevant to one Series of Covered Bonds. This means that, where a matter concerns one
Series of Covered Bonds only, the Covered Bondholders of all other Series would also be able to attend and

29
vote in respect of the relevant matter which may result in an outcome at the applicable meeting that would be
detrimental to the position of the Covered Bondholders of the affected Series.

The NBR has discretion as to when and whether to appoint a Cover Pool Administrator where certain
conditions are met.

In certain limited circumstances (see “Events of Default under the Covered Bonds are limited and Covered
Bondholders will have very limited rights in respect of the acceleration and enforcement of the Covered
Bonds” below) the NBR may appoint a Cover Pool Administrator. The appointment of the Cover Pool
Administrator may be delayed due to the fact that there is no timeframe or procedure to be followed for the
appointment of the Cover Pool Administrator. Once appointed and subject to prior consultation with the
NBR in certain situations, the Cover Pool Administrator shall have full control of the Cover Pool and related
cash flows. The rights of the Covered Bondholders before and after the appointment of a Cover Pool
Administrator are unclear and it is not certain what or if any actions can be taken by the Covered
Bondholders and, if such actions can be taken, how or if actions taken by the Covered Bondholders before
the appointment of the Cover Pool Administrator will be continued by the Cover Pool Administrator once
appointed. See “Overview of the Romanian Covered Bond Legislation” for further details regarding
circumstances when the Cover Pool Administrator is appointed and the rights of the Covered Bondholders
before and after the appointment of a Cover Pool Administrator.

Events of Default under the Covered Bonds are limited and Covered Bondholders will have very limited
rights in respect of the acceleration and enforcement of the Covered Bonds.

In accordance with the Romanian Covered Bond Legislation in force as at the date of this Base Prospectus, it
will only be possible to accelerate and enforce Covered Bonds once a Cover Pool Administrator has been
appointed in respect of the Cover Pool by the NBR (or, in the case of bankruptcy of the Issuer, by a
bankruptcy judge). The Romanian Covered Bond Legislation provides that a Cover Pool Administrator can
be appointed upon: (1) non-payment by the Issuer of any amount in respect of the Covered Bonds; (2)
removal of approval for issuances of Covered Bonds under the Programme by the NBR; (3) breach of the
Over-Collateralisation Test where the NBR determines there are no prospects for the Issuer to remedy such
breach; and/or (4) bankruptcy of the Issuer (each of (1) to (4) an Event of Default). Apart from these Events
of Default there will be no other events of default in respect of the Covered Bonds. The occurrence of an
Event of Default under items (1) to (3) above will give rise to the right of the NBR to appoint a Cover Pool
Administrator, and an Event of Default under item (4) above will give rise to the right of a bankruptcy judge
to appoint or replace a Cover Pool Administrator, however, this will not give rise to the right of the Covered
Bondholders to accelerate the Covered Bonds or enforce their claims against the Issuer unless the Cover Pool
Administrator (after consultation with the NBR) approves such cause of action. It is unclear whether a
Covered Bondholders Resolution would be required for the Cover Pool Administrator to be able to take
enforcement action in relation to the Cover Pool. Moreover, the Covered Bondholders might not have the
right to direct the Cover Pool Administrator to take any such enforcement action if the Cover Pool
Administrator did not consider enforcement to be the most appropriate course of action in the circumstances.
In any event, any acceleration action and any action of sale of the Cover Pool Assets by the Cover Pool
Administrator would be subject to consultation with the NBR.

Enforcement of the Cover Pool will only be possible where the NBR has appointed a Cover Pool
Administrator and may require the consent of the Covered Bondholders.

The Romanian Covered Bond Legislation is not prescriptive as to the action that the Covered Bondholders
and/or the Covered Bondholders Representative are able to take upon the occurrence of an Event of Default
but prior to the appointment of the Cover Pool Administrator and it is possible that the Cover Pool
Administrator may reverse or change any action the Covered Bondholders and/or the Covered Bondholders
Representative have determined to take prior to its appointment. Furthermore, any acceleration action and
any action of sale of the Cover Pool Assets proposed to be taken by the Cover Pool Administrator would be

30
subject to prior consultation with the NBR and may be also subject to receipt of its opinion. Thus, while the
Romanian Covered Bond Law refers to prior consultation with the NBR (who will take into consideration,
among other things, whether the Asset Coverage Test continues to be met) in practice the Cover Pool
Administrator might not take any such action until, and subject to, the opinion of the NBR is received in this
respect. There is no binding timeframe within which the NBR must determine whether or not to approve
enforcement proceedings and as such there may be a delay between the occurrence of an Event of Default
and any enforcement action being taken by the Cover Pool Administrator during which time there may be a
decline in the financial position of the Issuer or the value of the Cover Pool Assets or both.

If a Cover Pool Administrator is appointed, the Covered Bonds may be repaid sooner or later than expected
and/or in an amount less than the Final Redemption Amount stated in the applicable Final Terms.

The Cover Pool Assets.

In the event of enforcement of the Cover Pool Assets, it may only be possible to transfer the Loans to entities
that are authorised to grant loans for real estate investment purposes. Such entities may be subject to NBR
approval. Moreover, a transfer of all or part of the Cover Pool Assets together with related Cover Pool
liabilities may be made only to a credit institution qualifying as an issuer within the meaning of the
Romanian Covered Bond Legislation. There is no assurance as to whether there will be an eligible transferee
to take over such assets and liabilities which may result in a delay in realising amounts due to the Covered
Bondholders on enforcement.

The movable mortgage over the Third Party Collection Account(s).

Pursuant to Romanian law, a movable mortgage over an account must expressly identify the account to
which such movable mortgage relates. Therefore, the movable mortgage over the Third Party Collection
Account(s) will only be valid once any Third Party Collection Account is opened and is expressly identified
in the Movable Mortgage over the Cover Pool and Collection Accounts Agreement among the mortgaged
property and is registered in the National Register for Movable Property Publicity. Before such registration
has occurred, the Covered Bondholders shall not have a priority claim against any Third Party Collection
Account on enforcement, insolvency or similar proceedings.

There is no statutory segregation of cash flows derived from the Cover Pool until the appointment of the
Cover Pool Administrator.

Pursuant to Romanian Covered Bond Legislation, cash flows derived from the Cover Pool Assets, including
any amounts standing to the credit of the ABR Collection Accounts, the Transaction Accounts or any Third
Party Collection Account(s), will only be segregated from the other assets of the Issuer upon the appointment
of a Cover Pool Administrator by the NBR. Until such assets are segregated and provided that no
Segregation Event, Issuer Event or Event of Default has occurred, the Issuer is free (subject to maintaining
the Reserve Ledger Required Amount and an amount credited to the Transaction Account that is sufficient to
satisfy the Statutory Tests) to dispose of the amounts collected from the Cover Pool Assets, which could,
depending also on the financial status of the Issuer at the time, adversely affect the recovery rate of the
Covered Bondholders’ claims in relation to the Covered Bonds.

The NBR may appoint a Cover Pool Administrator prior to the end of, and notwithstanding, any
applicable contractual grace period.

Notwithstanding any remedy periods provided in the Transaction Documents, a Cover Pool Administrator
may be appointed immediately upon the occurrence of an Event of Default which may result in the Covered
Bonds being declared due and payable sooner than expected or desired by the Covered Bondholders.

31
The Issuer may not have eligible assets available to allocate as Additional Cover Pool Assets in the Cover
Pool when required in accordance with the Romanian Covered Bond Legislation.

The Issuer shall be required, subject to making the necessary registrations with respect to the Cover Pool
Assets in the Internal Cover Pool Register, to allocate Additional Cover Pool Assets to the Cover Pool and/or
remove or substitute Cover Pool Assets where so required in accordance with the Romanian Covered Bond
Legislation, subject to observing the requirements set out in the Romanian Covered Bond Legislation
(including obtaining the prior written consent of the Asset Monitor to the allocation, removal or substitution,
as the case may be).

For example, Loans which are included in the Cover Pool are and will generally be subject to amortisation of
principal and payment of interest on a monthly basis. They are also subject to early repayment of principal at
any time in whole or part by the relevant borrowers. Early repayments of principal on mortgage credits may
result in the Issuer being required to include Additional Cover Pool Assets in the Cover Pool in order for the
Issuer to comply with the requirements under the Romanian Covered Bond Legislation. If the Issuer does not
originate or acquire new mortgage loans to replace the Loans which were included in the Cover Pool, but
were repaid, it is possible that the Issuer will not satisfy the requirements with respect to the maintenance of
the Cover Pool in accordance with the Romanian Covered Bond Legislation.

The Issuer may not have sufficient eligible Loans or other Eligible Financial Assets available at the relevant
time in order to carry out such allocation of Additional Cover Pool Assets or the substitution of the Cover
Pool Assets. Moreover, it is possible that the consent of the Asset Monitor to such allocation or substitution
will not be obtained, for example, if the proposed Additional Cover Pool Assets do not meet the applicable
Eligibility Criteria. In such circumstances, the inability of the Issuer to effect the addition of Additional
Cover Pool Assets to the Cover Pool or the substitution of the Cover Pool Assets with eligible Loans or other
eligible Cover Pool Assets may have an adverse effect on the Issuer’s ability to satisfy the Statutory Tests or
may affect the ability of the Issuer to make payments to the Covered Bondholders when due.

The Issuer may breach the regulatory requirements in respect of the Cover Pool.

The Issuer, its Cover Pool and issuances of the Covered Bonds by the Issuer are subject to a number of
regulatory restrictions under Romanian law.

In order to structure the Cover Pool, the Issuer has to observe certain conditions and the Cover Pool Assets
have to meet certain Eligibility Criteria. Although the Issuer will certify that the Cover Pool Assets meet the
Eligibility Criteria and the Asset Monitor will perform agreed upon procedures (AUP) in accordance with
the International Standard on Related Services 4400 “Engagements to perform agreed upon procedures
regarding financial information” (ISRS 4400) in order to agree whether the Cover Pool Assets meet the
Eligibility Criteria, it remains possible that particular assets in the Cover Pool might not satisfy all Eligibility
Criteria. If the Issuer does not comply with the requirements set out under the Romanian Covered Bond
Legislation with respect to the Cover Pool, this could adversely affect the recoveries of the Covered
Bondholders upon enforcement. Moreover, depending on the nature of the breach, the NBR may, inter alia,
revoke the Issuer’s authorisation to issue Covered Bonds.

The Cover Pool Administrator may arrange for the Issuer to enter into new financing arrangements with
liquidity facility providers who would be granted priority ranking on enforcement of the Cover Pool
Assets.

The Romanian Covered Bond Law provides that following its appointment, the Cover Pool Administrator
may arrange for the Issuer to enter into new financing arrangements with liquidity facility providers to cover
any temporary liquidity shortfalls arising with the Issuer. Pursuant to the Romanian Covered Bond
Legislation, such lenders providing a liquidity facility to the Issuer shall rank in priority to the Covered

32
Bondholders upon enforcement of the Cover Pool Assets which may reduce the amount recovered by
Covered Bondholders on enforcement.

There is uncertainty as to the statutory position of the Covered Bondholders where there are insufficient
proceeds from enforcement of the security over the Cover Pool to meet all claims of the Covered
Bondholders.

It is unclear under Romanian law what the statutory rights of the Covered Bondholders are if the claims of
the Covered Bondholders are not met in full from the realisation of the Cover Pool. The Romanian Covered
Bond Law states that the residual claims of the Covered Bondholders will rank pari passu with the unsecured
and unsubordinated obligations of the Issuer and refers to the priority of payments set out in Law No. 85 of
25 June 2014 on pre-insolvency and insolvency proceedings (the Romanian Insolvency Law). However, it
is unclear whether this priority of payment would apply if the Issuer is not subject to insolvency proceedings
at the time of enforcement or whether the waterfall generally applicable in enforcements would apply
instead. When ranking pari passu with other unsecured and unsubordinated obligations of the Issuer,
depending on the financial status of the Issuer, the recovery rate of the Covered Bondholders with respect to
the residual claims can be significantly lower.

In the event of bankruptcy of the Issuer, the following unsecured and unsubordinated obligations of the
Issuer would, as of the date this Base Prospectus, have priority over the residual claims of the Covered
Bondholders:

(a) taxes, stamp duty and any other expenses related to the bankruptcy proceedings, including payment
of the expenses related to the preservation and administration of Issuer’s assets, as well as the
payment of the remuneration of the professionals hired according to the law (including the judicial
liquidator);

(b) receivables resulting from eligible deposits in accordance with the provisions of applicable
legislation on deposit guarantee schemes, including receivables under the deposit guarantee schemes
arising from subrogation to the rights of the guaranteed deponents and/or from financing, in
accordance with the law, of the rescission measures of the bankrupt issuer, and receivables deriving
from employment relations arising no more than six months prior to the commencement of the
bankruptcy proceedings;

(c) receivables resulting from eligible deposits of natural persons, of micro-enterprises and small and
medium-sized enterprises which exceed the coverage threshold provided for by applicable legislation
on deposit guarantee schemes and the deposits of natural persons, of micro-enterprises and small and
medium-sized enterprises which would be eligible deposits unless created through branches located
outside of the EU of institutions established in the EU;

(d) receivables arising from the activity of the Issuer after the commencement of the bankruptcy
proceedings; and

(e) budgetary receivables and receivables arising from deposit guarantee schemes, other than those
provided under paragraph (b) above, together with the receivables of the National Bank of Romania
deriving under loans granted by the National Bank of Romania to the Issuer.

In the event of enforcement occurring prior to the Issuer being subject to bankruptcy or similar proceedings,
the following unsecured and unsubordinated obligations of the Issuer would, as of the date of this Base
Prospectus, have priority over the residual claims of the Covered Bondholders:

(a) claims representing any fees, costs and expenses related to legal proceedings, safeguarding measures
(in Romanian, masuri asiguratorii), enforcement, preservation of the assets sold within public
auction, any expenses incurred in the common interest of creditors and claims against the Issuer,

33
 representing the fees related to the formalities provided under Romanian law, necessary for acquiring
the adjudicated assets and the registration thereof with the publicity registers;

(b) claims representing wages or other debts assimilated thereto, pensions, amounts for unemployed
persons, child care, temporary work incapacity, maternity leave, death grants granted in the social
security scheme, as well as claims for damages caused by death and body integrity or health injuries;

(c) fiscal claims related to taxes, fees, contributions and other sums provided by law, owed to the state
budget, social security budget, local budgets and special funds budgets;

(d) claims deriving from loans granted by the State;

(e) claims representing compensation for damages caused to public property through illicit acts;

(f) claims resulting from bank loans, supply of goods, provision of services or performance of work,
including rent; and

(g) claims representing fines owed to the state budget or local budgets.

The Issuer can issue additional series of Covered Bonds without requiring the consent of the Covered
Bondholders but which may dilute the interests of existing Covered Bondholders in the Cover Pool.

The Issuer may from time to time issue additional Series of Covered Bonds without requiring the consent of
the existing Covered Bondholders to such issuance. Any issuance of an additional Series of Covered Bonds
might dilute the interests of existing Covered Bondholders in the Cover Pool to the extent that such issuance
would dilute their rights when voting in respect of a Covered Bondholders Resolution. The holders of all
Covered Bonds issued under the Programme will rank pari passu among themselves and share recourse to
the same Cover Pool.

Risks Applicable to the Cover Pool Assets

Limited description of the Cover Pool received by Covered Bondholders.

Other than as set out in the Investor Report, the Covered Bondholders will not receive detailed statistics or
information in relation to the Loan Assets in the Cover Pool, because it is expected that the composition of
the Cover Pool will frequently change due to, for instance:

(a) the Issuer assigning Additional Cover Pool Assets to the Cover Pool; and

(b) the Issuer removing Cover Pool Assets from the Cover Pool or substituting existing Cover Pool
Assets in the Cover Pool with Additional Cover Pool Assets.

There is no assurance that the characteristics of the Loan Assets assigned to the Cover Pool on an Issue Date
will be the same as those Loan Assets in the Cover Pool as at a subsequent date. However, each Loan Asset
will be required to meet the Eligibility Criteria and be subject to the representations and warranties set out in
the Servicing and Cash Management Agreement. In addition, pursuant to the Romanian Covered Bond
Legislation, the Cover Pool Assets are subject to certain Statutory Tests, information in respect of which will
be set out in the Servicer Reports.

The Prima Casa guarantee may impact the remedies of the Covered Bondholders in recovering
outstanding debts.

If the State makes a payment under the State guarantee in respect of a Prima Casa Loan, the State will have
the right to proceed to enforcement of such Prima Casa Loan against the applicable Borrower according to

34
Romanian Law No. 207 of 20 July 2015 on the fiscal procedure code, as amended and, except in limited
situations, control such process. This may affect the remedies available to the Covered Bondholders upon
enforcement of the Cover Pool and therefore affect the level of recoveries available to the Covered
Bondholders on enforcement (for example, it will be the fiscal authority that will drive the enforcement
procedure, including, for example, the manner and timing of realisation of the Prima Casa Loans included in
the Cover Pool).

Some of the Loans included in the Cover Pool may not have been originated by the Issuer.

It is possible that some or a significant number of the Loans included in the Cover Pool at any time were not
originated by the Issuer. In respect of such acquired Loans, there can be no assurance that the lending criteria
of the relevant originating entity will be as effectively applied as, or comparable with (and not materially
inferior to) that of the Issuer. Accordingly, while such Loans will still be subject to the Eligibility Criteria,
the asset quality of Loans not originated by the Issuer may be materially worse than that of the Loans that
were originated by the Issuer. This may result in the deterioration in the performance and value of the Cover
Pool Assets and/or potential difficulties in meeting the Statutory Tests.

Security and insolvency considerations.

The Issuer will grant security over (i) the Cover Pool, the ABR Collection Accounts and any Third Party
Collection Account(s) pursuant to the Movable Mortgage over the Cover Pool and Collection Accounts
Agreement and (ii) the Transaction Documents, the Hedging Agreements and the Offshore Bank Accounts
pursuant to the Deed of Charge in respect of certain of its obligations, including its obligations under the
Covered Bonds. In certain circumstances, including the occurrence of certain insolvency events in respect of
the Issuer, the ability to realise any such security may be delayed and/or the value of the security impaired.
There can be no assurance that the Issuer will not become bankrupt and/or the subject of bankruptcy
proceedings or resolution tools and/or that the Covered Bondholders would not be adversely affected by the
application of insolvency or bankruptcy laws or resolution tools.

There may be a delay between the Issuer breaching the Statutory Tests and the Asset Monitor identifying
such breach.

The Asset Monitor shall be required pursuant to the Asset Monitor Agreement to perform AUP in
accordance with ISRS 4400 in order to agree with the mathematical accuracy of the calculations performed
by the Issuer in respect of the Statutory Tests (including, as regards the Over-Collateralisation Test, in crisis
simulations). The Asset Monitor will perform the AUP within the deadline prescribed under the Romanian
Covered Bond Legislation, being as at the date of this Base Prospectus, 20 calendar days from the end of the
relevant period in respect of which the applicable quarterly report is to be prepared.

However, there can be no assurance that the Asset Monitor will immediately identify a breach of such
Statutory Tests. Furthermore, such AUP performed by the Asset Monitor may not result in other breaches
under the Transaction Documents being identified. Any delay in identifying a breach of the Statutory Tests
or the provisions of the Transaction Documents may result in a delay in notification of the occurrence of an
Issuer Event or, in the case of the Over-Collateralisation Test, an Event of Default, which may ultimately
result in the Covered Bondholders suffering losses if the condition of the Issuer has deteriorated between the
occurrence of the breach of the Statutory Tests or provision of the Transaction Documents and such breach
being identified.

If the Issuer fails to maintain the Internal Cover Pool Register, the Covered Bondholders may lose their
priority claim in respect of the Cover Pool Assets.

The Issuer must maintain an internal cover pool register in respect of the Cover Pool Assets. References to
the Internal Cover Pool Register shall mean the internal evidence register (in Romanian, registrul de
evidenţă internă) maintained by the Issuer as required by, without limitation, Article 19 of the Romanian

35
Covered Bond Law with respect to the Cover Pool Assets (the Internal Cover Pool Register ). If the
Internal Cover Pool Register is not maintained in accordance with the Romanian Covered Bond Legislation,
the NBR may revoke the Issuer’s authorisation to issue the Covered Bonds. Furthermore, assets are only
deemed to be part of the Cover Pool (and the Covered Bondholders and other Cover Pool Secured Creditors
will only have priority claims in relation thereto) to the extent such assets are entered by the Issuer in the
Internal Cover Pool Register. If an asset is not properly registered with the Internal Cover Pool Register, then
the Covered Bondholders shall not have recourse to that asset for satisfying with priority their claims in
relation to the Covered Bonds.

Risks relating to the security securing the Covered Bonds

Proceeds from the enforcement of mortgages may not satisfy the Issuer’s claims in full.

The proceeds from the liquidation of the assets subject to security in favour of the Issuer (which in turn are
securing the Covered Bonds) may not be sufficient to satisfy the claims of the Issuer in full; in this case, the
unsatisfied portion of those claims will rank pari passu with all the unsecured and unsubordinated
obligations of the debtor and will be satisfied on a pro rata basis with all other general creditors’ claims of
such debtor, except for those obligations of the Issuer so identified from time to time by the mandatory
provisions of the Romanian law as being preferred. Where the Issuer fails to recover in full its claims against
the underlying debtors, depending also on the financial status of the Issuer, the recovery rate of the Covered
Bondholders with respect to their claims under the Covered Bonds could also be decreased.

Creditors may face various difficulties in enforcement which could result in enforcement proceedings
being delayed or suspended.

Enforcement of the Romanian law-governed security securing the Covered Bonds would be generally made
in accordance with the mandatory provisions of the Romanian Civil Procedure Code. However, certain
limitations may arise during the enforcement process, which could either delay or limit the recoveries of the
enforcing creditor such as: (i) the actual existence in the debtor’s estate of assets to be enforced or the actual
possibility of realising such assets; (ii) advancing procedural fees for carrying out certain enforcement
measures or acts under given circumstances; (iii) the option of the debtor to challenge the enforcement itself
(or any enforcement act) within a prescribed time frame; (iv) the possibility to request the suspension of
enforcement or even to request intermediary suspension until the main suspension claim (i.e. the claim for
the suspension of the enforcement procedure) is resolved (subject to the payment of bail); (v) sanctions for
not addressing certain procedural matters within the time frame provided by law, statutory limitation period
(in Romanian, prescriptie extinctivă) or termination of right by passage of time (in Romanian, perimare); or
(vi) limitations on the acquisition price in case the enforcing creditor acquires the enforced assets. Any such
enforcement incidents could delay, limit or obstruct the realisation of the rights of the Covered Bondholders
against the Issuer (under the Movable Mortgage over the Cover Pool and Collection Accounts Agreement or
otherwise).

Risk Factors which are material for the purpose of assessing the market risks associated with the
Covered Bonds issued under the Programme

The Covered Bonds may not be a suitable investment for all investors.

Each potential investor in the Covered Bonds must determine the suitability of that investment in light of its
own circumstances. In particular, each potential investor may wish to consider either on its own or with the
help of its financial and other professional advisers, whether it:

(a) has sufficient knowledge and experience to make a meaningful evaluation of the Covered Bonds, the
merits and risks of investing in the Covered Bonds and the information contained in this Base
Prospectus and any applicable supplement and/or the applicable Final Terms;

36
(b) has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Covered Bonds and the impact that the Covered
Bonds will have on its overall investment portfolio;

(c) has sufficient financial resources and liquidity to bear all of the risks of an investment in the Covered
Bonds, including the Covered Bonds with principal or interest payable in one or more currencies, or
where the currency for principal or interest payments is different from the potential investor’s
currency;

(d) understands thoroughly the terms of the Covered Bonds and be familiar with the behaviour of any
relevant indices and financial markets; and

(e) is able to evaluate possible scenarios for economic, interest rate and other factors that may affect its
investment and its ability to bear the applicable risks.

Some Covered Bonds are complex financial instruments. Sophisticated institutional investors generally do
not purchase complex financial instruments as stand-alone investments. They purchase complex financial
instruments as a way to reduce risk or enhance yield with an understood, measured and appropriate addition
of risk to their overall portfolios. A potential investor should not invest in the Covered Bonds which are
complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate
how the Covered Bonds will perform under changing conditions, the resulting effects on the value of the
Covered Bonds and the impact this investment will have on the potential investor’s overall investment
portfolio.

In addition, the investment activities of certain investors are subject to investment laws and regulations, or
review or regulation by certain authorities. A potential investor should consult its legal advisers to determine
whether and to what extent (1) Covered Bonds are legal investments for it, (2) Covered Bonds can be used as
collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any
Covered Bonds. Financial institutions should consult their legal advisers or appropriate regulators to
determine the appropriate treatment of any Covered Bonds under any applicable risk-based capital or similar
rules.

Regulatory initiatives may have an adverse impact on the regulatory treatment of the Covered Bonds.

In Europe, the U.S. and elsewhere, there is significant focus on fostering greater financial stability through
increased regulation of financial institutions, and their corresponding capital and liquidity positions. This has
resulted in a number of regulatory initiatives which are currently at various stages of implementation and
which may have an impact on the regulatory position for certain investors in covered bond exposures and/or
on the incentives for certain investors to hold covered bonds, and may thereby affect the liquidity of such
securities. Investors in the Covered Bonds are responsible for analysing their own regulatory position and
none of the Issuer, the Dealer or the Arranger makes any representation to any prospective investor or
purchaser of the Covered Bonds regarding the treatment of their investment on the Programme Closing Date
or at any time in the future.

In particular, it should be noted that the Basel Committee on Banking Supervision (BCBS) has approved a
series of significant changes to the Basel regulatory capital and liquidity framework (such changes being
referred to by the BCBS as Basel III). Basel III provides for a substantial strengthening of existing
prudential rules, including new requirements intended to reinforce capital standards (with heightened
requirements for global systemically important banks) and to establish a leverage ratio “backstop” for
financial institutions and certain minimum liquidity standards (referred to as the “Liquidity Coverage Ratio”
and the “Net Stable Funding Ratio”). BCBS member countries agreed to implement the initial phase of the
Basel III reforms from 1 January 2013 and the second phase from 1 January 2022, subject to transitional and
phase-in arrangements for certain requirements. As implementation of Basel III requires national legislation,

37
the final rules and the timetable for its implementation in each jurisdiction, as well as the treatment of
covered bonds, may be subject to some level of national variation. It should also be noted that changes to
regulatory capital requirements have been made for insurance and reinsurance undertakings through
participating jurisdiction initiatives, such as the Solvency II framework in Europe.

Prospective investors should therefore make themselves aware of the requirements described above (and any
corresponding implementing rules of their regulator), where applicable to them, in addition to any other
applicable regulatory requirements with respect to their investment in the Covered Bonds. No predictions can
be made as to the precise effects of such matters on any investor or otherwise.

Absence of secondary market.

There is not, at present, an active and liquid secondary market for the Covered Bonds, and no assurance is
provided that a secondary market for the Covered Bonds will emerge. Neither the Arranger nor the Dealer
are obliged to and nor do they intend to make a market for the Covered Bonds. None of the Covered Bonds
has been, or will be, registered under the Securities Act or any other applicable securities laws and they are
subject to certain restrictions on the resale and other transfer thereof as set forth under “Subscription and
Sale”. If a secondary market does emerge, it may not continue for the life of the Covered Bonds or it may not
provide the Covered Bondholders with liquidity of investment with the result that a Covered Bondholder
may not be able to find a buyer to buy its Covered Bonds readily or at prices that will enable the Covered
Bondholder to realise a desired yield.

In addition, the Covered Bondholders should be aware of the prevailing and widely reported global credit
market conditions (which continue at the date hereof), whereby there is a general lack of liquidity in the
secondary market for instruments similar to the Covered Bonds. As a result of the current liquidity crisis,
there exist significant additional risks to the Issuer and the investors which may affect the returns on the
Covered Bonds to investors.

Tax Risks

Changes in effective tax rates, tax legislation or changes in the interpretation of such legislation may have
an adverse effect on the Issuer’s results.

The Issuer’s future effective tax rates may be adversely affected by a number of factors, including changes in
the valuation of its deferred tax assets and liabilities, increases in expenses not deductible for tax purposes,
the outcome of any potential discussions with relevant tax authorities, changes in relation to taxation laws or
tax rates or the interpretation of such taxation laws and changes in generally accepted accounting principles.
Any significant increase in the Issuer’s future effective tax rates, including following the ongoing initiatives
in relation to changes in the fiscal legislation at international and local level, such as the Action Plan on Base
Erosion and Profit Shifting of the Organisation for Economic Co-operation and Development, Anti-
Avoidance Directive issued by the European Commission and Article 11 of Romanian Law No. 277 of 8
September 2015 regarding the Fiscal Code, as subsequently amended and supplemented (the Romanian
Fiscal Code) could adversely impact net results for such future periods and, as a result, could adversely
affect the Issuer’s business, financial condition, prospects and results of operations.

There are uncertainties in the Romanian taxation system.

The Issuer’s operations are affected by the tax rules in force from time to time in the jurisdictions where it
conducts operations or has assets. These rules pertain to corporate tax, property tax, tax on financial assets,
withholding tax, value added tax, other governmental or municipal taxes and interest deductions and
subsidies. The Issuer’s tax situation is also affected by transactions conducted intra-Group that are
considered to be priced on market terms. Although the Issuer’s business is conducted in accordance with its
interpretation of applicable tax laws and regulations and in accordance with advice it has received from its
tax advisers, the possibility that its interpretation is incorrect, or that such laws and regulations change,

38
possibly with retroactive effect, cannot be excluded. Furthermore, future changes in applicable laws and
regulations may affect the conditions of the Issuer’s business.

The taxation system in Romania is not as well-established as those in more developed economies and is
subject to constant change as referenced above. The lack of established jurisprudence and case law may
result in unclear or non-existent regulations, decrees and explanations of the taxation laws and/or views on
interpretations thereof. Taxation laws (including case law) in Romania may, as a result, be in particular
subject to changes, which can result in unusual complexities and more significant tax risks for the Issuer’s
relevant companies and business generally and these could adversely affect its business, financial condition,
prospects and results of operations.

Risks related to the Covered Bonds generally

It may not be possible to appoint a replacement Servicer when required in accordance with the
Transaction Documents.

The Transaction Documents provide for the substitution of the Servicer upon the occurrence of a Servicer
Termination Event (which includes, among other things, the occurrence of an Issuer Event – see “General
Description of the Programme – Appointment of Replacement Servicer” for further information). There can
be no assurance that replacement of ABR as the Servicer (or any delay in making such replacement) would
not cause delays in payment on the Covered Bonds and the Covered Bondholders might suffer loss as a
result.

The Covered Bonds may not be admitted to trading on the Luxembourg Stock Exchange, the Bucharest
Stock Exchange (the BSE) or any other stock exchange.

Admission to trading on the Luxembourg Stock Exchange, the BSE or any other stock exchange is
dependent on the approval of the relevant authority to such trading being obtained. Admission of the
Covered Bonds to trading on any such exchange will be subject to certain requirements. The Issuer intends to
take all necessary steps to ensure the Covered Bonds are admitted to trading on the Luxembourg Stock
Exchange’s regulated market and the Regulated Spot Market of the BSE (the Regulated Spot Market) as
soon as possible after the closing of each issuance of the Covered Bonds. However, there is no guarantee
that, should the admission conditions for the approval by the Luxembourg Stock Exchange and/or the BSE
change, all such listing and/or trading conditions will be met. Consequently there is no assurance that the
Covered Bonds will be admitted to trading on the Luxembourg Stock Exchange’s regulated market or the
Regulated Spot Market of the BSE on the estimated date or at all. If the Covered Bonds are not admitted to
trading on the Regulated Spot Market of the BSE, the applicable provisions of the Romanian Covered Bond
Legislation may be deemed to be breached (albeit the Romanian Covered Bond Legislation does not provide
for a specific sanction in this respect), and depending on the seriousness of the breach, the NBR may revoke
the Issuer’s authorisation to issue Covered Bonds. Moreover, the Covered Bonds not being admitted to
trading on the Luxembourg Stock Exchange’s regulated market or the BSE may negatively affect the ability
of the Covered Bondholders to transfer the Covered Bonds.

Trading on the BSE may be suspended.

The Romanian Financial Supervisory Authority (the FSA) is authorised to suspend securities from trading or
to request the BSE to suspend the trading of securities of a company listed on the BSE if the continuation of
trading would negatively affect investors’ interests or to the extent that the relevant issuer is in breach of its
obligations under the relevant securities laws and regulations. Also, the BSE is entitled to suspend the
trading of securities of a listed company in other circumstances, in accordance with its regulations. Any
suspension could affect the Covered Bonds’ trading price and would impair the transfer of the Covered
Bonds.

39
Rating Agency Confirmation in respect of the Covered Bonds.

The terms of certain of the Transaction Documents provide that, in certain circumstances, the Issuer must,
and the Covered Bondholders Representative may, obtain confirmation from the Rating Agency that any
particular action proposed to be taken by the Issuer, the Servicer or the Covered Bondholders Representative
will not adversely affect, or cause to be withdrawn, the then current ratings of the Covered Bonds (a Rating
Agency Confirmation).

By acquiring the Covered Bonds, investors will be deemed to have acknowledged and agreed that,
notwithstanding the foregoing, a credit rating is an assessment of credit and does not address other matters
that may be of relevance to the Covered Bondholders, including, without limitation, in the case of a Rating
Agency Confirmation, whether any action proposed to be taken by the Issuer, Servicer, the Covered
Bondholders Representative or any other party to a Transaction Document is either (i) permitted by the terms
of the relevant Transaction Document, or (ii) in the best interests of, or not prejudicial to, some or all of the
Covered Bondholders. In being entitled to have regard to the fact that the Rating Agency has confirmed that
the then current ratings of the Covered Bonds would not be adversely affected or withdrawn, each of the
Issuer, the Covered Bondholders Representative and the other Secured Creditors (including the Covered
Bondholders) is deemed to have acknowledged and agreed that the above does not impose or extend any
actual or contingent liability on the Rating Agency to the Issuer, the Covered Bondholders Representative,
the Secured Creditors (including the Covered Bondholders) or any other person or create any legal relations
between the Rating Agency and the Issuer, the Covered Bondholders Representative, the Secured Creditors
(including the Covered Bondholders) or any other person whether by way of contract or otherwise.

Any such Rating Agency Confirmation may or may not be given at the sole discretion of the Rating Agency.
It should be noted that, depending on the timing of delivery of the request and any information needed to be
provided as part of any such request, it may be the case that the Rating Agency cannot provide a Rating
Agency Confirmation in the time available or at all, and the Rating Agency will not be responsible for the
consequences thereof. Such confirmation, if given, will be given on the basis of the facts and circumstances
prevailing at the relevant time, and in the context of cumulative changes to the transaction of which the
securities form part since the issuance closing date. A Rating Agency Confirmation represents only a
restatement of the opinions given, and is given on the basis that it will not be construed as advice for the
benefit of any parties to the transaction.

The Covered Bonds can only be accelerated in limited circumstances.

Acceleration of the Covered Bonds will only be possible following the occurrence of an Event of Default.
The Events of Default set out in the Conditions of the Covered Bonds are limited to non-payment,
withdrawal by the NBR of its approval for the Issuer to issue Covered Bonds under the Programme, a breach
of the Over-Collateralisation Test where the NBR determines there are no prospects for the Issuer to remedy
such breach and bankruptcy of the Issuer. The occurrence of an Issuer Event will not in any circumstances
trigger the acceleration of the Covered Bonds. In addition acceleration will only be possible where a Cover
Pool Administrator has been appointed and has completed its consultations with the NBR in respect of such
acceleration and has concluded that acceleration is the best course of action in the circumstances, subject to
the Covered Bondholders voting in favour of such acceleration (where the Cover Pool Administrator has
sought the approval of the Covered Bondholders pursuant to a Covered Bondholders Resolution). As such,
there may be a delay between the occurrence of an Event of Default and the appointment of the Cover Pool
Administrator and further delay in the consultation process with the NBR in respect of such acceleration.
Furthermore, there is no assurance that the NBR will agree with a proposal by the Cover Pool Administrator
to accelerate the Covered Bonds.

40
Reliance on Hedging Counterparties.

To provide a hedge against possible variances in the rates of interest payable on the Loans in the Cover Pool
(which may, for instance, include discounted rates of interest, fixed rates of interest or rates of interest which
track a base rate and other variable rates of interest) and EURIBOR for one, three or six month Euro deposits
or ROBOR for one, three or six month RON deposits, as applicable, the Issuer may enter into an Interest
Rate Swap with the relevant Interest Rate Swap Provider in respect of each Series of Covered Bonds under
the relevant Interest Rate Swap Agreement.

In addition, to provide a hedge against interest rate and/or other risks in respect of amounts received by the
Issuer under the Loans in the Cover Pool and the Interest Rate Swaps and amounts payable by the Issuer
under the Covered Bonds, the Issuer may enter into a Covered Bond Swap with a Covered Bond Swap
Provider in respect of a Series of Covered Bonds under the Covered Bond Swap Agreement between the
Issuer and that Covered Bond Swap Provider.

If the Issuer fails to make timely payments of amounts due under any Hedging Agreement, then it will have
defaulted under that Hedging Agreement. A Hedging Counterparty is only obliged to make payments to the
Issuer as long as the Issuer complies with its payment obligations under the relevant Hedging Agreement. If
the Hedging Counterparty is not obliged to make payments or if it defaults on its obligations to make
payments of amounts in the relevant currency equal to the full amount to be paid to the Issuer on the due date
for payment under the relevant Hedging Agreement, the Issuer will be exposed to any changes in the relevant
currency exchange rates to Euro and to any changes in the relevant rates of interest. Unless a replacement
swap is entered into, the Issuer may have insufficient funds to make payments under the Covered Bonds.

If a Hedging Agreement terminates, or there is a partial termination following the sale of any Loans, then the
Issuer (or the Servicer on its behalf) may be obliged to make a termination payment to the relevant Hedging
Counterparty. There can be no assurance that the Issuer (or the Servicer on its behalf) will have sufficient
funds available to make a termination payment under the relevant Hedging Agreement, nor can there be any
assurance that the Issuer will be able to enter into a replacement swap agreement, or if one is entered into,
that the credit rating of the replacement swap counterparty will be sufficiently high to prevent a downgrade
of the then current ratings of the Covered Bonds by the Rating Agency.

Differences in timings of obligations of the Issuer and the Covered Bond Swap Provider under the
Covered Bond Swaps.

With respect to each of the Covered Bond Swaps, if any, the Issuer (or the Servicer on its behalf) will,
periodically, pay or provide for payment of an amount to each corresponding Covered Bond Swap Provider
based on EURIBOR for Euro deposits for the agreed period. The Covered Bond Swap Provider may not be
obliged to make corresponding swap payments to the Issuer under a Covered Bond Swap until amounts are
due and payable by the Issuer under the Covered Bonds. If a Covered Bond Swap Provider does not meet its
payment obligations to the Issuer under the relevant Covered Bond Swap Agreement or such Covered Bond
Swap Provider does not make a termination payment that has become due from it to the Issuer under the
Covered Bond Swap Agreement, the Issuer may have a larger shortfall in funds with which to make
payments under the Covered Bonds than if the Covered Bond Swap Provider’s payment obligations
coincided with Issuer’s payment obligations under the Covered Bond Swap. Hence, the difference in timing
between the obligations of the Issuer and the obligations of the Covered Bond Swap Providers under the
Covered Bond Swaps may affect the Issuer’s ability to make payments with respect to the Covered Bonds. A
Covered Bond Swap Provider may be required, pursuant to the terms of the relevant Covered Bond Swap
Agreement, to post collateral with the Issuer if the relevant rating of the Covered Bond Swap Provider is
downgraded by a Rating Agency below the rating specified in the relevant Covered Bond Swap Agreement.

41
The Covered Bondholders and/or the Cover Pool Administrator may be unable to effect the service of
process or enforce foreign judgments against the Issuer or its assets in the jurisdictions in which it
operates.

The Issuer is incorporated in Romania and the Covered Bonds are issued pursuant to Romanian law, which
may limit the legal recourse of investors in the Covered Bonds against it.

Romanian law may require additional formalities to be performed or conditions to be met in order to enforce
judgments against the Issuer that were obtained in foreign courts. The laws of Romania permit an action to
be brought before a court of competent jurisdiction in Romania for the recognition and enforcement of a final
and conclusive judgment in personam rendered by a court from an EU member state, provided that the
relevant conditions set forth in Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and
enforcement of judgments in civil and commercial matters are met. However, other conditions may be
applicable with respect to specific matters, under special Romanian legislation or international conventions.
Similar rules on the recognition and enforcement of foreign court judgments apply to judgments issued in
non-EU member states which are parties to the 2007 Lugano Convention on jurisdiction and the recognition
and enforcement of judgments in civil and commercial matters.

Judgments rendered by courts in the United States and other non-EU member states which are not parties to
the 2007 Lugano Convention are subject to different requirements, in particular those set out under the
Romanian Civil Procedure Code. Subject to special internal legislation (including ratified international
conventions) regulating the recognition and enforcement of foreign judgments on specific matters, Romanian
law allows an action to be brought before a court of competent jurisdiction in Romania for the recognition of
a judgment in personam rendered by a court of a non-EU member state, provided that the relevant conditions
in respect of recognition of foreign judgments set out under the Romanian Civil Procedure Code are met
(such provisions being generally aligned with the provisions of Regulation (EU) No. 1215/2012).
Furthermore, the recognition and enforcement of foreign judgments in administrative, customs, criminal or
other public law related matters are subject to special legislation and certain conditions may need to be
fulfilled. The limitations set out above may deprive investors in the Covered Bonds of effective legal
recourse for claims related to their investment.

Covered Bonds not in physical form and holders of Covered Bonds held through Euroclear, Clearstream,
Luxembourg and the Bucharest Central Depository must rely on procedures of those clearing systems to
effect transfers of Covered Bonds, receive payments in respect of Covered Bonds and vote at meetings of
Covered Bondholders.

Covered Bonds issued under the Programme will be represented on issue by one or more Global Covered
Bonds that may be deposited with a common depositary or Common Safekeeper for Euroclear and
Clearstream, Luxembourg (each as defined under “Forms of the Covered Bonds”). Except in the
circumstances described in each Global Covered Bonds, investors will not be entitled to receive Covered
Bonds in definitive form. Each of Euroclear and Clearstream, Luxembourg and their respective direct and
indirect participants will maintain records of the beneficial interests in each Global Covered Bonds held
through it. While the Covered Bonds are represented by a Global Covered Bond, investors will be able to
trade their beneficial interests only through the relevant clearing systems and their respective participants.

While the Covered Bonds are represented by Global Covered Bonds, the Issuer will discharge its payment
obligation under the Covered Bonds by making payments through the relevant clearing systems. A holder of
a beneficial interest in a Global Covered Bond must rely on the procedures of the relevant clearing system
and its participants to receive payments under the Covered Bonds. The Issuer has no responsibility or
liability for the records relating to, or payments made in respect of, beneficial interests in any Global
Covered Bond.

42
Holders of beneficial interests in a Global Covered Bond will not have a direct right to vote in respect of the
Covered Bonds so represented. Instead, such holders will be permitted to act only to the extent that they are
enabled by the relevant clearing system and its participants to appoint appropriate proxies.

The fact that the Covered Bonds are not represented in physical form could, among other things:

(a) result in payment delays on the Covered Bonds because distributions on the Covered Bonds will be
sent by or on behalf of the Issuer to Euroclear or Clearstream, Luxembourg instead of directly to the
Covered Bondholders;

(b) make it difficult for the Covered Bondholders to pledge the Covered Bonds as security if the
Covered Bonds in physical form are required or necessary for such purposes; and

(c) hinder the ability of the Covered Bondholders to resell the Covered Bonds.

Covered Bonds issued under the Programme.

Covered Bonds issued under the Programme will either be fungible with an existing Series of Covered
Bonds or have different terms to an existing Series of Covered Bonds (in which case they will constitute a
new Series). All Covered Bonds will rank pari passu with each other in all respects and rateably without any
preference or priority among themselves, irrespective of their Series, for all purposes except for the timing of
the repayment of principal and the timing and amount of interest payable and will share in the security
granted by the Issuer under the Movable Mortgage over the Cover Pool and Collection Accounts Agreement
and the Deed of Charge.

Following the occurrence of an Event of Default and service by the Covered Bondholders Representative of
a Notice of Default, the Covered Bonds of all outstanding Series will become immediately due and payable
against the Issuer.

Ratings of the Covered Bonds.

The credit ratings assigned to the Covered Bonds by the Rating Agency address the expected loss that
Covered Bondholders may suffer. The expected credit ratings of the Covered Bonds are set out in the
relevant Final Terms for each Series of Covered Bonds. The Rating Agency may lower its rating or withdraw
its rating if, in the sole judgment of the Rating Agency, the credit quality of the Covered Bonds has declined
or is in question. In addition, at any time any Rating Agency may revise its relevant rating methodology with
the result that, among other things, any rating assigned to the Covered Bonds may be lowered. If any rating
assigned to the Covered Bonds is lowered or withdrawn, the market value of the Covered Bonds may reduce.

In certain circumstances, such as a downgrade in the Issuer’s rating, the Rating Agency may require that
additional Loan Assets or other Eligible Financial Assets are included in the Cover Pool above the level of
overcollateralisation required for the Issuer to satisfy the Statutory Tests in order for the rating assigned to
any outstanding Covered Bonds to be maintained. The inclusion of such additional Loan Assets or other
Eligible Financial Assets is not mandatory and the Issuer may in its discretion choose not to include any such
additional Loan Assets or Eligible Financial Assets in the Cover Pool which may result in a downgrade of
the outstanding Covered Bonds in such circumstances. In addition, should the Issuer choose to include such
additional assets in the Cover Pool to maintain the existing rating of the outstanding Covered Bonds, it is not
certain that any such Loan Assets or other Eligible Financial Assets that have been added to the Cover Pool
in excess of the level required to satisfy the Statutory Tests would benefit from the provisions granted by the
Romanian Covered Bond Law pursuant to which claw-back is not applicable to “the issuances of bonds
(including the replacement of assets within the cover pool according to Article 16) ” which would mean that
in the event of insolvency or similar proceedings relating to the Issuer, operations relating to such assets in
the Cover Pool above the level of overcollateralisation required to satisfy the Statutory Tests might be
subject to hardening periods.

43
A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision,
suspension or withdrawal at any time. In addition, the ratings assigned to the Covered Bonds may not reflect
the potential impact of all risks related to structure, market, additional factors discussed above, and other
factors that may affect the value of the Covered Bonds.

In general, European regulated investors are restricted under Regulation (EC) No. 1060/2009 (as amended)
(the CRA Regulation) from using credit ratings for regulatory purposes, unless such ratings are issued by a
credit rating agency established in the EU and registered under the CRA Regulation (and such registration
has not been withdrawn or suspended), subject to transitional provisions that apply in certain circumstances).
Such general restriction will also apply in the case of credit ratings issued by non-EU credit rating agencies,
unless the relevant credit ratings are endorsed by an EU-registered credit rating agency or the relevant non-
EU rating agency is certified in accordance with the CRA Regulation (and such endorsement action or
certification, as the case may be, has not been withdrawn or suspended, subject to transitional provisions that
apply in certain circumstances). The list of registered and certified rating agencies published by ESMA on its
website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating
agency included in such list, as there may be delays between certain supervisory measures being taken
against a relevant rating agency and the publication of the updated ESMA list. Certain information with
respect to the credit rating agencies and ratings is set out on the cover of this Base Prospectus.

Obligations under the Covered Bonds are obligations of the Issuer only.

The Covered Bonds will be solely obligations of the Issuer and will not be obligations of, or guaranteed by,
any of the Arranger, the Dealer, the Covered Bondholders Representative or any other party to the
Programme, their officers, members, directors, employees, security holders or incorporators. The Issuer will
be liable solely in its corporate capacity for their obligations in respect of the Covered Bonds and such
obligations will not be the obligations of their respective officers, members, directors, employees, security
holders or incorporators. No liability whatsoever in respect of any failure by the Issuer to pay any amount
due under the Covered Bonds shall be accepted by any of the Arranger, the Dealer, the Covered Bondholders
Representative, any company in the same group of companies as such entities or any other party to the
transaction documents relating to the Programme.

The Covered Bondholders Representative may agree to modifications to the Transaction Documents
without the Covered Bondholders’ or Secured Creditors’ prior consent.

Pursuant to the terms of the Covered Bondholders Representative Agreement, the Covered Bondholders
Representative may, without the consent or sanction of any of the Covered Bondholders or any of the other
Secured Creditors concur with the Issuer or any person in making or sanctioning any modification to the
Transaction Documents and the Conditions (other than in respect of a Covered Bondholders Reserved
Matter, as defined in Condition 14):

(a) provided that the Covered Bondholders Representative is of the opinion that such modification,
waiver or authorisation will not be materially prejudicial to the interests of any of the Covered
Bondholders; or

(b) which in the sole opinion of the Covered Bondholders Representative is of a formal, minor or
technical nature or is to correct a manifest error.

Realisation of charged assets following the occurrence of an Event of Default.

Although the Romanian Covered Bond Law states that the Covered Bondholders benefit from the movable
mortgage over the Cover Pool, the Romanian Covered Bond Legislation is not prescriptive as to the actions
the Cover Pool Administrator may take, if appointed, in relation to such mortgage. Moreover, it is unclear
what actions, if any, the Cover Pool Administrator may take in relation to the assets charged pursuant to the
Deed of Charge or the other assets not constituting part of the Cover Pool.

44
In any event, there is no guarantee that the proceeds of realisation of the assets charged for securing the
Covered Bonds will all be enforced by the Cover Pool Administrator and if enforced, will be in an amount
sufficient to repay all amounts due to the Secured Creditors (including the Covered Bondholders) under the
Covered Bonds and the Transaction Documents.

If a Cover Pool Administrator is appointed, then the Covered Bonds may be repaid sooner or later than
expected and/or in an amount that is less than the Final Redemption Amount stated in the applicable Final
Terms.

Risks related to the structure of a particular issue of the Covered Bonds

A wide range of Covered Bonds may be issued under the Programme. A number of these Covered Bonds
may have features which contain particular risks for potential investors. Set out below is a description of the
most common features:

Covered Bonds subject to optional redemption by the Issuer.

An optional redemption feature of the Covered Bonds is likely to limit their market value. During any period
when the Issuer may elect to redeem the Covered Bonds, the market value of those Covered Bonds generally
will not rise substantially above the price at which they can be redeemed. This also may be true prior to any
redemption period.

The Issuer may be expected to redeem the Covered Bonds when its cost of borrowing is lower than the
interest rate on the Covered Bonds. At those times, an investor generally would not be able to reinvest the
redemption proceeds at an effective interest rate as high as the interest rate on the Covered Bonds being
redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider
reinvestment risk in light of other investments available at that time.

If the Issuer has the right to convert the interest rate on any Covered Bonds from a fixed rate to a floating
rate, or vice versa, this may affect the secondary market and the market value of the Covered Bonds
concerned.

If the Issuer has the right to convert the interest rate on any Covered Bonds from a fixed rate to a floating
rate, or vice versa, this may affect the secondary market and the market value of the Covered Bonds
concerned. Fixed/Floating Rate Covered Bonds are Covered Bonds which may bear interest at a rate that
converts from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Where the Covered Bonds
convert from a fixed rate to a floating rate, the spread on the Fixed/Floating Rate Covered Bonds may be less
favourable than then prevailing spreads on comparable Floating Rate Covered Bonds tied to the same
reference rate. In addition, the new floating rate at any time may be lower than the rates on other Covered
Bonds. Where the Covered Bonds convert from a floating rate to a fixed rate, the fixed rate may be lower
than then prevailing rates on those Covered Bonds and could affect the market value of an investment in the
relevant Covered Bonds.

Covered Bonds which are issued at a substantial discount or premium may experience price volatility in
response to changes in market interest rates.

The market values of securities issued at a substantial discount (such as Zero Coupon Covered Bonds) or
premium to their principal amount tend to fluctuate more in relation to general changes in interest rates than
do prices for more conventional interest-bearing securities. Generally, the longer the remaining term of such
securities, the greater the price volatility as compared to more conventional interest-bearing securities with
comparable maturities.

45
The value of Fixed Rate Covered Bonds may be adversely affected by movements in market interest rates.

Investment in Fixed Rate Covered Bonds involves the risk that if market interest rates subsequently increase
above the rate paid on the Fixed Rate Covered Bonds, this will adversely affect the value of the Fixed Rate
Covered Bonds.

Future discontinuance of LIBOR, EURIBOR or ROBOR may adversely affect the value of Floating Rate
Covered Bonds which reference LIBOR, EURIBOR or ROBOR and other regulation and reform of
“benchmarks” may adversely affect the value of Covered Bonds linked to or referencing such
“benchmarks”.

On 27 July 2017, the Chief Executive of the Financial Conduct Authority in the United Kingdom, which
regulates LIBOR, announced that it does not intend to continue to persuade, or use its powers to compel,
panel banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. The
announcement indicates that the continuation of LIBOR on the current basis is not guaranteed after 2021. It
is not possible to predict whether, and to what extent, panel banks will continue to provide LIBOR
submissions to the administrator of LIBOR going forwards. This may cause LIBOR to perform differently
than it did in the past and may have other consequences which cannot be predicted.

In addition to this announcement in relation to LIBOR, there have been other recent national and
international regulatory guidance and proposals for reform of interest rates and indices which are deemed to
be “benchmarks”, including LIBOR, EURIBOR and ROBOR. Some of these reforms are already effective
while others are still to be implemented. These reforms could include, among other things, reforms to other
“benchmarks” similar to those reforms announced in relation to LIBOR, and any such reforms may cause
such “benchmarks” to perform differently than in the past, to disappear entirely, or have other consequences
which cannot be predicted. Any such consequence could have a material adverse effect on the value or
liquidity of, and return on, any Floating Rate Covered Bonds or any other Covered Bonds which are linked
to or reference a “benchmark”.

The Benchmarks Regulation was published in the Official Journal of the European Union on 29 June 2016
and applies from 1 January 2018. The Benchmarks Regulation applies to the provision of benchmarks, the
contribution of input data to a benchmark and the use of a benchmark within the European Union. It will,
among other things, (i) require benchmark administrators to be authorised or registered (or, if non-European
Union based, to be subject to an equivalent regime or otherwise recognised or endorsed) and (ii) prevent
certain uses by European Union supervised entities of “benchmarks” of administrators that are not authorised
or registered (or, if non-European Union based, not deemed equivalent or recognised or endorsed).

The Benchmarks Regulation could have a material impact on any Covered Bonds linked to or referencing a
“benchmark”, in particular, if the methodology or other terms of the “benchmark” are changed in order to
comply with the requirements of the Benchmarks Regulation. Such changes could, among other things, have
the effect of reducing, increasing or otherwise affecting the volatility of the published rate or level of the
“benchmarks”.

More broadly, any of the international or national reforms (including those announced in relation to LIBOR
and the application of any similar reforms to other “benchmarks”), or the general increased regulatory
scrutiny of “benchmarks”, could increase the costs and risks of administering or otherwise participating in
the setting of a “benchmark” and complying with any such regulations or requirements. Such factors may
have the following effects on certain “benchmarks”: (i) discourage market participants from continuing to
administer or contribute to the “benchmark”; (ii) trigger changes in the rules or methodologies used in the
“benchmark”; or (iii) lead to the disappearance of the “benchmark”. Any of the above changes or any other
consequential changes as a result of international or national reforms or other initiatives or investigations,
could have a material adverse effect on the value of and return on any Covered Bonds linked to or
referencing a “benchmark”.

46
Investors should consult their own independent advisers and make their own assessment about the potential
risks imposed by the Benchmarks Regulation reforms in making any investment decision with respect to any
Covered Bonds linked to or referencing a “benchmark”.

Investors should be aware that in the case of Floating Rate Covered Bonds, the Conditions of the Covered
Bonds provide for certain fallback arrangements in the event that a published Benchmark, including an
interbank offered rate such as LIBOR, EURIBOR, ROBOR or other relevant reference rates ceases to exist
or be published or another Benchmark Event occurs. These fallback arrangements include the possibility that
the Rate of Interest could be determined by reference to a Successor Rate or an Alternative Rate and that an
Adjustment Spread may be applied to such Successor Rate or Alternative Rate to reduce or eliminate, to the
fullest extent reasonably practicable in the circumstances, any economic prejudice or benefit (as the case
may be) to Covered Bondholders as a result of the replacement of the relevant benchmark or screen rate (as
applicable) originally specified with the Successor Rate or the Alternative Rate (as the case may be), together
with the making of certain Benchmark Amendments to the Conditions of such Covered Bonds, which in the
case of any Alternative Rate, any Adjustment Spread unless formally recommended or provided for and any
Benchmark Amendments shall be determined by the Issuer (acting in good faith, in a commercially
reasonable manner and by reference to such sources as it deems appropriate, which may include consultation
with an Independent Adviser).

In certain circumstances the ultimate fallback for the purposes of calculation of interest for a particular
Interest Period may result in the Rate of Interest for the last preceding Interest Period being used. This may
result in the effective application of a fixed rate for Floating Rate Covered Bonds based on the rate which
was last observed on the Relevant Screen Page. In addition, due to the uncertainty concerning the availability
of any Successor Rate or Alternative Rate, any determinations that may need to be made by the Issuer and
the involvement of any Independent Adviser, the relevant fallback provisions may not operate as intended at
the relevant time.

Any such consequences could have a material adverse effect on the value or liquidity of and return on any
such Covered Bonds. Moreover, any of the above matters or any other significant change to the setting or
existence of any relevant reference rate could affect the ability of the Issuer to meet its obligations under the
Floating Rate Covered Bonds or could have a material adverse effect on the value or liquidity of, and the
amount payable under, the Floating Rate Covered Bonds. Investors should consider these matters when
making their investment decision with respect to the relevant Floating Rate Covered Bonds.

General risk factors.

Set out below is a brief description of certain risks relating to the Covered Bonds generally:

Changes of law.

The structure of the issue of the Covered Bonds and the ratings which are to be assigned to them are based
on English and Romanian law and administrative practice, respectively, in effect as at the date of this Base
Prospectus, and having regard to the expected tax treatment of all relevant entities under such law and
practice. No assurance can be given as to the impact of any possible judicial decision or change to English or
Romanian law (or the laws of any other jurisdiction) (including any change in regulation which may occur
without a change in the primary legislation) or administrative practice in the UK or Romania after the date of
this Base Prospectus or can any assurance be given as to whether any such change would adversely affect the
ability of the Issuer to make payments under the Covered Bonds and/or could materially adversely impact
the value of any Covered Bonds affected by it.

Covered Bonds where denominations involve integral multiples: definitive Covered Bonds.

In relation to any issue of the Covered Bonds that have denominations consisting of a minimum Specified
Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such

47
Covered Bonds may be traded in amounts in excess of the minimum Specified Denomination that are not
integral multiples of such minimum Specified Denomination. In such a case, a Covered Bondholder who, as
a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination
in his account with the relevant clearing system at the relevant time may not receive a definitive Covered
Bond in respect of such holding (should definitive Covered Bonds be printed) and would need to purchase a
principal amount of the Covered Bonds at or in excess of the minimum Specified Denomination such that its
holding amounts to a Specified Denomination. Further, a holder who, as a result of trading such amounts,
holds an amount which is less than the minimum Specified Denomination in his account with the relevant
clearing system would not be able to sell the remainder of such holding without first purchasing a principal
amount of Covered Bonds at or in excess of the minimum Specified Denomination such that its holding
amounts to a Specified Denomination. It should further be noted that where a Covered Bondholder elects to
trade its Covered Bonds on the Bucharest Stock Exchange and consequently such Covered Bonds are cleared
through the Bucharest Central Depository, Covered Bonds can only be cleared through the Bucharest Central
Depository in specified denominations of EUR 100,000 (and not any integral multiples).

If definitive Covered Bonds are issued, the Covered Bondholders should be aware that definitive Covered
Bonds that have a denomination that is not an integral multiple of the minimum Specified Denomination
may be illiquid and difficult to trade.

Exchange rate risks and exchange controls.

The Issuer (or the Servicer on its behalf) will pay principal and interest on the Covered Bonds in the
Specified Currency. This presents certain risks relating to currency conversions if an investor’s financial
activities are denominated principally in a currency or currency unit other than the Specified Currency (the
Investor’s Currency). These include the risk that exchange rates may significantly change (including
changes due to devaluation of the Specified Currency or revaluation of the Investor’s Currency) and the risk
that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An
appreciation in the value of the Investor’s Currency relative to the Specified Currency would decrease (a) the
Investor’s Currency equivalent yield on the Covered Bonds, (b) the Investor’s Currency-equivalent value of
the principal payable on the Covered Bonds and (c) the Investor’s Currency-equivalent market value of the
Covered Bonds. As a result, investors may receive less interest or principal than expected, or no interest or
principal (in an Investor’s Currency-equivalent basis).

Government and monetary authorities may impose (as some have done in the past) exchange controls that
could adversely affect an applicable exchange rate or the ability of the Issuer to make payments in respect of
the Covered Bonds. As a result, investors may receive less interest or principal than expected, or no interest
or principal.

48
 GENERAL DESCRIPTION OF THE PROGRAMME

The following overview does not purport to be complete and is taken from, and is qualified in its entirety by,
the remainder of this Base Prospectus and, in relation to the terms and conditions of any particular Series or
Tranche of Covered Bonds, the applicable Final Terms. The Issuer and any relevant Dealer may agree that
Covered Bonds shall be issued in a form other than that contemplated in the Terms and Conditions, in which
event, if appropriate, a supplement to the Base Prospectus or a new Base Prospectus will be published.

Words and expressions defined in the “Terms and Conditions of the Covered Bonds” or elsewhere in this
Base Prospectus have the same meanings in this summary.

PRINCIPAL PARTIES

Issuer Alpha Bank Romania S.A. (ABR or the Issuer).

Arranger Barclays Bank PLC (the Arranger)

Dealer(s) Barclays Bank PLC and/or any other dealers appointed from time to time
in accordance with the Programme Agreement.

Servicer ABR (in its capacity as the servicer and, together with any replacement
servicer appointed pursuant to the Servicing and Cash Management
Agreement upon the occurrence of a Servicer Termination Event and
pursuant to the applicable law from time to time (the Servicer)) will
service the Loans and Related Security in the Cover Pool pursuant to the
Servicing and Cash Management Agreement.

The Servicer shall also undertake certain notification and reporting

services together with account handling services and cash management
activities (the Servicing and Cash Management Services) in accordance
with the Servicing and Cash Management Agreement and the Romanian
Covered Bond Legislation, including the calculation of the Statutory
Tests. See “Changes to The Cover Pool – Servicing and collection
procedures” below.

Asset Monitor (in Romanian, An asset monitor (in Romanian, agent), being an independent financial
agent) auditor approved by the NBR and appointed pursuant to the Asset Monitor
Agreement and the Romanian Covered Bond Legislation as an
independent monitor to perform, among other things, certain tests and
recalculations in respect of the Statutory Tests and notifications when
required in accordance with the requirements set out under the Romanian
Covered Bond Legislation and the Asset Monitor Agreement. The initial
Asset Monitor is PricewaterhouseCoopers Audit S.R.L., a financial
auditor organised and existing under the laws of Romania, having its
registered office at Lakeview Building, 301-311 Barbu Vacarescu Street,
Bucharest, 2, Romania, sole registration code (C.U.I.) 4282940, registered
with the Bucharest Commercial Registry under No. J40/17223/1993,
registered as a financial auditor with the Public Electronic Register of
Financial Auditors and Audit Firms under No.6 (the Asset Monitor). The
appointment of the Asset Monitor may need to be re-confirmed or a new
Asset Monitor may be appointed by the Issuer for the purposes of each
new NBR Approval (as defined below). The Asset Monitor will appoint
from time to time an individual to act as permanent representative of the

49
 Asset Monitor as set out in the Asset Monitor Agreement.

The Asset Monitor shall, among other things, check compliance by the
Issuer with the provisions of the Romanian Covered Bond Legislation, the
Base Prospectus and applicable Final Terms and will immediately, but not
later than two (2) Bucharest Business Days after ascertaining occurrence
of such breach, notify in writing the Issuer, the Covered Bondholders
Representative and the NBR as set out in the Romanian Covered Bond
Legislation and in the Asset Monitor Agreement in case of any non-
compliance by the Issuer.

For the avoidance of any doubt, the Asset Monitor will not perform any
procedures in order to confirm if the Base Prospectus was prepared in
accordance with the Commission Regulation (EC) No. 809/2004 of 29
April 2004 implementing the Prospectus Directive as regards information
contained in prospectuses as well as the format, incorporation by reference
and publication of such prospectuses and dissemination of advertisements.
Moreover, the Asset Monitor will not perform any procedures to confirm
if the Base Prospectus has been drafted and published in accordance with
any applicable capital market legislation.

NBR Approval means the approval that is issued by the National Bank of
Romania to an issuer in respect of the issuance of one or more series of
covered bonds up to a specified amount and which remains valid for 15
months from the date on which such approval was communicated to the
issuer.

Principal Paying Agent The Bank of New York Mellon, London Branch (the Principal Paying
Agent and, together with any agent appointed from time to time under
the Agency Agreement, the Paying Agents). The Principal Paying Agent
will act as such pursuant to the Agency Agreement.

Transfer Agent The Bank of New York Mellon SA/NV, Luxembourg Branch has been
appointed pursuant to the Agency Agreement as transfer agent (the
Transfer Agent).

Registrar The Bank of New York Mellon SA/NV, Luxembourg Branch has been
appointed pursuant to the Agency Agreement as registrar (the Registrar).

Account Bank The Bank of New York Mellon, London Branch has agreed to act as
account bank (the Account Bank) pursuant to the Bank Account
Agreement to hold the Offshore Bank Accounts. In the event that the
Account Bank ceases to be an Eligible Institution the Servicer will be
obliged to transfer the Offshore Bank Accounts to another bank or
financial institution located outside of Romania and which is an Eligible
Institution from time to time.

Eligible Institution means any bank or financial institution which has

the Account Bank Required Ratings (provided that such ratings are
always sufficient for the Covered Bonds to comply with Article 129(1)(c)
of the CRR (defined below)) (or such other ratings that may be agreed
between the parties to the Bank Account Agreement and the Rating
Agency from time to time).

Account Bank Required Ratings means a deposit rating of Baa3.

50
 Offshore Bank Accounts means each of the Transaction Accounts and
any Swap Collateral Accounts (each as defined below) and any other
account designated as an Offshore Bank Account by the Issuer, the
Security Trustee and the Covered Bondholders Representative from time
to time, each of which is maintained with the Account Bank.

Collection Account Bank ABR

Covered Bondholders A representative of the Covered Bondholders (in Romanian,

Representative (in Romanian, reprezentantul deținătorilor de obligațiuni) (together with any successor
reprezentantul deţinătorilor de covered bondholders representative appointed from time to time, the
obligaţiuni ipotecare) Covered Bondholders Representative) shall be appointed in accordance
with the Romanian Covered Bond Legislation by the holders of the first
Series of Covered Bonds issued under the Programme. The Covered
Bondholders Representative is appointed to, among other things,
represent the Covered Bondholders of all Series of Covered Bonds issued
under the Programme, exercise the rights of the Covered Bondholders of
all Series, provide certain notifications and ensure implementation of the
decisions of the Covered Bondholders when required in accordance with
the Romanian Covered Bond Legislation and the Covered Bondholders
Representative Agreement. The Covered Bondholders Representative
will represent the holders of all existing and subsequent Series of
Covered Bonds issued until and unless it is replaced by the Covered
Bondholders and will hold the security granted pursuant to the Movable
Mortgage over the Cover Pool and Collection Accounts Agreement in the
name and on behalf of the Covered Bondholders. See “Security for the
Covered Bonds” below. In accordance with the Romanian Covered Bond
Legislation the Covered Bondholders Representative shall be responsible
for the following:

(i) to represent the Covered Bondholders in relation to the Issuer,

public authorities and any other third party, including in a general
meeting of the creditors of the Issuer and the judicial liquidator,
in case of the Issuer’s insolvency, within the limits set by its
mandate pursuant to the Covered Bondholders Representative
Agreement;

(ii) to exercise, on behalf of the Covered Bondholders, their rights

arising from the ownership of the Covered Bonds (except for the
exercise of voting rights in a general meeting of the Covered
Bondholders which may only be exercised by the Covered
Bondholders);

(iii) to inform the Issuer and the Cover Pool Administrator no more
than 24 hours after the relevant event/the information has been
brought to its attention with respect to the convening of and the
resolutions of each general meeting of the Covered Bondholders,
as well as with respect to fulfilment of the publicity requirements
in respect of such meetings, by sending out copies of the relevant
documents; and

(iv) to use its reasonable endeavours to ensure the implementation of

51
 the resolutions passed by a general meeting of the Covered
Bondholders.

It is proposed that BNY Mellon Corporate Trustee Services Limited will

be appointed as the Covered Bondholders Representative by the holders
of the first Series of Covered Bonds issued under the Programme on the
terms of the Covered Bondholders Representative Agreement
substantially in the form attached as an Annex to this Base Prospectus.
The appointment of the Covered Bondholders Representative shall be
subject to the passing of a resolution confirming such appointment and
the terms of such appointment by the holders of the first Series of
Covered Bonds issued under the Programme at a meeting of such
Covered Bondholders to be convened after the first issuance of Covered
Bonds under the Programme in accordance with, inter alia, Article 23 of
the Romanian Covered Bond Law.

Security Trustee BNY Mellon Corporate Trustee Services Limited, acting through its
office at One Canada Square, London E14 5AL (the Security Trustee)
has been appointed to act as security trustee to hold the benefit of all
security granted by the Issuer (on trust for the Covered Bondholders and
the other Secured Creditors) under the Deed of Charge.

Hedging Counterparties The Issuer may, from time to time, enter into Hedging Agreements with
various swap providers and the Covered Bondholders Representative
(once appointed) to hedge certain currency and/or, if and to the extent
permitted by the Romanian Covered Bond Legislation, other risks (each a
Covered Bond Swap Provider) and interest risks (each an Interest Rate
Swap Provider and, together with the Covered Bond Swap Providers,
the Hedging Counterparties and each a Hedging Counterparty)
associated with the Covered Bonds and the Cover Pool. The Hedging
Counterparties will act as such pursuant to the relevant Hedging
Agreements (as defined herein). Each Hedging Counterparty will be
required to satisfy the conditions set out under the Romanian Covered
Bond Legislation (as of the date hereof, such conditions being those set
out under Articles 12, 14 and 18(8) of the Romanian Covered Bond Law
and Article 31 of the Romanian Covered Bond Regulation).

Cover Pool Administrator In accordance with the Romanian Covered Bond Legislation, the NBR
shall be entitled to appoint a cover pool administrator to administer the
Cover Pool upon or following the occurrence of an Event of Default
(other than bankruptcy, to which the following sentence applies) in
accordance with the Romanian Covered Bond Legislation (the Cover
Pool Administrator). In the case of the Issuer’s bankruptcy, a new
Cover Pool Administrator will be appointed by the bankruptcy judge,
after consultation with the NBR and will, by operation of law, replace the
Cover Pool Administrator initially appointed by the NBR (if any). The
Cover Pool Administrator shall be entitled to administer the Cover Pool
in the manner it determines most appropriate in the circumstances,
including selling some or all of the Loans in the Cover Pool; however,
the Cover Pool Administrator shall not be entitled to accelerate the
Covered Bonds unless the Covered Bondholders have provided an
instruction to accelerate the Covered Bonds in accordance with the
Conditions and consultation with the NBR in respect of such acceleration

52
 has been completed. Moreover, the Cover Pool Administrator must
consult with the NBR before engaging in any of the following operations:
(a) deferral of the maturity date of the Covered Bonds; (b) sale of part or
all of the Loans in the Cover Pool; (c) contracting new financings to
cover a liquidity temporary shortfall, based on the Cover Pool; and (d)
acceleration of the Covered Bonds.

Liquidity Facility Provider Upon being appointed, the Cover Pool Administrator may, following
consultation with the NBR, enter into a financing facility arrangement
with a third party facility provider (a Liquidity Facility Provider) for
the provision of a liquidity facility to cover any temporary shortfalls that
may occur in connection with payments to be made by the Issuer under
the Covered Bonds.

Luxembourg Listing Agent The Bank of New York Mellon SA/NV, Luxembourg Branch acting
through its offices at Vertigo Building – Polaris, 2-4 rue Eugène Ruppert,
L-2453 Luxembourg (the Luxembourg Listing Agent).

Bucharest Listing Agent Alpha Finance Romania S.A. acting through its offices at 237 B Calea
Dorobantilor 1st District, 2nd floor, 010566 Bucharest, Romania (the
Bucharest Listing Agent).

Rating Agency Moody’s Investors Service (Moody’s and the Rating Agency).

PROGRAMME DESCRIPTION

Description: Alpha Bank Romania S.A.’s EUR 1 billion Global Covered Bond
Programme.

Programme Amount Up to EUR 1 billion (or its equivalent in other currencies determined as
described in the Programme Agreement) outstanding at any time as
described herein. The Issuer may increase the amount of the Programme
in accordance with the terms of the Programme Agreement.

Issuance in Series Covered Bonds will be issued in Series, but on different terms from each
other, subject to the terms set out in the relevant Final Terms in respect of
such Series. Save in respect of the first issue of Covered Bonds, Covered
Bonds issued under the Programme will either be fungible with an
existing Series of Covered Bonds or have different terms from an existing
Series of Covered Bonds (in which case they will constitute a new Series).
The Covered Bonds will at all times rank pari passu without any
preference among themselves, irrespective of their Series, for all purposes
except for the timing of the repayment of principal and the timing and
amount of interest payable. The Issuer will issue Covered Bonds without
the prior consent of the existing Covered Bondholders.

As used herein, Tranche means Covered Bonds which are identical in all
respects (including as to listing and admission to trading) and Series
means a Tranche of Covered Bonds together with any further Tranche or
Tranches of Covered Bonds which are (i) expressed to be consolidated
and form a single series and (ii) identical in all respects (including as to
listing and admission to trading) except for their respective Issue Dates,
Interest Commencement Dates and/or Issue Prices.

53
Final Terms Final terms (the Final Terms) will be issued and published in accordance
with the terms and conditions of the Covered Bonds (the Conditions)
prior to the issue of each Series or Tranche detailing certain relevant terms
thereof which, for the purposes of that Series only, complete the
Conditions and the Base Prospectus and must be read in conjunction with
the Conditions and the Base Prospectus. The terms and conditions
applicable to any particular Series are the Conditions completed by the
relevant Final Terms.

Conditions precedent to the It is a condition precedent to the issuance of a new Series or Tranche of
Issuance of a new Series or Covered Bonds that, among other things, (i) there is no Issuer Event
Tranche of Covered Bonds outstanding and that such issuance would not cause an Issuer Event,
(ii) such issuance would not result in a breach of any of the Statutory
Tests, (iii) the Rating Agency has confirmed the then current rating of all
Covered Bonds issued and outstanding under the Programme and that the
ratings of such Covered Bonds will not be adversely affected or
withdrawn as a result of such issuance, and (iv) such issuance has been
approved by the NBR in accordance with the Romanian Covered Bond
Legislation, if applicable. Prior to the issuance of any such new Series or
Tranche of Covered Bonds, the Issuer will deliver to the Covered
Bondholders Representative a certificate signed by two directors of the
Issuer confirming that each of the conditions precedent to the issuance of
such new Series or Tranche of Covered Bonds has been met, on which
such certificate the Covered Bondholders Representative shall be entitled
to rely without liability.

Proceeds of the issue of The gross proceeds from each issue of Covered Bonds will be used by the
Covered Bonds Issuer to fund its general corporate purposes unless otherwise specified in
the applicable Final Terms for a Series of Covered Bonds.

Form of Covered Bonds The Covered Bonds will be issued in either bearer or registered form as
specified in the applicable Final Terms. Covered Bonds in registered form
(Registered Covered Bonds) will not be exchangeable for Covered
Bonds in bearer form (Bearer Covered Bonds) and vice versa.

Issue Dates The date of issue of a Series or Tranche as specified in the relevant Final
Terms (each, the Issue Date in relation to such Series or Tranche).

Specified Currency Subject to any applicable legal or regulatory restrictions, such currency or
currencies as may be agreed from time to time by the Issuer and the
relevant Dealer(s) (as set out in the applicable Final Terms).

Denominations The Covered Bonds will be issued in such denominations as may be

agreed between the Issuer and the relevant Dealer(s) and set out in the
applicable Final Terms. The minimum denomination of each Covered
Bond will be at least EUR 100,000 (or, if the Covered Bonds are
denominated in a currency other than Euro, at least the equivalent amount
in such currency) or such other higher amount as is required from time to
time by the relevant central bank (or equivalent body) or any laws or
regulations applicable to the relevant Specified Currency.

Fixed Rate Covered Bonds The applicable Final Terms may provide that certain Covered Bonds will

54
 bear interest at a fixed rate (Fixed Rate Covered Bonds), which will be
payable on each Interest Payment Date and on the applicable redemption
date and will be calculated on the basis of such Day Count Fraction as
may be agreed between the Issuer and the relevant Dealer(s) (as set out in
the applicable Final Terms).

Floating Rate Covered Bonds The applicable Final Terms may provide that certain Covered Bonds bear
interest at a floating rate (Floating Rate Covered Bonds). Floating Rate
Covered Bonds will bear interest at a rate determined:

(i) on the same basis as the floating rate under a notional interest rate
swap transaction in the relevant Specified Currency governed by
an agreement incorporating the ISDA Definitions; or

(ii) on the basis of a reference rate appearing on the agreed screen

page of a commercial quotation service; or

(iii) on such other basis as may be agreed between the Issuer and the
relevant Dealer(s),

as set out in the applicable Final Terms.

The margin (if any) relating to such floating rate (the Margin) will be
agreed between the Issuer and the relevant Dealer(s) for each issue of
Floating Rate Covered Bonds, as set out in the applicable Final Terms.

ISDA Definitions means the 2006 ISDA Definitions, as published by

ISDA.

Other provisions in relation Floating Rate Covered Bonds may also have a Maximum Rate of Interest,
to Floating Rate Covered a Minimum Rate of Interest or both (as indicated in the applicable Final
Bonds Terms). Interest on Floating Rate Covered Bonds in respect of each
Interest Period, as agreed prior to issue by the Issuer and the relevant
Dealer(s), will be payable on such Interest Payment Dates, and will be
calculated on the basis of such Day Count Fraction, in each case as may
be agreed between the Issuer and the relevant Dealer(s) (as set out in the
applicable Final Terms).

Interest Period means the period from (and including) an Interest

Payment Date (or, if none, the Interest Commencement Date) to (but
excluding) the next (or first) Interest Payment Date.

Interest Commencement Date means, in the case of interest-bearing

Covered Bonds, the date specified in the applicable Final Terms from
(and including) which the relevant Covered Bonds will accrue interest.

Maximum Rate of Interest means in respect of Floating Rate Covered

Bonds the percentage rate per annum (if any) specified in the applicable
Final Terms.

Minimum Rate of Interest means in respect of Floating Rate Covered

Bonds the percentage rate per annum (if any) specified in the applicable
Final Terms.

55
Benchmark Discontinuation In the case of Floating Rate Covered Bonds, if the Issuer determines that a
Benchmark Event has occurred, the relevant benchmark or screen rate
may be replaced by a Successor Rate or, if there is no Successor Rate but
the Issuer determines there is an Alternative Rate (acting in good faith, in
a commercially reasonable manner and by reference to such sources as it
deems appropriate, which may include consultation with an Independent
Adviser), such Alternative Rate. An Adjustment Spread may also be
applied to the Successor Rate or the Alternative Rate (as the case may be),
together with any Benchmark Amendments (which in the case of any
Alternative Rate, any Adjustment Spread unless formally recommended
or provided for and any Benchmark Amendments shall be determined by
the Issuer, acting in good faith, in a commercially reasonable manner and
by reference to such sources as it deems appropriate, which may include
consultation with an Independent Adviser). This is further described in
Condition 4.2(j).

Zero Coupon Covered Bonds The applicable Final Terms may provide that Covered Bonds, bearing no
interest (Zero Coupon Covered Bonds), may be offered and sold at a
discount to their nominal amount.

Ranking of the Covered All Covered Bonds will rank pari passu and pro rata without any
Bonds preference or priority among themselves, irrespective of their Series or
Tranche, for all purposes except for their respective Issue Dates and
Interest Commencement Dates and/or Issue Prices.

Taxation All payments of principal, interest and other proceeds (if any) on the
Covered Bonds by or on behalf of the Issuer will be made free and clear
of any withholding or deduction for, or on account of, any taxes, unless
the Issuer is required by applicable law to make such a withholding or
deduction. In the event that such withholding, or deduction is required by
law, there will be no requirement to pay any additional amounts in respect
of such withholding or deduction.

Status of the Covered Bonds The Covered Bonds will be issued on an unconditional basis and in
accordance with Law No. 304 of 27 November 2015 on issuances of
covered bonds, as published in the Official Gazette of Romania No. 902
of 4 December 2015, as such may be amended at any time (the Romanian
Covered Bond Law) and Regulation No. 1 of 3 March 2016 on issuances
of covered bonds, as published in the Official Gazette of Romania No.
184 bis of 11 March 2016, as such may be amended from time to time
(the Romanian Covered Bond Regulation and, together with the
Romanian Covered Bond Law, the Romanian Covered Bond
Legislation). The Covered Bonds are backed by assets forming the Cover
Pool of the Issuer and have the benefit of a movable mortgage established
over such assets, created pursuant to the provisions of the Movable
Mortgage over the Cover Pool and Collection Accounts Agreement and
the Romanian Covered Bond Legislation.

Security for the Covered By operation of the Romanian Covered Bond Law and in accordance with
Bonds the Transaction Documents, the Cover Pool (and, upon enforcement or
insolvency or similar proceedings relating to the Issuer, all cash flows
derived therefrom, such as any amounts standing to the credit of the ABR

56
Collection Accounts, the Transaction Accounts or the Third Party
Collection Account(s)) will be available to satisfy the obligations of the
Issuer to the Covered Bondholders and to the Hedging Counterparties on
a pari passu basis in priority to the Issuer’s obligations to any other
creditors other than creditors mandatorily preferred or provided by law,
until the repayment in full of the Covered Bonds. As at the date of this
Base Prospectus, the only mandatorily preferred creditors are the Asset
Monitor, the Cover Pool Administrator and any Liquidity Facility
Provider.

Pursuant to the Movable Mortgage over the Cover Pool and Collection
Accounts Agreement, security will be created initially in favour of the
Asset Monitor acting on behalf of the Covered Bondholders, and, once the
Covered Bondholders Representative is appointed, transferred in favour
of the Covered Bondholders Representative acting on behalf of the
Covered Bondholders. In the event of replacement of the Covered
Bondholders Representative, the Movable Mortgage over the Cover Pool
and Collection Accounts Agreement will be transferred to such new
Covered Bondholders Representative. The Movable Mortgage over the
Cover Pool and Collection Accounts Agreement will be registered with
the National Register for Movable Property Publicity (the National
Register) for opposability purposes.

Pursuant to the Deed of Charge, security will be created in favour of the

Security Trustee (acting on behalf of the Cover Pool Secured Creditors) in
respect of the Hedging Agreements and the other English law-governed
Transaction Documents (other than the Deed of Charge) and the
Transaction Accounts.

Collection Account Required Ratings means Caa2.

Cover Pool Secured Creditors means the Covered Bondholders and any
other parties which under the Romanian Covered Bond Legislation
benefit from priority rights against any other creditors upon enforcement
or other realisation of the Cover Pool Assets or any other equivalent,
subsequent or superior rights over or in relation to the Cover Pool (these
being, subject to the provisions of the Romanian Covered Bond Law, the
Hedging Counterparties (if any) and the Privileged Creditors).

Privileged Creditors means the creditors mandatorily preferred to the

Covered Bondholders pursuant to the Romanian Covered Bond
Legislation which are provided by the Romanian Covered Bond Law as
being the Cover Pool Administrator (if appointed), the Asset Monitor and
any Liquidity Facility Provider that may be appointed by the Cover Pool
Administrator from time to time.

Third Party Collection Account means any bank account(s) to be

opened upon the occurrence of a TPCA Event in the name of the Issuer or
the Covered Bondholders Representative (as the case may be) with a
Romanian credit institution which has the Collection Account Required
Ratings and, where the bank account(s) are opened in the name of the
Issuer, provided that (i) the credit institution agrees to grant control over
such bank account(s) to the Covered Bondholders Representative on

57
 terms satisfactory to the Covered Bondholders Representative and (ii)
such bank account(s) are subject to the Movable Mortgage over the Cover
Pool and Collection Accounts Agreement.

TPCA Event means the earlier to occur of: (i) the Issuer’s long-term local
and foreign currency deposit rating by the Rating Agency being
downgraded to Caa2 or lower; (ii) an Issuer Event; and (iii) a Servicer
Termination Event.

Cross-collateralisation and By operation of the Romanian Covered Bond Law and in accordance with
Recourse the Transaction Documents, the Cover Pool Assets shall form a single
portfolio, irrespective of the date of assignment to the Cover Pool and
shall be held for the benefit of the Cover Pool Secured Creditors as
provided by the Romanian Covered Bond Legislation irrespective of the
Issue Date of the relevant Series. The Covered Bondholders shall have
recourse to the Cover Pool.

The Cover Pool Assets may not be seized or attached in any form by
creditors of the Issuer other than by the Cover Pool Secured Creditors (but
provided that none of the Cover Pool Secured Creditors (other than the
Covered Bondholders) may start enforcement prior to initiation of such
proceedings by the Covered Bondholders).

In order to ensure that the Cover Pool is, at any time, sufficient to meet
the payment obligations of the Issuer under the Covered Bonds, the Issuer
shall be entitled, within certain limits and upon certain conditions, to
effect certain changes to the Cover Pool Assets comprising the Cover
Pool. See “Changes to The Cover Pool” below.

Issue Price Covered Bonds of each Series may be issued at par or at a premium or
discount to par on a fully-paid basis (in each case, the Issue Price for
such Series or Tranche) as specified in the relevant Final Terms in respect
of such Series.

Interest Payment Dates In relation to any Series of Covered Bonds, the Interest Payment Dates
will be specified in the applicable Final Terms.

Redemption The applicable Final Terms will indicate either that the relevant Series of
Covered Bonds cannot be redeemed prior to their stated maturity or that
such Series of Covered Bonds can be redeemed prior to their stated
maturity for taxation reasons in the manner set out in the Conditions, or
that such Covered Bonds will be redeemable at the option of the Issuer
and/or the Covered Bondholders upon giving notice to the Covered
Bondholders or the Issuer (as the case may be), on a date or dates
specified prior to such stated maturity and at a price or prices and on such
other terms as may be agreed between the Issuer and the relevant
Dealer(s) (as set out in the applicable Final Terms).

Unless previously redeemed or purchased and cancelled, each Covered

Bond will be redeemed by the Issuer at at least 100% of its nominal value
on its scheduled maturity date.

Final maturity The final maturity date for each Series (the Final Maturity Date) will be
specified in the relevant Final Terms as agreed between the Issuer and the

58
 relevant Dealer(s). Unless specified otherwise in the Final Terms or
previously redeemed as provided in the Conditions, the Covered Bonds of
each Series will be redeemed at their Principal Amount Outstanding on
the relevant Final Maturity Date.

If the Covered Bonds are not redeemed in full on the relevant Final
Maturity Date, an Event of Default will occur and the Covered
Bondholders Representative shall serve a Notice of Default on the Issuer
in accordance with the Conditions and shall notify the Asset Monitor who
as soon as possible but not later than five (5) Bucharest Business Days
after becoming aware of such an event and obtaining relevant evidence of
the occurrence of such event, shall request the NBR to appoint a Cover
Pool Administrator, where appropriate. The NBR will then determine
whether to appoint a Cover Pool Administrator to administer the Cover
Pool going forwards.

The Final Redemption Amount will not be less than the principal amount
outstanding of the relevant Covered Bonds.

Ratings Each Series issued under the Programme may be assigned a rating by the
Rating Agency as set out in the applicable Final Terms.

Approval, listing and It is intended that the Covered Bonds issued under the Programme shall
admission to trading be admitted to trading on the regulated market of the Luxembourg Stock
Exchange and to be listed on the Official List.

In addition, in accordance with Article 25(2) of the Romanian Covered

Bond Law, the Issuer must apply for admission of the Covered Bonds to
trading on the Bucharest Stock Exchange to the extent that the technical
conditions for trading and settling covered bonds denominated in a non-
leu currency are in place at the time of issuance of such covered bonds. It
is, therefore, also intended that the Covered Bonds issued under the
Programme shall be admitted to trading on the regulated market of the
Bucharest Stock Exchange.

Covered Bonds issued under the Programme may be unlisted or may be

listed or admitted to trading, as the case may be, on other stock exchanges
or markets agreed between the Issuer, the Covered Bondholders
Representative (acting upon the instructions of the Covered Bondholders)
and the relevant Dealer(s) in relation to each issue. The Final Terms
relating to each Tranche of the Covered Bonds will state whether or not
the Covered Bonds are to be listed and/or admitted to trading and, if so,
on which other stock exchanges or markets.

Clearing Systems Euroclear Bank S.A./N.V. (Euroclear), and/or Clearstream Banking, S.A.
(Clearstream, Luxembourg) and Depozitarul Central S.A. (the
Bucharest Central Depository) in relation to any Series of Covered
Bonds or any other clearing system as may be specified in the relevant
Final Terms.

Selling Restrictions There will be customary restrictions on the offer, sale and transfer of the
Covered Bonds in the United States, the European Economic Area
(including the United Kingdom and Romania) and such other restrictions

59
 as may be required in connection with the offering and sale of a particular
Tranche of Covered Bonds.

Romanian Covered Bond The Covered Bonds will be issued pursuant to the Romanian Covered
Legislation Bond Legislation.

Governing law The Bank Account Agreement, the Deed of Charge, the Agency
Agreement, the Programme Agreement, each Subscription Agreement and
each Hedging Agreement (if any) and any non-contractual obligations
arising out of or in connection with any of them will be governed by, and
construed in accordance with, English law.

The Covered Bonds and any non-contractual obligations arising out of or

in connection with any of them will be governed by and construed in
accordance with English law, save as stated under “Romanian law
applicable to the Covered Bonds” below.

The Movable Mortgage over the Cover Pool and Collection Accounts
Agreement, the Covered Bondholders Representative Agreement, the
Asset Monitor Agreement and the Servicing and Cash Management
Agreement will be governed by and construed in accordance with
Romanian law.

Romanian law applicable to The Covered Bonds, although otherwise expressed to be governed by, and
the Covered Bonds construed in accordance with, English law, and the Cover Pool will be
subject to and will benefit from those provisions of the Romanian
Covered Bond Legislation, Law No. 85 of 25 June 2014 on pre-
insolvency and insolvency proceedings, as published in the Official
Gazette of Romania No. 466 of 25 June 2014, as such may be amended
from time to time (the Romanian Insolvency Law), Law No. 312 of 4
December 2015 on the recovery and resolution of credit institutions and
investment firms and for amending and supplementing certain normative
acts regarding financial matters, as published in the Official Gazette of
Romania No. 920 of 11 December 2015, as such may be amended at any
time (the Romanian BRR Law) and any other provisions of Romanian
law applicable to or relevant for the Covered Bonds. Therefore, the
Covered Bonds will need to satisfy requirements of the Romanian
Covered Bond Legislation (as such may be amended from time to time)
and the Cover Pool and its maintenance will be governed by Romanian
law, notwithstanding that the governing law of the underlying Cover Pool
Assets may be other than Romanian law. Also, the provisions of Chapter
V (Special Provisions regarding the Administration of the Cover Pool and
Bankruptcy of the Issuers) of the Romanian Covered Bond Law and other
relevant provisions of the Romanian Covered Bond Legislation, the
Romanian Insolvency Law and the Romanian BRR Law will apply to the
Covered Bonds and the Cover Pool in the case of bankruptcy, insolvency
or pre-insolvency proceedings in respect of the Issuer.

CREATION AND ADMINISTRATION OF THE COVER POOL

The Cover Pool Pursuant to the Romanian Covered Bond Legislation, the Cover Pool
constitutes a separate patrimony of the Issuer for the purpose of fulfilling
its obligations arising in relation to the Covered Bonds. The Cover Pool

60
 may secure Covered Bonds from multiple Series, in which case all
Covered Bondholders will have equal ranking. The following assets may
be included in the Cover Pool (each a Cover Pool Asset and collectively,
the Cover Pool or the Cover Pool Assets), to the extent they meet the
eligibility requirements set out under the Romanian Covered Bond
Legislation, the Servicing and Cash Management Agreement and this
Base Prospectus (as updated and supplemented from time to time) as
follows and as such assets are registered from time to time in the Internal
Cover Pool Assets:

(a) claims arising out of a mortgage loan (i.e. loans which are fully
secured with an immovable mortgage or similar rights and which
are granted for acquiring or maintaining the ownership right over
a plot of land and/or an existing or future building or for
rehabilitating, modernising, consolidating or extending a building
or for repaying such loan) (the Loans) together with any ancillary
rights thereof (i.e. rights in rem or in personam securing a claim,
including movable and real estate mortgages and receivables
arising out of insurance agreements regarding the mortgaged real
estate assets and out of life insurance agreements) (the Related
Security and, together with the Loans, the Loan Assets);

(b) derivative financial instruments which meet the criteria pursuant

to the Romanian Covered Bond Legislation; and

(c) any other financial assets that are Eligible Financial Assets (as
defined below), in each case together with any ancillary rights
thereof.

Pursuant to the Romanian Covered Bond Legislation, the Issuer is

required to create a movable mortgage over the Cover Pool Assets.

The movable mortgage will be registered with the National Register in the
name of the Asset Monitor, but on behalf of the Covered Bondholders,
prior to the offering of the Covered Bonds for subscription. The movable
mortgage will be transferred in the name of the Covered Bondholders
Representative after its appointment by the general meeting of the
Covered Bondholders. According to the Romanian Covered Bond Law,
such movable mortgage must not also be registered in the relevant land
register.

In accordance with Romanian Covered Bond Law, the revenues generated

by the Loans included in the Cover Pool, including from enforcement of
any guarantees related to such Loans (such as cash flows from any
enforcement of any mortgage or any guarantee in respect of a Prima Casa
Loan), represent revenues related to the Cover Pool within the limit of the
value recorded in the Internal Cover Pool Register as regards that Loan.

CHANGES TO THE COVER POOL

Changes to the Cover Pool The Issuer shall be required, subject to making the necessary registrations
with respect to the Cover Pool Assets in the Internal Cover Pool Register
(in Romanian, Registrul de evidenţă internă), to allocate Additional
Cover Pool Assets to the Cover Pool and/or remove or substitute Cover
Pool Assets where so required in accordance with the Romanian Covered

61
Bond Legislation, subject to observing the requirements set out by the
Romanian Covered Bond Legislation (one of the requirements being the
prior written consent of the Asset Monitor, subject to the provisions of
article 17.2 of the Romanian Covered Bond Law); in particular, if at any
time while Covered Bonds remain outstanding under the Programme (i)
the weighted average term to maturity of the Loans and other receivables
included in the Cover Pool falls below the weighted average term to
maturity of the Covered Bonds or (ii) the Cover Pool Assets no longer
fulfil the Eligibility Criteria, the Issuer must ensure that the Cover Pool is
updated accordingly and the Cover Pool Assets no longer fulfilling the
Eligibility Criteria are removed from the Cover Pool.

Non-eligible Cover Pool Assets may be substituted with other Eligible

Financial Assets if: (i) the Issuer does not have other eligible Loans to be
included in the Cover Pool; (ii) the relevant Eligible Financial Assets are
not subject to a security interest; (iii) the relevant Eligible Financial
Assets do not have any arrears in payment; and (iv) the aggregated value
of all Eligible Financial Assets does not exceed 15% of the book value of
the Cover Pool.

Additional Cover Pool Assets means any further assets included in the
Cover Pool by the Issuer in accordance with the Servicing and Cash
Management Agreement and which are either Eligible Financial Assets
or Loan Assets which satisfy the Eligibility Criteria.

Eligible Financial Assets means any financial assets with no arrears in

payment, specified in the Romanian Covered Bond Legislation as being
eligible for inclusion in the Cover Pool which as at the date of this Base
Prospectus includes the following:

(a) exposures towards:

(i) the Romanian Government, National Bank of Romania

or territorial-administrative units in Romania;

(ii) central authorities, central banks, public sector entities,

regional authorities or local authorities in the EU that
qualify at least for step 2 credit quality, according to the
CRR;

(iii) multilateral development banks and international

organisations that qualify for a risk weighting equal to
zero in accordance with part III, title II, chapter 2 of the
CRR;

(iv) central authorities of third states, central banks of third

states, multilateral development banks, international
organisations that qualify for step 1 credit quality, as
provided in part III, title II, chapter 2 of the CRR, and
exposures for the purposes of this paragraph (iv), that
qualify at least for step 2 credit quality, in accordance
with part III, title II, chapter 2 of the CRR, provided that
they do not exceed the limit in article 129, paragraph
(1)(b) of the CRR; and

62
(b) exposures to credit institutions that qualify for step 1 credit
quality, as provided in part III, title II, chapter 2 of the CRR. The
total amount of such exposures should not exceed the limit set
out in article 129, paragraph (1)(c) of the CRR. The exposures to
EU institutions with a maturity not exceeding 100 days are not
subject to the requirements for step 1 credit quality, but the
respective credit institutions must qualify at least for step 2 of
credit quality, in accordance with part III, title II, chapter 2 of the
CRR.

Upon any addition to the Cover Pool of any Additional Cover Pool
Assets, the Issuer shall deliver to the Covered Bondholders
Representative on the applicable transfer date or the Issue Date, as
applicable, a certificate, or as the case may be, procure the delivery of a
certificate confirming that (i) such Additional Cover Pool Assets comply
with the Eligibility Criteria (in the case of Loan Assets) or are Eligible
Financial Assets and in each case are subject to the Movable Mortgage
over the Cover Pool and (ii) no Issuer Insolvency Event (as defined
below) or a breach of any Statutory Test has occurred or, as a result of
the addition of such Additional Cover Pool Assets to the Cover Pool, will
occur.

Issuer Insolvency Event means in relation to the Issuer:

(a) an order is made or an effective resolution passed for the

liquidation or winding up of the Issuer, except for the purposes of
a reconstruction, amalgamation or merger or following the
transfer of all or substantially all of the assets of the relevant
entity, the terms of which have previously been approved in
writing by the Covered Bondholders Representative or by an
extraordinary resolution of the Covered Bondholders (of all
Series taken together as a single Series);

(b) the licence of the Issuer is withdrawn by the NBR;

(c) the Issuer stops or threatens to stop payment to its creditors

generally;

(d) the Issuer’s solvency ratio (as referred to in the Romanian

Insolvency Law and as calculated pursuant to the applicable
regulations issued by the NBR (including, as of the date hereof,
Norm No. 12 of 15 December 2003 regarding the supervision of
the solvency and large exposures of credit institutions, as
amended)) is less than 2% or such other threshold provided in the
applicable legislation;

(e) the Issuer stops or threatens to stop payment or shall be unable

to, or shall admit inability to, pay its debts as they fall due, or
shall be adjudicated or found insolvent by a court of competent
jurisdiction or shall make a conveyance or assignment for the
benefit of, or shall enter into any composition or other
arrangement with, its creditors generally or the Issuer becomes
subject to any of the procedures set out by the Romanian BRR

63
 Law or becomes subject to the bankruptcy proceedings
(“deschiderea procedurii falimentului” in Romanian) as referred
to in Article 40(2) of the Romanian Covered Bond Law;

(f) a temporary judicial administrator, a judicial administrator or

other similar official shall be appointed in relation to the Issuer,
in each case pursuant to the Romanian Insolvency Law, the
Romanian BRR Law or otherwise; and/or

(g) the Issuer sends out a notice convening a meeting of its creditors
to propose a voluntary arrangement, including pursuant to the
introduction of a petition seeking institution of a preventative
concordate (concordat preventiv) or ad hoc mandate (mandate
ad-hoc).

Disposal of the Loan Assets Following the occurrence of an Event of Default and appointment of a
Cover Pool Administrator and subject to the consultation process with the
NBR for such disposal being completed, the Cover Pool Administrator
may dispose of part or all of the Cover Pool provided that, to the extent
required, the Covered Bondholders have approved any such acceleration
and/or disposal by the Cover Pool Administrator by way of a Covered
Bondholders Resolution passed at a general meeting of Covered
Bondholders in accordance with Condition 14 and the Covered
Bondholders Representative Agreement. The Cover Pool Assets shall
continue to include any Loans which have been selected for disposal but
which have not yet been sold. Any disposal of the Loan Assets shall be
subject to the generally applicable Romanian law provisions relating to
enforcement as in force at the relevant time. The Loans can only be sold
to third parties authorised to provide loans for real estate investment
purposes on a professional basis. Such parties may be subject to NBR
approval. Once a Cover Pool Administrator has been appointed by the
NBR only such administrator will have control over the Cover Pool
notwithstanding any contractual provisions in the Transaction
Documents.

Undertakings of the Issuer in Pursuant to the Transaction Documents, the Issuer or the Servicer
respect of the Cover Pool undertakes to manage the Cover Pool in the interest of the Covered
Bondholders and undertakes to take in a timely manner, any actions
required in order to ensure that the servicing of the Loan Assets is
conducted in accordance with the collection policy and recovery
procedure applicable to the Issuer.

Representations and Under the Servicing and Cash Management Agreement, the Issuer has
Warranties of the Issuer made and will make certain representations and warranties regarding
itself and the Cover Pool Assets including, inter alia:

(a) its status, capacity and authority to enter into the Transaction
Documents and assume the obligations expressed to be assumed
by it therein;

(b) the legality, validity, binding nature and enforceability of the

obligations assumed by it;

64
 (c) the existence of the Cover Pool Assets;

(d) the absence of any lien attaching to the Cover Pool Assets, other
than any liens constituted in accordance with and as required by
the Romanian Covered Bond Legislation;

(e) its full, unconditional, legal title to the Cover Pool Assets; and

(f) the validity and enforceability against the relevant debtors of the
obligations from which the Cover Pool Assets arise.

Eligibility Criteria Each Loan Asset to be included in the Cover Pool shall comply with the
following criteria (the Eligibility Criteria):

(a) each Loan is an existing loan denominated in Euro or RON;

(b) each Loan is governed by Romanian law and is subject to the

jurisdiction of the courts of Romania;

(c) if any Loan has characteristics other than those pertaining to the
Loan Assets included in the Cover Pool on the first Issue Date
(each such Loan, a New Asset Type), the Issuer has received
written confirmation from the Rating Agency that if such New
Asset Type is included in the Cover Pool, such inclusion of the
New Asset Type by the Issuer would, taking into account any
consequential amendments to the Eligibility Criteria, the
Transaction Documents (including the representations and
warranties of the Issuer) and the Statutory Tests, not have an
adverse effect on the then current ratings of the Covered Bonds
(provided further that there would be no breach of applicable law
as a result of the inclusion of such New Asset Type in the Cover
Pool);

(d) in respect of each Loan where the purpose was for the
construction of a new property, the Loan is secured against
completed properties only (evidenced by the hand-over minutes
recorded at the completion of works (in Romanian, proces-verbal
de receptie la terminarea lucrarii) dated on or prior to the
inclusion of the Loan in the Cover Pool);

(e) each Loan is not subject to any mortgage right or other legal or
contractual privilege;

(f) each Loan is fully secured with an immovable mortgage or

similar rights and was granted for acquiring or maintaining the
ownership right over a plot of land and/or an existing or future
building or for rehabilitating, modernising, consolidating or
extending a building or repaying such loan;

(g) the in rem rights are created exclusively in favour of the Issuer,
other than in the case of Loans partially guaranteed by the State
through governmental programmes;

65
(h) the immovable property over which a Loan is secured is insured
at all times under voluntary all risk insurance for an amount at
least equal to the market value of the real property as of the date
of the execution/renewal of the insurance policy and the rights
under such insurance policy are assigned in favour of the Issuer;

(i) the immovable property in respect of which a Loan has been

granted and over which such Loan is secured is located in
Romania or another country that is a member of the European
Economic Area;

(j) each Loan (i) at the time of its inclusion in the Cover Pool is not
in arrears; and (ii) thereafter is not in arrears for more than 15
days;

(k) no Loan constitutes an exposure to which forbearance measures

have been applied according to Annex V of Regulation (EU)
680/2014;

(l) each Borrower under a Loan is an individual and is not an

employee of the Issuer or any of its subsidiaries;

(m) except where the Loan was acquired by the Issuer for the
purposes of including it in the Cover Pool and secure the
Covered Bonds, all lending criteria and preconditions applied by
the Issuer’s credit policy and customary lending procedures have
been satisfied with regards to the granting of each Loan;

(n) each Loan is fully drawn down and the Issuer is not obliged to
advance any further amounts to the relevant Borrower;

(o) the weighted average term to maturity of the Loans included in

the Cover Pool is equal to or exceeds the weighted average term
to maturity of the Covered Bonds;

(p) the Borrower under the Loan (and, if applicable, any other
obligor under the Loan (including, for the avoidance of doubt,
any guarantor in respect of such Loan)) has been informed in
accordance with Article 10(1) of the Romanian Covered Bond
Law that the Loan will be included in the Cover Pool;

(q) the Borrower under the Loan (and, if applicable, any other
obligor under the Loan (including, for the avoidance of doubt,
any guarantor in respect of such Loan)) has not notified the
Issuer that it maintains the right to set-off against the Issuer
within 45 days of receipt of the notice delivered pursuant to
Article 10(1) of the Romanian Covered Bond Law;

(r) as at the date on which the Loan was granted, the nominal value
of such Loan did not exceed:

(i) 80% of the reference value of the immovable property

serving as collateral for such Loan, in the case of
residential Loans; or

66
 (ii) 60% of the reference value of the immovable property
serving as collateral for such Loan, in the case of any
other Loans,

except for Loans partially guaranteed by the State through

governmental programmes;

(s) the re-evaluation of the immovable property serving as collateral

in respect of the Loan is performed according to the provisions of
article 208(3) of Regulation (EU) No. 575/2013 of the European
Parliament and of the Council of 23 June 2013 on prudential
requirements for credit institutions and investment firms and
amending Regulation (EU) No. 648/2012, as published in the
European Union Official Journal L, 176 of 27 June 2013, as
amended (the Capital Requirements Regulation or,
alternatively, the CRR);

(t) in respect of a residential Loan, the inclusion of such Loan in the

Cover Pool (valued at its book value as at the date of its inclusion
in the Cover Pool) would not cause the aggregate book value of
all residential Loans included in the Cover Pool to exceed 80% of
the aggregate book value of all residential Loans on the Issuer’s
balance sheet that are eligible for inclusion in the Cover Pool;

(u) in respect of a Loan other than a residential Loan, the inclusion

of such Loan in the Cover Pool (valued at its book value as at the
date of its inclusion in the Cover Pool) would not cause the
aggregate book value of all the Loans other than residential
Loans included in the Cover Pool to exceed 60% of the aggregate
book value of all such Loans on the Issuer’s balance sheet that
are eligible for being included in the Cover Pool;

(v) in respect of any Loan, the inclusion of such Loan in the Cover
Pool would not cause the book value of the Loans against one
debtor (either separately or together with the claims of the Issuer
against affiliated persons of the debtor) to exceed 5% of the book
value of the Loans included in the Cover Pool;

(w) to the extent the Loan was acquired by the Issuer with the
purpose to include it in the Cover Pool and secure the Covered
Bonds, the term provided under Article 9(10) of the Romanian
Covered Bond Law has lapsed;

(x) at least one payment has been made by the Borrower in respect
of the Loan; and

(y) the aggregate book value of Loans secured by a mortgage over

commercial properties does not exceed 20% of the aggregate
book value of all Loans included in the Cover Pool.

Monitoring of the Cover Pool Both the Servicer and the Asset Monitor shall verify, in accordance with
the Romanian Covered Bond Legislation, that the Cover Pool satisfies
each of the Over-Collateralisation Test, Asset Coverage Test and

67
 Liquidity Test (collectively, the Statutory Tests and each a Statutory
Test). In order to agree the mathematical accuracy of the calculations
performed by the Issuer in respect of the Statutory Tests, the Asset
Monitor will perform AUP in accordance with ISRS 4400.

Statutory Tests The Cover Pool is subject to the Statutory Tests as set out in the
Romanian Covered Bond Legislation. Failure of the Issuer to cure a
breach of any one of the Statutory Tests within 14 Bucharest Business
Days will result in (i) an Issuer Event and (ii) the Issuer not being able to
issue further Covered Bonds. A breach by the Issuer of the Over-
Collateralisation Test where the NBR determines there are no prospects
for the Issuer to remedy such breach will result in an Event of Default.

Breach of Statutory Tests If (i) a Statutory Test (other than the Liquidity Test) is not satisfied on a
Monthly Calculation Date or (ii) the Liquidity Test is not satisfied on any
date, the Issuer must cure such breach(es) of the relevant Statutory Tests
within 14 Bucharest Business Days of the applicable test date, failing
which an Issuer Event shall occur. If the Over-Collateralisation Test is
not satisfied and the NBR determines there are no prospects for the Issuer
to remedy such breach, an Event of Default shall occur.

Monthly Calculation Date means the Bucharest business day which

falls 5 Bucharest business days after the Collection Period End Date.

Bucharest Business Day means a day (other than a Saturday or Sunday)

on which commercial banks are open for general business (including
dealings in foreign exchange and foreign currency deposits) in Bucharest.

The Asset Monitor will immediately, but no later than two (2) Bucharest
Business Days after ascertaining the occurrence of such breach, notify the
Issuer and the Covered Bondholders Representative, as well as the NBR
as set out in the Romanian Covered Bond Legislation and the Asset
Monitor Agreement of any breach of any of the Statutory Tests in
accordance with the Asset Monitor Agreement.

In the event that the Issuer breaches any Statutory Test, the Issuer will
not be permitted to issue any further Covered Bonds until such time as
such Statutory Test breach has been cured (if the breach is capable of
being cured). The Statutory Tests will continue to be tested after the
occurrence of an Issuer Event.

Over-Collateralisation Test The Issuer will ensure on each Monthly Calculation Date that the net
present value of the Cover Pool Assets exceeds the net present value of
any payment obligations in relation to all Series of Covered Bonds by at
least 2% (the Over-Collateralisation Test).

Moreover, the Issuer must ensure compliance with the Over-

Collateralisation Test even in crisis situations (although in such
situations, the requirement is that the net present value of the Cover Pool
Assets equals at least the net present value of any payment obligations in
relation to all Series of Covered Bonds). To this end, the Issuer will
perform on a monthly basis crisis simulations in accordance with the
Romanian Covered Bond Legislation.

68
Asset Coverage Test The Issuer will ensure on each Monthly Calculation Date that the value
of the Cover Pool, calculated as per the requirements of the Romanian
Covered Bond Legislation, is at least equal to the value of the Covered
Bonds and any other obligations that must be paid from the Cover Pool,
in accordance with the provisions of the Romanian Covered Bond
Legislation (which consist of obligations of the Issuer to pay any interest
payable on the Covered Bonds to the Covered Bondholders and of
obligations to the Asset Monitor, the Cover Pool Administrator, any
Hedging Counterparty, any lenders that have financed the coverage of
any temporary liquidity deficits, as well as any other expenses due in
relation to the Cover Pool and payable by the Issuer) (the Asset
Coverage Test).

Liquidity Test The Issuer will calculate on a daily basis for the following 180 days the
negative difference between the cash flow generated by the Cover Pool
Assets and the obligations due in the same period in relation to the
Covered Bonds and will ensure that the highest difference is covered with
other Eligible Financial Assets (the Liquidity Test). Accordingly, the
Issuer will cover with other Eligible Financial Assets the negative
difference between the cashflow generated by the Cover Pool Assets and
the obligations due, as these are calculated for the following 180 days.

For the purposes of calculating the Liquidity Test, subject to the

limitations set out in, among others, Article 13(5) of the Romanian
Covered Bond Law and Articles 35(1) and 36 of the Romanian Covered
Bond Regulation, the Issuer may include in the Cover Pool, on a
temporary basis, Eligible Financial Assets in excess of 15% of the book
value of the Cover Pool provided that, in all cases, the relevant Eligible
Financial Assets, upon being included in the Cover Pool, meet the
eligibility criteria for money market operations with the NBR.

Amendment to definitions The Servicing and Cash Management Agreement will provide that the
definitions of Cover Pool, Cover Pool Asset, Eligibility Criteria and
Statutory Tests may be amended by the Issuer (subject, and, where
applicable, in order, to reflect changes under, the provisions of the
Romanian Covered Bond Legislation) from time to time as a
consequence of, inter alia, including in the Cover Pool Additional Cover
Pool Assets that are New Asset Types and/or changes to the hedging
policies or servicing and collection procedures of ABR provided that: (i)
the NBR has provided its written approval of such amendment; (ii) the
Covered Bondholders have approved such amendment; and (iii) the
Rating Agency has provided confirmation in writing that the ratings on
the Covered Bonds would not be adversely affected or withdrawn as a
result of such amendment within 15 days of such notification. Subject to
the provisions of the Romanian Covered Bond Legislation, the Servicing
and Cash Management Agreement shall set forth the conditions for any
such amendment to be effected.

Issuer Events Prior to, or concurrent with the occurrence of an Event of Default, if any
of the following events (each, an Issuer Event) occurs:

(a) an Issuer Insolvency Event;

69
(b) the Issuer fails to pay any principal due and payable on the
Covered Bonds of any Series within a period of seven Bucharest
Business Days or if the Issuer fails to pay interest in respect of
the Covered Bonds of any Series within a period of seven
Bucharest Business Days, in each case from the due date thereof;

(c) default is made by the Issuer in the performance or observance of

any obligation, condition or provision binding on it (other than
any obligation for the payment of amounts due under the
Covered Bonds or Coupons of any Series) under the Agency
Agreement, the Deed of Charge, the Movable Mortgage over the
Cover Pool and Collection Accounts Agreement or any other
Transaction Document to which the Issuer is a party which, in
the opinion of the Covered Bondholders Representative, would
have a materially prejudicial effect on the interests of the
Covered Bondholders of any Series and (except where such
default is or the effects of such default are, in the opinion of the
Covered Bondholders Representative, not capable of remedy
when no such continuation and notice as is hereinafter mentioned
will be required), such default continues for 30 days (or such
longer period as the Covered Bondholders Representative may
permit) after written notice has been given by the Covered
Bondholders Representative to the Issuer requiring the same to
be remedied;

(d) if there is a breach of (i) a Statutory Test (other than the Liquidity
Test) on a Monthly Calculation Date or (ii) the Liquidity Test on
any date, and in each case, such breach is not remedied within 14
Bucharest Business Days; or

(e) if it is or will (in the opinion of the Covered Bondholders

Representative, having taken legal advice from a reputable firm
of lawyers or a reputable legal expert) become unlawful or illegal
for the Issuer to comply with any of its obligations under or in
respect of the Covered Bonds or any of the Transaction
Documents where such unlawfulness or illegality cannot be
remedied and, in the case of an unlawfulness or illegality which
can be remedied, is not remedied within 30 days after written
notice has been given by the Covered Bondholders
Representative to the Issuer requiring the same to be remedied
(although the Covered Bondholders Representative shall have no
duty to monitor such compliance by the Issuer),

then (for as long as such Issuer Event is continuing) (i) no further

Covered Bonds will be issued, (ii) the Servicer will procure that within
two Bucharest Business Days all collections of principal and interest on
deposit on the ABR Collection Accounts are transferred to the Third
Party Collection Account(s), (iii) the Servicer will notify all obligors and
counterparties to eligible assets forming part of the Cover Pool that any
and all future payments due under the Cover Pool Assets are paid
henceforth directly into any Third Party Collection Account(s) in
accordance with the Servicing and Cash Management Agreement, (iv) all

70
 collections of principal and interest on the Cover Pool Assets will be
dedicated exclusively to the payment of interest and repayment of
principal on the Covered Bonds and to the fulfilment of the obligations of
the Issuer vis-à-vis the other Cover Pool Secured Creditors and (v) if the
Issuer is the Servicer, its appointment as Servicer will be terminated and
a Replacement Servicer will be appointed pursuant to the terms of the
Servicing and Cash Management Agreement and the Romanian Covered
Bond Legislation subject to any limitations set under the Romanian BRR
Law, the Romanian Insolvency Law or any other relevant similar law.

Servicing and collection The Servicer will be responsible for the servicing of the Cover Pool,
procedures including, inter alia, for the following activities:

(a) collection and recovery in respect of each Cover Pool Asset;

(b) administration and management of the Cover Pool;

(c) management of any judicial or extra judicial proceeding

connected to the Cover Pool;

(d) keeping accounting records of the amounts due and collected

under the Loan Assets and the Hedging Agreements;

(e) preparation of quarterly reports (the Servicer Reports) (to be

submitted to the Issuer (if a Servicer Termination Event (as
defined below) has occurred and the Servicer is a different entity
than the Issuer), the Covered Bondholders Representative, the
Asset Monitor and the Rating Agency) on the amounts due by
debtors, and on the collections and recoveries made in respect of
the Loan Assets and Hedging Agreements; and

(f) carrying out the reconciliation of the amounts due and the
amounts effectively paid by the Borrowers under the Loans on
the relevant payment date.

Appointment of Replacement Where:

Servicer

(a) default is made by the Servicer in the payment on the due date of
any payment due and payable under the Servicing and Cash
Management Agreement (subject to applicable grace periods);

(b) default is made by the Servicer in the performance or observance

of any of its other covenants and obligations under the Servicing
and Cash Management Agreement (subject to certain materiality
thresholds and applicable grace periods);

(c) an Insolvency Event occurs in relation to the Servicer; or

(d) an Issuer Event occurs (where the Issuer and the Servicer are the
same entity),

(each, a Servicer Termination Event),

71
 then the Issuer must notify the Covered Bondholders Representative of
the occurrence of any such Servicer Termination Event, and the Issuer
shall terminate the appointment of the Servicer and appoint a
Replacement Servicer in accordance with the terms and conditions of the
Servicing and Cash Management Agreement and the Romanian Covered
Bond Legislation, subject to any limitations set under the Romanian BRR
Law, the Romanian Insolvency Law or any other relevant similar law.

ACCOUNTS AND CASH FLOW STRUCTURE:

Segregation Event and Prior to the occurrence of an Issuer Event, the Issuer will deposit on a
Collection Accounts daily basis within one Bucharest Business Day of receipt, all collections
of interest and principal it receives on the Cover Pool Assets (including all
moneys received from Eligible Financial Assets, if any, included in the
Cover Pool) into segregated RON- and EUR-denominated accounts
maintained with Romanian credit institutions (including Alpha Bank
România S.A.) (together, the ABR Collection Accounts and, together
with any Third Party Collection Account(s), the Collection Accounts).
The Issuer will not commingle any of its own funds and general assets
with amounts standing to the credit of the Collection Accounts. For the
avoidance of doubt, any cash amounts standing to the credit of the
Collection Accounts shall not comprise part of the Cover Pool for the
purposes of the Statutory Tests.

All amounts deposited in, and standing to the credit of, the Collection
Accounts shall to the maximum extent permitted by law and in any event
upon enforcement by the Covered Bondholders or insolvency or similar
proceedings relating to the Issuer constitute segregated property distinct
from all other property of the Issuer pursuant to the Romanian Covered
Bond Legislation.

Prior to a reduction in the long-term local and foreign currency deposit

rating of the Issuer below the Minimum Credit Rating (such occurrence, a
Segregation Event) or an Issuer Event, the Issuer will be entitled to draw
sums from time to time standing to the credit of the ABR Collection
Accounts in addition to any other funds available to it for any purpose
including to make payments on the Covered Bonds.

Minimum Credit Rating means B3.

Following the occurrence of a Segregation Event but prior to the

occurrence of an Issuer Event, (i) all amounts deposited shall remain in
the ABR Collection Accounts for the benefit of the holders of the Covered
Bonds and the other Cover Pool Secured Creditors and (ii) the Issuer shall
only be entitled to withdraw moneys from the ABR Collection Accounts
(I) to the extent that amounts standing to the credit of the ABR Collection
Accounts shall at all times exceed the equivalent of the aggregate of (A)
any amounts on any Covered Bonds Series outstanding falling due for
payment or required to be transferred before or on the following Interest
Payment Date of each Covered Bond Series outstanding, provided that the
Interest Payment Date falls before or on the date falling three calendar

72
 months after the date of the withdrawal (or in the case of Zero Coupon
Covered Bonds, the amount by which the Amortised Face Amount on the
next Programme Payment Date (provided such Programme Payment Date
falls on or before the date that falls three calendar months after the date of
withdrawal) exceeds the Amortised Face Amount of such Zero Coupon
Covered Bond on the Programme Payment Date on the date of
withdrawal, on the basis that the Accrual Yield and the Reference Price
are the same on each of such date) and (B) such other payments falling
due to the Cover Pool Secured Creditors on or before the date falling three
calendar months after the date of the withdrawal or (C) for the purpose of
making payments on the Covered Bonds and/or such other payments
falling due to the Cover Pool Secured Creditors, or (II) (subject to (I)
above) for the purposes of transferring funds to the Transaction Accounts
or making payments on the Covered Bonds and/or the Cover Pool
Secured Creditors (to the extent such amounts fall due) and/or such other
payments which should be made by the Issuer under the Programme.

If the Issuer’s rating is reinstated above the level at which a Segregation

Event occurs and so long as no Issuer Event has occurred and is
continuing, then the Issuer will be entitled to draw sums standing to the
credit of the ABR Collection Accounts in addition to any other funds
available to it for any purpose including to make payments on the
Covered Bonds.

Transaction Accounts The Issuer has established with the Account Bank a segregated EUR
denominated account in its name (the EUR Transaction Account) and a
segregated RON denominated account in its name (the RON Transaction
Account and, together, the Transaction Accounts). The Issuer will
establish on the EUR Transaction Account a reserve ledger (the Reserve
Ledger) on which it will be required to maintain the Reserve Ledger
Required Amount for so long as any Covered Bonds remain outstanding
under the Programme. Prior to the occurrence of a Segregation Event or
an Issuer Event, the Issuer will be entitled to withdraw amounts from time
to time standing to the credit of each of the Transaction Accounts, if any,
that are in excess of the sum of (i) any cash amounts required to satisfy
the Statutory Tests and (ii) the Reserve Ledger Required Amount.
Following the occurrence of a Segregation Event but prior to the
occurrence of an Issuer Event, the Issuer shall no longer be entitled to
withdraw amounts from the Transaction Accounts other than for the
purpose of making payments on the Covered Bonds and/or to the other
Cover Pool Secured Creditors. If the Issuer’s rating is subsequently
reinstated above the level at which a Segregation Event occurs, and
provided that no Issuer Event has occurred, the Issuer will again be
entitled to withdraw amounts from time to time standing to the credit of
the Transaction Accounts, if any, that are in excess of the sum of (i) any
cash amounts required to satisfy the Statutory Tests and (ii) the Reserve
Ledger Required Amount.

Following the occurrence of an Issuer Event (as defined above), the

Servicer shall (i) procure that within two Bucharest Business Days of the
occurrence of such Issuer Event, all collections of principal and interest
on deposit in the ABR Collection Accounts are transferred to the Third
Party Collection Account(s) and (ii) provide notification to all Obligors

73
 (in respect of Loan Assets) and counterparties to Eligible Financial Assets
forming part of the Cover Pool that any and all future payments due under
the Cover Pool Assets are henceforth to be effected directly to the Third
Party Collection Account(s). The Servicer shall procure that all amounts
deposited into the Third Party Collection Account(s) shall be transferred
to the applicable Transaction Account within three Bucharest Business
Days of receipt and provide any requisite notice to procure that this
occurs. The Issuer (or the Servicer on its behalf) will maintain records in
relation to the Transaction Accounts in accordance with the Transaction
Documents. The Transaction Accounts will be maintained with the
Account Bank for so long as the Account Bank is an Eligible Institution.

Reserve Ledger Required Amount means an amount calculated by the

Servicer as at each Monthly Calculation Date equal to the amount that
will be required to be paid by the Issuer in respect of the Covered Bonds
in respect of interest (in respect of those Covered Bonds where there is no
Hedging Agreement in place and all amounts to be paid to a Covered
Bond Swap Provider (in respect of those Covered Bonds where there is a
Hedging Agreement in place) (other than any principal exchange
amounts)) and all amounts paid to the other Cover Pool Secured Creditors
for the immediately following six month period.

Programme Payment Date means the 20th calendar day of January,

April, July and October of each year commencing on 20 July 2019 and if
such day is not a Bucharest Business Day, the first Bucharest Business
Day thereafter.

Event of Default If one of the following events (each an Event of Default) occurs, and is
continuing:

(a) withdrawal by the NBR of its approval for the Issuer to issue
Covered Bonds under the Programme; or

(b) a breach of the Over-Collateralisation Test where the NBR

determines there are no prospects for the Issuer to remedy such
breach; or

(c) failure by the Issuer to pay any principal due and payable on the
Covered Bonds of any Series or failure by the Issuer to pay
interest in respect of the Covered Bonds of any Series; or

(d) the opening of the bankruptcy proceeding (“deschiderea

procedurii falimentului” in Romanian, as referred to in Article 40
(2) of the Romanian Covered Bond Law) against the Issuer,

then the Covered Bondholders Representative having notice of such

occurrence continuing shall serve a notice of default (a Notice of Default)
on the Issuer and shall notify the Asset Monitor and the Cover Pool
Administrator (if already appointed by the NBR) or, if a Cover Pool
Administrator has not been appointed, the NBR who will appoint a Cover
Pool Administrator who, following consultation with the NBR, may
accelerate the Covered Bonds of all Series, subject, where required, to the
approval of the Covered Bondholders by way of a Covered Bondholders

74
 Resolution.

The Covered Bondholders Under the terms of the Covered Bondholders Representative Agreement,
Representative Agreement the form of which is attached to this Base Prospectus, the Covered
Bondholders Representative is appointed as representative of Covered
Bondholders of all Series of Covered Bonds issued under the Programme
(the Covered Bondholders Representative Agreement).

Servicing and Cash Under the terms of the Servicing and Cash Management Agreement
Management Agreement between the Issuer, the Covered Bondholders Representative (upon its
appointment) and the Servicer (the Servicing and Cash Management
Agreement), the Servicer shall be authorised, subject to the conditions
specified therein, to administer the cash flows arising from the Cover
Pool.

The Servicing and Cash Management Agreement sets forth the terms and
conditions upon which the Servicer shall be required to administer the
Cover Pool Assets, including certain undertakings for the benefit of the
Covered Bondholders.

Pursuant to the Servicing and Cash Management Agreement, the Servicer

shall undertake to prepare and deliver certain reports (including the
Servicer Reports) in connection with the Loan Assets. Pursuant to the
Servicing and Cash Management Agreement, the Servicer will agree to
perform certain obligations in connection with the management of the
Cover Pool.

The Servicing and Cash Management Agreement contains provisions

under which the Issuer shall be obliged, upon the terms and subject to the
conditions specified therein, to appoint an appropriate entity to perform
the Servicing and Cash Management Services to be performed by the
Servicer.

Asset Monitor Agreement Under the terms of the asset monitor agreement between the Asset
Monitor, the Covered Bondholders Representative (upon its appointment),
the Servicer and the Issuer (the Asset Monitor Agreement), the Asset
Monitor shall agree to carry out the activities provided under the
Romanian Covered Bond Legislation, including various testing and
notification duties, as required under the Romanian Covered Bond
Legislation, including, in relation to the calculations performed by the
Issuer and/or the Servicer, as applicable, in relation to the Statutory Tests.

Movable Mortgage over the The Issuer shall create a Romanian law movable mortgage over the Cover
Cover Pool and Collection Pool and the Collection Accounts (in favour of the Asset Monitor until the
Accounts Agreement appointment of the Covered Bondholders Representative, to be thereafter
transferred in the name of the Covered Bondholders Representative) (the
Movable Mortgage over the Cover Pool and Collection Accounts
Agreement). The Movable Mortgage over the Cover Pool and Collection
Accounts Agreement will also include an undertaking that any Third Party
Collection Account(s), once opened in the name of the Issuer, is included
under the movable mortgage created thereunder.

The Covered Bondholders Representative has been authorised, in

75
 accordance with the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement and the Covered Bondholders
Representative Agreement, following the occurrence of an Event of
Default to exercise all the Covered Bondholders’ rights arising out of the
Movable Mortgage over the Cover Pool and Collection Accounts
Agreement, in accordance with any instructions provided by the Cover
Pool Administrator and as approved by the Covered Bondholders, if
required.

Deed of Charge Pursuant to the terms of an English law-governed deed of charge, the
Issuer shall (i) create a charge over the Transaction Accounts and all
amounts standing to the credit thereof from time to time in favour of the
Security Trustee acting on behalf of the Cover Pool Secured Creditors;
and (ii) assign its rights arising under the Hedging Agreements and the
other English law-governed Transaction Documents (other than the Deed
of Charge) to the Security Trustee acting on behalf of the Secured
Creditors (the Deed of Charge).

The Security Trustee has been authorised, in accordance with the Deed of
Charge, subject to a Notice of Default being delivered to the Issuer
following the occurrence of an Event of Default or upon failure by the
Issuer to exercise its rights under the English law-governed Transaction
Documents, to exercise, in the name and on behalf of the Issuer, all the
Issuer’s rights arising out of the Transaction Documents to which the
Issuer is a party, subject in all cases to any instructions provided by the
Covered Bondholders Representative or the Cover Pool Administrator,
once appointed.

The Deed of Charge and any non-contractual obligations arising out of or

in connection with it shall be governed by English Law.

Agency Agreement Under the terms of an agency agreement between the Issuer, the Principal
Paying Agent and the other Paying Agents, the Registrar, the Transfer
Agent and the Covered Bondholders Representative (upon its
appointment) (the Agency Agreement), the Agents shall agree to provide
the Issuer with certain agency services and the Paying Agents shall agree,
inter alia, to make available for inspection such documents as may be
required from time to time by the rules of the Luxembourg Stock
Exchange and the Bucharest Stock Exchange and to arrange for the
publication of any notice to be given to the Covered Bondholders.

Bank Account Agreement Under the terms of a bank account agreement between the Issuer, the
Covered Bondholders Representative and the Account Bank, the Account
Bank shall agree to act as account bank in connection with the Programme
and to operate the Transaction Accounts, any Swap Collateral Accounts
and any other account required to be maintained offshore under the
Transaction Documents in accordance with instructions given by the
Servicer.

Hedging Agreements The Issuer may, from time to time during the Programme, enter into
Interest Rate Swap Agreements and Covered Bond Swap Agreements
(together the Hedging Agreements and each, a Hedging Agreement)
with one or more Hedging Counterparties for the purpose of, inter alia,

76
 protecting itself against certain risks (including, but not limited to, interest
rate, liquidity, currency and credit) related to the Loan Assets and/or the
Covered Bonds. In accordance with the terms set forth in the Servicing
and Cash Management Agreement, the Issuer may, at its discretion,
include its rights and claims arising from the Hedging Agreements which
relate to hedging of the interest rate risk and the currency risk (or further
to a change in the Romanian Covered Bond Legislation, any other risks
designated thereunder), together with the cash flows deriving therefrom,
in the Cover Pool provided that, inter alia: (i) the Hedging Counterparty
has agreed to the inclusion of the relevant derivative financial instruments
in the Cover Pool; (ii) the Hedging Counterparty is a credit institution
qualifying for at least a step 3 credit quality or a central counterparty; and
(iii) the netting set as defined in article 272(4) of the Capital
Requirements Regulation includes only derivative financial instruments
which are related to the Cover Pool or the Covered Bonds.

The Issuer’s rights arising from the Hedging Agreements will be included
as part of the Cover Pool at the Issuer’s discretion.

Interest Rate Swap Agreement means each agreement between the

Issuer and the relevant Interest Rate Swap Provider and the Covered
Bondholders Representative (upon its appointment) governing the Interest
Rate Swap in the form of the 1992 ISDA Master Agreement
(Multicurrency – Cross Border), as published by ISDA (ISDA Master
Agreement), including a schedule and one or more confirmations and a
credit support annex.

Covered Bond Swap Agreement means each agreement between the

Issuer, a Covered Bond Swap Provider and (upon its appointment) the
Covered Bondholders Representative governing any Covered Bond
Swaps in the form of an ISDA Master Agreement, including a schedule
and one or more confirmations and any credit support annex.

Transaction Documents The Servicing and Cash Management Agreement, the Programme
Agreement, each Subscription Agreement, the Agency Agreement, the
Bank Account Agreement, the Deed of Charge, the Movable Mortgage
over the Cover Pool and Collection Accounts Agreement, the Asset
Monitor Agreement, the Covered Bondholders Representative Agreement,
the Master Definitions and Construction Schedule, each of the Final
Terms, the Conditions, the Covered Bonds, the Coupons, any Hedging
Agreements, any custody agreement entered into from time to time in
connection with the holding of any Eligible Financial Assets, any
agreement entered into with a replacement Servicer, together with any
additional document entered into in respect of the Covered Bonds and/or
the Cover Pool and designated as a Transaction Document by the Issuer
and (upon its appointment) the Covered Bondholders Representative, are
together referred to as the Transaction Documents.

Subscription Agreement means an agreement supplemental to the

Programme Agreement (by whatever name called) in or substantially in
the form set out in the Programme Agreement or in such other form as
may be agreed between the Issuer and the Lead Manager (named therein)
or one or more Dealers (as the case may be).

77
Investor Report On the Bucharest Business Day which falls three Bucharest Business
Days prior to each Programme Payment Date, the Servicer will produce
an investor report (the Investor Report), which will contain information
regarding the Covered Bonds and the Cover Pool Assets, including
statistics relating to the financial performance of the Cover Pool Assets
for the immediately three preceding Collection Periods. Such report will
be available to the prospective investors in the Covered Bonds and to
Covered Bondholders on the Issuer’s website.

Collection Period means the period from (and including) a Collection

Period Start Date (or, in the case of the first Collection Period, the
Programme Closing Date) to the next Collection Period End Date.

Collection Period Start Date means the first calendar day of each
calendar month.

Collection Period End Date means the last calendar day of each calendar
month.

Programme Closing Date means 8 April 2019.

78
 TERMS AND CONDITIONS OF THE COVERED BONDS

The following are the Terms and Conditions of the Covered Bonds which will be incorporated by reference
into each Global Covered Bond (as defined below) and each Definitive Covered Bond (as defined below), in
the latter case only if permitted by the relevant stock exchange or other relevant authority (if any) and
agreed by the Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such
Definitive Covered Bond will have endorsed thereon or attached thereto such Terms and Conditions. The
applicable Final Terms (or the relevant provisions thereof) will be endorsed upon, or attached to, each
Global Covered Bond and Definitive Covered Bond. Reference should be made to “Applicable Final Terms”
for a description of the content of Final Terms which will specify which of such terms are to apply in relation
to the relevant Covered Bonds.

This Covered Bond is one of a Series (as defined below) of Covered Bonds issued by Alpha Bank Romania
S.A. (the Issuer) pursuant to the Agency Agreement (as defined below) and the Romanian Covered Bond
Legislation (as defined below).

References herein to the Covered Bonds shall be references to the Covered Bonds of this Series and shall
mean:

(a) in relation to any Covered Bonds represented by a global Covered Bond (a Global Covered Bond),
units of the lowest denomination specified in the relevant Final Terms (Specified Denomination) in
the currency specified in the relevant Final Terms (Specified Currency);

(b) any Global Covered Bond;

(c) any definitive Covered Bonds (in bearer form (Bearer Definitive Covered Bonds)) issued in
exchange for a Global Covered Bond in bearer form; and

(d) any definitive Covered Bonds in registered form (Registered Definitive Covered Bonds and,
together with Bearer Definitive Covered Bonds, Definitive Covered Bonds) (whether or not issued
in exchange for a Global Covered Bond in registered form).

In accordance with the requirements of the Romanian Covered Bond Legislation, a Covered Bondholders
Representative (as defined below) shall be appointed by the holders of the first Series of Covered Bonds
issued under the Programme by way of a Covered Bondholders Resolution to be passed at a meeting of the
holders of the first Series of Covered Bonds issued under the Programme, duly convened in accordance with
the provisions of Condition 14 (Meetings of Covered Bondholders, Modification and Waiver). Any
references to the Covered Bondholders Representative shall mean the covered bondholders representative (in
Romanian, reprezentantul deținătorilor de obligațiuni), being the entity appointed by the Covered
Bondholders (as defined below) to act as covered bondholders representative from time to time on the terms
and conditions set out in the Covered Bondholders Representative Agreement (as defined below) and in
accordance with Romanian Covered Bond Legislation (as defined below), together with any successor
covered bondholders representative appointed from time to time (the Covered Bondholders
Representative).

The Covered Bonds and the Coupons (as defined below) have the benefit of an agency agreement (such
agency agreement as amended and/or supplemented and/or restated from time to time, the Agency
Agreement) dated the Programme Closing Date and made between inter alios the Issuer, The Bank of New
York Mellon, London Branch as principal paying agent (the Principal Paying Agent, which expression
shall include any successor principal paying agent), the other paying agents named therein (together with the
Principal Paying Agent, the Paying Agents, which expression shall include any additional or successor
paying agents), The Bank of New York Mellon SA/NV, Luxembourg Branch as registrar (the Registrar,
which expression shall include any successor registrar, and, together with any transfer agent appointed

79
thereunder, the Transfer Agents, which expression shall include any successor transfer agents) and together
with the Paying Agents, the Registrar and any Calculation Agent referred to below, the Agents. Interest-
bearing Definitive Covered Bonds have (unless otherwise indicated in the applicable Final Terms) interest
coupons (Coupons) and, if indicated in the applicable Final Terms, talons for further Coupons (Talons)
attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires,
be deemed to include a reference to Talons or talons. The Final Terms for this Covered Bond (or the relevant
provisions thereof) are set out in Part A of the Final Terms attached to or endorsed on this Covered Bond
which complete these Terms and Conditions (the Conditions). References to the applicable Final Terms
are, unless otherwise stated, to Part A of the Final Terms (or the relevant provisions thereof) attached to or
endorsed on this Covered Bond.

The expression Prospectus Directive means Directive 2003/71/EC (as amended or superseded), and
includes any relevant implementing measure in a relevant Member State of the European Economic Area.

Any reference to Covered Bondholders or holders in relation to any Covered Bonds shall mean the holders
of the Covered Bonds and shall, in relation to any Covered Bonds represented by a Global Covered Bond, be
construed as provided below. Any reference herein to Couponholders shall mean the holders of the
Coupons and shall, unless the context otherwise requires, include the holders of the Talons. As used herein,
Tranche means Covered Bonds which are identical in all respects (including as to listing and admission to
trading) and Series means a Tranche of Covered Bonds together with any further Tranche or Tranches of
Covered Bonds which (a) are expressed to be consolidated and form a single series and (b) have the same
terms and conditions or terms and conditions which are the same in all respects save for the amount and date
of the first payment of interest thereon and the date from which interest starts to accrue.

Copies of the applicable Final Terms and the other Transaction Documents are available for inspection
during normal business hours at the registered office of the Issuer and of the Principal Paying Agent and at
the specified office of each of the other Paying Agents. If the Covered Bonds are to be admitted to trading on
the regulated market of the Luxembourg Stock Exchange and/or the Bucharest Stock Exchange, the
applicable Final Terms will be published on the website of the Luxembourg Stock Exchange
(www.bourse.lu) and/or on the website of the Bucharest Stock Exchange (www.bvb.ro) save that, if this
Covered Bond is neither admitted to trading on a regulated market in the European Economic Area nor
offered in the European Economic Area in circumstances where a prospectus is required to be published
under the Prospectus Directive, the applicable Final Terms and the other Transaction Documents will only be
obtainable by a Covered Bondholder holding one or more Covered Bonds and such Covered Bondholder
must produce evidence satisfactory to the Issuer and the relevant Paying Agent as to its holding of such
Covered Bonds and identity. The Covered Bondholders and the Couponholders are deemed to have notice of,
are bound by, and are entitled to the benefit of, all the provisions of, and definitions contained in, the Agency
Agreement and the applicable Final Terms and the other Transaction Documents which are applicable to
them. The statements in the Conditions include summaries of, and are subject to, the detailed provisions of
the Agency Agreement and the other relevant Transaction Documents.

For the purposes of these Conditions:

Romanian Covered Bond Law means Law No. 304 of 27 November 2015 on issuances of covered bonds,
as published in the Official Gazette of Romania No. 902 of 4 December 2015, as such may be amended at
any time;

Romanian Covered Bond Legislation means the Romanian Covered Bond Law and the Romanian Covered
Bond Regulation taken together, as well as any other Romanian law or similar normative act or regulation or
secondary act issued by the NBR for the application or by reference to the Romanian Covered Bond Law;
and

80
Romanian Covered Bond Regulation means Regulation No. 1 of 3 March 2016, as published in the
Official Gazette of Romania No. 184 bis of 11 March 2016, as such may be amended from time to time.

Except where the context otherwise requires, capitalised terms used and not otherwise defined in these
Conditions shall bear the meanings given to them in the applicable Final Terms and/or the master definitions
and construction schedule made between the parties to the Transaction Documents on or about the
Programme Closing Date (as amended and/or supplemented and/or restated from time to time, the Master
Definitions and Construction Schedule), a copy of each of which may be obtained as described above.

1. Form, Denomination and Title

The Covered Bonds are in bearer form or in registered form (as specified in the applicable Final
Terms) and, in the case of Definitive Covered Bonds, serially numbered, in the currency (the
Specified Currency) and the denominations (the Specified Denomination(s)) specified in the
applicable Final Terms. Covered Bonds of one Specified Denomination may not be exchanged for
Covered Bonds of another Specified Denomination and Bearer Covered Bonds may not be
exchanged for Registered Covered Bonds and vice versa.

This Covered Bond may be a Fixed Rate Covered Bond, a Floating Rate Covered Bond, a Zero
Coupon Covered Bond or a combination of any of the foregoing, depending upon the Interest Basis
as specified in the applicable Final Terms.

The Covered Bonds will be issued in such denominations as may be agreed between the Issuer and
the relevant Dealer(s) and set out in the applicable Final Terms save that the minimum denomination
of each Covered Bond will be at least EUR 100,000 (or, if the Covered Bonds are denominated in a
currency other than euro, at least the equivalent amount in such currency) or such other higher
amount as is required from time to time by the relevant central bank (or equivalent body) or any laws
or regulations applicable to the relevant Specified Currency.

It is a condition precedent to the issuance of a new Series or Tranche of Covered Bonds that (i) there
is no Issuer Event or Event of Default outstanding and that such issuance would not cause an Issuer
Event or Event of Default, (ii) such issuance would not result in a breach of any of the Statutory
Tests, (iii) the Rating Agency has confirmed the then current rating of all Covered Bonds issued and
outstanding under the Programme and that the ratings of such Covered Bonds will not be adversely
affected or withdrawn as a result of such issuance, (iv) the National Bank of Romania (the NBR) in
accordance with, inter alia, Article 4(1) of the Romanian Covered Bond Law has approved such
issuance and (v) if applicable, in respect of any Series or Tranche, a Hedging Agreement is entered
into. Prior to the issuance of any such new Series or Tranche of Covered Bonds, the Issuer will
deliver to the Covered Bondholders Representative a certificate signed by two directors of the Issuer
confirming that each of the conditions precedent to the issuance of such new Series or Tranche of
Covered Bonds has been met, on which such certificate the Covered Bondholders Representative
shall be entitled to rely on without liability.

Bearer Definitive Covered Bonds are issued with Coupons attached, unless they are Zero Coupon
Covered Bonds in which case references to Coupons and Couponholders in these Conditions are not
applicable.

Subject as set out below, title to the Bearer Covered Bonds and Coupons will pass by delivery and
title to the Registered Covered Bonds will pass upon registration of transfer in accordance with the
provisions of the Agency Agreement. The Issuer, the Paying Agents and the Covered Bondholders
Representative will (except as otherwise required by law) deem and treat the bearer of any Bearer
Covered Bond or Coupon and the registered holder of any Registered Covered Bond as the absolute
owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing

81
 thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global
Covered Bond, without prejudice to the provisions set out in the next succeeding paragraph.

For so long as any of the Covered Bonds are represented by a Global Covered Bond held on behalf
of or, as the case may be, registered in the name of a common depositary for, Euroclear Bank
S.A./N.V. (Euroclear) and/or Clearstream Banking, S.A. (Clearstream, Luxembourg), each
person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the
records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of
such Covered Bonds (in which regard any certificate or other document issued by Euroclear or
Clearstream, Luxembourg as to the nominal amount of such Covered Bonds standing to the account
of any person shall be conclusive and binding for all purposes save in the case of manifest error and
any such certificate or other document may comprise any form of statement or printout of electronic
records provided by the relevant clearing system (including, without limitation, Euroclear’s EUCLID
or Clearstream, Luxembourg’s Cedcom system) in accordance with its usual procedures and in
which the holder of a particular nominal amount of the Covered Bonds is clearly identified with the
amount of such holding) shall be treated by the Issuer, the Paying Agents and the Covered
Bondholders Representative as the holder of such nominal amount of such Covered Bonds for all
purposes other than with respect to the payment of principal or interest or other amounts on such
nominal amount of such Covered Bonds, for which purpose the bearer or, as applicable, the
registered holder of the relevant Global Covered Bond shall be treated by the Issuer, any Paying
Agent and the Covered Bondholders Representative as the holder of such nominal amount of such
Covered Bonds in accordance with and subject to the terms of the relevant Global Covered Bond and
the expressions Covered Bondholder and holder of Covered Bonds and related expressions shall
be construed accordingly.

In accordance with Article 25(2) of the Romanian Covered Bond Law, the Issuer must apply for
admission of the Covered Bonds to trading on the spot regulated market operated by Bursa de Valori
Bucuresti S.A. (in English, the Bucharest Stock Exchange) to the extent that the technical conditions
for trading and settling covered bonds denominated in a non-leu currency are in place at the time of
issuance of such covered bonds. To the extent that such technical conditions are in place, where
Covered Bonds are traded on the Bucharest Stock Exchange, such trades shall be settled through the
Depozitarul Central S.A. (the Bucharest Central Depository).

Covered Bonds which are represented by a Global Covered Bond will be transferable only in
accordance with the rules and procedures for the time being of Euroclear and Clearstream,
Luxembourg.

References to Euroclear and/or Clearstream, Luxembourg and/or the Bucharest Central Depository
shall, whenever the context so permits, be deemed to include a reference to any successor operator
and/or successor clearing system and/or any additional or alternative clearing system specified in the
applicable Final Terms or as may otherwise be approved by the Issuer, the Principal Paying Agent
and the Covered Bondholders Representative.

2. Transfers of Registered Covered Bonds

2.1 Transfers of interests in Registered Global Covered Bonds

Transfers of beneficial interests in Global Covered Bonds in registered form representing Covered
Bonds sold to non-U.S. persons outside the United States in reliance on Regulation S (Registered
Global Covered Bonds) will be effected by Euroclear or Clearstream, Luxembourg and, in turn, by
other participants and, if appropriate, indirect participants in such clearing systems acting on behalf
of beneficial transferors and transferees of such interests (which may include the Bucharest Central
Depository). A beneficial interest in a Registered Global Covered Bond will, subject to compliance

82
 with all applicable legal and regulatory restrictions, be exchangeable for Registered Definitive
Covered Bonds or for a beneficial interest in another Registered Global Covered Bond only in the
authorised denominations set out in the applicable Final Terms and only in accordance with the rules
and operating procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case
may be, and in accordance with the terms and conditions specified in the Agency Agreement.

2.2 Transfers of Registered Covered Bonds in definitive form

Subject as provided in Conditions 2.3 (Registration of transfer upon partial redemption) and 2.4
(Costs of registration) upon the terms and subject to the conditions set forth in the Agency
Agreement, a Registered Definitive Covered Bond may be transferred in whole or in part in the
authorised denominations set out in the applicable Final Terms. In order to effect any such transfer
(a) the holder or holders must (i) surrender the Registered Covered Bond for registration of the
transfer of the Registered Covered Bond (or the relevant part of the Registered Covered Bond) at the
specified office of the Registrar or any Transfer Agent, with the form of transfer thereon duly
executed by the holder or holders thereof or his or their attorney or attorneys duly authorised in
writing and (ii) complete and deposit such other certifications as may be required by the Registrar or,
as the case may be, the relevant Transfer Agent and (b) the Registrar or, as the case may be, the
relevant Transfer Agent, must, after due and careful enquiry, be satisfied with the documents of title
and the identity of the person making the request.

Any such transfer will be subject to such reasonable regulations as the Issuer, the Covered
Bondholders Representative and the Registrar may from time to time prescribe (the initial such
regulations being set out in the Agency Agreement).

Subject as provided above, the Registrar or, as the case may be, the relevant Transfer Agent, will,
within three business days (being for this purpose a day on which banks are open for business in the
city where the specified office of the Registrar or, as the case may be, the relevant Transfer Agent, is
located) of the request (or such longer period as may be required to comply with any applicable
fiscal or other laws or regulations), authenticate and deliver, or procure the authentication and
delivery of, at its specified office to the transferee or (at the risk of the transferee) send by uninsured
mail to such address as the transferee may request, a new Registered Definitive Covered Bond of a
like aggregate nominal amount to the Registered Definitive Covered Bond (or the relevant part of the
Registered Definitive Covered Bond) transferred.

In the case of the transfer of part only of a Registered Definitive Covered Bond, a new Registered
Definitive Covered Bond in respect of the balance of the Registered Definitive Covered Bond not
transferred will (in addition to the new Registered Definitive Covered Bond in respect of the nominal
amount transferred) be so authenticated and delivered or (at the risk of the transferor) sent by
uninsured mail to the address specified by the transferor.

2.3 Registration of transfer upon partial redemption

For the avoidance of doubt, in the event of a partial redemption of Covered Bonds under Condition 6
(Redemption and Purchase), the Issuer shall not be required to register the transfer of any Registered
Covered Bond, or part of a Registered Covered Bond, called for partial redemption.

2.4 Costs of registration

Covered Bondholders will not be required to bear the costs and expenses of effecting any registration
of transfer as provided above, except for any costs or expenses of delivery other than by regular
uninsured mail and except that the Issuer, Registrar or Transfer Agent may require the payment of a
sum sufficient to cover any stamp duty, taxes or any other governmental charge that may be imposed
in relation to the registration.

83
3. Status of the Covered Bonds

The Covered Bonds and any relative Coupons are issued in accordance with the Romanian Covered
Bond Legislation and constitute direct, unconditional and unsubordinated obligations of the Issuer,
secured over the Cover Pool Assets pursuant to a movable mortgage established over such Cover
Pool Assets, created pursuant to the provisions of the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement and the Romanian Covered Bond Legislation (the Movable
Mortgage over the Cover Pool). The Covered Bonds will at all times rank pari passu without any
preference among themselves, irrespective of their Series, for all purposes except for the timing of
the repayment of principal and the timing and amount of interest payable.

4. Interest

The applicable Final Terms will indicate whether the Covered Bonds are Fixed Rate Covered Bonds,
Floating Rate Covered Bonds or Zero Coupon Covered Bonds.

4.1 Interest on Fixed Rate Covered Bonds

This Condition 4.1 applies to Fixed Rate Covered Bonds only. The applicable Final Terms contains
provisions applicable to the determination of fixed rate interest and must be read in conjunction with
this Condition 4.1 for full information on the manner in which interest is calculated on Fixed Rate
Covered Bonds. In particular, the applicable Final Terms will specify the Interest Commencement
Date, the Rate(s) of Interest, the Interest Payment Date(s), the Final Maturity Date, the Fixed
Coupon Amount, any applicable Broken Amount, the Calculation Amount, the Day Count Fraction
and any applicable Determination Date.

Each Fixed Rate Covered Bond bears interest on its Principal Amount Outstanding from (and
including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest.
Interest will be payable, subject as provided in these Conditions, in arrear on the Interest Payment
Date(s) in each year up to (and including) the Final Maturity Date.

If the Covered Bonds are in definitive form, except as provided in the applicable Final Terms, the
amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period (as
defined in Condition 4.5(f) (Business Day, Business Day Convention, Day Count Fractions and
other adjustments)) ending on (but excluding) such date will amount to the amount of interest
payable on each Interest Payment Date in respect of the Fixed Interest Period ending on but
excluding such date (Fixed Coupon Amount). Payments of interest on any Interest Payment Date
will, if so specified in the applicable Final Terms, amount to the broken amount specified in the
relevant Final Terms (the Broken Amount) so specified.

As used in the Conditions, Fixed Interest Period means the period from (and including) an Interest
Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the next (or first)
Interest Payment Date.

If interest is required to be calculated for a period other than a Fixed Interest Period, such interest
shall be calculated by applying the Rate of Interest to each Specified Denomination, multiplying
such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest
sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or
otherwise in accordance with applicable market convention.

4.2 Interest on Floating Rate Covered Bonds

This Condition 4.2 applies to Floating Rate Covered Bonds only. The applicable Final Terms
contains provisions applicable to the determination of floating rate interest and must be read in

84
conjunction with this Condition 4.2 for full information on the manner in which interest is calculated
on Floating Rate Covered Bonds. In particular, the applicable Final Terms will identify any
Specified Interest Payment Dates, any Specified Period, the Interest Commencement Date, the
Business Day Convention, any Additional Business Centres, whether ISDA Determination or Screen
Rate Determination applies to the calculation of interest, the party who will calculate the amount of
interest due if it is not the Agent, the Margin, any maximum or minimum interest rates and the Day
Count Fraction. Where ISDA Determination applies to the calculation of interest, the applicable
Final Terms will also specify the applicable Floating Rate Option, Designated Maturity and Reset
Date. Where Screen Rate Determination applies to the calculation of interest, the applicable Final
Terms will also specify the applicable Reference Rate, Interest Determination Date(s) and Relevant
Screen Page.

(a) Interest Payment Dates

Each Floating Rate Covered Bond bears interest on its Principal Amount Outstanding from
(and including) the Interest Commencement Date and such interest will be payable in arrear
on either:

(i) the Specified Interest Payment Date(s) in each year specified in the applicable Final
Terms; or

(ii) if no Specified Interest Payment Date(s) is/are specified in the applicable Final
Terms, each date (each such date, together with each Specified Interest Payment
Date, an Interest Payment Date) which falls the number of months or other period
specified as the Specified Period in the applicable Final Terms after the preceding
Interest Payment Date or, in the case of the first Interest Payment Date, after the
Interest Commencement Date.

Such interest will be payable in respect of each Interest Period. In these Conditions, the
expression Interest Period shall mean the period from (and including) an Interest Payment
Date (or, if none, the Interest Commencement Date) to (but excluding) the next (or first)
Interest Payment Date.

(b) Rate of Interest

The Rate of Interest payable from time to time in respect of Floating Rate Covered Bonds
will be determined in the manner specified in the applicable Final Terms.

(c) ISDA Determination for Floating Rate Covered Bonds

Where ISDA Determination is specified in the applicable Final Terms as the manner in
which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period
will be the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the
Margin (if any). For the purposes of this Condition 4.2(c), ISDA Rate, for an Interest
Period, means a rate equal to the Floating Rate that would be determined by the Principal
Paying Agent or other person specified in the applicable Final Terms under an interest rate
swap transaction if the Principal Paying Agent or that other person were acting as
Calculation Agent for that swap transaction under the terms of an agreement incorporating
the 2006 ISDA Definitions, as published by the International Swaps and Derivatives
Association, Inc. and as amended and updated as at the Issue Date of the first Tranche of the
Covered Bonds (the ISDA Definitions), and under which:

(i) the Floating Rate Option is as specified in the applicable Final Terms;

85
 (ii) the Designated Maturity is the period specified in the applicable Final Terms; and

(iii) the relevant Reset Date is the day specified in the applicable Final Terms.

For the purposes of this Condition 4.2, Floating Rate, Calculation Agent, Floating Rate
Option, Designated Maturity and Reset Date have the meanings given to those terms in
the ISDA Definitions.

When this Condition 4.2(c) applies, in respect of each relevant Interest Period, the Principal
Paying Agent or the above-mentioned person will be deemed to have discharged its
obligations under Condition 4.5(f) (Business Day, Business Day Convention, Day Count
Fractions and other adjustments) in respect of the determination of the Rate of Interest if it
has determined the Rate of Interest in respect of such Interest Period in the manner provided
in this Condition 4.2(c).

(d) Screen Rate Determination for Floating Rate Covered Bonds

Where Screen Rate Determination is specified in the applicable Final Terms as the manner
in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period
will, subject as provided below, be either:

(i) the offered quotation (if there is only one quotation on the Relevant Screen Page); or

(ii) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005
being rounded upwards) of the offered quotations,

(expressed as a percentage rate per annum) for the Reference Rate (being either ROBOR,
LIBOR or EURIBOR, as specified in the applicable Final Terms) which appears or appear,
as the case may be, on the Relevant Screen Page (or such replacement page on that service
which displays the information) as at 11.00 a.m. (Bucharest time, in the case of ROBOR,
London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the
Interest Determination Date in question plus or minus (as indicated in the applicable Final
Terms) the Margin (if any), all as determined by the Principal Paying Agent. If five or more
of such offered quotations are available on the Relevant Screen Page, the highest (or, if there
is more than one such highest quotation, one only of such quotations) and the lowest (or, if
there is more than one such lowest quotation, one only of such quotations) shall be
disregarded by the Principal Paying Agent for the purpose of determining the arithmetic
mean (rounded as provided above) of such offered quotations.

The Agency Agreement contains provisions for determining the Rate of Interest pursuant to
this Condition 4.2(d) in the event that the Relevant Screen Page is not available or if, in the
case of paragraph (i) above, no such offered quotation appears or, in the case of paragraph
(ii) above, fewer than three such offered quotations appear, in each case as at the time
specified in the preceding paragraph.

(e) Minimum Rate of Interest and/or Maximum Rate of Interest

If the applicable Final Terms for a Floating Rate Covered Bond specifies a Minimum Rate
of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of
such Interest Period determined in accordance with the provisions of Condition 4.2(b) (Rate
of Interest) is less than such Minimum Rate of Interest, the Rate of Interest for such Interest
Period shall be such Minimum Rate of Interest.

86
 If the applicable Final Terms for a Floating Rate Covered Bond specifies a Maximum Rate
of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of
such Interest Period determined in accordance with the provisions of Condition 4.2(b) (Rate
of Interest) is greater than such Maximum Rate of Interest, the Rate of Interest for such
Interest Period shall be such Maximum Rate of Interest.

(f) Determination of Rate of Interest and calculation of Interest Amounts

The Principal Paying Agent will at or as soon as practicable after each time at which the
Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest
Period.

The Principal Paying Agent will calculate the amount of interest (the Interest Amount)
payable on the Floating Rate Covered Bonds for the relevant Interest Period by applying the
Rate of Interest to:

(i) in the case of Floating Rate Covered Bonds which are represented by a Global
Covered Bond, the aggregate outstanding nominal amount of the Covered Bonds
represented by such Global Covered Bond; or

(ii) in the case of Floating Rate Covered Bonds in definitive form, the Calculation
Amount,

and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding
the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any
such sub-unit being rounded upwards or otherwise in accordance with applicable market
convention. Where the Specified Denomination of a Floating Rate Covered Bond in
definitive form comprises more than one Calculation Amount, the Interest Amount payable
in respect of such Covered Bond shall be the aggregate of the amounts (determined in the
manner provided above) for each Calculation Amount comprising the Specified
Denomination without any further rounding.

(g) Linear Interpolation

Where Linear Interpolation is specified as applicable in respect of an Interest Period in the

applicable Final Terms, the Rate of Interest for such Interest Period shall be calculated by
the Principal Paying Agent by straight line linear interpolation by reference to two rates
based on the relevant Reference Rate (where Screen Rate Determination is specified as
applicable in the applicable Final Terms) or the relevant Floating Rate Option (where ISDA
Determination is specified as applicable in the applicable Final Terms), one of which shall
be determined as if the Designated Maturity were the period of time for which rates are
available next shorter than the length of the relevant Interest Period and the other of which
shall be determined as if the Designated Maturity were the period of time for which rates are
available next longer than the length of the relevant Interest Period provided however that if
there is no rate available for a period of time next shorter or, as the case may be, next longer,
then the Principal Paying Agent shall determine such rate at such time and by reference to
such sources as it (in consultation with the Issuer) determines appropriate.

Designated Maturity means, in relation to Screen Rate Determination, the period of time
designated in the Reference Rate.

87
(h) Notification of Rate of Interest and Interest Amounts

The Principal Paying Agent will cause the Rate of Interest and each Interest Amount for
each Interest Period and the relevant Interest Payment Date to be notified to the Issuer, the
Covered Bondholders Representative and to any stock exchange or other relevant competent
authority or quotation system on which the relevant Floating Rate Covered Bonds are for the
time being listed, quoted and/or traded or by which they have been admitted to listing or
trading and to be published in accordance with Condition 16 (Notices) as soon as possible
after their determination but in no event later than the fourth Business Day (as defined in
Condition 4.5(a) (Business Day, Business Day Convention, Day Count Fractions and other
adjustments)) thereafter and in the case of any notification to be given to the Luxembourg
Stock Exchange on or before the first Business Day of each Interest Period. Each Interest
Amount and Interest Payment Date so notified may subsequently be amended (or
appropriate alternative arrangements made by way of adjustment) without notice in the event
of an extension or shortening of the Interest Period. Any such amendment or alternative
arrangements will promptly be notified to the Covered Bondholders Representative and each
stock exchange or other relevant authority on which the relevant Floating Rate Covered
Bonds are for the time being listed, quoted and/or traded or by which they have been
admitted to listing or trading and to Covered Bondholders in accordance with Condition 16
(Notices).

(i) Certificates to be final

All certificates, communications, opinions, determinations, calculations, quotations and

decisions given, expressed, made or obtained for the purposes of the provisions of this
Condition 4.2, whether by the Principal Paying Agent or the Calculation Agent shall (in the
absence of manifest error) be binding on the Issuer, the Principal Paying Agent, the
Calculation Agent, the other Paying Agents, the Covered Bondholders Representative and
all Covered Bondholders and Couponholders and (in the absence of wilful default,
negligence or fraud) no liability to the Issuer, the Covered Bondholders or the
Couponholders shall attach to the Principal Paying Agent or the Calculation Agent in
connection with the exercise or non-exercise by it of its powers, duties and discretions
pursuant to such provisions.

(j) Benchmark Discontinuation

Notwithstanding the foregoing provisions of this Condition 4.2, if the Issuer determines that
a Benchmark Event has occurred in relation to an Original Reference Rate (as detailed
below) when any Rate of Interest (or any component part thereof) remains to be determined
by reference to that Original Reference Rate, then the following provisions of this
Condition 4.2(j) shall apply.

(i) Successor Rate or Alternative Rate

If there is a Successor Rate, then the Issuer shall promptly notify the Principal
Paying Agent and, in accordance with Condition 16 (Notices), the Covered
Bondholders of such Successor Rate and that Successor Rate shall (subject to
adjustment as provided in paragraph (ii) below) subsequently be used by the
Principal Paying Agent in place of the Original Reference Rate to determine the
relevant Rate(s) of Interest (or the relevant component part(s) thereof) for all
relevant future payments of interest on the Covered Bonds (subject to the further
operation of this Condition 4.2(j)).

88
 If there is no Successor Rate but the Issuer, acting in good faith, in a commercially
reasonable manner and by reference to such sources as it deems appropriate, which
may include consultation with an Independent Adviser, determines that there is an
Alternative Rate, then the Issuer shall promptly notify the Principal Paying Agent
and, in accordance with Condition 16 (Notices), the Covered Bondholders of such
Alternative Rate and that Alternative Rate shall (subject to adjustment as provided in
paragraph (ii) below) subsequently be used in place of the Original Reference Rate
to determine the relevant Rate(s) of Interest (or the relevant component part(s)
thereof) for all relevant future payments of interest on the Covered Bonds (subject to
the further operation of this Condition 4.2(j)).

(ii) Adjustment Spread

If, in the case of a Successor Rate, an Adjustment Spread is formally recommended,

or formally provided as an option for parties to adopt, in relation to the replacement
of the Original Reference Rate with the Successor Rate by any Relevant Nominating
Body, then the Issuer shall promptly notify the Principal Paying Agent and, in
accordance with Condition 16 (Notices), the Covered Bondholders of such
Adjustment Spread and the Principal Paying Agent shall apply such Adjustment
Spread to the Successor Rate for each subsequent determination of a relevant Rate
of Interest (or a component part thereof) by reference to such Successor Rate.

If, in the case of a Successor Rate where no such Adjustment Spread is formally
recommended or provided as an option by any Relevant Nominating Body, or in the
case of an Alternative Rate, the Issuer, acting in good faith, in a commercially
reasonable manner and by reference to such sources as it deems appropriate, which
may include consultation with an Independent Adviser, determines that there is an
Adjustment Spread in customary market usage in the international debt capital
markets for transactions which reference the Original Reference Rate, where such
rate has been replaced by the Successor Rate or the Alternative Rate (as the case
may be), then the Issuer shall promptly notify the Principal Paying Agent and, in
accordance with Condition 16 (Notices), the Covered Bondholders of such
Adjustment Spread and the Principal Paying Agent shall apply such Adjustment
Spread to the Successor Rate and the Alternative Rate (as the case may be) for each
subsequent determination of a relevant Rate of Interest (or a component part thereof)
by reference to such Successor Rate or Alternative Rate (as applicable).

If no such recommendation or option has been made (or made available) by any
Relevant Nominating Body, or the Issuer so determines that there is no such
Adjustment Spread in customary market usage in the international debt capital
markets and the Issuer further determines, acting in good faith, in a commercially
reasonable manner and following consultation with an Independent Adviser, that an
Adjustment Spread is required to be applied to the Successor Rate or the Alternative
Rate (as the case may be), then the Adjustment Spread shall be:

(A) the Adjustment Spread determined by the Issuer, acting in good faith, in a
commercially reasonable manner and following consultation with an
Independent Adviser, as being the Adjustment Spread recognised or
acknowledged as being the industry standard for over-the-counter derivative
transactions which reference the Original Reference Rate, where such rate
has been replaced by the Successor Rate or the Alternative Rate (as the case
may be); or

89
 (B) if there is no such industry standard recognised or acknowledged, such
Adjustment Spread as the Issuer, acting in good faith, in a commercially
reasonable manner and following consultation with an Independent Adviser,
determines to be appropriate.

Following any such determination of the Adjustment Spread, the Issuer shall
promptly notify the Principal Paying Agent and, in accordance with Condition 16
(Notices), the Covered Bondholders of such Adjustment Spread and the Principal
Paying Agent shall apply such Adjustment Spread to the Successor Rate or the
Alternative Rate (as the case may be) for each subsequent determination of a
relevant Rate of Interest (or a component part thereof) by reference to such
Successor Rate or Alternative Rate (as applicable).

(iii) Benchmark Amendments

If any Successor Rate, Alternative Rate or Adjustment Spread is determined in

accordance with this Condition 4.2(j) and the Issuer, acting in good faith, in a
commercially reasonable manner and by reference to such sources as it deems
appropriate, which may include consultation with an Independent Adviser,
determines in its discretion (A) that amendments to these Conditions and/or the
Agency Agreement and/or any other Transaction Document are necessary to ensure
the proper operation of such Successor Rate, Alternative Rate and/or Adjustment
Spread (such amendments, the Benchmark Amendments) and (B) the terms of the
Benchmark Amendments, then the Issuer and the Principal Paying Agent shall,
subject to the Issuer having to give notice thereof to the Covered Bondholders in
accordance with Condition 16 (Notices), without any requirement for the consent or
approval of Covered Bondholders, agree to the necessary modifications to these
Conditions and/or the Agency Agreement to give effect to such Benchmark
Amendments with effect from the date specified in such notice. The Principal
Paying Agent shall not be obliged to agree to any modifications which in its
reasonable opinion would have the effect of exposing it to further liability or
increasing its obligations or decreasing its rights and protections.

In connection with any such modifications in accordance with this Condition 4.2(j),
the Issuer shall comply with the rules of any stock exchange on which the Covered
Bonds are for the time being listed or admitted to trading.

Any Benchmark Amendments determined under this Condition 4.2(j) shall be

notified promptly by the Issuer to the Principal Paying Agent and, in accordance
with Condition 16 (Notices), the Covered Bondholders. Such notice shall be
irrevocable and shall specify the effective date of such Benchmark Amendments.

(iv) Independent Adviser

In the event the Issuer is to consult with an Independent Adviser in connection with
any determination to be made by the Issuer pursuant to this Condition 4.2(j), the
Issuer shall use its reasonable endeavours to appoint an Independent Adviser, as
soon as reasonably practicable, for the purposes of any such consultation.

An Independent Adviser appointed pursuant to this Condition 4.2(j) shall act in good
faith, in a commercially reasonable manner and (in the absence of fraud or wilful
default) shall have no liability whatsoever to the Issuer or the Covered Bondholders
for any determination made by it or for any advice given to the Issuer in connection

90
 with any determination made by the Issuer pursuant to this Condition 4.2(j) or
otherwise in connection with the Covered Bondholders.

If the Issuer is in any doubt as to whether there is an Alternative Rate and/or any
Adjustment Spread is required to be applied and/or in relation to the quantum of, or
any formula or methodology for determining, such Adjustment Spread and/or
whether any Benchmark Amendments are necessary and/or in relation to the terms
of any such Benchmark Amendments, a written determination of an Independent
Adviser in respect thereof shall be conclusive and binding on all parties, save in the
case of manifest error, and (in the absence of fraud or wilful default) the Issuer shall
have no liability whatsoever to the Covered Bondholders in respect of anything
done, or omitted to be done, in relation to that matter in accordance with any such
written determination.

No Independent Adviser appointed in connection with the Covered Bonds (acting in

such capacity), shall have any relationship or agency or trust with the Covered
Bonds.

(v) Survival of Original Reference Rate Provisions

Without prejudice to the obligations of the Issuer under this Condition 4.2(j), the
Original Reference Rate and the fallback provisions provided for above in this
Condition 4.2, the Agency Agreement and the applicable Final Terms, as the case
may be, will continue to apply unless and until the Bank has determined the
Successor Rate or the Alternative Rate (as the case may be), and any Adjustment
Spread and Benchmark Amendments, in accordance with the relevant provisions of
this Condition 4.2(j).

(vi) Definitions

In this Condition 4.2(j):

Adjustment Spread means either a spread, or the formula or methodology for

calculating a spread and the spread resulting from such calculation, which spread
may in either case be positive or negative and is to be applied to the Successor Rate
or the Alternative Rate (as the case may be) to reduce or eliminate, to the fullest
extent reasonably practicable in the circumstances, any economic prejudice or
benefit (as the case may be) to Covered Bondholders as a result of the replacement
of the Original Reference Rate with the Successor Rate or the Alternative Rate (as
the case may be);

Alternative Rate means an alternative benchmark or screen rate which the Issuer
determines in accordance with Condition 4.2(j) is used in place of the Original
Reference Rate in customary market usage in the international debt capital markets
for the purposes of determining rates of interest (or the relevant component part
thereof) for a commensurate interest period and in the same Specified Currency as
the applicable Covered Bonds;

Benchmark Event means:

(i) the Original Reference Rate ceasing to exist or be published;

(ii) the later of (A) the making of a public statement by the administrator of the
Original Reference Rate that it will, by a specified date, cease publishing the

91
 Original Reference Rate permanently or indefinitely (in circumstances
where no successor administrator has been appointed that will continue
publication of the Original Reference Rate) and (B) the date falling six
months prior to such specified date;

(iii) the making of a public statement by the supervisor of the administrator of

the Original Reference Rate that the Original Reference Rate has been
permanently or indefinitely discontinued or is prohibited from being used or
that its use is subject to restrictions or adverse consequences or, where such
discontinuation, prohibition, restrictions or adverse consequences are to
apply from a specified date after the making of any public statement to such
effect, the later of the date of the making of such public statement and the
date falling six months prior to such specified date; or

(iv) it has or will prior to the next Determination Date become unlawful for the
Calculation Agent, any Paying Agent or the Issuer to determine any Rate of
Interest and/or calculate any Interest Amount using the Original Reference
Rate (including, without limitation, under Regulation (EU) No. 2016/1011,
if applicable).

Independent Adviser means an independent financial institution of international

repute or other independent adviser of recognised standing with appropriate
expertise appointed by the Issuer at its own expense;

Original Reference Rate means the benchmark or screen rate (as applicable)
originally specified in the applicable Final Terms for the purposes of determining
the relevant Rate of Interest (or any component part thereof) in respect of the
Covered Bonds;

Relevant Nominating Body means, in respect of a benchmark or screen rate (as

applicable):

(i) the central bank for the currency to which the benchmark or screen rate (as
applicable) relates, or any central bank or other supervisory authority which
is responsible for supervising the administrator of the benchmark or screen
rate (as applicable); or

(ii) any working group or committee sponsored by, chaired or co-chaired by or

constituted at the request of (A) the central bank for the currency to which
the benchmark or screen rate (as applicable) relates, (B) any central bank or
other supervisory authority which is responsible for supervising the
administrator of the benchmark or screen rate (as applicable), (C) a group of
the aforementioned central banks or other supervisory authorities or (D) the
Financial Stability Board or any part thereof; and

Successor Rate means a successor to or replacement of the Original Reference Rate

which is formally recommended by any Relevant Nominating Body.

4.3 Interest on Zero Coupon Covered Bonds

Zero Coupon Covered Bonds will be offered and sold at a discount to their nominal amount and will
not bear interest. When a Zero Coupon Covered Bond becomes repayable prior to its Final Maturity
Date, it will be redeemed at the Early Redemption Amount calculated in accordance with

92
 Condition 6.5 (Early Redemption Amounts). In the case of late payment, the amount due and
repayable shall be calculated in accordance with Condition 6.8 (Late Payment).

4.4 Accrual of interest

Interest (if any) will cease to accrue on each Covered Bond (or in the case of the redemption of part
only of a Covered Bond, that part only of such Covered Bond) on the due date for redemption
thereof unless payment of principal is improperly withheld or refused or unless default is otherwise
made in respect of payment, in which event, interest will continue to accrue as provided in
Condition 6.8 (Late Payment).

4.5 Business Day, Business Day Convention, Day Count Fractions and other adjustments

(a) In these Conditions, Business Day means:

(i) a day on which commercial banks and foreign exchange markets settle payments and are
open for general business (including dealing in foreign exchange and foreign currency
deposits) in London, Bucharest and each Additional Business Centre (other than TARGET2
System) specified in the applicable Final Terms;

(ii) if TARGET2 System is specified as an Additional Business Centre in the applicable Final
Terms, a day on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer (TARGET2) System (the TARGET2 System) is open; and

(iii) either (A) in relation to any sum payable in a Specified Currency other than euro, a day on
which commercial banks and foreign exchange markets settle payments and are open for
general business (including dealing in foreign exchange and foreign currency deposits) in the
principal financial centre of the country of the relevant Specified Currency (if other than
London, Bucharest and any Additional Business Centre) or as otherwise specified in the
applicable Final Terms or (B) in relation to any sum payable in euro, a day on which the
TARGET2 System is open.

(b) If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no
numerically corresponding day in the calendar month in which an Interest Payment Date should
occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day,
then, if the Business Day Convention specified is:

(A) in any case where Specified Periods are specified in accordance with Condition 4.2(a)(ii)
(Interest Payment Dates), the Floating Rate Convention, such Interest Payment Date (1) in
the case of (x) above, shall be the last day that is a Business Day in the relevant month and
the provisions of (II) below shall apply mutatis mutandis or (2) in the case of (y) above, shall
be postponed to the next day which is a Business Day unless it would thereby fall into the
next calendar month, in which event (I) such Interest Payment Date shall be brought forward
to the immediately preceding Business Day and (II) each subsequent Interest Payment Date
shall be the last Business Day in the month which falls within the Specified Period after the
preceding applicable Interest Payment Date occurred; or

(B) the Following Business Day Convention, such Interest Payment Date shall be postponed to
the next day which is a Business Day; or

(C) the Modified Following Business Day Convention, such Interest Payment Date shall be
postponed to the next day which is a Business Day unless it would thereby fall into the next
calendar month, in which event such Interest Payment Date shall be brought forward to the
immediately preceding Business Day; or

93
 (D) the Preceding Business Day Convention, such Interest Payment Date shall be brought
forward to the immediately preceding Business Day.

(c) Day Count Fraction means, in respect of the calculation of an amount of interest for any Interest
Period:

(i) if Actual/Actual (ICMA) is specified in the applicable Final Terms:

(A) in the case of Covered Bonds where the number of days in the relevant period from
(and including) the most recent Interest Payment Date (or, if none, the Interest
Commencement Date) to (but excluding) the relevant payment date (the Accrual
Period) is equal to or shorter than the Determination Period (as defined in Condition
4.5(e) (Business Day, Business Day Convention, Day Count Fractions and other
adjustments)) during which the Accrual Period ends, the number of days in such
Accrual Period divided by the product of (I) the number of days in such
Determination Period and (II) the number of Determination Dates (as specified in
the applicable Final Terms) that would occur in one calendar year; or

(B) in the case of Covered Bonds where the Accrual Period is longer than the
Determination Period during which the Accrual Period ends, the sum of: (I) the
number of days in such Accrual Period falling in the Determination Period in which
the Accrual Period begins divided by the product of (x) the number of days in such
Determination Period and (y) the number of Determination Dates that would occur
in one calendar year; and (II) the number of days in such Accrual Period falling in
the next Determination Period divided by the product of (x) the number of days in
such Determination Period and (y) the number of Determination Dates that would
occur in one calendar year;

(ii) if Actual/Actual or Actual/Actual (ISDA) is specified in the applicable Final Terms, the
actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest
Period falls in a leap year, the sum of (A) the actual number of days in that portion of the
Interest Period falling in a leap year divided by 366 and (B) the actual number of days in that
portion of the Interest Period falling in a non-leap year divided by 365);

(iii) if Actual/365 (Fixed) is specified in the applicable Final Terms, the actual number of days
in the Interest Period divided by 365;

(iv) if Actual/365 (Sterling) is specified in the applicable Final Terms, the actual number of
days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling
in a leap year, 366;

(v) if Actual/360 is specified in the applicable Final Terms, the actual number of days in the
Interest Period divided by 360;

(vi) if 30/360, 360/360 or Bond Basis is specified in the applicable Final Terms, the number of
days in the Interest Period divided by 360, calculated on a formula basis as follows:

Day Count Fraction 

360xY 2
    
- Y1  30x M 2 - M1  D 2  D1 
360

where:

“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;

94
 “Y2” is the year, expressed as a number, in which the day immediately following the last day
of the Interest Period falls;

“M1” is the calendar month, expressed as a number, in which the first day of the Interest
Period falls;

“M2” is the calendar month, expressed as a number, in which the day immediately following
the last day of the Interest Period falls;

“D1” is the first calendar day, expressed as a number, of the Interest Period, unless such
number is 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day
included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in
which case D2 will be 30;

(vii) if 30E/360 or Eurobond Basis is specified in the applicable Final Terms, the number of
days in the Interest Period divided by 360, calculated on a formula basis as follows:

Day Count Fraction 

360xY 2
    
- Y 1  30x M 2 - M 1  D 2  D1 
360

where:

“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;

“Y2” is the year, expressed as a number, in which the day immediately following the last day
of the Interest Period falls;

“M1” is the calendar month, expressed as a number, in which the first day of the Interest
Period falls;

“M2” is the calendar month, expressed as a number, in which the day immediately following
the last day of the Interest Period falls;

“D1” is the first calendar day, expressed as a number, of the Interest Period, unless such
number would be 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day
included in the Interest Period, unless such number would be 31, in which case D2 will be
30;

(viii) if 30E/360 (ISDA) is specified in the applicable Final Terms, the number of days in the
Interest Period divided by 360, calculated on a formula basis as follows:

Day Count Fraction 

360xY 2
    
- Y1  30x M 2 - M1  D 2  D1 
360

where:

“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;

95
 “Y2” is the year, expressed as a number, in which the day immediately following the last day
of the Interest Period falls;

“M1” is the calendar month, expressed as a number, in which the first day of the Interest
Period falls;

“M2” is the calendar month, expressed as a number, in which the day immediately following
the last day of the Interest Period falls;

“D1” is the first calendar day, expressed as a number, of the Interest Period, unless (i) that
day is the last day of February or (ii) such number would be 31, in which case D1 will be 30;
and

“D2” is the calendar day, expressed as a number, immediately following the last day
included in the Interest Period, unless (i) that day is the last day of February but not the Final
Maturity Date or (ii) such number would be 31 and D2 will be 30; or

(ix) such other Day Count Fraction as may be specified in the applicable Final Terms.

(d) Determination Date has the meaning given in the applicable Final Terms.

(e) Determination Period means each period from (and including) a Determination Date to (but
excluding) the next Determination Date (including, where either the Interest Commencement Date or
the final Interest Payment Date is not a Determination Date, the period commencing on the first
Determination Date prior to, and ending on the first Determination Date falling after, such date).

(f) Fixed Interest Period means the period from (and including) an Interest Payment Date (or, if none,
the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.

(g) Interest Commencement Date means, in the case of interest-bearing Covered Bonds, the date
specified in the applicable Final Terms from (and including) which the relevant Covered Bonds will
accrue interest.

(h) Interest Payment Date has, in respect of Fixed Rate Covered Bonds, the meaning given in the
applicable Final Terms and, in respect of Floating Rate Covered Bonds, the meaning given in
Condition 4.2 (Interest on Floating Rate Covered Bonds), together the Interest Payment Dates.

(i) Interest Period means the period from (and including) an Interest Payment Date (or, if none, the
Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.

(j) Principal Amount Outstanding means, in respect of a Covered Bond on any day, the principal
amount of that Covered Bond on the relevant Issue Date thereof less principal amounts received by
the relevant Covered Bondholder in respect thereof on or prior to that day provided that the Principal
Amount Outstanding in respect of a Covered Bond that has been purchased and cancelled by the
Issuer shall be zero.

(k) If adjusted is specified in the applicable Final Terms against the Day Count Fraction, interest in
respect of the relevant Interest Period shall be payable in arrear on the relevant Interest Payment
Date and calculated from (and including) an Interest Payment Date (or the Interest Commencement
Date) to (but excluding) the next (or first) Interest Payment Date, as such Interest Payment Date
shall, where applicable, be adjusted in accordance with the Business Day Convention.

(l) If not adjusted is specified in the applicable Final Terms against the Day Count Fraction, interest in
respect of the relevant Interest Period shall be payable in arrear on the relevant Interest Payment

96
 Date and calculated from (and including) an Interest Payment Date (or the Interest Commencement
Date) to (but excluding) the next (or first) Interest Payment Date, but such Interest Payment Dates
shall not be adjusted in accordance with any Business Day Convention.

(m) sub-unit means, with respect to any currency other than euro, the lowest amount of such currency
that is available as legal tender in the country of such currency and, with respect to euro, Euro 0.01.

5. Payments

5.1 Method of payment

Subject as provided below:

(a) payments in a Specified Currency other than euro will be made by credit or transfer to an
account in the relevant Specified Currency (which, in the case of a payment in Japanese Yen
(JPY) to a non-resident of Japan, shall be a non-resident account) maintained by the payee
with a bank in the principal financial centre of the country of such Specified Currency
(which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be
Sydney and Auckland, respectively);

(b) payments will be made in euro by credit or transfer to a euro account (or any other account
to which euro may be credited or transferred) specified by the payee; and

(c) payments in U.S. Dollars will be made by transfer to a U.S. Dollar account maintained by
the payee with a bank outside of the United States (which expression, as used in this
Condition 5, means the United States of America, including the State and the District of
Columbia, its territories, its possessions and other areas subject to its jurisdiction).

All payments of interest in respect of Covered Bonds will be made to accounts located outside the
United States except as may be permitted by United States tax law in effect at the time of such
payment without detriment to the Issuer.

Payments will be subject in all cases to (i) any fiscal or other laws and regulations applicable thereto
in the place of payment and (ii) any withholding or deduction required pursuant to an agreement
described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the Code) or otherwise
imposed pursuant to Sections 1471 to 1474 of the Code, any regulations or agreements thereunder,
any official interpretations thereof, or any law implementing an intergovernmental approach thereto.
References to Specified Currency will include any successor currency under applicable law.

5.2 Presentation of Bearer Definitive Covered Bonds and Coupons

Payments of principal and interest (if any) in respect of Bearer Definitive Covered Bonds will
(subject as provided below) be made in accordance with Condition 5.1 (Method of payment) only
against presentation and surrender of Bearer Definitive Covered Bonds or Coupons (or, in the case
of part payment of any sum due, endorsement of the Bearer Definitive Covered Bond (or Coupon)),
as the case may be, only at a specified office of any Paying Agent outside the United States (which
expression, as used herein, means the United States of America (including the States and the District
of Columbia, its territories, its possessions and other areas subject to its jurisdiction)).

Fixed Rate Covered Bonds in definitive bearer form (other than Long Maturity Covered Bonds (as
defined below)) should be presented for payment together with all unmatured Coupons appertaining
thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of
matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of
payment not being made in full, the same proportion of the amount of such missing unmatured

97
 Coupon as the sum so paid bears to the sum due) will be deducted from the amount due for payment.
Each amount of principal so deducted will be paid in the manner mentioned above against surrender
of the relative missing Coupon at any time before the expiry of ten years after the Relevant Date (as
defined in Condition 10 (Prescription)) in respect of such principal (whether or not such Coupon
would otherwise have become void under Condition 10 (Prescription)) or, if later, five years from
the date on which such Coupon would otherwise have become due but in no event thereafter.

Upon amounts in respect of any Fixed Rate Covered Bond in definitive bearer form becoming due
and repayable by the Issuer prior to its Final Maturity Date, all unmatured Talons (if any)
appertaining thereto will become void and no further Coupons will be issued in respect thereof.

Upon the date on which any Floating Rate Covered Bond or a Long Maturity Covered Bond in
definitive bearer form becomes due and repayable, all unmatured Coupons and Talons (if any)
relating thereto (whether or not attached) shall become void and no payment or, as the case may be,
exchange for further Coupons shall be made in respect thereof. A Long Maturity Covered Bond is
a Fixed Rate Covered Bond (other than a Fixed Rate Covered Bond which on issue had a Talon
attached) whose nominal amount on issue is less than the aggregate interest payable thereon
provided that such Covered Bond shall cease to be a Long Maturity Covered Bond on the Interest
Payment Date on which the aggregate amount of interest remaining to be paid after that date is less
than the Principal Amount Outstanding of such Covered Bond.

If the due date for redemption of any Bearer Definitive Covered Bond is not an Interest Payment
Date, interest (if any) accrued in respect of such Covered Bond from (and including) the preceding
Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable
only against presentation and surrender of the relevant Bearer Definitive Covered Bond.

5.3 Payments in respect of Bearer Global Covered Bonds

Payments of principal and interest (if any) in respect of Covered Bonds represented by any Bearer
Global Covered Bond will (subject as provided below) be made in the manner specified above in
relation to Bearer Definitive Covered Bonds or otherwise in the manner specified in the relevant
Bearer Global Covered Bond against presentation or surrender, as the case may be, of such Bearer
Global Covered Bond if the Bearer Global Covered Bond is not intended to be issued in new global
covered bond (NGCB) form at the specified office of any Paying Agent outside the United States.
On the occasion of each payment, (i) in the case of any Bearer Global Covered Bond which is not
issued in NGCB form, a record of such payment made on such Bearer Global Covered Bond,
distinguishing between any payment of principal and any payment of interest, will be made on such
Bearer Global Covered Bond by the Paying Agent to which it was presented and such record shall be
prima facie evidence that the payment in question has been made and (ii) in the case of any Global
Covered Bond which is issued in NGCB form, the Paying Agent shall instruct Euroclear and
Clearstream, Luxembourg to make appropriate entries in their records to reflect such payment.

No payments of principal, interest or other amounts due in respect of a Bearer Global Covered Bond
will be made by mail to an address in the United States or by transfer to an account maintained in the
United States.

5.4 Payments in respect of Registered Covered Bonds

Payments of principal in respect of each Registered Covered Bond (whether or not in global form)
will be made against presentation and surrender of the Registered Covered Bond at the specified
office of the Registrar or any of the Paying Agents. Such payments will be made in accordance with
Condition 5.1 (Method of payment) by transfer to the Designated Account (as defined below) of the
holder (or the first named of joint holders) of the Registered Covered Bond appearing in the register

98
 of holders of the Registered Covered Bonds maintained by the Registrar (the Register) (i) where in
global form, at the close of the business day (being for this purpose a day on which Euroclear and
Clearstream, Luxembourg are open for business) before the relevant due date and (ii) where in
definitive form, at the close of business on the third business day (being for this purpose a day on
which banks are open for business in the city where the specified office of the Registrar is located).
For these purposes, Designated Account means the account (which, in the case of a payment in JPY
to a non-resident of Japan, shall be a non-resident account) maintained by a holder with a Designated
Bank and identified as such in the Register and Designated Bank means (in the case of a payment in
a Specified Currency other than euro) a bank in the principal financial centre of the country of such
Specified Currency and (in the case of a payment in euro) any bank which processes payments in
euro.

Payments of interest in respect of each Registered Covered Bond (whether or not in global form)
will be made by transfer on the due date to the Designated Account of the holder (or the first named
of joint holders) of the Registered Covered Bond appearing in the Register (i) where in global form,
at the close of the business day (being for this purpose a day on which Euroclear and Clearstream,
Luxembourg are open for business) before the relevant due date and (ii) where in definitive form, at
the close of business on the fifteenth day (whether or not such fifteenth day is a business day) before
the relevant due date (the Record Date). Payment of the interest due in respect of each Registered
Covered Bond on redemption will be made in the same manner as payment of the principal in
respect of such Registered Covered Bond.

None of the Issuer, the Covered Bondholders Representative or the Agents will have any
responsibility or liability for any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the Registered Global Covered Bonds or for maintaining,
supervising or reviewing any records relating to such beneficial ownership interests.

5.5 General provisions applicable to payments

The holder of a Global Covered Bond shall be the only person entitled to receive payments in respect
of Covered Bonds represented by such Global Covered Bond and the obligations of the Issuer will
be discharged by payment to, or to the order of, the holder of such Global Covered Bond in respect
of each amount so paid. Each of the persons shown in the records of Euroclear or Clearstream,
Luxembourg as the beneficial holder of a particular nominal amount of Covered Bonds represented
by such Global Covered Bond must look solely to Euroclear or Clearstream, Luxembourg, as the
case may be, for his share of each payment so made by the Issuer to, or to the order of, the holder of
such Global Covered Bond. No person other than the holder of the relevant Global Covered Bond
shall have any claim against the Issuer in respect of any payments due on that Global Covered Bond.

Notwithstanding the foregoing provisions of this Condition 5, payments of principal and/or interest
in respect of Bearer Covered Bonds in U.S. Dollars will only be made at the specified office of a
Paying Agent in the United States if:

(a) the Issuer has appointed Paying Agents with specified offices outside the United States with
the reasonable expectation that such Paying Agents would be able to make payment in U.S.
Dollars at such specified offices outside the United States of the full amount of principal
and/or interest on the Bearer Covered Bonds in the manner provided above when due;

(b) payment of the full amount of such principal and interest at all such specified offices outside
the United States is illegal or effectively precluded by exchange controls or other similar
restrictions on the full payment or receipt of principal and interest in U.S. Dollars; and

99
 (c) such payment is then permitted under United States law without involving, in the opinion of
the Issuer, adverse tax consequences to the Issuer.

5.6 Payment Day

If the date for payment of any amount in respect of any Covered Bond or Coupon is not a Payment
Day (as defined below), the holder thereof shall not be entitled to payment of the relevant amount
due until the next following Payment Day in the relevant place and shall not be entitled to further
interest or other sum in respect of any such delay. In this Condition 5.6 (unless otherwise specified in
the applicable Final Terms), Payment Day means any day which (subject to Condition 10
(Prescription)) is:

(a) a day on which commercial banks and foreign exchange markets settle payments and are
open for general business (including dealing in foreign exchange and foreign currency
deposits) in:

(i) in the case of Covered Bonds in definitive form only, the relevant place of
presentation; and

(ii) any Additional Financial Centre (other than TARGET2 System) specified in the
applicable Final Terms;

(b) if TARGET2 System is specified as an Additional Financial Centre in the applicable Final
Terms, a day on which the TARGET2 System is open; and

(c) either (i) in relation to any sum payable in a Specified Currency other than euro, a day on
which commercial banks and foreign exchange markets settle payments and are open for
general business (including dealing in foreign exchange and foreign currency deposits) in the
principal financial centre of the country of the relevant Specified Currency (if other than the
place of presentation, Bucharest, London and any Additional Financial Centre) or as
otherwise specified in the applicable Final Terms or (ii) in relation to any sum payable in
euro, a day on which the TARGET2 System is open.

5.7 Interpretation of principal and interest

Any reference in these Conditions to principal in respect of the Covered Bonds shall be deemed to
include, as applicable:

(a) any additional amounts which may be payable with respect to principal under Condition 7
(Taxation);

(b) the Final Redemption Amount (as defined in the Final Terms) (the Final Redemption
Amount) of the Covered Bonds;

(c) the Early Redemption Amount of the Covered Bonds but excluding any amount of interest
referred to therein;

(d) the Optional Redemption Amount(s) (if any) of the Covered Bonds;

(e) in relation to Zero Coupon Covered Bonds, the Amortised Face Amount (as defined in
Condition 6.5(b) (Early Redemption Amounts)); and

(f) any premium and any other amounts (other than interest) which may be payable under or in
respect of the Covered Bonds.

100
 Any reference in these Conditions to interest in respect of the Covered Bonds shall be deemed to
include, as applicable, any additional amounts which may be payable with respect to interest under
Condition 7 (Taxation).

5.8 Redenomination

Where redenomination is specified in the applicable Final Terms as being applicable, the Issuer may,
without the consent of the Covered Bondholders and the Couponholders, on giving prior written
notice to the Covered Bondholders Representative, the Agents, the Registrar (in the case of
Registered Covered Bonds), Euroclear and Clearstream, Luxembourg and at least 30 days’ prior
notice to the Covered Bondholders in accordance with Condition 16 (Notices), elect that, with effect
from the Redenomination Date specified in the notice, the Covered Bonds shall be redenominated in
euro. In relation to any Covered Bonds where the applicable Final Terms provides for a minimum
Specified Denomination in the Specified Currency which is equivalent to at least Euro 100,000 and
which are admitted to trading on a regulated market in the European Economic Area, it shall be a
term of any such redenomination that the holder of any Covered Bonds held through Euroclear
and/or Clearstream, Luxembourg must have credited to its securities account with the relevant
clearing system a minimum balance of Covered Bonds of at least Euro 100,000.

The election will have effect as follows:

(a) the Covered Bonds shall be deemed to be redenominated in euro in the denomination of
Euro 0.01 with a nominal amount for each Covered Bond equal to the nominal amount of
that Covered Bond in the Specified Currency, converted into euro at the Established Rate,
provided that, if the Issuer determines, in consultation with the Agents and the Covered
Bondholders Representative, that the then market practice in respect of the redenomination
in euro of internationally offered securities is different from the provisions specified above,
such provisions shall be deemed to be amended so as to comply with such market practice
and the Issuer shall promptly notify the Covered Bondholders, the competent listing
authority, stock exchange and/or market (if any) on or by which the Covered Bonds may be
listed and/or admitted to trading and the Paying Agents of such deemed amendments;

(b) save to the extent that an Exchange Notice has been given in accordance with paragraph (d)
below, the amount of interest due in respect of the Covered Bonds will be calculated by
reference to the aggregate nominal amount of Covered Bonds presented (or, as the case may
be, in respect of which Coupons are presented) for payment by the relevant holder and the
amount of such payment shall be rounded down to the nearest Euro 0.01;

(c) if Definitive Covered Bonds are required to be issued after the Redenomination Date, they
shall be issued at the expense of the Issuer in the denominations of Euro 100,000 and/or such
higher amounts as the Agents may determine and notify to the Covered Bondholders
Representative and the Covered Bondholders and any remaining amounts less than Euro
100,000 shall be redeemed by the Issuer and paid to the Covered Bondholders in euro in
accordance with Condition 6 (Redemption and Purchase);

(d) if issued prior to the Redenomination Date, all unmatured Coupons denominated in the
Specified Currency (whether or not attached to the Covered Bonds) will become void with
effect from the date on which the Issuer gives notice (the Exchange Notice) that
replacement euro-denominated Covered Bonds and Coupons are available for exchange
(provided that such securities are so available) and no payments will be made in respect of
them. The payment obligations contained in any Covered Bonds and Coupons so issued will
also become void on that date although those Covered Bonds and Coupons will continue to
constitute valid exchange obligations of the Issuer. New euro-denominated Covered Bonds

101
 and Coupons will be issued in exchange for Covered Bonds and Coupons denominated in
the Specified Currency in such manner as the Agents may specify and as shall be notified to
the Covered Bondholders in the Exchange Notice. No Exchange Notice may be given less
than 15 days prior to any date for payment of principal or interest on the Covered Bonds;

(e) after the Redenomination Date, all payments in respect of the Covered Bonds and the
Coupons, other than payments of interest in respect of periods commencing before the
Redenomination Date, will be made solely in euro as though references in the Covered
Bonds to the Specified Currency were to euro. Payments will be made in euro by credit or
transfer to a euro account (or any other account to which euro may be credited or
transferred) specified by the payee;

(f) if the Covered Bonds are Fixed Rate Covered Bonds and interest for any period ending on or
after the Redenomination Date is required to be calculated for a period ending other than on
an Interest Payment Date, it will be calculated by applying the Rate of Interest to each
Specified Denomination, multiplying such sum by the applicable Day Count Fraction, and
rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half
of any such sub-unit being rounded upwards or otherwise in accordance with applicable
market convention;

(g) if the Covered Bonds are Floating Rate Covered Bonds, the applicable Final Terms will
specify any relevant changes to the provisions relating to interest; and

(h) such other changes shall be made to this Condition 5.8] (and the Transaction Documents) as
the Issuer may decide, after consultation with the Agents and the Covered Bondholders
Representative, and as may be specified in the notice, to conform it to conventions then
applicable to instruments denominated in euro.

5.9 Definitions

In these Conditions, the following expressions have the following meanings:

Accrual Yield has, in relation to a Zero Coupon Covered Bond, the meaning given in the applicable
Final Terms.

Calculation Amount has the meaning given in the applicable Final Terms.

Cover Pool Secured Creditors means the Covered Bondholders and any other parties which under
the Romanian Covered Bond Legislation benefit from priority rights against any other creditors upon
enforcement or other realisation of the Cover Pool Assets or any other equivalent, subsequent or
superior rights over or in relation to the Cover Pool (these being, subject to the provisions of the
Romanian Covered Bond Law, the Hedging Counterparties (if any) and the Privileged Creditors.

Early Redemption Amount means the amount calculated in accordance with Condition 6.5 (Early
Redemption Amounts).

Established Rate means the rate for the conversion of the relevant Specified Currency (including
compliance with rules relating to roundings in accordance with applicable European Community
regulations) into euro established by the Council of the European Union pursuant to Article 123 of
the Treaty.

Euro means the single, unified, lawful currency of those member states of the European Union in
the Economic and Monetary Union.

102
 Minimum Rate of Interest means, in respect of Floating Rate Covered Bonds, the percentage rate
per annum (if any) specified in the applicable Final Terms.

Notice of Default has the meaning given to it in Condition 9.1 (Events of Default).

Optional Redemption Amount has the meaning (if any) given in the applicable Final Terms.

Optional Redemption Date has the meaning (if any) given in the applicable Final Terms.

Potential Event of Default means any condition, event or act which, with the lapse of time and/or
the issue, making or giving of any notice, certification, declaration, demand, determination and/or
request and/or the taking of any similar action and/or the fulfilment of any similar condition, would
constitute an Event of Default.

Privileged Creditors means the creditors mandatorily preferred to the Covered Bondholders
pursuant to the Romanian Covered Bond Legislation which are provided by the Romanian Covered
Bond Law as being the Cover Pool Administrator (if appointed), the Asset Monitor and any
Liquidity Facility Provider that may be appointed by the Cover Pool Administrator from time to
time.

Rate of Interest means the rate of interest payable from time to time in respect of Fixed Rate
Covered Bonds and Floating Rate Covered Bonds, as determined in, or as determined in the manner
specified in, the applicable Final Terms.

Redenomination Date means an Interest Payment Date under the Covered Bonds falling on or after
the date on which the country of the relevant Specified Currency becomes a participating Member
State to redenominate all, but not some only, of the Covered Bonds of any Series.

Reference Price has, in respect of a Zero Coupon Covered Bond, the meaning given in the
applicable Final Terms.

Screen Rate Determination means, if specified as applicable in the applicable Final Terms, the
manner in which the Rate of Interest on Floating Rate Covered Bonds is to be determined in
accordance with Condition 4.2(d) (Screen Rate Determination for Floating Rate Covered Bonds).

Treaty means the Treaty establishing the European Community, as amended.

6. Redemption and Purchase

6.1 Final redemption

Unless previously redeemed or purchased and cancelled as specified below, each Covered Bond will
be redeemed by the Issuer at its Final Redemption Amount specified in the applicable Final Terms in
the relevant Specified Currency on the Final Maturity Date specified in the applicable Final Terms.

6.2 Redemption for taxation reasons

Subject to Condition 6.5 (Early Redemption Amounts), the Covered Bonds may be redeemed at the
option of the Issuer in whole, but not in part, at any time (if the relevant Covered Bond is not a
Floating Rate Covered Bond) or on any Interest Payment Date (if the relevant Covered Bond is a
Floating Rate Covered Bond), on giving not less than the minimum period and not more than the
maximum period of notice specified in the applicable Final Terms to the Principal Paying Agent and,
in accordance with Condition 16 (Notices), the Covered Bondholders (which notice shall be
irrevocable), if:

103
 (a) on the occasion of the next date for payment of interest on the relevant Covered Bonds, the
Issuer is or would be required to pay additional amounts as provided or referred to in
Condition 7 (Taxation) as a result of any change in, or amendment to, the laws or regulations
of a Tax Jurisdiction, or any change in the application or official interpretation of such laws
or regulations, which change or amendment becomes effective on or after the date on which
agreement is reached to issue the first Tranche of the Covered Bonds; and

(b) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,

provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest
date on which the Issuer would be obliged to pay such additional amounts were a payment in respect
of the Covered Bonds then due.

Prior to the publication of any notice of redemption pursuant to this Condition 6, the Issuer shall
deliver to the Covered Bondholders Representative to make available at its specified office to the
Covered Bondholders (i) a certificate signed by two directors of the Issuer stating that the Issuer is
entitled to effect such redemption and setting forth a statement of facts showing that the conditions
precedent to the right of the Issuer so to redeem have occurred and (ii) an opinion of independent
legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay
such additional amounts as a result of such change or amendment and the Covered Bondholders
Representative shall be entitled to accept the certificate as sufficient evidence of the satisfaction of
the conditions precedent set out above without liability, in which event it shall be conclusive and
binding on the Covered Bondholders and the Couponholders.

Covered Bonds redeemed pursuant to this Condition 6.2 (Redemption for taxation reasons) will be
redeemed at their Early Redemption Amount referred to in Condition 6.5 (Early Redemption
Amounts) together (if appropriate) with interest accrued to (but excluding) the date of redemption.

6.3 Redemption at the option of the Issuer (Issuer Call)

If an issuer call is specified in the applicable Final Terms (Issuer Call), the Issuer may (to the extent
funds are available for such purpose), having given not less than the minimum period nor more than
the maximum period of notice specified in the applicable Final Terms to the Principal Paying Agent,
the Covered Bondholders Representative, the Registrar (in the case of the redemption of Registered
Covered Bonds) and, in accordance with Condition 16 (Notices), the Covered Bondholders (which
notice shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only
of the Covered Bonds then outstanding on any Optional Redemption Date specified in the applicable
Final Terms and at the Optional Redemption Amount(s) specified in the applicable Final Terms
together, if applicable, with interest accrued to (but excluding) the relevant Optional Redemption
Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption
Amount and not more than the Maximum Redemption Amount (if any) as specified in the applicable
Final Terms.

In the case of a partial redemption of Covered Bonds, the Covered Bonds to be redeemed (the
Redeemed Covered Bonds) will be selected individually by lot, in the case of Redeemed Covered
Bonds represented by Definitive Covered Bonds, and in accordance with the rules of Euroclear
and/or Clearstream, Luxembourg (to be reflected in the records of Euroclear and Clearstream,
Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion) in the case
of Redeemed Covered Bonds represented by a Global Covered Bond, in each case, not more than 30
days prior to the date fixed for redemption (such date of selection being hereinafter called the
Selection Date). In the case of Redeemed Covered Bonds represented by Definitive Covered Bonds,
a list of the serial numbers of such Redeemed Covered Bonds will be published in accordance with
Condition 16 (Notices) not less than 15 days (or such shorter period as may be specified in the

104
 applicable Final Terms) prior to the date fixed for redemption. The aggregate nominal amount of
Redeemed Covered Bonds represented by Definitive Covered Bonds or represented by Global
Covered Bonds shall, in each case, bear the same proportion to the aggregate nominal amount of all
Redeemed Covered Bonds as the aggregate nominal amount of Definitive Covered Bonds or Global
Covered Bonds outstanding bears, in each case, to the aggregate nominal amount of the Covered
Bonds outstanding on the Selection Date, provided that such nominal amounts shall, if necessary, be
rounded downwards to the nearest integral multiple of the Specified Denomination. No exchange of
the relevant Global Covered Bond will be permitted during the period from (and including) the
Selection Date to (and including) the date fixed for redemption pursuant to this Condition 6.3 and
notice to that effect shall be given by the Issuer to the Covered Bondholders in accordance with
Condition 16 (Notices) at least five days (or such shorter period as is specified in the applicable Final
Terms) prior to the Selection Date.

Prior to the publication of any notice of redemption pursuant to this Condition 6.3, the Issuer shall
deliver to the Covered Bondholders Representative a certificate signed by two directors (at the
relevant time) of the Issuer stating that the Issuer is entitled or required to effect such redemption and
setting forth a statement of facts showing that the conditions set out in Condition 6.3 (Redemption at
the option of the Issuer (Issuer Call)) for such right or obligation (as applicable) of the Issuer to arise
have been satisfied and that the Issuer will have the funds, not subject to the interest of any other
persons, required to fulfil its obligations hereunder in respect of the Covered Bonds and any amounts
required under the Servicing and Cash Management Agreement and/or the Deed of Charge to be
paid pari passu with, or in priority to, the Covered Bonds and the Covered Bondholders
Representative shall be entitled to accept the certificate as sufficient evidence of the satisfaction of
the conditions set out above without liability, in which event it shall be conclusive and binding on all
Covered Bondholders and Couponholders.

6.4 Redemption at the option of the Covered Bondholders (Investor Put)

(a) If an investor put is specified as being applicable in the Final Terms (the Investor Put), then, if and
to the extent specified in the applicable Final Terms, upon the holder of this Covered Bond giving to
the Issuer, in accordance with Condition 16 (Notices), not less than the minimum period and not
more than the maximum period of notice specified in the applicable Final Terms, the Issuer will,
upon the expiry of such notice, provided that the Servicer has notified the Covered Bondholders
Representative in writing that there will be sufficient funds available to pay any termination payment
due to the relevant Covered Bond Swap Provider(s), redeem in whole (but not in part), such Covered
Bond on the Optional Redemption Date as specified in the applicable Final Terms and at the relevant
Optional Redemption Amount together, if applicable, with interest accrued to (but excluding) the
relevant Optional Redemption Date.

(b) If this Covered Bond is in definitive form and held outside Euroclear and Clearstream, Luxembourg,
to exercise the right to require redemption of this Covered Bond, the holder of this Covered Bond
must deliver such Covered Bond, on any Business Day (as defined in Condition 4.5 (Business Day,
Business Day Convention, Day Count Fractions and other adjustments)) falling within the above-
mentioned notice period at the specified office of any Paying Agent, accompanied by a duly signed
and completed notice of exercise of the Investor Put in the form (for the time being current)
obtainable from any specified office of any Paying Agent (a Put Notice) and in which the holder
must specify a bank to which payment is to be made under this Condition 6.4.

(c) If this Covered Bond is represented by a Global Covered Bond or is in definitive form and held
through Euroclear or Clearstream, Luxembourg to exercise the right to require redemption of this
Covered Bond, the holder of this Covered Bond must, within the notice period, give notice to the
Principal Paying Agent of such exercise in accordance with the standard procedures of Euroclear and
Clearstream, Luxembourg (which may include notice being given on his instruction by Euroclear or

105
 Clearstream, Luxembourg or any common depositary or common safekeeper, as the case may be for
them to the Principal Paying Agent by electronic means) in a form acceptable to Euroclear and
Clearstream, Luxembourg from time to time.

(d) Any Put Notice or other notice given in accordance with the standard procedures of Euroclear and
Clearstream, Luxembourg by a holder of any Covered Bond pursuant to this Condition 6.4 shall be
irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and
the Cover Pool Administrator has declared the Covered Bonds to be due and payable pursuant to
Condition 9 (Events of Default and Enforcement), in which event such holder, at its option, may elect
by notice to the Issuer to withdraw the notice given pursuant to this Condition 6.4.

It may be that before an Investor Put can be exercised, certain conditions and/or circumstances will
need to be satisfied. Where relevant, the provisions will be set out in the applicable Final Terms.

6.5 Early Redemption Amounts

For the purpose of Condition 6.2 (Redemption for taxation reasons) and Condition 9 (Events of
Default and Enforcement):

(a) each Covered Bond (other than a Zero Coupon Covered Bond) will be redeemed at its Early
Redemption Amount; and

(b) each Zero Coupon Covered Bond will be redeemed at an amount (the Amortised Face
Amount) equal to the sum of:

(i) the Reference Price; and

(ii) the product of the Accrual Yield (compounded annually) being applied to the
Reference Price from (and including) the Issue Date of the first Tranche of the
Covered Bonds to (but excluding) the date fixed for redemption or (as the case may
be) the date upon which such Covered Bond becomes due and repayable.

Where such calculation in paragraph (b) above is to be made for a period which is not a whole
number of years, it shall be made (A) in the case of a Zero Coupon Covered Bond payable in a
Specified Currency other than euro, on the basis of a 360-day year consisting of 12 months of 30
days each, or (B) in the case of a Zero Coupon Covered Bond payable in euro, on the basis of the
actual number of days elapsed divided by 365 (or, if any of the days elapsed falls in a leap year, the
sum of (x) the number of those days falling in a leap year divided by 366 and (y) the number of those
days falling in a non-leap year divided by 365) or (C) on such other calculation basis as may be
specified in the applicable Final Terms.

6.6 Purchases

The Issuer or any subsidiary of the Issuer may at any time purchase or otherwise acquire Covered
Bonds (provided that, in the case of Bearer Definitive Covered Bonds, all unmatured Coupons and
Talons appertaining thereto are purchased therewith) at any price in the open market either by tender
or private agreement or otherwise. If purchases are made by tender, tenders must be available to all
Covered Bondholders alike. Such Covered Bonds may be held, reissued, resold or, at the option of
the Issuer or the relevant subsidiary, surrendered to any Paying Agent and/or the Registrar for
cancellation.

106
6.7 Cancellation

All Covered Bonds which are redeemed will forthwith be cancelled (together with, in the case of
Bearer Definitive Covered Bonds, all unmatured Coupons and Talons attached thereto or
surrendered therewith at the time of redemption). All Covered Bonds so cancelled and any Covered
Bonds purchased and surrendered for cancellation pursuant to Condition 6.6 (Purchases) and
cancelled (together with, in the case of Bearer Definitive Covered Bonds, all unmatured Coupons
and Talons cancelled therewith) shall be forwarded to the Principal Paying Agent and cannot be
reissued or resold.

6.8 Late Payment

If any amount payable in respect of any Covered Bond is improperly withheld or refused upon its
becoming due and repayable or is paid after its due date, the amount due and repayable in respect of
such Covered Bond (the Late Payment) shall itself accrue interest (both before and after any
judgment or other order of a court of competent jurisdiction) from (and including) the date on which
such payment was improperly withheld or refused or, as the case may be, became due, to (but
excluding) the Late Payment Date in accordance with the following provisions:

(a) in the case of a Covered Bond other than a Zero Coupon Covered Bond at the rate
determined in accordance with Condition 4.1 (Interest on Fixed Rate Covered Bonds) or
4.2 (Interest on Floating Rate Covered Bond), as the case may be; and

(b) in the case of a Zero Coupon Covered Bond, at a rate equal to the Accrual Yield,

in each case on the basis of the Day Count Fraction specified in the applicable Final Terms or, if
none is specified, on a 30/360 basis.

For the purpose of this Condition 6.8, the Late Payment Date shall mean the earlier of:

(i) the date which the Principal Paying Agent determines to be the date on which, upon further
presentation of the relevant Covered Bond, payment of the full amount (including interest as
aforesaid) in the relevant currency in respect of such Covered Bond is to be made; and

(ii) the seventh day after notice is given to the relevant Covered Bondholder (whether
individually or in accordance with Condition 16 (Notices)) that the full amount (including
interest as aforesaid) in the relevant currency in respect of such Covered Bond is available
for payment,

provided that in the case of both paragraphs (i) and (ii) above, upon further presentation thereof
being duly made, such payment is made.

7. Taxation

All payments of principal and interest and any payments in respect of a repurchase pursuant to
Condition 6.5 (Early Redemption Amounts) in respect of the Covered Bonds and the Coupons (if
any) by or on behalf of the Issuer shall be made free and clear of, and without withholding or
deduction for or on account of, any present or future taxes or duties of whatever nature imposed or
levied by or on behalf of any Tax Jurisdiction, unless such withholding or deduction is required by
law. Neither the Issuer, nor any other entity shall be obliged to pay any additional amount to any
Covered Bondholder on account of such withholding or deduction.

107
 As used herein:

Tax Jurisdiction means Romania or any political subdivision or any authority thereof or therein
having power to tax or any political subdivision or any authority thereof or therein having power to
tax or any other jurisdiction or any political subdivision or any authority thereof or therein having
power to tax to which payments made by the Issuer of principal and interest on the Covered Bonds
become generally subject.

8. Issuer Events

Prior to, or concurrent with the occurrence of an Event of Default, if any of the following events
(each, an Issuer Event) occurs:

(a) an Issuer Insolvency Event;

(b) the Issuer fails to pay any principal due and payable on the Covered Bonds of any Series or
fails to repurchase the Covered Bonds of any Series in accordance with Condition 6.5 (Early
Redemption Amounts) within a period of seven Bucharest Business Days or if the Issuer fails
to pay interest in respect of the Covered Bonds of any Series within a period of seven
Bucharest Business Days, in each case from the due date thereof;

(c) default is made by the Issuer in the performance or observance of any obligation, condition
or provision binding on it (other than any obligation for the payment of amounts due under
the Covered Bonds or Coupons of any Series) under the Deed of Charge, the Movable
Mortgage over the Cover Pool and Collection Accounts Agreement or any other Transaction
Document to which the Issuer is a party which, in the opinion of the Covered Bondholders
Representative (as certified to the Issuer in writing), would have a materially prejudicial
effect on the interests of the Covered Bondholders of any Series and (except where such
default is or the effects of such default are, in the opinion of the Covered Bondholders
Representative, not capable of remedy when no such continuation and notice as is
hereinafter mentioned will be required), such default continues for 30 days (or such longer
period as the Covered Bondholders Representative may permit) after written notice has been
given by the Covered Bondholders Representative to the Issuer requiring the same to be
remedied;

(d) if there is a breach of (i) a Statutory Test (other than the Liquidity Test) on a Monthly
Calculation Date or (ii) the Liquidity Test on any date, and in each case, such breach is not
remedied within 14 Bucharest Business Days; or

(e) if it is or will (in the opinion of the Covered Bondholders Representative, having taken legal
advice from a reputable firm of lawyers or a reputable legal expert) become unlawful or
illegal for the Issuer to comply with any of its obligations under or in respect of the Covered
Bonds or any of the Transaction Documents where such unlawfulness or illegality cannot be
remedied and, in the case of an unlawfulness or illegality which can be remedied, is not
remedied within 30 days after written notice has been given by the Covered Bondholders
Representative to the Issuer requiring the same to be remedied (although the Covered
Bondholders Representative shall have no duty to monitor such compliance by the Issuer),

then (for as long as such Issuer Event is continuing) (i) no further Covered Bonds will be issued,
(ii) the Servicer will procure that any and all payments due under the Cover Pool Assets are paid
henceforth directly into the Third Party Collection Account(s) in accordance with the Servicing and
Cash Management Agreement, (iii) all collections of principal and interest on the Cover Pool Assets
will be dedicated exclusively to the payment of interest and repayment of principal on the Covered
Bonds and to the fulfilment of the obligations of the Issuer vis-à-vis the other Cover Pool Secured

108
 Creditors and (iv) if the Issuer is the Servicer, its appointment as Servicer will be terminated and a
Replacement Servicer will be appointed pursuant to the terms of the Servicing and Cash
Management Agreement and the Romanian Covered Bond Legislation subject to any limitations set
under the Romanian BRR Law, the Romanian Insolvency Law or any other relevant similar law.

Issuer Insolvency Event means, in respect of the Issuer:

(a) an order is made or an effective resolution passed for the liquidation or winding up of the
Issuer, except for the purposes of a reconstruction, amalgamation or merger or following the
transfer of all or substantially all of the assets of the relevant entity, the terms of which have
previously been approved in writing by the Covered Bondholders Representative or by a
Covered Bondholders Resolution (of all Series taken together as a single Series);

(b) the licence of the Issuer is withdrawn by the NBR;

(c) the Issuer stops or threatens to stop payment to its creditors generally;

(d) the Issuer’s solvency ratio (as referred to in the Romanian Insolvency Law and as calculated
pursuant to the applicable regulations issued by the NBR (including, as of the date hereof,
Norm No. 12 of 15 December 2003 regarding the supervision of the solvency and large
exposures of credit institutions, as amended)) is less than 2% or such other threshold
provided in the applicable legislation;

(e) the Issuer stops or threatens to stop payment or shall be unable to, or shall admit inability to,
pay its debts as they fall due, or shall be adjudicated or found insolvent by a court of
competent jurisdiction or shall make a conveyance or assignment for the benefit of, or shall
enter into any composition or other arrangement with, its creditors generally or becomes
subject to the bankruptcy proceedings (“deschiderea procedurii falimentului” in Romanian)
as referred to in Article 40(2) of the Romanian Covered Bond Law;

(f) a temporary judicial administrator, a judicial administrator or other similar official shall be
appointed in relation to the Issuer, in each case pursuant to the Romanian Insolvency Law
(as defined below), the Romanian BRR Law (as defined below) or otherwise; and/or

(g) the Issuer sends out a notice convening a meeting of its creditors to propose a voluntary
arrangement, including pursuant to the introduction of a petition seeking institution of a
preventative concordate (concordat preventiv) or ad hoc mandate (mandate ad-hoc).

9. Events of Default and Enforcement

9.1 Events of Default

If any one or more of the following events (each an Event of Default) occurs, and is continuing:

(a) withdrawal by the NBR of its approval for the Issuer to issue Covered Bonds under the
Programme; or

(b) a breach of the Over-Collateralisation Test where the NBR determines there are no prospects
for the Issuer to remedy such breach; or

(c) failure by the Issuer to pay any principal due and payable on the Covered Bonds of any
Series or failure by the Issuer to pay interest in respect of the Covered Bonds of any Series;
or

109
 (d) the opening of the bankruptcy proceeding (“deschiderea procedurii falimentului” in
Romanian, as referred to in Article 40 (2) of the Romanian Covered Bond Law) against the
Issuer,

the Covered Bondholders Representative having notice of such occurrence continuing shall serve a
notice of default (a Notice of Default) on the Issuer, the Cover Pool Administrator (if already
appointed) and the Asset Monitor and:

(i) if an Event of Default under paragraphs (a) to (c) above occurs, the Asset Monitor
will, as soon as possible but no later than five (5) Bucharest Business Days after
becoming aware of such an event and obtaining relevant evidence of the occurrence
of such event, request the NBR to appoint a Cover Pool Administrator, where
appropriate (if not already appointed); and

(ii) if an Event of Default under paragraph (d) above occurs, the competent court will,
following consultation with the NBR, appoint a Cover Pool Administrator or replace
any Cover Pool Administrator previously appointed by the NBR.

Once appointed, the Cover Pool Administrator may, with the approval of the Covered Bondholders
(if required), declare the Covered Bonds of each Series immediately due and payable.

Following the appointment of a Cover Pool Administrator, the provisions of the Romanian Covered
Bond Legislation shall apply.

9.2 Enforcement

Upon its appointment, the Cover Pool Administrator may, subject to the provisions of the Romanian
Covered Bond Legislation take such proceedings or steps or exercise rights or powers under or in
connection with the Cover Pool, the Covered Bonds or any Transaction Document against the Issuer
and/or any other person as it may think fit to enforce pursuant to the Romanian Covered Bond
Legislation and any other applicable law.

No provision herein is aimed to limit any rights any Covered Bondholder or Couponholder may have
under any applicable law.

10. Prescription

The Covered Bonds (whether in bearer or registered form) and Coupons will become void unless
claims in respect of principal are made within ten years or, in the case of interest, five years after the
Relevant Date.

There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the
claim for paying in respect of which would be void pursuant to this Condition 10 or Condition 5
(Payments).

As used herein, the Relevant Date means the date on which payment in respect of the Covered Bond
or Coupon first becomes due and payable but, if the full amount of the moneys payable on such date
has not been received by the Principal Paying Agent or the Registrar, as the case may be, on or prior
to such due date, the Relevant Date shall be the date on which the full amount of such moneys shall
have been so received and notice to that effect has been given to the Covered Bondholders in
accordance with Condition 16 (Notices).

110
11. Replacement of Covered Bonds, Coupons and Talons

If any Covered Bond, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed, it may be
replaced at the specified office of the Principal Paying Agent (in the case of Bearer Covered Bonds
or Coupons) or the Registrar (in the case of Registered Covered Bonds), or any other place approved
by the Covered Bondholders Representative, of which notice shall be given to the Covered
Bondholders in accordance with Condition 16 (Notices) (and, if the Covered Bonds are then listed on
any stock exchange which requires the appointment of an Agent in any particular place, the Paying
Agent having its specified office in the place required by such stock exchange), subject to all
applicable laws and stock exchange requirements, upon payment by the claimant of the expenses
incurred in connection with such replacement and on such terms as to evidence, security, indemnity
and otherwise as the Issuer may reasonably require. Mutilated or defaced Covered Bonds, Talons or
Coupons must be surrendered before replacements will be issued.

12. Exchange of Talons

On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet
matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified
office of the Principal Paying Agent or any other Paying Agent in exchange for a further Coupon
sheet including (if such further Coupon sheet does not include Coupons to (and including) the final
date for the payment of interest due in respect of the Bearer Covered Bond to which it appertains) a
further Talon, subject to the provisions of Condition 10 (Prescription). Each Talon shall, for the
purposes of these Conditions, be deemed to mature on the Interest Payment Date on which the final
Coupon comprised in the relevant Coupon sheet matures.

13. Covered Bondholders Representative, Agents and Security Trustee

(a) In acting under the Agency Agreement and in connection with the Covered Bonds and the Coupons,
the Agents act solely as agents of the Issuer and, in certain circumstances specified therein, of the
Covered Bondholders Representative and do not assume any obligations towards or relationship of
agency or trust for or with any of the Covered Bondholders or Couponholders. The Agency
Agreement contains provisions permitting any entity into which any Agent is merged or converted or
with which it is consolidated or to which it transfers all or substantially all of its assets to become the
successor agent.

(b) The initial Agents and their initial specified offices are set forth in the Base Prospectus and in the
Master Definitions and Construction Schedule. If any additional Agents are appointed in connection
with any Series, the names of such Agents will be specified in Part B of the applicable Final Terms.
The initial Calculation Agent (if any) is specified in the relevant Final Terms. The Issuer reserves the
right at any time, with the prior written approval of the Covered Bondholders Representative, to vary
or terminate the appointment of any Agent and to appoint a successor Principal Paying Agent or
Calculation Agent and additional or successor Agents provided however that:

(i) there will at all times be a Principal Paying Agent and a Registrar;

(ii) so long as the Covered Bonds are listed on any stock exchange or admitted to listing by any
other relevant authority there will at all times be a Paying Agent (in the case of Bearer
Covered Bonds) and a Transfer Agent (in the case of Registered Covered Bonds) with a
specified office in such place as may be required by the rules and regulations of such stock
exchange or other relevant authority;

(iii) if a Calculation Agent is specified in the relevant Final Terms, the Issuer (or following the
occurrence of an Issuer Event, the Servicer) shall at all times maintain a Calculation Agent;

111
 (iv) there will at all times be a Paying Agent in a jurisdiction within Europe, other than the
jurisdiction in which the Issuer is incorporated; and

(v) notice of any variation, termination, appointment or change in any of the Agents or in their
specified offices shall promptly be given to the Covered Bondholders by the Issuer in
accordance with Condition 16 (Notices).

(c) In addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York
City in the circumstances described in Condition 5.5 (General provisions applicable to payments).

(d) Under the Deed of Charge, the Security Trustee is entitled to be indemnified and/or secured and/or
prefunded to its satisfaction and relieved from responsibility in certain circumstances. The Deed of
Charge provides that, when determining whether an indemnity or any security or pre-funding is
satisfactory to it, the Security Trustee shall be entitled (i) to evaluate its risk in any given
circumstance by considering the worst-case scenario and (ii) to require that any indemnity or
security given to it by the Covered Bondholders or any of them be given on a joint and several basis
and be supported by evidence satisfactory to it as to the financial standing and creditworthiness of
each counterparty and/or as to the value of the security and an opinion as to the capacity, power and
authority of each counterparty and/or the validity and effectiveness of the security.

(e) The Deed of Charge also contains provisions pursuant to which the Security Trustee is entitled, inter
alia, (i) to enter into business transactions with the Issuer and/or any of the Issuer’s subsidiaries and
to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the
Issuer and/or any of the Issuer’s subsidiaries, (ii) to exercise and enforce its rights, comply with its
obligations and perform its duties under or in relation to any such transactions or, as the case may be,
any such trusteeship without regard to the interests of, or consequences for, the Covered
Bondholders and (iii) to retain and not be liable to account for any profit made or any other amount
or benefit received thereby or in connection therewith.

(f) The Covered Bondholders Representative shall be appointed by way of a resolution of the Covered
Bondholders at the first meeting of the Covered Bondholders to be held after the first issuance of
Covered Bonds under the Programme, in accordance with, inter alia, Article 23 of the Romanian
Covered Bond Law. The form of the Covered Bondholders Representative Agreement to be entered
into by the Covered Bondholders Representative approved by the Covered Bondholders will be
attached to the resolution of the first meeting of the Covered Bondholders and shall be countersigned
by the Covered Bondholders Representative to confirm acceptance of the terms provided thereunder.
By purchasing Covered Bonds, the Covered Bondholders will be deemed to have acknowledged and
agreed that they shall only have a right of action against the Issuer through providing instructions to
the Covered Bondholders Representative in accordance with the voting procedures outlined in
Condition 14 (Meetings of Covered Bondholders, Modification and Waiver) and in the Covered
Bondholders Representative Agreement and the Agency Agreement and will not have a right to take
any action against the Issuer directly at any time.

(g) Under the Covered Bondholders Representative Agreement, the Covered Bondholders
Representative is entitled to be indemnified and/or secured and/or prefunded to its satisfaction and
relieved from responsibility in certain circumstances. The Covered Bondholders Representative
Agreement provides that, when determining whether an indemnity or any security or pre-funding is
satisfactory to it, the Covered Bondholders Representative shall be entitled (i) to evaluate its risk in
any given circumstance by considering the worst-case scenario and (ii) to require that any indemnity
or security given to it by the Covered Bondholders or any of them be given on a joint and several
basis and be supported by evidence satisfactory to it as to the financial standing and creditworthiness
of each counterparty and/or as to the value of the security and an opinion as to the capacity, power
and authority of each counterparty and/or the validity and effectiveness of the security.

112
(h) The Covered Bondholders Representative Agreement also contains provisions pursuant to which the
Covered Bondholders Representative is entitled, inter alia, (i) to enter into business transactions with
the Issuer and/or any of the Issuer’s subsidiaries and to act as trustee for the holders of any other
securities issued or guaranteed by, or relating to, the Issuer and/or any of the Issuer’s subsidiaries,
(ii) to exercise and enforce its rights, comply with its obligations and perform its duties under or in
relation to any such transactions or, as the case may be, any such trusteeship without regard to the
interests of, or consequences for, the Covered Bondholders and (iii) to retain and not be liable to
account for any profit made or any other amount or benefit received thereby or in connection
therewith.

14. Meetings of Covered Bondholders, Modification and Waiver

(a) Meetings of Covered Bondholders: The Covered Bondholders Representative Agreement and the
Agency Agreement contain provisions for convening meetings of Covered Bondholders of all Series
to consider any matter affecting their interest in the Covered Bonds, including the modification of
any provision of these Conditions or the provisions of the Covered Bondholders Representative
Agreement or the Agency Agreement as well as approving any enforcement action to be taken by the
Cover Pool Administrator pursuant to Condition 9.2 (Enforcement) (each, a Covered Bondholders
Resolution), where required. All such provisions are subject to the requirements of the Romanian
Covered Bond Law with respect to the convening of meetings of Covered Bondholders and the
passing of resolutions.

Any such modification or other action which is not expressly listed in the Romanian Covered Bond
Legislation or the Covered Bondholders Representative Agreement among the powers of the
Covered Bondholders Representative may, subject to the Romanian Covered Bond Legislation, be
made or taken if sanctioned by a Covered Bondholders Resolution. The Issuer shall convene the first
meeting of the Covered Bondholders at which the subject matter of such meeting shall be the
appointment of the relevant entity to act as the Covered Bondholder’s Representative and the terms
of such appointment. Upon confirmation of such terms, the Issuer shall enter into an agreement with
the Covered Bondholders Representative pursuant to which, among other things, the Issuer will
agree to pay the fees, costs and expenses of the Covered Bondholders Representative in respect of its
role as such under the Programme. Thereafter a meeting to consider a resolution in respect of any
such action may be convened by the Covered Bondholders Representative, at the request of the
Covered Bondholders holding at least 25% of the aggregate principal amount of the outstanding
Covered Bonds or at the request of the Cover Pool Administrator once (and if) appointed. The
quorum at any meeting convened to vote on a Covered Bondholders Resolution will be one or more
persons holding or representing not less than 75% of the Total Number of all outstanding Covered
Bonds issued under the Programme; any such Covered Bondholders Resolution shall be passed if
approved by more than 50% of the votes cast by Covered Bondholders attending and voting at such
meeting. If the meeting of the Covered Bondholders is not quorate, the meeting may be adjourned to
a later date at which there will be no minimum quorum requirements provided, however, that
Covered Bondholders Reserved Matters may only be sanctioned by an adjourned meeting of the
Covered Bondholders at which one or more persons holding or representing not less than 25% of the
Total Number of all outstanding Covered Bonds form a quorum and the Covered Bondholders
Resolution shall be passed if approved by more than 50% of the votes cast by Covered Bondholders
attending and voting at such meeting. Any Covered Bondholders Resolution duly passed at any such
meeting shall be binding on Covered Bondholders of all Series outstanding, whether or not they are
present at any meeting and whether or not they voted on the relevant Covered Bondholders
Resolution, and on all Couponholders.

In connection with the convening of, or voting on any matter at, any meeting of the holders of
Covered Bonds where any Covered Bonds are not denominated in Euro, the nominal amount of the
Covered Bonds not denominated in Euro shall be deemed, for the purposes of convening or voting

113
 on any matter at such meeting, to be an amount in Euro equal to the Principal Amount Outstanding
of such Covered Bonds converted to Euro using the Relevant Exchange Rate, where Relevant
Exchange Rate means the equivalent in euro determined by the Covered Bondholders
Representative: (i) for conversion of RON into euro, at the rate available from the website of the
National Bank of Romania (currently located at www.bnro.ro) or any successor source for the
conversion of RON into euro; and (ii) for the conversion of any other currency into euro, at the rate
specified as the FX rate available from Reuters or any successor rate displayed by Reuters or, if
Reuters is not showing such rate, an alternative rate from a recognised market source for the
conversion of the relevant currency or currencies into euro, in each case applicable on the day of
convening or holding such meeting, as applicable.

For the purposes of this Condition 14(a), Total Number means the number which is calculated by
dividing the aggregate Principal Amount Outstanding of all Covered Bonds issued under the
Programme (as converted to Euro where required in accordance with the preceding paragraph) by
100,000.

In addition:

Covered Bondholders Reserved Matter means:

(i) reduction or cancellation of the amount payable or, where applicable, modification of the
method of calculating the amount payable or modification of the date of payment or, where
applicable, modification of the method of calculating the date of payment in respect of any
principal or interest in respect of the Covered Bonds other than in accordance with the terms
thereof;

(ii) alteration of the currency in which payments under the Covered Bonds and Coupons are to
be made other than in accordance with Condition 6.6 (Purchases);

(iii) alteration of the quorum or majority required to pass a Covered Bondholders Resolution;

(iv) the sanctioning of any such scheme or proposal for the exchange or sale of the Covered
Bonds for or the conversion of the Covered Bonds into, or the cancellation of the Covered
Bonds in consideration of, shares, stock, covered bonds, bonds, debentures, debenture stock
and/or other obligations and/or securities of the Issuer or any other company formed or to be
formed, or for or into or in consideration of cash, or partly for or into or in consideration of
such shares, stock, bonds, covered bonds, debentures, debenture stock and/or other
obligations; and

(v) alteration of this definition of Covered Bondholders Reserved Matter.

(b) Rating Agency Confirmation and Notification: Any such modification referred to in paragraph (a)
above may only be effected provided that the Rating Agency has been notified.

(c) Modification: The Covered Bondholders Representative may, without the consent or sanction of any
of the Covered Bondholders or Couponholders or requiring the consent of any of the other Secured
Creditors, at any time and from time to time concur with the Issuer and any other party, to:

(i) any modification (other than in respect of a Covered Bondholders Reserved Matter) of the
terms and conditions applying to the Covered Bonds of one or more Series (including these
Conditions), the related Coupons or any Transaction Document provided that in the sole
opinion of the Covered Bondholders Representative such modification is not materially
prejudicial to the interests of the Covered Bondholders of such Series; or

114
 (ii) any modification of the terms and conditions applying to Covered Bonds of any one or more
Series (including these Conditions), the related Coupons or any Transaction Document
which is in the sole opinion of the Covered Bondholders Representative of a formal, minor
or technical nature or is to correct a manifest error.

Any such modification shall be binding on the Covered Bondholders, Couponholders and the
Secured Creditors and shall be notified by the Issuer to the Covered Bondholders in accordance with
Condition 16 (Notices) as soon as practicable thereafter.

(d) Breach/waiver: The Covered Bondholders Representative may, without the consent of any of the
Covered Bondholders of any Series and any Couponholders and any Secured Creditors and without
prejudice to its rights in respect of any subsequent breach or Issuer Event from time to time and at
any time but only if insofar as in the sole opinion of the Covered Bondholders Representative the
interests of the Covered Bondholders of any Series shall not be materially prejudiced thereby, waive
or authorise any breach or proposed breach by the Issuer of any of the covenants or provisions
contained in the Transaction Documents or determine that any Issuer Event shall not be treated as
such PROVIDED ALWAYS THAT the Covered Bondholders Representative shall not exercise any
powers conferred on it by this Condition 14(d) in contravention of any express direction given by a
Covered Bondholders Resolution but so that no such direction or request shall affect any waiver,
authorisation or determination previously given or made. Any such waiver, authorisation or
determination may be given or made on such terms and subject to such conditions (if any) as the
Covered Bondholders Representative may determine, shall be binding on the Covered Bondholders
and Couponholders and shall be notified by the Issuer (i) to the Covered Bondholders in accordance
with Condition 16 (Notices) and (ii) to the Rating Agency as soon as practicable thereafter.

(e) Notwithstanding the provisions of this Condition 14, the Covered Bondholders Representative shall
be obliged, without any consent or sanction of the Covered Bondholders of any Series (including the
related Couponholders) and without requiring the consent of the other Secured Creditors, to concur
with the Issuer in making any modification (other than in respect of a Covered Bondholders
Reserved Matter), for the avoidance of doubt, irrespective of whether such modification is materially
prejudicial to the interests of the Covered Bondholders of any Series, to:

(i) the terms and conditions applying to the Covered Bonds of one or more Series (including the
Conditions), the related Coupons or any Transaction Document for the purpose of
complying with, or implementing or reflecting, any change in the criteria of the Rating
Agency which may be applicable from time to time, provided that, in relation to any
amendment under this Condition 14(e)(i), the Issuer certifies in writing to the Covered
Bondholders Representative (upon which the Covered Bondholders Representative may rely
without further enquiry or liability to any person) that such modification is necessary to
comply with such criteria or, as the case may be, is solely to implement and reflect such
criteria and the Issuer either:

(A) has obtained from the Rating Agency written confirmation (or certifies in writing to
the Covered Bondholders Representative that it has been unable to obtain written
confirmation, but has received either oral confirmation from an appropriately
authorised person at the Rating Agency) that such modification would not result in a
downgrade, withdrawal or suspension of the then current ratings assigned to the
Covered Bonds by the Rating Agency and would not result in the Rating Agency
placing any Series of Covered Bonds on rating watch negative (or equivalent) in
relation to the proposed amendments and, if relevant, delivers a copy of each such
confirmation to the Covered Bondholders Representative; or

115
 (B) certifies in writing to the Covered Bondholders Representative that the Rating
Agency has been informed of the proposed modification and the Rating Agency has
not indicated that such modification would result in a downgrade, withdrawal or
suspension of the then current ratings assigned to the Covered Bonds by the Rating
Agency or the Rating Agency placing any Covered Bonds on rating watch negative
(or equivalent); or

(ii) the terms and conditions applying to the Covered Bonds of one or more Series (including the
Conditions), the related Coupons or any Transaction Document for the purpose of
complying with, or implementing or reflecting, any change that is requested by the Issuer in
order to enable the Issuer to comply with any requirements which apply to it under
Regulation (EU) No. 648/2012 (EMIR), subject to receipt by the Covered Bondholders
Representative of a certificate of the Issuer (upon which the Covered Bondholders
Representative may rely without further enquiry or liability to any person) certifying to the
Covered Bondholders Representative that the requested amendments are to be made solely
for the purpose of enabling the Issuer to satisfy any requirements which apply to it under
EMIR; or

(iii) implement any of the changes that may be required from time to time in accordance with the
provisions of Condition 4.2(j),

provided that the Covered Bondholders Representative shall not be obliged to concur with the Issuer
in making any modification that may, in the Covered Bondholders Representative’s sole opinion,
impact on the Covered Bondholders Representative’s rights, duties and obligations under the
Covered Bondholders Representative Agreement, the Conditions or any other Transaction
Document.

(f) Covered Bondholders Representative to have regard to interests of Covered Bondholders as a class:
In connection with the exercise by it of any of its powers, authorities and discretions (including,
without limitation, any modification, waiver, authorisation or determination), the Covered
Bondholders Representative shall have regard to the general interests of the Covered Bondholders of
a Series as a class but shall not have regard to any interests arising from circumstances particular to
individual Covered Bondholders or Couponholders (whatever their number) and, in particular but
without limitation, shall not have regard to the consequences of any such exercise for individual
Covered Bondholders or Couponholders (whatever their number) resulting from their being for any
purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any
particular territory or any political subdivision thereof and the Covered Bondholders Representative
shall not be entitled to require, nor shall any Covered Bondholder or Couponholder be entitled to
claim, from the Issuer, the Covered Bondholders Representative or any other person any
indemnification or payment in respect of any tax consequence of any such exercise upon individual
Covered Bondholders except to the extent already provided for in Condition 7 (Taxation) and/or any
undertaking given in addition to, or in substitution for, Condition 7 (Taxation) pursuant to the
Covered Bondholders Representative Agreement.

15. Further Issues

The Issuer may from time to time, without the consent of the Covered Bondholders (including
Couponholders) or any other Secured Creditors, create and issue further Covered Bonds having the
same terms and conditions as the Covered Bonds in all respects (or in all respects except for the
amount, first payment of interest thereon, date from which interest starts to accrue, issue date and/or
issue price) so as to consolidate and form a single Series with the Covered Bonds provided that (i) no
Issuer Event or Event of Default has occurred which is continuing and that such issuance would not
cause an Issuer Event or Event of Default, (ii) such issuance would not result in a breach of any of

116
 the Statutory Tests, (iii) the Rating Agency has been notified of such issuance, (iv) the NBR in
accordance with, inter alia, Article 4(1) of the Romanian Covered Bond Law has approved such
issuance and (v) if applicable, in respect of any Series or Tranche, a Hedging Agreement is entered
into.

16. Notices

All notices regarding the Bearer Covered Bonds will be deemed to be validly given if published in
one leading English language daily newspaper of general circulation in London or any other daily
newspaper in London approved by the Covered Bondholders Representative and (for so long as any
Bearer Covered Bonds are listed on the official list of the Luxembourg Stock Exchange) if published
in a daily newspaper of general circulation in Luxembourg or on the website of the Luxembourg
Stock Exchange www.bourse.lu. It is expected that such publication will be made in the Financial
Times in London and (in relation to Bearer Covered Bonds listed on the official list of the
Luxembourg Stock Exchange) in the Luxemburger Wort or the Tageblatt in Luxembourg. The Issuer
or, in the case of a notice given by the Covered Bondholders Representative, the Covered
Bondholders Representative shall also ensure that notices are duly published in a manner which
complies with the rules and regulations of any stock exchange or any other relevant authority on
which the Bearer Covered Bonds are for the time being listed or by which they have been admitted
to trading including publication on the website of the relevant stock exchange or relevant authority if
required by those rules. Any such notice shall be deemed to have been given on the date of first
publication (or if required to be published in more than one newspaper, on the first date on which
publication shall have been made in all the required newspapers or where published in such
newspapers on different dates, the last date of such first publication). If publication as provided
above is not practicable, notice will be given in such other manner, and will be deemed to have been
given on such date, as the Covered Bondholders Representative shall approve.

All notices regarding the Registered Covered Bonds will be deemed to be validly given if sent by
first class mail or (if posted to an address overseas) by airmail to the holders (or the first named of
joint holders) at their respective addresses recorded in the Register and will be deemed to have been
given on the fourth day after mailing and, in addition, for so long as any Registered Covered Bonds
are listed, quoted or traded on a stock exchange or are admitted to listing or trading by another
relevant authority and the rules of that stock exchange or relevant authority so require, such notice
will be published on the relevant website or published in a daily newspaper of general circulation in
the place or places required by those rules. Any such notice will be deemed to have been given on
the date of such publication. If the giving of notice as provided above is not practicable, notice will
be given in such other manner, and will be deemed to have been given on such date, as the Covered
Bondholders Representative shall approve.

Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to
the holders of Bearer Covered Bonds.

So long as the Covered Bonds are represented in their entirety by any Global Covered Bonds held on
behalf of Euroclear and/or Clearstream, Luxembourg, there may be substituted for such publication
in such newspaper(s), such websites or such mailing, the delivery of the relevant notice to Euroclear
and/or Clearstream, Luxembourg for communication by them to the Covered Bondholders provided
that, in addition, for so long as any Covered Bonds are listed on a stock exchange or admitted to
listing or trading by any other relevant authority and the rules of the stock exchange, or as the case
may be, other relevant authority so require, such notice will be published on the relevant website or
published in a daily newspaper of general circulation in the place or places required by that stock
exchange or, as the case may be, any other relevant authority. Any such notice shall be deemed to
have been given to the Covered Bondholders on the day on which the said notice was given to
Euroclear and/or Clearstream, Luxembourg, as appropriate.

117
 Notices to be given by any Covered Bondholder shall be in writing and given by lodging the same,
together (in the case of any Covered Bond in definitive form) with the relevant Covered Bond or
Covered Bonds, with the Principal Paying Agent (in the case of Bearer Covered Bonds) or the
Registrar (in the case of Registered Covered Bonds). While the Covered Bonds are represented by
Global Covered Bonds, any notice may be given by any Covered Bondholder to the Principal Paying
Agent or the Registrar through Euroclear and/or Clearstream, Luxembourg, as the case may be, in
such manner as the Principal Paying Agent, the Registrar, Euroclear and/or Clearstream,
Luxembourg, as the case may be, may approve for this purpose.

Where a notice relates to the calling of a meeting of the holders of Covered Bonds, such notice shall,
in addition to the foregoing, also be published on the website of the Issuer and in one leading
newspaper, chosen by the Issuer in its discretion, of general circulation in the city where the Issuer
has its main headquarters (this currently being Bucharest).

17. Substitution of the Issuer upon the appointment of a Cover Pool Administrator

The Cover Pool Administrator, if appointed, may transfer the obligations of the Issuer to another
qualifying Romanian credit institution in accordance with the provisions of Article 2(g) of the
Romanian Covered Bond Law (such entity, the New Issuer) together with the related Cover Pool in
order to ensure fulfilment of the claims of the Covered Bondholders under the Covered Bonds,
provided that:

(a) the New Issuer has obtained the prior approval of the NBR; and

(b) the publicity formalities provided under Article 9(3) of the Romanian Covered Bond Law in
relation to the transfer are observed.

18. Renominalisation and Reconventioning

If the country of the Specified Currency becomes, or announces its intention to become, a
participating Member State, the Issuer may, without the consent of the Covered Bondholders and
Couponholders, on giving at least 30 days’ prior notice to the Covered Bondholders and the Paying
Agents, designate a date (the Redenomination Date), being an Interest Payment Date under the
Covered Bonds falling on or after the date on which such country becomes a participating Member
State to redenominate all, but not some only, of the Covered Bonds of any series.

19. Governing Law and Jurisdiction

The Covered Bonds and any non-contractual obligations arising out of or in connection with the
Covered Bonds shall be governed by, and shall be construed in accordance with, English law, save
that the Covered Bonds will be subject to and will benefit from those provisions of the Romanian
Covered Bond Legislation, Law No. 85 of 25 June 2014 on pre-insolvency and insolvency
proceedings, as published in the Official Gazette of Romania No. 466 of 25 June 2014, as such may
be amended from time to time (the Romanian Insolvency Law), Law No. 312 of 4 December 2015
on the recovery and resolution of credit institutions and investment firms and for amending and
supplementing certain normative acts regarding financial matters, as published in the Official
Gazette of Romania No. 920 of 11 December 2015, as such may be amended at any time (the
Romanian BRR Law) and any other provisions of Romanian law applicable to or relevant for the
Covered Bonds. Also, the provisions of Chapter V (Special Provisions regarding the Administration
of the Cover Pool and Bankruptcy of the Issuers) of the Romanian Covered Bond Law and other
relevant provisions of the Romanian Covered Bond Legislation, the Romanian Insolvency Law and
the Romanian BRR Law will apply to the Covered Bonds and the Cover Pool in the case of
bankruptcy, insolvency or pre-insolvency proceedings in respect of the Issuer.

118
20. Submission to jurisdiction

(a) Subject to paragraph (c) below, the English courts have exclusive jurisdiction to settle any dispute
arising out of or in connection with the Covered Bonds and the Coupons, including any dispute as to
their existence, validity, interpretation, performance, breach or termination or the consequences of
their nullity and any dispute relating to any non-contractual obligations arising out of or in
connection with the Covered Bonds and the Coupons (a Dispute) and accordingly each of the Issuer
and the Covered Bondholders Representative and any Covered Bondholders or Couponholders in
relation to any Dispute submits to the exclusive jurisdiction of the English courts.

(b) To the extent permitted by applicable law, for the purposes of this Condition 20, the Issuer waives
any objection to the English courts on the grounds that they are an inconvenient or inappropriate
forum to settle any Dispute.

(c) To the extent allowed by law, the Covered Bondholders Representative and the Covered
Bondholders and the Couponholders may, in respect of any Dispute or Disputes, take:
(i) proceedings in any other court with jurisdiction; and (ii) concurrent proceedings in any number of
jurisdictions.

21. Appointment of Process Agent

The Issuer irrevocably appoints Alpha Bank London Limited at Capital House, 85 King William
Street, London EC4N 7BL, United Kingdom (UK) (Attn.: Lindsay Mackay (Managing
Director)/Graham Ballantyne (General Manager), Email:
[email protected]/[email protected], Fax: 00 44 207 332 0010), as its agent for
service of process in any proceedings before the English courts in relation to any Dispute, and agrees
that, in the event of Alpha Bank London Limited being unable or unwilling for any reason so to act,
it will immediately appoint another person approved by the Covered Bondholders Representative as
its agent for service of process in England in respect of any Dispute. The Issuer agrees that failure by
a process agent to notify it of any process will not invalidate service. Nothing herein shall affect the
right to serve process in any other manner permitted by law.

22. Third Parties

No person shall have any right to enforce any term or condition of this Covered Bond under the
Contracts (Rights of Third Parties) Act 1999 but this does not affect any right or remedy of any
person which exists or is available apart from that Act.

119
 FORMS OF THE COVERED BONDS

The Covered Bonds of each Series will be in either bearer form, with or without interest coupons and/or
talons attached or registered form, without interest coupons and/or talons attached. Covered Bonds in bearer
form (Bearer Covered Bonds) will be issued outside the United States in reliance on Regulation S and
Registered Covered Bonds will be issued outside the United States in reliance on Regulation S.

Bearer Covered Bonds

Each Tranche of Bearer Covered Bonds will be in bearer form and will initially be issued in the form of a
temporary global covered bond without interest coupons attached (a Temporary Global Covered Bond) or,
if so specified in the applicable Final Terms, a permanent global covered bond without interest coupons
attached (a Permanent Global Covered Bond and, together with a Temporary Global Covered Bond, the
Bearer Global Covered Bonds and each a Bearer Global Covered Bond) which, in either case, will:

(a) if the Bearer Global Covered Bonds are intended to be issued in new global covered bond (NGCB)
form, as stated in the applicable Final Terms, be delivered on or prior to the issue date of the relevant
Tranche to a common safekeeper (the Common Safekeeper) for Euroclear Bank S.A./N.V.
(Euroclear) and Clearstream Banking, S.A. (Clearstream, Luxembourg); and

(b) if the Bearer Global Covered Bonds are not intended to be issued in NGCB form, be delivered on or
prior to the issue date of the relevant Tranche to a common depositary (the Common Depositary)
for Euroclear and Clearstream, Luxembourg.

Bearer Covered Bonds will only be delivered outside the United States and its possessions.

Where the Bearer Global Covered Bonds issued in respect of any Tranche are in NGCB form, the applicable
Final Terms will also indicate whether such Bearer Global Covered Bonds are intended to be held in a
manner which would allow eligibility under the monetary authority of the Eurozone (Eurosystem). Any
indication that the Bearer Global Covered Bonds are to be so held does not necessarily mean that the
Covered Bonds of the relevant Tranche will be recognised as eligible collateral for Eurosystem monetary
policy and intra-day credit operations by the Eurosystem either upon issue or at any times during their life as
such recognition depends upon satisfaction of the Eurosystem eligibility criteria. The Common Safekeeper
for NGCBs will either be Euroclear or Clearstream, Luxembourg or another entity approved by Euroclear
and Clearstream, Luxembourg, as indicated in the applicable Final Terms.

While any Bearer Covered Bond is represented by a Temporary Global Covered Bond, payments of
principal, interest (if any) and any other amount payable in respect of the Bearer Covered Bonds due prior to
the Exchange Date (as defined below) will be made (against presentation of the Temporary Global Covered
Bond if the Temporary Global Covered Bond is not intended to be issued in NGCB form) only outside the
United States and its possessions and to the extent that certification (in a form to be provided by Euroclear
and/or Clearstream, Luxembourg) to the effect that the beneficial owners of interests in such Temporary
Global Bearer Covered Bond are not U.S. persons or persons who have purchased for resale to any U.S.
person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream,
Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification
(based on the certifications it has received) to the Principal Paying Agent.

On and after the date (the Exchange Date) which is 40 days after a Temporary Global Covered Bond is
issued, interests in such Temporary Global Covered Bond will be exchangeable (free of charge) upon a
request as described therein either for (a) interests in a Permanent Global Covered Bond of the same Series
or (b) Bearer Definitive Covered Bonds of the same Series with, where applicable, interest coupons and
talons attached (as indicated in the applicable Final Terms and subject, in the case of Bearer Definitive
Covered Bonds, to such notice period as is specified in the applicable Final Terms), in each case against

120
certification of non-U.S. beneficial ownership as described above unless such certification has already been
given, provided that purchasers in the United States and certain United States persons will not be able to
receive Bearer Definitive Covered Bonds or interests in the Permanent Global Covered Bond. The holder of
a Temporary Global Covered Bond will not be entitled to collect any payment of interest, principal or other
amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary Global
Covered Bond for an interest in a Permanent Global Covered Bond or for Bearer Definitive Covered Bonds
is improperly withheld or refused.

Payments of principal, interest (if any) or any other amounts on a Permanent Global Covered Bond will be
made outside the United States and its possession and through Euroclear and/or Clearstream, Luxembourg
against presentation or surrender (as the case may be) of the Permanent Global Covered Bond (if the
Permanent Global Covered Bond is not issued in NGCB form) without any requirement for certification.

The applicable Final Terms will specify that a Permanent Global Covered Bond will be exchangeable (free
of charge), in whole but not in part, for Bearer Definitive Covered Bonds with, where applicable, interest
coupons and talons attached upon the occurrence of an Exchange Event. For these purposes, Exchange
Event means that (i) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have
been closed for business for a continuous period of 14 days (other than by reason of holiday, whether
statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so
and no successor clearing system is available or (ii) the Issuer has or will become subject to adverse tax
consequences which would not be suffered were the Bearer Global Covered Bond (and any interests therein)
exchanged for Bearer Definitive Covered Bonds. The Issuer will promptly give notice to Covered
Bondholders of each Series of Bearer Global Covered Bonds in accordance with Condition 16 (Notices) if an
Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream,
Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Covered
Bond) or the Covered Bondholders Representative may give notice to the Principal Paying Agent requesting
exchange and, in the event of the occurrence of an Exchange Event as described in (ii) above, the Issuer may
also give notice to the Principal Paying Agent requesting exchange. Any such exchange shall occur not later
than 45 days after the date of receipt of the first relevant notice by the Principal Paying Agent.

The following legend will appear on all Bearer Covered Bonds (other than Temporary Global Covered
Bonds), talons and interest coupons relating to such Bearer Covered Bonds where TEFRA D is specified in
the applicable Final Terms:

“ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE
LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE
CODE”

The sections referred to provide that United States persons (as defined for U.S. federal tax purposes), with
certain exceptions, will not be entitled to deduct any loss on Bearer Covered Bonds, talons or interest
coupons and will not be entitled to capital gains treatment in respect of any gain on any sale, disposition,
redemption or payment of principal in respect of such Bearer Covered Bonds, talons or interest coupons.

Covered Bonds which are represented by a Bearer Global Covered Bond will only be transferable in
accordance with the rules and procedures for the time being of Euroclear or Clearstream, Luxembourg, as the
case may be.

Registered Covered Bonds

Registered Covered Bonds of each Tranche will initially be represented by a Registered Global Covered
Bond. Registered Global Covered Bonds will be: (a) if the applicable Final Terms specify the Registered
Global Covered Bonds are intended to be held in a manner which would allow Eurosystem eligibility (being

121
the new safekeeping structure (NSS)), deposited on the relevant Issue Date with the Common Safekeeper for
Euroclear and Clearstream, Luxembourg, and registered in the name of a nominee of the Common
Safekeeper; or (b) if the applicable Final Terms specify the Registered Global Covered Bonds are not
intended to be held in a manner which would allow Eurosystem eligibility, deposited on the relevant Issue
Date with a Common Depositary for Euroclear and Clearstream, Luxembourg and registered in the name of a
nominee for such Common Depositary, as applicable.

Any indication that the Registered Global Covered Bonds are intended to be held in a manner which would
allow Eurosystem eligibility does not necessarily mean that the Registered Global Covered Bonds of the
relevant Tranche will be recognised as eligible collateral for Eurosystem monetary policy and intra-day
credit operations by the Eurosystem either upon issue or at any times during their life as such recognition
depends upon satisfaction of the Eurosystem eligibility criteria. The Common Safekeeper for a Registered
Global Note held under the NSS will either be Euroclear or Clearstream, Luxembourg or another entity
approved by Euroclear and Clearstream, Luxembourg, as indicated in the applicable Final Terms.

Payments of principal, interest and any other amount in respect of the Registered Global Covered Bonds
will, in the absence of provision to the contrary, be made to the person shown on the Register (as defined in
Condition 5.4 (Payments in respect of Registered Covered Bonds)) as the registered holder of the Registered
Global Covered Bonds. None of the Issuer, the Covered Bondholders Representative, any Paying Agent or
the Registrar will have any responsibility or liability for any aspect of the records relating to or payments or
deliveries made on account of beneficial ownership interests in the Registered Global Covered Bonds or for
maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Payments of principal, interest or any other amount in respect of the Registered Covered Bonds in definitive
form will, in the absence of provision to the contrary, be made to the persons shown on the Register on the
relevant Record Date (as defined in Condition 5.4 (Payments in respect of Registered Covered Bonds))
immediately preceding the due date for payment in the manner provided in that Condition.

Interests in a Registered Global Covered Bond will be exchangeable (free of charge), in whole but not in
part, for Registered Definitive Covered Bonds without Coupons or Talons attached only upon the occurrence
of an Exchange Event. For these purposes, Exchange Event means that (a) in the case of a Registered
Global Covered Bond registered in the name of a nominee for a Common Depositary or a Common
Safekeeper for Euroclear and Clearstream, Luxembourg, the Issuer has been notified that both Euroclear and
Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by
reason of holiday, whether statutory or otherwise) or have announced an intention permanently to cease
business or have in fact done so and no successor clearing system is available or (b) the Issuer has or will
become subject to adverse tax consequences which would not be suffered were the Registered Global
Covered Bond (and any interests therein) exchanged for Registered Definitive Covered Bonds. The Issuer
will promptly give notice to Covered Bondholders of each Series of Registered Global Covered Bonds in
accordance with Condition 16 (Notices) if an Exchange Event occurs. In the event of the occurrence of an
Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any registered
holder of an interest in such Registered Global Covered Bond) or the Covered Bondholders Representative
may give notice to the Registrar requesting exchange and, in the event of the occurrence of an Exchange
Event as described in (b) above, the Issuer may also give notice to the Registrar requesting exchange. Any
such exchange shall occur not later than ten days after the date of receipt of the first relevant notice by the
Registrar.

General

Pursuant to the Agency Agreement (as defined under “Terms and Conditions of the Covered Bonds”), the
Principal Paying Agent shall arrange that, where a further Tranche of Covered Bonds is issued which is
intended to form a single Series with an existing Tranche of Covered Bonds, the Covered Bonds of such
further Tranche shall be assigned a common code and ISIN and, where applicable, CINS number which are

122
different from the common code, ISIN and CINS number assigned to Covered Bonds of any other Tranche
of the same Series until such time as the Tranches are consolidated and form a single Series.

Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits,
be deemed to include a reference to any successor operator and/or successor clearing system and/or
additional or alternative clearing system specified in the applicable Final Terms or as may otherwise be
approved by the Issuer, the Principal Paying Agent and the Covered Bondholders Representative.

123
 APPLICABLE FINAL TERMS

Set out below is the form of Final Terms which will be completed for each Tranche of Covered Bonds issued
under the Programme.

[IMPORTANT – PROHIBITION OF SALES TO EEA RETAIL INVESTORS – The Covered Bonds

are not intended to be offered, sold or otherwise made available to and should not be offered, sold or
otherwise made available to any retail investor in the European Economic Area (EEA). For these purposes, a
retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article
4(1) of Directive 2014/65/EU (as amended, MiFID II); or (ii) a customer within the meaning of Directive
2002/92/EC (as amended or superseded, the Insurance Mediation Directive), where that customer would
not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified
investor as defined in the Prospectus Directive. Consequently, no key information document required by
Regulation (EU) No. 1286/2014 (as amended, the PRIIPs Regulation) for offering or selling the Covered
Bonds or otherwise making them available to retail investors in the EEA has been prepared and therefore
offering or selling the Covered Bonds or otherwise making them available to any retail investor in the EEA
may be unlawful under the PRIIPs Regulation.]

[MIFID II PRODUCT GOVERNANCE/PROFESSIONAL INVESTORS AND ECPS ONLY

TARGET MARKET – Solely for the purposes of [the/each] manufacturer’s product approval process, the
target market assessment in respect of the Covered Bonds has led to the conclusion that: (i) the target market
for the Covered Bonds is eligible counterparties and professional clients only, each as defined in
Directive 2014/65/EU (as amended, MiFID II); and (ii) all channels for distribution of the Covered Bonds to
eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or
recommending the Covered Bonds (a distributor) should take into consideration the manufacturer[’s][s’]
target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own
target market assessment in respect of the Covered Bonds (by either adopting or refining the
manufacturer[’s][s’] target market assessment) and determining appropriate distribution channels.]

[Date]

ALPHA BANK ROMANIA S.A.

Legal entity identifier (LEI): 529900TKT32Z5LP7XF90

Issue of [Aggregate Nominal Amount of Tranche] [Title of Covered Bonds]

Under the EUR [1 billion]
Global Covered Bond Programme

PART A – CONTRACTUAL TERMS

[Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions set
forth in the Base Prospectus dated 8 April 2019 [and the supplement to the Base Prospectus dated [date]]
which [together] constitute[s] a base prospectus (the Base Prospectus) for the purposes of the Prospectus
Directive (Directive 2003/71/EC) as amended (the Prospectus Directive). This document constitutes the
Final Terms of the Covered Bonds described herein for the purposes of Article 5.4 of the Prospectus
Directive and must be read in conjunction with the Base Prospectus. Full information on the Issuer and the
offer of the Covered Bonds is only available on the basis of the combination of these Final Terms and the
Base Prospectus. The Base Prospectus has been published on the Luxembourg Stock Exchange website
(www.bourse.lu) and the Bucharest Stock Exchange website (www.bvb.ro).]

[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the numbering
should remain as set out below, even if “Not Applicable” is indicated for individual paragraphs or

124
subparagraphs (in which case the subparagraphs of the paragraphs which are not applicable can be
deleted). Italics denote directions for completing the Final Terms.]

1. (a) Series Number: [ ]

(b) Tranche Number: [ ]

(c) Date on which the Covered Bonds The Covered Bonds will be consolidated and form a
will be consolidated and form a single Series with [Provide issued
single Series: amount/ISIN/maturity date/issue date of earlier
Tranches] on [the Issue Date/exchange of the
Temporary Global Covered Bond for interests in the
Permanent Global Covered Bond, as referred to in
paragraph [ ] below, which is expected to occur on or
about [date]][Not Applicable]

2. Specified Currency or Currencies: [ ]

3. Aggregate Nominal Amount of Covered [ ]

Bonds:

(a) Series: [ ]

(b) Tranche: [ ]

4. Issue Price: [ ]% of the Aggregate Nominal Amount [plus

accrued interest from [insert date] (if applicable)]

5. (a) Specified Denominations: [ ]

(N.B. Covered Bonds must have a minimum

denomination of EUR 100,000 (or equivalent))

(Note – where multiple denominations above [EUR

100,000] or equivalent are being used the following
sample wording should be followed:

“[EUR 100,000] and integral multiples of [EUR

1,000] in excess thereof up to and including [EUR
199,000]. No Covered Bond in definitive form will be
issued with a denomination above [EUR 199,000]”)

(b) Calculation Amount (in relation to [ ]

calculation of interest in global
form see Conditions):

(If only one Specified Denomination, insert the

Specified Denomination. If more than one Specified
Denomination, insert the highest common factor. N.B.
There must be a common factor in the case of two or
more Specified Denominations)

6. (a) Issue Date: [ ]

125
 (b) Interest Commencement Date: [specify/Issue Date/Not Applicable]

(N.B. An Interest Commencement Date will not be

relevant for certain Covered Bonds, for example Zero
Coupon Covered Bonds)

7. Final Maturity Date: [Fixed rate – specify date/Floating rate – Interest

Payment Date falling in or nearest to [specify month
and year]]

8. Interest Basis: [[ ]% Fixed Rate]

[[ ] month [LIBOR/EURIBOR/ROBOR] +/- [ ]%

floating rate]

[Zero Coupon]

(See paragraph [14/15/16] below)

9. Redemption/Payment Basis: Subject to any purchase and cancellation or early

redemption, the Covered Bonds will be redeemed on
the Final Maturity Date at [ ]% of their nominal
amount

10. Change of Interest Basis: [Specify the date when any fixed to floating rate
change occurs or cross refer to paragraphs 13 and 14
below and identify there][Not Applicable]

11. Put/Call Options: [Not Applicable]

[Investor Put]

[Issuer Call]

[Investor Repurchase Put]

[(Further particulars specified below)]

12. Date [Shareholders and, if the case, Board] [ ]

approval for issuance of Covered Bonds
obtained: (Insert appropriate authorisation(s) required for the
particular tranche of Covered Bonds)

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

13. Fixed Rate Covered Bond Provisions [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs

of this paragraph 13)

(a) Rate[(s)] of Interest: [ ]% per annum payable in arrear on each Interest

Payment Date

126
 (b) Interest Payment Date(s): [[ ] in each year up to and including the Final
Maturity Date]

(Amend appropriately in the case of irregular

coupons)

(c) Fixed Coupon Amount[(s)]: [ ] per Calculation Amount

(Applicable to Covered Bonds in
definitive form)

(d) Broken Amount(s): [[ ] per Calculation Amount payable on the

(Applicable to Covered Bonds in Interest Payment Date falling [in/on] [ ]][Not
definitive form) Applicable]

(e) Day Count Fraction: [30/360/Actual/Actual [(ICMA/ISDA)]] [adjusted/not

adjusted]

(f) [Determination Date: [[ ] in each year][Not Applicable]

(N.B. Only relevant where Day Count Fraction is

Actual/Actual (ICMA). In such a case, insert regular
interest payment dates, ignoring issue date or maturity
date in the case of a long or short first or last coupon)]

14. Floating Rate Covered Bond Provisions [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs

of this paragraph 14)

(a) Interest Period(s): []

(b) Specified Interest Payment Dates: [ ][, [ ], [ ] and [ ]] in each year up to and including the
Final Maturity Date[, subject to adjustment in
accordance with the Business Day Convention in (c)
below/, not subject to adjustment, as the Business Day
Convention in (c) below is specified to be Not
Applicable]

(c) Business Day Convention: [Floating Rate Convention/Following Business Day

Convention/Modified Following Business Day
Convention/Preceding Business Day Convention] [Not
Applicable]

(d) Additional Business Centre(s): [ ]

(e) Manner in which the Rate(s) of [Screen Rate Determination/ISDA Determination]

Interest and Interest Amount is/are
to be determined:

(f) Party responsible for calculating [ ]

the Rate of Interest and Interest
Amount (if not the Principal
Paying Agent):

127
(g) Screen Rate Determination:

 Reference Rate: [ ] month [LIBOR/EURIBOR/ROBOR]

 Interest Determination [ ]
Date(s):
(Second London business day prior to the start of each
Interest Period if LIBOR (other than Sterling or Euro
LIBOR or EURIBOR), first day of each Interest Period
if Sterling LIBOR, the second day on which the
TARGET2 System is open prior to the start of each
Interest Period if EURIBOR or Euro LIBOR or
ROBOR)

 Relevant Screen Page: [ ]

(In the case of EURIBOR, if not Reuters EURIBOR 01

ensure it is a page which shows a composite rate or
amend the fallback provisions appropriately)

(h) ISDA Determination:

 Floating Rate Option: [ ]

 Designated Maturity: [ ]

 Reset Date: [ ]

(In the case of a LIBOR or EURIBOR or ROBOR

based option, the first day of the Interest Period)

(N.B. The fallback provisions applicable to ISDA

Determination under the 2006 ISDA Definitions are
reliant upon the provisions by reference banks of
offered quotations for LIBOR and EURIBOR which,
depending on market circumstances, may not be
available at the relevant time)

(i) Linear Interpolation: [Not Applicable/Applicable – the Rate of Interest for

the [long/short] [first/last] Interest Period shall be
calculated using Linear Interpolation (specify for each
short or long interest period)]

(j) Margin(s): [+/-][ ]% per annum

(k) Minimum Rate of Interest: [ ]% per annum

(l) Maximum Rate of Interest: [ ]% per annum

(m) Day Count Fraction: [Actual/Actual [(ICMA)/(ISDA)]

Actual/365 (Fixed)

128
 Actual/365 (Sterling)

Actual/360

[30/360][360/360][Bond Basis]

[30E/360][Eurobond Basis]

30E/360 (ISDA)

[adjusted/not adjusted]]

15. Zero Coupon Covered Bond Provisions [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs

of this paragraph 15)

(a) Accrual Yield: [ ]% per annum

(b) Reference Price: [ ]

(c) Business Day Convention: [Floating Rate Convention/Following Business Day

Convention/Modified Following Business Day
Convention/Preceding Business Day Convention/[Not
Applicable]]

(d) Day Count Fraction in relation to [30/360]

Early Redemption Amounts and
Late Payments: [Actual/Actual [(ICMA)/(ISDA)]]

[adjusted/not adjusted]

PROVISIONS RELATING TO REDEMPTION

16. Notice periods for Condition 6.2 Minimum period: [30] days
(Redemption for taxation reasons):
Maximum period: [60] days

17. Issuer Call [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs

of this paragraph 17)

(a) Optional Redemption Date(s): [ ]

(b) Optional Redemption Amount(s): [ ] per Calculation Amount

(c) (If redeemable in part):

(i) Minimum Redemption [ ] per Calculation Amount

Amount:

(ii) Maximum Redemption [ ] per Calculation Amount

Amount:

129
 (d) Notice Periods: Minimum period: [15] days

Maximum period: [30] days

(N.B. When setting notice periods, the Issuer is

advised to consider the practicalities of distribution of
information through intermediaries, for example,
clearing systems (which require a minimum of five
clearing system business days’ notice for a call) and
custodians, as well as any other notice requirements
which may apply, for example, as between the Issuer
and the Principal Paying Agent or Covered
Bondholders Representative)

18. Investor Put [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs

of this paragraph 18)

(a) Optional Redemption Date(s): [ ]

(b) Optional Redemption Amount(s): [ ] per Calculation Amount

(c) Notice periods: Minimum period: [15] days

Maximum period: [30] days

(N.B. When setting notice periods, the Issuer is

advised to consider the practicalities of distribution of
information through intermediaries, for example,
clearing systems (which require a minimum of 15
clearing system business days’ notice for a put) and
custodians, as well as any other notice requirements
which may apply, for example, as between the Issuer
and the Principal Paying Agent or Covered
Bondholders Representative)

19. Final Redemption Amount: [ ] per Calculation Amount

20. Early Redemption Amount payable on [ ] per Calculation Amount

redemption for taxation reasons or on
event of default:

GENERAL PROVISIONS APPLICABLE TO THE COVERED BONDS

21. Form of Covered Bonds: [Bearer Covered Bonds:

Temporary Global Covered Bond exchangeable for a

Permanent Global Covered Bond which is
exchangeable for Bearer Definitive Covered Bonds
upon an Exchange Event]

130
 [Permanent Global Covered Bond which is
exchangeable for Bearer Definitive Covered Bonds
upon an Exchange Event]

[(N.B. The exchange upon notice should not be

expressed to be applicable if the Specified
Denomination of the Covered Bonds in paragraph 5
includes language substantially to the following effect:
“[EUR 100,000] and integral multiples of [EUR
1,000] in excess thereof up to and including [EUR
199,000]”)]

[Registered Covered Bonds:

Registered in the name of a nominee of the [[common

safekeeper]/[common depositary for Euroclear and
Clearstream, Luxembourg]]]

22. [New Global Covered Bond][New [Yes/No]

Safekeeping Structure]:

23. Additional Financial Centre(s) or other [Not Applicable/give details].

special provisions relating to payment
dates: (Note that this paragraph relates to the date of
payment and not the end dates of Interest Periods for
the purposes of calculating the amount of interest to
which paragraph 14(d) relates)

24. Talons for future Coupons to be attached [Yes, as the Covered Bonds have more than 27 coupon
to Bearer Definitive Covered Bonds: payments, Talons may be required if, on exchange into
definitive form, more than 27 coupon payments are
still to be made/No]

THIRD PARTY INFORMATION

[[Relevant third party information] has been extracted from [specify source]. The Issuer confirms that such
information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from
information published by (specify source), no facts have been omitted which would render the reproduced
information inaccurate or misleading.]

Signed on behalf of Alpha Bank Romania S.A.

By:

Duly Authorised

131
 PART B – OTHER INFORMATION

1. LISTING AND ADMISSION TO TRADING

(a) Admission to trading and [Application has been made by the Issuer (or on its behalf) for
admission to listing: the Covered Bonds to be admitted to trading on [Specify
relevant regulated market and, if relevant, listing on an
official list] with effect from [ ]].

[Application is expected to be made by the Issuer (or on its

behalf) for the Covered Bonds to be admitted to trading on
[Specify relevant regulated market and, if relevant, listing on
an official list] with effect from [ ]].

[Application for listing of the Covered Bonds, and admission

to trading, on the regulated market of the Bucharest Stock
Exchange [will also be made]/[is also expected to be made].]

(N.B. Where documenting a fungible issue need to indicate

that original Covered Bonds are already admitted to trading.)

(b) Estimate of total expenses [ ]

related to admission to
trading:

2. RATINGS

Ratings: The Covered Bonds to be issued [[have been/are expected to

be] rated]/[The following ratings reflect ratings assigned to
Covered Bonds of this type issued under the Programme
generally]:

[insert details] by [insert legal name of the relevant credit

rating agency entity(ies) and associated defined terms].

Each of [defined terms] is established in the European Union

and is registered under Regulation (EC) No. 1060/2009 (as
amended) (the CRA Regulation).

(The above disclosure should reflect the rating allocated to

Covered Bonds of the type being issued under the Programme
generally or, where the issue has been specifically rated, that
rating.)

3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE

[Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person
involved in the issue of the Covered Bonds has an interest material to the offer. The
[Managers/Dealers] and their affiliates have engaged, and may in the future engage, in investment
banking and/or commercial banking transactions with, and may perform other services for, the Issuer
and its affiliates in the ordinary course of business. [Amend as appropriate if there are other
interests]]

132
 [(When adding any other description, consideration should be given as to whether such matters
described constitute “significant new factors” and consequently trigger the need for a supplement to
the Base Prospectus under Article 16 of the Prospectus Directive.)]

4. [REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES]

(a) Reasons for the offer: [ ]

(b) [Estimated net proceeds: [ ]]

(c) [Estimated total expenses: [ ]

(N.B. Delete unless the Covered Bonds are derivative

securities to which Annex XII of the Prospectus Directive
Regulation applies, in which case (a) above is required where
the reasons for the offer are different from making profit
and/or hedging certain risks and, where such reasons are
inserted in (a), disclosure of net proceeds and total expenses
at (b) and (c) above are also required.)]

5. YIELD (Fixed Rate Covered Bonds only)

Indication of yield: [ ] [Not Applicable]

6. HISTORIC INTEREST RATES (Floating Rate Covered Bonds only)

Details of historic [LIBOR/EURIBOR/ROBOR] rates can be obtained from [Reuters]/[Not

Applicable].

7. OPERATIONAL INFORMATION

ISIN Code: [ ]

Common Code: [ ]

CFI: [ ]/[Not Applicable]

FISN: [ ]/[Not Applicable]

(If the CFI or FISN is not required, requested or available,

it/they should be specified to be “Not Applicable”.)

[(insert here any other relevant [ ]]

codes such as CINS codes):

Any clearing system(s) other than [Not Applicable/give name(s), number(s) and address(es)]
Euroclear Bank S.A./N.V. and
Clearstream Banking, S.A. and [In the event that the Covered Bonds are also admitted to
the Bucharest Central Depository trading on the Bucharest Stock Exchange, the Covered Bonds
and the relevant identification may also be cleared through the Bucharest Central Depository.
number(s): However, Covered Bonds may only be traded through the
Bucharest Central Depository in denominations of €100,000
(i.e. it shall not be possible to trade integral amounts of €1,000

133
 in excess of €100,000 through the Bucharest Central
Depository).]

Delivery: Delivery [against/free of] payment

Names and addresses of initial [ ]

Paying Agent(s):

Names and addresses of [ ]

additional Paying Agent(s) (if
any):

Intended to be held in a manner [Yes. Note that the designation “yes” simply means that the
which would allow Eurosystem Covered Bonds are intended upon issue to be deposited with
eligibility: one of the ICSDs as common safekeeper [(and registered in
the name of a nominee of one of the ICSDs acting as common
safekeeper)] [include this text for Registered Covered Bonds
which are to be held under the NSS] and does not necessarily
mean that the Covered Bonds will be recognised as eligible
collateral for Eurosystem monetary policy and intra-day credit
operations by the Eurosystem either upon issue or at any or all
times during their life. Such recognition will depend upon the
ECB being satisfied that Eurosystem eligibility criteria have
been met.] /

[No. While the designation is specified as “no” at the date of

these Final Terms, should the Eurosystem eligibility criteria be
amended in the future such that the Covered Bonds are
capable of meeting them the Covered Bonds may then be
deposited with one of the ICSDs as common safekeeper [(and
registered in the name of a nominee of one of the ICSDs
acting as common safekeeper)] [include this text for
Registered Covered Bonds which are to be held under the
NSS]. Note that this does not necessarily mean that the
Covered Bonds will then be recognised as eligible collateral
for Eurosystem monetary policy and intra-day credit
operations by the Eurosystem at any time during their life.
Such recognition will depend upon the ECB being satisfied
that Eurosystem eligibility criteria have been met.]

8. DISTRIBUTION

Method of distribution: [Syndicated/Non-syndicated]

If syndicated, names of managers: [Not Applicable/give names]

Date of [Subscription] [ ]
Agreement:

Stabilisation Manager(s) (if any): [Not Applicable/give name]

If non-syndicated, name of [Not Applicable/give name]

relevant Dealer:

134
U.S. Selling Restrictions: [Reg S Compliance Category [1/2/3]; TEFRA D/TEFRA
C/TEFRA not applicable]

Prohibition of Sales to EEA Retail [Applicable/Not Applicable]

Investors:
(If the Covered Bonds clearly do not constitute “packaged”
products or the Covered Bonds do constitute “packaged”
products and a key information document will be prepared,
“Not Applicable” should be specified. If the Covered Bonds
may constitute “packaged” products and no key information
document will be prepared, “Applicable” should be specified.)

Prohibition of Sales to Belgian [Applicable/Not Applicable]

Consumers:
(N.B. advice should be taken from Belgian counsel before
disapplying this selling restriction.)

135
 BANKRUPTCY OF THE ISSUER

The Romanian Covered Bond Legislation contains provisions relating to the protection of the Covered
Bondholders and other preferred creditors upon the bankruptcy (in Romanian, faliment) of the Issuer.

In the event of bankruptcy of an issuer, the Romanian Covered Bond Law provides that, in order to fulfil the
obligations of an issuer towards the holders of its covered bonds under the Romanian Covered Bond Law
and under the base prospectus, or, as applicable, the offering document attesting the conditions of the issue,
the cover pool securing the covered bonds represents an autonomous estate, separate from the estate of the
issuer, subject to the liquidation procedure, and shall not be, under any circumstances (other than as
specifically stipulated in the Romanian Covered Bond Law (as further set out below)), subject to any
liquidation procedure of the issuer’s assets. Any sale-purchase agreements concluded in breach of these legal
provisions shall be null and void. The Romanian Covered Bond Law allows the judicial liquidator to include
the cover pool in a transaction encompassing the purchase of assets and assumption of liabilities by a third
party if the following requirements are cumulatively met: (i) the most recent monthly report prepared in
accordance with the Romanian Insolvency Law, as approved by the syndic judge, provides for prepayment of
the issuer’s obligations, as calculated to such date, towards the Covered Bondholders, prior to the sale of the
cover pool, and also the sources of funds to be used for the prepayment; and (ii) the Cover Pool
Administrator notifies the judicial liquidator of the proposed acceleration of amounts due under the Covered
Bonds as set out in the judicial liquidator’s report, as approved by the general meeting of the covered
bondholders with a majority of two-thirds of the votes which were cast. According to Article 49 of the
Romanian Covered Bond Law, if bankruptcy proceedings are closed prior to the termination of the
administration process in respect of the cover pool by the Cover Pool Administrator, such bankruptcy
proceedings shall be temporarily closed (evidencing any remaining creditors and their outstanding claims).
Any amounts resulting from the administration of the Cover Pool remaining after the satisfaction in full of
the claims of the covered bondholders shall be available for distribution to creditors whose claims were not
satisfied when the bankruptcy proceedings were temporarily closed.

Moreover, according to the Romanian Covered Bond Law, where bankruptcy proceedings are initiated
against the Issuer, covered bondholders are entitled to receive amounts due under the covered bonds in the
amount and on the dates stipulated in the Base Prospectus. Further, the provisions of Article 80 of the
Romanian Insolvency Law (stating, inter alia, that, except for certain cases expressly provided for in the law,
no interest, penalty or fee, generically designated as accessories, may be accrued in relation to any receivable
incurred prior to the opening of the procedure) will not apply to the interest which, according to the Base
Prospectus or, as applicable, according to the offering document attesting the conditions of the issue,
becomes due after the initiation of bankruptcy proceedings.

The servicing of the cover pool, as at the appointment date of the Cover Pool Administrator (in Romanian,
administrator de portofoliu), shall continue from the appointment date, throughout the bankruptcy
proceedings and independently from such proceedings until recovery of all receivables from the Cover Pool
has been made, except for the scenario set out in Article 45 of the Romanian Covered Bond Law (i.e. the
acceleration of the payment of the covered bonds following consultation with the covered bondholders and,
to this end, the assignment of the receivables in the Cover Pool to a third party as per Article 45).

In the case of acceleration of amounts due under the covered bonds and the assignment of the receivables in
the cover pool to a third party in accordance with Article 45 of the Romanian Covered Bond Law, if the
amounts resulting from such assignment of receivables are insufficient to pay the obligations of the issuer
under the covered bonds, as calculated to such date, to the Covered Bondholders, the Covered Bondholders
may seek to satisfy their claim for any outstanding amounts against the Issuer’s estate, together with the
other unsecured creditors, according to the provisions of Article 234 of the Romanian Insolvency Law.

136
According to Article 234 of the Romanian Insolvency Law, the claims of the issuer’s creditors will be
discharged out of the proceeds resulting from the sale of the issuer’s assets within the bankruptcy proceeding
of the issuer, in the following order:

(a) taxes, stamp duty and any other expenses related to the bankruptcy proceedings, including payment
of the expenses related to the preservation and administration of issuer’s assets, as well the payment
of the remuneration of the professionals hired according to the law (including the judicial liquidator);

(b) receivables resulting from eligible deposits within the scope of the provisions of the legislation on
deposit guarantee schemes, including the receivables under the deposit guarantee schemes from
subrogation to the rights of the guaranteed deponents and/or from financing, in accordance with the
law, of the rescission measures of the bankrupt issuer, as well as the receivables deriving from
employment relations for no more than six months prior to the commencement of the bankruptcy
proceedings;

(c) receivables representing that part of eligible deposits of natural persons, of micro-enterprises and
small and medium-sized enterprises which exceed the coverage threshold provided by the legislation
on deposit guarantee schemes and the deposits of natural persons, of micro-enterprises and small and
medium-sized enterprises which would be eligible deposits unless created through branches located
outside the EU of institutions established in the EU;

(d) receivables resulting from the activity of the Issuer after the commencement of the bankruptcy
proceedings;

(e) budgetary receivables, receivables of deposit guarantee schemes, other than those provided under
paragraph (b) above, as well as the receivables of the National Bank of Romania derived under loans
granted by the National Bank of Romania to the Issuer;

(f) receivables deriving from treasury operations, interbank operations, client operations, securities
transactions, other banking operations, as well as from those resulting from products deliveries,
provision of services or other works, from rents, as well as other unsecured receivables (the residual
claims of holders of Covered Bonds after realisation of the Cover Pool would rank pari passu with
the other creditors of this paragraph (f));

(g) receivables deriving from free of charge agreements;

(h) receivables deriving from debt instruments and loans, under agreements providing a subordination
clause according to which, in the event of liquidation or bankruptcy of the issuer, such receivables
are to be paid after the receivables of all unsubordinated unsecured creditors and, as applicable, of
other subordinated unsecured creditors; under this category of receivables, their payment shall be
made with the observance of the preference order established under the subordination clause related
to each such receivable; and

(i) the receivables of the shareholders of the bankrupt Issuer, deriving under the residual right of their
capacity, in accordance with legal and statutory provisions.

The hardening periods and fraud presumption established by means of Article 117(2) of the Romanian
Insolvency Law (stating, inter alia, that free of charge transfers performed within the last two years before
the commencement of the procedure may be annulled) shall not apply to issuances of Covered Bonds
approved by the NBR. Moreover, the same exemption applies with respect to the replacement of cover pool
assets under Article 16 of the Romanian Insolvency Law where the cover pool assets no longer fulfil the
applicable eligibility criteria or when the average weighted term to maturity of the loans in the cover pool
falls below the average weighted term to maturity of the covered bonds secured with the loans.

137
Upon registration of all the elements of the cover pool with the internal cover pool register and of the
movable mortgage over the cover pool and collection accounts agreement with the National Register, the
issue of the covered bonds, and the payments to covered bondholders and other preferred creditors, will not
be affected by the commencement of bankruptcy proceedings in respect of the issuer.

Covered bonds are excluded from the liabilities which are subject to the bail-in tool pursuant to Articles 285
and 286 of Law no. 312/2015 on the recovery and resolution of credit institutions and investment firms, as in
force as at the date of this Base Prospectus (which transposed into Romanian law Article 44(1) and (2) of
Directive 2014/59/EU). In accordance with Article 44 of Directive 2014/59/EU, all secured assets relating to
a covered bond cover pool will remain unaffected, segregated and with enough funding. However, the NBR,
as resolution authority, may exercise its power of conversion or write-down, where appropriate, in relation to
any part of a secured liability (such as the covered bonds) to the extent that it exceeds the value of the
security.

For more information, please refer to the “Overview of the Romanian Covered Bond Legislation” section of
this Base Prospectus.

138
 USE OF PROCEEDS

The net proceeds from each issue of Covered Bonds will be applied by the Issuer for its general corporate
purposes.

139
 OVERVIEW OF THE ROMANIAN COVERED BOND LEGISLATION

The following is a summary of the provisions of the Romanian Covered Bond Legislation relevant to the
transactions described in this Base Prospectus and of which prospective Covered Bondholders should be
aware. The summary does not purport to be, and is not, a complete description of all aspects of the
Romanian legislative and regulatory framework pertaining to covered bonds and prospective Covered
Bondholders should also read the detailed information set out elsewhere in this Base Prospectus.

Introduction

The transactions described in this Base Prospectus are the subject of specific legislation on covered bonds,
the Romanian Covered Bond Legislation. The Romanian Covered Bond Legislation includes Romanian
Covered Bond Law no. 304/2015 (published in Official Gazette no. 902 of 4 December 2015) and Romanian
Covered Bond Regulation No. 1/2016 issued by the NBR (published in Official Gazette no. 184bis of
11 March 2016). The Romanian Covered Bond Legislation has been enacted with a view to, inter alia,
providing a legal framework that is aligned with the best practices in this field at the European level with an
aim to permit the development of the market for such instruments in a prudent and supervised manner.

The provisions of the Romanian Covered Bond Legislation that are relevant in relation to the Programme
may be summarised as follows.

Romanian credit institutions may issue covered bonds pursuant to the provisions of the Romanian Covered
Bond Law and the Romanian Covered Bond Regulation. Covered bonds issued pursuant to the Romanian
Covered Bond Legislation are not subject to the general provisions applicable to issuances of corporate
bonds by joint stock companies (i.e. Section V (On the issuance of bonds) of Chapter IV (Joint stock
companies) of Title III (Operation of companies) of Romanian Law no. 31/1990 on companies, republished,
as further amended and supplemented).

The Romanian Covered Bond Regulation defines “issues/issuances” of covered bonds as the offering for
subscription of covered bonds within one or more individual offerings made during the 15 months following
the obtaining by the issuer of the NBR’s approval for issuing covered bonds.

The National Bank of Romania supervises the issuance of covered bonds in terms of compliance with the
prudential requirements stipulated in the Romanian Covered Bond Legislation.

For the purposes of the above paragraph, the NBR has the following duties:

(a) to issue regulations for the implementation of the Romanian Covered Bond Law;

(b) to approve covered bond issuances and withdraw such approval;

(c) to approve the asset monitor and withdraw the asset monitor’s approval;

(d) to check the level of compliance with all obligations incumbent upon the issuers of covered bonds
under the Romanian Covered Bond Law, the regulations issued for its implementation and the
provisions of the relevant prospectus or, as applicable, the offering document attesting the conditions
of the issue, including by conducting on-site verifications;

(e) to appoint the cover pool administrator in certain conditions, as further set out below; and

(f) to approve the transfer by any means of the obligations undertaken by the issuer in connection with
covered bonds issued pursuant to the Romanian Covered Bond Law, together with the related cover
pool, to another issuer.

140
The issuer shall send any amendments to the base prospectus or the offering document attesting the terms of
the issue to the NBR, together with an assessment establishing the extent to which such amendments ensure
further compliance with the requirements of the Romanian Covered Bond Law and the regulations issued for
its application. This shall also apply to issuers taking over by any means of transfer obligations related to
covered bonds issued pursuant to the Romanian Covered Bond Law together with the related cover pool.

According to the Romanian Covered Bond Regulation, the approval of the NBR for an issuance of covered
bonds is valid for 15 months after the date when the NBR communicated its approval decision to the issuer.
Any issuance of covered bonds to be made after the lapse of such term or, if earlier, in excess of the amount
specified in the approval of the NBR is subject to obtaining a new approval from the NBR. For the new
approval, the issuer must submit the documentation required under the Romanian Covered Bond Regulation,
including, inter alia, the documents related to the appointment of the asset monitor, which may be construed
as the Romanian Covered Bond Legislation requiring that the asset monitor appointed for the first issuance is
reconfirmed every 15 months, or, if earlier, with each new approval of the NBR.

Cover Pool – composition of assets

Article 2, paragraph 1(m) of the Romanian Covered Bond Law provides that the cover pool (in Romanian,
portofoliu de creanţe) comprises all real estate receivables (in Romanian, creanţe imobiliare) and other
financial assets together with the ancillary rights, as well as financial derivatives, securing the performance
by the issuer of the obligations undertaken under one or several issues of covered bonds.

The following assets (hereinafter, the cover pool or the cover pool assets) may be included in a cover pool,
to the extent they meet the eligibility requirements set under the Romanian Covered Bond Legislation and
the base prospectus, or, as applicable, the offering document attesting the conditions of the issue (hereinafter,
the eligibility criteria):

(a) real estate receivables represented by claims arising out of a mortgage loan (i.e. loans which (i) are
fully secured with an immovable mortgage or equivalent rights over immovable property and (ii) are
granted for acquiring or maintaining the ownership right over a plot of land and/or an existing or
future building or for rehabilitating, modernising, consolidating or extending a building or for
repaying such loan) (hereinafter, the loans) and ancillary rights related thereto (i.e. all the rights in
rem or in personam securing a receivable, including movable and immovable mortgages and
receivables arising out of insurance agreements regarding the mortgaged real estate assets and out of
life insurance agreements) (hereinafter, the loan assets);

(b) other financial assets, together with any ancillary rights thereof pursuant to the specific provisions of
the Romanian Covered Bond Legislation; and

(c) derivative financial instruments satisfying certain requirements as to the scope thereof and the
capacity of the counterparty.

There will be one cover pool, which may secure covered bonds from more than one issue, with the covered
bondholders holding covered bonds from different issues having the same rank of priority.

An issuer shall have to register all the elements of the cover pool with the internal cover pool register (in
Romanian, Registrul de evidenţă internă) before offering the covered bonds for subscription.

The Romanian Covered Bond Legislation provides that the issuer must observe certain statutory ratios (and
perform corresponding tests) with respect to the covered bonds, as regards asset coverage, liquidity coverage
and over-collateralisation (in the latter case, also under stress conditions). Under the over-collateralisation
test, the updated value of the elements of the cover pool must exceed the updated value of any payment
obligations undertaken through all covered bond issuances which, according to the law, must be covered by
the cover pool, throughout the term of the covered bonds, by the percentage stated in the base prospectus or,

141
as applicable, in the offering document attesting the conditions of the issuance, which cannot be lower than
2%, so that the covered bondholders are secured at any time with the cover pool until the maturity of the
covered bonds. According to this Base Prospectus, the over-collateralisation percentage under the
Programme is set at 2%. The issuer must ensure compliance with the over-collateralisation indicator also in
crisis conditions (although in such situations, the requirement is that the updated value of the cover pool
assets equals at least the net present value of any payment obligations in relation to all series of covered
bonds issued).

In respect of the asset coverage test, the issuer must ensure that at all times the value of the cover pool,
calculated according to the Romanian Covered Bond Legislation, is at least equal to the value of the covered
bonds and any other obligations that must be paid from the cover pool (consisting in the obligations of the
issuer to the asset monitor, the cover pool administrator, any hedging counterparty, any lenders that have
financed the coverage of any temporary liquidity deficits, as well as any other expenses due in relation to the
cover pool and payable by the issuer as provided by the Romanian Covered Bond Legislation).

Under the liquidity test, the issuer shall calculate on a daily basis for the following 180 days the negative
difference between the cash flow generated by the Cover Pool receivables and the obligations due in the
same period in relation to the covered bonds and will ensure that the highest difference is covered with other
eligible financial assets. For the purposes of calculating the liquidity test, subject to the limitations set out in,
among others, Article 13(5) of the Romanian Covered Bond Law and Articles 35(1) and 36 of the Romanian
Covered Bond Regulation, the issuer may include in the cover pool, on a temporary basis, eligible financial
assets in excess of 15% of the book value of the cover pool.

If, during the existence of the covered bonds, the elements in the cover pool no longer comply with the
eligibility requirements provided for under the law or the base prospectus, or, as applicable, the offering
document attesting the conditions of the issue, such elements shall be eliminated from the cover pool and,
concomitantly, the cover pool shall be correspondingly supplemented, in accordance with the conditions
provided for in the Romanian Covered Bond Law, the rules issued for its implementation and in the base
prospectus or, as applicable, the offering document attesting the conditions of the issue.

Issuers may substitute real estate receivables included in the cover pool, when such receivables no longer
meet the eligibility criteria, in order to supplement the cover pool with other financial assets, provided that
the following conditions are cumulatively met:

(a) such a possibility was expressly provided in the base prospectus or, as applicable, the offering
document attesting the conditions of the issue;

(b) the issuer does not hold eligible real estate receivables that may be included in the cover pool, in
compliance with the eligibility criteria;

(c) the relevant assets are not subject to a security interest; and

(d) the assets do not incur delayed payments.

The representative of the covered bondholders

The general meeting of covered bondholders appoints a representative responsible for representing the
interests of the covered bondholders, including in relation to third parties.

The representative of the covered bondholders has the following duties:

(a) to represent the covered bondholders before the issuer, the public authorities and any third person,
including before the meeting of the issuer’s creditors and before the judicial liquidator, in case of
bankruptcy of the issuer, within the limits of its authorisation;

142
(b) to exercise, in its own name but on behalf of the covered bondholders, their rights deriving from
holding covered bonds, except for the voting right in the general meetings of bondholders;

(c) to inform the issuer and the cover pool administrator, within maximum 24 hours as of the occurrence
of the relevant event or of the date when it becomes aware of the relevant information, with respect
to the calling and resolutions of the general meeting of bondholders, as well as with respect to the
fulfilment of publicity formalities, by delivery of copies of the relevant documents; and

(d) to ensure, according to its competencies, the implementation of the resolutions adopted by the
general meeting of bondholders.

The representative of covered bondholders is liable to the covered bondholders for the damages caused as a
result of the failure to fulfil or of the inappropriate fulfilment of the duties provided under the above
paragraph.

The representative of covered bondholders cannot transfer the representation right.

The representative of the covered bondholders may be elected only within a general meeting of the covered
bondholders, and there will be only one representative of all the covered bondholders, irrespective of the
number of issuances or offerings made.

Benefit of a prioritised claim by means of a movable mortgage

Pursuant to the Romanian Covered Bond Legislation, the issuer is required to create a movable mortgage
over the cover pool assets pursuant to the terms of a movable mortgage agreement to be attached to the base
prospectus.

The movable mortgage will be registered with the National Register in the name of the asset monitor (in
Romanian, agent), but on behalf of the covered bondholders, prior to the offering of the covered bonds for
subscription, by means of a global registration form. The movable mortgage will be transferred in the name
of the covered bondholders’ representative after its appointment by the general meeting of the covered
bondholders. According to the Romanian Covered Bond Law, such movable mortgage is not required to be
registered in the relevant land register of the immovable assets securing the Loan Assets.

According to Article 29(8) of the Romanian Covered Bond Law, no other creditor of the issuer may initiate
enforcement procedures in relation to the cover pool or any part thereof before the covered bondholders.
Pursuant to the movable mortgage, the covered bondholders shall have the right to satisfy their claims
against the issuer with priority over any other creditor, except the hedging counterparties under any financial
derivative instruments included in the cover pool which shall rank pari passu with the covered bondholders.
In addition, the Romanian Covered Bond Law provides that the cover pool administrator, the asset monitor,
as well as lenders that have financed the issuer’s temporary liquidity shortfall shall enjoy priority over the
covered bondholders in satisfying their claims against the issuer with respect to the cover pool.

Moreover, according to the Romanian Covered Bond Law, in case bankruptcy proceedings are initiated
against the issuer, the covered bondholders are entitled to receive the money due in the amount and at the
dates stipulated in the base prospectus. The provisions of Article 80 of the Romanian Insolvency Law
(stating, inter alia, that, except for certain cases expressly provided by the law, no interest, penalty or fee,
generically designated as accessories, may be accrued in relation to any receivable incurred prior to the
opening of the procedure) will not apply to the interest which, according to the base prospectus or, as
applicable, according to the offering document attesting the conditions of the issue, becomes due after the
initiation of the bankruptcy proceedings.

For the purpose of the provisions of the paragraph above, the management of the cover pool, as existing at
the appointment date of the cover pool administrator (in Romanian, administrator de portofoliu), shall

143
continue from the appointment date, including throughout the bankruptcy proceedings and independently
from such proceeding until recovery of all receivables from the cover pool, except as provided in Article 45
of the Romanian Covered Bond Law (i.e. the acceleration of the payment of the covered bonds following
consultation with the NBR and the approval of the Covered Bondholders and the assignment of the
receivables of the cover pool to a third party as per the said article).

Appointment of a cover pool administrator by the National Bank of Romania

According to the provisions of Article 40 of the Romanian Covered Bond Law, the NBR may appoint a
cover pool administrator in any of the circumstances below:

(a) the approval given to the issuer to issue covered bonds is withdrawn pursuant to paragraph 1 (b) of
Article 7 of the Romanian Covered Bond Law (i.e. the provisions of the Romanian Covered Bond
Law and any regulation issued for its implementation are no longer observed and the issuer does not
prove that there are prospects to remedy such non-compliance as soon as possible);

(b) the cover pool no longer complies with the requirement provided under Article 13(7) of the
Romanian Covered Bond Law (i.e. the over-collateralisation requirement as set out above) and there
are no prospects that the issuer will ensure the fulfilment thereof; or

(c) the issuer no longer fulfils its payment obligations towards the covered bondholders, under a covered
bonds issue.

The Romanian Covered Bond Law also provides that, in case bankruptcy proceedings are initiated against
the issuer, the syndic judge shall appoint, following consultations with the NBR, a cover pool administrator
upon whose appointment the mandate of the cover pool administrator appointed by the NBR shall terminate
by operation of law. At any stage of the bankruptcy proceedings, the syndic judge may replace the cover
pool administrator for justified reasons, with the consent of or upon motion made by the NBR.

Upon appointment of the cover pool administrator, the elements of the cover pool, registered with the
internal cover pool register and the amounts collected in relation to them by the issuer starting with the date
of such an appointment, shall be under the exclusive control of the cover pool administrator.

The cover pool administrator shall pursue the realisation of the covered bondholders’ rights, in accordance
with Articles 43 to 47 of the Romanian Covered Bond Law. The Romanian Covered Bond Law does not
contain any specific provision, other than as described herein, as regards the rights of the covered
bondholders following the appointment of the cover pool administrator and whether the covered bondholders
may exercise any of their rights directly.

All actions and operations performed by the issuer or the judicial liquidator with respect to any receivable
securing the issuer’s covered bonds, subsequent to the appointment of the cover pool administrator, shall be
null. The actions and operations performed on the day of the appointment of the cover pool administrator
shall be considered as being made subsequent to its appointment.

The cover pool administrator shall be responsible for keeping and publishing the internal cover pool register,
and for reporting on the requirements set under the Romanian Covered Bond Law as regards the statutory
tests (including the over-collateralisation test under crisis conditions) and the quarterly reports to be made by
the issuer on the risks associated with the cover pool, the total volume of covered bonds issued and the
structure of the cover pool, including the nominal value of the receivables in the cover pool, the residual
value of such receivables and the structure of their maturity. Such reports must also be submitted to the NBR
and published on the issuer’s website no later than on the 15th day of the month following the end of the
reference quarter.

144
For the purpose of satisfying the receivables of the covered bondholders in the amount and at the dates
provided in the base prospectus or, as applicable, in the offering document attesting the conditions of the
issue and of the distribution of the amounts owed to them, the cover pool administrator may:

(a) continue to collect the amounts owed by the debtors of the receivables in the cover pool, including
by way of restructuring or enforcement of receivables in the event of default by the relevant debtors;

(b) transfer the obligations undertaken by the issuer towards the covered bondholders to another issuer,
together with the related cover pool. To this end, the cover pool administrator must make sure that
the issuer taking over by transfer the obligations undertaken towards the covered bondholders
together with the related cover pool has obtained the prior approval of the National Bank of Romania
in compliance with Article 20(2) of the Romanian Covered Bond Law. The transfer is subject to the
relevant publicity formalities (i.e. registration of the transfer with the National Register); and

(c) perform any other activities necessary for satisfying the receivables included in the cover pool.

The cover pool administrator must consult with the NBR prior to committing to perform the following
operations:

(a) postponement of covered bonds maturity;

(b) partial or total sale of the cover pool;

(c) procurement of new financing to cover the temporary liquidity shortfall based on the cover pool
securing the covered bonds; and

(d) acceleration of covered bond payments.

The cover pool administrator must request the approval of the general meeting of covered bondholders for
acceleration of amounts due under the covered bonds and, in this respect, the assignment of the receivables
from the cover pool to a third party, authorised according to the law to grant mortgage loans on a
professional basis.

The distribution of the amounts resulting from the assignment of receivables according to the above
paragraph (i.e. the provisions of Article 45 of the Romanian Covered Bond Law) shall be made in the
following order of preference:

(a) receivables representing expenses incurred by the cover pool administrator with the sale of the cover
pool, its remuneration and the remuneration of the asset monitor;

(b) receivables under the financings granted to the issuer with the view to covering the temporary
liquidity shortfall;

(c) receivables resulting from the holding of covered bonds, pro rata, irrespective of the seniority and
maturity of the covered bonds issue and receivables held by counterparties under the agreements
underlying the financial derivatives included in the cover pool; and

(d) receivables of the issuer’s other creditors, according to Article 49(3) of the Romanian Covered Bond
Law, not paid in full upon the temporary closing of the bankruptcy proceedings against the issuer, in
the order provided under the Romanian Insolvency Law.

If the amounts resulting from the assignment of receivables according to Article 45 of the Romanian
Covered Bond Law are insufficient to pay the obligations of the issuer, as calculated to such date, to the
covered bondholders, the covered bondholders may satisfy their claims for any outstanding claims against

145
the issuer’s estate, together with the other unsecured creditors, according to the provisions of Article 234 of
the Romanian Insolvency Law. See “Bankruptcy of the Issuer”.

Banking Secrecy and data protection under the Romanian Covered Bond Law

In relation to the fulfilment of duties provided in the Romanian Covered Bond Law, the asset monitor, the
representative of covered bondholders and the cover pool administrator shall be subject to the provisions
regarding banking secrecy included in Chapter II of Title II, Part I of Government Emergency Ordinance
No. 99/2006, approved as further amended and supplemented by Law no. 227/2007 as further amended and
supplemented.

According to the Romanian Covered Bond Law, the provision of information that has the nature of banking
secrets to the asset monitor, the representative of covered bondholders and the cover pool administrator or to
a third party to whom the cover pool is fully or partially transferred, shall not be considered a breach of the
obligation to preserve banking secrecy.

Processing of personal data in relation to cover pool receivables by the asset monitor, the cover pool
administrator or any third party to whom the issuer’s obligations towards covered bondholders and/or the
cover pool (or parts thereof) are transferred, will be made for the purpose of achieving a legitimate interest,
in compliance with the provisions of Regulation (EU) No. 2016/679 of the European Parliament and of the
Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data
and on the free movement of such data, and repealing Directive 95/46/EC, as well as any Romanian law or
regulation issued for implementation of all or certain matters thereunder.

Public offering and listing of covered bonds

If the issuer chooses for a series of covered bonds to be issued pursuant to a public offering, such public
offering shall take place on the basis of a prospectus approved by the competent authority from the home
member state, determined according to applicable capital market legislation.

If the covered bonds are admitted to trading on a regulated market or on an alternative trading system, other
than those supervised by the Romanian Financial Supervisory Authority, the issuer must, within 30 days
from the day of their admission to trading, apply for the admission of those covered bonds to trading on the
regulated market or on the alternative trading system supervised by the Romanian Financial Supervisory
Authority, if the necessary technical conditions for the trading and the settlement of the covered bonds in the
currency in which they were issued exist on such regulated market or alternative trading system supervised
by the Romanian Financial Supervisory Authority.

The secondary covered bond legislation

Secondary Romanian covered bond legislation has been issued by the National Bank of Romania by virtue of
authorisations given by Article 58 of the Romanian Covered Bond Law. The secondary legislation is
represented by the Romanian Covered Bond Regulation and is aimed at implementing the Romanian
Covered Bond Law. To this effect, the Romanian Covered Bond Regulation clarifies additional definitions to
the Romanian Covered Bond Law (including, for example, the definition of “issuance of covered bonds”)
and sets out, among other things: (i) procedures for the submission of documents to obtain approval from the
National Bank of Romania in respect of the issuance of covered bonds; (ii) the documentation that needs to
be submitted to the National Bank of Romania in relation to a covered bonds issuance; (iii) additional
provisions in relation to the asset monitor (including the necessary documentation for the approval thereof);
(iv) rules regarding the form and content of the internal cover pool register, as well as additional rules
regarding how it is updated and maintained; (v) requirements regarding the structuring of the cover pool; (vi)
rules for the valuation and management of liquidity risk, the computation of the asset coverage and over-
collateralisation test; (vii) rules regarding stress tests; and (viii) data reporting and disclosure requirements.

146
 THE ISSUER AND THE GROUP

General information

Identification details

The legal name of the Issuer is Alpha Bank Romania S.A. The Issuer is organised as a joint stock company,
and it is incorporated under and operates pursuant to Romanian law. The Issuer is registered with the
Bucharest Trade Register under number J40/28415/1993 attributed on 28 December 1993, sole registration
code 5062063, and is a Romanian tax resident. The Issuer’s issued and subscribed share capital is
RON 958,811,443.20 divided into 8,323,016 shares, each with a nominal value of RON 115.2, out of which,
according to the articles of association of the Issuer, 38,500 shares are non-voting shares with preferential
dividend. According to its bylaws, the issuer functions for an indefinite period.

The Issuer’s headquarters are located at 237 B Calea Dorobantilor, 1st District, postal code 010566,
Bucharest, Romania, with phone number: +4021.209.99.99 and fax: +40214086546.

The Issuer is a Romanian credit institution, licensed by the NBR (number in the bank registry RB-PJR-40-
022/1999, authorisation no. 000013 dated 1 July 1994, as subsequently amended and supplemented,
hereinafter the Banking Licence) to provide banking services. Under its Banking Licence, the Issuer
provides services to a broad client base that includes retail and business clients (both local and international).
The Issuer’s services include, inter alia, retail and wholesale banking operations, issuance of VISA and
MasterCard credit and debit cards, mortgage and consumer loans, money transfers, trade finance etc.

The Issuer is also authorised to perform certain investment services activities under certificate no. 46 dated
19 March 2009, issued by the Romanian National Securities Commission (the predecessor of the FSA)
modified by Decision no. 450 dated 28 March 2019 issued by the FSA. Such investment services activities
consist of, among others, (i) reception and transmission of orders in relation to one or more financial
instruments, (ii) execution of orders on behalf of clients, (iii) trading on own account (iv) placement of
financial instruments without a firm commitment basis, (v) advice to undertakings on capital structure,
industrial strategy and related matters and advice and services relating to mergers and the purchase of
undertakings and (vi) investment research and financial analysis or other forms of general recommendation
relating to transactions in financial instruments. In accordance with the provisions of Romanian law, the
Issuer is also a member of the Investors Compensation Fund (member certificate series IC no 121 dated 30
March 2009).

History

In 1993, the Parent, together with the European Bank of Reconstruction and Development (EBRD)
established the Issuer, under the name “Banca Bucuresti S.A.”. The Issuer started its operations in 1994 and
was the first foreign-owned and controlled commercial bank to be established in Romania.

In early 2000, the Issuer changed its name from Banca Bucuresti S.A. to Alpha Bank Romania S.A., so as to
clearly show it as being member of the Alpha Bank Group. In 2002, the Parent acquired EBRD’s stake in the
Issuer.

As at the date of this Base Prospectus, the Issuer operates through its head office located in Bucharest and
130 branches located throughout Romania.

147
Organisational structure

Share capital and shareholders

The authorised, issued and fully paid share capital of the Issuer as of the date of this Base Prospectus is
8,323,016 shares with a par value of RON 115.2. All issued shares are fully paid.

The Issuer’s ownership structure as of the date of this Base Prospectus is as follows:

Shareholder No. of shares % Nominal amount (RON)

Alpha Bank A.E. (the Parent) 8,316,223 99.91838 958,028,889.6
Eirini Brintaki 6,793 0.08162 782,553.6
Total 8,323,016 100 958,811,443.2

Out of the 8,316,223 shares held by the Parent, 8,277,723 are ordinary shares carrying voting rights and
38,500 are non-voting preferential shares.

The Parent is listed on the Athens Stock Exchange. The Parent also has an American Depository Receipts
(ADR) over-the-counter programme in the U.S. market (depositary is Deutsche Bank Trust Company
Americas, 1 common share = 4 ADRs).

As at 28 February 2019, 83% of the voting rights in the Parent are held by institutional investors (79%
foreign and 4% Greek), 6% is held by retail investors, while the Hellenic Financial Stability Fund accounts
for 11% of the Parent’s common shares, the voting rights of which, however, are restricted and may only be
exercised in connection with decisions amending the Parent’s articles of association (such as decisions on the
increase or decrease of the Parent’s share capital, merger, de-merger etc.), or any other matter that requires a
special majority of the shareholders of the Parent. Overall, the Parent’s equity is held by approximately
116,000 shareholders.

Arrangements that may result in a change in control of the Issuer

To the best of the Issuer’s knowledge, at the date of this Base Prospectus there are no agreements which may
at a subsequent date result in a change of control of the Issuer.

Description of the Group

The Parent and its subsidiaries (collectively, the Group) is one of the leaders of the Greek financial sector
(Source: the Group), with a presence in the Greek and South Eastern Europe (SEE) financial market. The
Group offers a wide range of financial products and services, including retail banking, small and medium
enterprise (SME) and corporate banking, asset management and private banking, distribution of insurance
products, investment banking, brokerage services, leasing and real estate management.

The Group has assets of approximately EUR 61 billion in aggregate, 629 branches and 11,314 employees as
of 31 December 2018 (according to the Group’s consolidated audited financial statements for the financial
year ended 31 December 2018) . In the SEE region, the Group operates in Albania, Cyprus and Romania.
The Group is also present in the United Kingdom. In Romania, the Group consists mainly of the Issuer, as
well as of Alpha Finance Romania S.A., Alpha Leasing Romania IFN S.A. and Alpha Insurance Brokers
S.A.

The Issuer’s position within the Group

The Issuer plays a key role within the Group, being considered the flagship subsidiary in the SEE region.

148
Based on the audited consolidated financial statements of the Group as at 31 December 2018, the Issuer
accounted for a 5.96% share of the Group’s total assets.

Dependence upon other group entities

The Issuer is majority-owned by the Parent.

Parent funding (particularly EUR funding) is a key source of funding for the Issuer, though its importance
has decreased as reflected in the diminished amount of parent funding from EUR 1140 million in the year
ended 31 December 2016 to EUR 759 million as of 30 June 2018 (such amounts representing deposits of the
Parent and subordinated debt to the Parent), in part due to the Issuer’s success in attracting alternative
sources of funding such as customer deposits.

In spite of the control relationship between the Parent and the Issuer, neither Romanian law nor the Issuer’s
internal policies and procedures allow an abuse of rights by the controlling shareholder. The administrative
and management bodies of the Issuer undertake a thorough analysis of the significance of Group decisions,
considering the particularities of the Romanian market and the regulatory framework, aiming to maintain at
all times a sound capital base and risk indicators in line with various regulatory requirements.

Subsidiaries and associated entities of the Issuer

As at 30 June 2018, the Issuer had a participation of 26.68% in the share capital of Alpha Finance Romania
S.A. (AFR).

AFR is an investment firm authorised by the FSA (preceded by the Romanian National Securities
Commission) to provide a full range of financial investment services, i.e. execution of transactions on
clients’ and own account on the Bucharest Stock Exchange and international markets, intermediation of
public offerings, equity research etc.

The Issuer also holds the following participations in other companies as at 30 June 2018:

Country of
Investment incorporation Activity Ownership interest %
Biroul de Credit S.A. Romania financial activities 3.85
Societatea de Transfer de Fonduri si Decontari Romania other financial services 2.98
TransFonD S.A.
Casa de Compensare Bucuresti S.A. Romania derivatives clearing and 1.71
custody
Alpha Leasing Romania IFN S.A. Romania leasing 1.00
VISA Inc. USA cards services less than 1
SWIFT SCRL Belgium financial messaging less than 1
services
Source: The Issuer’s interim financial statements for the six months ended 30 June 2018

The Issuer also held a participation of 12.5% in Victoriabank S.A. Chisinau, which was disposed of in 2016.
Following this disposal, the Issuer recognised net gains on financial transactions in the amount of RON 21.9
million.

On 21 June 2016, Visa Inc. completed the acquisition of Visa Europe shares held by member firms. Before
the transaction, the Issuer had a stake of less than 1% in Visa Europe. Following this transaction, the Issuer
received preferential shares in Visa Inc. and recognised net gains amounting to RON 32.3 million.

149
Other Group entities present in Romania

Other Group participations in Romania include the following companies as of the date of the Base
Prospectus: AGI – RRE Participations 1 S.R.L., AGI – RRE Zeus S.R.L., AGI – RRE Poseidon S.R.L.,
Cordia Residence S.R.L., Asmita Gardens S.R.L., Ashtrom Residents S.R.L., Alpha Real Estate Services
S.R.L, Romfelt Real Estate S.A., AGI – RRE Hera S.R.L., Carmel Residential S.R.L., AGI-RRE Cleopatra
S.R.L., AGI-RRE Hermes S.R.L., Cubic Center Development S.A and TH Top Hotels S.R.L.

The Issuer does not have any participation in such Group companies.

150
 BUSINESS OF THE ISSUER

Business overview

Principal activities and markets

The Issuer’s core business activity consists of monetary intermediation. Under its Banking Licence and
Articles of Association, the Issuer may carry out the following activities:

 acceptance of deposits and other repayable funds;

 lending including, among others: consumer credit, mortgage credit, factoring with or without
recourse and financing of commercial transactions (including forfeiting);

 payment services;

 issuance and management of payment instruments such as: cheques, bills of exchange and
promissory notes;

 issuance of guarantees and acceptance of commitments;

 trading for own account and/or for the account of customers, according to the law, in:

(i) money market instruments such as cheques, bills of exchange, promissory notes and
certificates of deposit;

(ii) foreign currency;

(iii) exchange and interest-rate based instruments; or

(iv) transferable securities and other financial instruments;

 participation in the issuing of securities and other financial instruments by underwriting or

investment thereof or by investment and performance of ancillary services;

 advice to undertakings on capital structure, business strategy and other issues related to commercial
businesses, providing services relating to mergers and acquisitions as well as other consultancy
services;

 intermediation on the interbank market;

 portfolio management for clients and consultancy related thereto;

 safekeeping and management of financial instruments;

 credit reference services;

 rental of safe deposit boxes;

 issuance of electronic currency;

 depositing of assets of investment funds and investment companies;

151
 distribution of units of the investment funds and of shares of investment companies;

 acting as operator of the electronic archive of transferable securities;

 operations with precious metals, precious stones and objects thereof;

 data processing and database administration services or other similar services for third parties;

 acquisition of interests in the share capital of other entities; and

 any other activities or services, to the extent that they are included in the financial field, such as:

(i) activities auxiliary to financial intermediations, excluding insurance and pension funds
activities; the activity of providing/promoting digital certification services for creating
electronic signatures;

(ii) marketing of privately managed pension funds; and

(iii) offering/promoting electronic invoicing services to the Issuer’s clients.

Main products and services

The Issuer’s activities consist of two main operational segments: retail banking and wholesale banking, each
offering a wide range of financial products and services to its customers.

Retail Banking

The retail segment is directed at individual banking customers and small-sized businesses with an annual
turnover of up to EUR 2.5 million and credit limit less than EUR 1 million. The range of services offered by
the Issuer to its retail clients includes loan facilities (mortgage-based products, consumer auto loans and
credit cards), savings and deposits, transactional products (including products such as internet banking,
mobile banking and e-statements), insurance and investment products. For small-sized business clients, retail
banking includes a comprehensive range of standard business banking products and services, such as cash
management, payment services, financing products covering both short and long-term financing needs,
investment services and insurance.

Below is a brief overview of the main products and services offered by the Issuer to its retail customers.

Mortgages (under the brand name Alpha Housing)

The Issuer holds a systemic position in the Romanian mortgage market, ranking relatively high in terms of
housing loans portfolio (7.2% market share as at 30 June 2018 (see table in the section Issuer’s position in
the local market)).

The Issuer uses the brand name “Alpha Housing” for its mortgage products, which include loans for
acquisition and building of immovable property, land acquisition, refurbishment and/or decoration of
properties. The Issuer also provides refinancing on real estate loans contracted by customers from other
financial institutions.

In case of euro-denominated loans, a protection option can be attached to the mortgage agreement either
upon execution or at any time during the contractual period. The option has the following feature: for a
period of five years, irrespective of the fluctuation of EURIBOR 3M, the interest rate paid in connection with
the loan cannot increase by more than 2 percentage points over the interest rate valid at the time the
protection option was acquired.

152
Consumer loans

Consumer loan products address various credit needs of the Issuer’s customers, such as personal loans
(“Alpha Rapid” loans (unsecured or secured), “Alpha All in 1” (consumer loans for refinancing), “Alpha
Rapid” and “Alpha All in 1” bundle), loans for house renovation and upgrade of home facilities (“Alpha
Home Deco” loan), purchase of vehicles (“Alpha Auto” and “Alpha Auto First Car”), as well as overdraft
facilities.

Cards and POS

The Issuer issues Visa and MasterCard credit and debit cards, attaching in certain cases premium benefits,
such as exclusive services, additional security measures and special costs for services related to such cards.

The Issuer also launched “Alpha Shop”, a customer centric multi-partner loyalty programme developed in
collaboration with a group of selected merchants from several interest areas. Customers using credit or debit
cards issued by the Issuer receive bonus points for any purchase made in the partner stores or at other
merchants. The points gained can be used to acquire products and services in the multi-partner loyalty
programme.

Savings and deposits

The Issuer offers a comprehensive range of deposit products, such as:

 “You Decide Deposit” – a custom-tailored savings product, which allows the customer to use
deposited amounts as desired, by setting the maturity of the deposit and allowing add-ons at any
time;

 “Alpha Premier”/“Alpha SME Premier” – a deposit with advantageous interest rates and permanent
access to saved amounts;

 “Alpha Dreams” – a savings product marketed towards parents, for supporting their children’s
needs;

 “Alpha Progressive” – a savings product where interest increases monthly or quarterly (depending
on maturity); and

 “Alpha Administrator” – current account dedicated to associations of tenants and owners of

residential real estate assets.

Other savings and deposit products include certificates of deposit with coupons, term deposits and interest-
bearing current accounts.

Investment products

The Issuer offers euro-denominated mutual fund units managed by Alpha Asset Management A.E.D.A.K.,
the investment entity of the Group. The mutual funds which are part of the Issuer’s offering range from
conservative (which mainly include investments in government bonds) to mutual funds featuring a higher
degree of risk (approaching global allocation strategies or equities).

Bancassurance services

The Issuer’s retail banking services also include bancassurance products (offered in partnership with
insurance companies), such as general insurance (home insurance, insurance against acts of God – PAD, car
insurance (CASCO), in collaboration with Garanta Asigurari S.A. and Groupama Asigurari S.A.) and life

153
insurance and protection plans (“Payment Protection Insurance” provided in partnership with BNP Paribas
Cardiff, “Alpha Life Insurance” provided in partnership with Groupama Asigurari S.A., “Alpha Life”,
attaching also a savings product, and “Aegon Diagnose.me” provided together with AEGON Towarzystwo
Ubezpieczen na Zycie S.A. Varsovia – Sucursala Floresti).

Electronic payment services

The Issuer offers a suite of electronic payment products, including, inter alia, internet banking, mobile
banking, “Alpha E-statements” (an online service which provides round-the-clock access to information
about the customer’s financial information), Alpha TXT (mobile notification services), MoneyGram (online
money transfer services) and automatic payments (direct debit or standing order).

Current accounts services

Current accounts services offered by the Issuer to retail clients include:

 “Alpha Access” – a service which allows customers access to a wide range of banking operations in
both RON and foreign currency; this service includes, inter alia, issuance of a Visa debit card and
free of charge use of Alpha E-statements services; “Alpha Connect” and “Alpha Explore” packages
which include additional services, such as direct debit and internet banking via “Alpha Click”
(“Alpha Connect” current accounts package) and mobile banking, interest for own funds and SMS
alerts (“Alpha Explore” current accounts package);

 “Alpha Seniori” – a service directed at retired individuals, with features such as free account opening
and issuance of debit cards, no commissions for card payments, interest bonus for RON, EUR and
USD deposits opened for a minimum period of three months, utility payments directly from the
account etc.; and

 “Alpha Student” – a service directed at students, with features such as low costs, flexibility, mobile
banking, internet banking, interest bonus for RON, EUR and USD deposits opened for a minimum
period of three months, utility payments directly from the account etc.

The Issuer also has a comprehensive range of products dedicated to its small business clients, such as:

 “Alpha Cash Collector” – a current accounts package dedicated exclusively to insolvency

practitioners (the first such product on the Romanian market) which includes services dedicated to
both the insolvency practice, as well as to the companies managed by the insolvency practitioner;

 “Alpha Executor” – a consignment account dedicated to foreclosure officers, allowing them to

perform consignment transactions in the context of enforcement proceedings;

 “Alpha SME Import – Export” – a current accounts package dedicated to import-export businesses,
which includes discounts on operational fees and commissions, advantageous fees for payments in
foreign currency, access to the proprietary service which delivers instant confirmation of payments
to various customs offices (“Alpha Custom”) etc.;

 “Alpha IMMturism” – a current accounts package dedicated to tourism agencies, tour operators and
hotels, with services which include discounts on operational fees and commissions, discounts on
transactions in foreign currency, discounts for issuance of guarantee letters, etc.; and

 “Alpha Mastercard Professional” – a premium debit card dedicated exclusively to liberal professions
and authorised natural persons.

154
Wholesale Banking

The wholesale segment is directed at large-sized corporate clients (i.e. companies with an annual turnover of
over EUR 10 million and a credit limit of over EUR 5 million), as well as medium-sized corporate clients
(companies with an annual turnover of between EUR 2.5 million and EUR 10 million or with a credit limit
of between EUR 1 million to EUR 5 million). The Issuer offers a broad range of tailor-made products and
services to these wholesale customers, such as working capital facilities, corporate loans and letters of
guarantee, deposit facilities, credit and debit cards, cash management, treasury products, trade finance,
syndicated loans, payment services, liquidity management, leasing, investment banking services, etc.

Below is a brief overview of the main products and services offered by the Issuer to its wholesale customers.

Financing solutions

The main types of financing products offered include custom-tailored working capital facilities (overdrafts,
multi-optional and multi-currency credit lines, credit lines for discounting of promissory notes and cheques,
factoring, reverse factoring etc.), medium and long-term investment loans, arrangement and participation in
syndicated loans granted to large-sized corporates, structured finance etc. The Issuer also provides co-
financing solutions for projects financed under EU funding projects and programmes, as well as offers
advisory services in relation to such products.

Electronic payment services

The Issuer offers a variety of electronic payment services, such as internet banking (“Alpha Click”),
electronic invoicing (“E-factura”), electronic archiving (“Transfond”), online payment solutions (“E–
commerce”), digital certificates, instant confirmation of payments to various customs offices (“Alpha
Custom”), automatic collection of funds available in the State Treasury accounts (“Direct Trezotransfer”)
and automated printing of payment forms for non-resident clients (“Typifier-DPE”).

Payment and cash management services

Non-electronic payment and cash management products include direct debit, standing order, debit
instruments (cheques, promissory notes and bills of exchange) and safe transportation services.

Cards

The Issuer issues Visa cards to its corporate clients and delivers solutions for card payments, using ePOS
(electronic point of sale) and E-commerce technologies.

Other services

Other services directed at corporate clients include liquidity management (e.g. term deposits, overnight
facilities and current accounts), trade finance solutions (letters of guarantee, letters of credit and payment
bonds), as well as leasing solutions in partnership with Alpha Leasing Romania IFN S.A. (a Group
company).

In addition to the specific products offered to retail and wholesale clients, the Issuer also provides treasury
services and products, facilitating customer access to the foreign exchange markets, the Treasury Bills
market, as well as to money market products and derivatives.

The Issuer’s position in the local market As at 30 June 2018, the Issuer was the eighth largest bank operating
in Romania, with total assets amounting to RON 15.6 billion (EUR 3.3 billion) and a market share of
approximately 3.58% (in terms of assets) (Source: Issuer, NBR statistics).

155
The table below shows the Issuer’s position on the Romanian market as at 30 June 2018, in terms of market
share in relation to the following banking segments:

As at 30 June 2018
The Issuer Total industry The Issuer’s market
(RON million) * (RON million) ** share (%)
Gross loans 11,501 318,998 3.6%
Business lending 5,348 123,145 4.3%
Mortgage loans 5,013 69,824 7.2%
Customer deposits 9,913 413,633 2.4%

Source: *The Issuer’s interim financial statements for the six months ended 30 June 2018
** NBR statistics

As at 30 June 2018, the Issuer operated a nationwide network of 130 branches and employed 2,020 people.
The Issuer is thus able to provide nationwide commercial banking services to a vast majority of the
Romanian population as well as to corporate clients of any size.

The Issuer has a strong capital position with capital ratios among the highest in the Romanian banking
system and well above the regulatory minimum requirements. As of 30 June 2018, the Issuer had a Common
Equity Tier 1 (CET 1) of 20.81% and a total capital ratio of 25.39%.

The Issuer’s capital strategy aims to maintain sound capital adequacy both from an economic as well as a
regulatory perspective. It aims at monitoring and adjusting capital levels in an effort to achieve the optimal
balance between economic and regulatory considerations and ensure a proper environment for the future
growth of the Issuer’s business.

Strategy

The Issuer’s mission is to provide its customers with high quality banking services at competitive prices.
Specific components of the Issuer’s strategy include the following:

(a) Strengthening its position as a top ten bank in the Romanian market. The Issuer plans to
strengthen its current position as a top ten bank in the Romanian market by growing its loan
portfolio, particularly in its retail and small businesses segment and broadening its range of retail
products. The Issuer intends to implement this strategic goal by offering products and services
tailored to the needs of such customers, increasing cross-selling by developing its partnerships with
retailers and other commercial partners, as well as pursuing targeted marketing campaigns.

(b) Implementing a new IT infrastructure and upgrading its operational area. The Issuer continues to
invest in the upgrade of its IT infrastructure, with the aim to enable value creation across its business
segments, in line with the latest trends in banking services technology and customer experience, as
well as regulatory requirements, e.g. implementation of the General Data Protection Regulation and
the Payment Services Directive 2.

(c) Diversify sources of funds and sustain profitability and growth. The Issuer is actively working
towards diversifying its funding sources by pursuing the increase of customer deposits (offering new
and flexible deposit products), including customer deposits attracted via fintech platforms, accession
of financing lines with international financing institutions and the issue of debt instruments
(including covered bonds). The Issuer is also focusing on the increase of its efficiency levels by
working towards improvement of its cost-to-income ratios, and building its self-sufficient funding
capacities.

156
The implementation of these strategies depends on various factors and uncertainties, including those
described in the “Risk Factors” section of this Base Prospectus. There can be no assurance that these goals
will be reached.

Lending

The Issuer pursues a clear and comprehensive risk management culture in terms of loan granting, consistent
with the applicable legal requirements and correlated with its general strategic objectives, such as: adequate
and prudent management of risks, diversification of products, mitigation of the negative impact generated by
the economic environment and maximisation of long-term value generation.

Loan portfolio by product

The table below presents a breakdown of the Issuer’s loan portfolio by product for the years ended
31 December 2017 and 2016 and at 30 June 2018:

30 June 2018 31 December 2017 31 December 2016

(RON thousands) (RON thousands) (RON thousands)
Corporate 4,799,581 4,863,285 5,264,085
Small and medium enterprises 545,258 509,745 520,529
Small business loans 3,225 3,084 2,408
Individuals 6,152,502 5,996,068 5,615,086
- Consumer loans 1,050,207 1,016,179 1,007,946
- Housing loans 5,012,817 4,893,245 4,510,174
- Credit cards 89,478 86,644 96,966
Total loans, gross 11,500,566 11,372,182 11,402,108
Allowance for impairment losses (465,529) (433,847) (1,066,338)
Total loans, net 11,035,037 10,938,335 10,335,770

Source: The Issuer’s financial statements for the year ended 31 December 2017, separate financial statements for the year ended 31 December 2016
and the interim financial statements for the six months ended 30 June 2018

Loan portfolio by type of customer and currency

The table below presents a breakdown of the Issuer’s loan portfolio by type of customer and currency for the
years ended 31 December 2017 and 2016 and at 30 June 2018:

30 June 2018 31 December 2017 31 December 2016

(RON thousands) (RON thousands) (RON thousands)
Individuals
- in RON 2,943,378 2,649,079 1,984,045
- in foreign currency (EUR and USD) 3,209,124 3,346,989 3,631,041
Legal entities
- in RON 1,720,304 1,721,877 1,677,091
- in foreign currency (EUR and USD) 3,627,760 3,654,237 4,109,931
Total loans, gross 11,500,566 11,372,182 11,402,108
Allowance for impairment losses (465,529) (433,847) (1,066,338)
Total loans, net 11,035,037 10,938,335 10,335,770

Source: The Issuer’s financial statements for the year ended 31 December 2017, separate financial statements for the year ended 31 December 2016
and the interim financial statements for the six months ended 30 June 2018

In terms of foreign currency, the exposure is to the Euro and U.S. Dollar. The Issuer has never granted loans
denominated in Swiss francs and has no exposure to the Swiss franc.

157
Funding sources

The Issuer has a diverse funding base. Funds are raised using a broad range of instruments, including
deposits, borrowings and share capital.

Deposits

As at 31 December 2017, the customer deposits attracted by the Issuer increased by RON 1.5 billion, from
RON 7.9 billion for the year ended 31 December 2016 to RON 9.4 billion for the year ended 31 December
2017, out of which almost RON 4 billion was from business customers and RON 5.4 billion was from
individuals. The increase continued in the first half of 2018, amounting to RON 9.9 billion as of 30 June
2018.

The table below shows the breakdown of the Issuer’s deposits for the years ended 31 December 2017 and
2016 and at 30 June 2018:

30 June 2018 31 December 2017 31 December 2016

(RON thousands) (RON thousands) (RON thousands)
Current accounts and sight deposits 2,626,817 2,525,034 1,979,005
Term deposits 7,086,862 6,742,893 5,760,817
Collateral deposits 199,649 172,203 178,300
Certificates of deposit - 166 364
Total (including accrued interest) 9,913,328 9,440,296 7,918,486
Source: The Issuer’s financial statements for the year ended 31 December 2017, separate financial statements for the year ended 31 December 2016
and the interim financial statements for the six months ended 30 June 2018

The table below shows the currency profile of the Issuer’s deposits by type of customers for the years ended
31 December 2017 and 2016 and at 30 June 2018:

30 June 2018 31 December 2017 31 December 2016

(RON thousands) (RON thousands) (RON thousands)
Individuals
- in RON 2,478,238 2,437,086 2,270,050
- in foreign currency (EUR and USD) 3,385,613 2,989,107 2,611,251
Legal entities
- in RON 2,065,040 2,169,952 2,244,126
- in foreign currency (EUR and USD) 1,962,663 1,822,974 775,533
Total deposits 9,891,554 9,419,119 7,900,960
Accrued interest 21,774 21,177 17,526
Total (including accrued interest) 9,913,328 9,440,296 7,918,486
Source: The Issuer’s financial statements for the year ended 31 December 2017, separate financial statements for the year ended 31 December 2016
and the interim financial statements for the six months ended 30 June 2018

Fintech

In 2017, the Issuer began attracting funds from the German deposit market, through the Comonea platform,
based on a partnership agreement concluded with the German fintech company Deposit Solutions GmbH,
thus becoming a pioneer of such alternative funding sources on the Romanian market. By using the platform,
German individuals can access the Issuer’s service offering for savings accounts and term deposits, for
maturities of up to two years. The term deposits cannot be withdrawn prior to maturity, thus allowing the
Issuer to plan more accurately its assets and liabilities management.

158
Parent funding

In accordance with the Issuer’s strategy to build a self-sufficient funding capacity, the Issuer has decreased
its parent funding over the course of recent years.

In the period between 31 December 2016 and 31 December 2017, the Parent’s deposits with the Issuer
decreased, from RON 4.5 billion (EUR 985 million) to RON 3.4 billion (EUR 723 million), part of which
secures the Issuer’s assets. The funding from the Parent is primarily denominated in EUR and is accessed on
a medium to long-term basis.

Since 31 December 2017 and up to 30 June 2018, the outstanding payment obligations of the Issuer towards
the Parent have decreased to RON 2.8 billion.

Subordinated loans

The Issuer has entered into six subordinated loan agreements with Alpha Bank Greece. As at 30 June 2018
and 31 December 2017, the outstanding amounts under these loan agreements amounted to RON 724 million
(31 December 2016: RON 706 million).

The table below sets out the contracted amounts under subordinated loan agreements concluded with the
Parent and their respective maturity:

Date Amount Due date

November 2004 EUR 16,000,000 (fully drawn) November 2019
September 2005 EUR 60,000,000 (fully drawn) September 2019
February 2006 EUR 4,300,000 (fully drawn) February 2019
November 2006 EUR 13,000,000 (fully drawn) October 2019
September 2009 EUR 12,000,000 (fully drawn) September 2019
May 2011 EUR 80,000,000 (EUR 50,000,000 drawn as at 30 June 2018) Not applicable

Source: The Issuer’s interim financial statements for the six months ended 30 June 2018

International Financial Institutions

The Issuer maintains a long-standing relationship with international financial institutions (IFIs).

On 24 November 2005, the Issuer entered into a loan agreement with EBRD for financing small and
medium-sized municipalities and/or municipally-owned or controlled companies, with a maximum amount
of EUR 20 million and maturing in April 2021. As at 30 June 2018, the outstanding balance under this loan
agreement amounted to RON 4.07 million.

In May 2017, the Issuer signed an agreement with the International Finance Corporation (IFC) for EUR 50
million with the purpose of facilitating the growing demand on the Romanian market of mortgage lending,
which matures in 2022. As at 30 June 2018, the outstanding balance under this loan agreement amounted to
RON 228.4 million.

As at 30 June 2018, the outstanding balance under the financing agreements with IFIs amounted to RON
232.4 million.

The continuous support provided to the Issuer by the IFIs is also reflected by the trade finance agreements
concluded by the Issuer with both IFC and EBRD, offering partial or full guarantees for covering payment
risks for trade-related transactions (letters of credit, trade-related promissory notes, accepted drafts, bills of
exchange, guarantees, bid and performance bonds and advance payment guarantees). The agreement with
EBRD was signed in 2013 within the Trade Facilitation Programme developed by the EBRD, for an amount
of EUR 20 million. The agreement with IFC was signed in 2015 within the Global Trade Finance

159
Programme (GTFP) developed by the IFC and is subject to a limit that may be amended from time to time at
the discretion of the IFC.

As at 30 June 2018, the Issuer is in compliance with the covenants agreed with the IFIs.

On 29 August 2018 the Issuer, as borrower, and Black Sea Trade and Development Bank, as lender, entered
into a loan agreement under which the lender made available a revolving SME finance facility to the Issuer
in a maximum amount of EUR 40 million. The facility will be used by the Issuer to finance the investment
and working capital needs of industrial, production, agricultural or service-related SMEs in Romania, as part
of Alpha Bank’s commitment to financing and providing ongoing support to the development of the SME
market segment in Romania.

Rating

On 6 March 2019, Moody’s upgraded the long-term local and foreign currency deposit ratings of the Issuer
from “Ba3” to “Ba2” and its long-term Counterparty Risk Assessment (CRA) from “Ba2(cr)” to “Ba1(cr)”.
The bank's short-term Not Prime(cr) CRA has been affirmed. The outlook on the long-term deposit ratings
has been changed to stable from positive. The rating update followed the upgrade of the ratings of the
Parent, Alpha Bank A.E.

Employees

As at 31 December 2017, the number of the Issuer’s employees was 1,973, which is higher than at
31 December 2016, when the Issuer had 1,895 employees. As at 30 June 2018, the number of the Issuer’s
employees was 2,020.

The key personnel of the Issuer are highly skilled professionals with an established track record in the
banking sector and long-standing employment with the Issuer.

Information technology

The Issuer’s IT strategy aims to offer the best available IT support and services for its banking processes and
customers, ensuring an active involvement in the development of banking products and services and
implementing the latest IT technologies and trends.

In line with the Group’s IT strategy, the Issuer’s core banking platform (Flexcube), Internet and Mobile
solutions, Treasury front office and back office applications, collection application, SWIFT and AML/Know
Your Client (KYC) applications are delivered “as a service” by Alpha Supporting Services, the Group
company specialised in offering IT services to its subsidiaries. Local infrastructure, applications and IT
services are connected and interfaced with the Issuer’s central applications, and are managed by the Issuer’s
IT Division. Central or local IT services are based on a redundant infrastructure from production and backup
locations, with clear and tested business continuity and disaster recovery plans.

The Issuer has undertaken several projects during 2017-2018 in order to ensure value creation at the level of
the business as well as implementation of regulatory requirements, i.e. upgrading of the core banking
platform (Flexcube), internet and mobile banking solutions integration and upgrade, implementation of
Regulation (EU) No. 2016/679 of the European Parliament and of the Council of 27 April 2016 on the
protection of natural persons with regard to the processing of personal data and on the free movement of
such data, and repealing Directive 95/46/EC (the General Data Protection Regulation) and Directive
2015/2366/EU of the European Parliament and of the Council of 25 November 2015 on payment services in
the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU)
No. 1093/2010, and repealing Directive 2007/64/EC (the Payment Services Directive 2), local
infrastructure replacements and upgrade (servers, PCs, routers, printers, etc. – a group of multi-annual

160
projects aimed to maintain up to date infrastructure) as well as internet, third parties and core firewalls
replacement in production and disaster recovery sites.

Trend information

There has been no significant change in the financial or trading position of the Issuer and there has been no
material adverse change in the prospects of the Issuer since the date of the audited financial statements for
the year ended 31 December 2017.

Material contracts

Other than the agreements set out in this section, the Issuer has not entered into any material contracts, other
than contracts entered into in the normal course of business, which could result in the Issuer being under an
obligation or entitlement that is material to its ability to meet its undertakings towards Covered Bondholders.

Financing agreements executed with international financial institutions

2005 SMM Finance Facility Agreement

On 24 November 2005, the Issuer, as borrower, and EBRD, as lender, entered into an unsecured loan
agreement for the financing of small and medium-sized municipalities and/or companies, which are owned
and/or controlled by small and/or medium-sized municipalities in Romania (the 2005 SMM Finance
Facility Agreement). Pursuant to the 2005 SNN Finance Facility Agreement, the Issuer addressed a segment
that was ignored before, namely small and medium-sized municipalities.

Under the 2005 SMM Finance Facility Agreement, EBRD made available to the Issuer three term loan
facilities in a total amount of up to RON 72,182,560 (approx. EUR 16 million) and maturing in 2021. The
interest rate under the 2005 SMM Finance Facility Agreement is floating at a margin of 2.30% per annum
plus the Bucharest Interbank Offered Rate (ROBOR). Pursuant to the 2005 SMM Finance Facility
Agreement, the Issuer agreed not to prepay all or part of any payment obligation with a maturity over three
years without offering to proportionally prepay at the same time the loan provided by EBRD under the 2005
SMM Finance Facility Agreement, to the extent the prepayment exceeds EUR 10 million in any period of 12
consecutive months.

2017 Loan Agreement

On 18 May 2017, the Issuer, as borrower, and IFC, as lender, entered into a loan agreement for the financing
of the Issuer’s housing lending programme for the purchase, rehabilitation or expansion of owner-occupied
homes in Romania (the 2017 Loan Agreement).

IFC’s financing is expected to help the Issuer reach out to a greater number of homeowners and further
develop the local market. The loan is for an amount of up to EUR 50 million and is maturing in 2022.
Pursuant to the 2017 Loan Agreement, the Issuer agreed not to prepay any payment obligation with a
maturity over two years unless it gives IFC at least 30 calendar days’ advance notice of its intention to make
the proposed prepayment and, if IFC so requires, contemporaneously makes a proportional prepayment
under the 2017 Loan Agreement.

2018 Revolving Credit Line

On 29 August 2018, the Issuer, as borrower, and Black Sea Trade and Development Bank, as lender, signed
a loan agreement under which the lender made available to the Issuer a revolving SME finance facility in a
maximum amount of EUR 40 million, with a minimum disbursement amount of EUR 20 million (the 2018
Revolving Credit Line). The facility will be used by the Issuer to finance the investment and working
capital needs of industrial, production, agricultural or service-related SMEs in Romania as part of Alpha

161
Bank’s commitment to financing and providing ongoing support to the development of the SME market
segment in Romania.

The repayment term of each disbursement under the 2018 Revolving Credit Line is 360 days from each
respective disbursement date (the first drawn under the facility was on 25 September 2018). Interest accrued
on each disbursement at a rate equal to the sum of EURIBOR 1Year plus a margin of 1.5% per annum.

2018 Individual Loan Agreement

On 21 December 2018, the European Fund for Southeast Europe (EFSE) has granted the Issuer a local
currency loan facility of an amount equivalent to EUR 30 million (the Individual Loan Agreement),
available in two tranches, to support the Issuer’s financing of micro- and small-sized enterprises (MSEs).
The investment aims to promote sustainable entrepreneurship development in the country by strengthening
the bank’s capacity to provide long-term financing to MSEs in local currency.

The maximum repayment term of the last tranche of the facility granted under the Individual Loan
Agreement is December 2023.

162
Trade finance support agreements

2013 Issuing Bank Agreement

On 10 June 2013, the Issuer and EBRD entered into a non-committed trade finance guarantee facility
agreement (the 2013 Issuing Bank Agreement), pursuant to which EBRD agreed to issue, at its sole
discretion, irrevocable standby letters of credit (EBRD Guarantees) in support of payment obligations of the
Issuer arising under eligible instruments issued by the Issuer and associated with exports from or imports to
certain countries of operations. Such eligible instruments include documentary letters of credit, standby
letters of credit, guarantees, letters of indemnity, promissory notes and bills of exchange.

The trade credit line extended by EBRD to the Issuer is for an amount of up to EUR 20 million. The 2013
Issuing Bank Agreement was concluded under EBRD’s Trade Facilitation Programme.

In accordance with the 2013 Issuing Bank Agreement, any amounts disbursed by EBRD under any EBRD
Guarantees should be repaid by the Issuer on EBRD’s first demand, together with all accrued interest.

2015 Issuing Bank Agreement

On 4 May 2015, the Issuer and IFC entered into a non-committed trade finance guarantee facility agreement
(the 2015 Issuing Bank Agreement), pursuant to which IFC agreed to issue, at its sole discretion,
irrevocable standby letters of credit (IFC Guarantees) in support of payment obligations of the Issuer
arising under eligible instruments issued by the Issuer in connection with exports and imports of its
customers. Such eligible instruments include documentary letters of credit, standby letters of credit, demand
guarantees, promissory notes and, bills of exchange. The trade credit line extended by IFC is subject to a
limit that may be amended from time to time at the discretion of the IFC.

The 2015 Issuing Bank Agreement was concluded under IFC’s GTFP.

In accordance with the 2015 Issuing Bank Agreement, any amounts disbursed by IFC under any IFC
Guarantees should be repaid by the Issuer on IFC’s first demand, together with all accrued interest.

163
Relationship with the Parent

Standby financing agreement

2009 Credit Line Facility Agreement

On 23 April 2009, the Issuer, as borrower, and the Parent, as lender, entered into a credit line facility
agreement for the purpose of covering temporary liquidity requirements that may arise under liquidity crisis
circumstances (the 2009 Credit Line Facility Agreement). Under the 2009 Credit Line Facility Agreement,
the Parent made available to the Issuer a revolving loan facility in an aggregate amount of up to EUR 130
million, available until April 2012. The agreement was extended successively in recent years, and is due to
mature on 31 October 2019.

According to the 2009 Credit Line Facility Agreement, the Issuer must repay each loan drawn under this
facility within six months after its utilisation date. The interest rate under the 2009 Credit Line Facility
Agreement is floating at a margin of 3% per annum plus three months EURIBOR.

Subordinated debt

2011 and 2014 Subordinated Shareholder Loan Agreements

The Issuer, as borrower, and the Parent, as lender, entered into six subordinated term loan agreements for the
purpose of sustaining the Issuer’s capital requirements imposed by the Romanian banking legislation. Five of
these subordinated loan agreements were concluded between 2004 and 2009 and renegotiated in 2014.

Date Amount Due date

November 2004 EUR 16,000,000 (fully drawn) November 2019
September 2005 EUR 60,000,000 (fully drawn) September 2019
February 2006 EUR 4,300,000 (fully drawn) February 2019
November 2006 EUR 13,000,000 (fully drawn) October 2019
September 2009 EUR 12,000,000 (fully drawn) September 2019
May 2011 EUR 80,000,000 – out of which EUR Indefinite period of time
50,000,000 – disbursed amount

Source: The Issuer’s interim financial statements for the six months ended 30 June 2018

The repayment of such loans is subordinated to the full reimbursement of all claims against the Issuer, which
rank or are expressed to rank senior to the Parent’s claims under these loan agreements.

Parent deposits

On or around the date of this Base Prospectus, the Issuer holds deposits of the Parent, substantially all being
term deposits, part of which secure the Issuer’s assets, as per the agreements that entered into force on
18 December 2008 and 29 January 2010. At 31 December 2016, the value of the deposits from the Parent
amounted to approximately RON 4.5 billion, while at 31 December 2017, the value of the deposits from the
Parent amounted to approximately RON 3.4 billion.

164
The Comonea Project

2016 Marketing Agreement

In September 2016, the Issuer and Deposit Solutions GmbH entered into a marketing agreement (the 2016
Marketing Agreement), pursuant to which the Issuer is advertising its deposit products to individual retail
clients, who are German fiscal residents.

The project is carried out on a collaborative basis between the Issuer and a German local service bank
pursuant to agreements establishing the roles and responsibilities of each party, including the performance of
know-your-customer and anti-money laundering procedures. The 2016 Marketing Agreement is in force for
an indefinite period of time and its entry into, and performance, by the Issuer observes the requirements set
under Romanian law on outsourcing by credit institutions.

Data processing services agreements

2012 Outsourcing Agreement

On 2 July 2012, the Issuer, as service recipient, and Alpha Supporting Service S.A., as service provider,
entered into an outsourcing agreement (the 2012 Outsourcing Agreement) pursuant to which the Issuer
outsourced to the service provider data processing services of a technical nature in relation to its core
banking systems (its main operational platform), treasury front and back office applications, internet and
mobile banking solutions, KYC/AML applications, collection application and others, and in relation to the
environments listed therein (such as day-by-day operations, reporting and disaster recovery). Alpha
Supporting Service S.A., a Greek subsidiary of the Parent, is providing services of data processing to
banking institutions, including to banking institutions belonging to the Parent’s group.

According to the 2012 Outsourcing Agreement, the fees for the provision of services by the service provider
are calculated on a cost basis plus a mark-up of 5%, where applicable, determined at arm’s length. The cost
base is calculated according to a cost allocation method, which is based, when feasible, on a direct cost
allocation and, when it is not feasible, on the basis of a shared cost allocation with the Alpha Bank group
companies, which also received the same services. The 2012 Outsourcing Agreement is in force for an
indefinite period of time and its entry into, and performance, by the Issuer observes the requirements set
under Romanian law on outsourcing by credit institutions.

Legal and arbitration proceedings

The Issuer’s operations are subject to regulation and control by various independent regulators and
government authorities that exercise considerable discretion, and it is involved in various litigation and
administrative proceedings with such authorities. Certain cases relate to the interpretation and application of
legal provisions. Similarly, the Issuer encounters disputes with its customers in the ordinary course of
business that can ultimately lead to litigation. Due to the nature of these proceedings, their results are
uncertain. Most of these proceedings are in the ordinary course of business, and the Issuer believes that,
except as set forth below, in the 12 months preceding the date of this Base Prospectus, the Issuer has not
been involved in any governmental, legal or arbitration proceedings (including any proceedings which are
pending or threatened, of which it is aware) which may have or have had a significant effect on the Issuer’s
financial position and/or profitability.

165
Romanian Competition Council Inquiry

In November 2016, the Romanian Competition Council (RCC) opened a sector inquiry regarding retail
banking services, in order to evaluate the current accounts and online services, lending and credit card
segments in the Romanian market.

As at the date of this Base Prospectus, the outcome of this sector inquiry remains pending. In November
2018, the RCC issued a press release, providing some preliminary conclusions addressing retail banking
services (including with respect to the transposition of Directive 2015/2366/EU any payment services in the
internal market (PSD II) and the mobility of banks’ clients). As of the date of this Base Prospectus, the final
outcome of the inquiry, as well as the formal date of its finalisation have not been announced.

Sector inquiries are not targeted at particular companies and are concluded with reports describing the
markets analysed and including recommendations for better market functioning. The RCC cannot apply fines
as a result of sector inquiry proceedings for anti-competitive conduct, but may decide to open new
infringement investigations targeted at particular companies found to have committed anti-trust
infringements, which may ultimately result in the imposition of fines for up to 10% of total turnover in the
year prior to the sanctioning decision. Additionally, the results of an inquiry could lead to lawsuits being
brought by third parties or, to the extent the Issuer fails to provide accurate and complete information to RCC
within the terms indicated by it or imposed by applicable law in the context of such inquiries, RCC may
impose a fine for up to 1% of total turnover in the year prior to the sanctioning decision.

File no. 8455/3/2016

On 3 March 2016, the plaintiff, Vic City S.R.L., beneficiary of several loans granted by the Issuer and
subsequently assigned to the London Branch of the Parent, filed a complaint with the Bucharest Tribunal,
requesting the court to impose upon the Issuer and upon the assignee of the relevant loans, to pay jointly
damages for alleged breach of the plaintiff’s right of pay-out, of the obligation to perform the agreements in
good faith and on a confidential basis, requesting also the payment of judicial expenses. The total amount of
the claim (excluding the judicial expenses) amounted to approximately EUR 29.7 million.

On 15 March 2017, the Bucharest Tribunal annulled the claim for non-payment of the judicial stamp duty.
After going through the procedural stages of appeal and higher appeal, the file is currently pending with the
Bucharest Court of Appeal for a second judgment by this court, following the cassation of its first decision
by the High Court of Cassation and Justice (which ruled in favour of the Issuer).

When issuing its new decision, the Bucharest Court of Appeal must take into consideration the decision of
the High Court of Cassation and Justice, including the statements of Vic City’s judicial liquidator (as the new
representative of the plaintiff) and of the new special administrator of the plaintiff that they do no longer
assume the claims initially submitted by the former representative of the company.

File no. 434/2/2015

The plaintiff, the National Authority for Consumer Protection (ANPC) filed a complaint against the Issuer
on the basis of the provisions of Law no. 193/2000 on abusive clauses (Law no. 193/2000), requesting the
court:

 to ascertain that several clauses from the loan agreements reviewed by ANPC are abusive;

 to impose a fine on the Issuer pursuant to the provisions of Law no. 193/2000;

 to oblige the Issuer to modify all the loan agreements which contain the alleged abusive clauses in
the sense of eliminating those clauses; and

166
 to oblige the Issuer to return to the customers the amounts received based on the alleged abusive
clauses.

On 6 November 2015, the Bucharest Tribunal partially admitted the ANPC request and consequently:

 ascertained that the clause regarding the Issuer’s right to modify the interest rate is abusive;

 ascertained that the clause regarding financing of the administration fee and including the
administration fee in loan value is abusive;

 ascertained that the clause regarding the risk fee is abusive;

 imposed a fine in the amount of RON 200 on the Issuer;

 obliged the Issuer to modify all the loan agreements in progress and also the pre-formulated loan
agreements in sense of eliminating the clauses ascertained as being abusive; and

 rejected as not admissible the ANPC request for returning to the customers of the amounts received
based on the abusive clauses.

The Issuer filed an appeal against the sentence. On 20 March 2017, the Bucharest Court of Appeal rejected it
as groundless. The decision is definitive.

The Issuer has implemented the decision.

File no. 33588/3/2014

The plaintiff, ANPC, filed a complaint against the Issuer on the basis of the provisions of Law no. 193/2000,
following a complaint lodged with ANPC by a customer of the Issuer. Pursuant to the complaint, ANPC
requested the court to:

 ascertain that the clause regarding the Issuer’s right to modify the interest rate pursuant to an interest
rate review mechanism is abusive;

 impose a fine on the Issuer;

 oblige the Issuer to modify all the loan agreements in progress and also the pre-formulated loan
agreements in sense of eliminating the alleged abusive clauses; and

 return to the customers of the amounts received by the Issuer on the basis of the alleged abusive
clauses.

On 8 May 2017, the Bucharest Tribunal rejected ANPC’s claim as groundless.

The plaintiff filed appeal against the sentence.

On 7 June 2018, the Bucharest Court of Appeal rejected the appeal as groundless.

File no. 28717/3/2012

The plaintiffs Petronas Vasos, Petrona Eleni (Cypriot citizens) and the Romanian companies Zest Com SRL
and Mavipet Prod SRL owed by the two Cypriot citizens, filed a court claim requesting to oblige ABR to
return the amounts withdrawn from their accounts (by fraudulent actions of employees of the plaintiffs) of
RON 2,238,163.39, EUR 354,710.45 and GBP 15,032.02 and to pay ancillary amounts related to the claims

167
(legal expenses for these amounts, expenses for recovering these amounts – experts and attorneys fees) as
well as moral damages.

On 3 December 2015, the Bucharest Tribunal partially admitted the claim and obliged ABR to pay the
plaintiffs the amounts considered as unlawfully withdrawn from their accounts, together with legal interest,
damages and legal expenses. The amounts representing interest to the principal claim must be updated until
effective payment.

Both parties appealed the Bucharest Tribunal’s decision. According to the information stated on the court’s
web site, on 7 March 2019, Bucharest Court of Appeal rejected as groundless the appeal filed by the Bank
and admitted the plaintiff’s appeal thus obliging ABR to pay additional amounts to those set in first court.

Considering the Court of Appeal’s ruling, the Bank should pay to the plaintiffs a total amount representing
the roughly approximate equivalent of EUR 650,000, but computation of legal interest should be made until
final payment of the due amounts.

The Bucharest Court of Appeal decision has not yet been communicated to the bank. Starting with its
communication date, the decision becomes enforceable, ABR analysing the opportunity of challenging with
higher appeal the decision of the Bucharest Court of Appeal, including if the case, to request the suspension
of the enforcement of the decision.

168
 RISK MANAGEMENT

Risk management – overview

The risk management strategy and policy is approved by the board of directors of the Issuer (the Board of
Directors) and constitutes the main pillar supporting the Issuer in the implementation of its overall business
strategy and continuous operation under normal and adverse economic conditions. The significant risk
management strategy and policy is reviewed annually. Risk analysis is integrated into the Issuer’s annual
strategic planning process and strategic plan goals are reviewed against the risk policy. The internal audit
function is responsible for providing an independent review of the integrity of the overall risk management
processes and ensuring the appropriateness and effectiveness of the controls applied.

For a more comprehensive and effective identification and handling of all risks linked to the Issuer’s risk
profile, the Risk Management Unit, Credit Risk Committee, Operational Risk Committee and ALCO were
established.

The Issuer’s Audit Committee is responsible for monitoring compliance with the Issuer’s risk management
policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the
risks faced by the Issuer. The internal audit team assists the Issuer’s Audit Committee in these functions. The
internal audit team undertakes both regular and ad hoc reviews of risk management controls and procedures,
the results of which are reported to the Audit Committee.

The Issuer has exposure to the following main risks: credit risk, liquidity risk, market risk comprising
interest rate risk and foreign currency risk, financial risk of the banking portfolio, taxation risks and
operational risks.

For each of the above-mentioned risks, the Issuer has defined specific strategies and objectives, as well as
policies and procedures for accurate assessment, control mechanisms and mitigation measures. Thus, there
are detailed necessary steps and related instruments for identifying, measuring, monitoring and controlling
each of the material risks presented above, but also for determining and maintaining the adequate capital to
cover such risks.

Credit risk

Credit risk is the risk of financial loss to the Issuer if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Issuer’s loans and advances to
customers and other banks and investment securities. For risk management reporting purposes, the Issuer
considers and consolidates all elements of credit risk exposure.

Management of credit risk

Legal entities portfolios

Credit is granted only if it is approved by the Credit Committees (Country Credit Committee, Credit
Committee I and Credit Committee II). The approval limits of the Credit Committees are determined in
accordance with “total credit exposure”, defined as the sum of all credit facilities of the obligor (whether a
single company or group of associated companies).

In addition to credit approval limits per Credit Committee competence, the Issuer has set country credit
limits for direct and indirect exposures, used when assessing foreign counterparties’ credit risk.

Approval of credit limits, renewals, minimum security/collateral requirements and the respective pricing
relies on the client’s credit rating. In addition, the credit rating system is a tool for the estimation of the

169
future behaviour of obligors who belong to a group with similar characteristics, early recognition of potential
troubled facilities (early alert mechanism) and prompt, effective action for the minimisation of the expected
loss for the Issuer and the assessment of the quality of the Issuer’s loan portfolio and the credit risk
undertaken.

Obligors are rated in the following rating scales: AA, A+, A, A-, BB+, BB, BB-, B+, B, B-, CC+, CC, CC-,
C, D, D0, D1, D2 and E for the model applicable to companies with full financial statements and 1, 2, 3 and
4 for the model dedicated to real estate transactions. For presentation purposes, a “strong” rating includes the
rating scales AA, A+, A, A-, BB+, and 1 and 2, respectively, a “satisfactory” rating includes the rating scales
BB, BB-, B+, B, B-, CC+, CC and 3, respectively, and a “watch list” (higher risk) includes the rating scales
CC- and lower than CC- and 4, respectively.

Within the credit risk management framework and credit policy, the assessment of strict compliance with the
principles of environmentally and socially responsible financing towards legal entities has been integrated.
The main purpose is the management of potential risk arising from the operations of obligors that may be
connected to damage to the environment or society or to any direct threat of such damage, having as a result
a negative impact on the business operations and financial results of the Issuer.

Retail banking portfolio

A fundamental parameter in assessing retail banking credit risk is the existence of credit rating models that
are developed and employed throughout the credit cycle at the Issuer’s level. The aforementioned models
identify homogenous risk groups (pools) and are categorised, as follows, into:

(a) “behaviour models”, which assess a customer’s performance and predict the probability of default
within the following months; and

(b) “application credit scoring models”, which assess application data (which is mainly demographic)
and predict the probability of default within the following months.

The models are reviewed, validated and updated on an annual basis and are subject to continuous quality
control so as to ensure their predictive power.

Furthermore, the Issuer conducts exercises simulating crisis situations (stress tests) on a regular basis, where
the potential impact on the financial results of the Issuer of unfavourable developments in obligors’
transactional behaviour, as well as in the broader financial and/or macroeconomic environment, are explored.

Impairment Policy

The Issuer has defined customers' total exposures that are over the significant value of EUR 400,000 for
legal entities and EUR 250,000 for households, as 'significant for individual assessment'. The customers with
exposures over the above significance level and having at least one nonperforming exposure are individually
assessed. The assessment for individual impairment is performed on a regular basis.

The Collective Assessment applies to credit exposures which are not assessed individually, after having been
categorized based on similar characteristics of the credit risk group, and the portfolio that the borrower or the
credit facility belongs to. The future cash flows of a group of exposures that are collectively evaluated for
impairment are calculated on the basis of the estimated contractual cash flows and historical loss experience
for exposures with credit risk characteristics similar to those in the group using internal models for different
parameters (PD / LGD).

The Issuer performs controls in order to confirm that proper classification of exposures was performed and
that computation of impairment is correct.

170
The individual assessment for impairment is performed by the responsible business units, reviewed by the
Risk division and, together with the collective impairment, is ratified by the Credit Risk Committee.

Credit risk mitigation

Collateral

Collateral is received in order to mitigate credit risk that may arise from an obligor's inability to fulfil its
contractual obligations and include two broad categories: intangible collateral and tangible collateral.

Intangible collateral encompasses protection commitments and mechanisms and forms a framework of
obligations and rights that are typically included and described in specific contractual documents that bind
the Issuer and the borrowers during the lending process with specific commitments. The main type of
intangible collateral that the Issuer uses to protect against the risk of losses due to debtor insolvency is the
guarantee (i.e. personal guarantee, corporate guarantee, letter of guarantee etc.).

Tangible collateral provides the Issuer with the right to possess an asset (movable or immovable). In order to
better secure credit facilities granted, mortgaged and pledged assets are covered by an insurance contract,
with assignment of the relevant insurance contract to the Issuer.

Pursuant to the Issuer's credit policy, the existence and the valuation of mortgaged property is closely
monitored. The frequency of the appraisal usually does not exceed one year, except for residential real estate
properties, for which the reassessment is carried out at an interval of up to three years. All valuations are
carried out by certified appraisers (ANEVAR members).

In the case of pledges, depending on the right or the underlying asset on which it is registered, the periodic
revaluation varies from one month to one year.

Exposure to credit risk

Forbearance

The tool which is normally used by the Issuer for managing liquidity problems that borrowers may face in
repaying their obligations is the restructuring of debt through renegotiation of the original terms and
conditions of the loan agreement entered into by the relevant borrower.

In the context of the amendments made to the Commission Implementing Regulation (EU) No. 680/2014 of
16 April 2014 laying down implementing technical standards with regard to supervisory reporting of
institutions according to Regulation (EU) No. 575/2013 of the European Parliament and of the Council by
Commission Implementing Regulation (EU) No. 227/2015 of the European Committee and the executive
technical standards of EBA, currently translated in NBR Order 9/2017, the Issuer complies with the resulting
regulatory obligations for forborne exposures.

Write-offs and write-downs of bad debts

Write-offs are the accounting reduction of a debt, which does not entail waiving the legal claim against the
debtor(s) and, hence, the debt may be revived.

Indicative conditions for the submission of proposals for writing off a part or the whole of bad debts include,
but are not limited to, the following:

(a) the relevant agreements with the clients have been terminated;

171
(b) legal/enforcement proceedings have been initiated (as stipulated by the legal framework applicable
in each case) against all liable parties (guarantors/co-debtors) as well as on any property they own
that are not encumbered in favour of the Issuer;

(c) the Issuer's possible loss (after any privileged claims by third parties) was determined legally by the
final list of priority creditors or by a formal reorganisation/insolvency proceeding; and

(d) an impairment provision equal to the loss was recorded at least during the quarter preceding the one
in which the proposal is made.

Write-downs are defined as the permanent accounting reduction of a debt, as a result of a legally binding
decision or agreement (court judgment, contractual agreement, etc.), which may no longer be claimed and,
hence, is considered as definitively non-revivable. It also entails the fact that the Issuer definitively and
irrevocably waives its right to claim the written-down debt, unless (in case of settlement) it is ascertained
that the terms set by virtue of the aforementioned decision or agreement were violated.

Non-Performing Exposure

An exposure is considered as non-performing when one of the following criteria is satisfied:

(a) the exposure is more than 90 days past due;

(b) the exposure is one against which the Issuer has undertaken legal actions;

(c) the debtor is assessed as unlikely to pay its credit obligations when it is less than 90 days past due
and the Bank assesses that the borrower is unlikely to fully meet its credit obligations without the
liquidation of collateral, regardless the existence of any past due amount or the number of days past
due, the exposure is classified as a forborne non-performing exposure, as defined in 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 amending Regulation (EU) No.
648/2012, and of the Council by Commission Implementing Regulation (EU) No. 227/2015 of the
European Committee and the executive technical standards of EBA, currently translated in NBR
Order 9/2017.

More specifically, a non-performing exposure with forbearance measures includes the following:

(a) exposures which were non-performing prior to the extension of forbearance measures;

(b) exposures supported by insufficient payment plans (either initial or subsequent payment plans,
depending on the case;

(c) exposures which include contractual terms that delay the timing of regular repayment installments in
a manner that prevents the appropriate classification assessment, such as when grace periods over
two years for capital repayment are granted; and

(d) forborne exposures which have been reclassified from the performing exposures category, including
exposures under probation (forborne performing having been reclassified out of the forborne non-
performing loan status) having been re-forborne or that are more than 30 days past due.

172
The table below shows the loans and advances to customers by asset quality:

As at 31 December 2017 (RON thousands)

Non-impaired Impaired Impairment Allowance
Neither
past due Past due
nor but not Individually Collectively Total Gross Individually Collectively Total Gross Value of
impaired impaired assessed assessed amount assessed assessed amount collateral
Retail
Lending 4,881,769 723,739 180,244 213,400 5,999,152 121,577 132,250 5,745,325 5,046,023
Mortgage 4,099,993 565,969 101,583 125,700 4,893,245 69,510 63,965 4,759,770 4,585,484
Consumer 706,717 146,434 78,534 84,494 1,016,179 51,941 64,623 899,615 457,933
Credit Card 72,060 11,336 127 3,121 86,644 126 3,615 82,903 -
Other (incl.
SBL) 2,999 - - 85 3,084 - 47 3,037 2,606
Corporate
Lending 4,999,252 68,688 272,650 14,620 5,355,210 141,172 38,824 5,175,214 4,680,742
Large 4,528,086 50,305 263,287 3,787 4,845,465 136,079 29,580 4,679,806 4,284,305
SMEs 471,166 18,383 9,363 10,833 509,745 5,093 9,244 495,408 396,437
Public
Sector 16,292 1,528 - - 17,820 - 24 17,796 17,795
Greece - - - - - - - - -
Other
Countries 16,292 1,528 - - 17,820 - 24 17,796 17,795
Total 9,897,313 793,955 452,894 228,020 11,372,182 262,749 171,098 10,938,335 9,744,560
Source: The Issuer’s financial statements for the year ended 31 December 2017

As at 31 December 2016 (RON thousands)

Non-impaired Impaired Impairment Allowance
Neither
past due Past due
nor but not Individually Collectively Total Gross Individually Collectively Total Net Value of
impaired impaired assessed assessed amount assessed assessed amount collateral
Retail
Lending 4,551,808 599,912 195,018 270,756 5,617,494 131,144 210,790 5,275,560 4,619,047
Mortgage 3,827,709 451,888 111,335 119,242 4,510,174 74,713 85,465 4,349,996 4,150,753
Consumer 651,500 138,199 83,484 134,763 1,007,946 56,237 108,991 842,718 466,146
Credit Card 70,332 9,684 199 16,751 96,966 194 16,292 80,480 -
Other (incl.
SBL) 2,267 141 - - 2,408 - 42 2,366 2,148
Corporate
Lending 4,601,151 30,287 1,039,107 62,269 5,732,814 653,467 70,043 5,009,304 5,138,161
Large 4,190,712 14,107 976,120 31,346 5,212,285 613,006 53,989 4,545,290 4,709,138
SMEs 410,439 16,180 62,987 30,923 520,529 40,461 16,054 464,014 429,023
Public
Sector 50,032 1,768 - - 51,800 - 894 50,906 27,344
Greece - - - - - - - - -
Other
Countries 50,032 1,768 - - 51,800 - 894 50,906 27,344
Total 9,202,991 631,967 1,234,125 333,025 11,402,108 784,611 281,727 10,335,770 9,784,552
Source: The Issuer’s separate financial statements for the year ended 31 December 2016

The accumulated impairment allowance for collectively assessed loans and advances included an amount of
RON 74.8 million in 2017 and RON 97.2 million in 2016 concerning IBNR (losses that have been incurred
but not yet reported) provisions related to non-impaired loans.

The table below shows the breakdown of loans, which are neither past due nor impaired, and advances to
customers.

173
 As at 31 December 2017 (RON thousands)

Watch List Total neither past due

Strong Satisfactory (higher Risk) nor impaired Value of collateral
Retail Lending 4,878,770 2,999 - 4,881,769 4,207,711
Mortgage 4,099,993 - - 4,099,993 3,918,001
Consumer 706,717 - - 706,717 287,189
Credit Card 72,060 - - 72,060 -
Other (incl. SBL) - 2,999 - 2,999 2,521
Corporate Lending 649,565 4,314,742 34,945 4,999,252 4,356,159
Large 623,343 3,882,638 22,105 4,528,086 3,989,128
SMEs 26,222 432,104 12,840 471,166 367,031
Public Sector 741 15,551 - 16,292 16,267
Greece - - - - -
Other Countries 741 15,551 - 16,292 16,267
Total 5,529,076 4,333,292 34,945 9,897,313 8,580,137
Source: The Issuer’s financial statements for the year ended 31 December 2017

As at 31 December 2016 (RON thousands)

Watch List Total neither past

Strong Satisfactory (higher Risk) due nor impaired Value of collateral
Retail Lending 4,549,541 2,267 - 4,551,808 3,905,705
Mortgage 3,827,709 - - 3,827,709 3,606,484
Consumer 651,500 - - 651,500 297,214
Credit Card 70,332 - - 70,332 -
Other (incl. SBL) - 2,267 - 2,267 2,007
Corporate Lending 386,735 4,097,793 116,623 4,601,151 4,320,363
Large 385,123 3,704,177 101,412 4,190,712 3,981,425
SMEs 1,612 393,616 15,211 410,439 338,938
Public Sector 811 49,221 - 50,032 25,576
Greece - - - - -
Other Countries 811 49,221 - 50,032 25,576
Total 4,937,087 4,149,281 116,623 9,202,991 8,251,644
Source: The Issuer’s separate financial statements for the year ended 31 December 2016

Starting January 1st 2018, the policy for impairment calculation in respect to Exposures and other claims
stemming from Retail Banking and Wholesale Banking activities is in accordance with the International
Financial Reporting Standards 9 (IFRS 9).
The Bank recognizes an exposure in the financial statement position when it becomes a party to the
contractual provisions of the exposure. Subsequently, the exposures are classified in Stages based on the
criteria defined below.
The classification of loans in stages is based on the changes of the credit quality compared to the initial
recognition. The adoption of this model aims to: a) the timely recognition and measurement of credit losses
prior to their realization, b) the classification of exposures depending on the deterioration of their credit
quality, c) the more accurate measurement of expected credit losses.

Upon initial recognition of an exposure, the Bank determines whether this exposure is considered as credit
impaired (Credit Impaired at Initial Recognition).

Law on the discharge of mortgage-backed debts through transfer of title over immovable property

Following the enactment of Law no. 77/2016 on the discharge of mortgage-backed debts through transfer of
title over immovable property (Law 77/2016), which allows mortgage debtors falling under the “consumer”
category to obtain a write-off for their unpaid loans secured with mortgages by transferring the mortgaged
immovable asset to the lending bank. The Issuer performed a reassessment of its probability, default and loss
due to default for loan exposures subject to this law (all exposures with a valid settlement notification
received were marked as default).

174
The Issuer used historical information when estimating the probabilities of default for the relevant loans, as
well as expert judgement when estimating the loss due to default. Local validation of the probabilities of
default and loss due to such default will be performed when relevant history is available.

Non-performing loan disposals

A key target for the Issuer in recent years has been to reduce the size of NPEs and improve the performance
of its loan book through a balance sheet clean up.

During 2017, the Issuer began a balance sheet clean-up process via the sale of retail and corporate
nonperforming loans. Non-performing retail exposures reaching approx. RON 68 million were sold during
the third quarter of 2017. In January 2018, the Issuer entered into a sale agreement for corporate
non-performing exposures of approx. RON 785 million (this portfolio was reclassified as held for sale as of
December 2017).

As a result of these sustained efforts, the Issuer’s NPE ratio (computed as non-performing exposures divided
by gross loans and advances as per EBA Methodological Guide for FINREP report F18) decreased from
10.64% as at 31 December 2016 to 4.65% as at 31 December 2017.

Risk concentrations of the maximum exposure to credit risk

Concentration risk is a specific form of credit risk and arises due to a low degree of diversification between
counterparties or groups of counterparties, sectors geographic regions, or collateral.

The Issuer monitors concentration risk on a regular basis through detailed reporting, which informs senior
management and the Board of Directors.

An industry sector analysis of the Issuer’s financial assets exposed to credit risk as at 31 December 2017 and
31 December 2016, before and after taking into account all collateral held by the Issuer, is as follows:

As at 31 December 2017 As at 31 December 2016

(RON thousands) Gross maximum Net maximum exposure Gross maximum Net maximum
exposure exposure exposure
Financial Institutions 2,978,272 2,719,419 3,040,493* 2,844,991*
Manufacturing 585,064 37,516 496,512 94,004
Real Estate and Construction 2,603,414 44,784 2,935,205 299,573
Wholesale and Retail Trade 864,850 13,766 922,389 112,316
Public Sector 1,329,364 1,311,568 1,264,762 1,213,856
Hotels and Tourism 219,194 2,076 172,296 6,821
Other Industries 1,079,785 81,797 1,012,254 209,773
Individuals 6,000,194 253,780 5,615,085 341,892
Total 15,660,137 4,464,706 15,458,996* 5,123,226*
Source: The Issuer’s financial statements for the year ended 31 December 2017 and separate financial statements for the year ended 31 December
2016
*Figures extracted from the Issuer’s separate financial statements for the year ended 31 December 2016 as restated and presented in the Issuer’s
financial statements for the year ended 31 December 2017

Counterparty credit risk

Counterparty credit risk is the risk that a counterparty could default before the final settlement of all existing
transactions’ cash flows. An economic loss would occur if the portfolio of transactions with the counterparty
has a positive economic value to the Issuer at the time of counterparty default. According to CRR 575/2013,
the term transaction refers to: (i) over-the-counter (OTC) derivative transactions, such as FX or interest rate
derivative transactions; (ii) repurchase transactions, securities or commodities lending or borrowing
transactions or margin lending transactions; and (iii) long settlement transactions. In principle, the Issuer
only enters into the first two types of transactions.

175
The exposures generating counterparty credit risk are monitored on a daily basis. The Issuer has set limits
per counterparty group, per counterparty and per product.

Market risk

The most significant market risks that the Issuer faces are interest rate, foreign exchange and bond price
risks. Changes in interest rate levels, yield curves and spreads may affect the interest rate margin realised
between lending and borrowing costs. Changes in currency rates affect the value of assets and liabilities
denominated in foreign currencies and may affect income from foreign exchange dealing. The performance
of financial markets may cause changes in the value of the Issuer’s portfolio. The Issuer has implemented
risk management methods to mitigate and control these and other market risks to which the Issuer is exposed
and exposures are constantly measured and monitored. However, it is difficult to accurately predict changes
in economic or market conditions and to anticipate the effects that such changes could have on the Issuer’s
financial performance and business operations.

Currency risk

The Issuer is exposed to currency risk through transactions in foreign currencies against RON. The Issuer
manages its exposure to movements in exchange rates by modifying its assets and liabilities mix. The main
foreign currencies held by the Issuer are EUR and USD. In the Romanian market, exchange rates have a
certain degree of volatility and therefore open foreign exchange positions represent a source of currency risk.
In order to limit losses arising from adverse movements in exchange rates, the Issuer is currently pursuing a
policy of maintaining a foreign exchange position which is balanced overall.

Foreign currency risk is the risk of reduction in economic value arising from adverse changes in the value or
volatility of foreign exchange rates to record losses for on or off-balance sheet positions, or not achieving
estimated profits due to fluctuations in the foreign exchange market. The object of the identification,
assessment, monitoring and management of the foreign currency risk process is represented, according to the
Issuer’s policies and procedures, by the elements denominated in foreign currency.

The foreign exchange risk is measured by applying Value at Risk (VaR) methodology, scenario analysis and
stress testing. The method applied for calculating VaR is historical simulation. The Issuer uses a holding
period of between one and ten days, depending on the time which is required to liquidate the portfolio. The
VaR methodology is complemented with scenario analysis and stress testing, in order to estimate the
potential size of losses that could arise from the trading portfolio for hypothetical as well as historically
extreme movements of market parameters.

Interest rate risk

The Issuer incurs interest rate risk from its financial intermediation activity, principally in the form of
exposure to adverse changes in market interest rates. In the context of analysis of the banking portfolio,
interest rate gap analysis is performed. Assets and liabilities are allocated into time buckets according to their
re-pricing date (for variable interest rate instruments), or according to their maturity date (for fixed rate
instruments).

The main sources of interest rate risk arise when a mismatched correlation exists between the maturity (for
fixed interest rates) or re-pricing date (for floating interest rates) of the interest-bearing assets and liabilities,
adverse evolution of the slope and shape of the yield curve (the unparalleled evolution of the interest rate
yields of the interest-earning assets and interest-earning liabilities), and when a mismatched correlation
exists between the adjustments of the rates earned and paid on different instruments with otherwise similar
re-pricing characteristics and the options embedded in the Issuer’s products.

Asset-liability risk management activities are conducted in the context of the Issuer’s sensitivity to interest
rate changes. The Issuer generally grants loans with floating interest rates, according to the Issuer’s policy

176
and also with indexed interest rates (which re-price based on reference interest rates such as ROBOR,
EURIBOR and LIBOR). On the deposit side, the Issuer offers mainly products with fixed interest rates.

The Issuer is exposed to various risks associated with the effects of fluctuations in the prevailing levels of
market interest rates on its separate financial position and cash flows.

Interest margins may increase as a result of such changes but may reduce or create losses in the event that
unexpected movements arise. Management sets thresholds on the level of mismatch of interest rate re-pricing
that may be undertaken, which is monitored monthly (emergency review mechanism).

Liquidity risk

Liquidity risk is the risk that the Issuer will encounter from a potential inability to meet all payment
obligations associated with its financial liabilities that are settled by delivering cash or another financial asset
when they come due.

Liquidity risk arises in the general funding of the Issuer’s activities and in the management of asset positions.
It includes both the risk of being unable to fund assets at appropriate maturities and rates and the risk of
being unable to liquidate an asset at a reasonable price and in an appropriate timeframe.

The Issuer has access to a diverse funding base. Funds are raised using a broad range of instruments
including deposits, borrowings and share capital. This enhances funding flexibility, limits dependence on one
source of funds and generally lowers the cost of funds. The Issuer concentrates its efforts to maintain
adequate liquidity, such as ensuring the necessary funds to cover at all times its financial commitments on all
time bands.

The Issuer has set a well-defined organisational structure, with clear roles and responsibilities for the
relevant staff and business units, concerning all types of ALMM activities, including liquidity risk
management. The Risk Management Unit has assigned overall responsibility for liquidity risk management
to ALCO, which oversees the operations of the relevant business units.

Liquidity management is performed through the timely identification of liquidity needs, identification of all
available sources to cover these needs, and obtaining liquidity in the most cost-effective way for the Issuer.
The most important areas under constant monitoring are funding structure, evolution and relevant cost,
loan-to-deposits ratio, loan disbursements, collateral status, evolution of maturity mismatches and funding
needs under stress test conditions.

The Issuer performs a liquidity gap analysis for each currency that is exposed on a monthly basis. According
to the liquidity gap analysis, cash flows arising from all assets and liabilities are estimated and allocated into
time bands based on their maturity date, with the exception of accounts without contractual maturity (e.g.
demand customer deposits, rollover working capital loans etc.), which are allocated to time bands according
to their transactional behaviour. Moreover, the Issuer addresses its liquidity and funding gaps daily, on a
currency-by-currency basis.

For the monitoring of liquidity risk, stress tests are performed on a monthly basis according to the
methodology for “Liquidity Buffer and Liquidity Stress Scenarios”, in order to evaluate the impact of
potential adverse market conditions on the Issuer’s liquidity.

The Issuer has also developed and updated a contingency funding plan and an early warning indicators
framework to identify liquidity issues, increase in liquidity risk or funding needs and the corresponding
limits. The Risk Management Division monitors these indicators on a daily basis against their established
limits and reports any limit breaches to the appropriate levels of management.

177
Furthermore, the reporting requirements under Basel III include the introduction of two liquidity-related
ratios, the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) which are closely
monitored by the relevant business unit.

The Liquidity Coverage Ratio, which is calculated regularly according to regulatory requirements, stood at
779% at 31 December 2017 and 979% at 31 December 2016.

178
 Without
Up to 1 3 to 12 contractual
(RON thousands) month 1 to 3 months months Over 1 year maturity Total
ASSETS

Cash and balances with

National Bank of Romania 2,044,314 - - - - 2,044,314
Due from other banks 660,304 233,864 20,503 - - 914,671
Available-for-sale securities 314,026 109,623 762,522 137,171 - 1,323,342
Investments in associates - - - 804 - 804
Loans and advances to
customers 237,904 400,587 1,889,287 8,410,557 - 10,938,335
Derivative financial assets 1,566 - - - - 1,566
Property and equipment - - - - 91,803 91,803
Intangible assets - - - - 17,800 17,800
Other assets - - - - 36,992 36,992
Assets held for sale - - - 266,291 266,291

TOTAL ASSETS 3,258,114 744,074 2,672,312 8,548,532 412,886 15,635,918

Com. Lines from Group 745,552 - - - - 745,552

LIABILITIES

Due to banks 55,293 232,985 932,899 2,148,121 - 3,369,298

Other borrowed funds - - - 232,791 - 232,791
Due to customers 2,608,191 2,233,462 2,786,955 1,811,688 - 9,440,296
Derivative financial liabilities 1,714 - - - - 1,714
Subordinated debt - - - 723,978 - 723,978
Other liabilities 15 16 21 58 102,175 102,285
Deferred tax liabilities - - - - 1,346 1,346
Equity - - - - 1,764,210 1,764,210

TOTAL LIABILITIES &

EQUITY 2,665,213 2,466,463 3,719,875 4,916,636 1,867,731 15,635,918

Com. Lines to Group 37,480 - - 37,480 - 74,960

LIQUIDITY GAP Without

Up to 1 3 to 12 contractual
month 1 to 3 months months Over 1 year maturity Total
GAP 1,300,973 (1,722,389) (1,047,563) 3,594,416 (1,454,845) 670,592

Cumulated GAP 1,300,973 (421,416) (1,468,979) 2,125,437 670,592

Source: The Issuer’s financial statements for the year ended 31 December 2017

Operational risk

Operational risk is the risk of the occurrence of an event, with or without financial impact, resulting from
inadequate or failed internal processes, IT systems, people (intentionally or unintentionally) and from
external events. Operational risk also includes legal risk which is associated with legally flawed actions,
uncertainty regarding the definition of the law that may lead to inadequate interpretation and potential
inefficiencies in the legal framework.

Within this context and in order to achieve effective operational risk management, the Issuer has adopted and
implemented an operational risk framework which is aligned to the operational risk strategy of the Group
regulatory framework and is applied at all levels.

179
Identification and management of operational risk are performed so as to maintain a constant flow of
information and enhance the decision-making process.

The Issuer’s primary defences against operational risk are its policies, procedures and internal controls.

The Issuer has developed an appropriate organisational structure, with clearly defined roles and
responsibilities for its personnel and units, in order to manage operational risk issues.

The main bodies tasked with supervising and managing such operational risks are the Risk Management Unit
and the Operational Risk Committee.

The Risk Management Unit develops the appropriate tools, processes, procedures and techniques relevant to
operational risk management and monitors the implementation of appropriate action plans for its mitigation.
All units have appointed an operational risk co-ordinator and operational risk initiator.

Operational risk management is performed through risk identification, assessment, monitoring, reporting and
mitigation.

For more information on risk management, please read the Issuer’s financial statements for the year ended
31 December 2017 which are appended to this Base Prospectus.

Capital adequacy

The Issuer maintains a level of own funds that can be used at any time to cover risks inherent in the business.
The adequacy of the Issuer’s capital is monitored using, among other measures, the rules and ratios
established by the European Banking Authority (EBA) and adopted by the NBR.

The regulations require capital adequacy ratios to be calculated on the basis of financial information prepared
in accordance with EU and NBR prudential requirements. To be “sufficiently capitalised” under the current
legislative framework, a banking institution must have a CET1 ratio of at least 4.5% and 6% for the Tier I
capital ratio, while the total capital ratio must be maintained at 8%.

As at 31 December 2017, the Issuer’s capital adequacy ratio based upon the CRR was 25.43%, while at the
end of 2016 it stood at 23.46%. As at 30 June 2018, the Issuer’s capital adequacy ratio based upon the CRR
is 25.39%. The primary objectives of the Issuer’s capital management are to ensure that the Issuer complies
with externally imposed capital requirements and that it maintains strong credit ratings and healthy capital
ratios in order to support its business and to maximise shareholders’ value.

30 June 2018 31 December 2017 31 December 2016

(RON thousands) (RON thousands) (RON thousands)
Actual Required Actual Required Actual Required
CET 1 1,627,832 351,997 1,636,621 359,061 1,427,950* 363,269*
Tier 1 capital 1,627,832 469,329 1,636,621 478,748 1,427,950* 484,358*
Tier 2 capital 358,580 N/A 392,617 N/A 465,970 N/A
Total capital 1,986,412 625,772 2,029,238 638,331 1,893,920* 645,811*
Risk-weighted assets 7,822,145 7,822,145 7,979,136 7,979,136 8,072,637* 8,072,637*
CET 1 20.81% 4.50% 20.51% 4.50% 17.69%* 4.50%
Tier 1 capital 20.81% 6.00% 20.51% 6.00% 17.69%* 6.00%
Total capital ratio 25.39% 8.00% 25.43% 8.00% 23.46%* 8.00%
Source: The Issuer’s financial statements for the year ended 31 December 2017, separate financial statements for the year ended 31 December 2016
and the interim financial statements for the six months ended 30 June 2018
*Figures extracted from the Issuer’s separate financial statements for the year ended 31 December 2016 as restated and presented in the Issuer’s
financial statements for the year ended 31 December 2017

180
 DIRECTORS AND MANAGEMENT

Board of Directors

The leadership and management of the Issuer are entrusted to a Board of Directors consisting of nine
members under four-year mandates with the possibility of re-election.

At the date of this Base Prospectus, the members of the Board of Directors of the Issuer, their position in the
Issuer or its affiliates and their outside activities are as follows:

Name Position in the Issuer Position outside the Issuer

Christos Giampanas Chairman of the Board of Vice Chairman of the Board of Directors of Alpha Bank Cyprus Ltd
Directors, non-executive position
Member of the Board of Directors of Altius Insurance Company (Cyprus)
Sergiu Bogdan Oprescu Member and Executive President General Manager, Alpha Bank A.E.
(Alternate Chairman of the Board
of Directors) Chairman of the Board of Directors, Alpha Leasing Romania IFN S.A.
Chairman of the Board of Directors, Romanian Banking Association
Member of the Board of Directors, European Banking Federation
Member of the Executive Committee, European Mortgage Federation
Founding Member ELEC Romania Association
Evangelos Kalamakis Member, non-executive position Member of the Board of Directors of Alpha Finance Investment Services
AEPEY
Member of the Board of Directors of Alpha Ventures A.E.
Chairman of the Board of Directors of Alpha Investment Properties I A.E.
(1)
Lazaros Papagaryfallou Member, non-executive position General Manager, Alpha Bank A.E.
Member of the Board of Directors of Alpha Life S.A.
Vice Chairman, Board of Directors of Alpha Supporting Services S.A.
Chairman, Board of Directors of Alpha Debt Notification Services S.A.
Member of the Board of Directors of Cepal Holdings Sociètè Anonyme
Chairman of the Board of Directors of Alpha Ventures A.E.
Chairman of the Board of Directors of Alpha Ventures Capital Management
Chairman, Board of Directors of Alpha Real Estate and Investments S.A.
Nikolaos Zagorisios Member, non-executive position There are no such positions
Georgios Michalopoulos Member, non-executive position Member of the Board of Directors of Alpha Ventures S.A.
Member of the Board of Directors of Alpha Finance Investment Services S.A.
Member of the Board of Directors of Alpha Bank London Ltd.
Stelios Louisides(1) Member, non-executive position There are no such positions
Irene Rouvitha Panou Independent member Non-Executive Chairman of The Cyprus Telecommunications Authority
Independent Member of the Board of Directors of Alpha Leasing S.A.
(Greece)
Radu-Gheorghe Deac Independent member Independent Member of the Board of Directors of Alpha Finance Romania
S.A.
Independent Member of the Board of Directors of Alpha Leasing Romania
IFN S.A.
Sole owner and President of R.D. Business Consulting SRL (RDBC)
President and member of the Executive Committee of ELEC Romania
Association
Vice President and member of the Executive Committee of the ARDCE
Association
Sole owner of “PFA Deac Radu-Gheorghe”

181
Note:

(1) The two members of the Board of Directors will be replaced by two non-executive members, out of which one independent, according to
the resolutions passed at the general assembly of ordinary shareholders dated 22 February 2019. These changes in the structure of the
Board of Directors shall be effective subject to NBR approval of the proposed new members, in accordance with the applicable regulation.

The business addresses for the members of the Board of Directors is at the Issuer’s headquarters, located at
237 B Calea Dorobantilor, 1st District, Bucharest, Romania.

Executive Committee

The Board of Directors may delegate part of its duties to an Executive Committee chosen from among the
members of the Board of Directors or from outside it. The Executive Committee is made up of six members.

At the date of this Base Prospectus, the members of the Executive Committee of the Issuer, their position in
the Issuer or its affiliates and their principal outside activities are as follows:

Name Position in the Issuer Position outside the Issuer

Sergiu Bogdan Oprescu Executive President See above
Periklis Voulgaris Executive Vice President Wholesale Member of the Board of Directors of Alpha Finance Romania S.A.
Ion Stan Executive Vice President Operations Member of the Board of Directors of Alpha Leasing Romania IFN S.A.
Chairman of the Board of Directors of Alpha Insurance Brokers–Societate de
Brokeraj in Asigurare-Reasigurare S.R.L.
Cristian Daniel Dragoş Executive Vice President Retail Member of the Board of Directors of Alpha Insurance Brokers Societate de
Brokeraj in Asigurare-Reasigurare S.R.L.
Gabriel Mateescu Executive Vice President Financial Not applicable
Cornelia Dumitrescu Executive Vice President Risk Member of the Audit Committee of Alpha Leasing Romania IFN S.A.

The business addresses for each member of the Executive Committee is 237 B Calea Dorobantilor, 1st
District, Bucharest, Romania.

Conflicts of interest

Based on the information available to the Issuer at the date of this Base Prospectus, there is no existing
conflict between any duties of the members of the Board of Directors and Executive Committee towards the
Issuer and their private interests and/or other duties.

Certain members of the management bodies of the Issuer have, or may in the future have, similar positions
within the Group or other affiliated entities, a situation which may give rise to potential conflicts of interest
(should the Issuer enter into business relations with the respective entities). To the extent such potential
conflicts of interests may arise, the relevant persons will fully comply with the applicable legal provisions
and internal regulations dealing with conflicts of interest.

Board Committees

The activities of the Issuer’s Board committees are set out below, in accordance with the relevant charters or
other applicable governing instruments.

Audit Committee

The Audit Committee is a consultative body to the Board of Directors with the objective of monitoring,
reviewing and assessing the adequacy and effectiveness of the internal control system of the Issuer and

182
Audit Committee

The Audit Committee is a consultative body to the Board of Directors with the objective of monitoring,
reviewing and assessing the adequacy and effectiveness of the internal control system of the Issuer and
thereby improving the functioning and effectiveness of the Issuer. Within the framework of its competence,
the Audit Committee provides advice and assistance to the management body.

The Audit Committee assists the Board of Directors, in particular, in fulfilling its oversight responsibilities
regarding the financial reporting process, the system of internal control, the internal and external audit
process, and the Issuer’s process for monitoring compliance with applicable laws and regulations and its
code of conduct/ethics. Any delegation to the Audit Committee will not amend the attributions and
responsibilities of the Board of Directors.

The Audit Committee is composed of three members appointed by the Board of Directors and selected from
among its non-executive members. The Chairman and the majority of the members of the Audit Committee
are independent Directors.

Risk Management Committee

The Risk Management Committee of the Issuer is a consultative body to the Board of Directors with the
objective of advising the Board of Directors in connection with the present and future risk profile and risk
management global strategy of the Issuer, as well as assisting the Board of Directors with the monitoring the
implementation of this strategy by the senior management.

The Risk Management Committee performs assessments of the adequacy and effectiveness of the risk
management policies of the Issuer (including, in particular, compliance with the specified risk tolerance
level, the appropriateness of limits, the adequacy of provisions and overall capital adequacy in relation to the
amount and type of risks undertaken). Such assessments are undertaken on an annual basis or, to the extent
deemed necessary by the Risk Management Committee, more frequently.

The Risk Management Committee is composed of the Chairman and two other members, appointed by the
Board of Directors and selected from among non-executive members, the majority of whom are independent
(Chair included).

Remuneration Committee

The Remuneration Committee is a consultative body to the Board of Directors which provides competent
and independent opinions to the Board of Directors in relation to the remuneration policies and practices, as
well as on the incentives for risk, capital and liquidity management, and is responsible for the preparation of
decisions on remuneration to be taken by the Board of Directors, in particular regarding the remuneration of
the members of the management body in its management function as well as other identified employees,
within the guidelines set by the Group Remuneration Committee.

The Remuneration Committee is composed of the Chairman and two other members, appointed by the Board
of Directors and selected from among its non-executive members, the majority of whom are independent
(Chair included).

Nomination Committee

The Nomination Committee is a consultative body to the Board of Directors, assisting the Board of Directors
in connection with its structure and composition.

The Nomination Committee identifies and issues recommendations (subsequently for the approval of the
relevant management body or the general meeting of shareholders of the Issuer) concerning candidates to fill

183
in vacant management body positions and periodically assesses the structure, size, composition and
performance of the Issuer’s management body, as well as providing recommendations to the Board of
Directors concerning the number, structure and responsibilities of the various committees established at the
level of the Board of Directors.

The Nomination Committee is composed of the Chairman and two other members, appointed by the Board
of Directors and selected from among its non-executive members, the majority of whom are independent
(Chair included).

184
Operational Committees

Credit Risk Committee

The Credit Risk Committee provides support to the Executive Committee in the oversight of credit risk
activities and the implementation of relevant strategy. The Credit Risk Committee is responsible for the
assessment of the adequacy and effectiveness of policies and procedures of the Issuer’s credit risk
management, in particular concerning the taking of credit risk, the monitoring and management by business
line, geographic area, product activity, sector, industry etc., and the issuing of relevant recommendations to
senior management.

The Credit Risk Committee convenes quarterly or ad hoc following a proposal by one of its members. The
Credit Risk Committee and notifies the minutes of its meetings to senior management of the Issuer and the
chairman of the Credit Risk Committee informs the Executive Committee of its activity.

Operational Risk Committee

The Operational Risk Committee oversees operational risk management activities and ensures that the
appropriate operational risk governance structure is in place at the Issuer’s level. It assigns operational risk
limits, tolerance levels and target benchmarking levels to the various business units within the Issuer,
reviews the operational risk events and decides whether to pursue relevant actions within the limits conferred
on it by relevant management body decisions. The Operational Risk Committee reviews operational risk
reports prepared by the Risk Management Division and provides regular reports to the Risk Management
Committee, summarising the operational risk profile of the Issuer. The Operational Risk Committee also
receives and reviews the reports prepared by the Issuer’s Legal Division, setting out legal proceedings
brought against the Issuer by third parties.

The Operational Risk Committee meets whenever necessary, but at least quarterly.

Assets and Liabilities Committee

The Assets and Liabilities Committee (ALCO) has overall responsibility for the liquidity, interest rate and
structural foreign exchange management of the Issuer. ALCO is responsible for managing the asset and
liability portfolio composition to ensure prudent balance sheet structure. It also ensures optimal use of capital
in accordance with regulatory and internal limits. Within this context, ALCO examines and decides on issues
related to treasury and balance sheet management and monitors the evolution of results, the budget, the
funding plan, capital adequacy and the overall financial volumes of the Issuer, approving the respective
actions and policies in compliance with both Group policies and applicable NBR regulations. In addition,
ALCO approves the interest rate policy, the structure of the investment portfolios and the total market,
interest rate and liquidity risk limits.

ALCO meets whenever necessary, but at least quarterly.

Credit Committees

The issuer has organised a number of Credit Committees with specific duties regarding the approval of credit
facilities according to established levels of competence, namely: ABR Country Credit Committee, Credit
Committee I, Credit Committee II, Retail Credit Committee, Retail Credit Committee I, Retail Credit
Committee II, Large Corporates Credit Committee, Commercial Credit Committee and Workout Credit
Committee.

Credit Committees meet at least once per week. On a case-by-case basis, for urgent matters, such committees
can meet ad hoc.

185
Arrears Committees

The Arrears Committees mainly approve the actions, implementation and management of the Issuer’s
recovery processes, deployed during either restructuring/rescheduling processes or during legal proceedings
(including foreclosure, insolvency and bankruptcy) undertaken against debtors/guarantors/co-debtors which
register temporary and/or permanent overdue amounts.

Two Arrears Committees, I and II, have been established at the Issuer’s level, each having its own approval
competence limits established on the basis of total credit exposure/unsecured exposures.

Troubled Assets Committee

The Troubled Assets Committee examines issues related to the management of the portfolio placed under the
responsibility of the Workout & Arrears Unit (Arrears Division, Workout Division and Retail
Non-performing Loans Division), in order to meet the business targets of the Issuer.

This committee was established to ensure definition and review of the strategy for managing arrears,
approval of the non-performing loans policy and procedures and the operational framework of the Arrears
Committees, initial approval and monitoring of the progress of the annual budgets’ achievement, the
business plans and the targets set to the Workout & Arrears Unit under the framework of the Issuer’s
business planning, as performed by the Board of Directors.

The Troubled Assets Committee also establishes available types of restructuring and final settlement
solutions for customers placed under the responsibility of the Workout & Arrears Unit, as well as the
periodic monitoring and assessment of the effectiveness of their implementation and the granting of initial
approval on proposals for write-offs or for selling troubled assets portfolios.

The Troubled Assets Committee convenes at least on a quarterly basis and/or on an ad hoc basis, following a
proposal by one of its members.

Change Control Committee

The Change Control Committee is the structure under whose approval a change request can be transformed
into a project, regardless of category, except where coming from the area of territorial network development.
The Change Control Committee analyses the correctness, opportunity and financial/functional impact of
approved project proposals within the established competency limits or, when necessary, makes approval
recommendations.

The Change Control Committee convenes at least on a quarterly basis and/or on an ad hoc basis.

Personnel Committee

The Personnel Committee decides on matters related to the Issuer’s staff (e.g. hiring, salary, transfers,
evaluation, training plans), up to the level of deputy manager and equivalent positions.

The Personnel Committee meets whenever necessary, but at least quarterly.

Purchase Committee

In principle, the Purchase Committee establishes the Issuer’s purchasing policy, to the extent and within the
limits of the Group acquisition policy, analysing matters such as outsourcing versus internal services, or
investment versus leasing, frame agreements versus local suppliers etc.

186
In addition, the Purchase Committee analyses the opportunity and the financial impact of new projects (other
than those falling under the authority of the Change Control Committee) and approves such projects if in the
range of competencies, or advises for further approval.

The Purchase Committee meets whenever necessary, but at least four times per year.

Work Safety and Health Committee

The Work Safety and Health Committee approves the annual work safety and health programme with the
aim of improving the work environment.

187
 SELECTED FINANCIAL INFORMATION OF THE ISSUER

The tables below set out the income statement, statement of financial position, statement of profit and loss
and other comprehensive income, and statement of cash flow of the Issuer, which are extracted from the
audited financial statements of the Issuer for the years ending 31 December 2016 and audited financial
statements of the Issuer for the year ending, 31 December 2017. These financial statements are accompanied
by the respective independent auditor’s reports, and are in each case prepared in accordance with the
International Financial Reporting Standards (IFRS) as adopted by the European Union (the Annual
Financial Statements) and the interim unaudited financial statements as at 30 June 2018 and for the first six
months period ended on 30 June 2018 prepared in accordance with IFRS as adopted by the European Union
unaudited and not reviewed (the Interim Financial Statements and, together with the Annual Financial
Statements, the Financial Statements).

In August 2016, the Issuer increased its participation in Alpha Finance Romania S.A. to 26.68% of the share
capital of this entity. As of 31 December 2016, the Issuer’s participation in Alpha Finance Romania S.A. has
not been accounted using the equity method due to the fact that all exemption criteria required by IAS 28
“Investments in Associates and Joint Ventures” were satisfied. Taking into consideration the exemption
criteria set forth by IAS 28 and the provisions of IAS 27 “Separate financial statements”, the Issuer prepared
separate financial statements for the year ending 31 December 2016, in which investments in associates are
carried at cost.

As of 30 June 2018 and 31 December 2017, the Issuer has accounted its investment in Alpha Finance
Romania S.A. using the equity method. The Issuer decided to begin applying the equity method on the basis
that it intends to issue publicly traded instruments and that, following such issuance, the IAS 28 exemption
would no longer apply. Under the equity method, the investment is initially recognised at cost and adjusted
thereafter for the post-acquisition change in the Issuer’s share of net assets of the associate.

The report of the independent auditor of the Issuer for the year ended 31 December 2017 states that the
Annual Financial Statements present fairly, in all material respects, the financial position of the Issuer as at
31 December 2017 and its financial performance and its cash flow for the year ended 31 December 2017 in
accordance with IFRS as adopted by the EU.

The report of the independent auditor of the Issuer for the year ended 31 December 2016 states that the
Annual Financial Statements give a true and fair view of the unconsolidated financial position of the Issuer
and its unconsolidated performance and its unconsolidated cash flow for the year ended 31 December 2016
in accordance with IFRS as adopted by the EU.

Prospective investors should not rely on interim results as being indicative of results that the Issuer may
expect for the full year.

Prospective investors should read the following selected financial information in conjunction with the
information contained in “Risk Factors”, the Financial Statements, which are appended to this Base
Prospectus (see “Financial Statements and Auditors’ Reports”).

188
Income statement
30 June 2018 30 June 2017 31 December 2017 31 December 2016
(RON thousands) (RON thousands)
unaudited Extracted from audited Annual Financial
Statements
Interest and similar income 278,846 234,046 493,736 484,639
Interest expense (56,471) (40,020) (87,676) (88,760)
Net interest income 222,375 194,026 406,060 395,879
Fee and commission income 51,228 45,090 94,775 91,826
Fee and commission expense (9,550) (7,941) (17,791) (15,372)
Net fee and commission income 41,678 37,149 76,984 76,454
Dividend income 1,003 852 886 3,035

Gains less losses on financial transactions 16,024 19,202 104,869 94,884

Gains less losses from derecognising financial assets (6,762) - - -
measured at amortised cost
Other operating income 774 3,857 8,315 7,320

Net operating income 275,092 255,086 597,114 577,572

Net impairment loss on financial assets (7,028) 5,627 41,390 (85,829)

Staff costs (84,751) (77,771) (160,534) (149,732)
Depreciation and amortisation expenses (9,358) (8,398) (17,090) (15,773)
Other operating expenses (108,850) (92,859) (204,321) (204,350)

Operating expenses (209,987) (173,401) (340,555) (455,684)

Share from the profit/loss of associates (190) (15) (150) (216)*

Profit/(loss) before tax 64,915 81,670 256,409 121,672*
Income tax expense (83,647) (13,099) (41,675) (7,294)*
Net profit/(loss) for period (18,732) 68,571 214,734 114,378*
Source: The Issuer’s financial statements for the year ended 31 December 2017, separate financial statements for the year ended 31 December 2016
and the interim financial statements for the six months ended 30 June 2018
*Figures extracted from the Issuer’s separate financial statements for the year ended 31 December 2016 as restated and presented in the Issuer’s
financial statements for the year ended 31 December 2017

Statement of Profit or Loss and Other Comprehensive Income

30 June 2018 30 June 2017 31 December 31 December

2017 2016

(RON thousands) (RON thousands)

unaudited Extracted from audited Annual
Financial Statements
Net profit/(loss) for period (18,732) 68,571 214,734 114,378 *
Other comprehensive income:
Items that may be reclassified to profit or loss
Net change in reserves of securities measured at fair value through 185 - - -
other comprehensive income
Net change in reserves of available-for-sale financial assets - 6,307 (1,694) (7,414)

Income tax (1) (1,009) 271 1,186

Total amount that may be reclassified to profit or loss, after income 184 5,298 (1,423) (6,228)

189
 30 June 2018 30 June 2017 31 December 31 December
2017 2016

(RON thousands) (RON thousands)

unaudited Extracted from audited Annual
Financial Statements
tax

Fair value changes of equity instruments measured at fair value 1,112 - - -

through other comprehensive income
Income tax (178) - - -
Total amount that will not be reclassified to profit or loss, after 934 - - -
income tax
Other comprehensive income, net of tax 1,118 5,298 (1,423) (6,228)

Total comprehensive income (17,614) 73,869 213,311 108,150*

Source: The Issuer’s financial statements for the year ended 31 December 2017, separate financial statements for the year ended 31 December 2016
and the interim financial statements for the six months ended 30 June 2018
*Figures extracted from the Issuer’s separate financial statements for the year ended 31 December 2016 as restated and presented in the Issuer’s
financial statements for the year ended 31 December 2017

Statement of Financial Position

30 June 2018 31 December 2017 31 December 2016

(RON thousands) (RON thousands)
unaudited Extracted from audited Annual Financial
Statements
Assets
Cash and balances with National Bank of Romania 2,366,480 2,044,314 2,445,616
Derivative financial assets 933 1,566 3,106
Due from banks 946,882 914,671 537,495
Investment securities
Available-for-sale securities - 1,323,342 1,252,556*
Measured at fair value through other comprehensive income 1,073,766 - -
Investments in associates 614 804 966*
Loans and advances to customers 11,035,037 10,938,335 10,335,770
Property and equipment 89,421 91,803 96,552
Intangible assets 23,025 17,800 7,336
Other assets 30,939 36,992 41,814*
Assets held for sale 10,832 266,291 11,033*
Total Assets 15,577,929 15,635,918 14,732,244*

Liabilities and Equity

Due to banks 2,814,571 3,369,298 4,472,042
Derivative financial liabilities - 1,714 4,248
Due to customers 9,913,328 9,440,296 7,918,486
Other borrowed funds 232,422 232,791 6,076
Subordinated debt 724,167 723,978 705,540
Provisions 20,763 13,627 18,638
Deferred tax liabilities - 1,346 708*
Other liabilities 163,478 88,658 55,597

190
Total liabilities 13,868,729 13,871,708 13,181,335*
Share capital 983,145 983,145 983,145
Reserve 149,518 152,208 140,803
Retained earnings 576,537 628,857 426,961*
Shareholders’ equity 1,709,200 1,764,210 1,550,909*
Total Liabilities and Equity 15,577,929 15,635,918 14,732,244*
Source: The Issuer’s financial statements for the year ended 31 December 2017, separate financial statements for the year ended 31 December 2016
and the interim financial statements for the six months ended 30 June 2018
*Figures extracted from the Issuer’s separate financial statements for the year ended 31 December 2016 as restated and presented in the Issuer’s
financial statements for the year ended 31 December 2017

Statement of Cash Flows

30 June 2018 30 June 2017 31 December 2017 31 December 2016

(RON thousands) (RON thousands) (RON thousands) (RON thousands)
unaudited unaudited Extracted from audited Annual Financial
Statements
Cash flow from operating activities
Profit/(loss) before taxation 64,915 81,670 256,409 121,672*
Adjustments:
Net impairment loss on financial assets 8,716 (1,421) (32,116) 91,504
Dividend and similar income (1,003) (852) (886) (3,035)
Depreciation and amortisation 9,358 8,398 17,090 15,773
Fixed assets written-off and impairment 19 - 952 1,964
Loss/(Gain) from transactions of equity investments - (791) - (5,327)
Loss/(Gain) from sales of tangible assets - - - (127)
Loss/(Gain) from sales of assets recovered from 597 - (172) (23)
customers
Share of loss in associates 190 15 150 216*
Other adjustments (9,634) (31,070) 49,014 6,110
Operating profit before changes in operating assets 73,158 55,949 290,441 228,727
and liabilities
Changes in operating assets
Decrease/(increase) in amounts due from other banks 232,983 (45) (237,393) 1,078
Decrease/(increase) in loans and advances to (121,968) (329,942) (858,293) (22,546)
customers
Decrease/(increase) in other assets 260,670 (17,283) 6,689 (1,664)
Total changes in operating assets 371,685 (347,270) (1,088,997) (23,132)
Changes in operating liabilities
(Decrease)/increase in amounts due to banks (554,727) (284,379) (1,102,708) (2,026,500)
(Decrease)/increase in amounts due to customers 472,435 356,971 1,518,159 1,621,318
(Decrease)/increase in other liabilities 22,555 37,285 (12,715) 13,782
Total changes in operating liabilities (59,737) 109,877 402,736 (391,400)*
Net cash from operations 385,106 (181,444) (395,820) (185,805)*
Income tax paid (34,691) - - (8,565)
Net cash flows from operating activities 350,415 (181,444) (395,820) (194,370)*
Cash flow from investing activities
Purchase of property and equipment and intangibles (12,220) (5,832) (23,757) (11,393)

191
 30 June 2018 30 June 2017 31 December 2017 31 December 2016
(RON thousands) (RON thousands) (RON thousands) (RON thousands)
unaudited unaudited Extracted from audited Annual Financial
Statements
Proceeds from sale of property and equipment - - - 127
Proceeds from sale/maturities of AFS securities 877,976 1,183,807 1,887,302 2,011,635
Purchase of AFS securities (627,632) (1,152,117) (1,959,296) (2,012,686)
Proceeds from sale of equity investments - - - 52,707
Purchase of equity investments - - - (1,125)
Dividends received 1,003 852 886 3,035
Net cash flows from investing activities 239,127 26,710 (94,865) 42,300
Cash flow from financing activities
Finance lease repayments (38) (73) (150) (151)
Other borrowed funds (673) 89,026 228,378 (1,353)*
Subordinated loan - 34 - 15
Net cash flows from financing activities (711) 88,987 228,228 (1,489)*
Net increase/(decrease) in cash and cash equivalents 588,831 (65,747) (262,457) (153,559)
Cash and cash equivalents at 1 January 2,704,514 2,966,971 2,966,971 3,120,530
Cash and cash equivalents at 30 June 3,293,345 2,901,224 - -
Cash and cash equivalents at 31 December - - 2,704,514 2,966,971
Interest received 269,365 208,520 523,334 489,579
Interest paid 55,599 43,468 85,718 87,486
Source: The Issuer’s financial statements for the year ended 31 December 2017, separate financial statements for the year ended 31 December 2016
and the interim financial statements for the six months ended 30 June 2018
*Figures extracted from the Issuer’s separate financial statements for the year ended 31 December 2016 as restated and presented in the Issuer’s
financial statements for the year ended 31 December 2017

Following the application of the equity method for accounting the participation in Alpha Finance Romania
S.A. as applicable from 2017, in respect of comparative information for the period ended 31 December 2016
the following items from the statement of financial position and income statement as of 31 December 2016
have been reclassified and adjusted:

(RON thousands) Amount previously reported Reclassification Adjustment Restated amount – Financial
– Separate Financial statements
Statements 31 December 31 December 2016
2016
Available-for-sale securities 1,253,738 (1,182) - 1,252,556
Investments in associates – 1,182 (216) 966
Deferred tax liabilities 743 – (35) 708
Retained earnings 427,142 – (181) 426,961
Share from loss of associates – – (216) (216)
Income tax expense (7,329) – 35 (7,294)
Source: The Issuer’s financial statements for the year ended 31 December 2017

Statutory auditors

The financial statements of the Issuer have been audited for the year ended 31 December 2016 by KPMG
Audit S.R.L. (KPMG), headquartered in Victoria Business Park DN1, 69-71 Sos. Bucuresti-Ploiesti, Sector
1, Bucharest, 013685, Romania, P.O. Box 18-191.

The financial statements of the Issuer have been audited for the year ended 31 December 2017 by Deloitte
Audit S.R.L. (Deloitte), headquartered in 4-8 Sos. Nicolae Titulescu, East Entrance, 2nd Floor – Deloitte
area and 3rd Floor, Bucharest, 011141, Romania.

192
The interim financial statements of the Issuer for the six month periods ended 30 June 2018 included in the
Base Prospectus, have not been audited or reviewed. The auditors have no material interest in the Issuer.

KPMG’s report on the 31 December 2016 statutory separate financial statements was not qualified.

Deloitte’s report on the 31 December 2017 statutory financial statements was not qualified.

193
 OVERVIEW OF THE BANKING SERVICES SECTOR IN ROMANIA

The Romanian banking system has gone through a consolidation process during the recent years, marked by
portfolio purchases in targeted business segments, as well as merger and acquisition deals involving credit
institutions.

Over the past few years, the number of banks in Romania gradually declined from 43 registered banks in
2009 to 34 (seven of which are foreign bank branches) as of 31 December 2018 (Source: NBR statistics).

The market share of foreign-owned credit institutions (including branches of foreign credit institutions)
decreased to 75%, by reference to total assets at 31 December 2018 in comparison to 77% at 31 December
2017 and 91.3% at 31 December 2016 on the background of the mergers and acquisitions in the Romanian
banking sector. The main countries of origin of the foreign credit institutions owning share capital in
Romanian banks are currently Austria, Greece and France (Source: NBR Annual Report 2017, NBR
statistics).

In addition, credit institutions from other EU Member States can provide services in Romania on a
cross-border basis without establishing a presence in Romania. As of the date of this Base Prospectus, a total
number of 297 credit institutions from other EU Member States had notified the NBR of their intention to
provide services in Romania on a cross-border basis (Source: Public Registers available on the NBR
website).

According to the data published by the NBR, the aggregate assets of the banking sector totalled RON 486
billion at December 2018, making up 51.7% of the provisional GDP (Source: National Institute of Statistics
INSSE, NBR statistics).

Romania has been experiencing positive, single-digit loan growth beginning in 2016 as total loans to
residents increased by 6.2% compound annual growth rate from December 2016 to December 2018. Lending
to the private sector (households and non-financial companies) prevails, with a share of 93.7% in total loans
to residents, the majority of which are RON denominated (6.3% at December 2018). RON-denominated
loans to the private sector (households and non-financial companies) registered two-digit annual growth rates
in recent years, namely an increase of 15.9% at 31 December 2017 in comparison to the level of RON-
denominated loans as at 31 December 2016 and a 13.7% growth rate as at 31 December 2018 compared to
31 December 2017.

Funding of the banking sector relies on financing sources from the domestic market with the stock of
residents’ deposits experiencing a steady upward trend reaching almost 68% of total liabilities at December
2018. Both main categories of depositors, i.e. households and corporations, had a favourable contribution to
deposit expansion, in particular to the local currency (LCY) component. (Source: NBR statistics)

These developments consolidated the downward trend of the loan-to-deposit ratio related to the private
sector that reached almost 75.9% as at 31 December 2018 (Source: NBR statistics).

194
 2016 2017 2018
Number of banks 37 35 34
Total assets (RON mn) 429,026.7 460,018.6 486,135.4
in % of GDP 56.3% 53.7% 51.7%
Total loans (RON mn) 291,341.5 321,356.6 340,202.7
Total loans to private sector - households
220,100.6 232,603.3 250,317.1
and non-financial corporations (RON mn)
% of total loans to residents 95.5% 96.2% 96.2%
Mortgage loans (RON mn) 58,445.6 66,155.4 73,484.2
growth in % yoy 12.5% 13.2% 11.1%
Loans to private sector in LCY (RON mn) 122,573.3 142,035.2 161,465.2
% of total loans to private sector 55.7% 61.1% 64.5%
growth in % yoy 14.6% 15.9% 13.7%
Total deposits (RON mn) 393,101.7 411,435.4 431,880.8
Loan-to-deposit ratio (private sector) 80.3% 76.9% 75.9%
Return on Assets – ROA 1.1% 1.3% 1.6%
Return on Equity – ROE 10.4% 12.5% 14.9%
Source:NBR

The quality of bank assets has improved in past years due to the progress made in balance sheet clean up.
Once the highest in the Central and Eastern Europe (CEE) region, Romania’s NPL ratio (based on EBA
definition) has declined sharply from 20.7% in December 2014 to 5.6% as at 30 September 2018 The level is
below the EBA’s red threshold (8%) but still higher than the EU average (3.4% in September 2018).
According to the NBR, the NPL coverage ratio stands at an adequate level, i.e. 57.5% in September 2018
(Source: NBR Financial Stability Report December 2018, EBA Interactive Dashboard Q3 2018).

25% 100% 50%

NPL ratio
20% 90% 40%
EBA threshold

15% 80% 30%

10% 70% 20%

5% 60% 10% 8%

0% 50% 0%
ES

LT

LV

LU
MT

BE

CZ
CY

BG
SI*

RO

AT

NL
DE
GR

HU
HR

DK

NO

GB
PT
IT

IE

PL

SK
FR

EE*

FI
SE

Dec-14 Dec-15 Dec-16 Dec-17 Sep-18

NPL ratio Restructured loans ratio NPL coverage by provisions (rha)

Source: NBR, EBA

Romania distinguishes itself among EU Member States through the significant efforts undertaken in order to
lower its NPL ratio. From 2015 to 2017, sales of non-performing loans in Romania amounted to EUR 8.5
billion, while for the first half of 2018, NPL sales were estimated at around EUR 1.01 billion in Romania
(Source: The NBR Financial Stability Report June 2018, The NBR Financial Stability Report December
2018).

The balance sheet clean-up efforts also paid off in terms of the profitability of the Romanian banking sector,
which returned to positive territory in 2015 on the back of the reduction in net impairment charges on loans
after a maximum recorded during 2014. Profitability was also driven by an increase in operating profit amid
low funding costs, a favourable domestic macroeconomic environment and recovery of LCY lending.
According to the NBR, ROE levels recorded in 2016 and 2017 were 10.4% and 12.5%, respectively, and

195
improved further to 14.9% at 31 December 2018. In terms of operating efficiency, the aggregate level of
cost-to-income ratio of the Romanian banking sector was (53.7% at September 2018). (Source: NBR
statistics)

According to the NBR, capital adequacy indicators are at an adequate level, which helps ensure a good
capacity to absorb unexpected losses and to further sustain lending. The average level of solvency indicators
(total capital ratio of 19.97%, Tier 1 capital ratio of 17.83% at the end of September 2018) places Romania’s
banking sector in the lowest risk bucket defined by the European Banking Authority (Source: The NBR
Financial Stability Report December 2018).

Romania
2016 2017 Sept 2018
Total capital ratio 19.7% 20.0% 20.0%
Tier 1 CAR 17.6% 18.0% 17.8%
Leverage ratio 8.9% 8.9% 8.8%
Source: The NBR Financial Stability Report December 2018

196
 THE MORTGAGE AND HOUSING MARKET IN ROMANIA

Romanian Mortgage Market

The housing and mortgage market

The Romanian mortgage market is relatively young, taking into account that the first mortgage loan was
granted in 2001. Since then, the market has been continuously growing by a double digit growth rate, even
post the 2008 crisis. Despite the high growth rate of the mortgage market, Romania remains with the lowest
amount of total outstanding residential loans to GDP in the EU (7.6% vs. 45.7% in EU28, as of the end of
2017, according to European Mortgage Federation, Hypostat 2018).

As of December 2018, the total market outstanding reached EUR 15.78 billion and the total number of active
loans (according to the Credit Bureau) was446,860.

The total mortgage portfolio represents 55% of the total individuals’ loans at 31 December 2018. In terms of
structure by currency, 66% is represented by local currency loans while 34% are FX loans (mainly EUR-
denominated loans).

Regarding non-performing loans, the mortgage loans have the lowest NPL rate among the other types of
loans, without taking into account the clean-up actions registered in the market over the last years, especially
for unsecured loans. By September 2018, the NPL rate for mortgage loans was 2.82%.

The residential sector

Romania has a total dwellings stock of 8.98 million, out of which 4.9 million are located in urban areas and
4.08 million in rural areas. The ownership occupation rate is the highest in Europe – 96.9% compared with
66.4% across Europe, according to EMF (Hypostat 2018). This is a characteristic for the East-European
countries, the population having access to buy their homes after the end of communism, in very attractive
pricing conditions.

Even if after the 2008-2009 crisis the property prices suffered a significant decrease, a growing trend has
been registered starting with 2015. In the first three quarters of 2018, the price of residential properties
increased by ~5% compared with end of 2017.

Source: National Institute of Statistics INSSE (www.insse.ro )

197
Mortgage lending process and characteristics

In Romania, generally credit institutions can originate mortgage loans, with marginal input from non-
banking financial institutions. The products available in the market can be split into the following categories:

 Standard mortgage loans, with floating or fixed interest rates, granted for the acquisition or
construction, refurbishment of a real estate, for a plot of land acquisition or a balance transfer from
one bank to another, granted on a maximum 30-35 years; or

 Prima Casa (First House) loans, granted in accordance with Romanian Government Programme for
real estate market stimulation. The programme was launched in 2009. The loans are secured with
state guarantee for 40% or 50% of the principal outstanding. The government guaranteed loans for
first home buyers (Prima Casa) supporting significantly the expansion of housing loans. The low
down payment required (5% of the principal to the extent it is below the ceiling set under the law),
the reduced credit costs (no analysis fee, reduced margins) and the ceiling on the price of the house
which could be acquired maintained the affordability of house acquisitions. The stock of house loans
guaranteed by the state in total housing loans reached around 60% by the end of 2017.

The service providers involved in the mortgage lending process are:

 Credit Bureau – aims to support the participants to the banking system by providing them real,
updated, aggregated and consistent information regarding individuals who have outstanding loans
with banks or financial companies, have purchased an asset via leasing or have been insured against
default risk with an insurer. The Credit Bureau is a joint stock company having 21 banks as its
shareholders.

The Credit Bureau has been operational since August 2004 and, currently, manages negative and positive
data and data regarding fraudulent customers and irregularities, coming from banks and non-banking
financial institutions. The business of the Credit Bureau includes:

 collecting/processing data on customer portfolios – individual customers;

 information and analysis offered to participants in order to identify and measure credit risk,
better quality loans, fraud risk mitigation and loan protection;

 establishing uniform criteria for scoring; and

 financial and banking consulting.

Fiscal Authority (ANAF data base) – starting with 2015, banks can choose to interrogate the Fiscal
Authority data base in order to check the income cashed by a client. This step simplified the origination
workflow, by eliminating the documents required to the client by prove his monthly income. The information
is extracted based on live interrogation, so also the time-to-answer has been significantly reduced.

 Authorised valuators – the property valuation is performed mainly through external partners of the
bank, accredited valuators, members of The National Association of Authorised Romanian Valuators
(ANEVAR), based on standards imposed by ANEVAR.

 Insurance companies – for all the mortgage loans granted, the banks require the property insurance
to cover all the risks for the mortgaged property. The client has the right to choose the insurance
company.

 Notaries – involved in property-related transactions, drafting and authenticating the deeds and the
mortgage contracts, registering the property and the mortgage rights with the Land Book.

198
 Land Book – a public institution tasked with the role of keeping evidence of all properties, property
rights and liens upon the property.

The origination process is performed mainly through the banks’ units. Third parties can be involved as well
as real estate agencies, developers and brokers (credit intermediaries).

The surveillance and control are ensured by the NBR and partially by the National Authority for Consumer
Protection (ANPC).

Regulatory framework regarding mortgage loans

The legal framework regarding mortgage loans comprises both primary legislation (of general or special
application) enacted by the Romanian Parliament or Government as well as secondary regulations issued by
relevant supervisory authorities, such as the National Bank of Romania, among which are the following:

NBR Credit Regulation No. 17/2012

NBR Credit Regulation No. 17/2012 defines the main principles to be incorporated in the credit policy of the
bank when assessing the clients, creditworthiness and the credit categories that can be granted to individuals.
In addition, it sets forth certain thresholds and methodologies to be applied, with respect to maximum loan-
to-value (currently a maximum of 85% for loans denominated in RON and 75% for loans denominated in
EUR) that can be applied in the case of mortgage secured loans and the methodology for debt-service-to-
income (DSTI) computation. Following the amendments made to NBR Credit Regulation No. 17/2012 in
November 2018 by NBR Regulation No. 6/2018, which came into effect from 1 January 2019, the maximum
DSTI threshold has been lowered to 40% for RON-denominated loans (for first home buyers to 45%) and for
loans granted in EUR to 20% (for first home buyers to 25%). Such thresholds are not applicable to loans
granted exclusively for refinancing credit exposures originated before NBR Regulation No. 6/2018 amending
NBR Regulation No. 17/2012 enters into force.

Government Emergency Ordinance No. 50/2010

Government Emergency Ordinance No. 50/2010 (GEO 50/2010) is in force since 21 June 2010 and
transposed the EU Directive 2008/48/CE on credit agreements for consumers and repealed Council Directive
87/102/EEC. It focuses on all types of credit facilities: mortgage loans (other than those covered under GEO
52/2016), consumer loans, credit cards, overdrafts, as well as new and existing portfolios. GEO 50/2010 does
not apply to “Prima Casa” loans.

The main provisions of GEO 50/2010 refer to the linking of all the base rates to public indices, limitation of
the commissions to be paid by the client in relation to the credit contract, and sets forth standard
pre/contractual information and notifications.

Government Emergency Ordinance No. 52/2016

Government Emergency Ordinance No. 52/2016 (GEO 52/2016) is in force since 30 September 2016 and
transposed the EU Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014
on credit agreements for consumers relating to residential immovable property and amending Directives
2008/48/EC and 2013/36/EU and Regulation (EU) No. 1093/2010.

GEO 52/2016 regards only mortgage loans and other loans linked to a mortgage and applies only for new
loans granted starting with 30 September 2016. The main add-on versus Government Ordinance No. 50/2010
was that it imposes new regulations for credit intermediaries. GEO 52/2016 does not apply to “Prima Casa”
loans.

199
Law No. 77/2016

In May 2016, Law No. 77/2016 on discharge of real estate mortgage-backed debts through transfer of title
over immovable property entered into force, allowing mortgage debtors which fall under the “consumer”
category to obtain a write-off on their unpaid loans secured with a real estate mortgage right, by transferring
the mortgaged immovable asset to the lending bank. The law applies to loan financed amounts of up to the
RON equivalent of EUR 250,000 granted for acquisition/construction/refurbishment of a residential property
or consumer loans secured by mortgage over residential properties. Moreover, the debtor must not be
convicted for illegal actions in relation to the mortgage secured loan.

The Constitutional Court reviewed the law for several constitutional issues and through Decision No. 623
dated 25 October 2016 and published in the Official Gazette No. 53 of 18 January 2017 ruled that a debtor
could benefit from the provisions of the law only in the context of hardship and provided that a court decides
that there are real reasons to apply the non-recourse law. The law does not apply to Prima Casa loans.

200
 REGULATION AND SUPERVISION OF BANKS IN ROMANIA

Regulatory environment

Government Emergency Ordinance No. 99/2006 on credit institutions and capital adequacy, as amended to
the date of this Base Prospectus (the Romanian Banking Act), sets out the regulatory framework for all
types of credit institutions (banks, state supported savings and lending systems in the Romanian housing
field, credit co-operatives, mortgage loan banks). Law No. 312/2004 regarding the Statute of the NBR,
Emergency Government Ordinance No. 113/2009 on payment services, the Romanian Insolvency Law, Law
No. 312/2015 on recovery and resolution of credit institutions and investment firms and for amending and
supplementing certain normative acts relating to financial matters, NBR Regulation No. 4/2005 on the
foreign exchange regime as subsequently amended, and NBR Regulation No. 5/2013 on prudential
requirements for credit institutions are other significant legal acts of the Romanian banking regulatory
framework.

In addition, European Union regulations are binding in their entirety and directly applicable in Romania, as
an European Union member state. Therefore, national transposition measures are not required but Member
States must however take all the necessary steps to ensure that the regulations are actually applied in their
national law. Among such regulations, the Capital Requirements Regulation, together with Directive No.
2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions
and investment firms (CRD IV), as implemented under Romanian law, is of high importance.

Supervision of the Romanian banking sector

The main regulator in the banking sector is the National Bank of Romania, which is the Romanian central
bank. The NBR exercises licensing and prudential oversight and issues regulations in the banking sector. The
NBR’s objectives are also to ensure and maintain price stability, and define and implement monetary policy
and the exchange rate policy.

Romanian credit institutions are organised as joint stock companies and must be licensed by the NBR. In
addition, prior approval from the NBR is required in case of mergers between two or more credit institutions.
The prior written approval of the NBR is also mandatory in the case of changes occurring within credit
institutions related, inter alia, to: supplementing the object of activity, the persons nominated to discharge
managerial responsibilities, the financial auditors, setting up a subsidiary in third countries or expanding a
network of subsidiaries within Romania (if the NBR imposed limitations in this respect on a credit institution
due to risk management deficiencies or the inappropriate evolution of banking prudential indicators in
relation to the credit institution). Any changes related, among others, to a credit institution’s registered
office, name, and increase and, in certain circumstances, decrease in share capital must be notified to the
NBR.

Provision of banking services in Romania by EU and EEA credit institutions

EU and EEA credit institutions can provide services into Romania on a professional basis by establishing a
branch or providing the services directly. Thus, Romanian branches of credit institutions established in other
EU Member States may operate in Romania on the basis of a notification sent to the NBR by the home
Member State supervisory authority and by registering the local branch with the Romanian Trade Registry.
Credit institutions authorised and supervised in another EU or EEA Member State may provide services in
Romania also directly and immediately, without the establishment of a local presence, on the basis of a
notification sent to the NBR by their home supervisory authority.

The NBR monitors compliance with the Romanian Banking Act and with the regulations applicable to
Romanian credit institutions. To this end, the NBR performs prudential supervision of credit institutions

201
based on, inter alia, reports sent by the latter on a periodical basis. These reports reflect the activities carried
out by credit institutions and their observance of the regulations in force.

Regulatory capital and liquidity

Capital adequacy

Romanian banking regulations closely follow EU legislation in the field, without national exceptions or
carve outs.

In terms of regulatory capital and liquidity requirements starting from 1 January 2014, the Capital
Requirements Regulation became directly applicable in Romania, and the national execution measures
implementing CRD IV entered into force.

Romanian legislation requires a minimum level of the initial capital of credit institutions. At the time of their
authorisation, Romanian banks and local branches of foreign banks must hold an initial capital of RON 37
million.

The CRR requires credit institutions to have set aside enough capital to cover unexpected losses and keep an
adequate solvency level in a crisis. As a main principle, the amount of capital required depends on the risk
attached to the assets of a particular credit institution. This is referred to as the ‘own funds requirement’ and
is expressed as a percentage of risk-weighted assets. In other words, the riskier the assets, the more capital
the credit institution has to set aside.

The own funds consist of the following:

(a) Tier 1 capital which consists of the sum of the following:

 CET 1 capital made up of capital instruments (under the conditions laid down in Article 28
or 29 of the CRR, as applicable), share premium accounts, retained earnings, accumulated
other comprehensive income, other reserves, funds for general banking risk after application
of some adjustments and deductions; and

 Additional Tier 1 capital which consists of capital instruments, under the conditions laid
down in Article 52(1) of the CRR and share premium accounts related to the instruments
referred to in this bullet after application of adjustments.

(b) Tier 2 capital, which includes capital instruments and subordinated loans under the conditions laid
down in Article 63 of the CRR, the share premium accounts related to instruments referred to in this
bullet and some adjustments depending on the method of calculating risk-weighted exposure
amounts.

A total amount of capital that credit institutions and investment firms are required to hold should be equal to
at least 8% of risk-weighted assets. The share that has to be of the highest quality capital – CET 1 – should
make up 4.5% of risk-weighted assets (up to December 2014 – between 4% and 4.5%).

Liquidity requirements

Basel III has introduced two new liquidity ratios: the Liquidity Coverage Ratio (LCR) and the Net Stable
Funding Ratio (NSFR). They are monitored by EBA from the beginning of 2012 on a quarterly basis, but
since 2013 LCR has been switched to monthly monitoring. LCR and NSFR are reported on both stand-alone
(individual) and consolidated levels. By imposing limits to the LCR indicator, EBA ensures that a credit
institution maintains an adequate level of high quality liquid assets that can be converted into cash to meet its
liquidity needs for a 30 calendar day time horizon under a liquidity pre-specified stress scenario. The limit

202
regarding the liquidity coverage ratio – unencumbered high quality assets against net cash outflows over a
30-day stress period – has been phased in gradually, starting at 60% in 2015 and reaching 100% in 2018.

NSFR focuses on the long-term funding and serves to define the minimum acceptable amount of stable
funding, based on the credit institution’s liquidity characteristics of assets and activities over a one year time
horizon.

Additionally to EBA requirements, the NBR requires the calculation and monitoring of a monthly liquidity
indicator reported to the NBR according to NBR Regulation No. 25/2011 and NBR Order No. 22/2011. The
level of the liquidity indicator is calculated as a ratio between effective liquidity (on-balance sheet assets,
off-balance sheet received commitments and amounts to be received related to derivatives) and the necessary
liquidity (on-balance sheet liabilities, off-balance sheet given commitments and amounts to be paid related to
derivatives) for a predefined set of maturity bands. The indicator is calculated and reported per significant
currencies (i.e. RON, EUR) and per total currencies and has a minimum regulatory limit of 1 for the maturity
bands of less than one month, between one and three months, between three and six months and between six
and 12 months.

Leverage

The leverage ratio is an additional prudential measure to enhance financial stability by determining capital
requirements on the basis of non-risk-weighted assets so as to prevent the building up of excessive leverage
during economic upswings and to act as a backstop to internal model-based capital requirements.

Pursuant to the CRR, “leverage” means the relative size of an institution’s assets, off-balance sheet
obligations and contingent obligations to pay or to deliver or to provide collateral, including obligations from
received funding, made commitments, derivatives or repurchase agreements, but excluding obligations
which can only be enforced during the liquidation of an institution, compared to that institution’s own funds.

Reporting and calculating the leverage ratio is done in accordance with the provisions of CRR (including
relevant implementing regulations) and NBR Regulation 5/2013.

Capital buffers

In addition to the mandatory CET 1 capital requirement set out in the CRR, all credit institutions are required
to hold certain capital buffers to ensure that they accumulate a sufficient capital base in prosperous times to
enable them to absorb losses in the event of a crisis.

Capital conservation buffer

Credit institutions have to hold a capital conservation buffer in order to preserve its capital. If a credit
institution does not comply with this buffer, it will have to limit or stop payments of dividends or bonuses.

The capital conservation buffer for Romanian credit institutions is implemented gradually during 1 January
2016-31 December 2018 as follows:

 0.625% of total risk exposure during 1 January 2016-31 December 2016;

 1.25% of total risk exposure during 1 January 2017-31 December 2017;

 1.875% of total risk exposure during 1 January 2018-31 December 2018; and

 2.5% of total risk exposure starting with 1 January 2019.

203
Countercyclical capital buffer

The countercyclical capital buffer is a prudential tool introduced by the Basel III agreement to counteract the
effects of the economic cycle on credit institutions’ lending activity. It requires a credit institution to have an
additional amount of capital (CET 1) in good times, when credit growth is strong, so that when the economic
cycle turns, and economic activity slows down or even contracts, this buffer can be released to allow the
credit institution to keep lending to the real economy.

The countercyclical capital buffer can vary between 0% and 2.5%, calibrated in steps of 0.25 percentage
points or multiples of 0.25 percentage points. Starting with 1 January 2016, the countercyclical capital buffer
for credit institutions that have exposures from loans granted in Romania is 0% from total risk exposure.

Other systemically important institutions (O-SII) buffer

CRD IV provides for a buffer to apply to domestically important institutions as well as institutions of EU
importance.

From 1 January 2018, Romanian credit institutions identified as O-SII by the NBR (including the Issuer)
must maintain at individual, sub-consolidated or consolidated level, as the case may be, an O-SII capital
buffer of 1% of total risk exposure. According to CRD IV, the competent authority can request the relevant
credit institutions to maintain an O-SII buffer of up to 2% of total risk exposure; however, further to a recent
change in the Romanian legislation implementing CRD IV into national law, the 2% threshold has been
eliminated, which would allow the NBR, if it so decided, to require a higher buffer.

Systemic risk buffer

Member states have the right to require credit institutions to hold a systemic risk buffer of CET 1
capital. The requirement may be applied to the entire financial sector or its separate parts. The aim is to
prevent and mitigate long-term non-cyclical systemic or macro-prudential risks which may have serious
negative consequences for the real economy. Currently, in Romania, this buffer applies to only a few credit
institutions nominated by the NBR which fulfil the requirements set under NBR Regulation No. 5/2013 and
NBR Order No. 4/2018.

Large exposures

The so-called “large exposures” are the exposures of an institution to a single client or a group of connected
clients, representing more than 10% of its eligible capital (therefore “large” compared to an institution’s
overall capital resources). According to the CRR, a large exposure cannot exceed 25% of the institution’s
eligible capital (or EUR 150 million, whichever is higher, in respect of such institution). The purpose of this
limit is to protect institutions from significant losses caused by the sudden default of an individual
counterparty or a group of connected counterparties.

Minimum Reserves Requirement (MRR)

All Romanian credit institutions, including branches of foreign credit institutions, are obliged to maintain in
accounts opened with the NBR amounts of cash denominated in RON or in foreign currency as minimum
reserves. The minimum reserve requirements imposed by the NBR and the interest rates for the deposits
placed as reserves are an important tool for implementing the NBR’s monetary policy, as it allows the central
bank to influence the volume and structure of banking liabilities. While the main function of RON-
denominated reserve requirements is the monetary control and stabilisation of interbank money market rates,
the function of foreign currency-denominated reserve requirements is to moderate the expansion of foreign
exchange loans.

204
The amounts of the minimum reserves which must be maintained by credit institutions during the reserves
maintenance period are computed as the average daily balances of either RON and foreign currency
denominated liabilities from credit institutions’ balance sheets (except interbank liabilities with Romanian
credit institutions, obligations to the NBR and own capital) during the reserves observation period multiplied
with the applicable minimum mandatory reserves ratio (evidenced in the table below as at the date of this
Base Prospectus). The observance period and the maintenance period are one month long and successive (the
observance period lasts from the 24th of the previous month to the 23rd of the current month, while the
maintenance period lasts from the 24th of the current month to the 23rd of the subsequent month).

Reserve requirements ratios can be different in terms of currency and residual maturities of the items
included in the reserve base (shorter or longer than two years).

Reserve ratio (%)

Reserve base
RON FCY
Liabilities with residual maturity shorter than two years from the end of the 8 8
observance period
Liabilities with residual maturity longer with clauses referring to early 8 8
than two years from the end of the withdrawal, repayment, transfer
observance period
without clauses referring to early 0 0
withdrawal, repayment, transfer
Non-repayable loans 0 0
Source: NBR

The NBR pays interest for deposits placed as minimum reserves. No interest is paid by the NBR for amounts
placed with the NBR during the reserves maintenance period which exceed the minimum reserves amounts
computed during the reserves observation period.

Bank Deposit Guarantee Fund (FGDB)

In Romania, credit institutions which are authorised by the NBR to collect deposits from the public are
required to participate in a deposit guarantee scheme. The Bank Deposit Guarantee Fund is recognised as a
statutory deposit guarantee scheme. If a credit institution is not capable to repay a deposit, for reasons
directly related to its financial standing, or becomes subject to bankruptcy proceedings, FGDB will
reimburse each of that credit institution’s customers up to the RON equivalent of EUR 100,000.

FGDB also administers the bank resolution fund and may operate as special administrator, temporary
administrator, sole liquidator, court-appointed liquidator or shareholder of a bridge institution or of an asset
management vehicle, according to the legislation on the recovery and resolution of credit institutions and
investment firms.

Although the guarantee threshold per guaranteed depositor per credit institution is set at the RON equivalent
of EUR 100,000, a temporarily higher coverage limit was set for several categories of natural persons’
deposits. These categories include deposits resulting from:

 Residential real estate transactions;

 the retirement, dismissal, invalidity or death of the depositor; or

 Receipt of insurance benefits or compensation for criminal injuries or wrongful convictions.

205
Participations in credit institutions

Changes of shareholding of credit institutions follow Directive 2007/44/EC amending Council Directive
92/49/EEC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural
rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the
financial sector, which Romania has implemented. The acquisition (whether directly or indirectly) of a
qualifying holding in a Romanian credit institution (i.e., 10% of its share capital or voting rights), or of
participations which would lead to the increase of the qualifying holding over 20%, 33% or 50% of the share
capital or voting rights of that credit institution or in such a way that the credit institution becomes a
subsidiary of the acquirer must be approved by the NBR. Similarly, the NBR must be notified in advance by
any shareholder intending to dispose of its qualifying holding or to reduce its qualifying holding in the
Romanian credit institution leading to its voting rights or quota in the share capital to fall below the
following thresholds: 50%, 33% or 20% or to the credit institution no longer being a subsidiary of the
disposing shareholder.

The proposed acquirer is evaluated by the NBR taking into account the following cumulative criteria: the
reputation of the proposed acquirer, its integrity and professional capacity; the reputation, knowledge, skills
and experience of the persons which shall be appointed as directors/managers following the acquisition; the
financial solidity of the proposed acquirer, the ability of the Romanian credit institution to comply with the
capital adequacy rules (in particular as regards the requirement that the group of the credit institution has in
place a structure allowing for an efficient supervision, efficient exchange of information between competent
authorities and sharing responsibilities between such authorities), and whether there are reasonable grounds
to suspect that in relation to the proposed acquisition a criminal offence was committed related to money
laundering and terrorism financing risks.

A less stringent notification regime is available if the NBR already possesses the necessary information or
may obtain it from another supervisory authority. If the proposed acquirer is a regulated entity from a state
other than an EU member state, the NBR may collaborate with the supervisory authority if the following
conditions are met: the supervisory regime of the respective state is considered similar by the NBR, there are
no laws, regulations or administrative measures of the respective state which would impede the exchange of
information, and the supervisory authority from the respective state agreed to conclude an agreement with
the NBR with respect to the exchange of information.

The voting rights of the prospective or current significant shareholder are automatically suspended if it fails
to comply with these notification requirements or if the NBR objects to the transaction.

If the provisions on the notification requirements are not observed (or upon the NBR’s opposition to the
relevant acquisition), the person that acquired shares or voting rights in excess of the aforementioned
thresholds must sell its participation within three months as of the NBR’s opposition. If the acquirer does not
comply, the NBR may instruct the respective credit institution to cancel the relevant shares and further
dispose the issuance of shares in replacement of the cancelled ones or the decrease of the credit institution’s
share capital.

Shareholdings in non-financial entities

Any qualifying holding held directly or indirectly by a credit institution in shares or other equities in entities
other than credit institutions may not exceed 15% of the credit institution’s eligible capital. The total value of
a credit institution’s qualifying holding in non-financial entities may not exceed 60% of the credit
institution’s eligible capital. Credit institutions are generally not allowed to hold participations granting
control over non-financial entities.

In order to facilitate the performance of financial reconstruction or rescue operations of non-financial entities
by means of debt-to-equity swap operations, the NBR adopted a regulation which, provided that several

206
prudential requirements are met, allows derogations from the aforementioned limitations on holdings in non-
financial entities. The net value (after impairment adjustment) of shares temporarily held is fully deducted
from the credit institution’s Tier 1 capital. Credit institutions are allowed to hold such shares resulting from a
financial assistance or restructuring operation for a maximum period of 36 months (which may be extended
only one time to 48 months, based on justified reasons, by the Supervision Division of the NBR).

Recovery and resolution

Banking resolution is the process of restructuring a credit institution in order to ensure the continuity of the
critical function of the credit institution, to restore its viability, wholly or partially, and to liquidate the
residual part under normal insolvency proceedings. The NBR is the resolution authority for the banking
sector and has responsibilities regarding planning and carrying out of resolution actions.

In order to ensure the efficiency of potential resolution actions, the NBR prepares resolution plans for credit
institutions, which include measures that could be taken, if need be, in accordance with the established
resolution strategy. The resolution plan contains, mainly, the following elements: a demonstration of how
critical functions could be maintained, identification of major impediments related to the assessment of
resolvability and measures to remove them, different resolution strategies that could be applied,
arrangements for financing the resolution tools, minimum requirements of own funds and eligible liabilities,
options for preserving access to payment services, and an estimation of the timeframe for executing each
material aspect of the plan.

The NBR carries out resolution actions only in case three cumulative conditions have been fulfilled:

 the credit institution encounters or is likely to encounter a major difficulty;

 having regard to timing and other relevant circumstances, there is no reasonable prospect that any
alternative private sector measures, taken in respect of the institution, would prevent the major
difficulty status of the credit institution within a reasonable timeframe; and

 the resolution action is necessary in the public interest.

A credit institution shall be deemed to encounter or to be likely to encounter a major difficulty in one or
more of the following circumstances:

(a) the institution infringes or there are objective elements to support a determination that the institution
will, in the near future, infringe the requirements for continuing authorisation in a way that would
justify the withdrawal of the authorisation by the NBR including but not limited to because the
institution has incurred or is likely to incur losses that will deplete all or a significant amount of its
own funds;

(b) the assets of the credit institution are or there are objective elements to support a determination that
the assets of the institution will, in the near future, be less than its liabilities;

(c) the institution is or there are objective elements to support a determination by the NBR that the
institution will, in the near future, be unable to pay its debts or other liabilities as they fall due;
and/or

(d) extraordinary public financial support is required.

Resolution actions, which include resolution tools and resolution powers, aim to fulfil any of the following
objectives:

 to ensure the continuity of critical functions;

207
 to avoid a significant adverse effect on the financial stability, in particular by preventing contagion,
including to market infrastructures, and by maintaining market discipline;

 to protect public funds by minimising reliance on extraordinary public financial support;

 to protect depositors covered by the deposit guarantee scheme and of the investors covered by the
compensation scheme according to capital markets’ legislation; or

 to protect client funds and client assets.

The resolution tools that can be used, individually or in any combination, are:

 sale of business;

 bridge institution;

 asset separation (this tool can only be used together with another tool); and

 bail-in.

Within the NBR the resolution function is structurally separated from and subject to separate reporting/
subordination lines from the credit institution supervision function as well as from the other functions and
activities of the central bank. The resolution function is organised within the bank resolution division.

In the event of failure by a credit institution to comply with the applicable regulations, the NBR may apply
penalties ranging from written warnings to fines (of up to 10% of the previous year net turnover for legal
entities or up to the RON equivalent of EUR 5 million for natural persons, as well as up to twice the amount
of the benefit derived from the misconduct, if applicable). The NBR may also order temporary prohibition to
exercise certain functions within the credit institution, order cease of misconduct, withdraw the approval
granted to persons discharging managerial responsibilities within the credit institution or even withdraw the
banking licence (thus leading to its unwinding) or suspend the exercise by the responsible shareholders of its
voting rights within the credit institution.

In case a credit institution undergoes significant deterioration of prudential and financial performance
indicators, or to prevent a potentially significant deterioration thereof, the NBR may institute certain
measures in relation to the respective credit institution and its stakeholders in order to restore or maintain its
financial soundness. Such measures include requesting persons owning a qualified shareholding in the
respective credit institution to financially support the institution by contributing to a share capital increase or
by granting thereto loans or prohibiting distribution of profits to shareholders.

Reporting

Credit institutions in Romania must regularly file reports with the NBR including, but not limited to:

 Monthly financial reports;

 Large exposures (individual quarterly and half year levels);

 Capital adequacy (individual quarterly and half year levels);

 Monthly liquidity coverage ratio (LCR) and additional liquidity metrics (ALMM);

 Quarterly net stable funding ratio (NSFR);

208
 Minimum Reserves Requirement (MRR);

 Monthly liquidity indicator according to NBR Regulation No. 25/2011 and NBR Order No. 22/2011;
and

 Annual audited financial statements and semi-annual financial data.

Recent legislative changes with impact on banking sector

International Financial Reporting Standard 9

In July 2014, the International Accounting Standards Board (IASB) issued IFRS 9 “Financial Instruments”,
the standard that replaced IAS 39 “Financial Instruments: Recognition and Measurement” and which was
adopted on 1 January 2018. The new standard provides for significant differentiations in the classification
and measurement of financial instruments as well as in hedge accounting.

According to the NBR, application of IFRS 9 is expected to increase the volume of allowances for
impairment, and negatively impact profitability and solvency ratios.

An indication of the new requirements is presented below:

Classification and measurement

Financial instruments are to be classified, at initial recognition, at either amortised cost or at fair value. The
criteria to be considered for the initial classification of the financial assets are (i) the entity’s business model
for managing the financial assets and (ii) the contractual cash flow characteristics of the financial assets.

In addition, IFRS 9 permits, at initial recognition, equity instruments to be classified at fair value through
other comprehensive income. The option precludes equity instruments held for trading. Moreover, with
regard to embedded derivatives, if the hybrid contact contains a host that is within the scope of IFRS 9, the
embedded derivative shall not be separated and the accounting treatment of the hybrid contact should be
based on the above requirements for the classification of the financial instruments.

With regard to the financial liabilities, the main difference is that the change in the fair value of a financial
liability initially designated at fair value through profit or loss shall be recognised in profit or loss with the
exception of the effect of change in the liability’s credit risk which shall be recognised directly in other
comprehensive income.

Impairment

The new standard requires the recognition of lifetime expected credit losses if the credit risk of the financial
instrument has increased significantly since initial recognition. If the credit risk has not increased
significantly since initial recognition, 12-month expected credit losses shall be recognised.

209
Hedging

The main changes introduced by IFRS 9 as compared to the former requirements of IAS 39 are summarised
below:

 more items are eligible for participating in a hedging relationship either as hedging instruments or as
hedged items;

 the requirement for hedge effectiveness tests to be within the range of 80%-125% is removed. Hedge
effectiveness test is performed progressively only and under certain circumstances a qualitative
assessment is considered adequate; and

 in case that a hedging relationship ceases to be effective but the objective of risk management
regarding the hedging relationship remains the same, the entity shall rebalance the hedging
relationship in order to satisfy the hedge effectiveness criteria.

Except for the aforementioned modifications, the issuance and entering into force of IFRS 9 has resulted in
the amendment to other standards and mainly to IFRS 7 where new disclosures were added.

MiFID II

As of 3 January 2018, the EU regulatory framework set by the Directive 2014/65/EU of the European
Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive
2002/92/EC and Directive 2011/61/EU (Markets in Financial Instruments Directive II) (MiFID II) and the
Regulation (EU) No. 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in
financial instruments and amending Regulation (EU) No. 648/2012 (Markets in Financial Instruments
Regulation) (MiFIR) became applicable.

MiFID II has been transposed into Romanian legislation by Law No. 126/2018 on markets of financial
instruments and by several regulations issued by the National Bank of Romania and the Financial
Supervisory Authority.

MiFID II replaced, extended and improved the former European rules on markets in financial instruments its
high level goals being increased transparency of markets, a shift in trading towards more structured
marketplaces, lower cost market data, improved best execution, orderly trading behaviour within markets,
more explicit costs of trading and investing. It gives more extensive powers to supervisory authorities and
introduces the possibility to impose higher fines in case of infringement of its requirements. Under MiFID II
and MiFIR, rules on transparency and oversight of financial markets, including derivatives markets, are
extended to have a broader application. MiFID II strengthens investor protection by introducing additional
organisational and conduct requirements.

MiFID II will have a significant impact on credit institutions and other financial institutions from the
perspective of their strategy and operations (e.g. redefine what sort of products they offer in the market,
interaction with clients, clients’ categorisation, technological development due to significant data and
reporting requirements, training of employees who provide information or advice on financial products or
investment services), increased costs and increased regulatory requirements.

Payment Service Directive

The Directive 2015/2366/EU of the European Parliament and of the Council of 25 November 2015 on
payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU
and Regulation (EU) No. 1093/2010, and repealing Directive 2007/64/EC (PSD II) became applicable on 13
January 2018. PSD II is still in the process of being implemented into the Romanian legislation.

210
The aim of PSD II is to provide the legal foundation for the further development of a better integrated
internal market for electronic payments within the EU, to put in place comprehensive rules for payment
services with the goal of making international payments (within the EU) as easy, efficient and secure as
payments within a single country and it seeks to open up payment markets to new entrants leading to more
competition, greater choice and better prices for consumers. It also provides the necessary legal platform for
the Single Euro Payments Area.

PSD II supports the emergence of new players in the payment services area and the development of
innovative mobile and internet payments in Europe. Credit institutions will be obliged to allow access to the
accounts of their customers for the so-called third party payment services providers offering payment
initiation services or account information services.

PSD II is complemented by Regulation (EU) 2015/751 which puts a cap on interchange fees charged
between credit institutions for card-based transactions. This is expected to drive down the costs for
merchants in accepting consumer debit and credit cards.

General Data Protection Regulation

Regulation (EU) No. 2016/679 on the protection of natural persons with regard to the processing of personal
data and on the free movement of such data (GDPR) was adopted by the European Parliament in May 2016
and replaces the 1995 General Data Protection Directive 95/46/EC. GDPR took effect starting on 25 May
2018.

Companies are subject to the GDPR as far as they process personal data of EU data subjects for their goods
or service offerings in the EU and/or for the monitoring of the behaviour of EU data subjects taking place
within the EU.

The GDPR introduces new requirements and more stringent data protection challenges, backed by extremely
high fines of up to 4% of total annual worldwide turnover or €20 million for non-compliance.

The high level goals of the regulation refer mainly to:

 A harmonised legal framework leading to a uniform application of rules to the benefit of the EU
digital single market. This means one single set of rules for citizens and businesses;

 A level-playing field for all companies operating in the EU market. GDPR requires companies based
outside the EU to apply the same rules as companies based in the EU if they are offering goods and
services related to the personal data or are monitoring the behaviour of individuals in the European
Union;

 Stronger individuals’ rights: GDPR introduces new transparency requirements; strengthened rights
of information, access and erasure (‘right to be forgotten’); silence or inactivity are no longer
considered as valid consent as a clear affirmative action to express the consent is required; protecting
children’s online activity;

 More control over personal data for individuals. GDPR establishes a new right to data portability,
allowing citizens to ask a company or an organisation to return personal data provided to the
respective entity on the basis of consent or contract; it will also allow for such personal data to be
transmitted directly to another company or organisation, when it is technically feasible;

 Stronger protection against data breaches – it clearly defines what is a ‘personal data breach’ and
introduces an obligation to notify the supervisory authority;

211
 More clarity on the obligations of processors and the responsibility of controllers when selecting a
processor; and

 The protection of the personal data guaranteed by GDPR travels with the data outside the EU
ensuring a high level of protection.

GDPR directly affects European credit institutions and it has major implications on the three core banking
areas of organisation, processes and systems. Entities must, inter alia, have in place a target operating model
for data protection governance with policies and a framework including organisation, processes and
roles/responsibilities, implement processes for relevant personal data scope identification, or customer
consent management, disclosure of stored personal data, correction of wrong personal data, right to erasure
and portability, implement and document privacy impact assessments, review and adapt existing IT
architecture regarding data storage, transformation and processing of personal data.

Anti-money laundering (AML)

Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention
of the use of the financial system for the purposes of money laundering or terrorist financing, amending
Regulation (EU) No. 648/2012 of the European Parliament and of the Council, and repealing Directive
2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC
(AML IV) came into force on June 2015, while member states were supposed to fully implement it into their
domestic legislation by 26 June 2017.

AML IV has not yet been implemented in Romania, albeit the draft law prepared and approved by the
Romanian Government was registered on 20 June 2018 with the Romanian Parliament and is currently
subject to the parliamentary approval process.

The areas of focus primarily addressed in AML IV are as follows:

Risk based approach – Furthermore, obliged entities are required to document their risk assessments (taking
into account risk factors including those relating to their customers, countries or geographic areas, products,
services, transactions or delivery channels), and have in place policies, controls, and procedures to mitigate
and manage effectively AML/counter-terrorist financing risks.

Ultimate Beneficial Owners – All corporate and legal entities incorporated within Member States, as well as
any trustees of any express trust governed under Member States’ law are required to obtain and hold
adequate, accurate and current information on their beneficial ownership. This information will be held in a
central register by the Member State and will be accessible, by competent authorities, financial intelligence
units and, in the context of customer due diligence, to “obliged entities” (such as credit institutions and
financial institutions: insurance companies and investment firms) or persons or organisations that can
demonstrate a “legitimate interest”.

Customer Due Diligence (CDD) – The automatic entitlement to apply Simplified Due Diligence (SDD)
when obliged entities deal with specified categories of customers is removed under AML IV. The use of
SDD procedures is still allowed, but must now be justified on the basis that the business relationship or
transaction carries a lower degree of risk.

Politically Exposed Persons (PEPs) – obliged entities are required to apply enhanced due diligence measures
on PEPs, regardless of their country of residence. Obliged entities will therefore need to review their
customer registers to ascertain if they need to reclassify and apply enhanced CDD to any existing customers
as PEPs under the new definition, as well as applying these measures to new customers.

212
Recent domestic legislative initiatives with impact on banking sector

Proposed changes to GO No. 13/2011 on statutory interest levels

Another legislative development, with a potential negative impact on the Romanian banking sector, is the
draft law for the modification of Government Ordinance No. 13/2011 establishing the remunerative/penalty
statutory interest related to monetary obligations, as well as certain financial and fiscal measures in the
banking sector (GO No. 13/2011), which sought to impose a cap on the interest owed by individuals for the
loans. The effective annual interest rate is capped in respect of mortgage loans (the level of such cap being
subject to further clarification), consumer loans (which are subject to a cap of up to 18%) and loans or any
financing granted to consumers below the RON equivalent of EUR 3,000 (which are subject to a cap of up to
50%). According to the draft law, the provisions would have also been applicable to ongoing contracts when
the law entered into force, provided that the hardship condition is satisfied with respect to such contracts.
Following the objection of unconstitutionality raised against this draft law, it was declared entirely
unconstitutional and in violation of the Romanian Constitution by the Romanian Constitutional Court. As
such the provisions thereof will need to be further reviewed by the Romanian Parliament.

Proposed changes to the Romanian Banking Act as regards loan agreements and guarantee and mortgage
agreements no longer being considered writ of enforcements

There is also a legislative proposal for amending and completing Article No. 120 from the Romanian
Banking Act regarding the credit institutions and capital adequacy. Under the proposed amendments, loan
agreements and mortgage agreements or personal guarantees concluded with the consumers would no longer
be considered writ of enforcements. Furthermore, if delay penalties, interests or other accessory payment
obligations are included in the loan agreement, the amount of such damages could not have exceeded 50% of
the amount representing due instalments at the termination date. Following the objection of
unconstitutionality raised against this draft law, it was declared entirely unconstitutional and in violation of
the Romanian Constitution by the Romanian Constitutional Court. As such the provisions thereof will need
to be further reviewed by the Romanian Parliament.

Proposed changes to GEO No. 50/2010 on consumer loans assignments

The Government Emergency Ordinance No. 50/2010 on the consumer loan agreements is also subject to a
proposal of amendment, on the matter of consumer loans assignments. Under this draft law, the assignee of
the loan receivable would not have been able to claim from the consumer debtor more than double of the
assignment price. Correspondently, the consumer debtor would have been released of the debt, if paying to
the assignee the double of the assignment price, without any additional costs. According to the draft law, the
provisions would have been applicable also to ongoing contracts when the law would have entered into
force. Following the objection of unconstitutionality raised against this draft law, it was declared entirely
unconstitutional and in violation of the Romanian Constitution by the Romanian Constitutional Court. As
such the provisions thereof will need to be further reviewed by the Romanian Parliament.

Law No. 72 of 22 March 2018 regarding the approval of the Government’s Ordinance No. 25/2017 for
modifying and completing Law No. 227/2015

In 2018, Law No. 72 of 22 March 2018 regarding the approval of the Government’s Ordinance No. 25/2017
for modifying and completing Law No. 227/2015 was adopted and impacted the banking sector in 2018 with
respect to the sale of loans, mainly NPL’s. There is a limitation on the tax deductibility of 30% of the net loss
(the difference between sale price and the value of the sold loans).

Government Emergency Ordinance No. 114/2018 regarding the establishment of measures in the field of
public investment and fiscal-budgetary measures

213
The banking sector has been dramatically impacted by the GEO No. 114/2018, applicable as of 1 January
2019, which established a progressive quarterly tax on the financial assets of the banks that was initially
dependent on the evolution of Romanian Interbank Offer Rate (ROBOR). In March 2019, GEO no.
114/2018 was amended through GEO no. 19/2019 which has brought, inter alia, changes to the tax on the
financial assets of the banks and its computation method. According to GEO no. 19/2019, the tax is 0.4% per
year (for each credit institution with a market share equal to or higher than 1%) and 0.2% per year (for each
credit institution with a market share lower than 1%) and is applied to the net financial assets in the balance
sheet at the end of the semester and the year for which the tax is due, respectively, less certain asset classes
(such as cash, non-performing exposures at net value etc). Based on certain benchmarks regarding the
market share, credit balance and interest margin determined for the year for which the tax on financial assets
is owed, the tax on financial assets may be reduced. As such, the tax may be reduced as follows: a) for the
increase of credit balance i) with 50%, if the increase of the credit balance granted to the non-financial
institutions and households is equal or higher than the credit increase target (for 2019 is set at +8%) or (ii)
up to 50%, if the increase of the credit balance granted to the non-financial institutions and households is
lower than the credit increase target; and b) for reduction of the interest margin i) with 50%, if the interest
margin calculated for the semester/year for which is owed is lower than the reference rate (which for 2019 is
set at 4 percentage points) or the reduction of the interest rate margin is equal or higher than the margin
reduction target (which for 2019 is set at -8%) or ii) up to 50%, if the reduction of the interest rate margin is
lower than the margin reduction target. Credit institutions which record an accounting loss are not subject to
the tax on financial assets.

214
 DESCRIPTION OF THE TRANSACTION DOCUMENTS

Servicing and Cash Management Agreement

The Servicing and Cash Management Agreement, made between the Issuer, the Servicer, the Security
Trustee, and, upon its appointment, the Covered Bondholders Representative, contains provisions relating to,
inter alia:

 the Issuer’s and the Servicer’s obligations when dealing with any cash flows arising from the Cover
Pool and the Transaction Documents;

 the servicing, calculation, notification and reporting services to be performed by the Issuer and/or the
Servicer, together with cash management services and account handling services in relation to
moneys from time to time standing to the credit of the Transaction Accounts, the ABR Collection
Accounts and the Third Party Collection Account(s) (if any);

 the covenants of the Servicer;

 the representations and warranties of the Issuer regarding itself and the Cover Pool Assets;

 the responsibilities of the Servicer following the service of a Notice of Default on the Issuer or upon
failure of the Issuer to perform its obligations under the Transaction Documents; and

 the circumstances in which the Issuer will be obliged, subject to consultation with the Security
Trustee and/or the Covered Bondholders Representative to appoint a new servicer to perform the
Servicing and Cash Management Services.

Servicing

Pursuant to the Servicing and Cash Management Agreement, the Servicer has agreed to service the Loans
and their Related Security comprised in the Cover Pool and provide cash management services.

The Servicer will be required to administer the Loans and their Related Security in accordance with the
Issuer’s administration, arrears and enforcement policies and procedures forming part of the Issuer’s policy
from time to time as they apply to those Loans.

Subject to the terms of the Servicing and Cash Management Agreement, the Servicer will have the power to
exercise the rights, powers and discretions and to perform the duties of the Issuer in relation to the Loans and
their Related Security that it is servicing pursuant to the terms of the Servicing and Cash Management
Agreement, and to do anything which it reasonably considers necessary, convenient or incidental to the
administration of the Loans and their Related Security.

Right of delegation by the Servicer

The Servicer may from time to time sub-contract or delegate the performance of its duties under the
Servicing and Cash Management Agreement, provided that it will nevertheless remain responsible for the
performance of those duties to the Issuer and the Covered Bondholders Representative and, in particular, will
remain liable at all times for servicing the Loans and their Related Security and for the acts or omissions of
any delegate or sub-contractor. The Issuer shall provide its consent in advance to such sub-contracting or
delegation, that will constitute, to the maximum extent permitted by law, prior consent of the Issuer, subject
to all requirements provided under the Servicing and Cash Management Agreement being fulfilled by the
delegate or sub-contractor.

215
Appointment of Replacement Servicer

Upon the occurrence of any of the following events (each, a Servicer Termination Event):

 default is made by the Servicer in the payment on the due date of any payment due and payable by it
under the Servicing and Cash Management Agreement and such default continues unremedied for a
period of three Bucharest Business Days after the earlier of the Servicer becoming aware of such
default and receipt by the Servicer of written notice from the Security Trustee and/or the Covered
Bondholders Representative requiring the same to be remedied;

 default is made by the Servicer in the performance or observance of any of its other covenants and
obligations under the Servicing and Cash Management Agreement, which is materially prejudicial to
the interests of the Security Trustee and/or the Covered Bondholders and such default continues
unremedied for a period of 20 Bucharest Business Days after the Servicer becoming aware of such
default, provided that where the relevant default occurs as a result of a default by any person to
whom the Servicer has sub-contracted or delegated part of its obligations hereunder, such default
shall not constitute a Servicer Termination Event if, within such period of 20 Bucharest Business
Days of awareness of such default by the Servicer, the Servicer terminates the relevant sub-
contracting or delegation arrangements and takes such steps as the Security Trustee and/or the
Covered Bondholders Representative may approve to remedy such default;

 the occurrence of an Insolvency Event in relation to the Servicer; or

 the occurrence of an Issuer Event (where the Issuer and the Servicer are the same entity),

then at any time after the Security Trustee and/or the Covered Bondholders Representative has received
notice of any such Servicer Termination Event, but subject to no Cover Pool Administrator being appointed,
the Issuer shall, following notification to the NBR (to the extent required under applicable law) and subject
to consultation with the Security Trustee and/or the Covered Bondholders Representative and while such
Servicer Termination Event continues, use its reasonable endeavours to:

(a) appoint an independent investment or commercial bank of international repute (the Investment
Bank) to, together with the Issuer, select an entity to act as a replacement servicer (the Replacement
Servicer), which entity shall be appointed as Replacement Servicer; and

(b) by notice in writing to the Servicer (to the extent that the Servicer is a different entity from the
Issuer) terminate its appointment as Servicer under the Servicing and Cash Management Agreement
with effect from a date (not earlier than the date of the notice) specified in the notice (or, to the
extent that the Issuer and the Servicer are the same entity, such termination shall take effect from the
date on which the Replacement Servicer is appointed).

In relation to any of the Servicer Termination Events listed above, any reference to the Servicer being
“aware” of any matter, event or circumstance shall be satisfied if such matter, event or circumstance is
actually known or ought to have been known to any member of the department of the Servicer with
responsibility in respect of the obligations of the Servicer under the Servicing and Cash Management
Agreement.

Insolvency Event means, in respect of the Servicer: (a) an order is made or an effective resolution passed for
the liquidation or winding up of the relevant entity; or (b) the Servicer stops or threatens to stop payment to
its creditors generally or shall be unable to, or shall admit its inability to, pay its debts as they fall due or the
relevant entity ceases or threatens to cease to carry on its business or substantially the whole of its business;
or (c) an encumbrancer takes possession or a receiver, administrator, administrative receiver or other similar
officer is appointed to the whole or any substantial part of the undertaking, property and assets of the

216
relevant entity or a distress, diligence or execution is levied or enforced upon or against the whole or any
substantial part of the chattels or property of the relevant entity and, in the case of any of the foregoing
events, is not discharged within 30 days; or (d) the Servicer is unable to pay its debts as they fall due; or (e) a
creditors’ collective enforcement procedure is commenced against the Servicer (including such procedures as
provided for under the Romanian Insolvency Law or any other similar law, if any).

In accordance with Article 43 of the Romanian Covered Bond Law and unless otherwise provided by the
applicable law, the appointment of Servicer or the Replacement Servicer, as applicable, thereunder, shall
terminate in respect of any right, power and obligation granted to the Cover Pool Administrator under the
Romanian Covered Bond Legislation, upon the appointment of a Cover Pool Administrator.

Neither the Covered Bondholders Representative nor the Security Trustee will be obliged to act as servicer in
any circumstances.

The Cover Pool

Pursuant to the Romanian Covered Bond Law, the Issuer will be entitled to create the Movable Mortgage
over:

(a) claims arising out of a mortgage loan (i.e. loans which are fully secured with an immovable
mortgage or similar rights and which are granted for acquiring or maintaining the ownership right
over a plot of land and/or an existing or future building or for rehabilitating, modernising,
consolidating or extending a building or for repaying such loan) (the Loans) together with any
ancillary rights thereof (i.e. rights in rem or in personam securing a claim, including movable and
real estate mortgages and receivables arising out of insurance agreements regarding the mortgaged
real estate assets and out of life insurance agreements) (the Loan Assets);

(b) derivative financial instruments which meet the criteria pursuant to the Romanian Covered Bond
Legislation; and

(c) any other financial assets that are Eligible Financial Assets, in each case together with any ancillary
rights thereof,

as such assets are registered from time in the Internal Cover Pool Register (each a Cover Pool Asset and
collectively the Cover Pool).

The Issuer shall be required, subject to making the necessary registrations with respect to the Cover Pool
Assets in the Internal Cover Pool Register (in Romanian, Registrul de evidenţă internă), to allocate
Additional Cover Pool Assets to the Cover Pool and/or remove or substitute Cover Pool Assets where so
required in accordance with the Romanian Covered Bond Legislation, subject to observing the requirements
set out by the Romanian Covered Bond Legislation (one of the requirements being the prior written consent
of the Asset Monitor, subject to the provisions of article 17.2 of the Romanian Covered Bond Law); in
particular, if at any time while any Covered Bonds remain outstanding under the Programme (i) the weighted
average term to maturity of the Loans and other receivables included in the Cover Pool falls below the
weighted average term to maturity of the Covered Bonds or (ii) the Cover Pool Assets no longer fulfil the
Eligibility Criteria (with respect to the Loans) or other eligibility requirements set out under the Romanian
Covered Bond Legislation, the Issuer must ensure that the Cover Pool is updated accordingly and the Cover
Pool Assets no longer fulfilling the Eligibility Criteria (with respect to the Loans) or other eligibility
requirements set out under the Romanian Covered Bond Legislation are removed from the Cover Pool.

Additional Cover Pool Assets means any further assets included in the Cover Pool by the Issuer in
accordance with the Servicing and Cash Management Agreement and which are either Eligible Financial
Assets or Loan Assets which satisfy the Eligibility Criteria.

217
Non-eligible Cover Pool Assets may be substituted with other Eligible Financial Assets if: (i) the Issuer does
not have other eligible Loans to be included in the Cover Pool; (ii) the relevant Eligible Financial Assets are
not subject to a security interest; (iii) the relevant Eligible Financial Assets do not have any arrears in
payment; and (iv) the aggregated value of all Eligible Financial Assets does not exceed 15% of the book
value of the Cover Pool.

Eligible Financial Assets means any financial assets with no arrears in payment, specified in the Romanian
Covered Bond Legislation as being eligible for inclusion in the Cover Pool which as at the date of this Base
Prospectus includes the following:

(a) exposures towards:

(i) the Romanian Government, the NBR or territorial-administrative units in Romania;

(ii) central authorities, central banks, public sector entities, regional authorities or local
authorities in the EU that qualify at least for step 2 credit quality, according to the CRR;

(iii) multilateral development banks and international organisations that qualify for a risk
weighting equal to zero in accordance with part III, title II, chapter 2 of the CRR; and

(iv) central authorities of third states, central banks of third states, multilateral development
banks, international organisations that qualify for step 1 credit quality, as provided in
part III, title II, chapter 2 of the CRR, and exposures for the purposes of this paragraph (iv),
that qualify at least for step 2 credit quality, in accordance with part III, title II, chapter 2 of
the CRR, provided that they do not exceed the limit in article 129, paragraph (1)(b) of the
CRR; and

(b) exposures to credit institutions that qualify for step 1 credit quality, as provided in part III, title II,
chapter 2 of the CRR. The total amount of such exposures should not exceed the limit set out in
article 129, paragraph (1)(c) of the CRR. The exposures to EU institutions with a maturity not
exceeding 100 days are not subject to the requirements for step 1 credit quality, but the respective
credit institutions must qualify at least for step 2 of credit quality, in accordance with part III, title II,
chapter 2 of the CRR.

When required under the Servicing and Cash Management Agreement, the Issuer shall deliver a certificate,
or as the case may be, procure the delivery of a certificate to the Covered Bondholders Representative
confirming that (i) the Cover Pool Assets (including any Additional Cover Pool Assets added to the Cover
Pool prior to or for the purposes of such issuance) comply with the Eligibility Criteria (with respect to the
Loans) or are Eligible Financial Assets, and in each case are subject to the Movable Mortgage over the Cover
Pool and Collection Accounts and (ii) no Issuer Insolvency Event or a breach of any Statutory Test has
occurred or, as a result of the addition of such Additional Cover Pool Assets to the Cover Pool, will occur.
The Covered Bondholders Representative shall be entitled to accept such certificate without further enquiry
or liability.

For so long as any Covered Bonds of any Series remain outstanding under the Programme, the Servicer shall
verify on each Monthly Calculation Date that, as at the last calendar day of the calendar month immediately
preceding such Monthly Calculation Date, the Cover Pool satisfies the Statutory Tests, each of which are
described below.

(a) The Over-Collateralisation Test: On a monthly basis, the Issuer will ensure that the net present value
of the Cover Pool Assets exceeds the net present value of the all cash outflow relating to the
principal amount outstanding of all Series of Covered Bonds, together with all accrued interest
thereon and the contractual value of any other payment obligations that must be paid from the Cover
Pool in accordance with the Romanian Covered Bond Law, being as of the date of this Agreement

218
 (the obligations of the Issuer to the Asset Monitor, the Cover Pool Administrator (if appointed), any
Hedging Counterparty, any lenders that have financed any temporary liquidity deficits and any other
expenses due in relation to the Cover Pool and payable by the Issuer in accordance with the
Romanian Covered Bond Legislation, by at least 2%. Any Cover Pool Assets that do not meet the
Eligibility Criteria (with respect to the Loans) or other eligibility requirements set out under the
Romanian Covered Bond Legislation will be removed from any calculation pertaining to the Over-
Collateralisation Test. The Issuer must ensure compliance with the Over-Collateralisation Test even
in crisis situations in accordance with the Romanian Covered Bond Legislation (although in such
situations, the requirement is that the net present value of the Cover Pool Assets equals at least the
net present value of any payment obligations in relation to all Series of Covered Bonds). Such crisis
situations include, but are not limited to, the following: (i) positive or negative changes of 3.5
percentage points in the yield curves of the interest rate; (ii) increases or decreases in the exchange
rate of currencies of (A) 35.5% for EU currencies, (B) 40.9% for the U.S. dollar and (C) 52.6% for
other currencies; (iii) deterioration in the quality of the Cover Pool Assets based on historic data; (iv)
changes in payment behaviour in relation to the Cover Pool Assets based on historic prepayment
data; and (v) price decreases in the real estate market, as well as potential decreases in amounts
obtained on enforcement, based on historic data. In relation to paragraphs (iii), (iv) and (v) above,
the Issuer is obliged to document the manner in which it accounts for such risks, as well as any
additional risks that the Issuer believes may affect the Over-Collateralisation Test.

(b) The Asset Coverage Test: On a monthly basis, the Issuer will ensure that the total value of the Cover
Pool Assets, calculated as per the requirements of the Romanian Covered Bond Legislation, is at
least equal to the aggregate of the Euro Equivalent of the accounting value of the principal amount
outstanding of all Series of Covered Bonds, together with all accrued interest thereon and any other
obligations that must be paid from the Cover Pool, in accordance with the provisions of the
Romanian Covered Bond Legislation (which consist of obligations of the Issuer to the Asset
Monitor, the Cover Pool Administrator (if appointed), any Hedging Counterparty, any lenders that
have financed the coverage of any temporary liquidity deficits, as well as any other expenses due in
relation to the Cover Pool and payable by the Issuer if so provided under the Romanian Covered
Bond Legislation). Any Loans in arrears, any Loans secured by mortgages over plots of land without
buildings will be given zero weighting in the Asset Coverage Test. Each other Loan in the Cover
Pool is weighted according to the lower of: (i) in the case of residential loans fully secured with a
mortgage in favour of the Issuer: (A) the accounting value of that receivable; (B) the value of the
principal of that mortgage together with any previous mortgage rights; and (C) 80% of the value of
that mortgaged property; (ii) in the case of residential loans partially secured with a mortgage in
favour of the Issuer: (I) the accounting value of that receivable; (II) the value of the principal of that
mortgage together with any previous mortgage rights; and (III) 80% of the value of that mortgaged
property corresponding to the security percentage in favour of the Issuer; and (iii) in the case of
commercial loans, fully secured with a mortgage in favour of the Issuer: (1) the accounting value of
that receivable; (2) the value of the principal of that mortgage together with any prior mortgage
rights; and (3) 60% of the value of that mortgaged property.

(c) The Liquidity Test: The Issuer will calculate on a daily basis for the following 180 days the negative
difference between all cash inflow generated by the Cover Pool Assets in such period (including, but
not limited to, payments of principal and interest under the Loans as well as any inflows relating to
derivative financial instruments under any Hedging Agreement(s) included in the Cover Pool) and
all cash outflow triggered by the obligations in the same period in relation to the Covered Bonds then
outstanding under the Programme (including any obligations to any Hedging Counterparty under any
Hedging Agreement and any fees payable to third parties) and will ensure that the highest difference
is covered with other Eligible Financial Assets. For the purposes of calculating the Liquidity Test,
subject to the limitations set out in, among others, Article 13(5) of the Romanian Covered Bond Law
and Articles 35(1) and 36 of the Romanian Covered Bond Regulation, the Issuer may include in the
Cover Pool, on a temporary basis, Eligible Financial Assets in excess of 15% of the book value of

219
 the Cover Pool provided that, in all cases, the relevant Eligible Financial Assets, upon being
included in the Cover Pool, meet the eligibility criteria for money market operations with the NBR.

Amendment to definitions

Under the Servicing and Cash Management Agreement, the parties have agreed that the definitions of Cover
Pool, Cover Pool Asset, Eligibility Criteria and Statutory Test may be amended by the Issuer (subject, and,
where applicable, in order, to reflect changes under, the provisions of the Romanian Covered Bond
Legislation) from time to time as a consequence of, inter alia, including in the Cover Pool Additional Cover
Pool Assets that are New Asset Types and/or changes to the hedging policies or servicing and collection
procedures of ABR, provided that (i) the NBR has provided its written approval of such amendment, (ii) the
Covered Bondholders have approved such amendment by a Covered Bondholders Resolution, and (iii) the
Rating Agency has provided confirmation in writing that the ratings of the Covered Bonds would not be
adversely affected or withdrawn as a result of such amendment.

Collection Accounts

Prior to the occurrence of an Issuer Event, the Issuer will deposit on a daily basis within one Bucharest
Business Day of receipt all collections of interest and principal it receives on the Cover Pool Assets, into
segregated RON- and EUR-denominated accounts maintained with Romanian credit institutions (including
Alpha Bank România S.A., such accounts being referred together as the ABR Collection Accounts, and,
together with the Third Party Collection Account(s), the Collection Accounts).

Prior to a reduction in the long-term local and foreign currency deposit credit rating of ABR below the
Minimum Credit Rating (such occurrence, a Segregation Event) or an Issuer Event, the Issuer will be
entitled to draw sums from time to time standing to the credit of the ABR Collection Accounts in addition to
any other funds available to it for any purpose including to make payments on the Covered Bonds.

Following the occurrence of a Segregation Event but prior to the occurrence of an Issuer Event, (i) all
amounts deposited shall remain in the ABR Collection Accounts for the benefit of the holders of the Covered
Bonds and (ii) the Issuer shall only be entitled to withdraw moneys from the ABR Collection Accounts (I) to
the extent that amounts standing to the credit of the ABR Collection Accounts shall at all times exceed the
equivalent of the aggregate of (A) any amounts on any Covered Bonds Series outstanding falling due for
payment in the following Programme Payment Date(s) or required to be transferred before or on the
following Interest Payment Date of each Covered Bond Series outstanding, provided that the Interest
Payment Date falls before or on the date falling three calendar months after the date of the withdrawal (or, in
the case of Zero Coupon Covered Bonds, the amount by which the Amortised Face Amount on the next
Programme Payment Date (provided such Programme Payment Date falls on or before the date that falls
three calendar months after the date of withdrawal) exceeds the Amortised Face Amount of such Zero
Coupon Covered Bond on the Programme Payment Date on the date of withdrawal, on the basis that the
Accrual Yield and the Reference Price are the same on each of such date) and (B) such other payments
falling due to the Cover Pool Secured Creditors on or before the date falling three calendar months after the
date of the withdrawal or (C) for the purpose of making payments falling due to the Hedging Counterparties,
the Cover Pool Administrator, the Asset Monitor and (where applicable) any lenders that have financed any
temporary liquidity deficits, or (II) (subject to (I) above) for the purposes of transferring funds to the
Transaction Accounts or making payments on the Covered Bonds and/or the Cover Pool Secured Creditors
(to the extent such amounts fall due) and/or such other payments which should be made by the Issuer under
the Programme.

If the Issuer’s rating(s) are reinstated above the level at which a Segregation Event occurs and so long as no
Issuer Event has occurred and is continuing, then the Issuer will be entitled to draw sums standing to the
credit of the ABR Collection Accounts in addition to any other funds available to it for any purpose
including to make payments on the Covered Bonds.

220
Transaction Accounts and Reserve Ledger

Prior to the issuance of the first Series of Covered Bonds under the Programme, the Issuer will establish with
the Account Bank in its name (i) an EUR-denominated account (the EUR Transaction Account) and (ii) a
RON-denominated account (the RON Transaction Account, and, together with the EUR Transaction
Account, the Transaction Accounts). The Issuer will establish on the EUR Transaction Account the
Reserve Ledger on which it will be required to maintain the Reserve Ledger Required Amount for so long as
any Covered Bonds remain outstanding under the Programme.

Prior to the occurrence of a Segregation Event or an Issuer Event, the Issuer will be entitled to withdraw
amounts from time to time standing to the credit of each of the Transaction Accounts, if any, that are in
excess of the sum of: (i) any cash amounts required to satisfy the Statutory Tests; and (ii) the Reserve Ledger
Required Amount. Following the occurrence of a Segregation Event but prior to the occurrence of an Issuer
Event, the Issuer shall no longer be entitled to withdraw amounts from the Transaction Accounts other than
for the purpose of making payments on the Covered Bonds and/or to the other Cover Pool Secured Creditors.
If the Issuer’s rating is subsequently reinstated above the level at which a Segregation Event occurs, and
provided that no Issuer Event has occurred, the Issuer will again be entitled to withdraw amounts from time
to time standing to the credit of the Transaction Accounts, if any, that are in excess of the sum of: (A) any
cash amounts required to satisfy the Statutory Tests; and (B) the Reserve Ledger Required Amount.

Reserve Ledger Required Amount means an amount calculated by the Servicer as at each Monthly
Calculation Date equal to the amount that will be required to be paid by the Issuer in respect of the Covered
Bonds in respect of interest (in respect of those Covered Bonds where there is no Hedging Agreement in
place and all amounts to be paid to a Covered Bond Swap Provider (in respect of those Covered Bonds
where there is a Hedging Agreement in place) (other than any principal exchange amounts)) and all amounts
paid to the other Cover Pool Secured Creditors for the immediately following six month period.

Third Party Collection Account(s)

Upon the occurrence of a TPCA Event, the Servicer shall open a bank account or bank accounts in the name
of the Issuer or the Covered Bondholders Representative as applicable with another credit institution located
in Romania and which has the Collection Account Required Ratings from time to time (the Third Party
Collection Account(s)). Following the occurrence of an Issuer Event (as defined above), the Servicer shall:
(i) procure that within two Bucharest Business Days of the occurrence of such Issuer Event, any amounts
standing to the credit of the ABR Collection Accounts and any amount received by the Issuer or the Servicer
in respect of the Loan Assets and the Eligible Financial Assets, all amounts received by the Issuer for
effecting payments on the Covered Bonds and all amounts received by the Issuer pursuant to any Interest
Rate Swap and any Covered Bond Swaps (other than Swap Collateral Excluded Amounts (if any)) are
transferred to the Third Party Collection Account(s); (ii) provide notification to all Borrowers (and any other
obligors under the Loans, if applicable) that any and all future payments due under the Loan Assets are
henceforth to be effected directly to such Third Party Collection Account(s); (iii) procure that all payments
due under the Cover Pool Assets are paid directly into the Third Party Collection Account(s); and (iv)
procure that all amounts deposited into the Third Party Collection Account(s) shall be transferred to the
Transaction Account within three Bucharest Business Days of receipt.

Collection Account Required Ratings means Caa2.

TPCA Event means the earlier to occur of: (i) the Issuer’s long-term local and foreign currency deposit
rating by the Rating Agency being downgraded to Caa2 or lower; (ii) an Issuer Event; and (iii) a Servicer
Termination Event.

221
Law and Jurisdiction

The Servicing and Cash Management Agreement and any non-contractual obligations arising out of or in
connection with it will be governed by Romanian law. Any disputes arising out of or relating to the Servicing
and Cash Management Agreement, including a dispute relating to any non-contractual obligations shall be
settled by the competent Romanian courts.

Asset Monitor Agreement

The Asset Monitor will discharge its responsibilities under the Asset Monitor Agreement and the Romanian
Covered Bonds Legislation, subject to due receipt of the information to be provided by the Issuer and/or the
Servicer to the Asset Monitor, by performing Agreed Upon Procedures (AUP) in accordance with the
International Standard on Related Services 4400 “Engagements to perform agreed upon procedures
regarding financial information” (ISRS 4400) and issuing the corresponding report (AUP Report), as well
as by performing procedures (ISAE 3000 procedures) in accordance with the International Standard on
Assurance Engagements 3000 “Revised, assurance engagements other than audits or reviews of historical
financial information” (ISAE 3000) and issuing the corresponding report (ISAE 3000 Report), as the case
may be.

In accordance with, and as required by, the Romanian Covered Bond Legislation, the Asset Monitor shall
perform the following services (acknowledging that the services referred to in Article 22 (2) of the Romanian
Covered Bond Law will need to be performed after the appointment of a Cover Pool Administrator):

(a) perform AUP in order to agree with the mathematical accuracy of the calculations of the Statutory
Tests) (including, as regards the Over-Collateralisation Test, in crisis situations), the Cover Pool
Average Maturity, the Covered Bonds Average Maturity and the Aggregate Issuances Limit and
consequently compliance by the Issuer with the respective legal requirements. For such purpose and
subject to receipt of the information to be provided to it by the Issuer and/or the Servicer as further
detailed under the Asset Monitor Agreement, or subject to receipt of such information from the
Cover Pool Administrator (as applicable), in relation to the calculations performed by the Issuer
(and/or the Servicer on its behalf) or the Cover Pool Administrator regarding the relevant Statutory
Tests, the Cover Pool Average Maturity, the Covered Bonds Average Maturity and the Aggregate
Issuances Limit, the Asset Monitor shall perform AUP and issue the corresponding AUP Report;

(b) perform AUP in order to agree whether the Cover Pool Assets included in the Cover Pool fulfil the
Eligibility Criteria (with respect to the Loans) or are Eligible Financial Assets;

(c) perform AUP in order to agree whether the Issuer has complied with its obligation to carry out the
re-evaluation(s) of the assets serving as collateral for the Loans in the Cover Pool;

(d) as regards the Internal Cover Pool Register, monitor the keeping thereof, and perform AUP in order
to agree (if the case), within five (5) Bucharest Business Days, with any amendments or changes
proposed by the Issuer to be performed in the Internal Cover Pool Register. The results of the AUP
in respect of any new registrations in the Internal Cover Pool Register or in any sub-register thereof,
if the case, pursuant to the amendment or changes proposed by the Issuer shall be reported to the
NBR, within the deadline and as prescribed under the Romanian Covered Bond Regulation, such
deadline being 20 calendar days from the end of the relevant trimester for which the quarterly reports
referred to therein are prepared;

(e) as regards the derivative financial instruments subject to the Hedging Agreements entered into by the
Issuer for hedging risks associated with currency exchange and interest rates in respect of Loans
included in the Cover Pool:

222
 (i) perform AUP in respect of the periodic reports prepared by the Issuer or by the Cover Pool
Administrator that are to be submitted to the NBR with respect to the contractual
performance of such derivative financial instruments;

(ii) perform AUP in order to recalculate the mark-to-market value determined by the Issuer or
by the Cover Pool Administrator for such derivative financial instruments; and

(iii) perform AUP in order to agree as to whether the derivative financial instruments are used
exclusively for the purposes of hedging risks associated with currency exchange and interest
rates;

(f) perform ISAE 3000 procedures in respect of the reports issued by the Issuer or by the Cover Pool
Administrator to the NBR according to Article 36 of the Romanian Covered Bond Law;

(g) subject to receipt of the information to be provided to it by the Issuer and/or the Servicer on its
behalf, the Asset Monitor shall for the purposes of the Issuer obtaining any required issuance
approvals from the NBR in accordance with, without limitation, Article 22 (3) of the Romanian
Covered Bond Law and Article 5 (1)(d) and, if the case, Article 7(3) of the Romanian Covered Bond
Regulation prepare and submit to the Issuer an AUP Report in order to agree whether the Cover Pool
(in regard to structuring the Cover Pool and the Eligibility Criteria) and the Prospectus comply with
the requirements set out in the Romanian Covered Bond Legislation within 20 Bucharest Business
Days from the request of the Issuer for the purposes of the submission by the Issuer to the NBR of
the documents required under the Romanian Covered Bond Legislation to be submitted by the Issuer
to the NBR for the purposes of obtaining an NBR Approval. For the avoidance of any doubt, the
Asset Monitor will not perform any procedures in order to confirm if the Prospectus was prepared in
accordance with the Commission Regulation (EC) No. 809/2004 of 29 April 2004 implementing
Directive 2003/71/EC of the European Parliament and of the Council as regards information
contained in prospectuses as well as the format, incorporation by reference and publication of such
prospectuses and dissemination of advertisement. Moreover, the Asset Monitor will not perform any
procedures to confirm if the Prospectus is drafted / executed with the observance of applicable
capital market legislation;

(h) immediately but not later than within two (2) Bucharest Business Days upon ascertaining occurrence
of such breach, give notice to the Issuer, the NBR and the Covered Bondholders Representative in
relation to any breach by the Issuer of an obligation set out in the Romanian Covered Bond
Legislation or the Prospectus (including the Conditions), including without limitation if an Event of
Default occurs. A breach is considered to have occurred if: (i) an Asset Monitor Report issued
pursuant to the Asset Monitor’s obligations listed under this section results in an exception (for the
AUP) or a qualified opinion (for the ISAE 3000 procedure), as appropriate under the applicable
reporting standards listed above; or (ii) the Asset Monitor otherwise ascertains a relevant breach of
the Romanian Covered Bond Legislation or the Prospectus by the Issuer. Whenever the Issuer will
inform the Asset Monitor of the occurrence of such a breach, such notification will be given only in
writing, while expressly indicating that a breach occurred and describing the breach;

(i) as soon as possible but not later than within three (3) Bucharest Business Days of becoming aware of
such an event and obtaining relevant evidence of the occurrence of such event, give notice to the
NBR and the Covered Bondholders Representative if the Issuer does not remedy a breach of an
obligation set out in the Romanian Covered Bond Legislation or the Prospectus (including the
Conditions) within the deadline and as required thereunder;

(j) as soon as possible but not later than within five (5) Bucharest Business Days of becoming aware of
such an event and obtaining relevant evidence of the occurrence of such event, request the NBR to
appoint a Cover Pool Administrator when an event referred to under Article 40 (1) of the Romanian

223
 Covered Bond Law has occurred and give notice to the Covered Bondholders Representative of such
request;

(k) perform AUP in respect of the reports delivered pursuant to Article 43 (4) from the Romanian
Covered Bond Law as well as the documentation that the Cover Pool Administrator submits to the
NBR in order to consult with the NBR on the postponement of the maturity of the Covered Bonds,
the selling of all or a part of the Cover Pool, obtaining financing for coverage of a temporary
liquidity shortfall, or accelerating the payments of the Covered Bonds as provided in Article 44 (3) in
the Romanian Covered Bond Law;

(l) enter into and (within the deadline set out therein) register in the National Register in its name, but
on behalf of the Covered Bondholders, the Movable Mortgage over the Cover Pool and Collection
Accounts Agreement;

(m) perform AUP and submit to the Issuer the corresponding AUP Report as to whether a specific
change of the Prospectus made by the Issuer is in compliance with the Romanian Covered Bond
Legislation, as provided under the Asset Monitor Agreement;

(n) perform AUP and issue the corresponding AUP Report, as required by Article 22 (2) of the
Romanian Covered Bond Law as to whether the Covered Bonds will continue to meet the
requirements of Article 8 (5) of the Romanian Covered Bond Law (the Asset Coverage Test)
following the implementation of any operation referred to in Article 44 (3) of the Romanian Covered
Bond Law; and

(o) if the case, issue its prior approval on a transfer of the Covered Bonds and the Issuer’s obligations
towards the Covered Bondholders towards another issuer as referred to in Article 50 of the
Romanian Covered Bond Law.

Other than (i) in relation to the testing by the Asset Monitor of the arithmetic accuracy of the calculations
performed by the Issuer and/or the Servicer on the Issuer’s behalf in accordance with the provisions of the
Asset Monitor Agreement, (ii) the issuance of the ISAE 3000 Report in regard to the content of the
transparency reports (the Transparency Reports) and (iii) the verification as to whether the Cover Pool
Assets included in the Cover Pool fulfil the Eligibility Criteria, the Asset Monitor shall be entitled to assume
that all information provided to it by the Issuer and/or the Servicer, as further detailed in the Asset Monitor
Agreement, is true and correct and is complete and not misleading and the Asset Monitor not required to
conduct an audit or other similar examination in respect of or otherwise take steps to verify the accuracy or
completeness of such information or of any sources from which such information has been extracted by the
Issuer and/or the Servicer on the Issuer’s behalf. The Asset Monitor shall not be required by the Parties to
confirm whether the information provided to it by the Issuer and/or Servicer on the Issuer’s behalf (i) has
been accurately extracted from the sources identified therein or agrees with any underlying accounting or
other information or (ii) is presented in compliance with any relevant accounting or other definitions as to its
elements and composition.

On completion of its calculations and procedures in respect of an Asset Monitor Report, the Asset Monitor
will deliver the relevant Asset Monitor Reports to the Issuer and/or the Servicer (in their respective
capacities, collectively referred to as the Recipients) and the Issuer and / or the Servicer will then deliver it
to the Covered Bondholders Representative, for information purposes only and the Asset Monitor accepts no
responsibility or liability whatsoever towards the Covered Bondholders Representative in relation to Asset
Monitor Reports.

In addition, if and for so long as the long-term, unsecured, unguaranteed and unsubordinated debt obligation
ratings of the Issuer or the Servicer are below the Minimum Credit Rating or following the occurrence of an
Issuer Event, and subject to receipt of the information to be provided to the Asset Monitor by the Issuer

224
and/or the Servicer, the Asset Monitor shall perform AUP in order to agree with the mathematical accuracy
of the calculations of the Statutory Tests (including, as regards the Over-Collateralisation Test, in crisis
situations), the Cover Pool Average Maturity, the Covered Bonds Average Maturity and the Aggregate
Issuances Limit and consequently compliance by the Issuer with the respective legal requirements, as
applicable, in respect of the last calendar day of each calendar month, as applicable, as soon as reasonably
practicable (and in any event not later than 10 (ten) Bucharest Business Days following receipt of the
relevant information from the Issuer and/or the Servicer) and issue the corresponding AUP Report. If the
Servicer and the Issuer each regains long-term, unsecured, unguaranteed and unsubordinated debt obligation
ratings equal to the Minimum Credit Rating, the AUP procedures in regard to the Issuer’s and/or the
Servicer's calculations will be performed by the Asset Monitor in accordance with the section above, as
applicable and will issue the corresponding Asset Monitor Report.

If such AUP performed by the Asset Monitor, as applicable, reveals errors in the relevant calculations
performed by the Issuer and/or Servicer such that a Statutory Test, the Cover Pool Average Maturity, the
Covered Bonds Average Maturity and the Aggregate Issuances Limit has been failed on the relevant
calculation date (where the Servicer or the Issuer had recorded it as being satisfied) and subject to receipt of
the information to be provided to the Asset Monitor by the Issuer and/or the Servicer, as further detailed
under the Asset Monitor Agreement, for a period of six months thereafter the Asset Monitor shall perform
the corresponding AUP in regard to the Issuer's (or the Servicer if the case) above mentioned calculations in
respect of the last calendar day of each calendar month occurring during that six month period. The Asset
Monitor shall perform those AUP and issue the corresponding AUP Report as soon as reasonably practicable
and in any event not later than 10 (ten) Bucharest Business Days following receipt of the relevant
information from the Issuer and/or Servicer. These AUP Reports are not included in the reporting obligations
towards NBR and are delivered by the Asset Monitor solely to the Issuer and / or Servicer and only the
Issuer and / or Servicer are Recipients of these AUP Reports.

Undertakings of the Asset Monitor

The Asset Monitor shall undertake to the Issuer and the Covered Bondholders Representative that it shall:

(a) exercise reasonable skill and care in the performance of its obligations;

(b) comply with all material legal and regulatory requirements applicable to the conduct of its business,
including any provisions regarding the banking secrecy as provided in Article 51 paragraph 1 from
the Romanian Covered Bond Law and any data protection legal requirements as provided in the
relevant legislation so that it can lawfully attend to the performance of its obligations under the Asset
Monitor Agreement;

(c) enter into and maintain in force throughout its appointment as Asset Monitor a liability insurance to
cover risks from the activities performed as asset monitor according to the Asset Monitor Agreement
and the Romanian Covered Bond Legislation. The insurance policy must also cover the risks relating
to the individual appointed to act as permanent representative. The insured amount must be at least
equal to the double of the amount of the gross annual fees;

(d) within two (2) Bucharest Business Day from entering into an insurance policy as required under
paragraph (c) above, submit a copy of the policy and the related general terms to the Issuer, that will
forward it to the NBR;

(e) perform all necessary registrations of the mortgage created over the Cover Pool pursuant to the
Movable Mortgage over the Cover Pool and Collection Accounts Agreement, with the public
registries, such as the National Register;

(f) promptly and in any event within 20 Bucharest Business Days, transfer in favour of the Covered
Bondholders Representative, once appointed, the mortgage over the Cover Pool created pursuant to

225
 the Movable Mortgage over the Cover Pool and Collection Accounts Agreement as further provided
therein. The Asset Monitor undertakes to perform any registrations regarding such transfer with the
public registries, such as the National Register. Without limitation to the foregoing, the Asset
Monitor shall within five (5) Business Days after the date of the CBR Transfer Agreement, register
with the National Register the transfer of the Movable Mortgage from the name of the Asset Monitor
to the name of the Covered Bondholders Representative and provide the Covered Bondholders
Representative with proof of such registration having been completed pursuant to the applicable law;

(g) appoint from time to time an individual to act as permanent representative of the Asset Monitor it
being understood that the Asset Monitor will ensure that the appointed individual will meet all
requirements provided by the Romanian Covered Bond Legislation and that such individual will
exercise reasonable skill and care in the performance of its obligations under such appointment.

Fees

As at the Programme Closing Date, the Issuer or the Servicer, as applicable, will pay to the Asset Monitor a
fee for the services to be performed by the Asset Monitor plus any expenses validly incurred by the Asset
Monitor in respect of its services hereunder.

Termination

The appointment of the Asset Monitor, in respect of any specific issuance, shall terminate if it is not
approved by the NBR to act as asset monitor for any issuance under the Programme in the context of the
Issuer obtaining an NBR Approval for such issuance, such termination to take effect as of the date when a
replacement asset monitor appointed by the Issuer or the Cover Pool Administrator (if appointed) (where the
replacement is not appointed by the Cover Pool Administrator, such replacement to be approved, in advance,
by the Covered Bondholders Representative, which agrees to perform the duties (or substantially similar
duties) of the Asset Monitor set out in the Asset Monitor Agreement, has been approved by the NBR.

The Asset Monitor may, at any time, without liability (no termination penalty being payable by the Asset
Monitor to the other Parties), resign from its appointment upon providing the Issuer (who shall notify in its
turn the Rating Agency in this respect), the Servicer and the Covered Bondholders Representative with at
least 60 Bucharest Business Days (subject to the last sentence of this paragraph) prior written notice. Without
limitation, the Asset Monitor may resign from its appointment, on written notice if any action taken by the
Recipients causes a professional conflict of interest for the Asset Monitor under the rules of the professional
and/or regulatory bodies regulating the activities of the Asset Monitor. The Issuer (or after the appointment
of a Cover Pool Administrator, the Cover Pool Administrator) may, at any time but subject to the prior
written consent of the Covered Bondholders Representative (other than with respect to an action taken by the
Cover Pool Administrator), terminate the appointment of the Asset Monitor hereunder upon providing the
Asset Monitor with at least 30 Bucharest Business Days' prior written notice, provided that such termination
may not be effected unless and until a replacement asset monitor approved by the NBR has been appointed
by the Issuer or the Cover Pool Administrator (if appointed) (where the replacement is not appointed by the
Cover Pool Administrator, such replacement to be approved by the Covered Bondholders Representative,
which agrees to perform the duties (or substantially similar duties) of the Asset Monitor set out in the Asset
Monitor Agreement. However, at their absolute discretion, the Issuer or the Cover Pool Administrator shall
not be bound to comply with the 30 Bucharest Business Day prior notice and hence may terminate the
appointment of the Asset Monitor with immediate effect or subject to a shorter prior notice period if the
termination is triggered by failure of the Asset Monitor to comply with the eligibility conditions provided by
the Romanian Covered Bond Legislation and/or by the failure of the Asset Monitor to comply with its
obligations under the Asset Monitor Agreement and/or with its duties under the Romanian Covered Bond
Legislation, if such failure is not remedied by the Asset Monitor within 10 Bucharest Business Days upon
receipt of a written notice, provided that, in any case, such termination may not be effected unless and until a
replacement asset monitor approved by the NBR has been appointed.

226
Law and Jurisdiction

The Asset Monitor Agreement and any non-contractual obligations arising out of or in connection with it
will be governed by Romanian law. Any disputes arising out of or relating to the Asset Monitor Agreement,
including a dispute relating to any non-contractual obligations shall be settled by the competent Romanian
courts.

Covered Bondholders Representative Agreement

A Covered Bondholders Representative Agreement will be entered into by the Covered Bondholders
Representative who will be appointed by way of a resolution of the Covered Bondholders at the first meeting
of the Covered Bondholders to be held after the first issuance of Covered Bonds in accordance with, inter
alia, Article 23 of the Romanian Covered Bond Law. The form of the Covered Bondholders Representative
Agreement to be entered into by the Covered Bondholders Representative approved by the Covered
Bondholders is attached as an Annex to this Base Prospectus and will be attached to the resolution of the first
meeting of the Covered Bondholders and the Covered Bondholders Representative shall sign an acceptance
letter in order to confirm acceptance of the terms provided thereunder and the Issuer shall sign a letter of
confirmation and undertaking in relation to the Covered Bondholders Representative Agreement.

The Covered Bondholders Representative Agreement contains provisions relating to, inter alia:

(a) the terms and conditions of the appointment of the Covered Bondholders Representative, including
payment of its fees as approved by the first Covered Bondholders’ meeting;

(b) the obligations and duties to be performed by the Covered Bondholders Representative as
representative of the Covered Bondholders according to the Conditions and the Romanian Covered
Bond Legislation, including but not limited to, serving any Notice of Default where required;

(c) the transfer of the Movable Mortgage created under the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement from the Asset Monitor to the Covered Bondholders Representative
appointed by the Covered Bondholders and the registration of such transfer with the National
Register for opposability purposes;

(d) limits applicable to the representation powers of the Covered Bondholders Representative and the
liability of the Covered Bondholders Representative; and

(e) the circumstances in which the Covered Bondholders Representative may resign or be removed.

Law and Jurisdiction

The Covered Bondholders Representative Agreement and any non-contractual obligations arising out of or in
connection with it will be governed by Romanian law.

Agency Agreement

Under the terms of an Agency Agreement to be entered into on the Programme Closing Date between the
Issuer, the Principal Paying Agent (together with any paying agent appointed from time to time under the
Agency Agreement, the Paying Agents), the Transfer Agent and the Registrar, and subsequently acceded to
by the Covered Bondholders Representative following its appointment by the Covered Bondholders (as
described in “Covered Bondholders Representative Agreement” above) (the Agency Agreement), the Paying
Agents have agreed to provide the Issuer with certain agency services and have agreed, inter alia, to make
available for inspection such documents as may be required from time to time by the rules of the
Luxembourg Stock Exchange and to arrange for the publication of any notice to be given to the Covered
Bondholders.

227
For the purposes of Condition 4.2(d) (Screen Rate Determination for Floating Rate Covered Bonds), the
Agency Agreement provides that if the Relevant Screen Page is not available or if no offered quotation
appears or if fewer than three offered quotations appear, in each case as at 11.00 a.m. (London time in the
case of LIBOR, or Brussels time in the case of EURIBOR, or Bucharest time in the case of ROBOR (the
Specified Time)), the Principal Paying Agent shall request each of the reference banks to provide the
Principal Paying Agent with its offered quotation (expressed as a percentage rate per annum) for the
reference rate at approximately the Specified Time on the Interest Determination Date in question. If two or
more of the reference banks provide the Principal Paying Agent with offered quotations, the Rate of Interest
for the Interest Period shall be the arithmetic mean (rounded if necessary to the fifth decimal place, with
0.000005 being rounded upwards) of the offered quotations plus or minus (as appropriate) the Margin (if
any), all as determined by the Principal Paying Agent.

For the purposes of Condition 4.2(d) (Screen Rate Determination for Floating Rate Covered Bonds), the
Agency Agreement also provides that if on any Interest Determination Date only one or none of the
reference banks provides the Principal Paying Agent with an offered quotation, the Rate of Interest for the
relevant Interest Period shall be the rate per annum which the Principal Paying Agent determines as being the
arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of
the rates, as communicated to (and at the request of) the Principal Paying Agent by the reference banks or
any two or more of them, at which such banks were offered, at approximately the Specified Time on the
relevant Interest Determination Date, deposits in the Specified Currency for a period equal to that which
would have been used for the reference rate by leading banks in the London interbank market (if the
reference rate is LIBOR) or the Eurozone interbank market (if the reference rate is EURIBOR) or the
Bucharest interbank market (if the reference rate is ROBOR) plus or minus (as appropriate) the Margin (if
any) or, if fewer than two of the reference banks provide the Principal Paying Agent with offered rates, the
offered rate for deposits in the Specified Currency for a period equal to that which would have been used for
the reference rate, or the arithmetic mean (rounded as provided above) of the offered rates for deposits in the
Specified Currency for a period equal to that which would have been used for the reference rate, at which, at
approximately the Specified Time on the relevant Interest Determination Date, any one or more banks
(which bank or banks is or are in the opinion of the Issuer suitable for the purpose) inform the Principal
Paying Agent it is quoting to leading banks in the London interbank market (if the reference rate is LIBOR)
or the Eurozone interbank market (if the reference rate is EURIBOR) plus or minus (as appropriate) the
Margin (if any), provided that, if the Rate of Interest cannot be determined in accordance with the foregoing
provisions of this section, the Rate of Interest shall be determined as at the last preceding Interest
Determination Date (though substituting, where a different Margin is to be applied to the relevant Interest
Period from that which applied to the last preceding Interest Period, the Margin relating to the relevant
Interest Period in place of the Margin relating to that last preceding Interest Period).

Law and Jurisdiction

The Agency Agreement and any non-contractual obligations arising out of or in connection with it will be
governed by English law.

For the purposes of this section, any capitalised terms have the meanings given to them in the “Terms and
Conditions of the Covered Bonds”.

Movable Mortgage over the Cover Pool and Collection Accounts Agreement

The Issuer shall create, in accordance with the provisions of Romanian law, including Article 29 of the
Romanian Covered Bond Law, a Romanian law-governed movable mortgage (the Movable Mortgage) over
the Cover Pool pursuant to a movable mortgage agreement (the Movable Mortgage over the Cover Pool
and Collection Accounts Agreement). Pursuant to the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement, a movable mortgage will also be created over the ABR Collection Accounts
and Third Party Collection Accounts. In accordance with the Romanian Covered Bond Law, the Movable

228
Mortgage over the Cover Pool and Collection Accounts Agreement shall be entered into between the Issuer,
as mortgagor, and the Asset Monitor, in its name and on behalf of the Covered Bondholders, as secured
creditor, and registered with the National Register for opposability purposes prior to the first issuance of
Covered Bonds under the Programme. The Movable Mortgage shall be transferred from the name of the
Asset Monitor to the name of the Covered Bondholders Representative following the appointment of the
Covered Bondholders Representative as described under “Covered Bondholders Representative Agreement”
above.

The form of the Movable Mortgage over the Cover Pool and Collection Accounts Agreement to be entered
into by the Issuer and the Asset Monitor on the Programme Closing Date is attached as an Annex to this
Base Prospectus.

Law and Jurisdiction

The Movable Mortgage over the Cover Pool and Collection Accounts Agreement and any non-contractual
obligations arising out of or in connection with it will be governed by Romanian law.

Deed of Charge

Pursuant to the terms of the Deed of Charge entered into on the Programme Closing Date by, amongst
others, the Issuer and the Security Trustee the obligations of the Issuer towards the Cover Pool Secured
Creditors under or pursuant to the Transaction Documents to which it is a party are secured by: (i) an
assignment by way of first fixed security over all of the Issuer’s interests, rights and entitlements under and
in respect of any English Charged Document; and (ii) a first fixed charge (which may take effect as a floating
charge) over the rights and benefits of the Transaction Accounts and all amounts standing to the credit of the
Transaction Accounts.

English Charged Documents means the Transaction Documents (other than the Deed of Charge and the
Romanian law-governed Transaction Documents) to which the Issuer is, or may become, a party and which
are assigned (by way of security) to the Security Trustee pursuant to the Deed of Charge, and each an
English Charged Document.

The Deed of Charge will also provide that (other than in certain limited circumstances) only the Security
Trustee (acting on the instructions of the Cover Pool Administrator) may enforce the security created under
the Deed of Charge. The proceeds of any such enforcement of the Deed of Charge will be required to be
applied in accordance with the order of priority set out in the Romanian Covered Bond Legislation.

Release of Security

In accordance with the Deed of Charge, all amounts which the Servicer (on behalf of the Issuer) is permitted
to withdraw from the Transaction Accounts pursuant to the terms of the Deed of Charge will be released
from the security created pursuant to the Deed of Charge. In addition, upon the Issuer or the Servicer making
a disposal of an Eligible Financial Asset (to the extent governed by English law) charged under the Deed of
Charge and provided that the proceeds of such disposal are paid into the relevant Transaction Account in
accordance with the terms of the Servicing and Cash Management Agreement, that Eligible Financial Asset
(to the extent governed by English law) will be released from the security created pursuant to the Deed of
Charge.

At such time that all of the obligations owing by the Issuer to the Cover Pool Secured Creditors have been
discharged in full, the Security Trustee will, at the request and cost of the Issuer, take whatever action is
necessary to release the assets charged pursuant to the Deed of Charge from the security granted thereunder,
or to the order of, the Issuer.

229
Enforcement

If a Notice of Default is served on the Issuer and a Cover Pool Administrator is appointed, the Security
Trustee (acting on the instruction of the Cover Pool Administrator and, where required, the instructions of
the Covered Bondholders) shall be entitled to enforce the security constituted by the Deed of Charge, and/or
take such steps as it shall deem necessary, subject in each case to being indemnified and/or secured to its
satisfaction. All proceeds received by the Cover Pool Administrator from the enforcement of the Deed of
Charge Security will be applied in accordance with the Romanian Covered Bond Legislation.

Law and Jurisdiction

The Deed of Charge and any non-contractual obligations arising out of or in connection with it will be
governed by English law.

Hedging Agreements

To hedge against possible variances in the rates of interest payable on the Loans in the Cover Pool and
EURIBOR for one, three or six month Euro deposits or ROBOR for one, three or six month RON deposits,
as applicable, the Issuer may enter into an Interest Rate Swap with an Interest Rate Swap Provider in respect
of any Series of Covered Bonds under an Interest Rate Swap Agreement.

In addition, to hedge against interest rate and/or other risks in respect of amounts received by the Issuer
under the Loans in the Cover Pool and Interest Rate Swaps and amounts payable by the Issuer under the
Covered Bonds, the Issuer may enter into a Covered Bond Swap with a Covered Bond Swap Provider in
respect of a Series of Covered Bonds under a Covered Bond Swap Agreement between the Issuer and a
Covered Bond Swap Provider.

Any Interest Rate Swap Agreement and/or Covered Bond Swap Agreement will be entered into between the
Issuer, the relevant Interest Rate Swap Provider or Covered Bond Swap Provider and the Covered
Bondholders Representative in the form of the 1992 ISDA Master Agreement (Multicurrency – Cross
Border), as published by ISDA (ISDA Master Agreement), including a schedule and one or more
confirmations and a credit support annex.

Law and Jurisdiction

Any Interest Rate Swap Agreement (and each Interest Rate Swap thereunder), any Covered Bond Swap
Agreement (and each Covered Bond Swap thereunder) and any non-contractual obligations arising out of or
in connection with it will be governed by English law.

Bank Account Agreement

Pursuant to the terms of the Bank Account Agreement to be entered into on the Programme Closing Date
between the Account Bank, the Issuer and the Servicer (and subsequently acceded to by the Covered
Bondholders Representative once it has been appointed as described in “Covered Bondholders
Representative Agreement” above), the Servicer will maintain with the Account Bank the offshore bank
accounts, which will be operated in accordance with the Servicing and Cash Management Agreement and the
Deed of Charge (the Offshore Bank Accounts).

If the Account Bank ceases to satisfy the requirements of an Eligible Institution (which constitutes any bank
which has the Account Bank Required Ratings, provided that such ratings are always sufficient for the
Covered Bonds to comply with Article 129(1)(c) of the CRR) (or such other ratings that may be agreed
between the parties to the Bank Account Agreement and the relevant Rating Agency from time to time), then
unless the Account Bank within 30 calendar days of such occurrence obtains an unconditional and unlimited
guarantee (in a form acceptable to the Rating Agency) of its obligations under the Bank Account Agreement

230
from a financial institution satisfying the requirements of an Eligible Institution and provided that the Rating
Agency has provided a Rating Agency Confirmation, the Servicer or the Issuer shall:

(a) immediately serve a written notice of termination of the Bank Account Agreement on the relevant
Account Bank (such termination to be effective on the later of the date falling three Bucharest
Business Days following service of such notice and the date on which the relevant replacement bank
account(s) is established with an entity which is an Eligible Institution);

(b) open replacement accounts with a financial institution which is an Eligible Institution; and

(c) once the relevant replacement account bank has been established:

 if an affected Offshore Bank Account is a Transaction Account, immediately transfer

amounts standing to the credit of the Transaction Account to any replacement Transaction
Account and close the affected Transaction Account;

 if an affected Offshore Bank Account is a Swap Collateral Account, immediately transfer

amounts standing to the credit of that Swap Collateral Account to any replacement Swap
Collateral Account and close the affected Swap Collateral Account; and

 immediately transfer amounts standing to the credit of all other affected Offshore Bank
Accounts held with the Account Bank (if any) to any replacement accounts and close all
other affected Offshore Bank Accounts.

Swap Collateral Account means any swap collateral account which may be opened after the Programme
Closing Date in accordance with the terms of any Hedging Agreement and the Bank Account Agreement.

The costs arising from any remedial action taken by the Account Bank, following its ratings ceasing to
satisfy the requirements of an Eligible Institution shall be borne by the Account Bank. For the avoidance of
doubt, the Issuer will be responsible for any costs associated with the replacement of the Account Bank.

The Bank Account Agreement and any non-contractual obligations arising out of or in connection with it
will be governed by English law.

Issuer-ICSDs Agreement

The Issuer will enter into an Issuer-ICSDs Agreement with Euroclear Bank S.A./N.V. and Clearstream
Banking SA (the ICSDs) in respect of any Covered Bonds issued in NGCB form. The Issuer-ICSDs
Agreement provides that the ICSDs will, in respect of any such NGCBs, maintain their respective portion of
the issue outstanding amount through their records.

The Issuer-ICSDs Agreement and any non-contractual obligations arising out of or in connection with it will
be governed by English law.

231
 TAXATION

Romania

The information presented within this section regarding the tax implications of purchase, holding or sale of
Covered Bonds in Romania is of a general nature and included herein solely for information purposes. The
purpose of this section is not to provide an exhaustive description of all possible tax matters, which may be
of relevance in respect of the decision of purchasing the Covered Bonds. Specifically, this section does not
deal with any particular factors or situations that may apply to any individual investor. This summary is not
intended to be, nor should it be construed to be, legal or tax advice. This summary is based on the Romanian
laws in force as at the date of this Base Prospectus, which may be amended from time to time. The
information presented within this section is limited only to taxation matters connected to the investment
decision, and accordingly potential investors shall not apply the information below to any other business
areas, including (but not limited to) the legal aspects of Covered Bonds transactions.

Pursuant to the Romanian Fiscal Code and the related methodological norms (approved by Government
Decision No. 1/2016 regarding the Methodological Norms of the Fiscal Code, as subsequently amended) (the
Methodological Norms), income derived from corporate bonds is generally taxable in Romania.

Definitions

For determining the tax consequences in Romania for Covered Bondholders, the following definitions
provided by the Romanian Fiscal Code will apply:

Romanian resident individual means any individual who fulfils at least one of the following conditions:

(a) has his/her domicile in Romania;

(b) has his/her centre of vital interests located in Romania;

(c) is present in Romania for a period or for several periods exceeding in aggregate 183 days during any
12 consecutive months, which ends in the calendar year concerned; and

(d) is a Romanian citizen who works abroad as an officer or an employee of Romania in a foreign state.

non-resident individual means any individual which does not fulfil any of the conditions stated above for a
“Romanian resident individual”, as well as any individual who is a foreign citizen with diplomatic or
consular statute in Romania, any foreign citizen who is an officer or employee of an international or inter-
governmental entity, any foreign citizen who is an officer or employee of a foreign state in Romania or their
family members.

Romanian legal entity means a legal entity which has been incorporated and functions according to
Romanian law.

legal entity set-up according to the European legislation means any legal entity incorporated under the
laws of the European Union.

foreign legal entity means any legal entity which is not a Romanian legal entity and any legal entity
incorporated according to the European legislation which does not have its registered office in Romania.

resident in Romania means any Romanian legal entity or any foreign legal entity which has its place of
effective management in Romania, any legal entity having its registered office in Romania, which is
incorporated according to the European legislation and any Romanian resident individual.

232
non-resident means any foreign legal entity, any non-resident individual and any other foreign entities,
including collective investment vehicles without legal personality, which are not registered in Romania in
accordance with Romanian law.

interest is defined as any amount which must be paid or received for the use of money, regardless of
whether it must be paid or received in relation to a debt, in connection with a deposit or in accordance with a
financial leasing contract, instalment sale or other deferred payment sale.

affiliated parties means persons whose connection to another person is defined by at least one of the
following characteristics:

(a) a natural person is affiliated with another natural person if such persons are spouses or relatives up to
and including the third degree;

(b) a natural person is affiliated with a legal person if that person owns, directly or indirectly, the
holdings of the legal person representing a minimum of 25% of the value/number of the participation
titles or of the voting rights held in the legal person, or if it actually controls the legal person;

(c) a legal person is affiliated with another legal person if the former holds at least, directly or indirectly,
the holdings of the affiliated person representing a minimum of 25% of the value/number of the
participation titles or of the voting rights held in the other legal person, or if it actually controls the
legal person; and

(d) a legal person (person a) is affiliated with another legal person (person b) if a third person holds,
directly or indirectly, a minimum of 25% of the value/number of the participation titles or of the
voting rights held in, or if it actually controls, both person a and person b.

Taxation of Covered Bondholders resident in Romania for tax purposes and compliance obligations

Taxation of interest and compliance obligations

Romanian resident legal entities

Interest received on the Covered Bonds by resident legal entities in the form of interest on the Covered
Bonds will be subject to corporate income tax (profit tax) at a rate of 16% at the level of said entity.

If the resident entity applies the micro-enterprise regime, then the interest income will be included in the
taxable base (representing the gross income), to which a 1% rate is applied (if the entity has at least one
employee) or a 3% rate is applied for legal entities that do not have any employees.

Covered Bondholders who are resident legal entities will receive the gross amount of interest in respect of
Covered Bonds held.

Romanian tax resident individual Bondholders

As the bonds are issued by a Romanian resident company (Alpha Bank Romania SA), the income generated
by holding them and/or by disposing of them is considered income generated in Romania.

Interest income received by Romanian resident individuals is subject to income tax at the rate of 10%. The
income tax is withheld at source by the payer of income and the Romanian resident individual receives only
the net amount. The tax is final and no income tax reporting obligation arises for individual Bondholder.

Individuals deriving interest income are required to pay also the health insurance contribution if the annual
interest income solely or aggregated with other revenues derived during the year (e.g. interest income,

233
dividend income, rental or self-employment income) is at least equal to the value of 12 minimum gross
salary income (currently RON 2,080). In this case, the individual is required to pay the health insurance
contribution of 10% due on a computation base which is capped at the value of 12 minimum gross salary
income (for the year 2019, the annual health insurance contribution is capped at RON 496) and report the
health insurance contribution by means of the annual return. The general deadline for filing is 15 March of
the current year for the revenues derived in the previous year and for the revenues estimated to be derived in
the current year. The deadline to settle the health insurance contributions liabilities is 15 March of the year
following the one the income was derived.

Romanian collective investment vehicles without legal personality and pension funds

No payment or tax compliance obligations will arise in respect of interest derived from holding the Covered
Bonds via collective investment vehicles without legal personality and pension funds set up in accordance
with Romanian legislation.

Taxation of capital gains and compliance obligations

Capital gains are not defined as such by the Romanian Fiscal Code. Generally, taxable income resulting from
the transfer of securities is computed as the positive difference between the sale price and the acquisition
price, less the costs related to the transaction.

Romanian resident legal entities

Capital gains derived by resident legal entities from the transfer of Covered Bonds will be subject to
corporate income tax (profit tax) at a rate of 16% at the level of said legal entities.

In the case of resident legal entities applying the micro-enterprises regime, the income derived from the sale
of the Covered Bonds will be included in the taxable base (representing the gross income), to which a 1%
rate is applied (if the entity has at least one employee) or a 3% rate is applied for the legal entities that do not
have any employees.

No tax is withheld at source in respect of capital gains.

Romanian collective investment vehicles without legal personality and pension funds

No payment or tax compliance obligations will arise in respect of the capital gains derived from trading the
Covered Bonds via collective investment vehicles without legal personality and pension funds set up in
accordance with Romanian legislation.

Taxation of Covered Bondholders not resident in Romania for tax purposes and compliance obligations

Taxation of interest and compliance obligations

Legal entities not tax resident in Romania

Interest paid to non-resident legal entities in connection with the Covered Bonds will not be taxable in
Romania, and therefore no tax will be withheld at source, given that the Covered Bonds are issued under a
prospectus approved by the competent regulatory authority (the Romanian Financial Supervisory
Authority).

An exception applies to interest paid to an affiliated company, where interest is subject to the domestic 16%
withholding tax. The tax may be reduced or eliminated based on a double taxation treaty. In order to benefit
from the more favourable provisions of a double taxation treaty, the non-resident related party should obtain
and provide to the payer of income a fiscal residency certificate (valid for the respective fiscal year) issued

234
by the tax authorities of its country of residence, in original or in notarised photocopy form. Under certain
conditions, the exemption provided for interest payments by the EU Interest and Royalties Directive
(2003/49/EC) may apply for payments between associated companies.

No reporting obligations shall arise for the non-resident legal entities.

Collective investment vehicles without legal personality and pension funds without legal personality not tax
resident in Romania

Interest paid to non-resident collective investment vehicles without legal personality and pension funds
without legal personality in connection with the Covered Bonds will not be taxable in Romania, and
therefore no tax will be withheld at source, given that the Covered Bonds are issued under a prospectus
approved by the Romanian Financial Supervisory Authority.

No reporting obligations shall arise for the non-resident collective investment vehicles without legal
personality and pension funds without legal personality.

Taxation of capital gains and compliance obligations

Capital gains obtained by non-resident legal entities

Capital gains derived by non-residents from trading the Covered Bonds on foreign markets are non-taxable
in Romania. Any non-resident should seek advice as to whether such gains are taxable in its jurisdiction. No
reporting obligations arise in Romania.

Capital gains derived from trading the Covered Bonds on the Romanian market by non-resident legal entities
or from the transfer of Covered Bonds issued by Romanian residents are considered to be Romanian-sourced
income, regardless of whether received in Romania or abroad, and are thus subject to taxation in Romania.

Capital gains from the transfer of Covered Bonds obtained by non-resident legal entities are subject to 16%
tax or reduced/nil tax based on the provisions of the double taxation treaty between Romania and the country
of residence of the non-resident. Irrespective of the tax rate applied (including nil tax), non-residents must
appoint a Romanian-resident tax agent in order to register, declare and settle (if the case) any tax liabilities in
the name and on behalf of the non-resident legal entity. Direct tax registration, although provided by
Romanian law for certain non-residents, is not achievable in practice and any non-resident should seek
advice in this respect.

In order to benefit from the more favourable provisions of a double taxation treaty, non-residents should
obtain and provide to an appointed Romanian tax agent a fiscal residency certificate issued by the tax
authorities of its country of residence and valid for the relevant fiscal year, in original or in notarised
photocopy form.

Collective investment vehicles without legal personality not tax resident in Romania and any other non-
resident assimilated vehicles without legal personality

Capital gains derived by non-resident collective investment vehicles without legal personality and any other
non-resident assimilated vehicles without legal personality (the latter being recognised by the relevant
regulatory body authorising their activity on that particular market) from trading the Covered Bonds on both
Romanian and foreign markets are non-taxable in Romania.

There are no tax registration and compliance obligations in Romania for collective investment vehicles
without legal personality not tax resident in Romania or any other non-resident assimilated vehicles without
legal personality receiving capital gains.

235
Pension funds without legal personality not tax resident in Romania trading on the Romanian market

Capital gains derived by pension funds without legal personality and non-tax resident in Romania from
trading the Covered Bonds on foreign markets are non-taxable in Romania. Any non-resident should seek
advice as to whether such gains are taxable in its jurisdiction. No reporting obligations arise in Romania.

Capital gains derived by pension funds without legal personality and non-tax resident in Romania from
trading the Covered Bonds on the Romanian market or from the transfer of Covered Bonds issued by
Romanian residents are considered as Romanian-sourced income, regardless of whether received in Romania
or abroad, and are thus subject to taxation in Romania.

Capital gains from the transfer of Covered Bonds obtained by non-residents are subject to 16% tax or
reduced/nil tax based on the provisions of any double taxation treaty between Romania and the country of
residence of the non-resident. Irrespective of the tax rate applied (including nil tax), non-residents must
appoint a Romanian-resident tax agent in order to register, declare and settle (if the case) any tax liabilities in
the name and on behalf of the non-residents. Direct tax registration, although provided by Romanian law for
certain non-residents, is not achievable in practice and non-residents should seek advice in this respect.

In order to benefit from the more favourable provisions of a double taxation treaty, non-residents should
obtain and provide to an appointed Romanian tax agent a fiscal residency certificate issued by the tax
authorities of its country of residence and valid for the respective fiscal year, in original or in notarised
photocopy form.

Tax on acquisition and redemption of the Covered Bonds on the Final Maturity Date

At the moment when the Covered Bondholders acquire the Covered Bonds, they will exchange cash for an
asset in the form of the Covered Bonds and this event should not trigger any tax implications for them in
Romania.

On the Final Maturity Date, the Issuer will redeem the Covered Bonds and will repay, through the Principal
Paying Agent, in full the principal amounts outstanding on the Covered Bonds, plus any accrued or unpaid
interest. According to the Romanian tax rules, the repayment of principal is not subject to any tax. Therefore,
provided that the Covered Bonds were originally purchased by the Covered Bondholders at face value, the
repayment of principal by the Issuer on the Final Maturity Date should not trigger any tax consequences.

To the extent that the Covered Bonds were initially issued at a discount, or acquired by a Covered
Bondholder at a discount, income on the redemption at maturity will arise. In these circumstances, such
income might be classified as a capital gain, incurring the tax treatment described above under “Taxation –
Romania – Taxation of capital gains and compliance obligations”.

Value added tax considerations

Investment transactions concerning financial instruments, such as the Covered Bonds, are generally VAT
exempt without deduction right.

Foreign Account Tax Compliance Act

Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, as amended, commonly known as
FATCA, a foreign financial institution (as defined by FATCA) may be required to withhold on certain
payments it makes (foreign passthru payments) to persons that fail to meet certain certification, reporting,
or related requirements. The Issuer is a foreign financial institution for these purposes. A number of
jurisdictions (including Romania) have entered into, or have agreed in substance to, intergovernmental
agreements with the United States to implement FATCA (IGAs), which modify the way in which FATCA
applies in their jurisdictions. Under the provisions of IGAs as currently in effect, a foreign financial

236
institution in an IGA jurisdiction would generally not be required to withhold under FATCA or an IGA from
payments that it makes. Certain aspects of the application of FATCA provisions and IGAs to instruments
such as Covered Bonds, including whether withholding would ever be required pursuant to FATCA or an
IGA with respect to payments on instruments such as the Covered Bonds, are uncertain and may be subject
to change. Even if withholding would be required pursuant to FATCA or an IGA with respect to payments
on instruments such as Covered Bonds, such withholding would not apply prior to 1 January 2019 and
Covered Bonds characterised as debt (or which are not otherwise characterised as equity and have a fixed
term) for U.S. federal tax purposes that are issued on or prior to the date that is six months after the date on
which final regulations defining foreign passthru payments are filed with the U.S. Federal Register generally
would be grandfathered for purposes of FATCA withholding unless materially modified after such date
(including by reason of a substitution of the Issuer). However, if additional Covered Bonds (as described
under Condition 15 (Further Issues)) that are not distinguishable from previously issued Covered Bonds are
issued after the expiration of the grandfathering period and are subject to withholding under FATCA, then
withholding agents may treat all Covered Bonds, including the Covered Bonds offered prior to the expiration
of the grandfathering period, as subject to withholding under FATCA. Holders should consult their own tax
advisers regarding how these rules may apply to their investment in Covered Bonds. In the event that any
withholding would be required pursuant to FATCA or an IGA with respect to payments on the Covered
Bonds, no person will be required to pay additional amounts as a result of withholding.

The proposed financial transactions tax (FTT)

On 14 February 2013, the European Commission published a proposal (the Commission’s Proposal) for a
Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal,
Slovenia and Slovakia (the participating Member States). However, Estonia has since stated that it will not
participate.

The Commission’s Proposal has very broad scope and could, if introduced, apply to certain dealings in the
Covered Bonds (including secondary market transactions) in certain circumstances. The issuance and
subscription of the Covered Bonds should, however, be exempt.

Under the Commission’s Proposal, the FTT could apply in certain circumstances to persons both within and
outside of the participating Member States. Generally, it would apply to certain dealings in Covered Bonds
where at least one party is a financial institution, and at least one party is established in a participating
Member State. A financial institution may be, or be deemed to be, “established” in a participating Member
State in a broad range of circumstances, including (a) by transacting with a person established in a
participating Member State or (b) where the financial instrument which is subject to the dealings is issued in
a participating Member State.

However, the FTT proposal remains subject to negotiation between participating Member States. It may
therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU
Member States may decide to participate.

Prospective holders of Covered Bonds are advised to seek their own professional advice in relation to the
FTT.

Luxembourg Taxation

The following information is of a general nature only and is included herein solely for information purposes.
It is based on the laws presently in force in Luxembourg, though it is not intended to be, nor should it be
construed to be, legal or tax advice. The information contained within this section is limited to Luxembourg
withholding tax issues and prospective investors in the Covered Bonds should therefore consult their own
professional advisers as to the effects of state, local or foreign laws, including Luxembourg tax law, to which
they may be subject.

237
Please be aware that the residence concept used under the respective headings below applies for Luxembourg
income tax assessment purposes only. Any reference in the present section to a withholding tax or a tax of a
similar nature, or to any other concepts, refers to Luxembourg tax law and/or concepts only.

Withholding Tax

(a) Non-resident holders of Covered Bonds

Under Luxembourg general tax laws currently in force, there is no withholding tax on payments of
principal, premium or interest made to non-resident holders of Covered Bonds, nor on accrued but
unpaid interest in respect of the Covered Bonds, nor is any Luxembourg withholding tax payable
upon redemption or repurchase of the Covered Bonds held by non-resident holders of Covered
Bonds.

(b) Resident holders of Covered Bonds

Under Luxembourg general tax laws currently in force and subject to the law of 23 December 2005
(as amended) (the Relibi Law) mentioned below, there is no withholding tax on payments of
principal, premium or interest made to Luxembourg resident holders of Covered Bonds, nor on
accrued but unpaid interest in respect of Covered Bonds, nor is any Luxembourg withholding tax
payable upon redemption or repurchase of Covered Bonds held by Luxembourg resident holders of
Covered Bonds.

Under the Relibi Law, payments of interest or similar income made or ascribed by a paying agent
established in Luxembourg to an individual beneficial owner who is a resident of Luxembourg will
be subject to a withholding tax of 20%. Such withholding tax will be in full discharge of income tax
if the beneficial owner is an individual acting in the course of the management of his/her private
wealth. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying
agent. Accordingly, payments of interest under the Covered Bonds coming within the scope of the
Law will be subject to a withholding tax at a rate of 20%.

238
 SUBSCRIPTION AND SALE

Covered Bonds may be issued from time to time by the Issuer to any one or more of the Dealers. The
arrangements under which Covered Bonds may from time to time be agreed to be issued by the Issuer to, and
subscribed by, Dealers are set out in a Programme Agreement dated 8 April 2019 (such Programme
Agreement as amended and/or supplemented and/or restated from time to time, the Programme
Agreement) and made between the Issuer and the Dealer. Any such agreement will, inter alia, make
provision for the form and terms and conditions of the relevant Covered Bonds, the price at which such
Covered Bonds will be subscribed by the Dealers and the commissions or other agreed deductibles (if any)
payable or allowable by the Issuer in respect of such subscription. The Programme Agreement makes
provision for the resignation or termination of appointment of existing Dealers and for the appointment of
additional or other Dealers either generally in respect of the Programme or in relation to a particular Tranche
of Covered Bonds. The Programme Agreement will be supplemented on or around the date of each issuance
by a Subscription Agreement, which will set out, inter alia, the relevant underwriting commitments. The
Issuer may pay the Dealers commissions from time to time in connection with the sale of any Covered
Bonds. In the Programme Agreement, the Issuer has agreed to reimburse and indemnify the Dealers for
certain of their expenses and liabilities in connection with the establishment and any future updates of the
Programme and the issue of Covered Bonds under the Programme. The Dealers are entitled to be released
and discharged from their obligations in relation to any agreement to purchase Covered Bonds under the
Programme Agreement in certain circumstances prior to payment to the Issuer.

United States

The Covered Bonds have not been and will not be registered under the Securities Act or the securities laws
or “blue sky” laws of any state or other jurisdiction of the United States and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions
exempt from, or not subject to, the registration requirements of the Securities Act and any applicable local,
State or Federal securities laws. Terms used in this paragraph have the meanings given to them by
Regulation S under the Securities Act.

The Covered Bonds in bearer form are subject to U.S. tax law requirements and may not be offered, sold or
delivered within the United States or its possessions or to U.S. persons, except in certain transactions
permitted by U.S. Treasury regulations. Terms used in this paragraph have the meanings given to them by
the United States Internal Revenue Code of 1986 and U.S. Treasury regulations promulgated thereunder. The
applicable Final Terms will identify whether the C Rules or the D Rules apply or whether TEFRA is not
applicable.

Each Dealer has represented and, agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that it will not offer, sell or deliver Covered Bonds (i) as part of its
distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of the Tranche
of Covered Bonds of which such Covered Bonds are a part, as determined and certified by the relevant
Dealer, in the case of a non-syndicated issue, or the lead manager, in the case of a syndicated issue, within
the United States or to, or for the account or benefit of, U.S. persons except in either case in accordance with
Regulation S under the Securities Act. Each Dealer has further agreed, and each further Dealer appointed
under the Programme will be required to agree, that it will send to each dealer to which it sells any Covered
Bond during the distribution compliance period a confirmation or other notice setting forth the restrictions on
offers and sales of the Covered Bonds within the United States or to, or for the account or benefit of, U.S.
persons. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities
Act.

Until 40 days after the commencement of the offering of any Series of Covered Bonds, an offer or sale of
such Covered Bonds within the United States by any dealer (whether or not participating in the offering) may

239
violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in
accordance with an available exemption from registration under the Securities Act.

Prohibition of Sales to EEA Retail Investors

Unless the Final Terms in respect of any Covered Bonds specifies “Prohibition of Sales to EEA Retail
Investors” as “Not Applicable”, the Dealer has represented and agreed, and each further Dealer appointed
under the Programme will be required to represent and agree, that it has not offered, sold or otherwise made
available and will not offer, sell or otherwise make available any Covered Bonds which are the subject of the
offering contemplated by this Base Prospectus as completed by the Final Terms in relation thereto to any
retail investor in the European Economic Area. For the purposes of this provision:

(a) the expression retail investor means a person who is one (or more) of the following:

(i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended,
MiFID II);

(ii) a customer within the meaning of Directive 2002/92/EC (as amended or superseded, the
Insurance Mediation Directive), where that customer would not qualify as a professional
client as defined in point (10) of Article 4(1) of MiFID II; or

(iii) not a qualified investor as defined in Directive 2003/71/EC (as amended or superseded, the
Prospectus Directive); and

(b) the expression an offer includes the communication in any form and by any means of sufficient
information on the terms of the offer and the Covered Bonds to be offered so as to enable an investor
to decide to purchase or subscribe to the Covered Bonds.

If the Final Terms in respect of any Covered Bonds specifies “Prohibition of Sales to EEA Retail Investors”
as “Not Applicable”, in relation to each Member State of the European Economic Area which has
implemented the Prospectus Directive (each, a Relevant Member State), the Dealer has represented and
agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that
with effect from and including the date on which the Prospectus Directive is implemented in that Relevant
Member State (the Relevant Implementation Date) it has not made and will not make an offer of Covered
Bonds which are the subject of the offering contemplated by this Base Prospectus as completed by the Final
Terms in relation thereto to the public in that Relevant Member State except that it may, with effect from and
including the Relevant Implementation Date, make an offer of such Covered Bonds to the public in that
Relevant Member State:

(a) at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(b) at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in the
Prospectus Directive) subject to obtaining the prior consent of the Dealer or Dealers nominated by
the Issuer for any such offer; or

(c) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of Covered Bonds referred to in (a) to (c) above shall require the Issuer or any
Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus
pursuant to Article 16 of the Prospectus Directive.

240
For the purposes of this provision:

(a) the expression an offer of Covered Bonds to the public in relation to any Covered Bonds in any
Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and the Covered Bonds to be offered so as to enable an investor
to decide to purchase or subscribe the Covered Bonds, as the same may be varied in that Member
State by any measure implementing the Prospectus Directive in that Member State; and

(b) the expression Prospectus Directive means Directive 2003/71/EC (as amended, including by
Directive 2010/73/EU), and includes any relevant implementing measure in each Relevant Member
State.

United Kingdom

The Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of
Section 21 of the Financial Services and Markets Act 2000) received by it in connection with the
issue or sale of any Covered Bonds in circumstances in which Section 21(1) of the Financial
Services and Markets Act 2000 does not apply to the Issuer; and

(b) it has complied and will comply with all applicable provisions of the Financial Services and Markets
Act 2000 with respect to anything done by it in relation to any Covered Bonds in, from or otherwise
involving the United Kingdom.

Romania

The Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that:

(a) it has complied and will comply with: (i) the public offer selling restrictions under the Prospectus
Directive, described above in this section; and (ii) all applicable provisions of Romanian Law No. 24
of 21 March 2017 regarding issuers of financial instruments and market operations, implementing
into Romanian law the Prospectus Directive, as amended and in force, of Regulation No. 5/2018 on
issuers and operations with securities, and implementing norms issued or approved by the Romanian
National Securities Commission, the Romanian Financial Supervisory Authority or any other
competent Romanian authority and applicable EU legislation; and

(b) it is authorised to perform financial investment services in Romania and any other operations it may
be purported to carry out in Romania in relation to the Programme and it will comply with any
applicable laws, rules and regulations of Romania, including Law No. 297/2004 regarding capital
markets, as amended and supplemented, Law No. 24/2017 on issuers and market operations, and all
implementing regulations issued by the Romanian Financial Supervisory Authority or by the
European Commission.

Japan

The Covered Bonds have not been and will not be registered under the Financial Instruments and Exchange
Act of Japan (Act No. 25 of 1948, as amended, the FIEA) and the Dealer has represented and agreed, and
each further Dealer appointed under the Programme will be required to represent and agree, that it has not
directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Covered Bonds, in
Japan or to, or for the benefit of, any resident of Japan (as defined under item 5, paragraph 1, Article 6 of the

241
Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, as amended)), or to others for re-offering or
resale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan, except pursuant to an
exemption from the registration requirements of, and otherwise in compliance with, the FIEA and any other
applicable laws, regulations and ministerial guidelines of Japan.

Republic of France

The Dealer and the Issuer has represented and agreed, and each further Dealer appointed under the
Programme will be required to represent and agree, that:

(a) it has only made and will only make an offer of Covered Bonds to the public in France following the
notification of the approval of this Prospectus to the Autorité des marchés financiers (AMF) by the
Commission de Surveillance du Secteur Financier and in the period beginning on the date of the
publication of the Final Terms relating to the offer of Covered Bonds and ending at the latest on the
date which is 12 months after the date of the approval of this Prospectus by Commission de
Surveillance du Secteur Financier, all in accordance with Articles L.412-1 and L.621-8 of the French
Code monétaire et financier and the Règlement général of the AMF; or

(b) it has not offered or sold and will not offer or sell, directly or indirectly, Covered Bonds to the public
in France, and has not distributed or caused to be distributed and will not distribute or cause to be
distributed to the public in France, the Base Prospectus, the relevant Final Terms or any other
offering material relating to the Covered Bonds, and that such offers, sales and distributions have
been and will be made in France only to (i) providers of investment services relating to portfolio
management for the account of third parties, and/or (ii) qualified investors (investisseurs qualifiés),
other than individuals, all as defined in, and in accordance with, Articles L.411-1, L.411-2, D.411-1
and D.411-3 of the French Code monétaire et financier.

Belgium

Other than in respect of Covered Bonds for which “Prohibition of Sales to Belgian Consumers” is specified
as “Not Applicable” in the applicable Final Terms, the Dealer has represented and agreed, and each further
Dealer appointed under the Programme will be required to represent and agree, that an offering of Covered
Bonds may not be advertised to any individual in Belgium qualifying as a consumer within the meaning of
Article I.1 of the Belgian Code of Economic Law, as amended from time to time (a Belgian Consumer) and
that it has not offered, sold or resold, transferred or delivered, and will not offer, sell, resell, transfer or
deliver, the Covered Bonds, and that it has not distributed, and will not distribute, any prospectus,
memorandum, information circular, brochure or any similar documents in relation to the Covered Bonds,
directly or indirectly, to any Belgian Consumer.

General

The Dealer has agreed, and each further Dealer appointed under the Programme will be required to agree,
that it will comply with (to the best of its knowledge and belief) all applicable securities laws and regulations
in force in any jurisdiction in which it purchases, offers, sells or delivers Covered Bonds or possesses or
distributes this Base Prospectus and will obtain any consent, approval or permission required by it for the
purchase, offer, sale or delivery by it of Covered Bonds under the laws and regulations or directives in force
in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and
neither the Issuer, the Covered Bondholders Representative nor any of the other Dealers shall have any
responsibility therefor.

None of the Issuer, the Covered Bondholders Representative or any of the Dealers represents that Covered
Bonds may at any time lawfully be sold in compliance with any applicable registration or other requirements
in any jurisdiction, or pursuant to any exemption available thereunder, or assumes any responsibility for
facilitating such sale.

242
 GENERAL INFORMATION

Approval, listing and admission to trading

Application has been made to the CSSF to approve this document as a base prospectus. Application has also
been made to the Luxembourg Stock Exchange for the Covered Bonds issued under the Programme to be
admitted to trading on the Luxembourg Stock Exchange’s regulated market and to be listed on the Official
List of the Luxembourg Stock Exchange. The Luxembourg Stock Exchange’s regulated market is a regulated
market for the purposes of the MiFID Product Governance rules under EU Delegated Directive 2017/593.

Application will be made to the Bucharest Stock Exchange for Covered Bonds issued under the Programme
to be admitted to trading on the regulated market of the Bucharest Stock Exchange. There is no assurance
that, when made, such application for admission of the Covered Bonds to trading on the regulated market of
the Bucharest Stock Exchange will be accepted.

However, Covered Bonds may be issued pursuant to the Programme which will not be listed on the
Luxembourg Stock Exchange, the Bucharest Stock Exchange or any other stock exchange or which will be
listed on such stock exchange as the Issuer and the Dealer(s) may agree.

Authorisations

The establishment, implementation and operation of the Programme and the issue of Covered Bonds have
been duly confirmed and authorised by the general meeting of the shareholders of the Issuer dated 5
November 2018 and in accordance with, inter alia, Article 4(1) of the Romanian Covered Bond Law, by the
National Bank of Romania on 26 February 2019.

Post-issuance information

The Issuer provides quarterly Investor Reports detailing, among other things, compliance with the Statutory
Tests. This information will be available on the Issuer’s website (www.alphabank.ro).

Litigation

There are no governmental, legal or arbitration proceedings (including any such proceedings which are
pending or threatened of which the Issuer is aware), during the 12 months preceding the date of this Base
Prospectus which may have, or have had in such period, significant effects on the Issuer’s financial position
or profitability.

No significant or material change

Since 31 December 2017 (the last day of the financial period in respect of which the most recent audited
financial statements of the Issuer have been prepared), there has been no material adverse change in the
prospects of the Issuer. Since 30 June 2018, there has been no significant change in the financial or trading
position of the Issuer.

Documents available for inspection

For a period of 12 months following the date of this Base Prospectus, copies of the following documents
will, when published, be available for inspection from the registered office of the Issuer, from the specified
offices of the Paying Agents or the Luxembourg Listing Agent and, save for the items listed under (e) below,
will also be available on the websites of the Issuer and of the Bucharest Listing Agent:

(a) the constitutional documents (with an English translation thereof) of the Issuer;

243
(b) the audited annual financial statements of the Issuer in respect of the financial years ended 31
December 2017 and 31 December 2016 (with an English translation thereof), in each case together
with the audit reports prepared in connection therewith;

(c) the unaudited interim financial statements of the Issuer for the period ended 30 June 2018 (with an
English translation thereof);

(d) the most recently published audited annual financial statements of the Issuer and the most recently
published unaudited interim financial statements of the Issuer (with an English translation thereof
and in each case with any audit or review reports prepared in connection therewith);

(e) the Programme Agreement, the Deed of Charge, the Covered Bondholders Representative
Agreement, the Agency Agreement, and the forms of the Global Covered Bonds, the Covered Bonds
in definitive form, the Coupons and the Talons;

(f) a copy of this Base Prospectus; and

(g) any future offering circulars, prospectuses, information memoranda, supplements and Final Terms
(save that a Final Terms relating to a Covered Bond which is neither admitted to trading on a
regulated market in the European Economic Area nor offered in the European Economic Area in
circumstances where a prospectus is required to be published under the Prospectus Directive will
only be available for inspection by a holder of such Covered Bond and such holder must produce
evidence satisfactory to the Issuer and the Principal Paying Agent as to its holding of Covered Bonds
and identity) to this Base Prospectus and any other documents incorporated herein or therein by
reference.

In addition, copies of this Base Prospectus, any supplement to the Base Prospectus, any documents
incorporated by reference and each Final Terms relating to Covered Bonds which are admitted to trading on
the official list of the Luxembourg Stock Exchange and the Bucharest Stock Exchange will also be available
for inspection free of charge from the website of the Luxembourg Stock Exchange, at www.bourse.lu and, as
regards the Base Prospectus and any supplement to the Base Prospectus, also from the website of the
Bucharest Stock Exchange, at www.bvb.ro.

Clearing Systems

The Covered Bonds have been accepted for clearance through Euroclear and Clearstream, Luxembourg
(which are the entities in charge of keeping the records) and also for clearance through the Bucharest Central
Depository. The appropriate Common Code and ISIN for each Tranche of Covered Bonds allocated by
Euroclear and Clearstream, Luxembourg will be specified in the applicable Final Terms. If the Covered
Bonds are to clear through an additional or alternative clearing system, the appropriate information will be
specified in the applicable Final Terms.

The address of Euroclear is Euroclear Bank S.A./N.V., 1 Boulevard du Roi Albert II, B-1210 Brussels; the
address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg
and the address of the Bucharest Central Depository is 34-36 Carol I Boulevard 020922, Floors 3, 8 and 9,
Bucharest 2, Romania.

Conditions for determining price

The price and amount of Covered Bonds to be issued under the Programme will be determined by the Issuer
and the Dealer at the time of issue in accordance with prevailing market conditions.

244
Yield

In relation to any Tranche of Fixed Rate Covered Bonds, an indication of the yield in respect of such
Covered Bonds will be specified in the applicable Final Terms. The yield is calculated at the Issue Date of
the Covered Bonds on the basis of the relevant Issue Price. The yield indicated will be calculated as the yield
to maturity as at the Issue Date of the Covered Bonds and will not be an indication of future yield.

Independent Auditor

The statutory auditors of the Issuer are Deloitte Audit S.R.L., of 4-8 Sos. Nicolae Titulescu, East Entrance,
2nd Floor – Deloitte area and 3rd Floor, Bucharest, 011141, Romania (the Auditor). The Auditor was
appointed for the first time on 6 July 2017. The Auditor is a member of the Chamber of Financial Auditors of
Romania.

The financial statements of the Issuer as of and for the financial year ended 31 December 2017 have been
prepared in accordance with IFRS as adopted by the European Union and have been audited by the Auditor,
resulting in the unqualified report referenced herein.The separate financial statements of the Issuer as of and
for the year ended 31 December 2016 included in this Base Prospectus have been prepared in accordance
with IFRS as adopted by the European Union and have been audited by KPMG Audit S.R.L., of Victoria
Business Park DN1, 69-71 Sos. Bucuresti-Ploiesti, Sector 1, Bucharest, 013685, Romania, P.O. Box 18-191
(KPMG), independent auditors, as stated in the report appearing herein. KPMG is a member of the Chamber
of Financial Auditors of Romania.The interim financial statements of the Issuer for the six month period
ended 30 June 2018 included in the Base Prospectus, have not been audited or reviewed.

Each of the Auditor and KPMG has no material interest in the Issuer.

245
 INDEX

€ ............................................................................ 5 Business Day Convention .................................. 93

2013 Issuing Bank Agreement ......................... 163 Calculation Agent .............................................. 86
30/360 ................................................................. 94 Calculation Amount ......................................... 102
30E/360 .............................................................. 95 Capital Requirements Regulation ...................... 67
30E/360 (ISDA).................................................. 95 CDD ................................................................. 212
360/360 ............................................................... 94 CET 1............................................................... 156
ABR .................................................................... 49 Civil Code .......................................................... 25
ABR Collection Accounts .......................... 72, 220 Clearstream, Luxembourg ....................59, 82, 120
Account Bank ..................................................... 50 Code ................................................................... 97
Accrual Period .................................................... 94 Collection Accounts....................................72, 220
Accrual Yield.................................................... 102 Collection Period ............................................... 78
Actual/360 .......................................................... 94 Collection Period End Date ............................... 78
Actual/365 (Fixed).............................................. 94 Collection Period Start Date .............................. 78
Actual/365 (Sterling) .......................................... 94 Common Depositary ........................................ 120
Actual/Actual ...................................................... 94 Common Safekeeper........................................ 120
Actual/Actual (ICMA)........................................ 94 Conditions .................................................3, 54, 80
Actual/Actual (ISDA) ......................................... 94 Couponholders ................................................... 80
Additional Cover Pool Assets .......................... 217 Coupons ............................................................. 80
adjusted ............................................................... 96 Cover Pool ..............................................1, 60, 217
ADR.................................................................. 148 Cover Pool Administrator .................................. 52
AFR .................................................................. 149 Cover Pool Asset ........................................60, 217
Agency Agreement ............................... 76, 79, 227 Cover Pool Secured Creditors ....................57, 102
Agents ................................................................. 80 Covered Bond Swap Agreement ....................... 77
ALCO ............................................................... 185 Covered Bond Swap Provider ........................... 52
AMF ................................................................. 242 Covered Bondholder .................................3, 80, 82
AML IV ............................................................ 212 Covered Bondholders Representative ...........51, 79
Amortised Face Amount................................... 106 Covered Bondholders Representative Agreement
ANEVAR ......................................................... 198 ........................................................................... 75
Annual Financial Statements ............................ 188 Covered Bondholders Reserved Matter ........... 114
ANPC ....................................................... 166, 199 Covered Bonds .................................................... 1
applicable Final Terms ....................................... 80 CRA ................................................................. 160
Asset Coverage Test ........................................... 69 CRA Regulation .....................................2, 44, 132
Asset Monitor ..................................................... 49 CRD IV ............................................................ 201
Asset Monitor Agreement .................................. 75 CRR ................................................................... 67
Auditor.......................................................... 8, 245 CSSF .................................................................... 1
Banking Licence ............................................... 147 Day Count Fraction............................................ 94
Base Prospectus ............................................ 1, 124 Dealer................................................................... 1
Basel III ........................................................ 24, 37 Deed of Charge .................................................. 76
BCBS ............................................................ 24, 37 Definitive Covered Bonds ................................. 79
Bearer Covered Bonds ........................................ 54 Deloitte ............................................................ 192
Bearer Definitive Covered Bonds....................... 79 Designated Account ........................................... 99
Benchmarks Regulation........................................ 2 Designated Bank ................................................ 99
Bond Basis .......................................................... 94 Designated Maturity .....................................86, 87
Borrower ............................................................. 26 Determination Date............................................ 96
Broken Amount .................................................. 84 Determination Period ......................................... 96
BRRD ................................................................. 23 Dispute ............................................................. 119
Bucharest Business Day ..................................... 68 distributor......................................................4, 124
Bucharest Central Depository....................... 59, 82 DSTI ................................................................ 199
Bucharest Listing Agent ..................................... 53 Early Redemption Amount .............................. 102
Bucharest Stock Exchange ............................. 1, 82 EBA ................................................................. 180
Business Day ...................................................... 93 EBRD............................................................... 147

246
EBRD Guarantees ............................................ 163 Insolvency Event ............................................. 216
EEA .............................................................. 4, 124 Insurance Mediation Directive .....................4, 240
EFSE ................................................................. 162 Interest Amount ................................................. 87
Eligibility Criteria............................................... 65 Interest Commencement Date.......................55, 96
Eligible Financial Assets ............................ 62, 218 Interest Payment Date ...................................85, 96
EMIR ................................................................ 116 Interest Period .........................................55, 85, 96
English Charged Document .............................. 229 Interest Rate Swap Agreement .......................... 77
ESMA ................................................................... 2 Interest Rate Swap Provider .............................. 52
Established Rate ............................................... 102 Interim Financial Statements ........................... 188
EU ......................................................................... 1 Internal Cover Pool Register ............................. 36
EUR ...................................................................... 5 Investor Put ...................................................... 105
EUR Transaction Account .................................. 73 Investor Report .................................................. 78
Euro .............................................................. 5, 102 Investor’s Currency ........................................... 48
Eurobond Basis................................................... 95 ISDA Definitions ..........................................55, 85
Euroclear............................................... 59, 82, 120 ISDA Determination .......................................... 85
Event of Default ......................................... 74, 109 ISDA Rate.......................................................... 85
Exchange Date .................................................. 120 Issue Date .......................................................... 54
Exchange Event ........................................ 121, 122 Issue Price .......................................................... 58
Exchange Notice............................................... 101 Issuer .........................................................1, 49, 79
FATCA ............................................................. 236 Issuer Call ........................................................ 104
FGDB ............................................................... 205 Issuer Event ................................................69, 108
FIEA ................................................................. 241 Issuer Insolvency Event ..............................63, 109
Final Maturity Date ............................................ 58 KPMG.............................................................. 192
Final Redemption Amount ............................... 100 Late Payment ................................................... 107
Final Terms..................................................... 1, 54 Late Payment Date........................................... 107
Financial Statements ......................................... 188 Law .................................................................. 238
Fixed Coupon Amount ....................................... 84 Law 77/2016 .................................................... 174
Fixed Interest Period..................................... 84, 96 Law no. 151/2015 .............................................. 25
Fixed Rate Covered Bonds ................................. 54 Law no. 193/2000 ............................................ 166
Floating Rate ...................................................... 86 LCR ..........................................................178, 202
Floating Rate Convention ................................... 93 leu ........................................................................ 5
Floating Rate Covered Bonds ............................. 55 Liquidity Facility Provider ................................ 53
Floating Rate Option .......................................... 86 Liquidity Test .................................................... 69
Following Business Day Convention ................. 93 Loan Assets.................................................61, 217
foreign financial institution .............................. 236 Loans ..........................................................61, 217
foreign passthru payments ................................ 236 Long Maturity Covered Bond ............................ 98
FX loans ............................................................. 15 Luxembourg Listing Agent................................ 53
GDPR ......................................................... 23, 211 Luxembourg Stock Exchange .............................. 1
General Bail-in ................................................... 23 Margin ............................................................... 55
General Data Protection Regulation ................. 160 Master Definitions and Construction Schedule . 81
GEO 50/2010 .................................................... 199 Maximum Rate of Interest ................................. 55
GEO 52/2016 .................................................... 199 Member State ....................................................... 5
Global Covered Bond ......................................... 79 MiFID II .......................................1, 124, 210, 240
GO No. 13/2011 ............................................... 213 MiFID Product Governance Rules ...................... 4
Hedging Agreement............................................ 76 MiFIR .............................................................. 210
Hedging Counterparty ........................................ 52 Minimum Credit Rating..................................... 72
holder of Covered Bonds .................................... 82 Minimum Rate of Interest ...........................55, 103
ICSDs ............................................................... 231 Modified Following Business Day Convention. 93
IFC .................................................................... 159 Monthly Calculation Date.................................. 68
IFC Guarantees ................................................. 163 Moody’s ............................................................. 53
IFIs.................................................................... 159 Movable Mortgage........................................... 228
IFRS.................................................................. 188 Movable Mortgage over the Cover Pool............ 84
IGAs ................................................................. 236
Individual Loan Agreement .............................. 162

247
Movable Mortgage over the Cover Pool Related Security ................................................. 61
Agreement and Collection Accounts Agreement Relevant Date .................................................. 110
.................................................................... 75, 228 relevant Dealer ..................................................... 1
MREL ................................................................. 24 Relevant Implementation Date ........................ 240
MRR ................................................................. 204 Relevant Member State.................................5, 240
MSEs ................................................................ 162 Replacement Servicer ...................................... 216
National Bank of Romania ................................... 1 Reserve Ledger .................................................. 73
National Register ................................................ 57 Reserve Ledger Required Amount .............74, 221
NBR ................................................................ 1, 81 Reset Date .......................................................... 86
NBR Approval .................................................... 28 retail investor ................................................... 240
New Asset Type ................................................. 65 Romanian Banking Act.................................... 201
NGCB ......................................................... 98, 120 Romanian BRR Law .....................................23, 60
not adjusted......................................................... 96 Romanian Covered Bond Law......................56, 80
Notice of Default ................................ 74, 103, 110 Romanian Covered Bond Legislation ...........56, 80
NPLs ................................................................... 15 Romanian Covered Bond Regulation ...........56, 81
NSFR ........................................................ 178, 202 Romanian Insolvency Law .........................60, 118
NSS ................................................................... 122 RON ..................................................................... 5
offer .................................................................. 240 RON Transaction Account ................................ 73
offer of Covered Bonds to the public ............... 241 Screen Rate Determination .............................. 103
Offshore Bank Accounts .................................. 230 SDD ................................................................. 212
Optional Redemption Amount.......................... 103 Securities Act ....................................................... 4
Optional Redemption Date ............................... 103 SEE .................................................................. 148
Over-Collateralisation Test................................. 68 Segregation Event .......................................72, 220
Paying Agents....................................... 50, 79, 227 Selection Date .................................................. 104
Payment Day .................................................... 100 Series ............................................................53, 80
Payment Services Directive 2 ........................... 160 Servicer .............................................................. 49
PEPs.................................................................. 212 Servicer Reports ................................................ 71
Potential Event of Default ................................ 103 Servicer Termination Event ........................71, 216
Preceding Business Day Convention .................. 94 Servicing and Cash Management Agreement .... 75
PRIIPs Regulation ........................................ 4, 124 Servicing and Cash Management Services ........ 49
Principal Amount Outstanding ........................... 96 SME ................................................................. 148
Principal Paying Agent ................................. 50, 79 Specified Currency .......................................79, 81
Privileged Creditors .......................................... 103 Specified Denomination .................................... 79
Programme ........................................................... 1 Specified Period ................................................. 85
Programme Agreement ..................................... 239 Specified Time ................................................. 228
Programme Closing Date ................................... 78 State ..................................................................... 5
Programme Payment Date .................................. 74 Statutory Test ..................................................... 67
Prospectus Act 2005 ............................................. 1 Subscription Agreement .................................... 77
Prospectus Directive ........... 1, 4, 80, 124, 240, 241 sub-unit .............................................................. 97
PSD II ............................................................... 210 Swap Collateral Account ................................. 231
Put Notice ......................................................... 105 Talons ................................................................ 80
Rate of Interest ................................................. 103 TARGET2 ......................................................... 93
Rating Agency .................................................... 53 TARGET2 System ............................................. 93
Rating Agency Confirmation.............................. 40 Temporary Global Covered Bond ................... 120
RCC .................................................................. 166 Tranche .........................................................53, 80
Redeemed Covered Bonds ............................... 104 Transaction Accounts ........................................ 73
Redenomination Date ............................... 103, 118 Transaction Documents ..................................... 77
Reference Price................................................. 103 Transfer Agent ..............................................50, 80
Register ............................................................... 99 Treaty ............................................................... 103
Registered Definitive Covered Bonds ................ 79 VaR .................................................................. 176
Registrar ....................................................... 50, 79 Zero Coupon Covered Bonds ............................ 56
Regulation S ......................................................... 4

248
 ANNEX

COVERED BONDHOLDERS REPRESENTATIVE AGREEMENT AND MOVABLE MORTGAGE

OVER THE COVER POOL AND COLLECTION ACCOUNTS AGREEMENT

A-1
EXECUTION VERSION

SPECIFIC TERMS OF APPOINTMENT

of the
COVERED BONDHOLDERS REPRESENTATIVE

under the

€1 billion Global Covered Bond Programme of

Alpha Bank Romania S.A. as Issuer

Radu Tărăcilă Pădurari Retevoescu SCA in association with Allen & Overy LLP
A-2
 CONTENTS

Sections Page

1. Definitions, Interpretation and Construction ......................................................................................... 1

2. Appointment of the Covered Bondholders Representative ................................................................... 4
3. Rights and Obligations .......................................................................................................................... 5
4. Terms and Conditions of Appointment ............................................................................................... 12
5. Liability ............................................................................................................................................... 15
6. Remuneration and Indemnification of the Covered Bondholders Representative .............................. 18
7. Termination ......................................................................................................................................... 19
8. Notices ................................................................................................................................................. 20
9. Confidentiality ..................................................................................................................................... 20
10. Miscellaneous ...................................................................................................................................... 21
11. Governing Law .................................................................................................................................... 21
12. Dispute Resolution .............................................................................................................................. 21
Schedule 1 ........................................................................................................................................................ 22
Provisions for General Meetings of Covered Bondholders .............................................................................. 22
Schedule 2 ........................................................................................................................................................ 27
Form of Notice of Default ................................................................................................................................ 27
Schedule 3 ........................................................................................................................................................ 29
Form of Acceptance Letter ............................................................................................................................... 29
Appendix 1 ...................................................................................................................................................... 31
Specific Terms of Appointment of the Covered Bondholders Representative ................................................. 31
Schedule 4 ........................................................................................................................................................ 32
Letter of confirmation and undertaking by the Issuer relating to the Terms of Appointment (this
Issuer Letter)..................................................................................................................................................... 32

A-3
THESE SPECIFIC TERMS OF APPOINTMENT OF THE COVERED BONDHOLDERS
REPRESENTATIVE (the Terms of Appointment) were approved in the general meeting of covered
bondholders dated [date to be inserted] following the issuance by Alpha Bank Romania S.A., as issuer (the
Issuer) of the first series of covered bonds under a €1 billion Global Covered Bond Programme (the
Programme) established in accordance with the Romanian Covered Bond Legislation, with further series
(each, a Series) of covered bonds (the Covered Bonds) being envisaged to be issued under the Programme.

Upon the Covered Bondholders Representative issuing the Acceptance Letter in accordance with these
Terms of Appointment, these Terms of Appointment together with the Acceptance Letter shall constitute the
Covered Bondholders Representative Agreement (the Covered Bondholders Representative Agreement)
as referred to in the prospectus relating to the Programme dated [date to be inserted] (the Prospectus).

WHEREAS:

(A) The Issuer issued on [date to be inserted] under the Programme the EUR [to be inserted] [to be
inserted]% Covered Bonds due [maturity to be inserted] (the First Series of Covered Bonds).

(B) In accordance with the Romanian Covered Bond Law, the holders of the First Series of Covered
Bonds issued under the Programme must appoint a representative to represent Covered Bondholders
collectively in their dealings with the Issuer and other relevant third parties in connection with the
Programme and the Covered Bonds. The terms and conditions of the appointment of such
representative were approved by the holders of the First Series of Covered Bonds in a general
meeting held in accordance with the Romanian Covered Bond Law on [date to be inserted] and
such terms and conditions are further set out herein.

(C) Pursuant to the resolution of the general meeting of Covered Bondholders dated [date to be
inserted], the Covered Bondholders agreed to appoint [name of entity appointed to act as Covered
Bondholders Representative to be inserted together with all identification details.] to act as
representative of the covered bondholders under and in accordance with article 23 (1) of the
Romanian Covered Bond Law and these Terms of Appointment (the Nominated Representative).

1. DEFINITIONS, INTERPRETATION AND CONSTRUCTION

(a) Defined Terms. Wherever used in these Terms of Appointment, unless the context otherwise
requires, the following terms have the following meanings:

Acceptance Letter means the letter of acceptance substantially in the form set out in Schedule 3
(Form of Acceptance Letter) signed and dispatched by the Nominated Representative in accordance
with, among others, Section 2 (b) below.

Bucharest Business Day means a day (other than a Saturday or Sunday or a statutory holiday in
Romania) on which commercial banks are open for general business (including dealings in foreign
exchange and foreign currency deposits) in Bucharest.

Civil Code means the Civil Code as republished in the Official Gazette of Romania No. 505 of 15
July 2011, approved by Law No. 287 of 17 July 2009 regarding the Civil Code and Law No. 71 of 3
June 2011 regarding the application of the Civil Code, as such may be amended at any time.

Covered Bondholders has the meaning given to it under the Master Definition and Construction
Schedule.

Covered Bondholders Representative means the Nominated Representative who has accepted its
appointment made under the resolution of the general meeting of the Covered Bondholders by
issuing an Acceptance Letter.

A-4
Covered Bondholders Resolution means a resolution passed at a general meeting of the Covered
Bondholders, convened and held in accordance with the Romanian Covered Bond Law, the Terms
and Conditions and (where applicable) these Terms of Appointment, with the majority required by
the Romanian Covered Bond Law and/or, if higher, with the majority required by the Terms and
Conditions of the Covered Bonds including any resolution passed at the general meeting of the First
Series of Covered Bondholder prior to the appointment of the Covered Bondholders Representative.

EMIR means Regulation (EU) no. 648/2012 of the European Parliament and of the Council of 4
July 2012 on OTC derivatives, central counterparties and trade repositories, as published in the
European Union Official Journal L, 201 of 27 July 2012, as amended.

Financial Supervisory Authority means the Financial Supervisory Authority (in Romanian,
Autoritatea de Supraveghere Financiară), as regulated in accordance with Government Emergency
Ordinance No. 93 of 18 December 2012 regarding the creation, organisation and functioning of the
Financial Supervisory Authority, as published in the Official Gazette of Romania No. 874 of 21
December 2012 and as approved by Law No. 113 of 23 April 2013, as amended.

First Series of Covered Bonds has the meaning given to such term in Preamble (A) above.

Issuer Letter means the letter of confirmation and undertaking by the Issuer substantially in the
form set out in Schedule 4 (Letter of confirmation and undertaking by the Issuer relating to the
Terms of Appointment) signed and dispatched by the Issuer to the Covered Bondholders
Representative as referred to in Section 2(b) below.

Movable Mortgage over the Cover Pool and Collection Accounts Agreement means the movable
mortgage agreement entered into on 8 April 2019 between the Issuer, as mortgagor, and the Asset
Monitor, as asset monitor, on behalf of the Covered Bondholders, whereby a Romanian law
governed movable mortgage was created over the Cover Pool Assets and Collection Accounts to
secure the Covered Bonds pursuant to the provisions of the Romanian Covered Bond Legislation
(including without limitation Article 22 (1) (m) and Article 29 (2) and (3) of the Romanian Covered
Bond Law).

National Register means the National Register for Movable Publicity (in Romanian, Registrul
National de Publicitate Mobiliara) as regulated in accordance with Law No. 297 of 3 December
2018 regarding the National Register for Movable Publicity and for the abolishment of Government
Decision No. 89/2000 regarding certain measures for the authorisation of operators and carrying out
of the registrations in the Electronic Archive for Movable Security, as published in the Official
Gazette No. 1040 of 7 December 2018, or any similar public register, replacing the National
Register.

NBR means the National Bank of Romania.

NBR Approval means each approval of the NBR granted pursuant to Article 4 of the Romanian
Covered Bond Law and Article 7 (2) and (3) of the Romanian Covered Bond Regulation.

Romanian Covered Bond Law means Law No. 304 of 27 November 2015 on issuances of covered
bonds, as published in the Official Gazette of Romania No. 902 of 4 December 2015, as such may be
amended from time to time.

Romanian Covered Bond Legislation means the Romanian Covered Bond Law and the Romanian
Covered Bond Regulation as well as any other Romanian law or similar normative act or regulation
or secondary act issued by the NBR for the application or by reference to the Romanian Covered
Bond Law.

Romanian Covered Bond Regulation means Regulation No. 1 of 3 March 2016 on issuances of

A-5
 covered bonds, as published in the Official Gazette of Romania No. 184 bis of 11 March 2016, as
such may be amended from time to time.

(b) Certain Additional Defined Terms. The terms and expressions defined in the preamble to and recitals
preceding these Terms of Appointment constitute an integral part hereof and the respective meanings
of such terms and expressions are herein incorporated by reference.

(c) Master Definitions and Construction Schedule Defined Terms. Wherever used in these Terms of
Appointment, unless the context otherwise requires or it is otherwise provided, terms beginning with
capital letters have the meanings given to such terms in the Terms and Conditions of the Covered
Bonds or the master definitions and construction schedule signed by, among others, the Issuer, for
the purpose of identification on 8 April 2019 (Master Definitions and Construction Schedule).

(d) Interpretation. In these Terms of Appointment, unless the contrary intention appears, references to:

(i) these Terms of Appointment shall, upon the Covered Bondholders Representative issuing
the Acceptance Letter in accordance with these Terms of Appointment, be deemed to be
references to the Covered Bondholders Representative Agreement;

(ii) the Prospectus and/or the Master Definitions and Construction Schedule and/or Terms
and Conditions and/or the Terms of Appointment or the Covered Bondholders
Representative Agreement (as applicable) shall be construed as references to the
Prospectus and/or the Master Definitions and Construction Schedule, Terms and Conditions
and/or the Terms of Appointment or the Covered Bondholders Representative Agreement (as
applicable) as such has been amended, restated and/or supplemented from time to time;

(iii) an amendment and the phrase amended includes any change, modification, supplement,
novation, variation, increase, extension (whether of maturity or otherwise), restatement, re-
enactment or replacement (however fundamental and whether or not more onerous) and
amended will be construed accordingly;

(iv) a law includes any law, ordinance, regulation, rule, official directive, request or guideline,
which is mandatory to be complied with, of any governmental, intergovernmental or
supranational body, agency, department, regulatory or other authority or organisation, and
legal shall be construed accordingly;

(v) any statute, law, act, contract, instrument or document are references to such statute, law,
act, contract, instrument or document as amended, modified, assigned, novated, restated or
re-enacted and include references to every law, instrument, decision, consent or document
made thereunder or pursuant thereto. Reference to a certain piece of legislation or identified
provision or article of a piece of legislation shall be construed as reference to that piece of
legislation, provision or article, as such may be amended, republished or replaced at any
time; and

(vi) any phrase introduced by the terms including, include, in particular, such as or any similar
expression shall be construed as illustrative and shall not limit the scope of the words
preceding or following those terms.

(e) Number and Persons. In these Terms of Appointment, unless the contrary intention appears, words
importing the singular number only shall include the plural and vice versa, words importing the
masculine gender shall include the feminine and neuter genders and vice versa and words importing
persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and
companies and vice versa.

(f) Sections and References. The division of these Terms of Appointment into Sections and the insertion

A-6
 of headings are for the convenience of reference only and shall not affect the construction or
interpretation of these Terms of Appointment. The terms these Terms of Appointment, hereof,
pursuant hereto and similar expressions refer to these Terms of Appointment and not to any
particular Section or other portion hereof and include any agreement or instrument supplemental or
ancillary hereto. Unless something in the subject matter or context is inconsistent therewith,
references herein to Sections are to Sections of these Terms of Appointment.

2. APPOINTMENT OF THE COVERED BONDHOLDERS REPRESENTATIVE

(a) Further to the Covered Bondholders Resolution dated [date to be inserted], the Nominated
Representative was appointed by the holders of the First Series of Covered Bonds issued under the
Programme as the representative of the Covered Bondholders in accordance with the provisions of
Article 23 (1) of the Romanian Covered Bond Law in relation to the First Series of Covered Bonds
and all future Series of Covered Bonds issued under the Programme, and such appointment shall be
effective upon the signing and dating by the Nominated Representative of the Acceptance Letter.

(b) Within 5 (five) Bucharest Business Days as of the date of its nomination by the Covered
Bondholders (such date being the date of the Covered Bondholders Resolution referred to under
paragraph (a) above), the Nominated Representative shall sign and dispatch an acceptance letter
substantially in the form attached as Schedule 3 (Form of Acceptance Letter) hereto, in order to agree
to, and confirm, the terms of its appointment as described in these Terms of Appointment and the
Issuer shall give notice of such acceptance to the Covered Bondholders according to Condition 16
(Notices) of the Terms and Conditions of the Covered Bonds.

(c) For clarity purposes, the Covered Bondholders have the right to reconfirm the appointment of the
then appointed Covered Bondholders Representative or to appoint a new Covered Bondholders
Representative after each issue by the Issuer of a new Series of Covered Bonds, by way of a Covered
Bondholders Resolution. Notwithstanding the foregoing, to the maximum extent permitted by
applicable law, if, irrespective of the reason, the Covered Bondholders (i) do not require the Covered
Bondholders Representative to convene a meeting of Covered Bondholders that is quorate for such
purposes or (ii) do not pass a resolution for the termination of the appointment of, and replacement
of [Name of entity acting as covered bondholders representative to be inserted herein.] from its
function of Covered Bondholders Representative or (iii) pass a resolution for the termination of the
appointment, and replacement of [Name of entity acting as covered bondholders representative to be
inserted herein.] from its function as Covered Bondholders Representative, but the newly appointed
Covered Bondholders Representative does not accept its appointment, the appointment of [Name of
entity acting as covered bondholders representative to be inserted herein.] as the Covered
Bondholders Representative shall, subject to Section 7, continue in full force and effect in
accordance with the provisions of these Terms of Appointment and the Romanian Covered Bond
Legislation.

(d) The powers granted to the Covered Bondholders Representative under these Terms of Appointment
shall be read to also include any and all proceedings, actions and steps necessary for their
performance.

(e) The Covered Bondholders shall promptly take any action, in the opinion of the Covered Bondholders
Representative necessary or desirable, in order to allow the Covered Bondholders Representative to
perform its rights and obligations set out herein, including, if the case, issue any special power of
attorney in authenticated and/or apostilled form or in any other form required by law, any special
instruction or such other documents which may be required.

(f) No provision of these Terms of Appointment or of any other Transaction Document shall require the
Covered Bondholders Representative to do anything which may (i) be illegal or contrary to
applicable law or regulation and/or policies (including internal policies relating to Know Your
Customer (KYC) and the prevention of money laundering and the financing of terrorism) applicable

A-7
 to it; or (ii) cause it to expend or risk its own funds or otherwise incur any Liability in the
performance of any of its duties or in the exercise of any of its rights, if it shall have grounds for
believing that repayment of such funds or adequate indemnity against such risk or Liability is not
assured to it.

(g) Pursuant to Article 23 (3) of the Romanian Covered Bond Law, the general provisions of the Civil
Code on mandate agreements shall also apply accordingly with respect to the obligations and
liability of the Covered Bondholders Representative. In case of any inconsistencies between the
provisions of the Civil Code and those of these Terms of Appointment, the provisions set out
hereunder shall prevail to the maximum extent permitted by law.

3. RIGHTS AND OBLIGATIONS

(a) Powers according to the Romanian Covered Bond Law: The Covered Bondholders
Representative shall (unless otherwise mandatorily provided under the Romanian Covered Bond
Legislation or any other applicable law from time to time) have power, and is hereby authorised to:

(i) represent the Covered Bondholders in relation to the Issuer, public authorities and any other
third party, including in the general meetings of the creditors of the Issuer and towards the
liquidator, in case of bankruptcy of the Issuer;

(ii) exercise on behalf of the Covered Bondholders the rights of the Covered Bondholders arising
from the ownership of the Covered Bonds, except for the exercise of the Covered
Bondholders’ voting rights in the general meeting of the Covered Bondholders;

(iii) inform the Issuer and the Cover Pool Administrator (when appointed), within no more than
24 hours from the occurrence of a relevant event or from the date on which such information
is brought to its attention, with respect to the convening of, and the resolutions of, each
general meeting of the Covered Bondholders, as well as with respect to the fulfilment of the
publicity requirements in their respect, by sending out copies of the relevant documents; and

(iv) ensure, according to its abilities, the implementation of the Covered Bondholders
Resolutions.

(b) Other powers of the Covered Bondholders Representative: Without prejudice to paragraph (a)
above, the Covered Bondholders Representative is also hereby empowered and authorised to:

(i) receive any certificates, notices, demands and any other documents on behalf of the Covered
Bondholders, as provided under the Transaction Documents;

(ii) operate any Third Party Collection Account, if opened in the name of the Covered
Bondholders Representative;

(iii) without any consent or other confirmation from the Covered Bondholders, concur with the
Issuer in making any modification (other than in respect of a Covered Bondholders Reserved
Matter), for the avoidance of doubt, irrespective of whether such modification is materially
prejudicial to the interests of the Covered Bondholders of any Series, to:

I. the terms and conditions applying to the Covered Bonds of one or more Series
(including the Terms and Conditions), the related Coupons or any Transaction
Document for the purpose of complying with, or implementing or reflecting, any
change in the criteria of the Rating Agency which may be applicable from time to
time, provided that in relation to any amendment under Condition 14(e)(i) of the
Terms and Conditions, the Issuer confirms in writing to the Covered Bondholders
Representative (by way of a certificate signed by two directors of, or two other

A-8
 persons duly authorised by, the Issuer, upon which the Covered Bondholders
Representative may rely without further enquiry or liability to any person) that such
modification is necessary to comply with such criteria or, as the case may be, is
solely to implement and reflect such criteria as well as that the Issuer either:

(A) has obtained from the Rating Agency written confirmation (or certifies in
writing to the Covered Bondholders Representative that it has been unable
to obtain written confirmation, but has received either oral confirmation
from an appropriately authorised person at the Rating Agency) that such
modification would not result in a downgrade, withdrawal or suspension of
the then current ratings assigned to the Covered Bonds by the Rating
Agency and would not result in the Rating Agency placing any Series of
Covered Bonds on rating watch negative (or equivalent) in relation to the
proposed amendments and, if relevant, delivers a copy of each such
confirmation to the Covered Bondholders Representative; or

(B) the Rating Agency has been informed of the proposed modification and the
Rating Agency has not indicated that such modification would result in a
downgrade, withdrawal or suspension of the then current ratings assigned to
the Covered Bonds by the Rating Agency or the Rating Agency placing any
Covered Bonds on rating watch negative (or equivalent); or

II. the terms and conditions applying to the Covered Bonds of one or more Series
(including the Terms and Conditions), the related Coupons or any Transaction
Document for the purpose of complying with, or implementing or reflecting, any
change that is requested by the Issuer in order to enable the Issuer to comply with
any requirements which apply to it under EMIR, subject to receipt by the Covered
Bondholders Representative of a certificate of the Issuer (signed by two directors of,
or two other persons duly authorised by, the Issuer) (upon which the Covered
Bondholders Representative may rely without further enquiry or liability to any
person) confirming to the Covered Bondholders Representative that the requested
amendments are to be made solely for the purpose of enabling the Issuer to satisfy
any requirements which apply to it under EMIR; or

III. agree and implement any of the changes that may be required from time to time in
accordance with the provisions of Condition 4.2(j) of the Terms and Conditions,

provided that the Covered Bondholders Representative shall not be obliged to concur with
the Issuer in making any modification that may, in the Covered Bondholders
Representative’s sole opinion, impact on the Covered Bondholders Representative’s rights,
duties, authorities, protections and obligations under these Terms of Appointment, the Terms
and Conditions under the Prospectus or any other Transaction Document or expose it to any
liabilities;

(iv) without prejudice to the foregoing, without any consent or other confirmation from the
Covered Bondholders, concur with the Issuer and/or any other parties thereto in making any
modification (other than in respect of a Covered Bondholders Reserved Matter), for the
avoidance of doubt, irrespective of whether such modification is materially prejudicial to the
interests of the Covered Bondholders of any Series, to:

I. any modification (other than in respect of a Covered Bondholders Reserved Matter)

of the terms and conditions applying to the Covered Bonds of one or more Series,
the related Coupons or any Transaction Document provided that in the sole opinion
of the Covered Bondholders Representative such modification is not materially
prejudicial to the interests of the Covered Bondholders of such Series; or

A-9
 II. any modification of the terms and conditions applying to Covered Bonds of any one
or more Series, the related Coupons or any Transaction Document which is in the
sole opinion of the Covered Bondholders Representative of a formal, minor or
technical nature or is to correct a manifest error.

Any such modification shall be binding on the Covered Bondholders and shall be notified by
the Issuer to the Covered Bondholders in accordance with Condition 16 (Notices) as soon as
practicable thereafter;

(v) without prejudice to the foregoing, without any consent or other confirmation from the
Covered Bondholders and without prejudice to its rights in respect of any subsequent breach
or Issuer Event from time to time and at any time but only if insofar as in the sole opinion of
the Covered Bondholders Representative the interests of the Covered Bondholders of any
Series shall not be materially prejudiced thereby, waive or authorise any breach or proposed
breach by the Issuer of any of the covenants or provisions contained in the Transaction
Documents or determine that any Issuer Event shall not be treated as such PROVIDED
ALWAYS THAT the Covered Bondholders Representative shall not exercise any powers
conferred on it by this paragraph (v) in contravention of any express direction given by a
Covered Bondholders Resolution but so that no such direction or request shall affect any
waiver, authorisation or determination previously given or made. Any such waiver,
authorisation or determination may be given or made on such terms and subject to such
conditions (if any) as the Covered Bondholders Representative may determine, shall be
binding on the Covered Bondholders and shall be notified by the Issuer (i) to the Covered
Bondholders in accordance with Condition 16 (Notices) and (ii) to the Rating Agency as
soon as practicable thereafter;

(vi) in accordance with the Movable Mortgage over the Cover Pool and Collection Accounts
Agreement, following the occurrence of an Event of Default to exercise all the Covered
Bondholders rights recognized by law on their behalf and arising out of the Movable
Mortgage over the Cover Pool and Collection Accounts Agreement (including without
limitation to enter into and register any release of the mortgages created thereunder), in
accordance with any instructions provided by the Cover Pool Administrator and as approved
by the Covered Bondholders if mandatorily required under the applicable law;

(vii) without prejudice to the foregoing, without any consent or other confirmation from the
Covered Bondholders, in its discretion:

I. for the purposes of Clause 3.2(a)(i) of the Servicing and Cash Management
Agreement, to give its prior written consent to the proposed arrangement regarding
the delegation of the Servicer of all or any of its powers and obligations under the
Servicing and Cash Management Agreement;

II. for the purposes of Clause 3.2(a)(ii) of the Servicing and Cash Management
Agreement, where the arrangements involve the deposit or control of any Customer
Files relating to the Cover Pool for the purpose of performing any delegated
Servicing and Cash Management Services by the Servicer`s delegate, to confirm the
acknowledgement executed by the delegate to the effect that any such Customer
Files are and will be held to the order of the Servicer or as the Servicer shall direct,
to the extent permitted under applicable law is in the form and substance acceptable
to it;

III. for the purposes of Clause 3.2(a)(iii) of the Servicing and Cash Management
Agreement, where the arrangements involve or may involve the receipt by the
Servicer`s delegate of monies belonging to the Issuer which, in accordance with the
Servicing and Cash Management Agreement, are to be paid into the Transaction

A-10
 Accounts, to confirm, in its discretion, if the declaration executed by the delegate of
the Servicer (that any such monies held by it or to its order are held on trust or
similar arrangement for the Issuer and will be paid forthwith into the Transaction
Accounts or, following an Event of Default, as otherwise directed by the Covered
Bondholders Representative or the Cover Pool Administrator, to the extent
permitted under the applicable law) is in the form and substance acceptable to it;

IV. for the purposes of Clause 3.4(a) of the Servicing and Cash Management
Agreement, to approve the proposals advanced to it by the Servicer for remedying or
curing any matter or thing which becomes known to the Servicer and which is a
breach or potential breach of any representations, warranties and undertakings of the
Servicer contained in the Servicing and Cash Management Agreement (if such
breach or potential breach is capable of remedy or cure);

V. for the purposes of Clause 7.1(b) of the Servicing and Cash Management
Agreement, to direct the Servicer, if applicable, to take all such action as may be
required from time to time to maintain and/or preserve any and all of the Related
Security and its priority;

VI. for the purposes of the Servicing and Cash Management Agreement, to execute such
further documents provided under Clause 7.1(h) of the Servicing and Cash
Management Agreement, in accordance with the conditions set out therein;

VII. for the purposes of Clause 7.2 of the Servicing and Cash Management Agreement,
to request the Servicer to provide the records detailed under Clause 7.2 of the
Servicing and Cash Management Agreement, subject to the Servicer being
reasonably capable of providing such information without significant additional cost
and subject to the provisions of any data protection laws and other applicable
legislation from time to time and provided that no duty of confidence and no
industry code of practice will or may be breached thereby;

VIII. for the purposes of the Servicing and Cash Management Agreement, to give its prior
consent in writing to any amendments to or termination of any of the Transaction
Documents, save in accordance with their terms, that the Servicer may agree to, as
provided under Clause 14(l) of the Servicing and Cash Management Agreement;

IX. for the purposes of the Servicing and Cash Management Agreement, to demand the
delivery from the Servicer of a certificate as provided under Clause 14(q) of the
Servicing and Cash Management Agreement;

X. for the purposes of Clause 17.1(a)(i) of the Servicing and Cash Management
Agreement, to give notice to the Servicer requiring the default made by the Servicer
as provided under Clause 17(1)(a)(i) of the Servicing and Cash Management
Agreement to be remedied;

XI. for the purposes of Clause 17.1(a)(ii) of the Servicing and Cash Management
Agreement, to give its approval as regards the steps to be taken by the Servicer to
remedy the default made by the Servicer as provided under Clause 17.1(a)(ii) of the
Servicing and Cash Management Agreement;

XII. for the purposes of Clause 17.1(a)(iv)(i) of the Servicing and Cash Management
Agreement, to consult with the Issuer in appointing the Investment Bank (as defined
therein);

XIII. for the purposes of Clause 17.2(a) of the Servicing and Cash Management

A-11
 Agreement, to give its consent in writing to the termination of the appointment of
the Servicer under the Servicing and Cash Management Agreement, upon notice of
termination given by the Servicer to the Covered Bondholders Representative;

XIV. for the purposes of Section 5.5 of the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement, to receive from the Issuer the certificate referred to
thereunder as a condition precedent to the Issuance of a new Series or Tranche of
Covered Bonds;

XV. for the purposes of Section 6.1(c) of the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement, to confirm, in its discretion, if the proof of filing
and registration with the National Register by the Issuer of any amendments to the
Movable Mortgage over the Cover Pool and Collection Accounts Agreement is in
form and substance satisfactory to it;

XVI. for the purposes of Section 8.1 of the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement to request the Issuer to execute all acts and
agreements and to perform all actions as it may (in its discretion) request. In
addition and without limitation to the foregoing, for the purposes of Section 8.1(a)
of the Movable Mortgage over the Cover Pool and Collection Accounts Agreement,
the Covered Bondholders Representative is also hereby empowered and authorised
to confirm, in its discretion, if the execution by the Issuer of any documents with
respect to all or any part of the Mortgaged Property is in the form and substance
acceptable to it, and for the purposes of Section 8.1(b) of the Movable Mortgage
over the Cover Pool and Collection Accounts Agreement, the Covered Bondholders
Representative is also hereby empowered and authorised to request the Issuer to
deposit with the Covered Bondholders Representative any or all of such documents
as referred to therein;

XVII. for the purposes of Section 12.1 of the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement, to confirm, in its discretion, that all the Romanian
Secured Obligations have been irrevocably performed and discharged in full;

XVIII. for the purposes of Section 3.2 of Schedule 1 (Form of CBR Transfer Agreement) of
the Movable Mortgage over the Cover Pool and Collection Accounts Agreement, to
confirm, in its discretion, if the proof of registration with the National Register by
the Asset Monitor of the transfer of the Movable Mortgage from the name of the
Asset Monitor to the name of the Covered Bondholders Representative is in the
form and substance acceptable to it;

XIX. for the purposes of the Asset Monitor Agreement, to negotiate, agree and enter into
in its discretion but only insofar as in the sole opinion of the Covered Bondholders
Representative the interests of the Covered Bondholders of any Series shall not be
materially prejudiced thereby, any amendments to the Asset Monitor Agreement, as
envisaged under Section 1.8 of the Asset Monitor Agreement;

XX. for the purposes of the Asset Monitor Agreement, to counter-sign for
acknowledgement purposes all addenda executed by the Issuer, the Servicer and the
Asset Monitor as envisaged under Section 12.6 of the Asset Monitor Agreement;

XXI. for the purposes of the Asset Monitor Agreement, to give its prior express written
consent to specific amendments of the Asset Monitor Agreement (and enter into any
related amendments), as referred to under Section 12.7 of the Asset Monitor
Agreement; and

A-12
 XXII. to give any other confirmations, directions, orders, instructions, notifications or
other similar documents expressly or implicitly referred to as to be given by the
Covered Bondholders Representative under the Transaction Documents and to enter
into any amendments, modifications or supplements necessary, recommendable or
required to conclude under the Transaction Documents, in its discretion but only
insofar as in the sole opinion of the Covered Bondholders Representative the
interests of the Covered Bondholders of any Series shall not be materially prejudiced
thereby.

(c) Prohibition on delegation: Notwithstanding anything to the contrary in these Terms of

Appointment, the Covered Bondholders Representative shall not have the right to delegate its
representation powers herein granted unless otherwise permitted by the Romanian Covered Bond
Legislation from time to time.

(d) Compliance with law. The Covered Bondholders Representative will comply with all material legal
and regulatory requirements of Romanian law applicable to the conduct of Covered Bondholders
Representatives, including any provisions regarding the banking secrecy as provided in article 51
paragraph 1 of the Romanian Covered Bond Law, any data protection legal requirements as provided
in the relevant legislation so that it can lawfully perform its obligations under these Terms of
Appointment and the Romanian Covered Bond Legislation and the obligations provided by the Civil
Code (such as, for example, the obligation to request, within the term provided by law, the
deregistration of the movable mortgage created under the Movable Mortgage over the Cover Pool
and Collection Accounts Agreement from the National Register following the release of such
mortgage).

(e) Receipt of monies from the Issuer. In the event that the Covered Bondholders Representative
receives any amounts of money from the Issuer on the account of the Covered Bondholders, the
Covered Bondholders Representative shall transfer such amounts, as soon as practicable after
receiving such amounts, to the Paying Agents for transmission to the Covered Bondholders as well
as, if the case, for payment of the fees due for such services to the Paying Agents according to the
Agency Agreement and the other Transaction Documents. Until such payment is made by the
Covered Bondholders Representative any such amounts due to the Covered Bondholders will be kept
by the Covered Bondholders Representative in an account opened especially for such purpose (the
Segregated Account). To the maximum extent permitted by the applicable law, the Covered
Bondholders Representative shall ensure that all amounts deposited in, and standing to the credit of,
the Segregated Account are held separately and segregated from all other property of the Covered
Bondholders Representative and, to the maximum extent permitted by the applicable law shall not
form part of the Covered Bondholders Representative’s estate. The Covered Bondholders
Representative may only dispose of any amounts standing to the credit of the Segregated Account by
paying such sums to the Covered Bondholders as described above.

(f) Becoming a party to the Transaction Documents. Within 20 (twenty) Bucharest Business Days
following the date of the Acceptance Letter, the Covered Bondholders Representative shall enter into
the documents (as such documents are expressly described and/or attached to the relevant
Transaction Documents) necessary to become a party to the Transaction Documents it is expressed
to become a party to, such Transaction Documents to which the Covered Bondholders
Representative is expressed to become a party being, as of the date hereof, the following: the
Movable Mortgage over the Cover Pool and Collection Accounts Agreement, the Asset Monitor
Agreement, the Servicing and Cash Management Agreement, the Deed of Charge, the Bank Account
Agreement and the Agency Agreement.

(g) Replacement of the Covered Bondholders Representative. In the event of the termination of the
appointment of the Covered Bondholders Representative and the appointment of a new Covered
Bondholders Representative by a meeting of the Covered Bondholders, the former Covered
Bondholders Representative will (at the expense of the Issuer (properly incurred)) use all reasonable

A-13
 endeavours to transfer its rights and obligations under the Transaction Documents to which it is a
party to the new Covered Bondholders Representative, including without limitation by entering into
any transfer certificate or amendment agreement, as the case may be, within the deadlines set out
under the relevant Transaction Document.

(h) In the event that a new Covered Bondholders Representative is appointed by a meeting of the
Covered Bondholders, the former Covered Bondholders Representative will at the expense (properly
incurred) of the Issuer use all reasonable endeavours to perform all and any necessary formalities
with all relevant registries, including the public registries such as the National Register, and fulfil all
the opposability requirements towards third parties as set out in the Movable Mortgage over the
Cover Pool and Collection Accounts Agreement and in the other Transaction Documents.

(i) Obligations relating to meetings of the Covered Bondholders. The Covered Bondholders
Representative shall (unless otherwise provided in the Romanian Covered Bond Legislation from
time to time):

(i) at the request and direction of the Covered Bondholders holding at least 25 per cent of the
principal amount outstanding of the Covered Bonds of all Series (and, where applicable,
converted into Euro at the Relevant Exchange Rate or at the request of the Cover Pool
Administrator (if appointed) and in each case at the expense of the Issuer, promptly convene
a general meeting of the Covered Bondholders;

(ii) without prejudice to the foregoing, at the request and direction of the Covered Bondholders
holding at least 25 per cent of the principal amount outstanding of the Covered Bonds of all
Series (and, where applicable, converted into Euro at the Relevant Exchange Rate) following
issuance by the NBR of each new NBR Approval, at the expense of the Issuer, promptly
convene a general meeting of the Covered Bondholders to confirm its appointment or replace
it with a different entity acting as Covered Bondholders Representative;

(iii) not challenge before a court or otherwise the Covered Bondholders Resolutions; and

(iv) verify that no later than 15 days after each general meeting of Covered Bondholders where a
Covered Bondholders Resolution has been passed (including a Covered Bondholders
Resolution where a new Covered Bondholders Representative is appointed) the Issuer
submits such resolution with the Official Gazette for publication therein. If the Issuer does
not fulfil this obligation within the term provided by law, the Covered Bondholders
Representative shall submit the above mentioned resolution with the Official Gazette as soon
as practicable.

An overview of the provisions under the Romanian Covered Bond Law on holding a general meeting
of Covered Bondholders as in force at the date of these Terms of Appointment as well as additional
rules as approved by the Covered Bondholders to apply with respect to the convening and holding of
such meetings are included in Schedule 1 (Provisions for General Meetings of the Covered
Bondholders), it being acknowledged that the Covered Bondholders Representative may seek further
and/or detailed legal advice on the provisions therein as it considers appropriate, but it will not have
an obligation to do so.

(j) Event of Default. If an Event of Default (as defined in the Terms and Conditions) occurs, and is
continuing, then the Covered Bondholders Representative having notice of such occurrence
continuing shall serve a Notice of Default on the Issuer, the Cover Pool Administrator (if already
appointed) and the Asset Monitor, in accordance with the Terms and Conditions, substantially in the
form set out in Schedule 2 (Form of Notice of Default) hereof, as soon as practicable after becoming
aware of such occurrence. The Asset Monitor will (upon assessment of an Event of Default, except
for the opening of a bankruptcy proceeding) notify the NBR who will appoint a Cover Pool
Administrator (if not already appointed) and in case of an Event of Default regarding the opening of

A-14
 the bankruptcy proceeding occurs, the competent court will, following consultation with the NBR,
appoint a Cover Pool Administrator or replace any Cover Pool Administrator previously appointed
by the NBR. Once appointed, the Cover Pool Administrator may, with the approval of the Covered
Bondholders (if required), declare the Covered Bonds of each Series immediately due and payable.

(k) If, in the course of the exercise of its rights, powers, authorities or discretions, the Covered
Bondholders Representative believes the interests of holders of the Covered Bonds of any one or
more Series would be materially prejudiced thereby, the Covered Bondholders Representative shall
not exercise such right, power, authority, or discretion without the approval of the general meeting of
Covered Bondholders by way of a Covered Bondholders Resolution, except that in the situations set
out under Sections 3(b)(iii), 3(j) and 4(f), the Covered Bondholders Representative may exercise its
rights, powers, authorities or discretions as provided therein without any approval from the Covered
Bondholders.

(l) Following a notice of resignation sent by the Asset Monitor to the Issuer or a notice of termination of
the appointment of the Asset Monitor by the Issuer, the Covered Bondholders Representative shall
approve the appointment of a substitute asset monitor by the Issuer. Such approval shall be deemed
given by the Covered Bondholders Representative if the substitute is an accountancy firm of
international standing as confirmed to the Covered Bondholders Representative by a certificate of the
Issuer signed by two directors of, or two other persons duly authorised by, the Issuer, on which the
Covered Bondholders Representative may rely absolutely without further enquiry or liability.

(m) Disclosure of its capacity as Covered Bondholders Representative. In carrying out its powers
hereunder, the Covered Bondholders Representative is hereby authorised and instructed by the
Covered Bondholders to inform third parties that it is acting as a representative of the Covered
Bondholders and, in so doing and without limitation to the foregoing, not undertake any obligations
towards any third parties on its own account or without disclosing that it is acting as a representative
of the Covered Bondholders.

4. TERMS AND CONDITIONS OF APPOINTMENT

(a) The Covered Bondholders Representative may in relation to these Terms of Appointment and the
other Transaction Documents rely and/or act on the advice or report or opinion of or any information
obtained from any auditor, lawyer, valuer, accountant, surveyor, banker, professional adviser, broker,
financial adviser, auctioneer or other expert whether obtained by the Covered Bondholders, the
Covered Bondholders Representative or otherwise and whether or not addressed to the Covered
Bondholders Representative notwithstanding that such advice, report, opinion, information, or any
engagement letter or any other document entered into by the Covered Bondholders Representative
and the relevant person in connection therewith, contains any monetary or other limit on the liability
of the relevant person and the Covered Bondholders Representative shall not be responsible for any
Liability occasioned by so acting or relying. The Covered Bondholders confirm that the Covered
Bondholders Representative acting as described in this paragraph complies with the standard of
diligence of a good owner (in Romanian, cu diligenta unui bun proprietar) as required under article
2018 of the Civil Code.

(b) Any such advice, opinion or information as described in Section 4(a) above may be sent or obtained
by letter, telex, telegram, facsimile transmission or cable and the Covered Bondholders
Representative shall not be liable for acting on any advice, opinion or information purporting to be
conveyed by any such letter, telex, telegram, facsimile transmission or cable although the same shall
contain some error or shall not be authentic. The Covered Bondholders confirm that the Covered
Bondholders Representative acting as described in this paragraph complies with the standard of
diligence of a good owner (in Romanian, cu diligenta unui bun proprietar) as required by article
2018 of the Civil Code.

(c) The Covered Bondholders Representative may call for and shall be at liberty to accept as sufficient

A-15
 evidence of any fact or matter or the expediency of any transaction or thing a certificate signed by
two directors of, or two other persons duly authorised by, the Issuer, upon which the Covered
Bondholders Representative may rely without further enquiry or liability, and the Covered
Bondholders Representative shall not be bound in any such case to call for further evidence or be
responsible for any Liability that may be occasioned by it or any other person acting on such
certificate.

(d) The Covered Bondholders Representative shall not be bound to give notice to any person of the
execution of any documents comprised or referred to in these Terms of Appointment or to take any
steps to ascertain whether any Segregation Event, Issuer Event, Event of Default or any similar event
has occurred, except as set out in the Transaction Documents. Until it shall have actual knowledge or
express notice to the contrary pursuant to the Covered Bondholders Representative Agreement, the
Covered Bondholders Representative shall be entitled to assume that no such events have occurred
and that the Issuer and the Servicer are observing and performing all of their respective obligations
under this Covered Bondholders Representative Agreement, the Terms and Conditions and other
Transaction Documents.

(e) Any consent or approval given by the Covered Bondholders Representative for the purposes of these
Terms of Appointment or any other Transaction Document may be given on such terms and subject
to such conditions (if any) as the Covered Bondholders Representative thinks fit and notwithstanding
anything to the contrary in these Terms of Appointment may be given retrospectively. The Covered
Bondholders Representative may give any consent or approval, exercise any power, authority or
discretion or take any similar action (whether or not such consent, approval, power, authority,
discretion or action is specifically referred to in the Covered Bondholders Representative
Agreement) if it is satisfied that the interests of the Covered Bondholders will not be materially
prejudiced thereby, except for those modifications or notifications referred to under Sections 3(b)(iii)
and 3(j) herein where the Covered Bondholders Representative may give consent or approval or may
exercise any power, authority or discretion or take any similar action, even in the case when the
interests of the Covered Bondholders may be prejudiced . For the avoidance of doubt, the Covered
Bondholders Representative shall not have any duty to the Covered Bondholders in relation to such
matters other than that which is contained in the preceding sentence.

(f) For the purpose of paragraph (c) of the definition of Issuer Event set out in the Terms and
Conditions, the Covered Bondholders Representative may (and is hereby authorised to) determine
whether or not a default in the performance or observance by the Issuer of any obligation under the
provisions of these Terms of Appointment, under the Deed of Charge, the Movable Mortgage over
the Cover Pool and Collection Accounts Agreement or any other Transaction Document is capable
of remedy and/or is materially prejudicial to the interests of the Covered Bondholders. If the Covered
Bondholders Representative shall certify that any such default is, in its opinion, not capable of
remedy and/or materially prejudicial to the interests of the Covered Bondholders such certificate
shall be conclusive and binding upon the Issuer, the Security Trustee, the Servicer and the Covered
Bondholders.

(g) For the purpose of paragraph (e) of the definition of Issuer Event set out it the Terms and Conditions,
the Covered Bondholders Representative may (and is hereby authorised to) determine, after taking
legal advice from a reputable firm of lawyers or a reputable legal expert, whether or not it has
become unlawful or illegal for the Issuer to comply with any of its obligations under or in respect of
the Covered Bonds or these Terms of Appointment, the Deed of Charge, the Movable Mortgage over
the Cover Pool Agreement or any other Transaction Document and/or if such unlawfulness of
illegality is capable of remedy. If the Covered Bondholders Representative shall certify that it has
become unlawful or illegal for the Issuer to comply with such obligations and/or that any such
unlawfulness or illegality is, in its opinion, not capable of remedy, such certificate shall be
conclusive and binding upon the Issuer, the Security Trustee, the Servicer and the Covered
Bondholders.

A-16
(h) In connection with the exercise or performance by it of any of its powers, authorities or discretions
under these Terms of Appointment or any other Transaction Document (including, without
limitation, any modification, waiver, authorisation or determination), the Covered Bondholders
Representative shall have regard to the interests of the Covered Bondholders of each Series (but to
the maximum extent permitted by the applicable law shall not have regard to any interests arising
from circumstances particular to individual Covered Bondholders whatever their number, it hereby
being understood that the intent of the Covered Bondholders is expressed and/or set out in a Covered
Bondholders Resolution) and, in particular but without limitation, shall not have regard to the
consequences of such exercise for individual Covered Bondholders (whatever their number)
resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or
subject to the jurisdiction of, any particular territory or any political sub-division thereof and the
Covered Bondholders Representative shall not be entitled to require, nor shall any Covered
Bondholder be entitled to claim, from the Issuer, the Covered Bondholders Representative or any
other person any indemnification or payment in respect of any Tax or stamp duty consequences of
any such exercise upon individual Covered Bondholders, except to the extent already provided for in
Condition 7 (Taxation) of the Terms and Conditions and/or in any undertaking or covenant given in
addition thereto or in substitution therefor.

(i) The Covered Bondholders Representative may engage any lawyer, accountant, broker or other
person engaged in any profession or business in order to perform the instructions of the Covered
Bondholders. Any such professionals shall be entitled to charge and be paid all usual and proper
professional and other charges for business transacted and acts done by him or his firm in connection
with the matters entrusted by the Covered Bondholders Representative in relation to the performance
of the instructions given by the Covered Bondholders or any other of the Transaction Documents to
which the Covered Bondholders Representative is a party and also his reasonable charges in addition
to disbursements for all other work and business done and all time spent by him or his firm in
connection with matters arising in connection with these Terms of Appointment including matters
which might or should have been attended to in person by a proxy not being a lawyer, accountant,
broker or other professional person.

(j) The Covered Bondholders Representative shall not be concerned, and need not enquire, as to
whether or not any Covered Bonds are issued in breach of the Programme Limit.

(k) Subject to the applicable legal requirements, if the Covered Bondholders Representative will be
subject to any reorganizational procedure such as merger or division, any company resulting from
such procedure shall be bound by the provisions of the Covered Bondholders Representative
Agreement and shall continue to act as the Covered Bondholders Representative under these Terms
of Appointment and the other Transaction Documents.

(l) The Covered Bondholders Representative shall not be bound to take any action in connection with
these Terms of Appointment or any other Transaction Document or any obligations arising pursuant
thereto, including, without prejudice to the generality of the foregoing, forming any opinion or
employing any financial or legal adviser, where it is not satisfied that it will be indemnified and/ or
secured and/or prefunded against all Liabilities which may be incurred in connection with such
action and may demand prior to taking any such action that there be paid to it in advance such sums
as it reasonably considers (without prejudice to any further demand) shall be sufficient so to
indemnify and/or secure and/or prefund it.

(m) The Covered Bondholders Representative shall fully rely on the certificates issued by the Issuer and
signed by two directors of, or two other persons duly authorised by, the Issuer, without any further
enquiry or liability to any person, in connection with the exercise or performance by it of any of its
obligations, powers, authorities or discretions under these Terms of Appointment or any other
Transaction Document, including as provided under Section 3(b)(iii) herein.

(n) Unless notified in writing to the contrary pursuant to the Covered Bondholders Representative

A-17
 Agreement, the Covered Bondholders Representative shall be entitled to assume without enquiry
(other than requesting a certificate issued by the Issuer and signed by two directors of, or two other
persons duly authorised by, the Issuer) that no Covered Bonds are held by, for the benefit of, or on
behalf of, the Issuer or its Subsidiaries.

(o) Notwithstanding anything contained in these Terms of Appointment, to the extent required by any
applicable law, if the Covered Bondholders Representative is or will be required to make any
deduction or withholding from any distribution or payment made by it hereunder or if the Covered
Bondholders Representative is or will be otherwise charged to, or is or may become liable to, Tax as
a consequence of performing its duties hereunder whether as principal, agent, proxy or otherwise,
and whether by reason of any assessment, prospective assessment or other imposition of liability to
Taxation of whatsoever nature and whensoever made upon the Covered Bondholders Representative,
and whether in connection with or arising from any sums received or distributed by it or to which it
may be entitled under these Terms of Appointment (other than in connection with its remuneration as
provided for herein) or any investments or deposits from time to time representing the same,
including any income or gains arising therefrom or any action of the Covered Bondholders
Representative in connection with the powers and authorisations conferred by these Terms of
Appointment (other than the remuneration herein specified) or otherwise, then the Covered
Bondholders Representative shall be entitled to make such deduction or withholding or, as the case
may be, to retain out of sums received by it an amount sufficient to discharge any liability to Tax
which relates to sums so received or distributed or to discharge any such other liability of the
Covered Bondholders Representative to Tax from the funds received by the Covered Bondholders
Representative for the Covered Bondholders.

(p) In connection with the exercise or performance by it of any of its obligations, powers, authorities or
discretions under these Terms of Appointment or any other Transaction Document, the Covered
Bondholders Representative shall have the right to refrain from exercising such obligations, powers,
authorities or discretions or any other activities it may have the obligation to undertake pursuant to
these Terms of Appointment or any other Transaction Document, if the Issuer does not indemnify
the Covered Bondholders Representative in accordance with Section 6(b) below or the Issuer does
not confirm, upon the Covered Bondholders request for such confirmation, that it shall indemnify the
Covered Bondholders Representative in accordance with Section 6(b) below, in the form and
substance acceptable to the Covered Bondholders Representative.

5. LIABILITY

(a) Notwithstanding anything else contained within these Terms of Appointment, the Covered
Bondholders Representative may refrain without liability from doing anything that would or might in
its opinion be contrary to any law of any state or jurisdiction (including but not limited to Romania)
or any directive or regulation of any agency of any such state or jurisdiction and may without
liability do anything which is, in its opinion, necessary to comply with any such law, directive or
regulation.

(b) Nothing in these Terms of Appointment shall, in any case in which the Covered Bondholders
Representative has failed to show the degree of care and diligence required of it as representative
having regard to the provisions of the Covered Bondholders Representative Agreement or any other
Transaction Document conferring on it any powers, authorities or discretions, relieve or indemnify
the Covered Bondholders Representative against any Liabilities which by virtue of any rule of law
would otherwise attach to it in respect of any gross negligence, wilful misconduct or fraud of which
it may be guilty in relation to its duties under these Terms of Appointment. Notwithstanding any
provision of these Terms of Appointment or any other Transaction Document to the contrary, the
Covered Bondholders Representative (whether or not acting through its agents, delegates or
representatives) shall not in any event be liable for indirect, special, punitive or consequential loss or
damage, liability, claim, expense of any kind whatsoever (including but not limited to loss of profits,
loss of use, loss of production, loss of business, loss of goodwill, loss of business opportunity),

A-18
 suffered or incurred by any other party as a result of the performance or non-performance of its
obligations under these Terms of Appointment or any other Transaction Document.

(c) To the maximum extent permitted by applicable law, the Covered Bondholders Representative shall
not be liable to any person by reason of having acted upon any decision of the meeting of the
Covered Bondholders or any Covered Bondholders Resolution in respect whereof minutes have been
made and signed even though subsequent to its acting it may be found that the decision or the
Covered Bondholders Resolution is invalid for any reasons, including any defect in the constitution
of the meeting or the passing of the Covered Bondholders Resolution.

(d) Except as otherwise mandatorily provided by the applicable law, in fulfilling its obligations under
the Covered Bondholders Representative Agreement, the Covered Bondholders Representative will
not be liable to the Covered Bondholders for the execution of the obligations assumed by third
parties with whom the Covered Bondholders Representative has concluded agreements in order to
fulfil its obligations arising under the Covered Bondholders Representative Agreement.

(e) The Covered Bondholders Representative shall not be responsible for the execution, delivery,
legality, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in evidence of
these Terms of Appointment and any other Transaction Document or any other document relating or
expressed to be supplemental thereto and shall not be liable for any failure to obtain any licence,
consent or other authority for the execution, delivery, legality, effectiveness, adequacy, genuineness,
validity, performance, enforceability or admissibility in evidence of these Terms of Appointment and
any other Transaction Document or any other document relating or expressed to be supplemental
thereto.

(f) The Covered Bondholders Representative shall not be responsible for, or for investigating any matter
which is the subject of, any recital, statement, representation, warranty or covenant of any person
contained in these Terms of Appointment, or any other agreement or document relating to the
transactions contemplated in these Terms of Appointment or under such other agreement or
document.

(g) The Covered Bondholders Representative will not be responsible for (i) supervising the performance
by the Issuer or any other party to the Transaction Documents of their respective obligations under
the Transaction Documents and the Covered Bondholders Representative will be entitled to assume,
until it has received written notice to the contrary pursuant to the Transaction Documents, that all
such persons are properly performing their duties; for the avoidance of doubt, the Covered
Bondholders Representative will not have any duty to monitor the Servicer’s performance of its
payment obligation on the due date of any payment due and payable by it under the Servicing and
Cash Management Agreement; (ii) considering the basis on which approvals or consents are granted
by the Issuer or any other party to the Transaction Documents under the Transaction Documents; (iii)
monitoring the Cover Pool or any changes thereto made by the Issuer or the Servicer, including,
without limitation, compliance with the Statutory Tests; or (iv) monitoring whether the Cover Pool
Assets satisfy the Eligibility Criteria. The Covered Bondholders Representative will not be liable to
any Covered Bondholder or other Secured Creditor for any failure to make or to cause to be made on
their behalf the searches, investigations and enquiries which would normally be made by a prudent
mortgagee in relation to the Movable Mortgage and have no responsibility in relation to the legality,
validity, sufficiency and enforceability of the Movable Mortgage and the Transaction Documents.

(h) Where the Covered Bondholders Representative is required to consider whether any event or the
exercise by it of any of its powers, authorities or discretions is or will be materially prejudicial to the
interests of the Covered Bondholders, the Covered Bondholders Representative shall be entitled to
call for and rely and act upon the advice or opinion of any reputable financial or other adviser
(whether or not such adviser shall be a Secured Creditor or otherwise party to any Transaction
Document) and if relied upon by the Covered Bondholders Representative shall be binding on the
Covered Bondholders of all Series and the Covered Bondholders Representative shall not incur any

A-19
 Liability by reason of so acting or relying. The Covered Bondholders Representative shall not be
liable for any error of judgement made in good faith by any officer or employee of the Covered
Bondholders Representative assigned by the Covered Bondholders Representative to administer its
matters arising from the Covered Bondholders Representative Agreement.

(i) The Covered Bondholders Representative shall not be responsible for the execution, legality,
effectiveness, adequacy, genuineness, validity, enforceability or suitability of any Loan Assets or
other documents entered into in connection therewith, nor shall it be responsible or liable to any
person because of any invalidity of any provisions of such documents or the unenforceability thereof,
whether arising from statute, law or decision of any court. The Covered Bondholders Representative
shall not have any responsibility for, or have any duty to make any investigation in respect of or in
any way be liable whatsoever for:

(i) the nature, status, creditworthiness or solvency of any Borrower or any other person or entity
who has at any time provided any security or support whether by way of guarantee, charge or
otherwise in respect of any advance made to any Borrower;

(ii) the execution, legality, validity, adequacy, admissibility in evidence or enforceability of any
document underlying a Loan Asset or any other document entered into in connection
therewith;

(iii) the scope or accuracy of any representations, warranties or statements made by or on behalf
of any Borrower in any application for any advance or any document entered into in
connection therewith;

(iv) the performance or observance by any Borrower or any other person of any provisions of any
document underlying a Loan Asset or in any document entered into in connection therewith
or the fulfilment or satisfaction of any conditions contained therein or relating thereto or as
to the existence or occurrence at any time of any default, event of default or similar event
contained therein or waiver or consent which has at any time been granted in relation to any
of the foregoing;

(v) the existence, accuracy or sufficiency of any legal or other opinions, searches, reports,
certificates, valuations or investigations delivered or obtained or required to be delivered or
obtained at any time in connection with any Cover Pool Asset;

(vi) the title of the Issuer to any Cover Pool Asset;

(vii) the compliance of the provisions and contents of and the manner and formalities applicable
to the execution of the documents underlying a Loan Asset, and any documents connected
therewith, with any requirement of law;

(viii) the failure by the Servicer or the Issuer to obtain or comply with any licence, consent or
other authority in connection with the origination, sale or purchase of any of the Cover Pool
Assets or the making of any advances in connection therewith;

(ix) the failure to call for delivery of documents of title to or require any transfers, legal
mortgages, charges or other further assurances in relation to any of the assets which relate to
the subject matter of any of the Transaction Documents or any other document; or

(x) any other matter or thing relating to or in any way connected with any Cover Pool Assets or
any document entered into in connection therewith, whether or not similar to the foregoing.

(j) The Covered Bondholders hereby agree to ratify and confirm anything done by the Covered
Bondholders Representative when performing the powers granted pursuant to the Covered

A-20
 Bondholders Representative Agreement and agree that the Covered Bondholders Representative may
not be held liable as a result of or in connection with anything the Covered Bondholders
Representative shall do by virtue of the exercise of the Covered Bondholders Representative
Agreement.

(k) Subject to anything to the contrary provided under this Section 5, the Covered Bondholders
Representative shall not be liable or responsible for any Liabilities or inconvenience which may
result from anything done or omitted to be done by it in accordance with the provisions of the
Covered Bondholders Representative Agreement or any other Transaction Document.

6. REMUNERATION AND INDEMNIFICATION OF THE COVERED BONDHOLDERS

REPRESENTATIVE

(a) The Issuer shall pay to the Covered Bondholders Representative, by way of remuneration for its
services as Covered Bondholders Representative under the Covered Bondholders Representative
Agreement, such amount as shall be agreed from time to time by exchange of letters between the
Issuer and the Covered Bondholders Representative. Such remuneration shall accrue from day to day
and be payable (except as otherwise provided by any applicable mandatory provision, in priority to
payments to Covered Bondholders) up to and including the date when the powers and duties of the
Covered Bondholders Representative arising from these Terms of Appointment have been
discharged provided that, if upon due presentation of any Covered Bond in accordance with the
Terms and Conditions, payment of the moneys due in respect thereof is improperly withheld or
refused, remuneration will commence again to accrue. Consequently, the Covered Bondholder will
not be under any obligation (although they have the right to do so) to pay any such fees,
commissions or other remuneration or expenses to the Covered Bondholders Representative in
respect of its duties as Covered Bondholders Representative.

(b) The Issuer shall indemnify the Covered Bondholders Representative in full in respect of all
proceedings, claims and demands and all costs, charges, expenses, and Liabilities for which it may
be or become liable or which may properly be incurred by it in respect of any matter or thing done or
omitted in any way relating to these Terms of Appointment or any other Transaction Document to
which the Covered Bondholders Representative is a party (including, for the avoidance of doubt, any
Liabilities incurred or arising as a result of the Covered Bondholders Representative observing the
rules for the convening and holding of a general meeting set out in Schedule 1 (Provisions for
General Meetings of Covered Bondholders) save to the extent that the same arises as a result of
wilful misconduct, negligence or fraud (in Romanian: fapta savarsita cu intentie, culpa sau frauda)
on the part of the Covered Bondholders Representative and it shall confirm to the Covered
Bondholders Representative, upon the Covered Bondholders Representative request for such
confirmation, that it shall indemnify the Covered Bondholders Representative in accordance with
this Section, in the form acceptable to the Covered Bondholders Representative. The Issuer agrees
that it will not be considered that costs, charges, expenses or Liabilities arose as a result of wilful
misconduct, negligence or fraud on the part of the Covered Bondholders Representative where it has
acted by observing the rules for the convening and holding of a general meeting set out in Schedule 1
(Provisions for General Meetings of Covered Bondholders).

(c) The Issuer shall also pay all costs, fee, charges, demands, expenses, or other liabilities (including,
without limitation, in respect of taxes, duties, levies, imposts and other charges) and including any
value added tax or similar tax charged or chargeable in respect thereof and legal fees and expenses
incurred by the Covered Bondholders Representative in relation to the preparation and execution of
the exercise of its powers and the performance of its duties under, and in any other manner in
relation to, these Terms of Appointment, including but not limited to travelling expenses and any
stamp, issue, registration, documentary and other taxes or duties paid or payable by the Covered
Bondholders Representative in connection with any action taken or contemplated by or on behalf of
the Covered Bondholder for enforcing, or resolving any doubt concerning, or for any other purpose
in relation to, these Terms of Appointment.

A-21
(d) The Issuer hereby further undertakes to the Covered Bondholders Representative that all monies
payable by the Issuer to the Covered Bondholders Representative under this Section 6 and pursuant
to the terms of any separate agreement in writing shall be made without set-off, counterclaim,
deduction or withholding unless compelled by law in which event the Issuer will pay such additional
amounts as will result in the receipt by the Covered Bondholders Representative of the amounts
which would otherwise have been payable by the Issuer to the Covered Bondholders Representative
in the absence of any such set-off, counterclaim, deduction or withholding.

(e) In case any action shall be brought against the Covered Bondholders Representative in respect of
which recovery may be sought from the Issuer under this Section 6, the Covered Bondholders
Representative shall as soon as reasonably practicable notify the Issuer in writing.

(f) In the event of the occurrence of an Issuer Event or an Event of Default or the Covered Bondholders
Representative considering it expedient or necessary or being requested by the Issuer to undertake
duties which the Covered Bondholders Representative and the Issuer agree to be of an exceptional
nature or otherwise outside the scope of the normal duties of the Covered Bondholders
Representative under these Terms of Appointment the Issuer shall pay to the Covered Bondholders
Representative such additional remuneration as shall be agreed between them.

7. TERMINATION

(a) Bankruptcy, winding-up or other similar proceedings against the Covered Bondholders
Representative. The appointment of the Covered Bondholders Representative may be terminated by
the Covered Bondholders in case of bankruptcy, winding-up or other similar proceedings against the
Covered Bondholders Representative. If the Covered Bondholders Representative is subject to any
bankruptcy, winding-up proceedings or similar proceedings, it shall promptly inform the Covered
Bondholders in this respect and it shall continue to perform its rights and obligations under the
Covered Bondholders Representative Agreement if a delay in that performance would prejudice the
interests of the Covered Bondholders, including, inter alia, promptly convene a general meeting of
the Covered Bondholders for the appointment of a new Covered Bondholders Representative.

In accordance with the provisions of article 2030 of the Civil Code, to the extent applicable, the
bankruptcy, death or incapacity (as applicable) of any Covered Bondholder shall not trigger the
termination of the mandate of the Covered Bondholders Representative.

(b) Termination at any time. Without prejudice to the foregoing paragraph, the appointment of
[Drafting note: Name of entity acting as covered bondholders representative to be inserted herein.]
as Covered Bondholders Representative may also be terminated at any time by the Covered
Bondholders, within a general meeting, and the new Covered Bondholders Representative has
accepted its appointment. [Without prejudice to the foregoing, the appointment of [Drafting note:
Name of entity acting as covered bondholders representative to be inserted herein.] as Covered
Bondholders Representative may be terminated by the Covered Bondholders following the receipt of
each new NBR Approval, if within the meeting subsequent to such new NBR Approval the
appointment of [Drafting note: Name of entity acting as covered bondholders representative to be
inserted herein.] as Covered Bondholders Representative is not reconfirmed (but a new Covered
Bondholders Representative is appointed)].

(c) Subject to the provisions of paragraph (d) below, the Covered Bondholders Representative is
allowed to terminate its appointment hereunder at any time on giving not less than 90 days' prior
written notice without incurring any liabilities derived from such termination. If no appointment of a
new covered bondholders representative has become effective pursuant to paragraph (d) below
within such 90 days of the date of such notice, the Covered Bondholders Representative shall be
entitled to appoint a successor of it under the Covered Bondholders Representative Agreement.
Notwithstanding the foregoing, no such appointment by the Covered Bondholders Representative of
a successor shall take effect until the date of its approval by a Covered Bondholders Resolution.

A-22
(d) Notwithstanding anything to the contrary in this Covered Bondholders Representative Agreement,
any termination of the appointment of [Drafting note: Name of entity acting as covered bondholders
representative to be inserted herein.] as Covered Bondholders Representative shall only be effective
starting with the date when, cumulatively, (i) a new Covered Bondholders Representative is
appointed by the general meeting of the Covered Bondholders in accordance with the provisions of
the Romanian Covered Bond Legislation and (ii) such new Covered Bondholders Representative
accepts its appointment as Covered Bondholders Representative.

8. NOTICES

Any notice, demand or other communication to be served or given under the Covered Bondholders
Representative Agreement, shall be given in writing and shall be sufficiently served or given if made
in the manner specified in Part 3 (Notices) of the Master Definitions and Construction Schedule,
save for the Covered Bondholders Representative, whose notice provisions shall be those set out in
the Acceptance Letter.

9. CONFIDENTIALITY

(a) Each of the Covered Bondholders and the Covered Bondholders Representative shall keep
confidential all information of any kind whatsoever provided to it pursuant to these Terms of
Appointment and/or the Acceptance Letter save for:

(i) information (including reports, advice, opinions or any other similar document) that it is
expressly authorised to provide to any other party, any Dealer or any Rating Agency under
the terms of these Terms of Appointment or, in the case of the Covered Bondholders
Representative, any information for the purpose of discharging, in such manner as it thinks
fit, its rights, powers, authorities, duties or obligations;

(ii) information that is public knowledge otherwise than as a result of the wrongful conduct of
such party;

(iii) information that such party is required to disclose pursuant to any Romanian law or any
other applicable law or order of any Romanian or other applicable court or pursuant to any
direction, request or requirement (whether or not having the force of law) of the NBR, the
Financial Supervisory Authority or any governmental or other regulatory or taxation
authority in Romania (including, without limitation, any official bank examiners or
regulators), the Bucharest Stock Exchange or the Luxembourg Stock Exchange, including to
protect itself against any allegation or claim or in any proceedings;

(iv) information in order to comply with a resolution of the general meeting of the Covered
Bondholders;

(v) information that such party wishes to disclose to its professional indemnity insurers or
advisers where such insurers or advisers receive the same under a duty of confidentiality;

(vi) information that such party is required to disclose to the relevant authorities on a public
interest disclosure basis or in order to comply with its statutory obligations relating to money
laundering and the proceeds of crime;

(vii) information that is required for the purpose of defending itself against any claim,
proceeding, allegation, breach or default or any information required for the Covered
Bondholders Representative to defend its reputation;

(viii) information disclosed to professional advisers of such party; and

A-23
 (ix) information disclosed with the prior written consent of the other parties.

(b) The Covered Bondholders agree that the Covered Bondholders Representative shall not be required
to disclose to any other party any information which is price sensitive or confidential to any other
client of the Covered Bondholders Representative and any information received by the Covered
Bondholders Representative other than by reason of, or in its capacity as, Covered Bondholders
Representative pursuant to the Covered Bondholders Representative Agreement.

10. MISCELLANEOUS

(a) Entire Agreement. Schedule 1 to Schedule 4 constitute an integral part of these Terms of
Appointment and, upon the issuance of an Acceptance Letter by the Nominated Representative, these
Terms of Appointment and the Acceptance Letter shall constitute the entire agreement between the
Covered Bondholders and the Nominated Representative as regards the appointment of, and the
performance of the rights and obligations by, the Nominated Representative as the Covered
Bondholders Representative.

(b) Survival of Sections. Sections 6, 9, 11 and 12 of these Terms of Appointment shall continue to
survive notwithstanding any termination of the Covered Bondholders Representative Agreement.

11. GOVERNING LAW

These Terms of Appointment and, upon issuance of the Acceptance Letter, the Covered Bondholders
Representative Agreement and any non-contractual obligations arising out of or in connection with
such documents are governed by Romanian law.

12. DISPUTE RESOLUTION

Any disputes arising out of or relating to these Terms of Appointment and, upon issuance of the
Acceptance Letter, the Covered Bondholders Representative Agreement, including a dispute relating
to any non-contractual obligations arising out of or in connection with such documents, and which
could not be settled amicably by the parties shall be settled by the competent Romanian courts.

A-24
 SCHEDULE 1

PROVISIONS FOR GENERAL MEETINGS OF COVERED BONDHOLDERS

1. As used in this Schedule the following expressions shall have the following meanings unless the
context otherwise requires:

(a) 24 hours shall mean a period of 24 hours including all or part of a day upon which commercial
banks are open for general business in both the place where the relevant meeting is to be held and in
each of the places where the Paying Agents have their specified offices (disregarding for this purpose
the day upon which such meeting is to be held) and such period shall be extended by one period or,
to the extent necessary, more periods of 24 hours until there is included as aforesaid, all or part of a
day upon which commercial banks are open for general business in all of the places mentioned
above;

(b) 48 hours shall mean a period of 48 hours including all or part of two days upon which commercial
banks are open for general business in both the place where the relevant meeting is to be held and in
each of the places where the Paying Agents have their specified offices (disregarding for this purpose
the day upon which such meeting is to be held) and such period shall be extended by one period or,
to the extent necessary, more periods until there is included as aforesaid, all or part of two days upon
which commercial banks are open for general business in all of the places mentioned above;

(c) Covered Bondholders Reserved Matter means:

(i) reduction or cancellation of the amount payable or, where applicable, modification of the
method of calculating the amount payable or modification of the date of payment or, where
applicable, modification of the method of calculating the date of payment in respect of any
principal or interest in respect of the Covered Bonds other than in accordance with the terms
thereof;

(ii) alteration of the currency in which payments under the covered bonds and Coupons are to be
made other than in accordance with Condition 6.6 (Purchases);

(iii) alteration of the quorum or majority required to pass a Covered Bondholders resolution; and

(iv) alteration of this definition of Covered Bondholders Reserved Matter.

(d) block voting instruction shall mean an English language document issued by a Paying Agent and
dated in which:

(i) it is certified that Bearer Covered Bonds (whether in definitive form or represented by a
Bearer Global Covered Bond and not being Bearer Covered Bonds in respect of which a
voting certificate has been issued and is outstanding in respect of the meeting specified in
such block voting instruction and any adjourned such meeting) have been deposited with
such Paying Agent or (to the satisfaction of such Paying Agent) were held to its order or
under its control or blocked in an account with a clearing system and that no such Bearer
Covered Bonds will cease to be so deposited or held or blocked until the first to occur of:

(A) the conclusion of the meeting specified in such document or, if later, of any
adjourned such meeting; and

(B) the surrender to the Paying Agent not less than 48 hours before the time for which
such meeting or any adjourned such meeting is convened of the receipt issued by
such Paying Agent in respect of each such deposited Bearer Covered Bond which is

A-25
 to be released or (as the case may require) of the Bearer Covered Bond or Bearer
Covered Bonds ceasing with the agreement of the Paying Agent to be held to its
order or under its control or so blocked and the giving of notice by the Paying Agent
to the Issuer in accordance with paragraph 15 below of the necessary amendment to
the block voting instruction;

(e) voting certificate shall mean an English language certificate issued by a Paying Agent and dated in
which it is stated:

(i) that on the date thereof, Bearer Covered Bonds (whether in definitive form or represented by
a Bearer Global Covered Bond and not being Bearer Covered Bonds in respect of which a
block voting instruction has been issued and is outstanding in respect of the meeting
specified in such voting certificate or any adjourned such meeting) were deposited with such
Paying Agent or (to the satisfaction of such Paying Agent) were held to its order or under its
control or blocked in an account with a clearing system and that no such Bearer Covered
Bonds will cease to be so deposited or held or blocked until the first to occur of:

(A) the conclusion of the meeting specified in such certificate or, if later, of any
adjourned such meeting; and

(B) the surrender of the certificate to the Paying Agent who issued the same; and

(ii) that the bearer thereof is entitled to attend and vote at such meeting and any adjourned such
meeting in respect of the Bearer Covered Bonds represented by such certificate;

(iii) it is certified that each holder of such Bearer Covered Bonds has instructed such Paying
Agent that the vote(s) attributable to the Bearer Covered Bond or Bearer Covered Bonds so
deposited or held or blocked should be cast in a particular way in relation to the resolution or
resolutions to be put to such meeting or any adjourned such meeting and that all such
instructions are valid during the period commencing 48 hours prior to the time for which the
meeting is convened or of the adjourned meeting, until the conclusion or adjournment
thereof and they are not revocable, nor capable of amendment; and

(iv) one or more persons named in the block voting instruction (each hereinafter called a proxy)
is or are authorised and instructed by the Paying Agent to cast the votes attributable to the
listed Bearer Covered Bonds in accordance with the instructions contained in this document;
and

(f) Total Number means the number which is calculated by dividing the aggregate Principal Amount
Outstanding of all Covered Bonds issued under the Programme (as converted to Euro where required
in accordance with the paragraph 2 below) by 100,000.

2. In connection with any meeting of the holders of Covered Bonds where any of such Covered Bonds
are not denominated in euro, the nominal amount of the Covered Bonds not denominated in euro
shall be converted into euro at the Relevant Exchange Rate applicable at the date of the meeting or
request for convening of such meeting), where Relevant Exchange Rate means the equivalent in
euro determined by the Covered Bondholders Representative: (i) for conversion of RON into euro, at
the rate available from the website of the National Bank of Romania (currently located at
www.bnro.ro) or any successor source for the conversion of RON into euro; and (ii) for the
conversion of any other currency into euro, at the rate specified as the FX rate available from Reuters
or any successor rate displayed by Reuters or, if Reuters is not showing such rate, an alternative rate
from a recognised market source for the conversion of the relevant currency or currencies into euro,
in each case applicable on the day of convening or holding such meeting, as applicable. In such
circumstances, on any poll each person present shall have one vote for each €1 of the Principal
Amount Outstanding of the Covered Bonds (converted as above) which he holds or represents.

A-26
3. A holder of a Bearer Covered Bond (whether in definitive form or represented by a Bearer Global
Covered Bond) may obtain a voting certificate or a block voting instruction from the Paying Agent
in respect of such Covered Bond, by depositing the Bearer Covered Bond with such Paying Agent,
to the satisfaction of such Paying Agent) or by holding the Bearer Covered Bond to its order or
under its control or by blocking it in an account with a clearing system, in each case not less than 48
hours before the date on which the meeting is set and on the terms set out in sub-paragraph (e)(i) or
(d)(i) above. In the case of a block voting instruction, the covered bondholder must instruct the
Paying Agent to the effect set out in sub-paragraph (e)(iii).

4. A holder of Registered Covered Bonds (whether in definitive form or represented by a Registered

Global Covered Bond (other than a Registered Covered Bond referred to in paragraph 5 below)) may
appoint any person (a proxy) to act on his or its behalf in connection to any meeting of the Covered
Bondholders and any adjourned meeting, by means of a written instrument in the English language
(a form of proxy) signed by the holder or, in the case of a corporation, executed under its common
seal or signed on its behalf by an attorney or a duly authorised officer of the corporation and
delivered to the specified office of the Registrar not later than 48 hours prior to the date on which the
meeting is set.

5. Any holder of Registered Covered Bonds (whether in definitive form or represented by a Registered
Global Covered Bond) in the form of a corporation may authorise any person to act as its
representative (a representative) in connection with any meeting of the Covered Bondholders and
any adjourned meeting, by resolution of its directors or other governing body.

6. Except for the first meeting, the meetings of the Covered Bondholders will be convened by the
Covered Bondholders Representative at the request and direction of the covered bondholders holding
at least 25% of the total principal amount outstanding of the covered bonds or at the request of the
cover pool administrator (if any). The first meeting of the Covered Bondholders shall be convened
by the Issuer.

7. The general meeting of the Covered Bondholders shall be convened no later than 15 days, and shall
meet no later than 60 days, in each case from the date of the request addressed to the Covered
Bondholders Representative or, as the case may be, to the Issuer.

8. The convening notice shall set the reference date for the entitled Covered Bondholders to be notified
and to vote at that general meeting, which shall apply also for the subsequent meeting to be held if
the quorum for the first meeting is not met. The reference date must fall after the date when the
publicity formalities regarding the convening notice were fulfilled and must not exceed 15 days
before the date on which the general meeting of the Covered Bondholders is convened for the first
time. In accordance with the Romanian Covered Bond Law, the convening notice shall be published
on the Issuer's website and in one leading newspaper, chosen by the Covered Bondholders
Representative in its discretion, of general circulation in the city where the Issuer has its main
headquarters (this currently being Bucharest). The convening notice shall also be published in a daily
newspaper of general circulation in Luxembourg or on the website of the Luxembourg Stock
Exchange www.bourse.lu. In addition to the publication requirements set out under the Romanian
Covered Bond Law, the convening notice shall be also published in accordance with Condition 16 of
the Terms and Conditions. The date of the general meeting of the Covered Bondholders must be not
less than 30 days from the date when the convening notice was published on the Issuer's website.
The convening notice shall be drafted in Romanian and English language. All convening notices
shall include the date, the place and time of the meeting, the agenda, and the date and time for the
second general meeting, if the first meeting cannot be held for not meeting the quorum requirements.
Convening notices shall not contain the full text of any resolution to be proposed, with the exception
of Covered Bondholders Reserved Matters. Unless the meeting is convened by the Issuer or by the
cover pool administrator, respectively, they will (as regards the cover pool administrator, if any)
each receive a copy of the notice, by post. The convening notice shall mention (a) the possibility that
the Covered Bonds be deposited with the Paying Agent, be held to its order or under its control or

A-27
 blocked in an account with a clearing system for the purpose of obtaining voting certificates or
appointing proxies, not later than 48 hours prior to the date on which the meeting is set and (b) the
deadline for the submission of the form of proxy, if one is appointed, or of the decision for the
nomination of the corporation’s representative, as provided in paragraphs 4 and 5 above.

9. The Covered Bondholders cannot be represented within the general meeting by the shareholders,
directors, censors or employees of the Issuer. Moreover, the Covered Bondholders Representative
cannot vote in the general meeting as a representative of other Covered Bondholders. Except for the
Issuer and the cover pool administrator (if any), that can attend and speak in such general meetings,
only the persons presenting proof of their title as Covered Bondholders or as proxies or
representatives of the Covered Bondholders can be allowed to attend, speak in and vote on any
general meeting of the Covered Bondholders.

10. The Covered Bondholders Representative shall be the chairman (the Chairman) of the general
meeting and may be assisted by one to three secretaries. The secretaries are elected from among the
Covered Bondholders that are present to the general meeting and they shall verify the attendance list
of the Covered Bondholders and indicate the share from the total value of the Covered Bonds held
by each Covered Bondholder.

11. For clarity purposes, the Covered Bondholders may also vote within the general meeting by means
of correspondence, namely by sending their vote, in the form prescribed, and by following the
procedures indicated, in the convening notice.

12. The quorum at any meeting convened to vote on a Covered Bondholders resolution will be one or
more persons holding or representing not less than 75% of the Total Number of the outstanding
covered bonds; any such resolution of Covered Bondholders shall be passed if approved by the
majority of the votes cast (i.e. more than 50%). If the meeting of the Covered Bondholders is not
quorate, the meeting shall be adjourned to a later date at which there will be no minimum quorum
requirements and the resolution of Covered Bondholders shall be passed if approved by the majority
of the votes cast by Covered Bondholders attending and voting at such meeting (including those
covered bondholders voting by means of correspondence). However, Covered Bondholders
Reserved Matters may only be sanctioned by an adjourned meeting of the Covered Bondholders at
which one or more persons holding or representing not less than 25% of the Total Number of all
outstanding Covered Bonds form a quorum and the resolution of the Covered Bondholders shall be
passed if approved by more than 50% of the votes cast by Covered Bondholders attending and
voting at such meeting.

13. If within 15 minutes (or such longer period not exceeding 30 minutes as the Chairman may decide)
after the time appointed for any such meeting a quorum is not present for the transaction of any
particular business, then, subject and without prejudice to the transaction of the business (if any) for
which a quorum is present, the Chairman shall adjourn the meeting as regards such transaction(s) for
which the quorum is not present; the meeting shall stand adjourned to the date and the time referred
to in the convening notice as the date and the time for the second general meeting, if the first
meeting cannot be held for not meeting the quorum requirements. If within 15 minutes (or such
longer period not exceeding 30 minutes as the Chairman may decide) after the time appointed for
such adjourned meeting a quorum is not present in case of Covered Bondholders Reserved Matters,
then, subject and without prejudice to the transaction of the business (if any) for which a quorum is
not needed, the Chairman) shall dissolve such meeting.

14. No person shall be entitled to attend and speak nor shall any person be entitled to vote at any
meeting of Covered Bondholders or join with others in requesting the convening of such a meeting
or to exercise the rights conferred on Covered Bondholders by Condition 9 (Events of Default and
Enforcement) of the Terms and Conditions unless he either produces the Bearer Definitive Covered
Bond or Bearer Definitive Covered Bonds of which he is the holder or a voting certificate or is a

A-28
 proxy or a representative or is the holder of a Registered Definitive Covered Bond or Registered
Definitive Covered Bonds.

15. All items on the agenda as well as, if any, all other questions submitted to a meeting, shall be
decided upon through a voting process as follows:

(a) each person present (in person or by proxy) or voting by correspondence shall have one vote
in respect of each €1 in the principal amount of the outstanding covered bonds; and

(b) in the case of Covered Bonds denominated in another currency, the amount shall be
calculated according to paragraph 2 above.

16. Without prejudice to the obligations of the proxies named in any block voting instruction or form of
proxy and representatives, any person entitled to more than one vote need not use all his votes or cast
all the votes to which he is entitled in the same way.

17. The proxies named in any block voting instruction or form of proxy and representatives need not be
Covered Bondholders.

18. Any vote given in accordance with the terms of a block voting instruction or form of proxy shall be
valid notwithstanding the previous revocation or amendment of the block voting instruction or form
of proxy or of any of the relevant Covered Bondholders' instructions, except for the receipt in written
of such revocation or amendment by the Issuer, from the Paying Agent or, as the case may be, from
the Registrar, not later than 48 hours prior to the date on which the meeting (or adjourned meeting) is
set.

19. The secretary/secretaries of the meeting check(s) the fulfilment of the convening formalities, the date
and place of the general meeting of the covered bondholders, the present Covered Bondholders, the
votes cast by the present Covered Bondholders and by means of correspondence and the number of
the Covered Bonds. The secretary/secretaries is/are also responsible for drafting the summaries of
the discussions and the resolutions taken within the general meeting and shall prepare the minutes of
the general meetings of the Covered Bondholders. Such minutes are thereafter signed by the
Chairman. The minutes shall be submitted into registries provided for this purpose by the Issuer and
they shall be evidence of the matters contained therein.

20. Any Covered Bondholders Resolution duly passed at any such meeting shall be binding on all the
Covered Bondholders, whether present or not and whether voting against such resolution.

21. The resolutions of the general meetings of the Covered Bondholders must be submitted, within 15
days by the Issuer, with the Official Gazette of Romania, in view of publication in Part IV of the
Official Gazette and shall inform the Covered Bondholders Representative of such submission. If the
Issuer does not fulfil this obligation within the term provided by law, the Covered Bondholders
Representative shall submit the above-mentioned resolution with the Official Gazette as soon as
practicable possible at the expense of the Issuer.

22. The Covered Bondholders Representative must inform the Issuer and the cover pool administrator (if
any) about the resolutions of the general meetings of the Covered Bondholders on the same day
when such resolutions were taken.

A-29
 SCHEDULE 2

FORM OF NOTICE OF DEFAULT

[On the letterhead of the Covered Bondholders Representative]

To: ALPHA BANK ROMANIA S.A.

as the Issuer

To: [name of servicer to be inserted]

as the Servicer

To: [name of asset monitor to be inserted]

as the Asset Monitor

[To: [name of cover pool administrator to be inserted]

as the Cover Pool Administrator] [Drafting note: To be included if appointed at the time of such
notice.]

From: [ ]

as the Covered Bondholders Representative

Dated: [date to be inserted]

Dear Madams/Sirs,

Notice of Default

We refer to the €1 billion global covered bond programme established by Alpha Bank Romania S.A., as
issuer, in accordance with the Romanian Covered Bond Legislation, and to the Terms of Appointment
approved pursuant to the resolution of the general meeting of the Covered Bondholders dated [date to be
inserted] and the Acceptance Letter dated [date to be inserted] issued by us (the Covered Bondholders
Representative Agreement).

We hereby notify you that an Event of Default has occurred. Accordingly, this notice shall constitute a
Notice of Default which is served upon the Issuer pursuant to Condition 9 (Events of Default and
Enforcement) of the Terms and Conditions.

Unless the context otherwise requires, capitalised terms used in this Notice of Default and not defined herein
shall have the meanings provided in the Master Definitions and Construction Schedule.

A-30
We hereby reserve all our rights and those of the Covered Bondholders and each other Secured Creditor
under the Covered Bonds, the Covered Bondholders Representative Agreement and the other Transaction
Documents in respect of any Event of Default under the Covered Bonds or any Transaction Document.

Yours faithfully,

...................................................
for and on behalf of
[name of Covered Bondholders Representative to be included]
as Covered Bondholders Representative

A-31
 SCHEDULE 3

FORM OF ACCEPTANCE LETTER

To: ALPHA BANK ROMANIA S.A.

as the Issuer

ALPHA BANK ROMANIA S.A.

as the Servicer

To: The Covered Bondholders

From: [name of covered bondholders representative to be inserted]

as the Covered Bondholders Representative

Dated: [date to be inserted]

Dear Madams/Sirs,

1. We refer to the Specific Terms of Appointment of the Covered Bondholders Representative in

relation to the €1 billion global covered bond programme established by the Issuer in accordance
with the Romanian Covered Bond Legislation, as approved by the resolution of the general meeting
of the Covered Bondholders dated [date to be inserted], a copy of which is enclosed herein as
Appendix 1 (the Terms of Appointment).

This is an Acceptance Letter for the purposes of the Terms of Appointment. Upon us issuing this
Acceptance Letter in accordance with the Terms of Appointment, the Terms of Appointment
together with this Acceptance Letter shall constitute the Covered Bondholders Representative
Agreement as referred to in the Prospectus.

Terms defined in the Terms of Appointment have the same meaning in this Acceptance Letter unless
given a different meaning herein.

2. We, [name of the Covered Bondholders Representative], pursuant to our appointment as Covered
Bondholders Representative following the resolution of the general meeting of the Covered
Bondholders dated [date to be inserted] hereby agree to become a representative of the covered
bondholders as envisaged by Article 23 (1) of the Romanian Covered Bond Law, the Terms of
Appointment, this Acceptance Letter, the Terms and Conditions and resolution of the general
meeting of the Covered Bondholders dated [date to be inserted].

3. We, the Covered Bondholders Representative:

a) for the purpose of Articles 1202 - 1203 of the Civil Code, hereby confirm that Section 6 of
this Acceptance Letter and Sections 3, 4, 5, 6, 7, 10(b), 11 and 12 of the Terms of
Appointment have been discussed and negotiated and we expressly agree with all the
provisions in this Acceptance Letter and the Terms of Appointment, including, but not
limited to, limitation of liability, unilateral termination, suspension of the performance of
obligations, loss of right or term, limitation of right to challenge, limitation of contractual
freedom, silent renewal, governing law and choice of jurisdiction, including, but not limited
to, Section 6 of this Acceptance Letter and Sections 3, 4, 5, 6, 7, 10(b), 11 and 12 of the
Terms of Appointment;

A-32
 b) for the purposes of Article 1221 of the Civil Code, hereby confirm that we have the
necessary experience and knowledge in order to enter into and evaluate this Acceptance
Letter and the Terms of Appointment and we are not in a state of need as at the date of this
Acceptance Letter;

c) hereby waive any retention right (in Romanian, drept de retentie) including as provided in
article 2029 of the Civil Code;

d) confirm that we shall refrain from entering into any agreement that may generate a conflict
of interests, as provided for, inter alia, by articles 1303-1304 of the Civil Code; and

e) will perform our rights and obligations under Covered Bondholders Representative
Agreement with the diligence of a good owner (in Romanian, cu diligența unui bun
proprietar).

4. We, the Covered Bondholders Representative, hereby confirm that we have received a copy of the
Prospectus, the Master Definitions and Construction Schedule and of the Transaction Documents to
which we are expressed to become a party, and we hereby confirm that we are aware of the Terms
and Conditions of the Covered Bonds, the Master Definitions and Construction Schedule and the
other Transaction Documents to which we are expressed to become a party and of our role as
regulated by the Romanian Covered Bond Legislation.

5. Our administrative details are as follows:

Address: [address to be inserted]

Attention: [contact person to be inserted]

E-Mail: [email to be inserted]

Facsimile: [facsimile to be inserted]

6. This Acceptance Letter and any non-contractual obligations arising out of or in connection with it
are governed by Romanian law. Any disputes arising out of or relating to this Acceptance Letter,
including a dispute relating to any non-contractual obligations arising out of or in connection with
this Acceptance Letter, and which could not be settled amicably shall be settled by the competent
Romanian courts.

Consequently, the signature(s) below confirm both our consent to the terms of this Acceptance Letter as well
as to the terms of the Terms of Appointment, and thus to the terms of the Covered Bondholders
Representative Agreement, and also the acceptance of any uncommon clauses for the purpose of Articles
1202 – 1203 of the Civil Code, as stated above.

Covered Bondholders Representative

[name of Covered Bondholders Representative to be inserted]

By: ___________________________

Name: ___________________________

Title: ___________________________

A-33
 APPENDIX 1

Specific Terms of Appointment of the Covered Bondholders Representative

A-34
 SCHEDULE 4

LETTER OF CONFIRMATION AND UNDERTAKING BY THE ISSUER RELATING TO THE

TERMS OF APPOINTMENT (this ISSUER LETTER)

To: The Covered Bondholders

To: The Covered Bondholders Representative

Dated: [date to be inserted]

Dear Madams/Sirs,

We, ALPHA BANK ROMÂNIA S.A., a credit institution established and operating under the laws of
Romania, having its registered office at 237 B Calea Dorobanților, sector 1, Bucharest, Romania, sole
registration code (C.U.I.) 5062063, fiscal attribute RO, registered with the Banking Registry under No. RB-
PJR-40-022/ 1999, registered with the Bucharest Commercial Registry under No. J40/28415/1993, European
Unique Identifier ROONRC.J40/28415/1993, refer to the SPECIFIC TERMS OF APPOINTMENT OF THE
COVERED BONDHOLDERS REPRESENTATIVE (the Terms of Appointment) approved in the general
meeting of covered bondholders dated [date to be inserted] following the issuance by us as issuer (the
Issuer) of the first series of covered bonds under a €1 billion Global Covered Bond Programme (the
Programme) established in accordance with the Romanian Covered Bond Legislation, with further series
(each, a Series) of covered bonds (the Covered Bonds) being envisaged to be issued under the Programme.

1. We, as the Issuer, hereby confirm that we have received a copy of the Terms of Appointment and we
hereby confirm that we are aware of the provisions therein, in particular without limitation, we agree
and confirm we undertake:

a) the obligations set out as obligations of the Issuer in the Terms of Appointment, including without
limitation under Section 3 paragraphs (b)(iv), (b)(v), (g), (h) and (i), and Section 6 (Remuneration
and Indemnification) of the Terms of Appointment;

b) in accordance with Article 32(4) of the Romanian Covered Bond Law, within 5 (five) Business Days
of receipt of a copy of the convening notice from the Covered Bondholders Representative, publish
such notice for the convening of a meeting of the holders of the Covered Bonds on its web-site and
in one leading newspaper, indicated by the Covered Bondholders Representative in its discretion, of
general circulation in the city where the Issuer has its main headquarters (this currently being
Bucharest);

c) for the purposes of Article 33(4) of the Romanian Covered Bond Law, to submit all resolutions of
general meetings of Covered Bondholders notified to us with the Official Gazette for publication
therein within not later than 15 days and inform the Covered Bondholders Representative of such
submission; and

d) pay for the costs and expenses relating to the convening of any meeting of the holders of Covered
Bonds (in accordance with Article 32(1) of the Romanian Covered Bond Law) as well as any other
such expenses properly incurred with the holding of such meetings;

2. We hereby:

a) for the purpose of Articles 1202 - 1203 of the Civil Code, hereby confirm that we expressly agree
with all the provisions in this Issuer Letter and the Terms of Appointment including, but not limited

A-35
 to, those on limitation of liability, unilateral termination, suspension of the performance of
obligations, loss of right or term, limitation of right to challenge, limitation of contractual freedom,
silent renewal, governing law and choice of jurisdiction, including, but not limited to, Sections 3, 4,
5, 6, 7, 10(b), 11 and 12 of the Terms of Appointment; and

b) for the purposes of Article 1221 of the Civil Code, hereby confirm that we have the necessary
experience and knowledge in order to enter into and evaluate this Issuer Letter and the Terms of
Appointment and we are not in a state of need as at the date of this Issuer Letter.

3. This Issuer Letter and any non-contractual obligations arising out of or in connection with it are
governed by Romanian law. Any disputes arising out of or relating to this Issuer Letter, including a
dispute relating to any non-contractual obligations arising out of or in connection with this Issuer
Letter, and which could not be settled amicably shall be settled by the competent Romanian courts.

Consequently, the signature(s) below confirm our consent to the terms of this Issuer Letter and the Terms of
Appointment, and also the acceptance of any uncommon clauses for the purpose of Articles 1202 – 1203 of
the Civil Code, as stated above.

ALPHA BANK ROMÂNIA S.A. as Issuer

By: ___________________________

Name: ___________________________

Title: ___________________________

Date: ___________________________

[name of entity appointed to act as Covered Bondholders] as Covered Bondholders Representative

By: ___________________________

Name: ___________________________

Title: ___________________________

Date: ___________________________

A-36
EXECUTION VERSION

MOVABLE MORTGAGE AGREEMENT

OVER THE COVER POOL AND COLLECTION ACCOUNTS
RELATING TO THE €1 BILLION GLOBAL COVERED BOND
PROGRAMME OF ALPHA BANK ROMÂNIA S.A.

ENTERED INTO ON 8 APRIL 2019

between

ALPHA BANK ROMÂNIA S.A.

(as Mortgagor)

and

PRICEWATERHOUSECOOPERS AUDIT S.R.L.

(as Asset Monitor, acting on behalf of
the Covered Bondholders)

Radu Tărăcilă Pădurari Retevoescu SCA in association with Allen & Overy LLP
A-37
 CONTENTS
Section Page

1. DEFINITIONS AND CONSTRUCTION ............................................................................................. 2

2. REPRESENTATIONS AND WARRANTIES ..................................................................................... 5
3. MORTGAGE ........................................................................................................................................ 6
4. CONTINUING MORTGAGE .............................................................................................................. 7
5. AFFIRMATIVE COVENANTS OF THE MORTGAGOR ................................................................. 8
6. REGISTRATION REQUIREMENTS .................................................................................................. 9
7. NEGATIVE COVENANTS OF THE MORTGAGOR ...................................................................... 10
8. FURTHER ASSURANCES ................................................................................................................ 11
9. ENFORCEMENT ............................................................................................................................... 12
10. NOTICES ............................................................................................................................................ 12
11. MISCELLANEOUS ............................................................................................................................ 13
12. TERMINATION ................................................................................................................................. 14
13. COVERED BONDHOLDERS REPRESENTATIVE ........................................................................ 14
14. GOVERNING LAW AND DISPUTE RESOLUTION ...................................................................... 15

SCHEDULE 1 FORM OF CBR TRANSFER AGREEMENT ................................................................ 16

SCHEDULE 2 COLLECTION ACCOUNTS .......................................................................................... 23
PART 1 LIST OF COLLECTION ACCOUNTS .......................................................................... 23
PART 2 FORM OF LETTER OF CONFIRMATION OF MOVABLE MORTGAGE OVER
COLLECTION ACCOUNTS .......................................................................................... 24
SCHEDULE 3 NEW ISSUANCE CONDITION PRECEDENT CERTIFICATE .................................. 27

SIGNATURES PAGE ...................................................................................................................................... 29

A-38
This MOVABLE MORTGAGE AGREEMENT OVER THE COVER POOL AND COLLECTION
ACCOUNTS (this Agreement or this Movable Mortgage over the Cover Pool and Collection Accounts
Agreement) is entered into on 8 April 2019

BETWEEN:

(1) ALPHA BANK ROMÂNIA S.A., a credit institution established and operating under the laws of
Romania, having its registered office at 237 B Dorobanților St., sector 1, Bucharest, Romania, sole
registration code (C.U.I.) 5062063, fiscal attribute RO, registered with the Banking Registry under
No. RB-PJR-40-022/ 1999, registered with the Bucharest Commercial Registry under No.
J40/28415/1993, European Unique Identifier ROONRC.J40/28415/1993, as mortgagor (the
Mortgagor or ABR), hereunder acting through the representative(s) identified on the signature page
below; and

(2) PricewaterhouseCoopers Audit S.R.L., a financial auditor organized and existing under the laws
of Romania, having its registered office at Lakeview Building, 6/1 floor, 301-311 Barbu Vacarescu
Street, sector 2, Bucharest, Romania, fiscal attribute RO, registered as a financial auditor within the
Public Electronic Register of Financial Auditors and Audit Firms under No. 6, European Unique
Identifier ROONRC.J40/17223/1993, in its capacity as asset monitor (in Romanian, agent) (the
Asset Monitor) acting hereunder on behalf of the covered bondholders (as defined below) as
secured creditors (the Covered Bondholders), pursuant to, inter alios, Article 29 (2) of the
Romanian Covered Bond Law, hereunder acting through the representative(s) identified on the
signature page below.

(the Mortgagor and the Asset Monitor as well as the Covered Bondholders Representative upon its
appointment and entry into of the CBR Transfer Agreement, are referred to, collectively, as the Parties, and
each, as a Party).

WHEREAS:

(A) The Mortgagor (in such capacity, the Issuer) intends to issue covered bonds (the Covered Bonds, as
defined in the Master Definitions and Construction Schedule) from time to time in Series in
accordance with the Romanian Covered Bond Legislation (as well as the relevant Transaction
Documents) under a €1,000,000,000 (one billion euros) Global Covered Bond Programme (the
Programme).

(B) The Covered Bonds may be denominated in any currency agreed between the Issuer and the relevant
Dealer(s) and may be issued in bearer or registered form. The Covered Bonds shall bear a fixed or
floating interest rate and be due when, and as, provided in more detail in the terms and conditions
relating to the Covered Bonds (the Conditions, as defined in the Master Definitions and
Construction Schedule). Final terms (the Final Terms, as defined in the Master Definitions and
Construction Schedule) will be issued and published in accordance with the Conditions prior to the
issue of each Series or Tranche of Covered Bonds detailing certain relevant terms thereof which, for
the purposes of that Series only, complete the Conditions applicable to that Series. The terms and
conditions applicable to any particular Series will be the Conditions completed by the relevant Final
Terms.

(C) This Agreement forms part of the Transaction Documents.

(D) In accordance with the provisions of the Romanian Covered Bond Law (including without limitation
article 29 thereof), the Issuer is required to create a Romanian law governed movable mortgage over
the Cover Pool. According to Articles 22(1)(m) and 29(2) of the Romanian Covered Bond Law, the
Movable Mortgage over the Cover Pool and Collection Accounts Agreement shall be initially
entered into between the Issuer, as mortgagor, and the Asset Monitor in its name and on behalf of the
Covered Bondholders (as defined below), and registered with the National Register for opposability

A-39
 purposes prior to the first Series of Covered Bonds being offered for subscription. According to
Article 29(3) of the Romanian Covered Bond Law, after the appointment of the Covered
Bondholders Representative, the movable mortgage created pursuant to the Movable Mortgage over
the Cover Pool and Collection Accounts Agreement in the name of the Asset Monitor shall be
transferred to the name of the Covered Bondholders Representative.

(E) In order to ensure fulfilment of the foregoing legal requirements, the Parties have agreed to enter into
this Agreement.

NOW THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS:

1. DEFINITIONS AND CONSTRUCTION

1.1 Defined Terms. Wherever used in this Agreement, unless the context otherwise requires, the
following terms have the following meanings:

Account Bank means a credit institution where the Collection Accounts of the Mortgagor are
domiciled, including without limitation the Account Banks listed in the attached Part 1 (List of
Collection Accounts) of Schedule 2 (Collection Accounts) from time to time.

Account Monies means all monies from time to time credited to or from time to time standing to the
credit of the Collection Accounts or any of them and all interest from time to time payable thereon.

Ancillary Rights means all and any in rem and/or in personam rights that secure a claim, including
movable and immovable mortgages and receivables arising from insurance agreements regarding the
mortgaged immovable property and life insurance agreements.

Bucharest Business Day means a day (other than a Saturday or Sunday or a statutory holiday in
Romania) on which commercial banks are open for general business (including dealings in foreign
exchange and foreign currency deposits) in Bucharest (Romania).

CBR Transfer Agreement means an agreement to be entered into substantially in the form set out
in Schedule 1 (Form of CBR Transfer Agreement) for the purposes of, among others, transferring the
Movable Mortgage created under this Agreement from the name of the Asset Monitor to the name of
the Covered Bondholders Representative.

Civil Code means the Civil Code as republished in the Official Gazette of Romania No. 505 of 15
July 2011, approved by Law No. 287 of 17 July 2009 regarding the Civil Code and Law No. 71 of 3
June 2011 regarding the application of the Civil Code, as such may be amended at any time.

Collection Accounts means any and all present and future bank accounts of the Mortgagor opened
with Romanian credit institutions, including any account opened by the Mortgagor at Alpha Bank
România S.A. and any Third Party Collection Account, where the payments by the underlying
debtors in relation to the Cover Pool Assets are made, as such bank accounts are listed in the
attached Part 1 (List of Collection Accounts) of Schedule 2 (Collection Accounts) from time to time.

Cover Pool has the meaning given to such term in the Master Definitions and Construction Schedule
and refers to the cover pool (in Romanian, portofoliu de creanțe), as referenced in Article 2(m) of the
Romanian Covered Bond Law, securing the Issuer’s obligations in connection with any and all
issuances of Covered Bonds.

Cover Pool Assets means the assets included from time to time in the Cover Pool (in Romanian,
portofoliu de creanțe), more specifically, the Loan Assets, other financial assets that are Eligible
Financial Assets, together with any ancillary rights thereof and derivative financial instruments
which meet the criteria pursuant to the Romanian Covered Bond Legislation, as such are registered

A-40
in the Internal Cover Pool Register; for the avoidance of doubt, such assets include any and all
accessory rights relating to such assets (such as, without limitation, any immovable mortgages
securing the Loan Assets).

Cover Pool Secured Creditors means the Covered Bondholders and any other parties which under
the Romanian Covered Bond Legislation benefit from priority rights against any other creditors upon
enforcement or other realisation of the Cover Pool Assets or any other equivalent, subsequent or
superior rights over or in relation to the Cover Pool (these being, subject to the provisions of the
Romanian Covered Bond Law, the Hedging Counterparties (if any) and the Privileged Creditors).

Covered Bonds has the meaning given to such term in Preamble (A) above.

Covered Bondholders has the meaning given to it under the Master Definition and Construction
Schedule.

Encumbrance means any movable mortgage (in Romanian, ipoteca mobiliară), immovable
mortgage (in Romanian, ipoteca imobiliară), pledge, charge, privilege, priority, hypothecation,
encumbrance, assignment, lien, attachment, set-off or other security interest of any kind, or any other
agreement or arrangement having the effect of conferring security upon or with respect to, or any
segregation of, or other preferential arrangement with respect to, any present or future assets,
revenues or rights, including, without limitation, any taxes or duties due to any public body or any
designation of loss payees or beneficiaries or any similar arrangement under any insurance policy
and excluding any unsecured personal liabilities.

Internal Cover Pool Register means the internal evidence register (in Romanian, registrul de
evidenţă internă) as referred to in paragraph n) of Article 2 of the Romanian Covered Bond Law and
maintained by the Mortgagor in accordance with the Romanian Covered Bond Law.

Master Definitions and Construction Schedule means the master definitions and construction
schedule signed on or about the date of this Agreement by, among others, the Issuer and the Asset
Monitor, for the purpose of identification, as the same may be amended, restated, supplemented,
replaced or novated from time to time.

Mortgaged Property means any and all benefits, rights, receivables, claims or proceeds of the
Mortgagor arising from or relating to:

(a) the Cover Pool Assets;

(b) to the extent not included under paragraph (a) above, the Proceeds; and

(c) to the extent not included under paragraphs (a) or (b) above, the Collection Accounts and the
Accounts Monies.

Movable Mortgage means the movable mortgage (in Romanian, ipotecă mobiliară) as regulated by
the Civil Code and the Romanian Covered Bond Law created in favour of the Covered Bondholders
in accordance with Section 3.1 of this Agreement and the foregoing legal provisions.

National Register means the National Register for Movable Publicity (in Romanian, Registrul
National de Publicitate Mobiliara) as regulated in accordance with Law No. 297 of 3 December
2018 regarding the National Register for Movable Publicity and for the abolishment of Government
Decision No. 89/2000 regarding certain measures for the authorisation of operators and carrying out
of the registrations in the Electronic Archive for Movable Security, as published in the Official
Gazette No. 1040 of 7 December 2018, or any similar public register, replacing the National
Register.

A-41
 NBR means the National Bank of Romania.

Privileged Creditors means any creditors mandatorily preferred to the Covered Bondholders, these
being, subject to the provisions of the Romanian Covered Bond Law the Cover Pool Administrator
(if appointed), the Asset Monitor and any Liquidity Facility Provider (if any).

Proceeds means the income realised, benefits (in Romanian, fructe), property and other products (in
Romanian, produse) realised or derived from the Mortgaged Property, including, without limitation,
any amounts and/or property received by the Mortgagor as a result of a transfer, sale, exchange or
other alienation in whole or part thereof, as well as any amount collected under any insurance, and
any amounts obtained as a result of any administration, disposal and/or subsequent operations of any
part of the Mortgaged Property forming part of the Movable Mortgage pursuant to Article 2392 of
the Civil Code.

Registration Notice means the notice to be registered with the National Register for the purposes of
perfecting or protecting the security hereby created (or intended to be created) and preserving or
protecting the rights of the Covered Bondholders under this Agreement and the Romanian Covered
Bond Law, pursuant to, without limitation Articles 22(m) and 29(2) of the Romanian Covered Bond
Law.

Romanian Covered Bond Law means Law No. 304 of 27 November 2015 on issuances of covered
bonds, as published in the Official Gazette of Romania No. 902 of 4 December 2015, as such may be
amended at any time.

Romanian Covered Bond Legislation means the Romanian Covered Bond Law and the Romanian
Covered Bond Regulation as well as any other Romanian law or similar normative act of regulation
or secondary act issued by the NBR for the application or by reference to the Romanian Covered
Bond Law.

Romanian Covered Bond Regulation means Regulation No. 1 of 3 March 2016 issued by the
National Bank of Romania, as published in the Official Gazette of Romania No. 184 (bis) of 11
March 2016, as such may be amended from time to time.

Romanian Secured Obligations means any and all sums of money and obligations (whether actual
or contingent) as are now or as shall from time to time be owed or due by the Issuer to the Covered
Bondholders under or in relation to the Covered Bonds, including without limitation repayment of
the nominal value of the Covered Bonds and payment of interest, expenses, fees, penalties and/or
other costs under or in connection with the Covered Bonds, as well as the due and punctual
performance by the Mortgagor of its obligations under this Agreement and the Conditions and, to the
maximum extent permitted by the Romanian Covered Bonds Legislation, any other obligation under
the other Transaction Documents or any other obligations arising under or in relation to the Covered
Bonds, as well as any and all expenses incurred with regard to the preservation and/or sale of any
part of the Mortgaged Property, as well as the protection or enforcement of any of the Covered
Bondholders’ other rights arising from or related to this Agreement.

Secured Amount means the amount referred to in Section 3.2 of this Agreement.

1.2 Certain Additional Defined Terms. The terms and expressions defined in the preamble and recitals of
this Agreement constitute an integral part hereof and the respective meanings of such terms and
expressions are herein incorporated by reference.

1.3 Master Definitions and Construction Schedule Defined Terms. Wherever used in this Agreement,
unless the context otherwise requires or it is otherwise provided, the terms beginning with capital
letters have the meanings given to such terms in the Master Definitions and Construction Schedule.

A-42
1.4 Interpretation. Part 2 (Principles of Interpretation and Construction) and Part 3 (Notices) of the
Master Definitions and Construction Schedule apply to this Agreement as though it was set out in
full in this Agreement. In addition, unless the contrary intention appears, references to:

(a) the Master Definitions and Construction Schedule shall be construed as references to the
Master Definitions and Construction Schedule as such has been amended, restated and/or
supplemented from time to time;

(b) Terms and Conditions shall be construed as references to the Terms and Conditions in
relation to the Programme as such has been amended, restated and/or supplemented from
time to time;

(c) an amendment and the phrase amended includes any change, modification, supplement,
novation, variation, increase, extension (whether of maturity or otherwise), restatement, re-
enactment or replacement (however fundamental and whether or not more onerous) and
amended will be construed accordingly;

(d) a mortgage is reference to a movable or immovable mortgage (in Romanian, ipoteca

mobiliară sau imobiliară) created in accordance with the Civil Code and mortgaged shall
be construed accordingly;

(e) any act, contract or instrument are references to such act, contract or instrument as
amended, modified, assigned, novated, restated or re-enacted and include references to every
law, instrument, decision or consent made thereunder or pursuant thereto. Reference to a
certain piece of legislation or identified provision or article of a piece of legislation shall be
construed as reference to that piece of legislation, provision or article, as such may be
amended, republished or replaced at any time; and

(f) any phrase introduced by the terms include, in particular, such as or any similar expression
shall be construed as illustrative and shall not limit the scope of the words preceding those
terms.

1.5 Number and Persons. In this Agreement, words importing the singular number only shall include the
plural and vice versa, words importing the masculine gender shall include the feminine and neuter
genders and vice versa and words importing persons shall include individuals, partnerships,
associations, trusts, unincorporated organizations and companies and vice versa.

1.6 Sections and References. The division of this Agreement into Sections and the insertion of headings
are for the convenience of reference only and shall not affect the construction or interpretation of this
Agreement. The terms this Agreement, hereof, pursuant hereto and similar expressions refer to this
Agreement and not to any particular Section or other portion hereof and include any agreement or
instrument supplemental or ancillary hereto. Unless something in the subject matter or context is
inconsistent therewith, references herein to Sections or Articles are to Sections or Articles of this
Agreement.

2. REPRESENTATIONS AND WARRANTIES

The Mortgagor hereby represents and warrants to the Covered Bondholders on the date of this
Agreement, on each date when a Cover Pool Asset is included in the Cover Pool as well as on each
Issue Date that:

(a) it is the registered (where applicable and required to do so to have a valid and/or enforceable
title) and the sole and absolute owner (in Romanian, proprietarul absolut, exclusiv și
perpetuu) of the Mortgaged Property and has good, valid and marketable (in Romanian, se
află în circuitul civil) title to the Mortgaged Property;

A-43
 (b) it has the right to charge the Mortgaged Property as contemplated herein;

(c) the Mortgaged Property is free and clear of any and all Encumbrances, whatsoever in favour
of any party, except for the priority benefitting the Privileged Creditors according to the
Romanian Covered Bond Law and the Mortgaged Property is not subject to any legal or
conventional restrictions or obstacles that might adversely affect the enjoyment of the
Mortgaged Property and/or the Movable Mortgage created herein by the Covered
Bondholders or the Cover Pool Administrator and the Movable Mortgage constituted under
this Agreement will be of first ranking upon the registration of the Registration Notice with
the National Register;

(d) it has fulfilled any formalities, including with regard to the public registries such as the
National Register and has submitted all relevant notices to the assigned debtors, and made
all relevant publications, relating to the inclusion of the Cover Pool Assets in the Cover
Pool, as required by and in accordance with the Romanian Covered Bond Legislation and
that Cover Pool Assets comply with the Eligibility Criteria (with respect to the Loan Assets)
or such other eligibility requirements as set out under the Romanian Covered Bond
Legislation and are subject to this Agreement;

(e) the Mortgagor has fully and timely performed all obligations incumbent on it under all
underlying contracts relating to the Mortgaged Property and the Mortgagor has complied
with all provisions thereof; and

(f) this Agreement creates valid, binding and enforceable security interests and obligations in
accordance with its terms and the execution, delivery and performance by it of this
Agreement has been duly authorised by all necessary corporate actions, does not contravene
or conflict with any provisions of the constitutive documents of the Mortgagor or any
existing law, regulation or order having jurisdiction over the Mortgagor and does not result
in a breach of, or constitute a default under any agreement or instrument to which the
Mortgagor is a party or by which it or its property or assets may be bound or affected and the
Mortgagor has taken all necessary actions to ensure that the security interests and the
obligations constituted by this Agreement represent legally valid and binding security
interests and obligations of the Mortgagor enforceable in accordance with their respective
terms.

3. MORTGAGE

3.1 Creation of the Movable Mortgage. For securing the due and punctual performance of the Romanian
Secured Obligations up to the Secured Amount, the Mortgagor, as owner of the Mortgaged Property,
hereby creates in favour of the Covered Bondholders, pursuant to the terms of this Agreement, the
Romanian Covered Bonds Law and, as applicable, the Civil Code, the Movable Mortgage over any
and all of the Mortgaged Property, as it is at the date hereof and as shall become from time to time.

3.2 Secured Amount. According to the Civil Code and without prejudice to the rights of the Covered
Bondholders to receive full payment of the Romanian Secured Obligations due to them and/or to
have their rights under or in relation to the Covered Bonds satisfied in full, the Parties hereby agree
that the maximum amount secured under this Agreement and which represents the fair equivalent
value estimated in good faith by the Parties of all and any Romanian Secured Obligations is EUR
1,200,000,000 (one billion two hundred million euros) representing the aggregate of:

(a) the principal amount of up to EUR 1,000,000,000 (one billion euros) owed or which may be
owed by the Mortgagor under or in relation to each and any outstanding Series of Covered
Bonds secured by this Movable Mortgage; plus

A-44
 (b) an additional amount of EUR 200,000,000 (two hundred million euros) representing the fair
equivalent value estimated by the Parties of all and any other Romanian Secured Obligations
that might be secured at any particular time by this Movable Mortgage owed or potentially
owed by the Mortgagor, in any capacity whatsoever, to the Covered Bondholders, under or
in relation to the Covered Bonds.

3.3 Movable Mortgage over present and future assets. For the avoidance of doubt, the Parties hereby
acknowledge and agree that the Movable Mortgage created hereunder over the Mortgaged Property
is a mortgage over present and future assets, as such may be registered from time to time in the
Internal Cover Pool Register.

3.4 Future obligations. The Parties hereby agree that any and all future Romanian Secured Obligations
shall be secured by the Movable Mortgage which shall maintain its ranking throughout the entire
duration of this Agreement, pursuant to Article 2370 of the Civil Code.

4. CONTINUING MORTGAGE

4.1 The Movable Mortgage shall constitute and be a continuing movable security notwithstanding any
settlement of account, set-off, reduction or repayment of the amount of the Romanian Secured
Obligations (in full or in part) and shall be in addition to and shall not be in any way prejudiced or
affected by any collateral or other security created by the Mortgagor in favour of the Covered
Bondholders, (upon its appointment and entry into of the CBR Transfer Agreement) the Covered
Bondholders Representative, the Security Trustee or any other party to any Transaction Documents
or any other security interests, indemnities or guarantees which may now or at any time hereafter be
held or judgement or order obtained by the foregoing or by the Cover Pool Administrator for all or
any part of the monies hereby secured, nor shall any such collateral or other security, judgement or
order or any lien to which the Covered Bondholders may be otherwise entitled (including, but not
limited to, any security, mortgage, charge or lien prior to the date hereof on the property hereby
mortgaged or any part thereof) or the liability of the Mortgagor or any other person not party hereto
for all or any part of the monies hereby secured be in anyway prejudiced or affected by the Movable
Mortgage.

4.2 Without prejudice to any rights of any Hedging Counterparty or Privileged Creditors under the
Romanian Covered Bond Law, the Mortgagor hereby agrees that the Movable Mortgage created by
this Agreement shall be held by the Covered Bondholders as a continuing security for the payment
and discharge in full of the sums due to the Covered Bondholders in connection with the Romanian
Secured Obligations up to the Secured Amount.

A-45
5. AFFIRMATIVE COVENANTS OF THE MORTGAGOR

5.1 Cover Pool Assets. The Mortgagor hereby undertakes and covenants that the Mortgagor will:

(a) take or cause to be taken, as the case may be, all steps to maintain in full force and effect,
and to preserve and enforce its rights under all Cover Pool Assets or rights necessary for the
conduct of its business, and pursue all claims and remedies arising under such Cover Pool
Assets; and

(b) publish on its website and update, on an on-going basis, the information from the Internal
Cover Pool Register relating to the Cover Pool Assets required by the Romanian Covered
Bond Legislation, namely as required pursuant to Article 29(6) of the Romanian Covered
Bond Law.

5.2 Collection Accounts. The Mortgagor hereby undertakes and covenants that the Mortgagor will:

(a) within five (5) Bucharest Business Days from the date hereof, with respect to the Collection
Accounts listed in Schedule 2Part 1 (List of Collection Accounts) on the date of execution of
this Agreement:

(i) deliver to each Account Bank listed therein, except itself, a letter of confirmation
substantially in form and substance conforming to that set forth in the attached
Schedule 2Part 2 (Form of Letter of Confirmation of Movable Mortgage over
Collection Accounts);

(ii) deliver to the Asset Monitor (or, upon its appointment and entry into of the CBR
Transfer Agreement, the Covered Bondholders Representative) two originals of each
letter of confirmation delivered pursuant to paragraph (i) above countersigned by the
relevant Account Bank.

(b) within ten (10) Bucharest Business Days after the Mortgagor opens a new Collection
Account not listed in Schedule 2Part 1 (List of Collection Accounts) or after any of the
identification details of the Collection Accounts as listed in Schedule 2Part 1 (List of
Collection Accounts) are changed:

(i) notify the Asset Monitor (or, upon its appointment and entry into of the CBR
Transfer Agreement, the Covered Bondholders Representative) accordingly;

(ii) execute an amendment to this Agreement to include such new Collection Account in
Schedule 2Part 1 (List of Collection Accounts) and/or to reflect the relevant
amendments to the description of the Collection Accounts as listed therein; and

5.3 Additional Covenants. The Mortgagor hereby undertakes and covenants that the Mortgagor will:

(a) take all steps which may be necessary or expedient to protect the interests of the Covered
Bondholders in the Mortgaged Property and/or to enable the Covered Bondholders to have
the full benefit of any Movable Mortgage constituted by this Agreement;

(b) upon its appointment and entry into of the CBR Transfer Agreement, immediately on
demand of the Covered Bondholders Representative pay to the Covered Bondholders
Representative according to the Covered Bondholders Representative Agreement or as the
Covered Bondholders Representative may direct all documented fees, costs and expenses
(including legal and other consultants' fees and expenses) properly incurred by the Covered
Bondholders Representative in connection with (i) the negotiation, execution, notarisation (if
required by law) and registration of any amendment to this Agreement and (ii) the

A-46
 reservation, exercise and/or enforcement of any of the Covered Bondholders’ rights under or
in relation to the Covered Bonds and/or this Agreement.

5.4 Collection Accounts opened with the Mortgagor. To the extent applicable, the Mortgagor hereby
grants control to the Covered Bondholders Representative (on behalf of the Covered Bondholders) or
the Cover Pool Administrator, as applicable, over the Collection Accounts opened with ABR in
accordance with Article 2410(2) of the Civil Code so that upon notice to ABR from the Cover Pool
Administrator (if appointed) or, to the extent permitted by applicable law and until the Cover Pool
Administrator is appointed, the Covered Bondholders Representative on behalf of the Covered
Bondholders, ABR will deal directly and solely with the Covered Bondholders Representative or the
Cover Pool Administrator, as applicable, in respect of such Collection Accounts and will follow the
instructions of the Covered Bondholders Representative or the Cover Pool Administrator, as
applicable, in respect of any disposal acts in respect of the credit balances of the Collection
Accounts.

5.5 Condition precedent to the Issuance of a new Series or Tranche of Covered Bonds. The Mortgagor
hereby undertakes and covenants that the Mortgagor will, prior to the issuance of a new Series or
Tranche of Covered Bonds, deliver to the Covered Bondholders Representative a certificate signed
by two directors of the Mortgagor, upon which the Covered Bondholders Representative may rely
without further enquiry or liability to any person, substantially in form and substance conforming to
that set forth in the attached Schedule 3 (New Issuance Condition Precedent Certificate).

6. REGISTRATION REQUIREMENTS

6.1 For the purposes of perfecting the Movable Mortgage created or expressed to be created by the
Mortgagor under this Agreement:

(a) within five (5) Bucharest Business Days after the date of this Agreement, but at least one (1)
Bucharest Business Day prior to the offering of the first Series of Covered Bonds, the Asset
Monitor will register the Movable Mortgage created by this Agreement with the National
Register, in the name of the Asset Monitor and on behalf of the Covered Bondholders;

(b) as soon as reasonably practicable (unless a mandatory term is provided by applicable law),
after the date of any amendment to this Agreement (it being hereby agreed that the Asset
Monitor will perform the corresponding registration following the execution of the CBR
Transfer Agreement within five (5) Bucharest Business Days from the date thereof) the
Asset Monitor (or, upon its appointment and entry into of the CBR Transfer Agreement, the
Covered Bondholders Representative) will register such amendment with the National
Register,

at the Mortgagor’s cost and expense, by submitting a Registration Notice in respect of the Movable
Mortgage and/or such amendment and provide the Mortgagor with proof of such filing and
registration; and

(c) notwithstanding paragraph (b) above, where the Mortgagor is legally able to register any
amendment to this Agreement with the National Register, the Mortgagor will register such
amendment with the National Register within five (5) Bucharest Business Days from the
date thereof and provide the Covered Bondholders Representative with proof of such filing
and registration, which will be in form and substance satisfactory to the Asset Monitor (or,
upon its appointment and entry into the CBR Transfer Agreement, the Covered Bondholders
Representative).

6.2 In addition, if at any time Romanian legislation or any other applicable law requires any registration
or notification to third parties or other formality in respect of the Movable Mortgage over the
Mortgaged Property:

A-47
 (a) if not prohibited under Romanian law, the Mortgagor will perform such registration,
notification to third parties or other formality, as soon as possible, and take all other
necessary actions as soon as possible in order to ensure that the Covered Bondholders
continue to have good, valid and enforceable security in respect of the Mortgaged Property;
and

(b) the Mortgagor shall notify the Asset Monitor (or, upon its appointment and entry into of the
CBR Transfer Agreement, the Covered Bondholders Representative) in writing of each such
registration, notification to third parties or other formality forthwith upon the same being
effected.

6.3 At least sixty (60) days before each and every fifth-year anniversary of the registration of this
Agreement with the National Register or any other date provided under Romanian law from time to
time as the date of expiry of a Registration Notice, the Mortgagor shall cause the filing of a
Registration Notice with the National Register, at its own cost and expense, for purpose of ensuring
the continuing validity and perfection of the Movable Mortgage.

6.4 If at any time during the duration of the Agreement, the Mortgagor changes its address specified by
reference in 10 of this Agreement, it shall immediately notify the change to the Asset Monitor (or,
upon its appointment and entry into of the CBR Transfer Agreement, the Covered Bondholders
Representative) in order for the Mortgagor to procure the amendment of the registration of the
Movable Mortgage with the National Register so as to reflect such change of the address.

6.5 The Mortgagor shall perform its obligations set-out in 6.2 to 6.4above, within the time limits
mentioned above, subject to the Mortgagor receiving, upon its written request (such request to be
delivered to the Asset Monitor or (upon its appointment and entry into of the CBR Transfer
Agreement) the Covered Bondholders Representative no less than three weeks prior before the date
such power of attorney is required), a power of attorney from the Asset Monitor or (upon its
appointment and entry into the CBR Transfer Agreement) the Covered Bondholders Representative,
certified by a lawyer or notarised and apostilled or any other documents necessary (provided that the
absence of a written request by the Mortgagor shall not invalidate its obligations) for performing
such obligations, but only if such power of attorney or other documents requested by the Mortgagor
are mandatorily required by Romanian legislation in force at such time or by the National Register
operators. All costs properly incurred by the Asset Monitor or (upon its appointment and entry into
of the CBR Transfer Agreement) the Covered Bondholders Representative in relation to the
negotiation, execution, notarisation and/or apostillisation of any power of attorney required pursuant
to this Section 6.5 shall be paid or reimbursed by the Mortgagor.

7. NEGATIVE COVENANTS OF THE MORTGAGOR

7.1 Mortgaged Property. The Mortgagor hereby warrants to and covenants with the Covered
Bondholders that it will not (except as permitted by the Terms and Conditions, the Servicing and
Cash Management Agreement or any other Transaction Documents):

(a) create, grant or permit to subsist any Encumbrance or other security over the whole or any
part of the Mortgaged Property, except for the Movable Mortgage created under this
Agreement and the rights of the Privileged Creditors according to the Romanian Covered
Bond Legislation;

(b) transfer, sell, assign, dispose of or otherwise alienate any right of ownership or any part (in
Romanian, dezmembrământ) thereof or any other right or interest in the whole or any part of
the Mortgaged Property.

The Parties hereby agree that this 7.1(b) is not essential (in Romanian, determinantă) for the
purposes of this Agreement and the prohibition imposed on the Mortgagor against a disposal

A-48
 of the Mortgaged Property as set out in this 7.1(b)shall subsist for as long as any Romanian
Secured Obligations remain outstanding, but in any event will not subsist for more than 49
years as of the date of this Agreement;

(c) do, or consent to the doing of, anything which might prejudice the validity, enforceability or
priority of the Movable Mortgage created pursuant to this Agreement; or

(d) obstruct or delay the enforcement proceedings against all or part of the Mortgaged Property.

The Parties hereby confirm their understanding that the above is not intended to limit the provisions
of Clause 4.2(b) of the Servicing and Cash Management Agreement as applicable from time to time
to the ABR Collection Accounts (and which as of the date hereof provides that the Issuer has the
right to withdraw any sums standing to the credit of each ABR Collection Account at any time and
deal with such sums at its discretion provided that no Segregation Event or Issuer Event has occurred
and is outstanding).

7.2 Cover Pool Assets. The Mortgagor hereby warrants to and covenants with the Asset Monitor (and,
upon its appointment and entry into of the CBR Transfer Agreement, the Covered Bondholders
Representative) that the Mortgagor will not (except as permitted by the Terms and Conditions):
waive, release, settle, compromise or abandon any of the Cover Pool Assets or do or omit to do any
other act or thing whereby the recovery in full of any of the Cover Pool Assets as and when they
become payable may be impeded or take any action which would result in a reduction in the value
of any Mortgaged Property.

8. FURTHER ASSURANCES

8.1 The Mortgagor undertakes to execute all acts and agreements and perform all actions reasonably
requested by the Asset Monitor (or, upon its appointment and entry into of the CBR Transfer
Agreement, the Covered Bondholders Representative) in accordance with the Terms and
Conditions, the Romanian Covered Bond Legislation or any other applicable law, including without
limitation:

(a) to execute any document with respect to all or any part of the Mortgaged Property in the
form and substance acceptable to the Asset Monitor (or, upon its appointment and entry into
of the CBR Transfer Agreement, the Covered Bondholders Representative); and

(b) to deposit with the Asset Monitor (or, upon their appointment, the Covered Bondholders
Representative and/or the Cover Pool Administrator), upon request, certified copies of all
certificates, titles, policies and other documents of title or evidence of ownership in relation
to any part of the Mortgaged Properties,

for purposes of:

(i) perfecting and ensuring the publicity of the Movable Mortgage hereby created;

(ii) preserving or protecting the Movable Mortgage and/or any of the rights of the Covered
Bondholders under this Agreement or under the Romanian Covered Bond Legislation or the
exercise of any such right and/or power, authority or discretion vested in the Covered
Bondholders under this Agreement and/or the Romanian Covered Bond Legislation; or

(iii) the enforcement of the Movable Mortgage over all or part of the Mortgaged Property being
performed in accordance with applicable legal provisions,

in any such case, forthwith upon written demand by the Asset Monitor, the Covered Bondholders
Representative and/or the Cover Pool Administrator (as applicable) and at the expense of the

A-49
 Mortgagor.

8.2 In addition to the foregoing, in accordance with article 32 (1) of the Romanian Covered Bond Law,
the Mortgagor undertakes, within four (4) Bucharest Business Days from the First Issue Date, to call
and thereafter chair the first general meeting of the Covered Bondholders and generally do all
necessary actions, prepare the relevant minutes and send all documents for the purposes of the first
meeting of the Covered Bondholders.

8.3 (a) The Mortgagor and the Asset Monitor undertake to promptly, and in any event within 20
Bucharest Business Days since the appointment of the Covered Bondholders Representative, execute
the CBR Transfer Agreement for the purposes of transferring in favour of the Covered Bondholders
Representative the Movable Mortgage created pursuant to this Agreement.

(b) The Parties agree that the Mortgagor is responsible to initiate and negotiate with the Covered
Bondholders Representative (once appointed) the transfer of the Movable Mortgage created pursuant
to this Agreement from the name of the Asset Monitor to the name of the Covered Bondholders
Representative. For such purpose, the Mortgagor undertakes towards the Asset Monitor to send to
the Asset Monitor a written notice confirming the appointment of a Covered Bondholder
Representative within four (4) Bucharest Business Days of such appointment. Neither the Asset
Monitor, nor the Mortgagor are liable for any delay caused in the transfer of the Movable Mortgage
created pursuant to this Agreement from the name of the Asset Monitor to the name of the Covered
Bondholders Representative, as a result of the latter refusing or delaying to execute the CBR
Transfer Agreement, on the terms included in the draft attached as Schedule 1 (Form of CBR
Transfer Agreement) or requesting any amendments on such version, other than amendments which
are editorial or immaterial in nature.

9. ENFORCEMENT

9.1 Writ of enforcement. This Agreement constitutes a writ of execution (in Romanian, titlu executoriu)
in accordance with Article 2431 of the Civil Code.

9.2 Enforceability. Nothing in this Agreement is intended to limit any rights conferred upon the
Covered Bondholders by Romanian law, including, if applicable, any right of enforcement to the
extent available to the Covered Bondholders as secured creditors, which shall become exercisable
by the Covered Bondholders, the Cover Pool Administrator or any other relevant entity pursuant to
Romanian law (including without limitation by Romanian Covered Bond Law).

9.3 Other creditors. In accordance with Article 29(7) of the Romanian Covered Bond Law, no other
creditor of the Issuer may take enforcement action with respect to the Cover Pool or a part thereof
prior to the Covered Bondholders. The Covered Bondholders shall have the right to satisfy their
claims with priority against other creditors of the Issuer as against the Cover Pool, other than, if
existing, (i) with respect to any Hedging Counterparty (with whom the Covered Bondholders will
rank pari passu) and (ii) Privileged Creditors (who will rank in preference to the Covered
Bondholders and any Hedging Counterparties) to the extent and for so long as they are mandatorily
preferred.

9.4 No Waiver. Any waiver by the Covered Bondholders Representative (on behalf of the Covered
Bondholders) of any default by the Mortgagor of any of the representations, warranties,
undertakings, terms or conditions contained herein, in the Conditions or in any other agreement
entered into by the Mortgagor in relation to the Covered Bonds shall not affect the exercise at any
time thereafter of any of the Covered Bondholders’ rights and remedies hereunder, as if no such
waiver had been made.

10. NOTICES

A-50
 Any notice, request or other communication to be served or given under this Agreement to the Asset
Monitor or (upon it becoming a party hereto) the Covered Bondholders Representative, or to the
Mortgagor shall be give or made in writing and shall be sufficiently served or given if made in the
manner specified in Part 3 (Notices) of the Master Definitions and Construction Schedule.

11. MISCELLANEOUS

11.1 Severability. If at any time one or more of the provisions in this Agreement is or becomes invalid,
illegal or unenforceable in any respect under any jurisdiction, that will not affect:

(a) the legality, validity or enforceability in that jurisdiction of any other term of this
Agreement; or

(b) the legality, validity or enforceability in other jurisdictions of that term or any other term of
this Agreement.

11.2 Successors and Assigns. This Agreement shall be binding upon the Mortgagor and its successors and
shall benefit the Covered Bondholders and the other Cover Pool Secured Creditors and their
successors. Without prejudice to the foregoing:

(a) Assignment/ transfer by the Mortgagor. The Mortgagor shall not assign or otherwise transfer
all or any part of its rights or obligations under this Agreement except as otherwise allowed
by the Romanian Covered Bond Legislation or the relevant documentation in relation to the
Programme, it being understood that nothing in this Agreement shall be deemed as
constituting a waiver of any rights the Covered Bondholders may have to consent or
withhold their consent to such transfer under any applicable legislation.

(b) Transfer by the Asset Monitor. Subject to 8.3 above, the Movable Mortgage hereby created
in the name of the Asset Monitor will be transferred from the name of the Asset Monitor to
the name of the Covered Bondholders Representative, after its appointment by the general
meeting of the Covered Bondholders, by way of the CBR Transfer Agreement.

(c) Other transfers. The Parties hereby agree that in the event of a change of Covered
Bondholders Representative pursuant to a resolution of the general meeting of the Covered
Bondholders, the Movable Mortgage created herein will be preserved and transferred
accordingly to such new Covered Bondholders Representative, to hold it on behalf of the
Covered Bondholders, by maintaining the same rights and priority ranking as originally
created, this provision being deemed to constitute express agreement (in Romanian,
prevedere expresă) from the Mortgagor on the preservation of the Movable Mortgage
created hereunder in accordance with Article 1611 of the Civil Code.

11.3 Undertaking of hardship risk. For the purpose of Article 1271 of the Civil Code on hardship, the
Mortgagor hereby expressly acknowledges and undertakes all risks of any change in circumstances,
including unforeseeable and exceptional changes in circumstances, which may render the
performance of its obligations and liabilities under this Agreement much more onerous or
burdensome.

11.4 Language. All notices to be furnished or communications to be given or made under this Agreement
between the Mortgagor and the Asset Monitor (and, upon its appointment and entry into of the CBR
Transfer Agreement, the Covered Bondholders Representative) shall be in the English language; all
other documents provided under or in connection with this Agreement must be in the English
language or, if not in English, and if so required by the Asset Monitor (or, upon its appointment and
entry into of the CBR Transfer Agreement, the Covered Bondholders Representative), accompanied
by a certified English translation and, in this case, the English translation will prevail unless the
document is a constitutional, statutory or other official document. Documents of a constitutional,

A-51
 statutory or other official status, such as registration forms used before the National Register,
provided under or in connection with this Agreement by the Asset Monitor to the other Parties will
be in Romanian language. A courtesy translation/summary of such documents will be provided by
the Mortgagor to the Covered Bondholders Representative upon request.

11.5 Confirmation of receipt of the Master Definitions and Construction Schedule. By signing the Master
Definitions and Construction Schedule, the Asset Monitor hereby confirms that it is aware of its
content. Upon its appointment and entry into of the CBR Transfer Agreement, the Covered
Bondholders Representative hereby confirms receipt of the Master Definitions and Construction
Schedule.

11.6 Schedules. Schedules from 1 to 3 form an integral part of this Agreement.

11.7 Originals. This Agreement shall be signed in five (5) originals in the English language, two (2) for
the Mortgagor and three (3) for the Asset Monitor (out of which two (2) originals shall be remitted
to the Covered Bondholders Representative upon the entry into of the CBR Transfer Agreement).

12. TERMINATION

12.1 When all the Romanian Secured Obligations have been irrevocably performed and discharged in
full, to the satisfaction of the Covered Bondholders Representative (having made reasonable enquiry
of the Security Trustee to ensure that it is satisfied of the same), the Mortgagor shall have the right to
request confirmation of the discharge of the Mortgage Property; the Parties acknowledge that in
accordance with Article 2428(2)(a) of the Civil Code, the Movable Mortgage terminates when the
Romanian Secured Obligations have been repaid.

12.2 The Asset Monitor or (upon its appointment and entry into of the CBR Transfer Agreement) the
Covered Bondholders Representative undertakes that, upon the termination of the Movable
Mortgage as per 12.1 above it shall provide the Mortgagor, as soon as reasonably practicable (unless
a mandatory term is provided by applicable law), with any and all notices or other documents
required by law and as reasonably requested by the Mortgagor, in order to allow the Mortgagor to
de-register the Movable Mortgage from the National Register or any other relevant registry with
which the Movable Mortgage might have been registered pursuant to the provisions of this
Agreement. All costs incurred by the Asset Monitor or (upon its appointment and entry into of the
CBR Transfer Agreement) the Covered Bondholders Representative in relation to the termination,
release and de-registration of the Movable Mortgage created hereunder shall be paid or reimbursed
by the Mortgagor.

13. COVERED BONDHOLDERS REPRESENTATIVE

13.1 If there is any change in the identity of the Covered Bondholders Representative, the Mortgagor and
the Asset Monitor hereby acknowledge and give their consent in advance to such new Covered
Bondholders Representative becoming a party to this Agreement to become effective on such
replacement and transfer of rights and obligations by the outgoing Covered Bondholders
Representative to the new Covered Bondholders Representative. To the maximum extent permitted
by law, this provision is deemed to constitute prior consent (in Romanian, consimţământ anticipat)
within the meaning of Articles 1315 and 1317 of the Civil Code.

13.2 Notwithstanding the foregoing, the other Parties to this Agreement hereby undertake that they shall
execute such documents and take such action as the Covered Bondholders Representative (or the
new Covered Bondholders Representative and/or the outgoing Covered Bondholders Representative)
may require for the purpose of the Covered Bondholders Representative becoming a party to this
Agreement and/or vesting in the new Covered Bondholders Representative the rights and obligations
of the outgoing Covered Bondholders Representative under this Agreement and releasing the
outgoing Covered Bondholders Representative from any future obligations under this Agreement.

A-52
13.3 Notwithstanding any other provisions of this Agreement, in acting under and in accordance with this
Agreement the Covered Bondholders Representative is entitled to seek instructions from the
Covered Bondholders in accordance with the provisions of the Covered Bondholders Representative
Agreement and at any time, and where it so acts or refrains from acting on the instructions of the
Covered Bondholders entitled to give it instructions, the Covered Bondholders Representative shall
not incur any liability to any person for so acting or refraining from acting.

13.4 The other Parties hereto acknowledge that the Covered Bondholders Representative has all of the
rights, powers, authorities, benefits, indemnities and protections vested in it by, and will act at all
times on the terms set out in, the Covered Bondholders Representative Agreement, as if such rights,
powers, authorities, benefits, indemnities, protections and terms were set out mutatis mutandis in this
Agreement.

14. GOVERNING LAW AND DISPUTE RESOLUTION

14.1 This Agreement and any non-contractual obligations arising out of or in connection with it are
governed by the legislation of Romania.

14.2 Any disputes arising out of or relating to this Agreement, including a dispute relating to any non-
contractual obligations arising out of or in connection with this Agreement, and which could not be
settled amicably by the Parties shall be settled by the competent Romanian courts.

A-53
 SCHEDULE 1

FORM OF CBR TRANSFER AGREEMENT

A-54
 TRANSFER AGREEMENT
IN RELATION TO THE MOVABLE MORTGAGE AGREEMENT
OVER THE COVER POOL AND COLLECTION ACCOUNTS
ENTERED INTO ON 8 APRIL 2019
RELATING TO THE € 1,000,000,000 GLOBAL COVERED BOND
PROGRAMME OF ALPHA BANK ROMÂNIA S.A.

ENTERED INTO ON [___]

between

ALPHA BANK ROMÂNIA S.A.

(as Mortgagor)

and

PRICEWATERHOUSECOOPERS AUDIT S.R.L.

(as Asset Monitor)

and

[Name of the Covered Bondholders Representative to be inserted]

(as Covered Bondholders Representative acting on behalf of
the Covered Bondholders)

A-55
This TRANSFER AGREEMENT (this CBR Transfer Agreement) in relation to the MOVABLE
MORTGAGE AGREEMENT OVER THE COVER POOL AND COLLECTION ACCOUNTS entered
into on 8 April 2019 (the Movable Mortgage over the Cover Pool and Collection Accounts Agreement)
is entered into on [●]

BETWEEN:

(1) ALPHA BANK ROMÂNIA S.A., a credit institution established and operating under the laws of
Romania, having its registered office at 237 B Dorobanților St., sector 1, Bucharest, Romania, sole
registration code (C.U.I.) 5062063, fiscal attribute RO, registered with the Banking Registry under
No. RB-PJR-40-022/ 1999, registered with the Bucharest Commercial Registry under No.
J40/28415/1993, European Unique Identifier ROONRC.J40/28415/1993, as mortgagor (the
Mortgagor), hereunder acting through the representative(s) identified on the signature page below;
and

(2) PricewaterhouseCoopers Audit S.R.L., a financial auditor organized and existing under the laws
of Romania, having its registered office at Lakeview Building, 6/1 floor, 301-311 Barbu Vacarescu
Street, sector 2, Bucharest, Romania, fiscal attribute RO, registered as a financial auditor within the
Public Electronic Register of Financial Auditors and Audit Firms under No. 6, European Unique
Identifier ROONRC.J40/17223/1993, in its capacity as asset monitor (in Romanian, agent) (the
Asset Monitor), pursuant to, inter alios, Article 29(2) of the Romanian Covered Bond Law,
hereunder acting through the representative(s) identified on the signature page below; and

(3) [Name of the Covered Bondholders Representative to be inserted], [identification details to be

included] in its capacity as covered bondholders representative (in Romanian, reprezentantul
deținătorilor de obligațiuni) (the Covered Bondholders Representative) acting on behalf of the
Covered Bondholders pursuant to, inter alios, Article 29(3) of the Romanian Covered Bond Law,
hereunder acting through the representative(s) identified on the signature page below;

(the Mortgagor, the Asset Monitor and the Covered Bondholders Representative are referred to, collectively,
as the Parties, and each, as a Party).

WHEREAS:

(A) The Mortgagor and the Asset Monitor are parties to the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement pursuant to which the Mortgagor created a movable mortgage over
the Cover Pool and Collection Accounts in the name of the Asset Monitor acting on behalf of the
Covered Bondholders.

(B) According to Articles 22(1)(m) and 29(2) of the Romanian Covered Bond Law, the Movable
Mortgage over the Cover Pool and Collection Accounts Agreement shall be initially entered into
between the Issuer, as mortgagor, and the Asset Monitor in its name and on behalf of the Covered
Bondholders, and registered with the National Register for opposability purposes prior to the first
Series of Covered Bonds being offered for subscription. According to Article 29(3) of the Romanian
Covered Bond Law, after the appointment of the Covered Bondholders Representative, the movable
mortgage created pursuant to the Movable Mortgage over the Cover Pool and Collection Accounts
Agreement in the name of the Asset Monitor shall be transferred to the name of the Covered
Bondholders Representative.

(C) [Name of the Covered Bondholders Representative to be inserted], [identification details to be

included] has been appointed as Covered Bondholders Representative by the Covered Bondholders
pursuant to the resolution of the Covered Bondholders dated [date to be inserted] and acceptance of
by the Covered Bondholders Representative of the Terms of Appointment and its entry into the
Covered Bondholders Representative Agreement occurred on [date to be inserted]. Pursuant to the

A-56
 Covered Bondholders Representative Agreement and in accordance with the Romanian Covered
Bond Legislation, the Covered Bondholders Representative has been authorised, requested,
empowered and directed to, among other things, accede to the Movable Mortgage over the Cover
Pool and Collection Accounts Agreement by entering into this CBR Transfer Agreement.

(D) This CBR Transfer Agreement is a Transaction Document.

(E) In order to reflect the transfer of the movable mortgage created pursuant to the Movable Mortgage
over the Cover Pool and Collection Accounts Agreement from the Asset Monitor to the Covered
Bondholders Representative, the Parties have agreed to enter into this CBR Transfer Agreement.

NOW THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS:

A-57
1. DEFINITIONS AND CONSTRUCTION

1.1 Defined Terms. Wherever used in this CBR Transfer Agreement, unless the context otherwise
requires and except to the extent amended hereby, the terms and expressions defined in the Movable
Mortgage over the Cover Pool and Collection Accounts Agreement, including by reference to
another document, have the same meanings when used in this CBR Transfer Agreement.

1.2 Incorporation by Reference. Sections 1.2 to 1.6 of the Movable Mortgage over the Cover Pool and
Collection Accounts Agreement are hereby incorporated by reference and shall apply mutatis
mutandis to this CBR Transfer Agreement.

2. TRANSFER OF THE MOVABLE MORTGAGE CREATED PURSUANT TO THE

MOVABLE MORTGAGE OVER THE COVER POOL AND COLLECTION ACCOUNTS
AGREEMENT

2.1 In accordance with Article 29(3) of the Romanian Covered Bond Law and Sections 8.3(a) and
11.2(b) of the Movable Mortgage over the Cover Pool and Collection Accounts Agreement, the
Asset Monitor hereby transfers to the name of the Covered Bondholders Representative the Movable
Mortgage originally created pursuant to the Movable Mortgage over the Cover Pool and Collection
Accounts Agreement in the name of the Asset Monitor, together will all other rights under the
Movable Mortgage over the Cover Pool and Collection Accounts Agreement, and each of the
Covered Bondholders Representative and the Mortgagor hereby expressly agrees, consents to and
accepts such transfer.

2.2 With effect from the date of this CBR Transfer Agreement, the Asset Monitor shall be discharged
from all obligations stated by the Movable Mortgage over the Cover Pool and Collection Accounts
Agreement to be performed by the Asset Monitor, except as otherwise provided by the Romanian
Covered Bond Legislation.

2.3 In accordance with Section 11.7 of the Movable Mortgage over the Cover Pool and Collection
Accounts Agreement, the Asset Monitor remits to the Covered Bondholders Representative,
concurrently with the entry into of this CBR Transfer Agreement, two (2) originals of the Movable
Mortgage over the Cover Pool and Collection Accounts Agreement. Furthermore, the Asset Monitor
remits to the Covered Bondholders Representative, concurrently with the entry into of this CBR
Transfer Agreement, one (1) original of each letter of confirmation delivered to the Asset Monitor by
the Mortgagor, prior to the appointment of the Covered Bondholders Representative, pursuant to
Section 5.2 (a) (ii) of the Movable Mortgage over the Cover Pool and Collection Accounts
Agreement.

2.4 The address, fax number and attention details for notices of the Covered Bondholders
Representative, for the purposes of Section 10 (Notices) of the Movable Mortgage over the Cover
Pool and Collection Accounts Agreement, are:

For the Covered Bondholders

Representative:

[name to be inserted]

Address: [●]

Attention: [●]

A-58
 Facsimile: [●]

3. REGISTRATIONS

3.1 The Asset Monitor hereby undertakes and covenants with the Covered Bondholders Representative
and the Mortgagor that the Asset Monitor will, within the deadlines set forth therein, comply with
the provisions of Section 6.1(b) of the Movable Mortgage over the Cover Pool and Collection
Accounts Agreement and the corresponding provisions of Section 4(f) of the Asset Monitor
Agreement.

3.2 Without prejudice to the obligations of the Asset Monitor in Section 6.1(b) of the Movable Mortgage
over the Cover Pool and Collection Accounts Agreement and the corresponding provisions of
Section 4(f) of the Asset Monitor Agreement, the Asset Monitor hereby reiterates its undertaking in
Section 6.1(b) of the Movable Mortgage over the Cover Pool and Collection Accounts Agreement
and the corresponding provisions of Section 4(f) of the Asset Monitor Agreement that the Asset
Monitor will, within five (5) Bucharest Business Days after the date of this CBR Transfer
Agreement, register with the National Register the transfer of the Movable Mortgage from the name
of the Asset Monitor to the name of the Covered Bondholders Representative and provide the
Covered Bondholders Representative with proof of such registration pursuant to the applicable law
and in form and substance satisfactory to the Covered Bondholders Representative.

4. MISCELLANEOUS

4.1 No other changes. Except as expressly stated in this CBR Transfer Agreement, the provisions of the
Movable Mortgage over the Cover Pool and Collection Accounts Agreement shall remain in full
force and effect.

4.2 Severability. If at any time one or more of the provisions in this CBR Transfer Agreement is or
becomes invalid, illegal or unenforceable in any respect under any jurisdiction, that will not affect:

(a) the legality, validity or enforceability in that jurisdiction of any other term of this CBR Transfer
Agreement; or

(b) the legality, validity or enforceability in other jurisdictions of that term or any other term of this
CBR Transfer Agreement.

4.3 Originals. This Agreement shall be signed in five (5) originals in the English language, two (2) for
the Mortgagor, one (1) for the Asset Monitor and two (2) for the Covered Bondholders
Representative.

5. GOVERNING LAW AND DISPUTE RESOLUTION

5.1 This CBR Transfer Agreement and any non-contractual obligations arising out of or in connection
with it are governed by the legislation of Romania.

5.2 Any disputes arising out of or relating to this CBR Transfer Agreement, including a dispute relating
to any non-contractual obligations arising out of or in connection with this Agreement, and which
could not be settled amicably by the Parties shall be settled by the competent Romanian courts.

A-59
IN WITNESS WHEREOF, each of the Parties, acting through their duly authorised representatives, has
caused this Agreement to be signed in their respective names as of the day and year first above written.

By signing this CBR Transfer Agreement, each Party also confirms that the provisions of this CBR Transfer
Agreement have been discussed and negotiated and it expressly agrees with all the provisions in this
Agreement on limitation of liability, unilateral termination, suspension of the performance of obligations,
loss of right or term, limitation of right to challenge, limitation of contractual freedom, silent renewal,
governing law and choice of jurisdiction, including but not limited to Section 5 of this CBR Transfer
Agreement.

Consequently, the signature below confirm each Party’s consent to the terms of this CBR Transfer
Agreement and also the acceptance of any uncommon clauses for the purpose of Articles 1202 – 1203 of the
Civil Code, as stated above.

MORTGAGOR ASSET MONITOR

ALPHA BANK ROMÂNIA S.A. PRICEWATERHOUSECOOPERS AUDIT S.R.L.

By: ____________________ By: ____________________

Name: [Signatory’s name] Name: [Signatory’s name]
Title: [Signatory’s title] Title: [Signatory’s title]

COVERED BONDHOLDERS
REPRESENTATIVE

[●]

By: ____________________
Name: [Signatory’s name]
Title: [Signatory’s title]

A-60
 SCHEDULE 2

COLLECTION ACCOUNTS

PART 1

LIST OF COLLECTION ACCOUNTS

IBAN ACCOUNT NUMBER CURRENCY

NO.
RO44BUCU0011630000001EUR EUR
1.
RO48BUCU0011630000002RON RON
2.

Dated: 8 April 2019

Yours truly,

ALPHA BANK ROMÂNIA S.A.

By: _______________________________

Name:

Title:

By: _______________________________

Name:

Title:

A-61
 PART 2

FORM OF LETTER OF CONFIRMATION OF MOVABLE MORTGAGE OVER COLLECTION

ACCOUNTS

From: ALPHA BANK ROMÂNIA S.A.

Address: [__]

Attention: [__]

To: [Name of bank]

Address: [__]

Attention: [__]

Re: [Specify relevant account number(s) and branch address(es)]

Date: [_]

Dear Sirs,

The undersigned, ALPHA BANK ROMÂNIA S.A. (the Mortgagor) and

PRICEWATERHOUSECOOPERS AUDIT S.R.L. in its capacity as asset monitor (agent, in Romanian) (the
Asset Monitor) in accordance with, among others, Law No. 304 of 27 November 2015 regarding issuances
of covered bonds (the Covered Bond Law), acting on behalf of covered bondholders (the Covered
Bondholders) under a € 1,000,000,000 Global Covered Bond Programme (the Programme) entered into a
movable mortgage agreement on 8 April 2019 (the Movable Mortgage Agreement), the movable mortgage
created thereunder [being subsequently transferred] / [being envisaged to be transferred, upon appointment
of a covered bondholders representative,] from the name of the Asset Monitor to the name of [[●] [name of
Covered Bondholders Representative to be inserted] in its capacity as] / [the] covered bondholders
representative (the Covered Bondholders Representative),] whereby the Mortgagor charged, among others,
the following bank accounts and account monies standing at any time to the credit balance of such bank
accounts (the Collection Accounts) opened with you (the Account Bank):

Collection Account identification: [IBAN]

Account Holder: [●]

For the purposes hereof, Cover Pool Administrator means a cover pool administrator (administrator de
portofoliu, in Romanian) appointed in accordance with the Covered Bond Law.

According to Articles 2410 and 2426 of the Civil Code, the publicity of the mortgage on Collection
Accounts is made by registration with the National Register for Movable Publicity (the National Register)
or by control over the mortgaged Collection Accounts and registration with the National Register, the
secured creditor holding the control over the Collection Accounts being preferred in ranking. In order to
obtain the control over the Collection Accounts, it is required that the Account Bank agrees that the Account
Bank, without requiring the Mortgagor’s consent, will follow the instructions of the secured creditors in
respect of the credit balances of the Collection Accounts.

A-62
Therefore, we kindly request you, as Account Bank, to agree to and confirm the agreement reached by the
Mortgagor and the Asset Monitor (or, as applicable, the Covered Bondholders Representative) acting on
behalf of the Covered Bondholders pursuant to the Movable Mortgage Agreement, as follows:

(1) until notice to the contrary from the Cover Pool Administrator or on behalf of the Covered
Bondholders (it being understood that such instruction will come from the Covered Bondholders
Representative) to the Account Bank, the Account Bank will deal directly and solely with the
Mortgagor in respect of the Collection Accounts; and

(2) upon notice to the Account Bank from the Cover Pool Administrator or on behalf of the Covered
Bondholders (it being understood that such instruction will come from the Covered Bondholders
Representative), the Account Bank will deal directly and solely with the Cover Pool Administrator
or the Covered Bondholders Representative, as applicable, in respect of all such Collection Accounts
and will follow their instructions in respect of any action in respect of the credit balances of the
Collection Accounts, without regard to any instructions or notification from the Mortgagor.

To this end, we kindly request you to countersign as indicated below on the four (4) originals of this
confirmation letter (one original for each signing party, except for the Asset Monitor, who will receive two
(2) originals, one of which to be delivered to the Covered Bondholders Representative, upon appointment).

For the avoidance of any doubt, this letter of confirmation reflects the signatories’ agreement on the creation
of control over the Collection Accounts in accordance with Article 2410(2)(b) of the Civil Code.

ALPHA BANK ROMÂNIA S.A. [Asset Monitor] / [Covered Bondholders

Representative]
Name:
Name:
Position:
Position:
Signature:
Signature:

[Name:]

[Position:]

[Signature:]

Agreement and confirmation by the Account Bank:

The undersigned Account Bank hereby agrees and confirms the following for the purpose of Article
2410(2)(b) of the Civil Code:

(1) until notice to the contrary from the Cover Pool Administrator or on behalf of the Covered
Bondholders (it being understood that such instruction will come from the Covered Bondholders
Representative) to the Account Bank, the Account Bank will deal directly and solely with the
Mortgagor in respect of the Collection Accounts; and

(2) upon notice to the Account Bank from the cover pool administrator or on behalf of the Covered
Bondholders (it being understood that such instruction will come from the Covered Bondholders
Representative), the Account Bank will deal directly and solely with them, as applicable, in respect

A-63
 of all such Collection Accounts and will follow their instructions in respect of any disposal acts in
respect of the credit balances of the Collection Accounts, without any implication of the Mortgagor;
and

(3) for the avoidance of any doubt, this agreement and confirmation reflects the signatories’ agreement
on the creation of control over the Collection Accounts in accordance with Article 2410(2)(b) of the
Civil Code.

[Account Bank]

Name: Name:

Position: Position:

Signature: Signature:

A-64
 SCHEDULE 3

NEW ISSUANCE CONDITION PRECEDENT CERTIFICATE

[on the letterhead of the Issuer]

To: [name of entity appointed to act as Covered Bondholders Representative to be inserted]

For the attention of [to be inserted]

[Date]
€1 billion Global Covered Bond Programme (the Programme) of Alpha Bank Romania S.A. (the
Issuer)

Dear Madams/Sirs,

This certificate is given to you in your capacity as Covered Bondholders Representative in relation to the
issuance of a new Series or Tranche of Covered Bonds (the New Issuance) under the Programme and in
accordance with Section 5.5 (Condition precedent to the Issuance of a new Series or Tranche of Covered
Bonds) of the Movable Mortgage over the Cover Pool and Collection Accounts Agreement.

Capitalised terms defined in the master definitions and construction schedule signed by, among others, the
Issuer for the purpose of identification on 8 April 2019 (Master Definitions and Construction Schedule)
have, unless expressly defined in this certificate, the same meaning in this certificate.

We, the undersigned, being two directors of Alpha Bank Romania S.A. (ABR) hereby certify to you in your
capacity as aforesaid that each condition precedent to such New Issuance has been met and including that:

(a) there is no Issuer Event outstanding and the New Issuance will not cause an Issuer Event;

(b) the New Issuance will not result in a breach of any of the Statutory Tests;

(c) the Rating Agency has confirmed the current rating of all Covered Bonds issued and outstanding
under the Programme and that the ratings of the Covered Bonds will not be adversely affected or
withdrawn as a result of the New Issuance;

(d) all formalities required by the law in relation to the applicable Borrowers (and/or other relevant
obligors) have been performed; as of the date hereof such formalities are [that all notices required to
be delivered to the applicable Borrowers (and/or other relevant obligors) and all relevant
publications in respect of the Loan Assets included in the Cover Pool have been delivered and/or
made as required pursuant to Article 10(1) of the Romanian Covered Bond Law, and none of the
applicable Borrowers (and/or relevant obligors) in respect of the Loan Assets included in the Cover
Pool has notified that it does not waive its set-off rights against the Issuer as referred to and required
under Article 10(2) of the Romanian Covered Bond Law)]1; and

(e) the New Issuance has been approved by the NBR in accordance with the Romanian Covered Bond
Legislation.

1
Update as appropriate.

A-65
ALPHA BANK ROMÂNIA S.A.

[Director] [Director]

A-66
 SIGNATURES PAGE

IN WITNESS WHEREOF, each of the Parties, acting through their duly authorised representatives, has
caused this Agreement to be signed in their respective names as of the day and year first above written.

By signing this Agreement, the Mortgagor also confirms that the provisions of this Agreement have been
discussed and negotiated and it expressly agrees with all the provisions in this Agreement on limitation of
liability, unilateral termination, suspension of the performance of obligations, loss of right or term, limitation
of right to challenge, limitation of contractual freedom, silent renewal, governing law and choice of
jurisdiction, including but not limited to Sections 2, 3, 4, 5, 7 , 8.1, 12, 13 and 14 of this Agreement.

Consequently, the signatures below confirm both the Parties’ consent to the terms of this Agreement and also
the acceptance of any uncommon clauses for the purpose of Articles 1202 – 1203 of the Civil Code, as stated
above.

MORTGAGOR ASSET MONITOR

ALPHA BANK ROMÂNIA S.A. PRICEWATERHOUSECOOPERS AUDIT S.R.L.

By: ____________________ By: ____________________

Name: Name:
Title: Title:

By: ____________________
Name:
Title:

A-67
 FINANCIAL STATEMENTS AND AUDITORS’ REPORTS
Contents

Unaudited interim financial statements of the Issuer for the period ended 30 June 2018 F-2
Financial statements of the Issuer and Auditors’ report thereon as at and for the financial year ended
31 December 2017 F-69
Separate financial statements of the Issuer and Auditors’ report thereon as at and for the financial
year ended 31 December 2016 F-204

F-1
 ALPHA BANK ROMANIA S.A.

INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2018

PREPARED IN ACCORDANCE WITH

INTERNATIONAL FINANCIAL REPORTING STANDARDS
AS ENDORSED BY THE EUROPEAN UNION

F-2
CONTENTS PAGE

INTERIM INCOME STATEMENT F-4

INTERIM STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME F-5

INTERIM STATEMENT OF FINANCIAL POSITION F-6

INTERIM STATEMENT OF CHANGES IN EQUITY F-7

INTERIM STATEMENT OF CASH FLOWS F-8 – F-9

NOTES TO THE INTERIM FINANCIAL STATEMENTS F-10 – F-68

F-3
ALPHA BANK ROMANIA SA
INTERIM INCOME STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”)

Period ended Period ended

Note 30 June 2018 30 June 2017
RON’000 RON’000

Interest and similar income 5 278,846 234,046

Interest expense 5 (56,471) (40,020)
Net interest income 222,375 194,026

Fee and commission income 6 51,228 45,090

Fee and commission expense 6 (9,550) (7,941)
Net fee and commission income 41,678 37,149

Dividend income 1,003 852

Gains less losses from derecognizing financial
(6,762) -
assets measured at amortised cost
Gains less losses on financial transactions 7 16,024 19,202
Other operating income 774 3,857

Net operating income 275,092 255,086

Impairment losses and provisions to cover

(7,028) 5,627
credit risk 8
Staff costs 9 (84,751) (77,771)
Depreciation and amortization 15 (9,358) (8,398)
Other operating expenses 10 (108,850) (92,859)

Operating expenses (209,987) (173,401)

Share from loss of associates (190) (15)
Profit before tax 64,915 81,670

Income tax expense 24 (83,647) (13,099)

Net profit/(loss) for period (18,732) 68,571

The interim financial statements were authorized for issue by the Board of Directors on 8 March
2019 and were signed on its behalf by:

The accompanying notes form an integral part of these interim financial statements.
F-4
ALPHA BANK ROMANIA SA
INTERIM STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”)

Period ended Period ended

30 June 2018 30 June 2017
RON’000 RON’000

Net profit/(loss) for the period (18,732) 68,571

Other comprehensive income:

Items that may be reclassified to profit or loss

Net change in reserves of securities measured at fair value
185 -
through other comprehensive income:
Net change in reserves of available-for-sale financial assets - 6,307
Income tax (1) (1,009)
Total amount that may be reclassified to profit or loss,
184 5,298
after income tax

Amounts that will not be reclassified to profit or loss

Gains/(Losses) from equity instruments measured at fair
1,112 -
value through other comprehensive income
Income tax (178) -
Total amount that will not be reclassified to profit or
934 -
loss, after income tax
Other comprehensive income, net of tax 1,118 5,298

Total comprehensive income (17,614) 73,869

The interim financial statements were authorized for issue by the Board of Directors on 8 March
2019 and were signed on its behalf by:

The accompanying notes form an integral part of these interim financial statements.
F-5
 ALPHA BANK ROMANIA SA
INTERIM STATEMENT OF FINANCIAL POSITION
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Note 30 June 2018 31 December 2017

RON’000 RON’000

ASSETS
Cash and balances with National
Bank of Romania 11 2,366,480 2,044,314
Derivative financial assets 16 933 1,566
Due from other banks 12 946,882 914,671
Investment securities
Available-for-sale securities 13 - 1,323,342
Measured at fair value through other
comprehensive income 13 1,073,766 -
Investments in associates 13 614 804
Loans and advances to customers 14 11,035,037 10,938,335
Property and equipment 15 89,421 91,803
Intangible assets 15 23,025 17,800
Deferred tax assets 24 655 -
Assets held for sale 17 10,832 266,291
Other assets 17 30,284 36,992

TOTAL ASSETS 15,577,929 15,635,918

LIABILITIES AND EQUITY

Due to banks 18 2,814,571 3,369,298
Derivative financial liabilities 16 - 1,714
Due to customers 19 9,913,328 9,440,296
Other borrowed funds 20 232,422 232,791
Subordinated debt 21 724,167 723,978
Provisions 22 20,763 13,627
Liabilities for current income tax 24 73,998 24,184
Deferred tax liabilities 24 - 1,346
Other liabilities 23 89,480 64,474
Total liabilities 13,868,729 13,871,708

Share capital 25 983,145 983,145

Reserves 149,518 152,208
Retained earnings 576,537 628,857

Total equity 1,709,200 1,764,210

TOTAL LIABILITIES AND EQUITY 15,577,929 15,635,918

The accompanying notes form an integral part of these interim financial statements.
F-6
ALPHA BANK ROMANIA SA
INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Share capital Reserves Retained earnings Total

Balance as at 01 January 2017 983,145 140,803 426,961 1,550,909

Changes for the period 1.1.-30.06.2017
68,571 68,571
Net profit for the period - -
Other comprehensive income, net of income tax
Net change in available-for-sale financial assets, net of tax - 5,298 - 5,298
Appropriation of legal reserves - - - -
Total other comprehensive income - 5,298 - 5,298
Total comprehensive income for the period - 5,298 68,571 73,869
Balance as at 30 June 2017 983,145 146,101 495,532 1,624,778

Balance as at 01 July 2017 983,145 146,101 495,532 1,624,778

Changes for the period 1.7.-31.12.2017

Net profit for the period - - 146,163 146,163
Other comprehensive income, net of income tax
Net change in available-for-sale financial assets, net of tax - (6,721) - (6,721)
Appropriation of legal reserves - 12,828 (12,828) -
Total other comprehensive income - 6,107 (12,828) (6,721)
Total comprehensive income for the period - 6,107 133,335 139,442
Other - - (10) (10)
Balance as at 31 December 2017 983,145 152,208 628,857 1,764,210

Balance as at 31 December 2017 983,145 152,208 628,857 1,764,210

Impact from the implementation of IFRS 9 - (2,874) (34,522) (37,396)

Balance as at 01 January 2018 983,145 149,334 594,335 1,726,814

Changes for the period 1.1.-30.06.2018
Net loss for the period - - (18,732) (18,732)
Other comprehensive income, net of income tax
Other comprehensive income recognised directly in equity, after income tax - 184 934 1,118
Appropriation of legal reserves - - - -
Total other comprehensive income - 184 934 1,118
Total comprehensive income for the period - 184 934 1,118

Balance as at 30 June 2018 983,145 149,518 576,537 1,709,200

As at 30 June 2018 statutory non-distributable reserves set-up in accordance with Romanian law amount to RON 154,564 thousand (31 December 2017: RON 154,564
thousand).

The accompanying notes form an integral part of these interim financial statements.
F-7
ALPHA BANK ROMANIA SA
INTERIM STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Period ended Period ended

Note 30 June 2018 30 June 2017

Cash flow from operating activities

Profit before taxation 64,915 81,670
Adjustments:
Net impairment loss/(gain) on financial assets 8 8,716 (1,421)
Dividend and similar income (1,003) (852)
Depreciation and amortization 15 9,358 8,398
Fixed assets written-off and impairment 15 19 -
Loss/(Gain) from transactions with equity
investments - (791)
Loss/(Gain) from sales of assets recovered from
customers 597 -
Share of loss in associates 190 15
Other adjustments (9,634) (31,070)
Operating profit before changes in operating
assets and liabilities 73,158 55,949

Changes in operating assets:

Decrease/(increase) in amounts due from other
banks 232,983 (45)
Decrease/(increase) in loans and advances to
customers (121,968) (329,942)
Decrease/(increase) in other assets 260,670 (17,283)

Total changes in operating assets 371,685 (347,270)

Changes in operating liabilities

(Decrease)/increase in amounts due to banks (554,727) (284,379)
(Decrease)/increase in amounts due to customers 472,435 356,971
(Decrease)/increase in other liabilities 22,555 37,285

Total changes in operating liabilities (59,737) 109,877

Net cash from operations 385,106 (181,444)

Income tax paid (34,691) -

Net cash flows from operating activities 350,415 (181,444)

Cash flow from investing activities

Purchase of property and equipment and
intangibles 15 (12,220) (5,832)
Proceeds from sale/maturities of investment
securities 877,976 1,183,807
Purchase of investment securities (627,632) (1,152,117)
Dividends received 1,003 852

Net cash flows from investing activities 239,127 26,710

The accompanying notes form an integral part of these interim financial statements.
F-8
ALPHA BANK ROMANIA SA
INTERIM STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Period ended Period ended

Note 30 June 2018 30 June 2017

Cash flow from financing activities

Finance lease repayments (38) (73)
Other borrowed funds 20 (673) 89,026
Subordinated loan 21 - 34
Net cash flows from financing activities (711) 88,987

Net increase / (decrease) in cash and cash

equivalents 588,831 (65,747)

Cash and cash equivalents at 1 January 29 2,704,514 2,966,971

Cash and cash equivalents at 30 June 29 3,293,345 2,901,224

Interest received 269,365 208,520

Interest paid 55,599 43,468

The accompanying notes form an integral part of these interim financial statements.
F-9
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

1. REPORTING ENTITY

Alpha Bank Romania SA (the "Bank") was incorporated in Romania in 1994 and is licensed by the
National Bank of Romania to conduct banking activities. The Bank is principally engaged in
wholesale and retail banking operations in Romania. Currently, the Bank operates through its head
office located in Bucharest and 130 branches (31 December 2017: 130). As of 30 June 2018, 36
were located in Bucharest (31 December 2017: 36) and 94 in other cities in Romania (31
December 2017: 94).

The registered office of the Bank is:

Alpha Bank Romania SA

Calea Dorobantilor no. 237B, District 1
Bucharest
Romania

As of 30 June 2018, the members of Board of Directors were as follows:

 Mr. Christos Giampanas, Chairman
 Mr. Sergiu Bogdan Oprescu, Member and Executive President
 Mr. Evangelos Kalamakis, Member
 Mr. Nikolaos Zagorisios, Member
 Mr. Lazaros Papagaryfallou, Member
 Mr. Georgios Michalopoulos, Member
 Mr. Stelios Louisides, Member
 Mrs. Irene Rouvitha Panou, Independent Member
 Mr. Radu Gheorghe Deac, Independent Member

The Bank serves a broad client base that includes corporations and individuals and offers banking
services to local and international entities which include but are not limited to wholesale and retail
banking operation, issuing of cards under the VISA and MasterCard network, mortgage and
consumer loans, money transfers, trade finance.

The number of employees as at 30 June 2018 was 2,020 (31 December 2017: 1,973).

Alpha Bank AE, the parent company of the Bank, based in Greece, 40 Stadiou Street 102 52
Athens, prepares a set of consolidated interim financial statements in accordance with International
Financial Reporting Standards as endorsed by the European Union for the period ended 30 June
2018, available on the following web site: www.alpha.gr.

As at 30 June 2018 and 31 December 2017, the Bank had no subsidiaries.

F-10
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

2. BASIS OF PRESENTATION

a) Statement of compliance

These financial statements relate to the financial period ended 30 June 2018 and they have been
prepared in accordance with IAS 34 – ‘Interim Financial Reporting’ as endorsed by the European
Union.
The interim financial statements as at 30 June 2018 and 30 June 2017 were not audited or
reviewed.
These financial statements do not include all the information provided in the annual financial
statements and should be read together with the Bank’s financial statements for the year ended 31
December 2017.
The interim financial statements include the statement of financial position, income statement,
statement of profit or loss and other comprehensive income, statement of changes in equity,
statement of cash flows and a selection of explanatory notes.
The accounts of the Bank are maintained in RON.

b) Basis of measurement

The interim financial statements of the Bank have been prepared on the historical cost basis
except for some assets and liabilities that are measured at fair value:

- investment securities measured at fair value through other comprehensive income

(applicable to the current reporting period)
- available for sale debt instruments (applicable to 2017)
- investment securities measured at fair value through profit or loss (applicable to the current
reporting period)
- derivative financial instruments.

Bank applied the going concern principle for the preparation of the interim financial statements as
at 30.06.2018.

c) Functional and presentation currency

The Bank’s management considers that the functional currency, as defined by IAS 21 “The Effects
of Changes in Foreign Exchange Rates” is RON. The interim financial statements are presented in
Romanian Lei (“RON”), rounded to the nearest thousand, unless otherwise indicated.
The exchange rates of major foreign currencies were:
Currencies 30 June 2018 31 December 2017 % Increase
Euro (EUR) 1: RON 4.6611 1: RON 4.6597 0.03%
US Dollar (USD) 1: RON 4.0033 1: RON 3.8915 2.87%

d) Use of estimates and judgments

The preparation of interim financial statements in conformity with IFRS requires management to
make judgments, estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. Actual results may differ from these
estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimates are revised.

F-11
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

2. BASIS OF PRESENTATION (CONTINUED)

e) Changes in accounting policies

All changes in accounting policies represent the effect of changes in relevant International
Financial Reporting Standards as endorsed by the European Union.
The significant modifications to the accounting policies, which are applicable from 1.1.2018, are
presented in note 3. Comparative information for 2017 was not restated, as permitted by IFRS 9.
In addition, the accounting policies applied in the current reporting period took into account the
following new standards and amendments to standards, as well as IFRIC 22, which were issued by
the International Accounting Standards Board (IASB), adopted by the European Union and applied
on 1.1.2018:

 Amendment to International Financial Reporting Standard 2 “Share-based Payment”:

Classification and Measurement of Share-based Payment Transactions (Regulation
2018/289/26.2.2018)

Effective for annual periods beginning on or after 1.1.2018

On 20.6.2016 the International Accounting Standards Board issued an amendment to IFRS 2 with
which the following were clarified:

 in estimating the fair value of a cash-settled share-based payment, the accounting for the
effects of vesting and non-vesting conditions shall follow the same approach as for equity-
settled share-based payments,

 where tax law requires an entity to withhold a specified amount of tax (that constitutes a tax
obligation of the employee) that relates to share-based payments and shall be remitted to the
tax authority, such an arrangement shall be classified as equity-settled in its entirety, provided
that the share-based payment would have been classified as equity-settled had it not included
the net settlement feature,

 if the terms and conditions of a cash-settled share-based payment transaction are modified
with the result that it becomes an equity-settled share-based payment transaction, the
transaction is accounted for as such from the date of the modification.

The above amendment had no impact on the financial statements of the Bank.

 Amendment to International Financial Reporting Standard 4 “Insurance Contracts”:

applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Regulation
2017/1988/3.11.2017)

Effective for annual periods beginning on or after 1.1.2018.

On 12.9.2016 the International Accounting Standards Board issued an amendment to IFRS 4 with
which:

- it provides insurers, whose activities are predominantly connected with insurance, with a
temporary exemption from application of IFRS 9 until 1.1.2021 and

- following full adoption of IFRS 9 and until applying IFRS 17, it gives all entities with insurance
contracts the option to present changes in fair value on qualifying designated financial assets in
other comprehensive income instead of profit or loss.

F-12
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

2. BASIS OF PRESENTATION (CONTINUED)

The above amendment does not apply to the financial statements of the Bank.

 International Financial Reporting Standard 9 “Financial Instruments” (Regulation

2016/2067/22.11.2016)

Effective for annual periods beginning on or after 1.1.2018

On 24.7.2014, the International Accounting Standards Board completed the issuance of the final
text of IFRS 9: Financial Instruments, which replaces the existing IAS 39. The new standard
provides for significant differentiations in the classification and measurement of financial
instruments as well as in hedge accounting. An indication of the new requirements is presented
below:

Classification and measurement

Financial instruments shall be classified, at initial recognition, at either amortized cost or at fair
value. The criteria that should be considered for the initial classification of the financial assets are
the following:
i. The entity’s business model for managing the financial assets. Three categories of
Business Models are defined:
 Hold to collect contractual cash flows
 Hold to collect and sell
 Other
ii. The contractual cash flow characteristics of the financial assets.

A financial asset shall be measured at amortized cost if both of the following conditions are met:

 the instrument is held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows and

 the contractual terms of the asset give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the principal amount outstanding.

If an instrument meets the above criteria but is held with the objective of both selling and collecting
contractual cash flows it shall be classified as measured at fair value through other comprehensive
income.

Financial assets that are not included in any of the above two categories are mandatorily
measured at fair value though profit or loss.

In addition, IFRS 9 permits, at initial recognition, equity instruments to be classified at fair value
through other comprehensive income. The option precludes equity instruments held for trading.

Moreover, with regards to embedded derivatives, if the hybrid contact contains a host that is within
the scope of IFRS 9, the embedded derivative shall not be separated and the accounting treatment
of the hybrid contact should be based on the above requirements for the classification of the
financial instruments.

With regards to the financial liabilities, the main difference is that the change in the fair value of a
financial liability initially designated at fair value through profit or loss shall be recognized in profit
or loss with the exception of the effect of change in the liability’s credit risk which shall be
recognized directly in other comprehensive income.

F-13
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

2. BASIS OF PRESENTATION (CONTINUED)

Impairment

Contrary to the existing IAS 39, under which an entity recognizes only incurred credit losses, the
new standard requires the recognition of lifetime expected credit losses if the credit risk of the
financial instrument has increased significantly since initial recognition. If the credit risk has not
increased significantly since initial recognition, 12-month expected credit losses shall be
recognized.
The impact from the application of IFRS 9 to the financial statements of the Bank is presented in
note 31.

 International Financial Reporting Standard 15 “Revenue from Contracts with Customers”

(Regulation 2016/1905/22.9.2016)

Effective for annual periods beginning on or after 1.1.2018

IFRS 15 “Revenue from Contracts with Customers” was issued on 28.5.2014 by the International
Accounting Standards Board. The new standard is the outcome of a joint project by the IASB and
the Financial Accounting Standards Board (FASB) to develop common requirements as far as the
revenue recognition principles are concerned.

The new standard shall be applied to all contracts with customers, except those that are in scope of
other standards, such as financial leases, insurance contracts and financial instruments.

According to the new standard, an entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.

A new revenue recognition model is introduced, by applying the following five steps:

 Step 1: Identify the contract(s) with a customer

 Step 2: Identify the performance obligations in the contract
 Step 3: Determine the transaction price
 Step 4: Allocate the transaction price to the performance obligations in the contract
 Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

The performance obligation notion is new and in effect represents a promise in a contract with a
customer to transfer to the customer either: (a) a good or service (or a bundle of goods or services)
that is distinct; or (b) a series of distinct goods or services that are substantially the same and that
have the same pattern of transfer to the customer.

The new IFRS 15 supersedes:

(a) IAS 11 “Construction Contracts”;

(b) IAS 18 “Revenue”;
(c) IFRIC 13 “Customer Loyalty Programmes”;
(d) IFRIC 15 “Agreements for the Construction of Real Estate”;
(e) IFRIC 18 “Transfers of Assets from Customers”; and
(f) SIC-31 “Revenue—Barter Transactions Involving Advertising Services”.

F-14
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

2. BASIS OF PRESENTATION (CONTINUED)

The Bank applies the new standard from 1.1.2018 without reforming comparative information for
2017.
It is noted that the main part of the Bank’s income is net interest income which is not affected by
the application of IFRS 15. In the Bank, the contracts most affected by the new standard relate to
the provision of the banking services (fees related to the execution of banking operations and to
asset management or to loan syndication).
For services provided over time, such as management fee income earned for the provision of asset
management services, income is recognized as the service is being provided to the customer.
If a performance obligation is not satisfied over time, it is satisfied at a point in time. For services
such as executing transactions (e.g. currency exchange transactions, customers’ trading in
securities) and coordinating and arranging syndicated loan transactions, the execution and
completion of the transaction requested by the customer signals the point in time, in which the
service is transferred to the customer.
There was no change necessary in the accounting treatment for the recognition of revenue due to
the application of IFRS 15.
On 12.4.2016 the International Accounting Standards Board issued an amendment to IFRS 15 with
which it provided clarifications on its application.

 Amendment to International Accounting Standard 40 “Investment Property”: Transfers of

Investment Property (Regulation 2018/400/14.3.2018)

Effective for annual periods beginning on or after 1.1.2018

On 8.12.2016 the International Accounting Standards Board issued an amendment to IAS 40 with
which it clarified that an entity shall transfer a property to, or from, investment property when, and
only when, there is a change in use. A change in use occurs when the property meets, or ceases
to meet, the definition of investment property and there is evidence of the change in use. In
isolation, a change in management’s intentions for the use of a property does not provide evidence
of a change in use. In addition, the examples of evidence of a change in use were expanded to
include assets under construction and not only transfer of completed properties.

The adoption of the above amendment had no impact on the Bank’s interim financial statements.

• Improvements to International Accounting Standards – cycle 2014-2016 (Regulation

2018/182/7.2.2018)

Effective for annual periods beginning on or after 1.1.2018.

As part of the annual improvements project, the International Accounting Standards Board issued,
on 8.12.2016, non- urgent but necessary amendments to IFRS 1 and IAS 28.

The adoption of the above amendments had no impact on the Bank’s interim financial statements.

F-15
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

2. BASIS OF PRESENTATION (CONTINUED)

 IFRIC Interpretation 22 “Foreign Currency Transactions and Advance Consideration”

(Regulation 2018/519/28.3.2018)

Effective for annual periods beginning on or after 1.1.2018

On 8.12.2016 the International Accounting Standards Board issued IFRIC 22. The Interpretation
covers foreign currency transactions when an entity recognizes a non-monetary asset or liability
arising from the payment or receipt of advance consideration before the entity recognizes the
related asset, expense or income. The Interpretation clarified that the date of the transaction, for
the purpose of determination of exchange rate to use on initial recognition of the asset, the income
or expense, is the date of initial recognition of the non-monetary asset or liability (i.e. advance
consideration). Additionally, if there are multiple payments or receipts in advance, the entity shall
determine a date of the transaction for each payment or receipt of advance consideration.

The adoption of the above Interpretation had no impact on the Bank’s interim financial statements.

f) Consolidated entities: Associates

The Bank’s participation in Alpha Finance Romania S.A is at the level of 26.68% share from
capital, as can be seen in note 13.

The Bank accounts for this investment using the equity method. Under the equity method the
investment is initially recognised at cost and adjusted thereafter for the post acquisition change in
the Bank’s share of net assets of the associate. In case the losses according to the equity method
exceed the investment in ordinary shares, they are recognized as a reduction of other elements
that are essentially an extension of the investment in the associate.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied by the Bank in preparing the interim financial statements are
consistent with those stated in the published financial statements for the year ended on
31.12.2017. It is noted, however, that the adoption of IFRS 9 resulted in significant modifications to
the accounting policies for financial assets and liabilities. Those accounting policies, which are
applicable from 1.1.2018, are presented below.

Accounting policies applied for financial assets and liabilities applicable from 1.1.2018
The following paragraphs describe the accounting policies that the Bank applies from 1.1.2018 for
financial assets and financial liabilities following IFRS 9 adoption.

3.1. Classification and measurement of financial instruments

i) Initial Recognition
The Bank recognises a financial asset or a financial liability in its statement of financial position
when, and only when, the entity becomes party to the contractual provisions of the instrument.
Upon initial recognition the Bank measures financial assets and liabilities at fair value. Financial
instruments not measured at fair value through profit or loss are initially recognised at fair value
plus transaction costs and minus income or fees that are directly attributable to the acquisition or
issue of the financial instrument.

F-16
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1. Classification and measurement of financial instruments (CONTINUED)

It is noted that loans and bonds are recognized in the balance sheet at the settlement date. For
bonds that are measured at fair value, the change in fair value during the period between the trade
date and the settlement date is recognized in profit or loss or in other comprehensive income
based on the bond’s classification category.

ii) Subsequent measurement of financial assets

The Bank classifies its financial assets as:

− Financial assets measured at amortised cost
− Financial assets measured at fair value through other comprehensive income, with gains or
losses recycled to profit or loss on derecognition
− Equity instruments measured at fair value through other comprehensive income, with no
recycling of gains or losses to profit or loss on derecognition
− Financial assets measured at fair value through profit or loss.

For each of the above categories the following apply:

a) Financial assets measured at amortised cost

In this category are classified the financial assets that satisfy both of the following criteria:
- are held within a business model whose objective is to hold financial assets in order to
collect contractual cash flows,
- the contractual terms of the asset give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the principal amount outstanding.

The above category is measured at amortised cost using effective interest method and is
periodically assessed for expected credit losses, as it is further described in notes 3.2 and 3.3.

b) Financial assets measured at fair value through other comprehensive income, with gains or
losses recycled to profit or loss on derecognition

In this category are classified the financial assets that satisfy both of the following criteria:
- are held within a business model whose objective is achieved by both collecting contractual
cash flows and selling financial assets,
- the contractual terms of the asset give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the principal amount outstanding.

The above category is periodically assessed for expected credit losses, as it is further described in
notes 3.2 and 3.3.

c) Equity instruments measured at fair value through other comprehensive income, with no
recycling of gains or losses to profit or loss on derecognition

In this category are classified equity instruments that are neither held for trading nor contingent
consideration recognised by an acquirer in a business combination and that Bank decides, at initial
recognition, to measure at fair value through other comprehensive income. This decision is
irrevocable. With the exception of dividends, which are directly recognized in profit or loss, all other
gains and losses arising from those instruments are directly recognized in other comprehensive
income and are not reclassified to profit or loss.

For those equity instruments there is no impairment assessment.

F-17
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1. Classification and measurement of financial instruments (CONTINUED)

d) Financial assets measured at fair value through profit or loss

Financial assets included in this category are:

i. those acquired principally for the purpose of selling in the near term to obtain short term
profit (held for trading).
ii. those that do not meet the criteria to be classified into one of the above categories
iii. those the Bank designated, at initial recognition, as at fair value through profit or loss; this
classification option, which is irrevocable, is used when the designation eliminates an
accounting mismatch which would otherwise arise from measuring financial assets and
liabilities on a different basis (i.e. amortized cost) in relation to another financial asset or
liability (i.e. derivatives which are measured at fair value through profit or loss).

As at the reporting date, the Bank had not designated, at initial recognition, any financial assets as
at fair value through profit or loss.

iii) Business Model assessment

The business model reflects how the Bank manages its financial assets in order to generate cash
flows. That is, the Bank’s business model determines whether cash flows will result from collecting
contractual cash flows, selling financial assets or both. The Bank’s business model is determined
at a level that reflects how groups of financial assets are managed together to achieve a particular
business objective. Accordingly, business model does not depend on management’s intentions for
an individual instrument but it is determined on a higher level of aggregation.

The business models of the Bank are determined by the Asset Liability Committee (ALCO) or the
Executive Committee (ExCo) which decides on the determination of a new business model both for
the loans and the securities portfolio. In this context:
• Loans and advances to customers and due from banks are included in the business model
whose objective is to hold financial assets in order to collect contractual cash flows (hold to
collect)
• For bonds and in general for fixed income investments, the Bank has identified the
following business models:
- Business model whose objective is to hold financial instruments in order to collect
their contractual cash flows (hold to collect)
- Business model that aims both at collecting contractual cash flows and selling (hold to
collect and sell)
- Trading portfolio.

The determination of the above business models has been based on:
• The way the performance of the business model and the asset portfolios held within it are
evaluated and reported to the Bank key management personnel.
• The risks that affect the performance of the business model (and the asset portfolios held
within) and, in particular, the way those risks are managed.
• The way managers of the business are evaluated (e.g., whether the evaluation is based on
the fair value of the assets managed or the contractual cash flows collected).
• The expected frequency and value of sales.

F-18
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1. Classification and measurement of financial instruments (CONTINUED)

The Bank, at each reporting date, reassesses its business models in order to confirm that there
has been no change compared to the prior period or application of a new business model. In the
context of the reassessment of the hold to collect business model past sales as well as expected
future sales are taken into account. In this assessment, the following cases of sales are considered
consistent with a hold to collect business model:
a) Sales of non-performing loans due to the credit deterioration of the debtor, excluding those
sales of loans considered as credit impaired at origination.
b) Sales made close to the maturity of the financial assets so that the proceeds from the sales
approximate the collection of the remaining contractual cash flows. In these cases, the
Bank defines as ‘close’, what is less than 5% of the total life of the instrument remaining at
the time of sale.
c) Sales (excluding a and b) which are infrequent (even if significant in value) or insignificant
in value both individually and in aggregate (even if frequent). The Bank has defined the
following thresholds:
− Significance: Sales exceeding 5% the previous reporting period gross balance of the
respective portfolio
− Frequency: Significant sale transactions occurring more than twice a year.

iv) Solely Payments of Principal and Interest (SPPI) assessment

For the purposes of applying the SPPI assessment:
− Principal is the fair value of the asset at initial recognition (which may change over the life
of the financial asset, for example if there are repayments of principal).
− Interest is the consideration for the time value of money, for the credit risk associated with
the principal amount outstanding during a particular period of time and for other basic
lending risks (i.e. liquidity risk) and costs, as well as a profit margin.

Contractual terms that introduce exposure to risks and volatility in contractual cash flows that are
not related to a basic lending arrangement, such as exposure to changes in equity prices or
commodity prices, do not give rise to contractual cash flows that are solely payments of principal
and interest on the principal amount outstanding.

In this context, in assessing whether contractual cash flows are SPPI, the Bank assesses whether
the instrument contain contractual terms that change the timing or amount of contractual cash
flows. More specifically, the following are taken into account:
- Leveraged payments
- Payments linked with the variability in exchange rates
- Conversion to equity terms
- Interest rates indexed to non-interest variables
- Prepayment or extension options
- Terms that limit the Bank’s claim to the cash flows from specified assets or based on which
the Bank has no contractual right to unpaid amounts
- Interest-free deferred payments
- Terms based on which the performance of the instruments is affected by equity or
commodity prices
Especially in the case of financing of a special purpose vehicle, in order for the loan to meet the
criterion that its cash flows are solely payments of principal and interest on the principal amount
outstanding, among other, at least one of the following conditions should apply:
- At initial recognition, LTV (Loan to Value) shall not exceed the threshold of 80% or LLCR
(Loan Life Coverage Ratio) shall be at least equal to the threshold of 1.25.
- The equity of the special purpose vehicle shall amount to at least 20% of its total assets.
- There are sufficient collaterals that are not related to the asset being funded.

F-19
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1. Classification and measurement of financial instruments (CONTINUED)

In addition, in determining whether contractual cash flows are solely payments of principal and
interest on the principal amount outstanding, it is assessed whether time value of money element
has been modified. Time value of money is the element of interest that provides consideration for
only the passage of time. That is, the time value of money element does not provide consideration
for other risks or costs associated with holding the financial asset. However, in some cases, the
time value of money element may be modified. That would be the case, for example, if a financial
asset’s interest rate is periodically reset but the frequency of that reset does not match the tenor of
the interest rate or if a financial asset’s interest rate is periodically reset to an average of particular
short- and long-term interest rates. In such cases, the Bank assesses the modification to
determine whether the contractual cash flows represent solely payments of principal and interest
on the principal amount outstanding. The objective of the assessment is to determine how different
the contractual (undiscounted) cash flows could be from the (undiscounted) cash flows that would
arise if the time value of money element was not modified (benchmark test). The effect of the
modified time value of money element must be considered in each reporting period and
cumulatively over the life of the instrument. If the Bank concludes that the contractual
(undiscounted) cash flows could be significantly different from the (undiscounted) benchmark cash
flows, the contractual cash flows are not solely payments of principal and interest on the principal
amount outstanding. According to the policy set by the Bank, the above assessment test does not
result in significant different contractual cash flows when the cumulative difference over the life of
the instrument does not exceed 10% and at the same time the number of individual cash flows with
a difference of more than 10% do not exceed 5% of total reporting periods of the asset until
maturity.

v) Reclassification of financial assets

Reclassifications of financial assets between measurement categories occur when, and only when,
the Bank changes its business model for managing the assets. In this case the reclassification is
applied prospectively. Changes in the business model of the Bank are expected to be rare. They
arise from senior management decisions as a result of external or internal changes which must be
significant to the entity’s operations and demonstrable to external parties.

If the Bank reclassifies a financial asset out of the amortized cost measurement category and into
the fair value through profit or loss measurement category, its fair value is measured at the
reclassification date. Any gain or loss arising from a difference between the previous amortized
cost of the financial asset and fair value is recognized in profit or loss. The same happens if the
Bank reclassifies a financial asset out of the amortized cost measurement category and into the
fair value through other comprehensive income measurement category, however in this case the
difference between the previous amortized cost of the financial asset and fair value is recognized
in other comprehensive income. The effective interest rate and the measurement of expected
credit losses are not adjusted as a result of the reclassification. However, the loss allowance would
be derecognized (and thus would no longer be recognized as an adjustment to the gross carrying
amount) but instead would be recognized as an accumulated impairment amount in other
comprehensive income.

If the Bank reclassifies a financial asset out of the fair value through profit or loss measurement
category and into the amortised cost measurement category, its fair value at the reclassification
date becomes its new gross carrying amount. At this date, the effective interest rate of the asset is
calculated while the date of the reclassification is treated as the date of initial recognition for
impairment calculation purposes.

F-20
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1. Classification and measurement of financial instruments (CONTINUED)

If the Bank reclassifies a financial asset out of the fair value through profit or loss measurement
category and into the fair value through other comprehensive income measurement category, the
financial asset continues to be measured at fair value. As in the above case, at this date, the
effective interest rate of the asset is calculated while the date of the reclassification is treated as
the date of initial recognition for impairment calculation purposes.

Ιf a financial asset is reclassified out of the fair value through other comprehensive income
measurement category and into the amortised cost measurement category, the asset is
reclassified at its fair value at the measurement date. However, the cumulative gain or loss
previously recognized in other comprehensive income is reversed and adjusted against the fair
value of the financial asset at the reclassification date. As a result, the financial asset is measured
at the reclassification date as if it had always been measured at amortised cost. This reversal
affects other comprehensive income but does not affect profit or loss and therefore is not a
reclassification adjustment under IAS 1. The effective interest rate and the calculation of expected
credit losses are not affected. However, the loss allowance is recognized as an adjustment to the
gross carrying amount of the financial asset from the reclassification date.

If the Bank reclassifies a financial asset out of the fair value through other comprehensive income
measurement category and into the fair value through profit or loss measurement category, the
financial asset continues to be measured at fair value. The cumulative gain or loss previously
recognised in other comprehensive income is reclassified from equity to profit or loss as a
reclassification adjustment (in accordance with IAS 1) at the reclassification date.

vi) Derecognition of financial assets

The Bank derecognizes financial assets when:

• the cash flows from the financial assets expire,
• the contractual right to receive the cash flows of the financial assets is transferred and at
the same time both risks and rewards of ownership are transferred,
• loans or investments in securities are no longer recoverable and consequently are written
off,
• the contractual cash flows of the assets are significantly modified.

In the case of transactions where despite the transfer of the contractual right to recover the cash
flows from financial assets both the risk and rewards remain with the Bank, no derecognition of
these financial assets occurs. The amount received by the transfer is recognized as a financial
liability.

In the case of transactions, whereby the Bank neither retains nor transfers risks and rewards of the
financial assets, but retains control over them, the financial assets are recognized to the extent of
the Bank’s continuing involvement. If the Bank does not retain control of the assets then they are
derecognised, and in their position the Bank recognizes, distinctively, the assets and liabilities
which are created or retained during the transfer.
In case of a change in the contractual terms of a financial asset, the change is considered
significant and therefore it results in the derecognition of the original asset and the recognition of a
new one when one of the following criteria is met:
- Change of issuer/debtor
- Change in denomination currency
- Consolidation of different types of contracts
- Consolidation of contracts that do not entirely satisfy the criterion that cash flows are solely
payments of principal and interest on the principal amount outstanding

F-21
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1. Classification and measurement of financial instruments (CONTINUED)

- Addition or deletion of equity conversion terms

- Separation of a non-SPPI debt instrument into two or more new instruments so that the
reason that leads to SPPI failure of the original instrument is not included in all of the new
instruments.
In case of derecognition due to significant modification, the difference between the carrying
amount of the original asset and the fair value of the new asset is directly recognized in the Income
Statement. Additionally, in case the original asset was measured at fair value through other
comprehensive income, the cumulative gains or losses recognized in other comprehensive income
is recycled to profit or loss.

In contrast, if the change in contractual cash flows is not significant, the gross carrying amount of
the asset is recalculated by discounting new contractual cash flows with the original effective
interest rate and the difference compared to the current gross carrying amount is directly
recognized in profit or loss (modification gain or loss). Fees related to the modification adjust the
carrying amount of the asset and are amortised over the remaining term of the modified financial
asset through the effective interest method.

vii) Subsequent measurement of financial liabilities

The Bank classifies financial liabilities in the following categories for measurement purposes:

a) Financial liabilities measured at fair value through profit or loss

i. This category includes financial liabilities held for trading, that is:
• financial liabilities acquired or incurred principally with the intention of selling or
repurchasing in the near term for short term profit, or
• derivatives; liabilities arising from either derivatives held for trading are presented
as “derivative financial liabilities” and are measured according to the principles set
out in note 3.1.x).
ii. This category also includes financial liabilities which are designated by the Bank at fair
value through profit or loss upon initial recognition, when:
• doing so results in more relevant information, because either:
- it eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring assets or liabilities or
recognising the gains and losses on them on different bases; or
- a group of financial liabilities or financial assets and financial liabilities is
managed and its performance is evaluated on a fair value basis, in accordance
with a documented risk management or investment strategy, and information
about the group is provided internally on that basis to the Bank’s key
management personnel; or
• the contract contains one or more embedded derivatives and the Bank measures
the compound financial instrument as a financial liability measured at fair value
through profit or loss unless:
- the embedded derivative does not significantly modify the cash flows that
otherwise would be required by the contract or
- it is clear with little or no analysis when a similar hybrid instrument is first
considered that the separation of the embedded derivative(s) is prohibited.
It is noted that in the above case, the amount of the change in fair value attributable to the Bank’s
own credit risk is recognized in other comprehensive income, unless this treatment would create or
enlarge an accounting mismatch in profit or loss. Amounts recognized in other comprehensive
income are never recycled to profit or loss.

F-22
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1. Classification and measurement of financial instruments (CONTINUED)

b) Financial liabilities carried at amortized cost

The liabilities classified in this category are measured at amortized cost using the effective interest
method.
All financial instruments that don’t qualify to be classified as financial liabilities at fair value through
profit or loss are classified in this category.
c) Liabilities arising from financial guarantees and commitments to provide loans at a below market
interest rate

A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make a payment.
The financial guarantee contracts and the commitments to provide loans at a below market interest
rate are initially recognized at fair value, and measured subsequently at the higher of:
• the amount of the provision determined during expected credit loss calculation,
• the amount initially recognized less cumulative amortization.
viii) Derecognition of financial liabilities

The Bank derecognizes a financial liability (or part thereof) when its contractual obligations are
discharged or cancelled or expire.
In cases that a financial liability is exchanged with another one with substantially different terms,
the exchange is accounted for as an extinguishment of the original financial liability and the
recognition of a new one. The same applies in cases of a substantial modification of the terms of
an existing financial liability or a part of it (whether or not attributable to the financial difficulty of the
debtor). The terms are considered substantially different if the discounted present value of the
cash flows under the new terms (including any fees paid net of any fees received), discounted
using the original effective interest rate, is at least 10% different from the present value of the
remaining cash flows of the original financial liability.

In cases of derecognition, the difference between the carrying amount of the financial liability (or
part of the financial liability) extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or
loss.

ix) Offsetting financial assets and financial liabilities

Financial assets and liabilities are offset and the net amount is presented in the balance sheet,
only in cases when the Bank has both the legal right and the intention to settle them on a net
basis, or to realize the asset and settle the liability simultaneously.

x) Derivative financial instruments

Derivatives are financial instruments that upon inception have a minimal or zero value that
subsequently changes in accordance with a particular underlying instrument (foreign exchange,
interest rate, index or other variable).
All derivatives are recognized as assets when their fair value is positive and as liabilities when their
fair value is negative.
Derivatives are entered into for trading purposes and they are measured at fair value.
In case a derivative is embedded in a financial asset, the embedded derivative is not separated
and the hybrid contract is accounted for based on the classification requirements for financial
assets.

F-23
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2. Credit impairment losses on loans and advances to customers, undrawn loan
commitments, letters of credit and letters of guarantee

The Bank, at each reporting date, recognizes a loss allowance for expected credit losses on loans
and advances to customers not measured at fair value through profit or loss as well as for off-
balance sheet exposures (letters of guarantee, letters of credit, and undrawn loan commitments).

The loss allowance for loans and off-balance sheet exposures is based on expected credit losses
related to the probability of default within the next twelve months, unless there has been a
significant increase in credit risk from the date of initial recognition in which case expected credit
losses are recognized over the life of the instrument. In addition, if the financial asset falls under
the definition of purchased or originated credit impaired (POCI) financial assets, a loss allowance
equal to the lifetime expected credit losses is recognized.

a) Default definition

The Bank has adopted as default definition non-performing exposures (NPE), as defined in the EC
Regulation 2015/227 of 9 January 2015 amending Implementing Regulation (EU) No. 680/2014 of
the Commission with subsequent modifications, the definition of default used for accounting
purposes being harmonized with the one used for regulatory purposes.

b) Classification of exposures into stages based on credit risk (Staging)

For the purposes of calculating expected credit losses, the exposures are classified into stages as
follows:
• Stage 1: Stage 1 includes performing exposures that do not have significant increase in
credit risk since initial recognition. Stage 1 also includes exposures for which credit risk has
been improved and the exposure has been reclassified from stages 2 or 3. In this stage,
expected credit losses are recognized based on the probability of default within the next
twelve months.
• Stage 2: Stage 2 includes performing exposures for which there has been a significant
increase in credit risk since initial recognition. Stage 2 also includes exposures for which
credit risk has been improved and the exposure has been reclassified from stage 3. In this
stage, lifetime expected credit losses are recognized.
• Stage 3: Stage 3 includes non-performing/impaired exposures. In this stage, lifetime
expected credit losses are recognized.

As an exception to the above, for purchased or originated credit impaired (POCI) exposures,
lifetime expected credit losses are always recognized. Purchased or originated credit impaired
exposures include:
− Exposures that at the time of acquisition meet the criteria to be classified as non-
performing exposures.
− Exposures for which there has been a change in repayment terms, either due to financial
difficulty or not, which resulted in derecognition and recognition of a new impaired asset
(POCI). If the exposure before the derecognition was classified as impaired the new loan
will be classified as POCI. However, especially for Wholesale Banking exposures, in the
case where the newly recognized loan is the result of a change of borrower whose overall
creditworthiness is better than the previous one, based on an assessment by the
competent Credit Committee, the new borrower does not have financial difficulties and
simultaneously has presented a viable business plan and no debt has been written-down,
then the exposure will not be classified as POCI.

F-24
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2. Credit impairment losses on loans and advances to customers, undrawn loan
commitments, letters of credit and letters of guarantee (continued)

c) Significant increase in credit risk

In determining significant increase in credit risk of an exposure since initial recognition and the
recognition of lifetime expected credit losses instead of 12 months expected credit losses, the
Bank assesses, at each reporting date, the risk of default compared to the risk of default at initial
recognition for all its performing exposures including those with no delinquencies.

The assessment of the significant increase in credit risk is based on the following:

• Quantitative Indicators: refers to the quantitative information used and more specifically to
the comparison of the probability of default (PD) between the reporting date and the date of
initial recognition. For Specialised Lending Exposures (e.g. IPRE, Project Financing) for
which credit risk rating has deteriorated compared to the credit risk rating at initial
recognition, this is considered to indicate significant increase in credit risk.

• Qualitative Indicators: refers to the qualitative information used which is not necessarily
reflected in the probability of default, such as the classification of an exposure as forborne
performing (FPL, according to EBA ITS). Additional qualitative indicators, both for corporate
and retail portfolios are also reflected through the Early Warning indicators where
depending on the underlying assessment, an exposure can be considered to have a
significant increase in credit risk or not. Especially for special lending portfolio, additional
qualitative indicators are captured through slotting category.
• Backstop Indicators: in addition to the above, and in order to capture cases for which there
are no triggers reflecting the increase in credit risk, based on qualitative and quantitative
indicators, the 30 days past due indicator is used as a backstop.

d) Calculation of expected credit loss

The measurement of expected credit losses is made as follows:

− For financial assets, a credit loss is the present value of the difference between:
i. the contractual cash flows and
ii. the cash flows that the Bank expects to receive
− For undrawn loan commitments, a credit loss is the present value of the difference
between:
i. the contractual cash flows that are due if the holder of the loan commitment draws
down the loan; and
ii. the cash flows that the Bank expects to receive if the loan is drawn down.
− For letters of guarantee and letters of credit, the loss is equal to the expected payments to
reimburse the holder for a credit loss that it incurs less any amounts that the Bank expects
to receive from the holder.

The Bank calculates impairment losses either on a collective (collective assessment) or on an

individual basis (individual assessment), taking into account the significance of an exposure or the
borrower’s limit. In addition, exposures that do not have common credit risk characteristics or for
which there are no sufficient historical behavioural data are assessed on an individual basis.

The Bank calculates expected credit losses based on the weighted probability of three scenarios,
which are used in the computation of forward looking risk parameters such as PD, LGD averaged.
More specifically, the Bank’s Chief Economist produces forecasts for the possible evolution of

F-25
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2. Credit impairment losses on loans and advances to customers, undrawn loan
commitments, letters of credit and letters of guarantee (continued)

macroeconomic variables that affect the level of expected credit losses of loan portfolios under a
baseline and under alternative macroeconomic scenarios and also generates the cumulative
probabilities associated with these scenarios.

The mechanism for calculating expected credit loss is based on the following credit risk
parameters:

• Probability of Default (PD): It is an estimate of the probability of a debtor to default over a

specific time horizon.

• Exposure at default (EAD): Exposure at Default is an estimate of the amount of the

exposure at the time of the default taking into account: (a) expected changes in the
exposure after the reporting date, including principal and interest payments; (b) the
expected use of credit limits and (c) accrued interest. The approved credit limits that have
not been fully disbursed represent a potential credit exposure and are converted into a
credit exposure equal to the approved undrawn credit limit multiplied by a Credit
Conversion Factor (CCF). The Credit Conversion factor of credit exposure is calculated
based on statistical models.

• Loss given default (LGD): Loss given default is an estimate of the loss that will occur if the
default occurs at a given time. It is based on the difference between the contractual cash
flows due and those expected to be received, including the liquidation of collaterals and
cure rate.

e) Presentation of expected credit losses in financial statements

Loss allowances for expected credit losses are presented in the Balance Sheet as follows:
- Financial assets measured at amortised cost and finance lease receivables: loss allowance
is presented as a deduction from the gross carrying amount of the assets.
- Financial assets measured at fair value through other comprehensive income: for those
assets no loss allowance is recognized in the Balance Sheet, however, its amount is
disclosed in the notes to the financial statements.
- Undrawn loan commitments and letters of credit/letters of guarantee: loss allowance is
recognized in line “Provisions” of liabilities in Balance Sheet.

The amount of expected credit losses for the period is presented in the caption “Impairment losses
and provisions to cover credit risk”. In the same caption the following are also recognized:
recoveries from written-off loans measured at amortised cost or at fair value through other
comprehensive income, modification gains or losses of loans measured at amortised cost or at fair
value through other comprehensive income and the favourable changes in expected credit losses
of POCI assets in case expected credit losses are less than the amount of expected credit losses
included in the estimated cash flows on initial recognition.

f) Write-offs

The Bank proceeds with the write-off of loans and advances to customers when it has no
reasonable expectations for their recovery. In this case, the loss allowance is used against the
carrying amount of the financial asset.

F-26
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.3. Credit impairment losses on due from banks and bonds

The Bank, at each reporting date, recognizes a loss allowance for expected credit losses on due
from banks and bonds not measured at fair value through profit or loss.

The loss allowance is based on expected credit losses related to the probability of default within
the next twelve months, unless there has been a significant increase in credit risk from the date of
initial recognition in which case expected credit losses are recognized over the life of the
instrument. In addition, if the financial asset falls under the definition of purchased or originated
credit impaired (POCI) financial assets, a loss allowance equal to the lifetime expected credit
losses is recognized.
a) Default definition

Due from banks and bonds are considered impaired when the external rating of the
issuer/counterparty is equivalent to default (D). In case there is no external rating, then the
instrument is characterized as impaired based on internal rating. If there is also an exposure to the
corporate issuer/counterparty to the loan portfolio which has been classified as impaired, the
instrument is also characterized as impaired.

b) Classification of due from banks and bonds into stages based on credit risk (Staging)

For the purposes of calculating expected credit losses, the exposures are classified into stages as
follows:
• Stage 1: Stage 1 includes non-impaired instruments that do not have significant increase in
credit risk since initial recognition. Stage 1 also includes instruments for which credit risk
has been improved and the instrument has been reclassified from stages 2 or 3. In this
stage, expected credit losses are recognized based on the probability of default within the
next twelve months.
• Stage 2: Stage 2 includes non-impaired instruments for which there has been a significant
increase in credit risk since initial recognition. Stage 2 also includes instruments for which
credit risk has been improved and the instrument has been reclassified from stage 3. In this
stage, lifetime expected credit losses are recognized.
• Stage 3: Stage 3 includes impaired instruments. In this stage, lifetime expected credit
losses are recognized.

As an exception to the above, for purchased or originated credit impaired (POCI) instruments,
lifetime expected credit losses are always recognized. An instrument is characterized as
purchased or originated credit impaired when:
• The instrument (or the issuer) has an external rating that corresponds to default at the time
of acquisition
• Corporate bonds resulting from debt restructuring are classified as purchased or originated
credit impaired, based on the guidelines applicable to the loan portfolio.

When a debt security has been purchased at a large discount and does not fall into any of the
categories mentioned above, the Bank examines the transaction in detail (transaction price,
recovery rate, issuer’s financial condition at the time of purchase, etc.) in order to determine
whether it should be recognised as purchased or originated credit-impaired (POCI). Classification
in this category requires documentation and approval by the relevant committees of the Bank.

F-27
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.3. Credit impairment losses on due from banks and bonds (continued)

c) Significant increase in credit risk

The classification into stages for the purpose of expected credit loss measurement is based on the
credit rating of rating agencies and on the issuer / counterparty PD (12 months).

The determination of significant increase in credit risk for non-investment grade securities is based
on the following two conditions:
- Downgrade in the issuer / counterparty’s credit rating on the reporting dates compared to
the credit rating on the date of the initial recognition.
- Increase in the probability of default of the issuer / counterparty for the 12-month period
compared to the corresponding probability of default at initial recognition.

Additionally, the Bank monitors the change in the credit spread since initial recognition. A change
in credit spread at the reporting date that exceeds a specific threshold compared to the credit
margin prevailing at the date of initial recognition is a trigger for reviewing the securities
classification stage.

d) Calculation of expected credit loss

The expected credit loss is the present value of the difference between:
i. the contractual cash flows and
ii. the cash flows that the Bank expects to receive

For the calculation of the expected credit loss, the following parameters are used:
• Probability of default (PD): the probability of default over the next 12 months is used to
calculate the expected credit loss for 12 months, and the probability of default over the life
of the instrument is used to calculate the lifetime expected credit losses.
• Exposure at default (EAD): In the case of securities, the Bank estimates the future
unamortized cost in order to calculate the EAD. In particular, for each period, EAD is the
maximum loss that would result from issuer / counterparty potential default.
• Loss given default (LGD) is the percentage of the total exposure that the Bank estimates as
unlikely to recover at the time of the default. The Bank distinguishes sovereigns from non-
sovereign issuers / counterparties as regards to the LGD estimation. In case the Bank has
also granted a loan to the issuer / counterparty of the security, the estimated LGD is
aligned to corresponding estimate for the loan portfolio (taking into account any potential
collaterals the loan portfolio is likely to have against the unsecured debt securities).

e) Presentation of expected credit losses in financial statements

Loss allowances for expected credit losses are presented in the Balance Sheet as follows:
- Financial assets measured at amortised cost: loss allowance is presented as a deduction
from the gross carrying amount of the assets.
- Financial assets measured at fair value through other comprehensive income: for those
assets no loss allowance is recognized in the Balance Sheet, however, its amount is
disclosed in the notes to the financial statements.

The amount of expected credit losses for the period is presented in the caption “Impairment losses
and provisions to cover credit risk”. The caption includes also the favourable changes in expected
credit losses of POCI assets in case expected credit losses are less than the amount of expected
credit losses included in the estimated cash flows on initial recognition.

F-28
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.4. Interest income and expense

Interest income and expense is recognized in the income statement for all interest bearing financial
assets and liabilities.
Interest income and expense is recognised on an accrual basis and measured using the effective
interest method.
Effective interest rate is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial asset or financial liability to the gross carrying amount of a
financial asset or to the amortised cost of a financial liability. When calculating the effective interest
rate, the Bank estimates the expected cash flows by considering all the contractual terms of the
financial instrument but does not consider the expected 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.

For financial assets, in particular, the following apply:

− For those financial assets classified within stage 1 or stage 2 for the purpose of expected
credit losses measurement, interest income is calculated by applying effective interest rate
to the gross carrying amount of the asset.
− For those financial assets classified within stage 3 for the purpose of expected credit losses
measurement, interest income is calculated by applying the effective interest rate to the
amortised cost of the asset.
− For purchased or originated credit impaired financial assets interest income is calculated by
applying the credit-adjusted effective interest rate to the amortised cost of the asset.

Borrowing costs that are directly attributable to assets that require a substantial period of time to
get ready for their intended use or sale are capitalized as part of the cost of the asset.
Capitalisation ceases when substantially all the activities necessary to prepare the asset for its
intended use are complete.

3.5. Gains less losses on financial transactions

Gains less losses on financial transaction include:

- fair value changes of financial assets and liabilities,
- gains and losses arising from the modification of the contractual terms of financial assets
measured at fair value through profit or loss,
- gains and losses arising from the derecognition of financial assets and liabilities due to
early repayment, disposal or significant modification of the contractual terms, except for
gains and losses arising from the derecognition of financial assets measured at amortised
cost which are recognized in a separate line item of the Income Statement,
- gains and losses arising from the impairment or disposal of Bank entities that have not
been classified as discontinued operations,
- exchange differences arising from the translation of financial instruments denominated in
foreign currencies.

3.6. Gains less losses on derecognition of financial assets measured at amortised

cost

Gains less losses on derecognition of financial assets measured at amortised cost include:
- Gains and losses from the derecognition of financial assets measured at amortised cost
- The difference, at initial recognition, between the nominal and the fair value of a financial
asset measured at amortised cost that is the result of the derecognition of another financial
asset due to significant modification of its contractual terms.

F-29
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. FAIR VALUE DISCLOSURES

The following table shows an analysis of financial instruments recorded at fair value, between
those whose fair value is based on quoted market prices, those involving valuation where the
model inputs are observable in the market and those where the valuation techniques involves the
use of market unobservable inputs.

Financial assets and liabilities measured at fair value:

30-Jun-18 31-Dec-17
2.2)
2.1) Securities
1) Securities measured at 3) 1) 2.1) 2.2) 3)
Derivative measured at FVOCI: Derivative Derivative Available Available Derivative
Financial FVOCI: Bonds and Financial Financial for Sale for Sale Financial
Assets Shares treasury bills Liabilities Assets Equity Securities Liabilities

Level 1 - - 1,060,804 - - - 1,311,544 -

Level 2 933 11,863 - - 1,566 10,737 - 1,714
Level 3 - 1,099 - - - 1,061 - -
Total 933 12,962 1,060,804 - 1,566 11,798 1,311,544 1,714

Fair value through other comprehensive income: The Bank measures fair value using a model
based on bid quotations extracted from market.
Available for sale: The Bank measures fair value for available for sale financial instruments using a
model based on bid quotations extracted from market.

At the period ended 30 June 2018 and 31 December 2017, the Bank disclosed the following assets
and liabilities into fair value levels:

 Level 1 - The government bonds amounting to RON 1,061 million (31 December 2017:
RON 1,312 million)
 Level 2 - Derivatives assets and liabilities and equity instruments amounting to RON 11.9
million (31 December 2017: RON 10.7 million).
 Level 3 - Equities classified as measured at fair value through other comprehensive income
(applicable to the current period), Available for Sale equity (applicable to 2017).

The reconciliation for the movement of financial instruments measured at fair value in Level 3 is
depicted below:

Securities
measured at
FVOCI: Shares

Balance 31.12.2017 1,061

Impact from the implementation of IFRS 9 38

Balance as at 01.01.2018 1,099

Total gain or loss recognized in Income Statement -
Total gain or loss recognized in Equity -
Purchase/Issue -
Sales/Repayments/Settlements -
Transfers in Level 3 from Level 2 -

Balance at 30.06.2018 1,099

F-30
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. FAIR VALUE DISCLOSURES (CONTINUED)

Derivative financial instruments: The Bank measures fair value for derivative financial assets using
observable prices or model inputs available in the market.

The table below sets out the carrying amounts and fair values of the Bank’s financial assets and
financial liabilities not measured at fair value:

30-Jun-2018
Loans and
Advances Other Total
to Amortized carrying
customers cost amount Fair value
Financial Assets
Loans and advances
to customers Level 3 11,035,037 - 11,035,037 12,155,486
Other non-current
Assets Held for Sale Level 2 - 1,768 1,768 1,611
Total financial
assets 11,035,037 1,768 11,036,805 12,157,097

Financial Liabilities
Due to banks Level 3 - 2,814,571 2,814,571 2,787,495
Due to customers Level 3 - 9,913,328 9,913,328 9,467,282
Other borrowed funds Level 3 - 232,422 232,422 228,138
Subordinated loan Level 3 - 724,167 724,167 723,579
Total financial
liabilities - 13,684,488 13,684,488 13,206,494

31-Dec-2017
Loans and Other Total
Advances to Amortized carrying
customers cost amount Fair value

Financial Assets
Loans and advances
to customers Level 3 10,938,335 - 10,938,335 10,796,234
Other non-current
Assets Held for Sale Level 2 - 256,953 256,953 256,953
Total financial
assets 10,938,335 256,953 11,195,288 11,053,187

Financial Liabilities
Due to banks Level 3 - 3,369,298 3,369,298 3,355,421
Due to customers Level 3 - 9,440,296 9,440,296 9,436,838
Other borrowed
funds Level 3 - 232,791 232,791 226,073
Subordinated loan Level 3 - 723,978 723,978 723,215
Total financial
liabilities - 13,766,363 13,766,363 13,741,547

F-31
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. FAIR VALUE DISCLOSURES (CONTINUED)

The following summarizes the major methods and assumptions used in estimating the fair values
of financial instruments reflected in the table above that are not carried at fair value and which
belong to level 2 and level 3 within fair value hierarchy.

Loans and advances to customers: These are net of provisions for impairment losses. The
estimated fair value of loans and advances, with fixed and variable interest rate and with changes
in credit status since inception, is based on discounted cash flows method.

Other non-current Assets Held for Sale: The estimated fair value of loans and advances presented
as Assets Held for Sale in accordance with IFRS 5 is based on estimated cash flow to be received
from their sale.
Deposits from banks and customers: The estimated fair value is based on discounted cash flows
method for term deposits. The fair value of saving and demand deposits was considered the same
as the accounting value.

Customer loans and deposits are categorized as financial instruments level 3 since there are
instruments that are not based on observable market data and the Discounted Cash Flows (DCF)
method is used in order to determine their fair value.

The discounted cash flow (DCF) analysis is a method of valuing an asset or a liability using the
concepts of the time value of money. All future cash flows are estimated and discounted to give
their present values (PVs) - the sum of all future cash flows, both incoming and outgoing, is the net
present value (NPV), which is taken as the value or price of the cash flows.

The components of the present value measurement include the following:

 An estimate of future cash flows up to the maturity for the customer loans and deposits,
using the respective implied forward yield curve;
 Estimations of the amount and timing of the cash flows of the products without contractual
maturity and reprising profile (i.e. revolving loans, sight deposits, current accounts) based
on conventions
 The time value of money, represented by the market rate that coincides with maturity dates
of the cash flows;
 The price for bearing the uncertainty inherent in the cash flows (liquidity risk premium);
 The credit risk (Expected loss) associated to the creditworthiness of the loans customer,
taking into consideration the Probability of Default (PD) and the Loss Given Default (LGD).

For Customer loans, the discount rate components are analyzed: Market Rate + Liquidity Premium
+ Expected loss.

For Customer Deposits, the discount rate components are analyzed: Market Rate + Liquidity
Premium.

Loans from banks and financial institutions: The fair value of loans from banks is based on the
present value of future cash flows, discounted at interest rates available to the Bank at the balance
sheet date for new debt with similar remaining maturity as no quoted market price is available.

In 2018, the bank adjusted the Fair Value Methodology for loans and deposits, including in the
future cash-flows the amounts resulting from capital and interest. The methodology used up to
31.12.2017 included only capital.

F-32
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

5. NET INTEREST INCOME

Period ended Period ended

30 June 2018 30 June 2017

Interest income
Current account and sight deposits with the National
Bank of Romania 2,490 513
Loans and placements to banks 7,950 6,251
Loans and advances to customers measured at
amortised cost 259,572 217,095
Investment securities measured at fair value through
other comprehensive income 7,564 -
Available for sale securities - 4,881
Other interest receivable 40 39

Total interest income 277,616 228,779

Period ended Period ended

30 June 2018 30 June 2017

Interest expense
Deposits and loans from banks (7,885) (2,758)
Deposits from customers (42,087) (33,232)
Subordinated debt (6,610) (6,453)

Total interest expense (56,582) (42,443)

Interest income from derivative transactions 1,230 5,267

Interest expense from derivative transactions 111 2,423

Total interest from derivative transactions 1,341 7,690

Total interest income 278,846 234,046

Total interest expense (56,471) (40,020)

Net Interest Income 222,375 194,026

F-33
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

6. NET FEE AND COMMISSION INCOME

Period ended Period ended

30 June 2018 30 June 2017

Lending commissions 932 705

Letters of guarantee commissions 2,097 2,781
Trade finance fees 184 136
Commissions from transactions with cash 11,245 9,914
Transfers of funds fees 21,333 18,133
Other fees and commissions 15,437 13,421
Fee and commission income 51,228 45,090

Inter-bank transactions fees and commissions (9,529) (7,914)

Other (21) (27)
Fee and commission expense (9,550) (7,941)

Net fee and commission income 41,678 37,149

Position “other fees and commissions” from the table above includes fees and commissions from
bancassurance activity.

The table below presents income from contracts per operating segment, that fall within the scope
of IFRS 15:
30 June 2018
Wholesale Retail Treasury Others Total
Fee and commission
51,228
income 8,540 42,352 336 -

7. GAINS LESS LOSSES ON FINANCIAL TRANSACTIONS

Period ended Period ended

30 June 2018 30 June 2017

Gain/(loss) from dealing in foreign exchange, net 15,698 (1,207)

Loss from foreign exchange derivatives, net (6,813) (16,341)
Gain from the revaluation of foreign currency assets
7,139 32,218
and liabilities, net
Gain on transactions with financial assets available
1,146
for sale -
Other Gain on financial assets (i) - 3,386

Net gain on transactions 16,024 19,202

i) This position includes sales of loans and advances to customers in period ended 30 June 2017
from which the Bank obtained a net gain amounting to RON 3.5 million.

F-34
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

8. IMPAIRMENT LOSSES AND PROVISIONS TO COVER CREDIT RISK

Period ended Period ended
Impairment losses on financial assets 30 June 2018 30 June 2017

Net impairment gains/(losses) from loans to

customers (please see note 14 b.) (7,920) 1,421
Losses on modifications of contractual terms of loans
and advances to customers (153) -
Recoveries from written-off loans 709 4,206
Impairment losses on loans and advances to
customers (7,364) 5,627
Provisions to cover credit risk relating to off balance
sheet items 1,132 -
Total impairment losses and provisions to cover
credit risk on loans and advances to customers (6,232) -

Impairment losses on debt securities measured at fair

value through other comprehensive income (192) -
Impairment losses on due from banks (604)
Total impairment losses on other financial
instruments (796) -

Total impairment losses and provisions to cover

credit risk (7,028) 5,627

9. STAFF COSTS

Period ended Period ended

30 June 2018 30 June 2017

Salaries (77,561) (60,338)

Social security contributions (2,440) (14,062)
Other staff costs (4,750) (3,371)

Total (84,751) (77,771)

Up to 31.12.2017, the social security contributions represent contributions paid by the employer to
the Romanian State defined pension scheme. Starting 1.1.2018, most of the contributions to state
defined pension scheme were relocated from employer to employee, except employment
insurance contribution.
The Bank does not have any further obligations to its employees regarding post-employment
benefits or termination benefits.

F-35
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

10. OTHER OPERATING EXPENSES

Period ended Period ended
30 June 2018 30 June 2017

Rent (20,777) (20,499)

Insurance expenses (1,590) (1,983)
Various taxes (12,903) (10,350)
Stationery (1,503) (1,571)
Advertising (8,725) (6,147)
Telecommunications (4,224) (3,781)
Information Technology (5,517) (5,019)
Electricity supplies costs (3,032) (2,966)
Professional fees (13,971) (9,366)
Contributions to deposit guarantee and national
resolution schemes (7,505) (12,353)
Impairment losses and write offs of fixed assets
(please see note 15) (19) -
Reversal of provisions for litigations, commitments,
contingencies (please see note 22) (18) 5,432
Other expenses (29,066) (24,256)

Total (108,850) (92,859)

11. CASH AND BALANCES WITH NATIONAL BANK OF ROMANIA

30 June 2018 31 December 2017

Cash in hand 149,464 190,853

Cash in ATMs 48,956 62,181
Current account at National Bank of Romania (NBR) 2,168,450 1,791,280
Allowance for impairment losses (390) -

Total 2,366,480 2,044,314

The balances per currency of the current accounts held with the NBR as at 30 June 2018 were:
RON 435,564 thousand (31 December 2017: RON 591,777 thousand) and EUR 371,776 thousand
(31 December 2017: EUR 257,421 thousands).The balance of the current account is used for the
mandatory reserves purposes and can vary on a daily basis. The mandatory reserve can be used
by the Bank for day to day activities providing the average balance for the month is maintained
within required formula.

At 30 June 2018 the minimum mandatory reserves rates established by the National Bank of
Romania for raised funds with maturity lower than 2 years and for raised funds with residual
maturity greater than 2 years which foresee contractual clauses regarding reimbursements,
withdrawals and anticipated transfers, are 8% for both funds denominated in RON and funds
denominated in foreign currency (31 December 2017: 8% for raised funds denominated in RON
and 8% for raised funds denominated in foreign currency).

The mandatory reserve is denominated in EUR for the foreign currency deposits and loans and in
RON for domestic currency deposits. The interest rate paid by the National Bank of Romania in
period ended 30 June 2018 for reserves held in RON increased from 0.10% to 0.23%, for reserves
held in USD increased from 0.08% to 0.10% and for reserves held in EUR it was maintained at
0.02%.

F-36
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

12. DUE FROM BANKS

30 June 2018 31 December 2017

Current accounts with other banks 348,699 101,367

Sight deposits with other banks 205,105 -
Term deposits with other banks 367,117 787,314
Collateral deposits with banks 26,201 25,990
Allowance for impairment losses (please see note 32) (240) -

Total due from banks 946,882 914,671

Current accounts, sight and term deposits with banks are unencumbered and at the immediate
disposal of the Bank as at 30 June 2018 and 31 December 2017.

13. FINANCIAL INVESTMENTS

Investment securities and Investments in associates

I. Investment securities

30 June 2018 31 December 2017

Securities measured at FVOCI

Government bonds and treasury bills (i) 1,060,804 -
Investment in equity securities (ii) 12,962 -

Available-for-sale securities
Government bonds and treasury bills (i) - 1,311,544
Investment in equity securities (ii) - 11,798

Total 1,073,766 1,323,342

i. As at 30 June 2018, the Bank held government bonds with coupon and treasury bills with
discount, in RON, issued by the Romanian Ministry of Public Finance. Government portfolio in
RON carries coupon rates ranging from 0.78% to 5.60% as at 30 June 2018 (31 December
2017: 0.65% to 5.60%).

The weighted average yield for government bonds at the end of 30 June 2018 was 2.91% (31
December 2017: 1.87%). As at 30 June 2018 and 31 December 2017 all the financial assets of the
Bank are unencumbered and at the immediate disposal of the Bank.

ii. Also included in financial assets investment securities are equity investments in shares of
Alpha Bank Group companies and other companies.

F-37
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

13. FINANCIAL INVESTMENTS (CONTINUED)

I. Investment securities (continued)

The movement and the breakdown of the investment equity securities as at 30 June 2018 were as
follows:

Investment in equity securities 30 June 2018 31 December 2017

Balance as at 31 December 11,798 9,354

Impact from the implementation of IFRS 9 38 -
As at 1 January 11,836 9,354
Other adjustments 1,126 2,444
At the end of period 12,962 11,798

30-Jun-18 31-Dec-17
Country of Ownership Value of Ownership Value of
Investment incorporation interest % owner ship interest % ownership
Biroul de Credite
S.A. Romania 3.85% 206 3.85% 206
Societatea de
Transfer de Fonduri
si Decontari
TransFonD S.A. Romania 2.98% 700 2.98% 700
Alpha Leasing
Romania IFN S.A. Romania 1.00% 77 1.00% 77
Casa de
Compensare
Bucuresti S.A. Romania 1.71% 5 1.71% 5
VISA Inc USA less than 1% 11,863 less than 1% 10,737
SWIFT SCRL Belgium less than 1% 111 less than 1% 73

II. Investments in associates

30 June 2018 31 December 2017

Investments in associates 614 804

Total 614 804

The movement and the breakdown of the investment in associates as at 30 June 2018 were as
follows:
30-Jun-18 31-Dec-17
Country of Ownership Value of Ownership Value of
Investment incorporation interest % owner ship interest % ownership
SSIF Alpha Finance
Romania S.A. Romania 26.68% 614 26.68% 804

F-38
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

13. FINANCIAL INVESTMENTS (CONTINUED)

II. Investments in associates (CONTINUED)

30 June 2018 31 December 2017

As at 1 January 804 966

Additions - -
Changes related to application of the equity method (190) (162)
At the end of period 614 804

14. LOANS AND ADVANCES TO CUSTOMERS

As of 30 June 2018, all loans and advances to customers are measured at amortised cost.

30 June 2018 31 December 2017

Corporate 4,799,581 4,863,285
Small and medium enterprises (SMEs) 545,258 509,745
Small business loans (SBL) 3,225 3,084
Individuals 6,152,502 5,996,068
- Consumer loans 1,050,207 1,016,179
- Housing loans 5,012,817 4,893,245
- Credit Cards 89,478 86,644

Total loans, gross 11,500,566 11,372,182

Allowance for impairment losses (465,529) (433,847)

Total loans, net 11,035,037 10,938,335

Loans can be repaid before their scheduled maturity.

(a) Analysis by type of customer

30 June 2018 31 December 2017

Individuals
- in RON 2,943,378 2,649,079
- in foreign currencies 3,209,124 3,346,989
Legal entities
- in RON 1,720,304 1,721,877
- in foreign currencies 3,627,760 3,654,237

Total loans, gross 11,500,566 11,372,182

Allowance for impairment losses (465,529) (433,847)

Total loans, net 11,035,037 10,938,335

F-39
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

14. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(b) Allowances for impairment losses – loans and advances to customers

During the period ended 30 June 2018 the Bank has written off loans and advances to customers with gross exposure RON 23 million (31 December
2017: RON 30 million) and corresponding allowance for loan losses.
The movement in allowance for impairment losses is analyzed as follows:

Mortgages Consumer Credit cards Corporate loans Total loans

Balance at 1.1.2017 160,178 165,228 16,486 724,446 1,066,338

Net impairment loss for the period (note 8) (10,638) 378 1,043 7,796 (1,421)
Effect of correction of interest revenue on impaired loans 771 1,320 3 9,224 11,318
Translation differences 360 279 (909) 1,964 1,694
Disposal/transfer of impaired loans - - - (5,524) (5,524)
Reclassification to assets held for sale - - - - -
Bad debts written-off (3,960) (9,046) (113) (12,221) (25,340)
Balance at 30.6.2017 146,711 158,159 16,510 725,685 1,047,065

Balance at 1.7.2017 146,711 158,159 16,510 725,685 1,047,065

Net impairment loss for the period (6,927) 2,949 609 (27,326) (30,695)
Effect of correction of interest revenue on impaired loans 54 414 (3) 6,015 6,480
Translation differences 3,090 2,088 80 11,429 16,687
Disposal/transfer of impaired loans (9,453) (45,146) (10,918) (1,631) (67,148)
Reclassification to assets held for sale - (1,879) (98) (531,730) -
Bad debts written-off - (21) (2,439) (2,375) (4,835)
Balance at 31.12.2017 133,475 116,564 3,741 180,067 433,847

Impact from implementation of IFRS 9 (3,604) (14,142) (1,229) 47,187 28,212

Balance at 1.1.2018 129,871 102,422 2,512 227,254 462,059
Net impairment gain/(loss) for the period (note 8) (4,586) 9,865 1,856 785 7,920
Effect of correction of interest revenue on impaired loans 25 399 - 4,439 4,863
Translation differences 321 1,373 (473) 12,961 14,182
Disposal/transfer of impaired loans - - - - -
Derecognition of financial assets (260) (515) - (12) (787)
Reclassification to assets held for sale - - - - -
Bad debts written-off (114) - - (22,594) (22,708)
Balance at 30.6.2018 125,257 113,544 3,895 222,833 465,529

F-40
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

15. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Furniture
Land and and EDP Tangible Intangible
Buildings Equipment Other fixed assets fixed assets

COST
1 January 2018 122,105 92,101 40,830 255,036 59,997

Additions 823 2,250 2,010 5,083 7,137

Disposals - (8) - (8) -
Write-off - (13,615) (12,375) (25,990) -
Reclassification - 1,296 (1,296) - -
30 June 2018 122,928 82,024 29,169 234,121 67,134

DEPRECIATION
1 January 2018 64,924 63,225 35,084 163,233 42,197

Depreciation charge 2,510 4,011 925 7,446 1,912

Impairment charge - - - - -
Disposals - (8) - (8) -
Write-off - (13,634) (12,337) (25,971) -
Reclassification - - - - -
30 June 2018 67,434 53,594 23,672 144,700 44,109

NET BOOK VALUE

30 June 2018 55,494 28,430 5,497 89,421 23,025
1 January 2018 57,181 28,876 5,746 91,803 17,800

F-41
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

15. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS (CONTINUED)

Furniture and
Land and EDP Tangible Intangible
Buildings Equipment Other fixed assets fixed assets

COST
1 January 2017 122,226 88,359 39,979 250,564 46,506
Additions 425 1,938 681 3,044 2,789
Disposals - - - - -
Write-off - - - - -
Reclassification - - - - -
30 June 2017 122,651 90,297 40,660 253,608 49,295

1 July 2017 122,651 90,297 40,660 253,608 49,295

Additions 1,108 4,050 2,064 7,222 10,702
Disposals - - - - -
Write-off (1,654) (3,132) (1,008) (5,794) -
Reclassification - 886 (886) - -
31 December 2017 122,105 92,101 40,830 255,036 59,997

DEPRECIATION
1 January 2017 60,288 59,429 34,295 154,012 39,170
Depreciation charge 2,769 3,353 901 7,023 1,375
Impairment charge - - - - -
Disposals - - - - -
Write-off - - - - -
Reclassification - - - - -
30 June 2017 63,057 62,782 35,196 161,035 40,545

1 July 2017 63,057 62,782 35,196 161,035 40,545

Depreciation charge 2,672 3,498 870 7,040 1,652
Impairment charge - - - - -
Disposals - - - - -
Write-off (805) (3,056) (981) (4,842) -
Reclassification - 1 (1) - -
31 December 2017 64,924 63,225 35,084 163,233 42,197

NET BOOK VALUE

31 December 2017 57,181 28,876 5,746 91,803 17,800
30 June 2017 59,594 27,515 5,464 92,573 8,750
1 January 2017 61,938 28,930 5,684 96,552 7,336

Fixed assets written-off during the period ended 30 June 2018 were related mainly to replacement
of IT equipment, compared with 31 December 2017 when fixed assets written-off amounting to
RON 1 million were mainly related to relocation or reorganization of some units and as a result of
year end stock count.
Intangible assets consist mainly of packaged software. Included within other fixed assets are motor
vehicles, furniture and fittings, household equipment, air conditioning equipment, etc.
As at 30 June 2018, the carrying value of the fixed assets purchased under finance lease
agreements is RON 1,185 thousand (31 December 2017: RON 1,575 thousand).

F-42
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

16. DERIVATIVE FINANCIAL INSTRUMENTS

For derivative assets and liabilities held, no hedge accounting is applied, however they are held for
risk management purposes. As at 30 June 2018, the Bank has in balance FX swaps; all
transactions are concluded with Alpha Bank AE (amounts in RON):

30 June 2018
Contractual nominal amount Fair value
Amount sold Amount bought Assets Liabilities

Foreign exchange swaps 256,759,772 260,000,000 933,449 -

Total 256,759,772 260,000,000 933,449 -

As at 31 December 2017, the Bank had in balance FX swap, all transactions are concluded with
Alpha Bank AE (amounts in RON).

31 December 2017
Contractual nominal amount Fair value
Amount sold Amount bought Assets Liabilities

Foreign exchange swaps 330,098,477 331,346,000 1,566,380 1,713,833

Total 330,098,477 331,346,000 1,566,380 1,713,833

17. OTHER ASSETS AND ASSETS HELD FOR SALE

30 June 2018 31 December 2017

Sundry debtors 9,975 8,791
Prepaid Expenses 4,048 3,133
Assets recovered by the Bank from customers in case of
terminated agreements 145 4,634
Other cash receivable 2,190 2,149
Other assets 13,926 18,285

Total Other Assets 30,284 36,992

Fixed assets held for sale 9,064 9,338
Other non-current assets held for sale (i) 1,768 256,953

Total Assets Held for Sale 10,832 266,291

Total Other Assets and Assets Held for Sale 41,116 303,283

F-43
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

17. OTHER ASSETS AND ASSETS HELD FOR SALE (CONTINUED)

(i) During 2017, the Bank started the process for the sale of a non-performing portfolio that
includes both individuals and corporate exposures. At the end of 31.12.2017 the portion of that
portfolio that was not derecognized was presented as Assets Held for Sale in accordance with
IFRS 5. For financial reporting purposes, as requested by IFRS 5 and IAS 39, the total of the
aforementioned loans were tested for impairment in accordance with the Bank’s current credit
impairment assessment methodology; their recoverable amount was calculated as the estimated
sale price less costs to sell, recognizing the difference as «net impairment losses from loans to
customers» in the income statement. During 2018, the sale of corporate portfolio was finalised so
as at 30.06.2018, the carrying amount of held for sale portfolio amounted to RON 1.8 million
(31.12.2017: RON 257 million).

18. DUE TO BANKS

30 June 2018 31 December 2017

Current account and sight deposits 38,840 55,293

Term deposits 1,468,662 1,776,720
Collateral deposits for loans to customers 1,307,069 1,537,285

Total due to banks 2,814,571 3,369,298

Funds attracted from other banks represent mainly deposits from Alpha Bank AE (Greece).

30 June 2018 31 December 2017

Shortest Longest Shortest Longest
Deposits from Alpha Bank period/ period/ period/ period/
Greece Lowest rate Highest rate Lowest rate Highest rate

Contractual
maturity 30 Days 4,018 Days 111 Days 4,018 Days

EUR Interest rate (0.36)% 0.00% 0.00% 0.00%

19. DUE TO CUSTOMERS

30 June 2018 31 December 2017

Current accounts and sight deposits 2,626,817 2,525,034

Term deposits 7,086,862 6,742,893
Collateral deposits 199,649 172,203
Certificates of deposit - 166

Due to customers 9,913,328 9,440,296

F-44
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

19. DUE TO CUSTOMERS (CONTINUED)

30 June 2018 31 December 2017

Individuals
- in RON 2,478,238 2,437,086
- in foreign currencies 3,385,613 2,989,107

Legal entities
- in RON 2,065,040 2,169,952
- in foreign currencies 1,962,663 1,822,974

Total deposits 9,891,554 9,419,119

Accrued interest 21,774 21,177

Total 9,913,328 9,440,296

Deposits can be withdrawn before their maturity, in which case the interest income is computed
based on current account interest rate prevailing at the date of withdrawal.

20. OTHER BORROWED FUNDS

Other borrowed funds represent credit facilities from the European Bank for Reconstruction and
Development (“EBRD”) for financing small and medium size municipalities and a credit facility from
International Finance Corporation (“IFC”).

On 24 November 2005 the Bank signed a loan agreement with EBRD for financing small and
medium-size municipalities and/or municipally owned or controlled companies, in total amount of
EUR 20 million, maturing in April 2021. The Bank has only drawn EUR 0.3 million and RON 13.75
million from the initial contractual amount of EUR 20 million in 2009. The remaining available
amount has been cancelled under the Agreement’s provisions during 2010. As at 30 June 2018,
the Bank has a remaining balance of EUR 0.08 million and RON 3.7 million from the above drawn
amounts.

On 18 May 2017, the Bank signed a loan agreement with IFC, in amount of EUR 50 million,
maturing in March 2022, which has been fully drawn the Bank by the end of 2017.

30 June 2018 31 December 2017

EBRD loans 4,072 4,749

IFC loans 228,350 228,042

Other borrowed funds 232,422 232,791

F-45
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

20. OTHER BORROWED FUNDS (CONTINUED)

The changes in liabilities arised from financing activities, including the cash flow and non-cash flow
changes are presented in the table below:

Non cash flows

1 Foreign
Cash flow from financing January Cash Accrued exchange
activities 2018 flows interest differences 30 June 2018

Other borrowed funds -

EBRD 4,749 (673) (4) - 4,072
Other borrowed funds - IFC 228,042 - 308 - 228,350

21. SUBORDINATED DEBT

In November 2004, the Bank signed a loan agreement with Alpha Bank AE for a subordinated loan
of EUR 16,000,000 with a seven-year maturity. The subordinated loan was extended and is to be
fully repaid in one installment in November 2019. The interest rate is equal to EURIBOR 3 months
plus 2.0%.

In September 2005, the Bank signed a second loan agreement with Alpha Bank AE for a
subordinated loan of EUR 60,000,000 with a seven-year maturity. The subordinated loan was
extended and is to be fully repaid in one installment in September 2019. The interest rate is equal
to EURIBOR 3 months plus 2.0%.

In February 2006, the Bank signed a third loan agreement with Alpha Bank AE for a subordinated
loan of EUR 4,300,000 with a seven-year maturity. The subordinated loan was extended and is to
be fully repaid in one installment in February 2019. The interest rate is equal to EURIBOR 3
months plus 2.0%.

In November 2006, the Bank signed a fourth loan agreement with Alpha Bank AE for a
subordinated loan of EUR 13,000,000 with a seven-year maturity. The subordinated loan was
extended and is to be fully repaid in one installment in October 2019. The interest rate is equal to
EURIBOR 3 months plus 2.0%.

In September 2009, the Bank signed a fifth loan agreement with Alpha Bank AE for a subordinated
loan of EUR 12,000,000 with a seven-year maturity. The subordinated loan was extended and is to
be fully repaid in one installment in September 2019. The interest rate is equal to EURIBOR 3
months plus 2.0%.

F-46
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

21. SUBORDINATED DEBT (CONTINUED)

In May 2011, the Bank signed a sixth subordinated loan agreement with Alpha Bank AE of EUR
80,000,000. The Bank has drawn only EUR 50,000,000 by 30 June 2018, under the contractual
provisions. The maturity schedule is based on monthly payments of interest and does not comprise
a final maturity date for the principal. The interest rate set for each monthly payments of interest is
based on EURIBOR 1 month plus 2.5%.

As at 30 June 2018 and 31 December 2017, subordinated debt balance was:

30 June 2018 31 December 2017

Subordinated debt 724,167 723,978

Total 724,167 723,978

The changes in liabilities arised from financing activities, including the cash flow and non-cash flow
changes are presented in the table below:

Non cash flows

01 Foreign
Cash flow from financing January Cash Accrued exchange 30 June
activities 2018 flows interest differences 2018

Subordinated debt 723,978 - (29) 218 724,167

22. PROVISIONS
Provisions includes: provisions for litigations, fraud cases and other contingencies amounting to
RON 10.5 million (31 December 2017: RON 10.5 million) and provisions for guarantees, letter of
credit and credit related commitments amounting to RON 10.2 million (31 December 2017: RON
3.1 million) (please see note 26).

The movement in the provisions was as follows:

Balance 1.1.2017 18,638

Changes for the period 1.1. – 30.06.2017

Provisions to cover credit risk relating to off-balance sheet items (5,432)
Provisions for other contingent liabilities -
Provisions for pending legal cases or issues in progress -
Foreign exchange differences (11)
Balance 30.06.2017 13,195

Changes for the period 1.7. – 31.12.2017

Provisions to cover credit risk relating to off-balance sheet items (2,590)
Provisions for other contingent liabilities 2,836
Provisions for pending legal cases or issues in progress 113
Foreign exchange differences 73
Balance 31.12.2017 13,627

F-47
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

22. PROVISIONS (CONTINUED)

IFRS 9 impact on provisions to cover credit risk relating to off-balance sheet

items 8,242
Balance 1.1.2018 21,869
Changes for the period 1.1. – 30.06.2018
Provisions to cover credit risk relating to off-balance sheet items (note 8) (1,132)
Provisions for other contingent liabilities -
Provisions for pending legal cases or issues in progress 18
Foreign exchange differences 8

Balance 30.06.2018 20,763

23. OTHER LIABILITIES

30 June 2018 31 December 2017

Social security liabilities 2,610 5,586

Finance lease payable (i) 71 110
Accrual sales incentive scheme 13,025 7,783
Amounts in transit 7,539 8,187
Income taxes to be paid to state authorities 73,998 24,184
Other liabilities 66,235 42,808

Other liabilities 163,478 88,658

(i) Finance lease payable is detailed as following:

30 June 2018 31 December 2017

Total minimum finance lease payments
Not later than 1 year 35 59
later than 1 year and not later than 5 years 40 58
75 117
less: Finance charge (4) (7)

Present value of finance lease payments 71 110

Not later than 1 year 32 55

Later than 1 year and not later than 5 years 39 55

F-48
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

24. TAXATION

Tax charge

The movements in net tax charge for the period were as follows:

Period ended Period ended

30 June 2018 30 June 2017

Current tax charge 84,506 13,021

Deferred tax charge/(release) (859) 78

Total tax charge for the period 83,647 13,099

The reconciliation of the tax on the Bank’s profit/(loss) before tax and the theoretical amount that
would arise using the basic tax rate of Romania is as follows:

Period ended Period ended

30 June 2018 30 June 2017

Profit before tax 64,914 81,670

Tax calculated at a tax rate of 16% 10,386 13,067
Increase/(decrease) due to:
- income not subject to tax (5,593) (1,483)
- expenses not deductible for tax purposes 6,708 3,334
- other differences (i) 72,146 (1,819)

Total income tax charge 83,647 13,099

(i) This amount is mainly related to current tax calculated according to Law 72/2018 in relation with
corporate loan portfolio for which the sale was finalized during first half of 2017 (please also see
note 17).

Deferred tax recognized in the income statement is attributable to temporary differences, the effect
of which is analyzed in the table below:
From 1 January to
30 June 2018 30 June 2017
Provisions for credit risk related to off
balance items 180 871
Depreciation and fixed assets write offs (47) 167
Other temporary differences (992) (960)
(859) 78

The Bank has not recognized deferred tax on the statutory reserves of RON 154,564 thousand (31
December 2017: 154,564 thousand), which were set-up under the Romanian Laws and Banking
Regulations and are non-distributable.

These reserves under the Romanian Fiscal legislation will remain untaxed until they are used (e.g.
transferred to distributable profits, covering losses, etc.). The Bank has no intention in the direction
of decrease or dissolving its activities and based on its current business plan it is unlikely that the
reserves will decrease.

F-49
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

24. TAXATION (CONTINUED)

As at 30 June 2018 the Bank recorded a deferred tax asset amounting to RON 5.2 million (31
December 2017: RON 3.2 million) out of which RON 4.2 million relates to other temporary
differences (31 December 2017: RON 2.1 million) and RON 1 million relates to unrealised loss
from bonds and other securities (31 December 2017: RON 1.1 million).

The deferred tax liability recorded as at 30 June 2018 was RON 4.6 million (31 December 2017:
RON 4.5 million) out of which RON 3.8 million relates to other temporary differences (31 December
2017: RON 3.9 million) and RON 0.8 million relates to unrealised gain from other securities (31
December 2017: RON 0.6 million).

The Bank envisages using the above amounts versus future taxable profit.

25. SHARE CAPITAL

30 June 2018 31 December 2017

Statutory value as per Constitutive Acts 958,811 958,811

Restatement of share capital in accordance with IAS 29 24,334 24,334

Total 983,145 983,145

The authorized, issued and fully paid share capital (as per Constitutive Acts) of the Bank as at 30
June 2018 is 8,323,016 shares with a par value of RON 115.2 (31 December 2017: 8,323,016
shares with a par value of RON 115.2).

All issued shares are fully paid.

The Bank’s ownership structure as per statutory accounts as of 30 June 2018 and 31 December
2017 is as follows:

30 June 2018
Number of Nominal
Shareholder shares % Amount

Alpha Bank A.E 8,316,223 99.91838% 958,029

Alpha Bank (Greece) 8,316,223 99.91838% 958,029

Other shareholders (Greek citizens) 6,793 0.08162% 782

Total 8,323,016 100% 958,811

F-50
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

25. SHARE CAPITAL (CONTINUED)

31 December 2017
Number of Nominal
Shareholder shares % Amount

Alpha Bank A.E 8,316,223 99.91838% 958,029

Alpha Bank (Greece) 8,316,223 99.91838% 958,029

Other shareholders (Greek citizens) 6,793 0.08162% 782

Total 8,323,016 100% 958,811

Alpha Bank has been listed on the Athens Exchange since 1925. In addition to the Greek stock
exchange, the share is traded over-the-counter on the New York exchange in the form of American
Depository Receipts (ADRs). The share is also included in international indexes such as the MSCI
Emerging Markets, MSCI Greece, FTSE All World and FTSE4Good Emerging Index.

26. COMMITMENTS AND CONTINGENCIES

Off balance sheet liabilities

The Bank pursuant to its normal operations is bound by contractual commitments that in the future
may result to changes in its asset structure. These commitments are monitored in off balance
sheet accounts and relate to letters of credit, letters of guarantee, undrawn credit facilities and
credit limits.
In addition, contingent liabilities for the Bank arise from undrawn loan commitments and credit
limits that may not be fulfilled immediately or may be partly fulfilled as long as the agreed upon
requirements are fulfilled by counterparties.
Letters of credit are used to facilitate trading activities and relate to the financing of contractual
agreements for the transfer of goods domestically or abroad, by undertaking the direct payment on
behalf of the third party bound by the agreement on behalf of the Bank’s client. Letters of credit, as
well as letters of guarantee, are commitments under specific terms and are issued by the Bank for
the purpose of ensuring that its clients will fulfill the terms of their contractual obligations.
From 1.1.2018, following the implementation of IFRS 9, the Bank measures the expected credit
losses for undrawn loan commitments and letters of credit / letters of guarantee, which are
included in the caption “Provisions”.
The balance of the abovementioned expected credit loss amounts to RON 10.2 million as of
30.6.2018 (please see note 22).

F-51
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

26. COMMITMENTS AND CONTINGENCIES (CONTINUED)

The aggregate amount of outstanding guarantees, letters of credit and commitments to extend
credit at the end of the period were:

30 June 2018 31 December 2017

Letters of guarantee issued in RON 148,200 184,899

Letters of guarantee issued in foreign currency 226,389 207,704

Total letters of guarantee issued 374,589 392,603

Letters of credit issued 49,306 36,770

Un-drawn credit facilities in RON 559,674 606,530

Un-drawn credit facilities in foreign currency 671,060 656,034

Total un-drawn credit facilities 1,230,734 1,262,564

Of which:
- committed 430,468 470,201
- uncommitted 800,266 792,363

Rent commitments

As at 30 June 2018 the Bank has rent commitments of RON 234,655 thousand (31 December
2017: RON 204,631 thousand) and to companies within the Group, the rent commitments amounts
to RON 5.5 million (31 December 2017: RON 7.2 million).

Future lease payments from operating lease contracts are as follows:

30 June 2018 31 December 2017

Less than one year 46,435 39,118

Between one and five years 129,157 102,891
More than five years 59,063 62,622

TOTAL 234,655 204,631

Litigations

The litigations in which the Bank is defendant as at 30 June 2018 and 31 December 2017 should
not involve material claims on the Bank. The litigations provisions booked in this respect amounts
to RON 3,130 thousands (31 December 2017: RON 3,112 thousands).

Other contingencies

The Romanian Government has a number of agencies authorized to audit (control) companies that
operate in Romania. These controls are similar to tax audits in other countries, and can cover only
the tax issues and other legal and regulatory issues of interest to these agencies. It is possible that
the Bank continue to be subject to fiscal controls due to issuance of new tax rules. Last tax audit
covered the period up to 31 December 2006.

F-52
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

27. CAPITAL

The Bank maintains an actively managed capital base to cover risks inherent in the business. The
adequacy of the Bank’s capital is monitored using, among other measures, the rules and ratios
established by the European Banking Authority (“EBA”) and adopted by the National Bank of
Romania (“NBR”) in supervising the Bank.

The regulations require for capital adequacy ratios to be calculated on financial information
prepared in accordance with EU and NBR prudential requirements. To be “sufficiently capitalized”
under NBR regulations a banking institution must have a Common Equity Tier I ratio of at least
4.5% and 6% for Total Tier I, while the total capital adequacy limit was maintained at 8%.

As at 30 June 2018, capital adequacy ratio based upon the NBR’s regulation is 25.39% (31
December 2017: 25.43%).

During the past period, the Bank had complied in full with all its externally imposed capital
requirements.

Capital management

The primary objectives of the Bank’s capital management are to ensure that the Bank complies
with externally imposed capital requirement and that the bank maintains strong credit ratings and
healthy capital ratios in order to support its business and to maximize shareholders’ value.

The Bank manages its capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristic of its activities. In order to maintain or adjust the
capital structure, the Bank may adjust the amount of dividend payment to shareholders, return
capital to shareholders or issue capital securities. No changes were made in the objectives,
policies and processes from the previous years.

Regulatory capital

30 June 2018 31 December 2017

Actual Required Actual Required

Common Equity Tier 1 1,627,832 351,997 1,636,621 359,061

Tier 1 capital 1,627,832 469,329 1,636,621 478,748
Tier 2 capital 358,580 N/A 392,617 N/A

Total capital 1,986,412 625,772 2,029,238 638,331

Risk weighted assets 7,822,145 7,822,145 7,979,136 7,979,136

Common Equity Tier 1 20.81% 4.50% 20.51% 4.50%

Tier 1 capital 20.81% 6.00% 20.51% 6.00%
Total capital ratio 25.39% 8.00% 25.43% 8.00%

Regulatory capital consists of Tier 1 capital, share capital, retained earnings including current loss
for the period, reserves and accumulated other comprehensive income. The other component of
regulatory capital is Tier 2 capital, which includes subordinated debt and preferences shares.

F-53
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

28. RELATED PARTY TRANSACTIONS

According to IAS 24, a related party is a person or entity that is related to the entity that is
preparing its financial statements.

For the Bank, in particular, related parties are considered:

1. Parent company Alpha Bank and the entities that constitute for the Bank or the parent
company:
 a subsidiary,
 a joint venture,
 an associate
 a Post-Employment Benefit Plan
2. A person and his close family members, if that person is a member of the key
management personnel.
The Bank considers as key management personnel all the members of the Bank’s and the Parent
Company’s Board of Directors and Executive Committee, including close family members of the
above mentioned persons.

During the period ended 30 June 2018 the Bank entered into a number of banking transactions
with Alpha Bank A.E. that controls 99.92% of the Bank’s ordinary shares, and group companies
(Alpha Bank London Ltd, Alpha Asset Management A.E.D.A.K, SSIF Alpha Finance Romania S.A.,
Alpha Supporting Services A.E, Alpha Bank Cyprus Ltd , Alpha Insurance Brokers
S.R.L.(Romania), Alpha Leasing Romania IFN S.A., AGI-RRE Participations 1 L.T.D., Alpha Real
Estate Services S.R.L., AGI - RRE Participations 1 S.R.L., AGI - RRE Poseidon Ltd, S.C. Romfelt
Real Estate S.A., AGI - RRE Zeus SRL, AGI - RRE Poseidon SRL, AGI - RRE Hera SRL, AGI -
RRE Artemis Ltd, S.C. Cordia Residence SRL, S.C. Carmel Residential SRL, AGI-RRE Cleopatra
S.R.L., AGI-RRE Hermes S.R.L., Asmita Gardens S.R.L., Ashtrom Residents S.R.L., Cubic Center
Development S.A., TH Top Hotels S.R.L.) in the normal course of business. These transactions
were carried out on commercial terms and conditions and at market rate.

F-54
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

28. RELATED PARTY TRANSACTIONS (CONTINUED)

These include loans, deposits and foreign currency transactions. The volumes of related party transactions, outstanding balances at the
period/year-end, and relating expense and income for the period are as follows:
Key management Associates and joint
personnel Parent ventures Other
30-Jun 31-Dec 30-Jun 31-Dec 30-Jun 31-Dec 30-Jun 31-Dec
2018 2017 2018 2017 2018 2017 2018 2017
Assets
Due from other banks - - 468,762 688,996 - - 66 66
Loans and advances to customers, net 889 935 - - - - 188,632 269,163
Derivative held for trading - - 933 1,566 - - - -
Investment securities measured at fair value
- - - - - - 77 -
through other comprehensive income
Available-for-sale securities - - - - - - - 77
Investments in associates - - - - 614 804 - -
Other assets - - 31 265 - 7 4 20

Total assets 889 935 469,726 690,827 614 811 188,779 269,326

Liabilities
Due to banks - - 2,813,249 3,366,947 - - 85 147
Due to customers 7,493 7,123 - - 12,853 8,595 92,516 101,116
Subordinated loan - - 724,167 723,978 - - - -
Derivative held for trading - - - 1,714 - - - -
Other liabilities - - - - - - 8,222 9,238

Total liabilities 7,493 7,123 3,537,416 4,092,639 12,853 8,595 100,823 110,501

Guarantees in favor of third parties - - 43,983 46,023 - - - 384

Guarantees received - - 69,987 72,584 - - - -
Undrawn credit facilities 260 240 745,776 745,552 932 932 99,919 130,971

F-55
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

28. RELATED PARTY TRANSACTIONS (CONTINUED)

Key
management Associates and
personnel Parent joint ventures Other
30-Jun 30-Jun 30-Jun 30-Jun 30-Jun 30-Jun 30-Jun 30-Jun
2018 2017 2018 2017 2018 2017 2018 2017

Interest income 11 11 6,303 11,453 - - 2,877 2,900

Interest expense 30 28 6,509 4,078 8 10 108 18
Net commission
income 5 6 239 311 5 6 107 72
Other operating
income 1 2 - 5 22 22 296 707
Other operating
expenses 8 9 - - - 23 8,743 7,457

The “due to banks” position above includes collateral deposits received from Alpha Bank A.E. in
amount of RON 1,307,070 thousand (31 December 2017: RON 1,537,286 thousand).

Transactions with key management personnel

The remunerations for the period ended 30 June 2018 amounted to RON 3,366 thousand (30 June
2017: RON 2,774 thousand).

Transferred loans receivables

During the period ended 30 June 2018 and year 2017 there have been no transfer transactions
with related parties, involving loans receivables.

29. CASH AND CASH EQUIVALENTS

30 June 2018 31 December 2017

Due from banks 926,475 660,200

Cash and balances with the National Bank of Romania 2,366,870 2,044,314

Total 3,293,345 2,704,514

30. OPERATING SEGMENTS

Retail

This segment includes individuals, professionals, small and very small companies operating in
Romania and abroad. The Bank, offers all types of deposit products (term/sight deposits, savings
accounts, current accounts), loan facilities (mortgages, consumer) and debit and credit cards to the
above customers.

F-56
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

30. OPERATING SEGMENTS (CONTINUED)

Wholesale

This segment includes all medium-sized and large companies, corporations with international
business activities. The Bank offers working capital facilities, corporate loans, and letters of
guarantee for the abovementioned corporations. This sector also includes factoring services.

Treasury

It includes the activities of the Dealing Room in the interbank market (FX Swaps, Bonds, Interbank
placements – Loans etc.). It includes also stock exchange, advisory and brokerage services
relating to capital markets offered by the Bank.

Others

This segment consists of administration departments of the Bank and income and expenses that
are not related to its operating activities or are non-recurring and are due to external factors.

30 June 2018
Wholesale Retail Treasury Others Total
Net Interest Income 88,356 129,127 4,892 - 222,375
Net fee and
commission income 7,572 34,935 (829) - 41,678
Other income 3,099 7,777 (28) 1 10,849

TOTAL INCOME 99,027 171,839 4,035 1 274,902

Depreciation and
amortization (2,334) (7,008) (16) - (9,358)
Other Expenses (34,299) (153,620) (3,235) (2,447) (193,601)
Impairment losses
and provisions to
cover credit risk 1,844 (8,273) (599) - (7,028)

TOTAL EXPENSES (34,789) (168,901) (3,850) (2,447) (209,987)

Profit/(loss) before
tax 64,238 2,938 185 (2,446) 64,915

Income tax expense (67,386) (6,525) - (9,736) (83,647)

NET
PROFIT/(LOSS) (3,148) (3,587) 185 (12,182) (18,732)

Total Assets 4,619,388 6,529,979 4,388,048 40,514 15,577,929

Total Liabilities 1,749,787 8,163,541 3,771,159 184,242 13,868,729

F-57
 ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

30. OPERATING SEGMENTS (CONTINUED)

30 June 2017
Wholesale Retail Treasury Others Total

Net Interest Income 76,831 107,032 10,163 - 194,026

Net fee and
commission income 7,445 30,749 (1,045) - 37,149
Other income 10,037 9,922 3,926 11 23,896

TOTAL INCOME 94,313 147,703 13,044 11 255,071

Depreciation and
amortization (1,872) (6,519) (7) - (8,398)
Other Expenses (29,326) (133,302) (7,171) (831) (170,630)
Net impairment
gain/(loss) on financial
assets (5,049) 10,698 (22) - 5,627

TOTAL EXPENSES (36,247) (129,123) (7,200) (831) (173,401)

Profit/(loss) before tax 58,066 18,580 5,844 (820) 81,670

Income tax expense - - - (13,099) (13,099)

NET PROFIT/(LOSS) 58,066 18,580 5,844 (13,919) 68,571

31 December 2017
Wholesale Retail Treasury Others Total

Total Assets 4,724,773 6,325,118 4,283,326 302,701 15,635,918

Total Liabilities 1,775,893 7,664,403 4,326,006 105,406 13,871,708

31. IMPACT FROM THE IMPLEMENTATION OF IFRS 9

The new accounting standard IFRS 9 replaced IAS 39 from 1 January 2018, imposing fundamental
changes in the way financial instruments are classified and measured. For the application of the
new standard, the Bank has launched an Implementation Program, which was organized around
two main work streams, the classification and measurement work stream and the impairment work
stream. The Committees of the Board of Directors (the Audit Committee and the Risk Management
Committee) have assumed an active role including involvement in the decision making process on
key assumptions and decisions related to the Implementation Program.

On the completion of the Implementation Program, new policies have been developed for the
classification, measurement and impairment of financial instruments that have been approved by
the Committees of the Board of Directors. New methodologies and procedures have also been
implemented to support these new policies.

F-58
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31. IMPACT FROM THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

The following table presents the reconciliation of the transition from IAS 39 to IFRS 9 as of 1
January 2018:

ASSETS 31.12.2017 Reclassi- Remea- 1.1.2018

IAS 39 fication surement IFRS 9

Cash and balances with National

Bank of Romania 2,044,314 2,044,314
Derivative financial assets 1,566 1,566
Due from other banks 914,671 (24) 914,647
Investment secutities
- Available for sale 1,323,342 (1,323,342) -
- Measured at fair value through
other comprehensive income 1,323,342 38 1,323,380
Investments in associates 804 804
Loans and advances to customers 10,938,335 (28,212) 10,910,123
Property and equipment 91,803 91,803
Intangible assets 17,800 17,800
Other assets 36,992 36,992
Assets held for sale 266,291 (2,275) 264,016
Total assets 15,635,918 - (30,473) 15,605,445

LIABILITIES AND EQUITY

Due to banks 3,369,298 3,369,298

Derivatives financial liabilities 1,714 1,714
Due to customers 9,440,296 9,440,296
Other borrowed funds 232,791 232,791
Subordinated debt 723,978 723,978
Provisions 13,627 8,242 21,869
Liabilities for current income tax 24,184 24,184
Deferred tax liabilities 1,346 (1,319) 27
Other liabilities 64,474 64,474
Total liabilities 13,871,708 - 6,923 13,878,631

Share capital 983,145 983,145

Reserves 152,208 (2,874) 149,334
Retained earnings 628,857 2,874 (37,396) 594,335
Shareholders' equity 1,764,210 - (37,396) 1,726,814

Total liabilities and equity 15,635,918 - (30,473) 15,605,445

F-59
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31. IMPACT FROM THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

The existing portfolio on 1 January 2018 has been classified as follows:

• Loans and advances to customers and due from banks were included in business models that
permit the classification of instruments at amortized cost (hold to collect), to the extent that from
the assessment of their contractual terms it is concluded that their contractual cash flows meet
the definition of principal and interest as defined by the new Standard (SPPI test). Upon
transition, no loans to customers failed the SPPI test.

• For securities and in general for fixed income investments, the following business models were
applied:
o business model that aims to hold the financial instruments in order to collect their
contractual cash flows (hold to collect),
o business model, that aims to both collect the contractual cash flows and sell the financial
asset (hold to collect and sell)
o trading portfolio
During the transition to the new standard, all of the securities were classified into the business
model whose objective is achieved both by collecting contractual cash flows and by selling
financial assets and, therefore, to the extent that their cash flows were solely principal and
interest on the principal amount outstanding, were classified in the fair value through other
comprehensive income category. Upon transition, no securities and fixed income investments
failed the SPPI test.

• The Bank has opted to measure at fair value through other comprehensive income, its equity
instruments and long term equity holdings that meet the definition of an equity instruments. The
changes in fair value as well as any gains or losses are recognized directly in equity without
being recycled to profit or loss. Any dividends that will be received are recognized in profit or
loss.
Based on the classification options described above, available for sale securities amounting
RON 1,323,342 as at 31.12.2017, were reclassified to securities measured at fair value through
other comprehensive income. Following these reclassifications, total equity has been positively
affected by RON 38.

• Derivatives have not been affected as they are measured at fair value through profit or loss both
before and after the implementation of IFRS 9.

• The Bank has not opted to designate at initial recognition debt securities as measured at fair
value through profit or loss.
• Financial liabilities are measured at amortized cost; thus they are not affected by the
implementation of IFRS 9 and there was no need to separately measure or present changes in
fair value due to credit risk.

F-60
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31. IMPACT FROM THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

The following tables present the impact on retained earnings and reserves, as a result of the
transition to IFRS 9:

Retained earnings
Balance at 31.12.2017 in accordance with IAS 39 628,857
Reclassification of shares to fair value through other
comprehensive income 2,874
Expected credit loss and remeasurement of financial assets
in accordance with IFRS 9 (38,715)
Deferred tax impact 1,319
Balance at 1.1.2018 in accordance with IFRS 9 594,335

Reserves
Balance at 31.12.2017 in accordance with IAS 39 152,208
Reclassification of shares to fair value through other
comprehensive income (2,874)
Balance as at 1.1.2018 in accordance with IFRS 9 149,334

The following table presents a reconciliation of impairment losses of financial assets between IAS
39 and IFRS 9 as at 31.12.2017 and as at 1.1.2018, respectively:

31 December 2017 Remeasure- 1 January

(IAS 39/IAS 37) ment 2018 (IFRS 9)

Cash and cash balances with central

Banks - - -
Due from Banks - 24 24
Loans and advances to customers 433,847 28,212 462,059
Other assets 533,707 2,276 535,983
Total allowance for amortised cost
measurement 967,554 30,512 998,066

Provisions for off balance sheet

accounts 3,117 8,242 11,359

F-61
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31. IMPACT FROM THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

The following table presents loans and advances to customers measured at amortised cost by
IFRS 9 stage as at 1.1.2018:
Purchased or
originated
credit
impaired
Stage 1 Stage 2 Stage 3 loans (POCI) Total
Mortgage
Carrying amount (before impairment
4,163,976 501,306 226,811 1,152 4,893,245
allowance)
Expected credit losses (1,342) (10,414) (117,638) (478) (129,872)
Net carrying amount 4,162,634 490,892 109,173 674 4,763,373
Consumer
Carrying amount (before impairment
689,540 163,354 162,300 985 1,016,179
allowance)
Expected credit losses (2,458) (7,718) (91,818) (427) (102,421)
Net carrying amount 687,082 155,636 70,482 558 913,758
Credit cards
Carrying amount (before impairment
69,686 13,710 3,248 - 86,644
allowance)
Expected credit losses (1,160) (625) (726) - (2,511)
Net carrying amount 68,526 13,085 2,522 - 84,133
Small Business
Carrying amount (before impairment
2,148 863 85 - 3,096
allowance)
Expected credit losses (25) (3) (25) - (53)
Net carrying amount 2,123 860 60 - 3,043
Total retail loans
Carrying amount (before impairment
4,925,350 679,233 392,444 2,137 5,999,164
allowance)
Expected credit losses (4,985) (18,760) (210,207) (905) (234,857)
Net carrying amount 4,920,365 660,473 182,237 1,232 5,764,307
Corporate lending and Public
sector
Carrying amount (before impairment
3,501,327 1,583,812 287,879 - 5,373,018
allowance)
Expected credit losses (14,774) (66,726) (145,702) - (227,202)
Net carrying amount 3,486,553 1,517,086 142,177 - 5,145,816
Total loans and advances to
customers
Carrying amount (before impairment
8,426,677 2,263,045 680,323 2,137 11,372,182
allowance)
Expected credit losses (19,759) (85,486) (355,909) (905) (462,059)
Net carrying amount 8,406,918 2,177,559 324,414 1,232 10,910,123

“Purchased or originated credit impaired loans” include loans amounting to RON 0.56 million which are not
impaired/non performing as at 1.1.2018.

F-62
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31. IMPACT FROM THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

The following table presents Financial Assets (other than loans and advances to customers) by
IFRS 9 stage as at 1.1.2018:

Loans
impaired at
initial
Stage 1 Stage 2 Stage 3 recognition Total
Balances with Central Banks 1,791,280 - - - 1,791,280
Due from banks 730,701 183,970 - - 914,671
Securities measured at fair
value through other
comprehensive income 1,311,545 - - - 1,311,545
Expected Credit Losses (16) (8) - (24)

However, the Bank is continuing to assess, test and refine the new accounting processes, internal
controls and governance framework necessitated by the adoption of IFRS 9. The new accounting
policies, assumptions, judgments and estimations remain subject to change until the Bank finalizes
its audited financial statements as at 31.12.2018.

Supervisory impact of the implementation of IFRS 9

On 25 October 2017 the European Parliament, the Council and the Commission agreed on the
proposed amendment of the Regulation (EU) No 575/2013 as regards transitional arrangements
for mitigating the impact of the introduction of IFRS 9 on own funds. The agreed Regulation
(2395/2017) was approved by the European Parliament and the Council and published in the
Official Journal of the European Union on 12 December 2017.

According to the transitional arrangements, institutions are allowed, beginning from the date of
initial application of IFRS 9 and for a duration of 5 years, to add back to their CET1 capital the after
tax amount of the difference between the loss allowances as of the date of transition to IFRS 9 and
the loss allowances as of 31.12.2017 in accordance with IAS 39 (“static” amount).

The amount of the difference that would be added to the ratio should decrease on an annual basis
based on scaling factors, in order for the amount of loss allowances to decrease over time down to
zero to deliver full implementation of the IFRS 9 impact after the end of the 5-year period (phase-
in). The factors to be applied per year are the following:

• 0.95 the 1st year,

• 0.85 the 2nd,
• 0.7 the 3rd,
• 0.5 the 4th and
• 0.25 the last year.

In addition, the institutions are allowed, for a duration of 5 years beginning from the date of initial
application of IFRS 9, to add back to the CET1 capital the amount, weighted by the
aforementioned scaling factors, of the after tax loss allowances of impairment stages 1 and 2 as of
the reporting date to the extent that this amount exceeds the amount of the respective allowances
as of the initial application of IFRS 9 (1.1.2018). Stages 1 and 2 are defined respectively as the 12
month expected credit losses and lifetime expected credit losses excluding credit impaired financial
assets.

F-63
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31. IMPACT FROM THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

Alpha Bank Romania makes use of Article 473a of the above Regulation and applies the transitional
arrangements foreseen for the calculation of Capital Adequacy on an individual basis. The Bank is
adequately capitalized to meet the needs arising from the application of the new standard as the
Common Equity Tier 1 (CET 1) ratio stood at 20.81% as at 30.06.2018 (please refer to note 27).

32. CREDIT RISK DISCLOSURE OF FINANCIAL INSTRUMENTS

This disclosure presents information regarding credit risk for the categories of financial instruments for
which expected credit losses are recognized, in accordance with IFRS 9.
It is particularly presented the classification of financial instruments and a reconciliation of impairment
losses per stage as at 30.06.2018.

a. Due from Banks

30.06.2018
Purchased or
originated
credit impaired
Stage 1 Stage 2 Stage 3 assets (POCI) Total

Due from banks

Book value before impairment 791,004 156,118 - - 947,122
Expected credit losses (205) (35) - - (240)
Net book value 790,799 156,083 - - 946,882

Accumulated allowance for impairment losses

Purchased or
originated
credit impaired
Stage 1 Stage 2 Stage 3 assets (POCI) Total
Opening balance 1.1.2018 16 8 - - 24
Changes for the period 1.1. -
30.06.2018
Reassessment of expected
credit losses 72 25 - - 97
Impairment on initial recognition 759 192 - - 951
Foreign exchange differences
and other movements (642) (190) - - (832)
Balance 30.06.2018 205 35 - - 240

F-64
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

32. CREDIT RISK DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)

b. Loans to customers measured at amortized cost

The following table presents loans measured at amortized cost per IFRS 9 stage, as at 30.06.2018:

30.06.2018
Purchased
or originated
credit
impaired
Stage 1 Stage 2 Stage 3 loans (POCI) Total
Mortgage
Book value before impairment 4,159,890 632,282 219,248 1,397 5,012,817
Expected credit losses (1,469) (11,262) (111,988) (538) (125,257)
Net book value 4,158,421 621,020 107,260 859 4,887,560
Consumer
Book value before impairment 693,035 190,469 165,512 1,191 1,050,207
Expected credit losses (3,403) (12,387) (97,320) (434) (113,544)
Net book value 689,632 178,082 68,192 757 936,663
Credit cards
Book value before impairment 69,326 16,013 4,139 - 89,478
Expected credit losses (276) (1,180) (2,439) - (3,895)
Net book value 69,050 14,833 1,700 - 85,583
Small Business
Book value before impairment 2,323 813 89 - 3,225
Expected credit losses (23) (11) (26) - (60)
Net book value 2,300 802 63 - 3,165
Total retail loans
Book value before impairment 4,924,574 839,577 388,988 2,588 6,155,727
Expected credit losses (5,171) (24,840) (211,773) (972) (242,756)
Net book value 4,919,403 814,737 177,215 1,616 5,912,971
Corporate and public sector
Book value before impairment 3,699,289 1,362,526 283,024 - 5,344,839
Expected credit losses (17,132) (69,701) (135,940) - (222,773)
Net book value 3,682,157 1,292,825 147,084 - 5,122,066
Loans and advances to
customers
Book value before impairment 8,623,863 2,202,103 672,012 2,588 11,500,566
Expected credit losses (22,303) (94,541) (347,713) (972) (465,529)
Net book value 8,601,560 2,107,562 324,299 1,616 11,035,037

"Purchased or originated credit impaired loans" include loans amounting to RON 1.97 million, which as
at 30.06.2018 are not impaired/non performing.

F-65
 ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

32. CREDIT RISK DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)

The following table presents the movement of accumulated allowance for impairment losses:
Retail Corporate and public sector Total

Purchased Purchased Purchased

or or or
originated originated originated
credit credit credit
impaired impaired impaired
loans loans loans
Stage 1 Stage 2 Stage 3 (POCI) Total Stage 1 Stage 2 Stage 3 (POCI Total Stage 1 Stage 2 Stage 3 (POCI) Total
Balance 1.1.2018 3,785 18,760 211,344 905 234,794 14,902 66,729 145,635 - 227,266 18,687 85,489 356,979 905 462,060
Transfer to stage 1 (from
2 or 3) 2,542 (2,431) (111) - - 10,463 (10,463) - - - 13,005 (12,894) (111) - -
Transfer to stage 2 (from
1 or 3) (402) 5,432 (5,030) - - (380) 380 - - - (782) 5,812 (5,030) - -
Transfer to stage 3 (from
1 or 2) (61) (2,467) 2,528 - - (2) (2,328) 2,330 - - (63) (4,795) 4,858 - -
Net remeasurement of
loss allowance (a) (2,393) 745 3,801 - 2,153 (14,006) (6,519) (5,523) - (26,048) (16,399) (5,774) (1,722) - (23,895)
Impairment losses on
new assets (b) 5,946 - - - 5,946 13,044 - - - 13,044 18,990 - - - 18,990
Changes in models/risk
parameters (c ) 716 1,446 (3,048) 36 (850) 129 13,050 497 - 13,676 845 14,496 (2,551) 36 12,826
Impairment losses on
loans (a+b+c) 4,269 2,191 753 36 7,249 (833) 6,531 (5,026) - 672 3,436 8,722 (4,273) 36 7,921
Derecognition of loans - (8) (766) - (774) - - (12) - (12) - (8) (778) - (786)
Write-offs - - (114) - (114) - - (22,594) - (22,594) - - (22,708) - (22,708)
Foreign exchange
differences and other
movements (4,962) 3,363 2,829 (54) 1,176 (7,018) 8,852 11,168 - 13,002 (11,980) 12,215 13,997 (54) 14,178
Change in the present
value of the allowance
account - - 340 85 425 - - 4,439 - 4,439 - - 4,779 85 4,864
Balance 30.06.2018 5,171 24,840 211,773 972 242,756 17,132 69,701 135,940 - 222,773 22,303 94,541 347,713 972 465,529

F-66
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

32. CREDIT RISK DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)

The Bank has recognized expected credit losses for the undrawn credit facilities and letters of
credit and letters of guarantee, the movement of which is presented in the following table:
Purchased or
originated
credit
impaired
Stage 1 Stage 2 Stage 3 loans (POCI) Total
Balance 1.1.2018 1,944 6,451 2,963 - 11,358
Transfer to stage 1 (from 2 or 3) 2,502 (2,502) - - -
Transfer to stage 2 (from 1 or 3) (106) 117 (11) - -
Transfer to stage 3 (from 1 or 2) (29) (2) 31 - -
Net remeasurement of expected
credit losses (a) - - - - -
Impairment losses on new off
balance sheet items (b) 1,101 - - - 1,101
Changes in models/risk parameters
(c ) (319) (1,134) (779) - (2,232)
Impairment losses on off balance
sheet items (a+b+c) 782 (1,134) (779) - (1,131)
Foreign exchange differences and
other movements (751) 725 35 - 9
Balance 30.06.2018 4,342 3,655 2,239 - 10,236

c. Investment securities measured at fair value through other comprehensive income

The following table presents the classification of investment securities per stage as at 30.06.2018
and the reconciliation of accumulated impairment per stage for the first half of 2018:

Purchased
or
originated
credit
impaired
securities
Stage 1 Stage 2 Stage 3 (POCI) Total
Other Government bonds
Expected credit losses (192) - - - (192)
Fair value 1,060,804 - - - 1,060,804
Other securities
Expected credit losses - - - - -
Fair value 12,962 - - - 12,962
Total of investment securities measured
at fair value through other
comprehensive income
Expected credit losses (192) - - - (192)
Fair value 1,073,766 - - - 1,073,766

F-67
ALPHA BANK ROMANIA SA
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2018
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

32. CREDIT RISK DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)

Allowance for impairment losses on securities

Purchased or
originated
credit
impaired
securities
Stage 1 Stage 2 Stage 3 (POCI) Total
Changes for the period 1.1. -
30.06.2018
Balance 1.1.2018 - - - - -
Net remeasurement of loss
allowance (a) 213 - - - 213
New securities originated or
purchased (b) 58 - - - 58
Impairment losses on
investment securities measured
at fair value through other
comprehensive income (a+b) 271 - - - 271
Derecognition of financial assets - - - - -
Foreign exchange differences and
other movements (79) - - - (79)
Balance 30.06.2018 192 - - - 192

33. SUBSEQUENT EVENTS

There have been no events subsequent to balance sheet date that would materially affect the
financial statements.

F-68
 ALPHA BANK ROMANIA S.A.

FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017

PREPARED IN ACCORDANCE WITH

INTERNATIONAL FINANCIAL REPORTING STANDARDS
AS ENDORSED BY THE EUROPEAN UNION

F-69
CONTENTS PAGE

INDEPENDENT AUDITORS REPORT F-71 – F-76

INCOME STATEMENT F-77

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME F-78

STATEMENT OF FINANCIAL POSITION F-79

STATEMENT OF CHANGES IN EQUITY F-80

STATEMENT OF CASH FLOWS F-81 – F-82

NOTES TO THE FINANCIAL STATEMENTS F-83 – F-203

ADMINISTRATOR’S REPORT 1 – 34

ANEXA 1–7

F-70
 INDEPENDENT AUDITOR’S REPORT

To the Shareholders,
Alpha Bank Romania S.A.
Bucharest, Romania

Report on the Audit of the financial statements

Opinion

1. We have audited the financial statements of Alpha Bank Romania S.A. (the “Bank”), with registered
office in 237B, C alea Dorobantilor, District 1, Bucharest, Romania, identified by the unique tax
registration code RO5062063, which comprise the statement of financial position as at December
31, 2017, and the income statement and statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year then ended, including a summary of
significant accounting policies and notes to the financial statements.

2. The financial statements as at December 31, 2017 are identified as follows:

 Equity 1,764,210 KRON

 Net profit for the financial year 214,734 KRON

3. In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Bank as at December 31, 2017, and its financial performance and its cash
flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and National Bank of Romania Order no. 27/2010 for the
approval of Accounting regulation in accordance with International Financial Reporting Standards as
adopted by the European Union, with subsequent amendments, (“Order 27/2010”).

Basis for Opinion

4. We conducted our audit in accordance with International Standards on Auditing (ISAs), Regulation
(EU) No. 537/2014 of the European Parliament and the C ouncil (forth named The “Regulation”) and
Law 162/2017 (“the Law”). 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 are
independent of the Bank in accordance with the International Ethics Standards Board for
Accountants’ C ode of Ethics for Professional Accountants (IESBA C ode), in accordance with ethical
requirements relevant for the audit of the financial statements in Romania including the Regu lation
and the Law, and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA C ode. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.

Key Audit Matters

5. Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.

F-71
Impairment of loans and advances
to customers
Nature of the area of focus How our audit addressed the key audit matter
As described in note 16 from financial We have reviewed of the provisioning methodology applied
statements the Bank has booked as at by the Bank and assessed its consistency with requirements
31 December 2017 Impairment of IFRS and National Bank of Romania.
allowances of 434 mil RON for the Loan
and advances to customers in gross Testing of internal controls
amount of 11,372 mil RON.
We have challenged the appropriateness of key processes
Impairment allowances represent and related controls management has established to support
management's estimate of the losses their collective and specific impairment calculations,
incurred within the loan portfolio at the including:
balance sheet date built on assumptions
and professional judgements with  controls for quality assurance of the source data
significant impact in the financial used in developing professional judgements;
position of the Bank.  controls related to timely identification of
impairment triggers;
As detailed in the Significant Accounting  controls related to debtors estimation of future
Policies section of the financial cash flows.
statements, the impairment allowances
are calculated on a collective basis for For the controls identified to be relevant in addressing the
portfolios of loans of a similar nature risks, we have tested the design and operating effectiveness
and on an individual basis for significant of these controls.
loans or loans with impairment triggers.
Collective impairment
Collective impairment allowances are
calculated based on risk parameters like In case of collective allowances, we were assessing for
probability of default (PD) and loss selected internal models, the model methodology and the
given default (LGD) which are derived internal validation reports.
from internal models and historical data
of the Bank. We have also reviewed the quality of the historical data
used in the computation of the risk parameters and
For specific impairment, professional recomputed the collective provision based on the risk
judgement is required first to timely parameters resulted from the models and loan portfolio at
determine when an impairment event the balance sheet date.
has occurred and then to estimate the
expected future cash flows to repay the The appropriateness of management’s estimates was also
loan exposure at default. Valuation of independently considered in respect of calculation
collateral is often used to determine methodologies and economic factors used by the Bank for
expected future cash flows that support valuation of collaterals, hair-cut factors for expected
recoverable amounts. Such recoveries recoveries.
from collaterals require assumptions
and data that with high degree of Identification of impaired loans
professional judgement.
For a sample of loans selected from the loan portfolio, we
Because of the significance of these have performed procedures to identify whether loss events
professional judgements and the size of exist and have been captured on a timely basis. In
loans and advances to customers, the reviewing the sample, we understood the latest
audit of impairment of loans and developments at the borrower and considered whether key
advances to customers is a key area of professional judgments were appropriate given the
focus. borrowers’ circumstances. We have independently searched
for any indicators of potential financial difficulty, such as ,
breach of covenants and defaults on timely payments.

Specific impairment

For a sample of loans selected from the non-performing

portfolio we have challenged the management expected
recoveries and developed our own expectations of a range
of reasonable outcomes for the impairment loss allowance
based on the detailed loan and counterparty information.

F-72
Interest and Fee Income
Recognition
Refer to Note 7 and 8 of the financial We have tested the design and operating effectiveness of
statements the key internal controls and focused on:

For the year ended 31 December 2017  Interest/fee inputs on customer loans and
the interest income represents RON 494 deposits;
mil RON and fee and commission income  Recording/ changes of fees and interest rates;
represents 95 mil RON, the main source  Management oversight and control on interest and
being loans to customers. These are the fee income, including budget monitoring;
main contributors to the operating  IT controls relating to access rights and change
income of the Bank affecting the Bank’s management of relevant automated controls with
profitability. the assistance of our IT specialists.

While interest income is accrued over We performed also the following procedures with regard to
the expected life of the financial interest and fees revenue recognition:
instrument using the effective interest
rate, the recognition of fee income - We evaluated the accounting treatment performed by the
depends on the nature of the fees as Bank in respect of fees charged to clients to determine
follows: whether the methodology complies with the requirement of
the relevant accounting standard (IAS 39). We have
 Fees that are directly focused our testing on challenging the correct classification
attributable to the financial of:
instrument are part of the • Fees that are identified as directly attributable
effective interest rate and to the financial instrument and are part of the
accrued over the expected life effective interest rate;
of such an instrument and are
presented as interest income. • Fees that are not identified as directly
attributable to the financial instrument.
 Fees for services provided are
recognized when service is - We assessed the completeness and accuracy of data used
provided and are presented as for the calculation of interest and fee income.
fee and commission income.
- We evaluated the mathematical formula used for accruing
 Fees for the execution of an act the relevant income over expected life of the loan.
are recognized when the act
has been completed and are - We have assessed the interest and fee income by building
presented as fee and our own expectation on the revenue and compared with the
commission income. actual results of the Bank.

Revenue recognition specifics, a high

volume of individually small transactions
which depends on data quality of
interest and fee inputs and on IT
solutions for their recording, resulted in
this matter being identified as a key
audit matter.

F-73
Other information

6. The C ompany’s financial statements for the year ended December 31, 2016 were audited by
another auditor, which expressed an unmodified opinion on the financial statements on April 7,
2017.

Administrator’s Report

7. Management is responsible for preparation and presentation of the other information. The other
information comprises the Administrator’s report which includes the non-financial information
declaration, but does not include the financial statements and our auditors report thereon.

Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.

In connection with our audit of the financial statements for the year ended 31 December 2017, our
responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.

With respect to the Administrator’s report, we read and report if this has been prepared, in all
material respects, in accordance with the provisions of the National Bank of Romania Order no.
27/2010, articles 11-13.

On the sole basis of the procedures performed within the audit of the financial statements, in our
opinion:

a) The information included in the administrators’ report for the financial year for which the
financial statements have been prepared are consistent, in all material respects, with these
financial statements;

b) The administrators’ report has been prepared, in all material respects, in accordance with the
provisions of the National Bank of Romania Order no. 27/2010, ar ticles 11-13.

Based on our knowledge and understanding concerning the Bank and its environment gained during
the audit on the financial statements prepared as at 31 December 2017, we are required to report if
we have identified a material misstatement of this Administrator’s report. We have nothing to report
in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial
Statements

8. Management is responsible for the preparation and fair presentation of the financial statements in
accordance with 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.

9. 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 li quidate the Bank or to
cease operations, or has no realistic alternative but to do so.

10. Those charged with governance are responsible for overseeing the Bank’s financial reporting
process.

F-74
Auditor’s Responsibilities for the Audit of the Financial Statements

11. 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 mater ial 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.

12. As part of an audit in accordance with ISAs, we exercise professional judgment and m aintain
professional skepticism 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 perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omis sions, misrepresentations, or the
override of internal 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.

 C onclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty 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 underlying transactions and
events in a manner that achieves fair presentation.

13. 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
internal control that we identify during our audit.

14. We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.

15. From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our aud itor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.

F-75
Report on Other Legal and Regulatory Requirements

16. We have been appointed by the General Assembly of Shareholders on 08.05.2017 to audit the
financial statements of Alpha Bank Romania S.A. for the financial year ended December 31, 2017.
The uninterrupted total duration of our commitment is 1 year, covering the financial year ended 31
December 2017.

We confirm that:

 Our audit opinion is consistent with the additional report submitted to the Audit C ommittee of the
Bank that we issued the same date. Also, in conducting our audit, we have retained our
independence from the audited entity.

 We have not provided for the Bank the non-audit services referred to in Article 5 (1) of EU
Regulation No.537 / 2014.

The engagement partner on the audit resulting in this independent auditor’s report is Petr Pruner.

Petr Pruner, Audit Partner

For signature, please refer to the

original Romanian version.

Registered with the Romanian Chamber of Financial Auditors

under no. 4147/11.01.2012

On behalf of:

DELOITTE AUDIT S.R.L.

Registered with the Romanian Chamber of Financial Auditors

under no. 25/25.06.2001

4-8 Nicolae Titulescu Road, East Entrance, 2nd Floor –

Deloitte area and 3rd Floor, Sector 1, 011141, Bucharest, Romania
Bucharest, Romania
April 30, 2018

F-76
ALPHA BANK ROMANIA SA
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”)

Year ended Year ended

31 December 31 December
Note 2017 2016*
RON’000 RON’000

Interest and similar income 7 493,736 484,639

Interest expense 7 (87,676) (88,760)

Net interest income 406,060 395,879

Fee and commission income 8 94,775 91,826

Fee and commission expense 8 (17,791) (15,372)

Net fee and commission income 76,984 76,454

Dividend income 886 3,035

Gains less losses on financial transactions 9 104,869 94,884

Other operating income 8,315 7,320

Net operating income 597,114 577,572

Net impairment gain/(loss) on financial assets 10 41,390 (85,829)

Staff costs 11 (160,534) (149,732)
Depreciation and amortization 17 (17,090) (15,773)
Other operating expenses 12 (204,321) (204,350)

Operating expenses (340,555) (455,684)

Share from loss of associates (150) (216)

Profit before tax 256,409 121,672

Income tax expense 26 (41,675) (7,294)

Net profit for period 214,734 114,378

*See note 2f)

The financial statements were authorized for issue by the Board of Directors on 18 April 2018 and
were signed on its behalf by:

The accompanying notes form an integral part of these financial statements.

F-77
ALPHA BANK ROMANIA SA
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”)

Year ended Year ended

31 December 31 December
2017 2016*
RON’000 RON’000

Net profit for the period 214,734 114,378

Other comprehensive income:

Items that may be reclassified to profit or loss

Fair value reserve (available-for-sale financial assets):
Net change in fair value 4,402 (6,812)
Net amount transferred to profit or loss (6,096) (602)
Income tax 271 1,186

Other comprehensive income, net of tax (1,423) (6,228)

Total comprehensive income 213,311 108,150

*See note 2f)

The financial statements were authorized for issue by the Board of Directors on 18 April 2018 and
were signed on its behalf by:

The accompanying notes form an integral part of these financial statements.

F-78
ALPHA BANK ROMANIA SA
STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31 December 31 December
Note 2017 2016*
RON’000 RON’000

ASSETS
Cash and balances with National
Bank of Romania 13 2,044,314 2,445,616
Derivative financial assets 18 1,566 3,106
Due from other banks 14 914,671 537,495
Available-for-sale securities 15 1,323,342 1,252,556
Investments in associates 15 804 966
Loans and advances to customers 16 10,938,335 10,335,770
Property and equipment 17 91,803 96,552
Intangible assets 17 17,800 7,336
Other assets 19 36,992 41,814
Assets held for sale 19 266,291 11,033

TOTAL ASSETS 15,635,918 14,732,244

LIABILITIES AND EQUITY

Due to banks 20 3,369,298 4,472,042
Derivative financial liabilities 18 1,714 4,248
Due to customers 21 9,440,296 7,918,486
Other borrowed funds 22 232,791 6,076
Subordinated debt 23 723,978 705,540
Provisions 24 13,627 18,638
Deferred tax liabilities 26 1,346 708
Other liabilities 25 88,658 55,597

Total liabilities 13,871,708 13,181,335

Share capital 27 983,145 983,145

Reserve on available for sale financial assets (2,356) (933)
Other reserves 154,564 141,736
Retained earnings 628,857 426,961

Total equity 1,764,210 1,550,909

TOTAL LIABILITIES AND EQUITY 15,635,918 14,732,244

*See note 2f)

The accompanying notes form an integral part of these financial statements.

F-79
ALPHA BANK ROMANIA SA
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Reserves on
available for sale
Share Capital financial assets Other reserves Retained Earnings Total
Balance as at 01 January 2016 983,145 5,295 135,642 318,677 1,442,759

Changes for the period 1.1.-31.12.2016*

Net profit for the period - - - 114,378 114,378
Other comprehensive income, net of income tax
Net change in available-for-sale financial assets, net of tax - (6,228) - - (6,228)
Appropriation of legal reserves - - 6,094 (6,094) -

Total other comprehensive income - (6,228) 6,094 (6,094) (6,228)

Total comprehensive income for the period - (6,228) 6,094 108,284 108,150

Balance as at 31 December 2016 983,145 (933) 141,736 426,961 1,550,909

Balance as at 01 January 2017 983,145 (933) 141,736 426,961 1,550,909
Changes for the period 1.1.-31.12.2017
Net profit for the period - - - 214,734 214,734
Other comprehensive income, net of income tax
Net change in available-for-sale financial assets, net of tax - (1,423) - - (1,423)
Appropriation of legal reserves - - 12,828 (12,828) -
Total other comprehensive income - (1,423) 12,828 (12,828) (1,423)
Total comprehensive income for the period - (1,423) 12,828 201,906 213,311

Other - - - (10) (10)

Balance as at 31 December 2017 983,145 (2,356) 154,564 628,857 1,764,210

The accompanying notes form an integral part of these financial statements.

F-80
ALPHA BANK ROMANIA SA
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Year ended Year ended

31 December 31 December
Note 2017 2016*
Cash flow from operating activities
Profit before taxation 256,409 121,672
Adjustments:
Net impairment loss/gain on financial assets 10 (32,116) 91,504
Dividend and similar income (886) (3,035)
Depreciation and amortization 17 17,090 15,773
Fixed assets written-off and impairment 17 952 1,964
(Gain) from transactions of equity investments 15 - (5,327)
(Gain) from sales of tangible assets - (127)
(Gain) from sales of assets recovered from
customers (172) (23)
Share of loss in associates 150 216
Other adjustments 49,014 6,110
Operating profit before changes in operating
assets and liabilities 290,441 228,727

Changes in operating assets:

Decrease/(increase) in amounts due from other
banks (237,393) 1,078
Decrease/(increase) in loans and advances to
customers** (858,293) (22,546)
Decrease/(increase) in other assets 6,689 (1,664)
Total changes in operating assets (1,088,997) (23,132)

Changes in operating liabilities

(Decrease)/increase in amounts due to banks (1,102,708) (2,026,500)
(Decrease)/increase in amounts due to customers 1,518,159 1,621,318
(Decrease)/increase in other liabilities (12,715) 13,782
Total changes in operating liabilities 402,736 (391,400)

Net cash from operations (395,820) (185,805)

Income tax paid - (8,565)

Net cash flows from operating activities (395,820) (194,370)

Cash flow from investing activities

Purchase of property and equipment and
intangibles 17 (23,757) (11,393)
Proceeds from sale of property and equipment 17 - 127
Proceeds from sale/maturities of AFS securities 1,887,302 2,011,635
Purchase of AFS securities (1,959,296) (2,012,686)
Proceeds from sale of equity investments - 52,707
Purchase of equity investments - (1,125)
Dividends received 886 3,035
Net cash flows from investing activities (94,865) 42,300

The accompanying notes form an integral part of these financial statements.

F-81
ALPHA BANK ROMANIA SA
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Year ended Year ended

31 December 31 December
Note 2017 2016*

Cash flow from financing activities

Finance lease repayments (150) (151)

Other borrowed funds 22 228,378 (1,353)
Subordinated loan 23 - 15

Net cash flows from financing activities 228,228 (1,489)

Net increase / (decrease) in cash and cash

equivalents (262,457) (153,559)

Cash and cash equivalents at 1 January 32 2,966,971 3,120,530

Cash and cash equivalents at 31 December 32 2,704,514 2,966,971

Interest received 523,334 489,579

Interest paid 85,718 87,486

*See note 2f)

** Including the loan portfolio reclassified as Assets Held for Sale (see note 4.b.iii)

The accompanying notes form an integral part of these financial statements.

F-82
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

1. REPORTING ENTITY

Alpha Bank Romania SA (the "Bank") was incorporated in Romania in 1994 and is licensed by the
National Bank of Romania to conduct banking activities. The Bank is principally engaged in
wholesale and retail banking operations in Romania. Currently, the Bank operates through its head
office located in Bucharest and 130 branches (31 December 2016: 130). As of 31 December 2017,
36 were located in Bucharest (31 December 2016: 36) and 94 in other cities in Romania (31
December 2016: 94).

The registered office of the Bank is:

Alpha Bank Romania SA

Calea Dorobantilor no. 237B, District 1
Bucharest
Romania

As of 31 December 2017, the members of Board of Directors were as follows:

 Mr. Christos Giampanas, Chairman

 Mr. Sergiu Bogdan Oprescu, Member and Executive President
 Mr. Evangelos Kalamakis, Member
 Mr. Nikolaos Zagorisios, Member
 Mr. Lazaros Papagaryfallou, Member
 Mr. Georgios Michalopoulos, Member
 Mr. Stelios Louisides, Member
 Mrs. Irene Rouvitha Panou, Independent Member
 Mr. Radu Gheorghe Deac, Independent Member

The Bank serves a broad client base that includes corporations and individuals and offers banking
services to local and international entities which include but are not limited to wholesale and retail
banking operation, issuing of cards under the VISA and MasterCard network, mortgage and
consumer loans, money transfers, trade finance.

The number of employees as at 31 December 2017 was 1,973 (31 December 2016: 1,895).

Alpha Bank AE, the parent company of the Bank, based in Greece, 40 Stadiou Street 102 52
Athens, prepares a set of consolidated financial statements in accordance with International
Financial Reporting Standards as endorsed by the European Union for the year ended 31
December 2017, available on the following web site: www.alpha.gr.

As at 31 December 2017 and 31 December 2016, the Bank had no subsidiaries.

F-83
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

2. BASIS OF PRESENTATION

a) Statement of compliance

These financial statements relate to the financial year ended 31 December 2017 and they have
been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed
by the European Union and sanctioned by the Order no. 27/2010 issued by National Bank of
Romania.
The accounts of the Bank are maintained in RON.

b) Basis of measurement

The financial statements of the Bank have been prepared on the historical cost basis except for the
available for sale debt instruments and derivative financial instruments which were measured at
fair value. Available for sale equity instruments are measured at cost where fair value cannot be
reliably measured. The Bank applied the going concern principle for the preparation of the financial
statements as at 31.12.2017.

c) Functional and presentation currency

The Bank’s management considers that the functional currency, as defined by IAS 21 “The Effects
of Changes in Foreign Exchange Rates” is RON. The financial statements are presented in
Romanian Lei (“RON”), rounded to the nearest thousand, unless otherwise indicated.

d) Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of policies and reported amounts
of assets and liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised. In particular, information
about significant areas of estimation uncertainty and critical judgments’ in applying accounting
policies that have the most significant effect on the amount recognized in the financial statements
are described in Notes 4 and 6.

e) Changes in accounting policies

All changes in accounting policies represent the effect of changes in relevant International
Financial Reporting Standards as endorsed by the European Union.

f) Consolidated entities: Associates

In 2016 the Bank increased its participation in Alpha Finance Romania S.A up to the level of
26.68% share from capital, as can be seen in note 15.

Giving the exemption criteria prescribed in IAS 28 “Investments in Associates and Joint Ventures”
and the provisions of IAS 27 “Separate financial statements”, the Bank prepared separate financial
statements for year ending 31 December 2016, in which investments in associates were carried at
cost.

F-84
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

2. BASIS OF PRESENTATION (CONTINUED)

As of 31 December 2017, the Bank accounted the investment using the equity method. The Bank
decided to begin applying the equity method since it has the intention to issue publicly traded
instruments and, following that issuance, the IAS 28 exemption no longer apply. Under the equity
method the investment is initially recognised at cost and adjusted thereafter for the post acquisition
change in the Bank’s share of net assets of the associate. In case the losses according to the
equity method exceed the investment in ordinary shares, they are recognized as a reduction of
other elements that are essentially an extension of the investment in the associate.

The Bank’s share of the associate’s profit or loss and other comprehensive income is separately
recognized in the income statement and in the statement of comprehensive income, accordingly. In
respect of comparative information for the period ended 31 December 2016, the following items
from statement of financial position and income statement as of 31 December 2016 have been
reclassified and adjusted:

Amount
previously
reported - Restated
Separate amount –
Financial Financial
Statements Statements
Year ended Year ended
31-Dec-16 Reclassification Adjustment 31-Dec-16

Available-for-sale
securities 1,253,738 (1,182) - 1,252,556
Investments in associates - 1,182 (216) 966
Deferred tax liabilities 743 - (35) 708
Retained earnings 427,142 - (181) 426,961
Share from loss of
associates - - (216) (216)
Income tax expense (7,329) - 35 (7,294)

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in
these financial statements, and have been applied consistently by the Bank.

a) Transactions in foreign currency

Transactions in foreign currencies are translated into the functional currency of the Bank at
exchange rates at the dates of the transaction. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are retranslated into the functional currency at the
exchange rate at that date. Foreign exchange differences arising on translation are recognized in
the income statement, except when deferred in equity as qualifying cash flow hedges and
qualifying net investments hedges. Non-monetary assets and liabilities that are measured in terms
of historical cost in a foreign currency are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign currencies that are
measured at fair value are translated to the functional currency at exchange rates at the dates the
fair value was determined. Foreign currency differences arising on retranslation are recognized in
profit or loss, except for differences arising on the retranslation of non-monetary available-for-sale
financial assets which are included in the fair value reserve in equity.

F-85
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The exchange rates of major foreign currencies were:

Currencies 31 December 2017 31 December 2016 % Increase/(Decrease)

Euro (EUR) 1: RON 4.6597 1: RON 4.5411 2.6%

US Dollar (USD) 1: RON 3.8915 1: RON 4.3033 -9.6%

b) Segment reporting

An operating segment is a component of the Bank that engages in business activities from which it
may earn revenues and incur expenses, including revenues and expenses that relate to
transactions with any of the Bank’s other components.

Operating segments are determined and measured based on the information provided to the
Executive Committee of the Bank, which is the body responsible for the allocation of resources
between the Bank’s operating segments and the assessment of their performance.

Based on the above, as well as the Bank’s administrative structure and activities, the following
operating segments have been determined:

• Retail Banking
• Wholesale Banking
• Treasury
• Other

It is noted that the methods used to measure operating segments for the purpose of reporting to
the Executive Committee are not different from those required by the International Financial
Reporting Standards.

c) Interest income and expense

Interest income and expense are recognized in the income statement for all interest bearing
instruments on an accrual basis using the effective interest method. The effective interest method
is a method of calculating the amortized cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the relevant period. 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 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.

Interest income on impaired loans is recognized based on the carrying value of the loan net of
impairment, at the original effective interest rate.

Loan origination fees, such as evaluating the borrowers’ financial condition, collateral and other
security arrangements, and related direct incremental expenses are deferred and subsequently
recognized in income as an adjustment to the effective yield.

F-86
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

d) Fees and commission

Fees and commissions income and expenses that are integral to the effective interest rate as a
financial asset or liability are included in the measurement of the effective interest rate.

Other fee and commission income arising on the financial services provided by the Bank including
cash management services, brokerage services, investment advice, financial planning, are
recognized in the separate income statement as the related service is provided.

Other fees and commission expenses relate mainly to transaction and service fees, which are
expensed as the services are received.

e) Gain less losses on financial transactions

Net income from other financial instruments comprises gains and losses related to financial assets
and liabilities and it includes all realized and unrealized fair value changes, gain and losses from
the sale of loans, disposal of securities and foreign exchange differences.

Differences that may arise between the carrying amount of financial liabilities settled or transferred
and the consideration paid are also recognised in gains less losses on financial transactions.

f) Dividends

Dividend income is recognized in the income statement when the right to receive income is
established.

g) Lease payments

The Bank as a lessee

Assets held by the Bank under leases that transfer to the Bank substantially all of the risks and
rewards of ownership are classified as finance leases. The leased asset is recognised as property,
plant and equipment and the related liability is recognised in “Other Liabilities”. The leased asset
and the liability are initially measured at an amount equal to the lower of its fair value and the
present value of the minimum lease payments. Subsequent to initial recognition, the leased assets
are depreciated over their useful lives unless the duration of the lease is less than the useful life of
the leased asset and the Bank is not expected to obtain ownership at the end of the lease, in which
case the asset is depreciated over the term of the lease. The lease payments are apportioned
between the finance charge and the reduction of the outstanding liability.

Assets held under other leases are classified as operating leases and are not recognized in the
Bank’s statement of financial position. Payments made under operating leases are recognized in
profit or loss on a straight-line basis over the term of the lease. Lease incentives received are
recognized as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the interest
expense and the reduction of the outstanding liability. The interest expense is allocated to each
period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability. Contingent lease payments are accounted for by revising the minimum
lease payments over the remaining term of the lease when the lease adjustment is confirmed.

F-87
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

g) Lease payments (continued)

The Bank as a lessor

The bank acts as a lessor only for assets under operating leases. The leased asset is recognized
and depreciation is charged over its estimated useful life. Income arising from the leased asset is
recognized as other income on an accrual basis.

h) Income tax expense

Income tax for the period comprises current and deferred tax. Income tax is recognized in the
income statement except to the extent that it relates to items recognized directly to equity, in which
case it is recognized in equity.

Current tax is the expected tax payable or receivable on the taxable income for the year, using tax
rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax
payable in respect of prior periods.

Deferred tax is recognized using the balance sheet method, providing for all temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Temporary deductible differences are the difference between
the carrying amount of an asset or liability in the balance sheet and its tax base, which will results
in amounts that are deductible in the determination of taxable profit for future periods in which the
carrying amount of the asset or liability is recovered or settled.

The existence of a deductible temporary difference depends only on a comparison of the carrying
amount of an asset and its tax base at the end of the reporting period and is not affected by any
future changes in the carrying amount.

The amount of deferred tax recognized is based on the expected manner of realization or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially
enacted at the balance sheet date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits
will be available against which the unused tax losses and credits can be utilized. Deferred tax
assets are reduced to the extent that it is no longer probable that the related tax benefit will be
realized.

Additional income taxes that arise from the distribution of dividends are recognized at the same
time as the liability to pay the related dividend.

The tax rate used to calculate the current and deferred tax position at 31 December 2017 is 16%
(2016: 16%).

F-88
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Financial assets and liabilities

i) Recognition

The Bank initially recognizes loans and advances, deposits, debt securities issued and
subordinated liabilities on the date that they are originated. All other financial assets and liabilities
(including assets and liabilities designated at fair value through profit or loss) are initially
recognized on the trade date at which the Bank becomes a party to the contractual provisions of
the instrument.

A financial asset or financial liability is measured initially at fair value plus, for an item not at fair
value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.

ii) Classification, initial recognition and subsequent measurement

The Bank classifies its financial assets in the following categories:

A. Financial assets at fair value through profit or loss. This category has two sub-categories:
financial assets held for trading and those designated at fair value through profit or loss at
inception. A financial instrument is classified in this category if acquired principally for the purpose
of short term profit-taking or if so designated by management. Financial assets at fair value
through profit or loss include derivatives held by the Bank for risk management and trading assets.

 Derivatives held for risk management

Derivative financial instruments held for risk management include currency swaps and interest rate
swaps. The Bank uses derivative financial instruments to hedge risks associated with exchange
rate fluctuations.

These derivatives are recognized in the balance sheet at fair value. Derivatives are carried as
assets when their fair value is positive. Any gains or losses arising from changes in fair values are
recognized in the income statement.

 Trading assets

Trading assets are those assets that the Bank acquires or incurs principally for the purpose of
selling or repurchasing in the near term, or holds as part of a portfolio that is managed together for
short-term profit or position taking. Trading assets are initially recognized and subsequently
measured at fair value in the balance sheet with transaction costs taken directly to profit or loss. All
changes in fair value are recognized as part of net trading income in profit or loss.

Reclassification out of the “held-for-trading” category to the “loans and receivables” category,
“held-to-maturity investments” category or “available-for-sale” category is permitted only when
there are rare circumstances and the financial assets are no longer held for sale in the foreseeable
future. In addition, reclassification out of the “held-for-trading” category to either “loans and
receivables” or “available-for-sale” is permitted, even when there are no rare circumstances, only if
the financial assets meet the definition of loans and receivables and there is the intention to hold
them for the foreseeable future or until maturity. On reclassification of a financial asset out of the
“fair value through profit or loss” category, all embedded derivative will be (re)assessed and, if
necessary, separately accounted for in financial statements.

F-89
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Financial assets and liabilities (continued)

ii) Classification, initial recognition and subsequent measurement (continued)

B. Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market, other than those that the Bank intends to sell
immediately or in the near term, those that the Bank, upon initial recognition, designates as “at fair
value through profit and loss”, those that the Bank, upon initial recognition, designates as
“available for sale” or those for which the holder may not recover substantially all of its initial
investment, other than because of credit deterioration. Loans and receivables comprise loans and
advances to banks and customers.
Loans and advances are initially measured at fair value plus incremental direct transaction costs,
and subsequently measured at their amortized cost using the effective interest method.

C. Held-to-maturity investments are non-derivative financial assets with fixed or determinable

payments and fixed maturities that the Bank’s management has the positive intention and ability to
hold to maturity, and which are not designated as ”at fair value through profit or loss” or as
“available-for-sale” and the asset shall not meet the definition of a “loan and receivable”.

Held-to-maturity investments are carried at amortized cost using the effective interest method. Any
sale or reclassification of a significant amount of held-to-maturity investments not close to their
maturity would result in the reclassification of all held-to-maturity investments as available-for-sale,
and prevent the Bank from classifying investment securities as held-to-maturity for the current and
the following two financial years.

However, sales and reclassifications in any of the following circumstances would not trigger a
reclassification:

 sales or reclassifications that are so close to maturity that changes in the market rate of interest
would not have a significant effect on the financial asset’s fair value

 sales or reclassifications after the Bank has collected substantially all of the asset’s original
principal

 sales or reclassifications attributable to non-recurring isolated events beyond the Bank’s control
that could not have been reasonably anticipated.

D. Available-for-sale financial assets are those financial assets that are designated as available
for sale or are not classified as loans and advances, held-to-maturity investments or financial
assets at fair value through profit or loss. Available-for-sale instruments include treasury bonds and
other bonds eligible for discounting with central banks, corporate bonds investments in unit funds
and other investment securities that are not at fair value through profit and loss or held-to-maturity.

Debt securities such as bonds and treasury bills issued by the Ministry of Public Finance of
Romania and corporate bonds are classified as available-for-sale assets and measured at fair
value using bid market quotations from active markets. Securities such as investments in mutual
funds are classified as available-for-sale assets and are carried at their market prices.

Equity investments are classified as available-for-sale assets and are carried at the fair value.
Where no reliable estimate of fair value is available, equity investments are stated at cost less
impairment.

F-90
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Financial assets and liabilities (continued)

ii) Classification, initial recognition and subsequent measurement (continued)

Interest income is recognized in profit or loss using the effective interest method. Dividend income
is recognized in profit or loss when the Bank becomes entitled to the dividend. Foreign exchange
gains or losses on available-for-sale debt security investments are recognized in profit or loss.

Other fair value changes are recognized directly in other comprehensive income until the
investment is sold or impaired and the cumulative gains and losses previously recognized in other
comprehensive income are reclassified to profit or loss as a reclassification adjustment.

The Bank classifies its financial liabilities in the following categories:

A. Financial liabilities at fair value through profit or loss. This category has two sub-
categories: financial liabilities designated by the entity as a liability at fair value through profit or
loss upon initial recognition and financial liabilities held for trading. A financial instrument is
classified in this category if acquired principally for the purpose of short term profit-taking or if so
designated by management.

Financial assets or liabilities (other than those held for trading) may be classified upon initial
recognition at fair value through profit or loss, if they either:

 eliminate or significantly reduce a measurement or recognition inconsistency (“accounting

mismatch”) that would otherwise arise from measuring assets and liabilities or recognizing
the gains or losses on them on different bases;

 the assets or liabilities are managed, evaluated and reported internally on a fair value basis;
or

 the asset or liability contains an embedded derivative that significantly modifies the cash
flows that could otherwise be required under the contract.

 Derivatives held for risk management

Derivative financial instruments held for risk management include currency swaps and interest rate
swaps. The Bank uses derivative financial instruments to mitigate risks associated with exchange
rate fluctuations and interest rate fluctuations.

These derivatives are recognized in the balance sheet at fair value.

 Trading liabilities

Trading liabilities are those liabilities that the Bank acquires or incurs principally for the purpose of
selling or repurchasing in the near term, or holds as part of a portfolio that is managed together for
short-term profit or position taking.

Trading liabilities are initially recognized and subsequently measured at fair value in the balance
sheet with transaction costs taken directly to profit or loss. All changes in fair value are recognized
as part of net trading income in profit or loss.

F-91
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. Other financial liabilities are measured at amortized cost using the effective interest rate
method. All financial instruments that don’t qualify to be classified as financial liabilities at fair value
through profit or loss are classified in this category.

 Deposits from customers and from banks, loans from banks and other financial
institutions, subordinated liabilities.
Deposits from customers and from banks, loans from banks and subordinated liabilities are initially
measured at fair value plus incremental direct transaction costs, and subsequently measured at
amortized cost using the effective interest method. When the Bank sells a financial asset and
simultaneously enters into an agreement to repurchase the asset (or a similar asset) at a fixed
price on a future date (“repo”), the arrangement is accounted for as “Due to banks”, and the
underlying asset continues to be recognized in the Bank’s financial statements.

 Financial guarantees
Financial guarantees are contracts that require the Bank to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payment when due in
accordance with the terms of a debt instrument. Financial guarantee liabilities are initially
recognized at their fair value, and the initial fair value is amortized over the life of the financial
guarantee. The guarantee liability is subsequently carried at the higher of this amortized amount
and the present value of any expected payment (when a payment under the guarantee has
become probable). Financial guarantees are included within “other liabilities”.

iii) Derecognition

The Bank derecognizes a financial asset when the contractual rights to the cash flows from the
asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in
a transaction in which substantially all the risks and rewards of ownership of the financial asset are
transferred. Any interest in transferred financial assets that is created or retained by the Bank is
recognized as a asset or liability.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or
the carrying amount allocated to the portion of the asset transferred), and the sum of (i) the
consideration received (including any new asset obtained less any new liability assumed) and (ii)
any cumulative gain or loss that had been recognized in other comprehensive income is
recognized in profit or loss.

The Bank derecognizes a financial liability when the obligation specified in the contract is either
discharged or cancelled or expires. Where there is an exchange between an existing borrower and
lender of debt instruments with substantially different terms, or there is a substantial modification of
the terms of an existing financial liability, this transaction is accounted for as derecognition of the
original financial liability and recognition of a new financial liability. Any gain or loss from
extinguishment of the original financial liability is recognized in profit or loss. The terms are
considered substantially different if the discounted present value of the cash flows under the new
terms (including any fees paid net of any fees received), discounted using the original effective
interest rate, is at least 10% different from the present value of the remaining cash flows of the
original financial liability.

When the Bank enters into transactions whereby it transfers assets recognized on its balance
sheet, but retains either all risks or rewards of the transferred assets or a portion of them, if all or
substantially all risks and rewards are retained, then the transferred assets are not derecognized
from the balance sheet. Transfers of assets with retention of all or substantially all risks and
rewards include, for example, securities lending and repurchase transactions.

F-92
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Financial assets and liabilities (continued)

iii) Derecognition (continued)

When assets are sold to a third party with a concurrent total rate of return swap on the transferred
assets, the transaction is accounted for as a secured financing transaction similar to repurchase
transactions. In transactions where the Bank neither retains nor transfers substantially all the risks
and rewards of ownership of a financial asset, it derecognizes the asset if control over the asset is
lost.

The rights and obligations retained in the transfer are recognized separately as assets and
liabilities as appropriate. In transfers where control over the asset is retained, the Bank continues
to recognize the asset to the extent of its continuing involvement, determined by the extent to
which it is exposed to changes in the value of the transferred asset.

iv) Offsetting

Financial assets and liabilities are offset and the net amount reported in the statement of financial
position when and only when there is a legally enforceable right to set off the recognized amounts
and there is an intention to settle on a net basis, or realize the asset and settle the liability
simultaneously.
Income and expenses are presented on a net basis only when permitted by the accounting
standards, or for gains and losses arising from a bank of similar transactions such as in the Bank’s
trading activity.

v) Amortized cost measurement

The amortized cost of a financial asset or liability is the amount at which the financial asset or
liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative
amortization using the effective interest method of any difference between the initial amount
recognized and the maturity amount, minus any reduction for impairment.

j) Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with
less than 90 days maturity including: cash, current accounts with banks, short term due from banks
and Reverse Repo agreements. Short-term balances due from banks are amounts that mature
within three months. Cash is carried at nominal value and cash equivalents are carried at
amortized cost in the statement of financial position.

k) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or, in its
absence, the most advantageous market to which the Bank has access at the date. The fair value
of a liability reflects its nonperformance risk.

When available, the Bank measures the fair value of an instrument using the quoted price in an
active market for that instrument. A market is regarded as active if transactions for the asset or
liability take place with sufficient frequency and volume to provide pricing information on an
ongoing basis.

F-93
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

k) Fair value measurement (continued)

The fair value of financial instruments that are not traded in an active market is determined by the
use of valuation techniques, appropriate in the circumstances, and for which sufficient data to
measure fair value are available, maximizing the use of relevant observable inputs and minimizing
the use of unobservable inputs. If observable inputs are not available, other model inputs are used
which are based on estimations and assumptions such as the determination of expected future
cash flows, discount rates, probability of counterparty default and prepayments. In all cases, the
Bank uses the assumptions that ‘market participants’ would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.

Assets and liabilities which are measured at fair value or for which fair value is disclosed, are
categorized according to the inputs used to measure their fair value as follows:

• Level 1 inputs: quoted market prices (unadjusted) in active markets,

• Level 2 inputs: directly or indirectly observable inputs,

• Level 3 inputs: unobservable inputs used by the Bank, to the extent that relevant
observable inputs are not available.

The best evidence of a fair value of a financial instrument at initial recognition is normally the
transaction price – the fair value of a consideration given or received. If the Bank determines that
the fair value at initial recognition differs from the transaction price and the fair value is evidenced
neither by a quoted price in an active market for an identical asset or liability nor based on a
valuation technique that uses only data from observable markets, then the financial instrument is
initially measured at the fair value, adjusted to defer the difference between the fair value at initial
recognition and the transaction price. Subsequently, that difference is recognized in profit or loss
on an appropriate basis over the life of an instrument but not later than when the valuation is wholly
supported by observable market data or the transaction is closed out.

The principal inputs to the valuation techniques used by the Bank are:

• Bond prices - quoted prices available for government bonds and certain corporate
securities.

• Credit spreads - these are derived from active market prices, prices of credit default swaps
or other credit based instruments, such as debt. Values between and beyond available data
points are obtained by interpolation and extrapolation.

• Interest rates - these are principally benchmark interest rates such as the LIBOR (London
Interbank Offered Rate), OIS (Overnight Index Swaps) and other quoted interest rates in
the swap, bond and futures markets. Values between and beyond available data points are
obtained by interpolation and extrapolation.

• Foreign currency exchange rates - observable markets both for spot and forward contracts
and futures.

• Equity and equity index prices - quoted prices are generally readily available for equity
shares listed on stock exchanges and for major indices on such shares.

F-94
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

k) Fair value measurement (continued)

• Price volatilities and correlations - Volatility and correlation values are obtained from pricing
services or derived from option prices.

• Unlisted equities - financial information specific to the company or industry sector

comparables.

• Loans and Deposits - market data and Bank/customer specific parameters.

The Bank recognizes transfers between levels of the fair value hierarchy as of the end of the
reporting period during which the change has occurred.

Where the Bank has positions with offsetting risks, mid-market prices are used to measure the
offsetting risk positions and a bid or asking price adjustment is applied only to the net open position
as appropriate. Fair values reflect the credit risk of the instrument and include adjustments to take
account of the credit risk of the Bank entity and the counterparty where appropriate. Fair value
estimates obtained from models are adjusted for any other factors, such as liquidity risk or model
uncertainties to the extent that the Bank believes a third-party market participant would take them
into account in pricing a transaction.

The most important category of non-financial assets for which fair value is estimated is real estate
property. The process, mainly, followed for the determination of the fair value is summarized
below:

• Assignment to the engineer - valuer

• Case study- Setting of additional data
• Autopsy - Inspection
• Data processing - Calculations
• Preparation of the valuation report

To derive the fair value of the real estate property, the valuer chooses among the three following
valuation techniques:

• Market approach (or sales comparison approach), which measures the fair value by
comparing the property to other identical ones for which information on transactions is
available.

• Income approach, which capitalizes future cash flows arising from the property using an
appropriate discount rate.

• Cost approach, which reflects the amount that would be required currently to replace the
asset with another asset with similar specifications, after taking into account the required
adjustment for impairment.

F-95
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

k) Fair value measurement (continued)

Examples of inputs used to determine the fair value of properties and which are analysed to the
individual valuations, are the following:

• Commercial property: price per square meter, rent growth per annum, long-term vacancy
rate, discount rate, expense rate of return, lease term, rate of non-leased properties/units
for rent.

• Residential property: Net return, reversionary yield, net rental per square meter, rate of
continually non leased properties/units, expected rent value per square meter, discount
rate, expense rate of return, lease term etc.

• General assumptions such as the age of the building, residual useful life, square meter per
building etc. are also included in the analysis of the individual valuation assessments.

It is noted that the fair value measurement of a property takes into account a market’s participant
ability to generate economic benefits by using the asset in its highest and best use or by selling it
to another market participant that would use the asset in its highest and best use.

l) Property and equipment

(i) Recognition and measurement

Items of property and equipment are measured at their cost less accumulated depreciation value
and impairment losses. Capital expenditure on property and equipment in the course of
construction is capitalized and depreciated once the assets enter into use. Cost includes
expenditures that are directly attributable to the acquisition of the asset.

(ii) Subsequent costs

The Bank recognizes in the carrying amount of an item of property, plant and equipment the cost
of replacing part of such an item when that cost is incurred, if it is probable that the future
economic benefits embodied with the item will flow to the Bank and the cost of the item can be
measured reliably. All other costs are recognized in the income statement as an expense as
incurred. Expenditure incurred to replace a component of an item of property and equipment that is
accounted for separately, including major inspection and overhaul expenditure, is capitalized.
Other subsequent expenditure is capitalized only when it increases the future economic benefits
embodied in the item of property and equipment. All other expenditure is recognized in the income
statement as an expense as incurred.

(iii) Depreciation

Depreciation is charged to the income statement on a straight-line basis over the estimated useful
lives of each part of an item of property, plant and equipment. The estimated useful lives for the
current and comparative periods are as follows:

Buildings 33 years
Equipment 3 – 18 years
Motor vehicles 5 - 9 years
Other tangible fixed assets 3 – 24 years

F-96
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

l) Property and equipment (continued)

Land is not depreciated but it is tested for impairment.

Depreciation methods, useful lives and residual values are reassessed periodically and adjusted if
appropriate.

m) Intangible assets

Intangible assets consist of purchased and in-house developed software.

Costs associated with developing or maintaining software programs are recognized as an expense
when incurred. Costs that are directly associated with 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 recognized as intangible assets. Subsequent expenditure
on software assets is capitalized only when it increases the future economic benefits embodied in
the specific asset to which it relates. All other expenditure is expensed as incurred. Amortization is
recognized in profit or loss on a straight-line basis over the estimated useful life of the software,
from the date that it is available for use. The estimated useful life of the software is three to five
years.

n) Assets held for sale

Non-current assets or disposal groups that are expected to be recovered principally through a sale
transaction, along with the related liabilities, are classified as held-for-sale. The above
classification is used if the asset is available for immediate sale in its present condition and its sale
is highly probable. Assets held for sale are initially recognized and subsequently remeasured at the
lower of their carrying amount and fair value less cost to sell. Any loss arising from the above
measurement is recorded in profit or loss and can be reversed in the future. Assets in this category
are not depreciated. Gains or losses from the sale of these assets are recognized in the income
statement.

Non - current assets that are acquired through enforcement procedures but are not available for
immediate sale or are not expected to be sold within a year are included in “Other Assets” and are
measured at the lower of cost (or carrying amount) and fair value. Non-current assets held for sale,
that the Bank subsequently decides either to use or to lease, are reclassified to the categories of
property, plant and equipment or investment property respectively. During their reclassification,
they are measured at the lower of their recoverable amount and their carrying amount before they
were classified as held for sale, adjusted for any depreciation, amortization or revaluation that
would have been recognized had the assets not been classified as held for sale.

o) Identification and measurement of impairment

i) Impairment losses for financial assets

At each balance sheet date the Bank assesses whether there is objective evidence that financial
assets not carried at fair value through profit or loss are impaired. Financial assets are impaired
when objective evidence demonstrates that a loss event has occurred after the initial recognition of
the asset, and that the loss event has an impact on the future cash flows on the asset that can be
estimated reliably.

F-97
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o) Identification and measurement of impairment (continued)

i) Impairment losses for financial assets (continued)

If there is objective evidence that an impairment loss on loans and receivables carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset's
carrying amount and the present value of estimated future cash flows discounted at the financial
asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition).
If a loan, receivable or held-to-maturity investment has a variable interest rate, the discount rate for
measuring any impairment loss is the variable interest rate at reporting date.

When a subsequent event causes the amount of impairment to decrease, the impairment loss is
reversed through profit and loss.

Loans and advances to customers

The Bank considers evidence of impairment for loans and advances to customers at both at
specific asset and collective level.

The Bank implemented the Impairment methodology that is in line with Alpha Bank Group IFRS
Impairment Framework, according to which it proceeds to impairment assessment when specific
quantitative or qualitative trigger events come to its attention, such as:

a) significant financial difficulty of the borrower or issuer;

b) default or delinquency over 90 days past due by a borrower;

c) the lender, for economic or legal reasons relating to the borrower's financial difficulty, is
granting to the borrower a concession that the lender would not otherwise consider such as
the rescheduling of the interest or principal payments;

d) indications that a borrower or issuer will enter bankruptcy;

e) the disappearance of an active market for a security; or

f) observable data relating to a group of assets such as adverse changes in the payment status
of borrowers or issuers in the group, or economic conditions that correlate with defaults in the
group.

The Bank first assesses whether objective evidence of impairment exists as described above,
individually for loans to customers that are individually significant, and individually or collectively for
loans that are not individually significant. If the Bank determines that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, it includes
the loans to customers in a group of loans with similar credit risk characteristics and collectively
assesses them for impairment.

F-98
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o) Identification and measurement of impairment (continued)

i) Impairment losses for financial assets (continued)

Individual assessment

The outstanding balance is the basic factor in determining whether the assessment of impairment
will be performed on an individual basis or on a collective basis.

More specifically the Bank includes in the individual assessment exposures that exceed the
established threshold, which as of 31 December 2017 amounts to EUR 400,000 or equivalent and
for which evidence of impairment exists (e.g. past due amounts, forborne facilities, significant
deterioration of client’s financial standing etc.). If no objective evidence of impairment existed for
the individually assessed assets, these assets have been included in the collective impairment
assessment for any impairment that has been incurred but not yet identified.

The above-mentioned exposures are individually assessed and the Bank decides whether an
objective evidence of impairment exists individually for these financial assets or not. If this is the
case, these assets will be subject to provisions calculation based on individually determined future
cash flows related to the transaction. The cash flows are discounted at the loans’ original effective
interest rate.

Collective impairment

For the purpose of a collective evaluation of impairment, loans to customers are grouped on the
basis of similar credit risk characteristics that are determined based on the borrower’s type (large
corporate, commercial corporate, or small and medium sized entity) for companies loans, and the
type of loan (consumer, credit cards, mortgage etc.) for retail loans. The Bank assesses for
collective impairment the forborne loans in categories for companies and retail loans. Each
category presented above is further detailed in buckets of overdue days.

Management considers that these characteristics chosen are the best estimate of similar credit risk
characteristics by being indicative of the debtors’ ability to pay all amounts due according to the
contractual terms of the assets being evaluated.

For impairment computation the collective assessment factors (PD and LGD) are estimated on the
basis of historical loss experience for loans with credit risk characteristics. The loan impairment
assessment considers the visible effects on current market conditions on the individual / collective
assessment of loans and advances to customers’ impairment.

During its ordinary course of business the Bank makes commitments and guarantees that
constitute off-balance sheet credit risks. A provision is established to provide for management’s
estimate of the credit losses inherent in off-balance sheet credit risks using the same methodology
as applied for loans.

F-99
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o) Identification and measurement of impairment (continued)

i) Impairment losses for financial assets (continued)

Write-offs

Write-offs are defined as the accounting reduction of a debt, which does not entail waiving the
legal claim against the debtors and, hence, the debt may be revived.

Proposals for writing-off a part or the whole of the debts may be submitted to the competent
committee on condition that the following have been carried out:

 The relevant agreements with the clients have been terminated.

 Payment Orders have been issued against all the liable parties.

 The procedure for the registration of compulsory encumbrances has commenced.

 At least one real estate property has been auctioned, in order for the privileged claims
(through the final creditors priority list) and, as a result, for the possible losses of the
Bank to be finalized. Equal Impairment Provision at least during the quarter preceding
the one of the proposal.

Write downs

Write-downs are defined as the permanent accounting reduction of a debt, as a result of a legally
binding decision or agreement (court judgment, contractual agreement etc.), which is no further
claimable and, hence, is considered as definitively non-revivable, whereas it also entails the fact
that the Bank definitively and irrevocably waives its right to claim the written-down debt, unless (in
case of settlement) it is ascertained that the terms set by virtue of the aforementioned decision or
agreement were violated.

Available for sale financial assets

For financial assets classified as available-for-sale, when a decline in the fair value of an available-
for-sale financial asset has been recognized directly in other comprehensive income and there is
objective evidence that the asset is impaired, the cumulative loss that had been recognized directly
in equity shall be removed from equity and recognized in profit or loss even though the financial
asset has not been derecognized.

At each reporting date an impairment test of financial assets is performed, if the case, as follows:

1. The respective securities are separated to be tested for impairment.

2. Securities are reviewed for events that constitute objective evidence for impairment losses.

3. Impairment provisions are calculated on an individual basis per each security, for which
there are objective evidences that impairment losses exist as the difference between
acquisition costs and current fair value, less the impairment loss which has already been
recognized in income statement for securities classified as available for sale.

F-100
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o) Identification and measurement of impairment (continued)

i) Impairment losses for financial assets (continued)

For equity instruments a significant or prolonged decline in fair value below the cost of the
investment is considered objective evidence of impairment. According to group policy a significant
decline is represented by a decrease of over 20% compared to the cost of the equity investment
while prolonged decline is a decrease in the fair value below amortized cost for a continuous
period exceeding one year. The above criteria are assessed in conjunction to the general market
conditions and in specific circumstances a smaller decline or a shorter period may be appropriate.

Impairment losses recognized in profit or loss for an investment in an equity instrument classified
as available for sale shall not be 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 increase can be
objectively related to an event occurring after the impairment loss was recognized in profit or loss,
the impairment loss shall be reversed, with the amount of the reversal recognized in profit or loss.

Financial assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity
instrument that is not carried at fair value because its fair value cannot be reliably measured, or on
a derivative asset that is linked to and must be settled by delivery of such an unquoted equity
instrument, the amount of the impairment loss is measured as the difference between the carrying
amount of the financial asset and the present value of estimated future cash flows discounted at
the current market rate of return for a similar financial asset. Such impairment losses are not
reversed. The carrying amounts of the Bank’s non-financial assets, other than deferred tax assets
are reviewed at each reporting date to determine whether there is any indication of impairment. If
any such indication exists then the asset’s recoverable amount is estimated.

For goodwill and intangible assets that have indefinite useful lives or that are not yet available for
use, the recoverable amount is estimated each year at the same time. The recoverable amount of
an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset.

ii) Impairment losses for non-financial assets

The Bank assess as at each balance sheet date its non-financial assets for impairment, particularly
property, plant and equipment, investment property, and other intangible assets.

An impairment loss is recognized in profit or loss when the recoverable amount of an asset is less
than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in
use.

F-101
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o) Identification and measurement of impairment (continued)

In assessing whether there is an indication that an asset may be impaired both external and
internal sources of information are considered, of which the following are indicatively mentioned:

 The asset’s market value has declined significantly, more than would be expected as a
result of the passage of time or normal use.

 Significant changes with an adverse effect have taken place during the period or will take
place in the near future, in the technological, economic or legal environment in which the
entity operates or in the market to which the asset is dedicated.

 Significant unfavorable changes in foreign exchange rates.

 Market interest rates or other rates of return of investments have increased during the
period, and those increases are likely to affect the discount rate used in calculating an
asset’s value in use.

 The carrying amount of the net assets of the entity is greater than its market capitalization.

 Evidence is available of obsolescence or physical damage of an asset.

Fair value less costs to sell is the amount received from the sale of an asset (less the cost of
disposal) in an orderly transaction between market participants.

Value in use is the present value of the future cash flows expected to be derived from an asset or
cash – generating unit through their use and not from their disposal. For the valuation of property,
plant and equipment, value in use incorporates the value of the asset as well as all the
improvements which render the asset perfectly suitable for its use by the Bank.

p) Provisions

A provision is recognized if, as a result of a past event, the Bank has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability. A
provision for restructuring is recognized when the Bank has approved a detailed and formal
restructuring plan, and the restructuring either has commenced or has been announced publicly.
Future operating losses are not provided for.

q) Employee benefits

i) Short term service benefits

Short-term employee benefits include wages, salaries, bonuses and social security contributions.
Short-term employee benefits are measured on an un-discounted basis and recognized as
expense when services are rendered. Short term employee benefits include items expected to be
settled wholly before twelve months after the end of the period in which the employees rendered
the related services.
A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-
sharing plans if the Bank has a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation can be estimated reliably.

F-102
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

q) Employee benefits (continued)

ii) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into an entity and will have no legal or constructive obligation to pay further amounts.

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. All
employees of the Bank are members and are also legally obliged to make defined contributions
(included in the social security contributions) to the Romanian State pension plan (a State defined
contribution plan). All relevant contributions to the Romanian State pension plan are recognized as
an expense in the income statement as incurred. The Bank does not have any further obligations.

The Bank does not operate any independent pension scheme and, consequently, have no
obligation in respect of pensions. The Bank does not operate any other post retirement benefit
plan. The Bank has no obligation to provide further services to former employees.

iii) Termination benefits

When the Bank decides to terminate the employment before retirement or the employee accepts
the Bank’s offer of benefits in exchange for termination of employment, the liability and the relative
expense for termination benefits are recognized at the earlier of the following dates:

 when the Bank can no longer withdraw the offer of those benefits; and

 when the Bank recognizes restructuring costs which involve the payment of termination
benefit.

r) Other standards and interpretations

The accounting policies for the preparation of the financial statements have been consistently
applied by the Bank to the years 2016 and 2017, after taking into account the following
amendments to standards which were issued by the International Accounting Standards Board
(IASB), adopted by the European Union and applied on 1.1.2017:

 Amendment to International Accounting Standard 7 “Statement of Cash Flows”: Disclosure

Initiative (Regulation 2017/1990/6.11.2017)

On 29.1.2016 the International Accounting Standards Board issued an amendment to IAS 7

according to which an entity shall provide disclosures that enable users of financial statements to
evaluate changes in liabilities for which cash flows are classified in the statement of cash flows as
cash flows from financing activities. The changes that shall be disclosed, which may arise both
from cash flows and non-cash changes, include:

 changes from financing cash flows,

 changes arising from obtaining or losing control of subsidiaries or other businesses,
 the effect of changes in foreign exchange rates,
 changes in fair values and
 other changes

F-103
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

 Amendment to International Accounting Standard 12 “Income Taxes”: Recognition of

Deferred Tax Assets for Unrealized Losses (Regulation 2017/1989/6.11.2017)

On 19.1.2016 the International Accounting Standards Board issued an amendment to IAS 12 with
which the following were clarified:

 Unrealized losses on debt instruments measured at fair value for accounting purposes and
at cost for tax purposes may give rise to a deductible temporary difference regardless of
whether the debt instrument’s holder expects to recover the carrying amount of the asset by
sale or by use.

 The recoverability of a deferred tax asset is assessed in combination with other deferred
tax assets. However, if tax law offsets specific types of losses only against a particular type
of income, the relative deferred tax asset shall be assessed in combination with other
deferred tax assets of the same type.

 During the deferred tax asset recoverability assessment, an entity compares the deductible
temporary differences with future taxable profit that excludes tax deductions resulting from
the reversal of those deductible temporary differences.

 The estimate of probable future taxable profit may include the recovery of some of an
entity’s assets for more than their carrying amount if there is sufficient evidence that it is
probable that the entity will achieve this.

The adoption of the above amendment by the Bank had no impact on its financial statements.

 Annual Improvements to International Accounting Standards – cycle 2014-2016

(Regulation 2018/182/7.2.2018)

As part of the annual improvements project, the International Accounting Standards Board issued,
on 8.12.2016, amendments to IFRS 12 with which it clarified that entities are not exempt from all of
the disclosure requirements in IFRS 12 with respect to interests in entries classified as held for
sale (or included in a disposal group) or as discontinued operations but only from specific
disclosures.

The adoption of the above amendments had no impact on the financial statements of the Bank.

Except for the standards mentioned above, the European Union has adopted the following new
standards and amendments to standards as well as IFRIC 22 which are effective for annual
periods beginning after 1.1.2017 and have not been early adopted by the Bank.

 Amendment to International Financial Reporting Standard 2 “Share-based Payment”:

Classification and Measurement of Share-based Payment Transactions (Regulation
2018/289/26.2.2018)

Effective for annual periods beginning on or after 1.1.2018

F-104
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

On 20.6.2016 the International Accounting Standards Board issued an amendment to IFRS 2 with
which the following were clarified:

 in estimating the fair value of a cash-settled share-based payment, the accounting for the
effects of vesting and non-vesting conditions shall follow the same approach as for equity-
settled share-based payments,

 where tax law requires an entity to withhold a specified amount of tax (that constitutes a tax
obligation of the employee) that relates to share-based payments and shall be remitted to the
tax authority, such an arrangement shall be classified as equity-settled in its entirety, provided
that the share-based payment would have been classified as equity-settled had it not included
the net settlement feature,

 if the terms and conditions of a cash-settled share-based payment transaction are modified
with the result that it becomes an equity-settled share-based payment transaction, the
transaction is accounted for as such from the date of the modification.

The Bank is examining the impact from the adoption of the above amendment on its financial
statements.

 Amendment to International Financial Reporting Standard 4 “Insurance Contracts”:

applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Regulation
2017/1988/3.11.2017)

Effective for annual periods beginning on or after 1.1.2018.

On 12.9.2016 the International Accounting Standards Board issued an amendment to IFRS 4 with
which:

- it provides insurers, whose activities are predominantly connected with insurance, with a
temporary exemption from application of IFRS 9 until 1.1.2021 and

- following full adoption of IFRS 9 and until applying IFRS 17, it gives all entities with insurance
contracts the option to present changes in fair value on qualifying designated financial assets in
other comprehensive income instead of profit or loss.

The above amendment does not apply to the financial statements of the Bank.

 International Financial Reporting Standard 9 “Financial Instruments” (Regulation

2016/2067/22.11.2016)

Effective for annual periods beginning on or after 1.1.2018

On 24.7.2014, the International Accounting Standards Board completed the issuance of the final
text of IFRS 9: Financial Instruments, which replaces the existing IAS 39. The new standard
provides for significant differentiations in the classification and measurement of financial
instruments as well as in hedge accounting. An indication of the new requirements is presented
below:

F-105
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

Classification and measurement

Financial instruments shall be classified, at initial recognition, at either amortized cost or at fair
value. The criteria that should be considered for the initial classification of the financial assets are
the following:

i. The entity’s business model for managing the financial assets. Three categories of
Business Models are defined:

 Hold to collect contractual cash flows

 Hold to collect and sell
 Other
ii. The contractual cash flow characteristics of the financial assets.

A financial asset shall be measured at amortized cost if both of the following conditions are met:

 the instrument is held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows and

 the contractual terms of the asset give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the principal amount outstanding.

If an instrument meets the above criteria but is held with the objective of both selling and collecting
contractual cash flows it shall be classified as measured at fair value through other comprehensive
income.

Financial assets that are not included in any of the above two categories are mandatorily
measured at fair value though profit or loss.

In addition, IFRS 9 permits, at initial recognition, equity instruments to be classified at fair value
through other comprehensive income. The option precludes equity instruments held for trading.

Moreover, with regards to embedded derivatives, if the hybrid contact contains a host that is within
the scope of IFRS 9, the embedded derivative shall not be separated and the accounting treatment
of the hybrid contact should be based on the above requirements for the classification of the
financial instruments.

With regards to the financial liabilities, the main difference is that the change in the fair value of a
financial liability initially designated at fair value through profit or loss shall be recognized in profit
or loss with the exception of the effect of change in the liability’s credit risk which shall be
recognized directly in other comprehensive income.

Impairment

Contrary to the existing IAS 39, under which an entity recognizes only incurred credit losses, the
new standard requires the recognition of lifetime expected credit losses if the credit risk of the
financial instrument has increased significantly since initial recognition. If the credit risk has not
increased significantly since initial recognition, 12-month expected credit losses shall be
recognized.

F-106
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

The impact from the application of IFRS 9 to the financial statements of the Bank is presented in
note 34.

• Amendment to International Financial Reporting Standard 9 “Financial Instruments”:

Prepayment Features with Negative Compensation (Regulation 2018/498/22.3.2018)

Effective for annual periods beginning on or after 1.1.2019

On 12.10.2017 the International Accounting Standards Board issued an amendment to IFRS 9 that
permits some pre-payable financial assets with negative compensation features, that would
otherwise been measured at fair value through profit or loss, to be measured at amortised cost or
at fair value through OCI. The amendment to IFRS 9 clarifies that a financial asset passes the
SPPI criterion regardless of the event or circumstance that cause the early termination of the
contract and irrespective of which party pays or receives reasonable compensation for the early
termination of the contract.

The Bank is examining the impact from the adoption of the above amendment on its financial
statements.

 International Financial Reporting Standard 15 “Revenue from Contracts with Customers”

(Regulation 2016/1905/22.9.2016)

Effective for annual periods beginning on or after 1.1.2018

IFRS 15 “Revenue from Contracts with Customers” was issued on 28.5.2014 by the International
Accounting Standards Board. The new standard is the outcome of a joint project by the IASB and
the Financial Accounting Standards Board (FASB) to develop common requirements as far as the
revenue recognition principles are concerned.

The new standard shall be applied to all contracts with customers, except those that are in scope of
other standards, such as financial leases, insurance contracts and financial instruments.

According to the new standard, an entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.

A new revenue recognition model is introduced, by applying the following five steps:

 Step 1: Identify the contract(s) with a customer

 Step 2: Identify the performance obligations in the contract
 Step 3: Determine the transaction price
 Step 4: Allocate the transaction price to the performance obligations in the contract
 Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

The performance obligation notion is new and in effect represents a promise in a contract with a
customer to transfer to the customer either: (a) a good or service (or a bundle of goods or services)
that is distinct; or (b) a series of distinct goods or services that are substantially the same and that
have the same pattern of transfer to the customer.

F-107
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

The new IFRS 15 supersedes:

(a) IAS 11 “Construction Contracts”;

(b) IAS 18 “Revenue”;
(c) IFRIC 13 “Customer Loyalty Programmes”;
(d) IFRIC 15 “Agreements for the Construction of Real Estate”;
(e) IFRIC 18 “Transfers of Assets from Customers”; and
(f) SIC-31 “Revenue—Barter Transactions Involving Advertising Services”.

The Bank will apply the new standard from 1.1.2018 without reforming comparative information for
2017. The differences that will arise from the adoption of IFRS 15 will be recognized directly in
equity as at 1.1.2018.

It is noted that the main part of the Bank’s income is net interest income which will not be affected
by the application of IFRS 15. In the Bank, the contracts most affected by the new standard relate
to the provision of the banking services (fees related to the execution of banking operations and to
asset management or to loan syndication).

For services provided over time, such as management fee income earned for the provision of asset
management services, income is recognized as the service is being provided to the customer.

If a performance obligation is not satisfied over time, it is satisfied at a point in time. For services
such as executing transactions (e.g. currency exchange transactions, customers’ trading in
securities) and coordinating and arranging syndicated loan transactions, the execution and
completion of the transaction requested by the customer signals the point in time, in which the
service is transferred to the customer.

The review of the accounting treatment currently applied to recognize revenue from these
contracts is in the process of completion; however, given that Bank’s current accounting practices
are broadly in line with the requirements of the new standard, the Bank does not expect that the
application of the new standard will have a significant impact on its financial statements.

 Amendment to International Financial Reporting Standard 15 “Revenue from Contracts

with Customers”: Clarifications to IFRS 15 Revenue from Contracts with Customers
(Regulation 2017/1987/31.10.2017)

Effective for annual periods beginning on or after 1.1.2018On 12.4.2016 the International
Accounting Standards Board issued an amendment to IFRS 15 with which it mainly clarified the
following:

 when a promised good or service is separately identifiable from other promises in a

contract, which is part of an entity’s assessment of whether a promised good or service is a
performance obligation,
 how to apply the principal versus agent application guidance to determine whether the
nature of an entity’s promise is to provide a promised good or service itself (i.e., the entity is
a principal) or to arrange for goods or services to be provided by another party (i.e., the
entity is an agent),
 for a license of intellectual property, which is a factor in determining whether the entity
recognizes revenue over time or at a point in time.

F-108
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

Finally, two practical expedients to the transition requirements of IFRS 15 were added for
completed contracts under full retrospective transition approach as well as for contract
modifications at transition.

The Bank is examining the impact from the adoption of the above amendment on its financial
statements.

 International Financial Reporting Standard 16 “Leases” (Regulation 2017/1986 /31.10.2017)

Effective for annual periods beginning on or after 1.1.2019

On 13.1.2016 the International Accounting Standards Board issued IFRS 16 “Leases” which
supersedes:

- IAS 17 “ Leases”
- IFRIC 4 “Determining whether an arrangement contains a lease”
- SIC 15 “Operating Leases – Incentives” and
- SIC 27 “Evaluating the substance of transactions involving the legal form of a lease”.

The new standard significantly differentiates the accounting of leases for lessees while essentially
maintaining the existing requirements of IAS 17 for the lessors. In particular, under the new
requirements, the classification of leases as either operating or finance is eliminated. A lessee is
required to recognize, for all leases with term of more than 12 months, the right-of-use asset as
well as the corresponding obligation to pay the lease payments. The above treatment is not
required when the asset is of low value.

The Bank is examining the impact from the adoption of IFRS 16 on its financial statements.

 Amendment to International Accounting Standard 40 “Investment Property”: Transfers of

Investment Property (Regulation 2018/400/14.3.2018)

Effective for annual periods beginning on or after 1.1.2018

On 8.12.2016 the International Accounting Standards Board issued an amendment to IAS 40 with
which it clarified that an entity shall transfer a property to, or from, investment property when, and
only when, there is a change in use. A change in use occurs when the property meets, or ceases
to meet, the definition of investment property and there is evidence of the change in use. In
isolation, a change in management’s intentions for the use of a property does not provide evidence
of a change in use. In addition, the examples of evidence of a change in use were expanded to
include assets under construction and not only transfer of completed properties.

The Bank is examining the impact from the adoption of the above amendment on its financial
statements.

• Improvements to International Accounting Standards – cycle 2014-2016 (Regulation

2018/182/7.2.2018)

Effective for annual periods beginning on or after 1.1.2018.

F-109
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

As part of the annual improvements project, the International Accounting Standards Board issued,
on 8.12.2016, non- urgent but necessary amendments to IFRS 1 and IAS 28.

The above amendments are not expected to have any impact on the financial statements of the
Bank.

 IFRIC Interpretation 22 “Foreign Currency Transactions and Advance Consideration”

(Regulation 2018/519/28.3.2018)

Effective for annual periods beginning on or after 1.1.2018

On 8.12.2016 the International Accounting Standards Board issued IFRIC 22. The Interpretation
covers foreign currency transactions when an entity recognizes a non-monetary asset or liability
arising from the payment or receipt of advance consideration before the entity recognizes the
related asset, expense or income. The Interpretation clarified that the date of the transaction, for
the purpose of determination of exchange rate to use on initial recognition of the asset, the income
or expense, is the date of initial recognition of the non-monetary asset or liability (i.e. advance
consideration). Additionally, if there are multiple payments or receipts in advance, the entity shall
determine a date of the transaction for each payment or receipt of advance consideration.

The Bank is examining the impact from the adoption of the above Interpretation on its financial
statements.

In addition, the International Accounting Standards Board has issued the following standards and
amendments to standards as well as IFRIC 23 which have not yet been adopted by the European
Union and they have not been early applied by the Bank.

 Amendment to International Financial Reporting Standard 10 “Consolidated Financial

Statements” and to International Accounting Standard 28 “Investments in Associates and
Joint Ventures”: Sale or contribution of assets between an investor and its associate or joint
venture

Effective date: To be determined

On 11.9.2014, IFRS 10 was amended in order to be clarified that in case that as a result of a
transaction with an associate or joint venture, a parent loses control of a subsidiary, which does not
contain a business, as defined in IFRS 3, it shall recognize to profit or loss only the part of the gain
or loss which is related to the unrelated investor’s interests in that associate or joint venture. The
remaining part of the gain from the transaction shall be eliminated against the carrying amount of
the investment in that associate or joint venture. In addition, in case the investor retains an
investment in the former subsidiary and the former subsidiary is now an associate or joint venture,
it recognizes the part of the gain or loss resulting from the re-measurement at fair value of the
investment retained in that former subsidiary in its profit or loss only to the extent of the unrelated
investor’s interests in the new associate or joint venture. The remaining part of the gain is
eliminated against the carrying amount of the investment retained in the former subsidiary.

In IAS 28, respectively, it was clarified that the partial recognition of the gains or losses shall be
applied only when the involved assets do not constitute a business. Otherwise, the total of the gain
or loss shall be recognized.

F-110
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

The Bank is examining the impact from the adoption of the above amendment on its financial
statements.

 International Financial Reporting Standard 14 “Regulatory deferral accounts”

Effective for annual periods beginning on or after 1.1.2016

On 30.1.2014 the International Accounting Standards Board issued IFRS 14. The new standard,
addresses the accounting treatment and the disclosures required for regulatory deferral accounts
that are maintained in accordance with local legislation when an entity provides rate-regulated
goods or services. The scope of this standard is limited to first-time adopters that recognized
regulatory deferral accounts in their financial statements in accordance with their previous GAAP.
IFRS 14 permits these entities to capitalize expenditure that non-rate-regulated entities would
recognize as expense.

It is noted that European Union has decided not to launch the endorsement of this standard and to
wait for the final standard.

The above standard does not apply to the financial statements of the Bank.

 International Financial Reporting Standard 17 “Insurance Contracts”

Effective for annual periods beginning on or after 1.1.2021

On 18.5.2017 the International Accounting Standards Board issued IFRS 17 which replaces IFRS
4 “Insurance Contracts”. In contrast to IFRS 4, the new standard introduces a consistent
methodology for the measurement of insurance contracts. The key principles in IFRS 17 are the
following:
• an entity identifies as insurance contracts those contracts under which the entity accepts
significant insurance risk from another party (the policyholder) by agreeing to compensate the
policyholder if a specified uncertain future event adversely affects the policyholder;

• separates specified embedded derivatives, distinct investment components and distinct

performance obligations from the insurance contracts;

• divides the contracts into groups that it will recognise and measure;

• recognises and measures groups of insurance contracts at:

i. a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that
incorporates all of the available information about the fulfilment cash flows in a way that
is consistent with observable market information; plus (if this value is a liability) or minus
(if this value is an asset)

ii. an amount representing the unearned profit in the group of contracts (the contractual
service margin);

• recognises the profit from a group of insurance contracts over the period the entity provides
insurance cover, and as the entity is released from risk. If a group of contracts is or becomes loss-
making, an entity recognises the loss immediately;

F-111
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

• presents separately insurance revenue, insurance service expenses and insurance finance
income or expenses; and

• discloses information to enable users of financial statements to assess the effect that contracts
within the scope of IFRS 17 have on the financial position, financial performance and cash flows of
an entity.

The above standard does not apply to the financial statements of the Bank.

 Amendments to IAS 19 “Employee Benefits”:- Plan Amendment, Curtailment or Settlement

Effective for annual periods beginning on or after 1.1.2019

On 7.2.2018 the International Accounting Standards Board issued an amendment to IAS 19 with
which it specified how companies determine pension expenses when changes to a defined benefit
pension plan occur. In case that an amendment, curtailment or settlement takes place IAS 19
requires a company to re-measure its net defined benefit liability or asset. The amendments to IAS
19 require specifically a company to use the updated assumptions from this re-measurement to
determine current service cost and net interest for the remainder of the reporting period after the
change to the plan. In addition, the amendment to IAS 19 clarifies the effect of a plan amendment,
curtailment or settlement on the requirements regarding the asset ceiling.

The Bank is examining the impact from the adoption of the above amendment on its financial
statements.

 Amendment to International Accounting Standard 28 “Investments in Associates”: Long-

term Interests in Associates and Joint Ventures

Effective for annual periods beginning on or after 1.1.2019

On 12.10.2017 the International Accounting Standards Board issued an amendment to IAS 28 to

clarify that long-term interests in an associate or joint venture that form part of the net investment in
the associate or joint venture — to which the equity method is not applied — should be accounted
using IFRS 9, including its impairment requirements. In applying IFRS 9, the entity does not take
account of any adjustments to the carrying amount of long-term interests that arise from applying
IAS 28.
The above amendment does not apply to the financial statements of the Bank.

 Improvements to International Accounting Standards – cycle 2015-2017

Effective for annual periods beginning on or after 1.1.2019

As part of the annual improvements project, the International Accounting Standards Board issued,
on 12.12.2017, non-urgent but necessary amendments to various standards.

The Bank is examining the impact from the adoption of the above amendments on its financial
statements.

F-112
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

r) Other standards and interpretations (continued)

 IFRIC Interpretation 23 “Uncertainty over Income Tax Treatments”

Effective for annual periods beginning on or after 1.1.2019

On 7.6.2017 the International Accounting Standards Board issued IFRIC 23. The Interpretation
clarifies application of recognition and measurement requirements in IAS 12 when there is
uncertainty over income tax treatments. The Interpretation specifically clarifies the following:

- An entity shall determine whether to consider each uncertain tax treatment separately or
together with one or more other uncertain tax treatments based on which approach better
predicts the resolution of the uncertainty.

- The estimations for the examination by taxation authorities shall be based on the fact that a
taxation authority will examine amounts it has a right to examine and have full knowledge of all
related information when making those examinations.

- For the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates, an entity shall consider whether it is probable that a taxation authority will
accept an uncertain tax treatment.

- An entity shall reassess an estimate if the facts and circumstances change or as a result of
new information.

The Bank is examining the impact from the adoption of the above Interpretation on its financial
statements.

4. RISK MANAGEMENT

a) Introduction and overview

The Bank has exposure to the following main risks:

 credit risk
 liquidity risk
 market risk, comprising interest rate risk and foreign currency risk
 financial risk of the banking portfolio
 taxation risks
 operational risks

This note presents information about the Bank’s exposure to each of the above risks, the Bank’s
objectives, policies and processes for measuring and managing risk, and the Bank’s
management of capital.

F-113
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

a) Introduction and overview (continued)

Risk management framework

The Bank Chief Risk Officer supervises the Risk Management Division and reports on a regular
basis and ad hoc to the Management Committees, the Risk Management Committee and to the
Board of Directors. As far as credit risk is concerned the reporting to the above mentioned
committees and to the Credit Risk Committee covers the following areas:

 The portfolio risk profile by rating grade

 The transition among rating grades and / or states (migration matrices)
 The estimation of the relevant risk parameters by rating grade, group of clients, etc.
 The estimation of PD’s and LGD’s for impairment purposes
 The changes in the rating process, in the criteria or in each specific parameter.
 The concentration risk (by risk type, industry sector, country, currency, collateral and
portfolio etc.).

Under the supervision of the Bank Chief Risk Officer the Risk Management Division has been
assigned with the responsibility of implementing the risk management framework, according to the
directions of the Risk Management Committee:

 Capital Management and Planning Department

 Wholesale Banking Credit Risk Department
 Retail Banking Credit Risk Department
 Market and Liquidity Risk Department
 Operational Risk Department

Risk Management Division ensures compliance and monitors the implementation of the risk
policies in line with the Group and local regulatory requirements. The Bank’s Audit Committee is
responsible for monitoring compliance with the Bank’s risk management policies and procedures,
and for reviewing the adequacy of the risk management framework in relation to the risks faced by
the Bank. The Bank’s Audit Committee is assisted in these functions by Internal Audit. Internal
Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures,
the results of which are reported to the Audit Committee.

b) Credit risk

I) Management of credit risk

Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Bank’s loans and
advances to customers and other banks and investment securities. For risk management reporting
purposes, the Bank considers and consolidates all elements of credit risk exposure.

F-114
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

A. Legal entities portfolios

Credit facilities belonging to Legal entities are included in the following categories subject to the
characteristics of the credit facility and the obligor, as shown in the table below:

Portfolio Characteristics

Obligors under the Corporate Companies with turnover > Euro 50 million
competence of Wholesale Euro 2.5 million < Companies with turnover <
Banking SME Euro 50 million or companies with credit limit
> Euro 1 million
Obligors under the SME Companies with turnover < Euro 2.5 million
competence of Retail Banking and credit limit < Euro 1 million

1. Credit Risk Approval Process

The limits of the Credit Committees are determined in accordance to Total Credit Exposure,
defined as the sum of all credit facilities of the obligor (single company or group of associated
companies) which can be approved by the Bank and include the following:

 Total credit requested exposure;

 Working Capital limits and credit lines;
 Letters of Credit/Letters of Guarantee limits;
 Credit Cards prepayment limit;
 Corporate Cards limits;
 Medium and long-term loans (current outstanding/exposure for facilities that have been fully
drawn or limit amount of undrawn facilities);
 Special credit limits or loans, or any form of personal financing to the company’s business
owners (mortgage loans, consumer loans, shares’ purchase, credit cards etc.)

1.1 Credit Approval Limits - Credit Committees

For legal entities, the Bank’s Credit Committees Structure is the following:

- Country Credit Committee

- Credit Committee I
- Credit Committee II

In addition to Credit Approval Limits per Credit Committee competence, the Bank has set Country
credit limits for direct and indirect exposures, used when assessing foreign counterparties credit
risk.

F-115
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

1.2. Credit Limit Expiry/Renewal date

The credit limits’ expiry/renewal date is determined by the competent Credit Committees. The
basic factor for the determination of the credit limit expiry is the client’s credit rating, which is not a
standalone approval or rejection criterion, but the basis for determining the minimum
security/collateral required and the respective pricing. As a rule, for clients that have been rated in
the Low, Medium and Acceptable credit risk zones, reviews are carried out on an annual basis, for
moderate risk - Watch List clients, on a semi-annual basis while obligors that have been rated as in
the High Risk zone are reviewed on a quarterly basis. Deviations from the above rule are not
allowed, except when the request by the responsible Business Units is approved by the competent
Credit Committees.

1.3. Environmental and social risk

Within Credit Risk Management Framework and Credit Policy, it has been integrated the
assessment of the strict compliance of the principles of an environmentally and socially responsible
financing towards legal entities. The main purpose is the management of potential risk arising from
the operations of obligors that may be connected with damage to the environment or the society or
with any direct threat of such damage, having as a result a negative impact on the business
operations and financial results of the Bank.

2. Credit Risk Measurement and Internal Ratings

The assessment of the obligors’ creditworthiness and their rating in credit risk scales is established
through rating systems.

The rating of the Bank’s obligors with the use of credit risk rating systems constitutes a basic tool
for:

 The decision-making process of Credit Committees for the approval/ renewal of credit limits
and the implementation of the appropriate pricing policy (interest rate spreads etc.).

 The estimation of the future behavior of obligors which belong to a group with similar
characteristics.

 The early recognition of potential troubled facilities (early alert mechanism) and the prompt,
effective action for the minimization of the expected loss for the Bank.

 The assessment of the quality of the Bank’s loan portfolio and the credit risk undertaken.

The aim of the credit risk rating systems is the estimation of the probability that the obligors will not
meet their contractual obligations to the Bank.

The rating system employed by the Bank is Alpha Bank Rating System (ABRS) which incorporates
different credit rating models. ABRS model - applied to companies with full financial statements,
IPRE Slotting – rating model dedicated to real estate transactions, Project finance - rating model
dedicated to specific Project finance transactions

All current and prospective clients of the Bank are assessed based on the appropriate credit risk
rating model and within pre-specified time frames.

F-116
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

i) Management of credit risk (continued)

For the estimation of the obligor’s credit risk, the Bank uses credit rating models to evaluate a
series of parameters, which can be grouped as follows:

 Financial Analysis: obligor’s financial ability (liquidity ratios, debt to income etc.).

 Peers’ Analysis: Obligor’s comparative position in the market in which it operates mostly
compared to its peers.

 Behavioral status and history of the obligor with the Bank and with third parties (debt in
arrears, adverse transaction records, etc.).

 Obligor’s qualitative characteristics (solid and healthy administration, management

succession, appropriate infrastructure and equipment etc.).

The credit rating models which are currently employed by the Bank are differentiated based on:

 The credit facility’s specific characteristics.

 The available information for the obligor’s assessment.

For each of the credit rating models, different parameters may be used, each of which contributes
in a specific manner to the relevant assessment.

Obligors Rating Scale

Obligors are rated in the following rating scales:

AA, A+, A, A-, BB+, BB, BB-, B+, B, B-, CC+, CC, CC-, C, D, D0, D1,D2, E – for the ABRS Mid
Corporation Model and 1, 2, 3, 4 for the IPRE slotting.

For presentation purposes of the table “Analysis of neither past due nor impaired Loans and
Advances to customers”, the “strong” rating includes the rating scales AA, A+, A, A- and BB+,
respectively IPRE slotting ratings 1 and 2, “satisfactory” rating includes the rating scales BB, BB-,
B+, B, B-, CC+ and CC, respectively IPRE slotting rating 2 and “watch list” (higher risk) includes
the rating scales CC- and lower than CC- and IPRE slotting rating 4.

B. Retail banking portfolio

Retail banking involves the lending facilities offered to borrowers covering traditional banking
products and services such as:

 Housing loans/Mortgages

 Consumer Loans and Credit Cards

 Very small entities (VSE), i.e. personal or family businesses regardless of the credit limit
and annual turnover

F-117
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

1. Credit Risk Approval Process

Alpha Bank monitors customer Total Credit Risk Exposure (For Individuals and Small Businesses),
which refers to the sum of all revolving limits of an obligor, all the balances of long term facilities
and for the case of legal entities the total exposure of facilities given to stakeholders of customer
companies.

Additionally, facilities for which the customer is guarantor or co-debtor are also taken into account.
Individuals:

 Requested loan amount or limit.

 Limits of credit/charge cards, revolving loans and overdraft facilities, as well as outstanding
balances of Consumer loans.

 Housing loans (the outstanding balances of the loans which have been fully disbursed or
the initial approved loan amount for cases of loans which have not been fully disbursed).

2. Credit Risk Measurement

A fundamental parameter in assessing Retail Banking Credit Risk is the existence of Credit Rating
Models that are developed and employed throughout the credit cycle at Bank level. The
aforementioned models are segmenting population in homogenous risk groups (pools) and are
categorized, as follows, in:

 Behavior Models, which assess the customer’s performance and predict the probability of
going default within the following months.

 Application Credit Scoring Models, which assess application data – mainly demographic-
and predict the probability of going default within the following months.

These models and the probabilities of default that derive from them, contribute a significant role in
risk management and decision making throughout Alpha Bank.

Specifically, the models are used in the following segments:

 In decision making of credit assessment and credit limit assignment.

 In predicting future performance of customers belonging to the same pool of common

characteristics.

 In identifying high risk accounts in time to schedule all necessary actions so as to reduce
expected losses for the Bank.

 In assessing the Bank’s portfolio quality and credit risk.

F-118
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

i) Management of credit risk (continued)

The parameters taken into consideration vary, according to the model’s type and product category
that it assesses. Indicatively, the following factors are listed:

 Personal/ demographic: data the customer’s age, profession, marital status

 Loan characteristics: product that he applied for, loan term, loan amount, financing
purpose.

 Behavior data: payments during latest period of time, max delinquency, outstanding loan
balance versus loan limit, transaction type.

Moreover, the models are reviewed, validated and updated on an annual basis and are subject to
continuous quality control so as to ensure at any time their predictive power.

Furthermore, on a regular basis the Bank conducts exercises simulating crisis situations (Stress
Tests) where the potential impact on the financial results of the Bank are explored due to
unfavorable developments both in obligors’ transactional behavior as well as in the broader
financial - macroeconomic environment.

C. Impairment Policy

The Bank has defined as ‘significant for individual assessment’ customers loans that are over the
significance value of EUR 400,000.

The assessment for individual impairment is performed on regular basis, as follows:

The Bank assesses whether objective evidence for individual assessment for impairment exists. In
cases which have been assessed individually but no impairment allowance was estimated, these
loans are assessed for impairment on a collective basis, grouped in pools based on similar credit
risk characteristics. The process for identifying impairment for loans and estimating their
impairment allowance consists of the following steps:

1. Identification of loans which will be individually assessed and for which events exist
which constitute objective evidence that an impairment loss has occurred.

2. Impairment calculation on an individual basis for the loans identified in the previous step,
as the difference between the recoverable amount and the carrying amount of the loan.

3. In cases where the impairment allowance under individual assessment was zero, these
loans will be assessed for impairment on a collective basis, based on similar credit risk
characteristics. For example, groups of loans are created per collateral coverage, days
in arrears etc., where the corresponding impairment factor will be applied.

4. Identification of the portfolios to be collectively assessed for loss events that have been
incurred but not reported ("IBNR").

The Bank performs controls in order to identify objective evidence that there is a need for
impairment for the loans that are significant and for which a trigger event for impairment exists.

F-119
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

i) Management of credit risk (continued)

The individual assessment for impairment is performed by the responsible Business Units, is
reviewed by the Credit Division and relevant ABG HO Divisions, together with the collective
impairment, is approved by the Executive Committee.

Trigger events for legal entities

Significant legal entities loans are assessed individually if at least one of the following conditions is
met:

1. Clients with credit risk rating D, D0, D1, D2 and E;

2. Clients with credit risk rating CC- and C;
3. Exposures with restructuring measures due to financial difficulties;
4. Significant deterioration in the industry outlook in which the borrower operates;
5. Insolvency;
6. Difficulties in paying other obligations (e.g. payment orders, bounced cheques, auctions,
bankruptcies, overdue payments to the State, to Social Security Funds, or to employees);
7. Occurrence of unexpected, extreme events such as natural disasters, fraud, etc.;
8. Interventions and actions by regulatory bodies/local authorities against the borrower (e.g.
Financial Supervisory Authority, fiscal authorities etc.);
9. Breach of contractual terms and conditions;
10. Adverse changes in the shareholders’ structure or the management of the company or
serious management issues/ problems;
11. Significant adverse changes in cash flows potentially due to ceased cooperation with a
key/major customer, significant reduction in demand of a main product or service, ceased
cooperation with a key/major supplier or suppliers cut credit, etc.
12. Significant deterioration of financial ratios of the obligor (Reduction of equity due to losses,
debt ratio etc.) and of estimated future cash flows of the obligor.

Trigger Events for Individuals / Free lancers and professionals

1. Customers with nonperforming exposures;

2. Customers with loans past due more than 90 days;
3. Customers with loans past due more than 30 days and less than 90 days;
4. Customers with restructured (forborne) loans;
5. Deceased or fraudulent Customers;
6. Occurrence of unexpected, extreme events such as fraud, natural disasters, etc.;
7. Stakeholders of Companies classified as nonperforming, in insolvency or in financial
difficulty with restructuring measures or with interventions and actions of regulatory
bodies/local authorities against their companies;
8. Customers who are Freelancers, Professionals and similar categories without activity or in
bankruptcy procedure;
9. Customers Freelancers, Professionals and similar categories for whom there is significant
deterioration of their financial capabilities either due to serious management issues, or bad
reputation, or cease of important co-operations, or significant deterioration in the outlook of
the industry in which the obligor operates.

F-120
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

i) Management of credit risk (continued)

Collective Assessment for Impairment

The collective assessment is performed as follows:

a. Exposures that have been individually assessed and therefore were found not to be
impaired on an individual basis -the impairment allowance estimated was zero- are
subsequently assessed for impairment on a collective basis, after they are grouped in
pools based on common credit risk characteristics.

b. Exposures with no impairment triggers are assessed collectively in pools based on similar
credit risk characteristics. The future cash flows of a group of exposures that are
collectively evaluated for impairment are calculated on the basis of the estimated
contractual cash flows and historical loss experience for exposures with credit risk
characteristics similar to those in the group.

Trigger Events for the Collective assessment per portfolio

The specific trigger events for the collective assessment are the following:

- Accounts up to 90 days past due with signs of unlikeliness to pay;

- Accounts more than 90 days past due;
- Forborne exposures with financial difficulties;
- Significant deterioration of the industry segment in which the borrower operates;
- Significant increases in overdue amounts in the financial sector in which the borrower
operates;
- Emergence of serious or unforeseen events (calamities, etc.).

Incurred but not reported losses

The need for objective evidence in order for the loss to be recognized and effectively the
impairment loss to be identified on individual loans, may lead to a delay in the recognition of a
loan’s impairment, which has already occurred. Within this context and in accordance with IAS 39,
it is appropriate to recognize impairment losses for those losses "which have been incurred but
have not yet been reported» (Incurred But Not Reported - IBNR).

F-121
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

ii) Credit risk mitigation

1. Collaterals

The regular repayment of credit facilities is directly connected with the obligors’ viability and
prospects, the strength of the companies and their shareholders, the sector in which they operate
and the current market conditions, as well as other unforeseeable factors that may arise during the
companies’ operating cycle and influence their operations in a positive or negative way.

Collaterals are received both for Wholesale and Retail lending in order to mitigate credit risk that
may arise from the obligor’s inability to fulfill their contractual obligations.

The mitigation tools applied by the Bank include two broad categories: intangible and tangible
collaterals.

2. Intangible Collaterals

Intangible collaterals encompass the protection commitments and mechanisms and form the
framework of the obligations and rights that are typically included and described in specific
contractual documents that bind the Bank and the borrowers during the lending process with
specific commitments. The commitments undertaken involve a third party to substitute for the
primary debtor in the event of the latter’s default or the primary debtor itself (natural or legal
entities) to honor the contractual loan agreements and their prompt repayment to the Bank and on
the other hand the Bank has the right to claim them.

The main type of intangible collateral that the Bank uses to protect the bank against the risk of
losses due to debtor insolvency is the Guarantee (i.e. personal guarantee, corporate guarantee,
letter of guarantee etc.)

3. Tangible Collaterals

Tangible collaterals provide the Bank with the right of possessing ownership on an asset (movable
or immovable).

Tangible collaterals are distinguished between mortgages registered over immovable properties
and mortgages (pledges) on movable assets (e.g., commodities, checks, bills of exchange) or on
claims and rights.

In order to better secure credit facilities granted, mortgage and pledged assets are covered by an
insurance contract, with assignment of the relevant insurance contract to the Bank.

3.1. Mortgages
Mortgages are registered on real estate or immovable assets which can be liquidated as
indicatively reported below:
- Residential Real Estate
- Commercial Real Estate
- Industrial Buildings
- Land
- Ships and aircrafts.

F-122
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

ii) Credit risk mitigation (continued)

Periodic revaluation of mortgaged property

According to Alpha Bank Credit Policy, the existence and the valuation of mortgaged property is
closely monitored. The frequency of the appraisal is usually not exceeding one year, except for
residential real estate properties, for which the reassessment is carried out in an interval of up to 3
years.

All valuations are carried out by certified appraisers (ANEVAR members).

3.2. Pledges

A Pledge is tangible collateral which provides seniority right from a movable asset whose
ownership remains with a third party.

Pledges can be registered on movable assets or on rights that have not been excluded or banned
from exchanges and are liquid as indicatively indicated below:

- Raw materials, products or commodities

- Machinery (movable)
- Bill of Landing,
- Bill of exchange
- Cheques and promissory notes
- Securities
- Deposit
- Any type of claim that can be pledged

Periodic revaluation of pledges

Depending on the right or the underlying asset on which a pledge is registered, the periodic
revaluation varies from one month to one year.

4. Acceptable Value

The Bank calculates the value of the received securities/collaterals based on the potential
proceeds that could arise if and when these are liquidated. This calculation refers to the acceptable
value/haircut of the securities/collaterals provided to the Bank by its obligors.

For the calculation of the forced-sale value, the following need to be considered:

 The quality of the securities/assets

 Their market value
 The degree of ability to liquidate
 The time required for their liquidation
 Their liquidation cost
 The current charges on the assets
 The privileged priority of third parties on the product of liquidation (e.g. Public Sector,
employees, etc.)

F-123
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

ii) Credit risk mitigation (continued)

The above have to be accounted for when determining the haircuts for each collateral/security.
Haircuts, depending on their nature are expressed as a percentage of their market value, their
nominal value or their weighted average value.

iii) Exposure to credit risk

Forbearance

Maintaining a healthy loan portfolio depends on the constant monitoring and assessment of the
borrowers in order to allow early identification and detection of future liquidity problems, which will
affect the normal repayment of their obligations to the Bank.

The credit tools which are normally used by the Bank for managing the liquidity problems that
borrowers are facing for repaying their obligations are the restructuring of debt through the
renegotiation of the original terms and conditions of the loan agreement they have entered into.

In the context of the Commission Implementing Regulation (EU) 227/2015 of the European
Committee dated 9 January 2015 and the executive technical standards of European Banking
Authority, translated in NBR Order 6/2014, the Bank assumes the resulting regulatory obligations
for forborne exposures.

Forbearance measures should be applied on the basis of the risk, cooperativeness and viability of
each debtor and consist of concessions that are robust and sustainable, through the renegotiation
of the initial terms and conditions of the debt contract duly taking into account the causes of the
debtor’s financial difficulties.

The existence of more favorable terms for renegotiating and modifying the terms and conditions of
the bilateral arrangement between the Bank and the debtor, who is facing or is about to face
difficulties in meeting his financial commitments (“financial difficulty”), are defined with respect to:

 Difference in favor of the debtor between the modified and the previous terms of the
contract.

 Cases where a modified contract includes more favorable terms than other debtors with a
similar risk profile could have obtained from the same institution.

Monitoring of forborne exposures

Following the Alpha Bank Group guidance, the Bank has undertaken a series of actions to ensure
adherence to the supervisory obligations and requirements.

 Adaptation of Information Systems of the Bank.

 Amendments of the existing processes, e.g. customization of new types of forborne
exposures.

F-124
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

iii) Exposure to credit risk (continued)

Write-offs and write-downs of bad debts

Bad Debt Write-off is defined as the reduction of the gross carrying amount of a financial asset,
when there is no reasonable expectation of recovery. The write-off refers to the accounting write-
off of a debt or a portion of it, i.e. the removal of the financial asset or part of it from the balance
sheet, which does not necessarily entail the waiver of the legal right to recover the debt.

Bad Debt Write-down is defined as the definitive reduction of a debt or portion of it, as a result of
a legally binding decision or agreement (court judgment, contractual agreement etc.), which is not
further claimable.

Indicative conditions for the submission of proposals for writing-off a part or the whole of bad debts
include, but are not limited to, the following:

 The relevant Agreements with the Customers have been terminated.

 Payment Orders have been issued against all liable parties to such Agreements.
 The actions regarding the investigation of immovable property have been completed
without any results.
 The procedure for the registration of encumbrances, in accordance with the Non-
Performing Loans Manuals in force for Wholesale Banking and Retail Banking,
respectively, has been completed.
 At least one real estate property has been auctioned, so that the preferential claims
(through the final creditor’s classification list) and, by extension, the Bank’s potential losses,
are finalised.
 In cases where the likelihood of further recovery of the debt is considered to be particularly
low, due to:

o the fact that the debtors are placed under special liquidation;
o the proven existence of preferential claims of a significant amount and the adoption
of a decision to cease litigation actions, in order to avoid non-collectable
enforcement costs;
o the fact that further litigation actions seeking collection of the claim is economically
unprofitable (e.g. low-value collateral);

then proceeding with the write-off requires the existence of an impairment provision in the same
amount, established no later than in the quarter preceding the submission of the proposal.

Definitions

The following definitions are applied in order to complete the following tables:

The Public Sector includes:

 The Central Government (all departments or Ministries and Public Administration)

 Local Authorities
 Companies dedicated to public sector activities

F-125
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

iii) Exposure to credit risk (continued)

Past Due Exposures

Past due exposures are defined as exposures that are more than one day past due.

Non-Performing Exposures

An exposure is considered as non-performing when one of the following criteria is satisfied:

 The exposure is more than 90 days past due

 An exposure against which legal actions have been undertaken by the Bank.
 The debtor is assessed as unlikely to pay its credit obligations in full without realization of
collateral.
 The exposure is classified as impaired (as defined below)
 The exposure is classified as forborne non-performing exposure, as defined in the
Implementing Regulation (EU) 575/09.01.2015, amending Implementing Regulation (EU)
No 680/2014 laying down implementing technical standards with regard to supervisory
reporting of institutions according to Regulation (EU) No 575/2013 of the European
Parliament.

More specifically, a non-performing exposure with forbearance measures includes the following:

 exposures which were non-performing prior to the extension of forbearance measures

 forborne exposures which have been reclassified from the performing exposures category,
including exposures under probation (forborne performing having been reclassified out of
the Forborne Non Performing Loan (FNPL) status) having been re-forborne or that are
more than 30 days past-due.

Performing Exposures

An exposure is considered as performing when the following criteria are met:

 The exposure is less than 90 days past due

 No legal actions have been undertaken against the exposure.
 The situation of the debtor has improved to the extent that full repayment, according to the
original or when applicable the modified conditions, is likely to be made.
 The exposure is not classified as impaired or
 The exposure is classified as forborne performing exposure, as defined in the
aforementioned Implementing Regulation (EU) 575/09.01.2015.

Unlikely to Pay Exposures For the Legal Entities Portfolios, the following exposures are
considered as unlikely to pay:

 Debtors that have been denounced in the competent Non-Performing Loans Unit and their
exposures are less than 90 days past due;
 Debtors with exposures for which an impairment amount has been allocated following the
individual assessment for impairment and with exposures of less than 90 days past due.

F-126
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

iii) Exposure to credit risk (continued)

For the retail Banking Portfolio, the following exposures are considered as unlikely to pay:
 Customers under the protection of the Law 151/2015. (Bankruptcy Law for Individuals);
 Customers that have notified the Bank their intent to give in the immovable property to the
bank in order to close the debt from the mortgage contract, based on the provisions of the
Law No. 77/ 2016 regarding the give in of the immovable property in order to close the
loans obligations;
 Fraudulent cases;
 Deceased Customers or Customers with heavy health problems;
 The legal entity is no longer active.

Impaired Exposures

Impaired exposures are defined as follows:

a. Exposures for which an impairment amount has been allocated following the individual
assessment for impairment;
b. Exposures in arrears more than 90 days or under legal workout/ actions status, for which
an impairment amount has been allocated following the collective assessment for
impairment;
c. Exposures of debtors assessed as unlikely to pay;
d. Forborne nonperforming exposures belonging to individuals, with delays of up to 90 days.

Allowances for impairment

The Bank estimates an allowance for impairment losses on assets carried at amortized cost that
represents its estimate of incurred losses in its loan. Assets carried at fair value through profit and
loss are not subject to impairment testing as the measure of fair value reflects the credit quality of
each asset. The allowance for impairment is determined both through individual and collective
assessment, in accordance with internal methodology described in accounting policy 3.n).

During 2017, the Bank implemented important balance-sheet cleansing measures. Thus, with
respect to retail – individuals’ portfolios, nonperforming exposures reaching some RON 68 million
were sold in Q3 2017. For the legal entities portfolios, nonperforming exposures reaching some
RON 785 million were reclassified as Held for sale during December 2017, these exposures are to
be sold in the first half of 2018.

Following the same approach as in previous years, with respect to the estimates and judgments
used in computation of allowances for impairment for exposures on insolvent customers, the
haircuts applied to the collaterals were the maximum allowed by the internal procedure, the only
cash-flow considered was from liquidation or foreclosure of collaterals.

As of 31 December 2017, the Bank’s portfolio of loans to companies undergoing insolvency

procedures (excluding exposures held for sale) had total gross exposure of RON 225.4 million (31
December 2016: RON 628 million) for which the Bank recorded allowances for impairment
amounting RON 138.7 million (31 December 2016: RON 428.6 million). These exposures are
covered with collaterals (value of collaterals discounted based on recovery rates and recovery
periods) totalling RON 89 million (31 December 2016: RON 197 million).

F-127
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)

iii) Exposure to credit risk (continued)

Following the enactment of Law 77/2016 on full settlement of mortgage/home equity loans (“the
Law”) on 13 May 2016, the Bank performed a reassessment of the probability of default and loss
given default for the loan exposures subject to the Law. Also, all exposures with a valid settlement
notification received were marked as default.

The Bank made use of historical evidence when estimating the probabilities of default for loans
subject to the law, and of expert judgment when estimating the loss given default.

As of 31 December 2017, the Bank’s portfolio of loans to individuals with active settlement
notification received had a total gross exposure of RON 62.3 million, for which the Bank recorded
allowances for impairment amounting RON 31.5 million. These exposures are covered with
collaterals (current market value) totaling RON 41.2 million.

As a note, at December 2017 no property has been taken in property by the Bank as a result of the
settlement following the Law provisions.

On 25 October 2016 the Romanian Constitutional Court accepted the unconstitutional exception
and declared that Art.11 in the Law is constitutional only to the extent that a court of law verifies
the conditions related to the existence of the unpredictability concept under the Civil Code from
1864 (that is applicable up to the enactment of the new Civil Code in 2011). In substance,
unpredictability occurs when an exceptional event took place and that could not be reasonably
foreseen by the parties as at the contract date, fact that makes the enforcement of the contract to
be an excessively onerous obligation for the debtor. The verification of these conditions is to be
done by a Court of Law, on a case by case basis, by ruling either the application or termination of
the contract.

Additionally, the Romanian Constitutional Court declared unconstitutional the following part of
Art.11 of the Law “as well as the devaluation of real estates”, considering that in substance, the
object of the loan contract is represented by amounts of money and not by real estate assets.

F-128
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)
iii) Exposure to credit risk (continued)
I. Financial instruments credit risk
31.12.2017 31.12.2016
Exposure Exposure
before Net exposure before Net exposure
impairment Impairment to credit risk impairment Impairment to credit risk
Α. Credit risk exposure relating to balance sheet
items

Balances with Central Banks 1,791,280 - 1,791,280 2,263,731 - 2,263,731

Due from Banks 914,671 - 914,671 537,495 - 537,495
Loans and advances to customers 11,372,182 433,847 10,938,335 11,402,108 1,066,338 10,335,770
Derivative Financial Assets 1,566 - 1,566 3,106 - 3,106
Available for sale securities
- Available for sale (Government bonds) 1,311,544 - 1,311,544 1,212,962 - 1,212,962
- Available for sale securities (other) 11,941 143 11,798 39,594 - 39,594

Total available for sale securities 1,323,485 143 1,323,342 1,252,556 - 1,252,556

Assets Held for Sale (Note 19) 256,953 - 256,953 - - -

Total carrying amount of on balance sheet items

exposed to credit risk (a) 15,660,137 433,990 15,226,147 15,458,996 1,066,338 14,392,658
Other on balance sheet items not exposed to credit risk 409,771 - 409,771 339,586 - 339,586

Total assets 16,069,908 433,990 15,635,918 15,798,582 1,066,338 14,732,244

B. Credit risk exposures relating to off balance

sheet items:
Letters of guarantee and letters of credit (Note 28) 429,373 3,117 426,256 613,399 11,087 602,312
Undrawn credit facilities (Note 28) 1,262,564 - 1,262,564 1,152,658 - 1,152,658

Total carrying amount of off balance sheet items

exposed to credit risk (b) 1,691,937 3,117 1,688,820 1,766,057 11,087 1,754,970

Total credit risk exposure (a+b) 17,352,074 437,107 16,914,967 17,225,053 1,077,425 16,147,628

F-129
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit risk (continued)
iii) Exposure to credit risk (continued)
II. Loans and advances to customers by asset quality
31.12.2017
Non impaired L&As Impaired L&As Impairment Allowance
Neither
past due Past due
nor but not Individually Collectively Total Gross Individually Collectively Total Net Value of
impaired impaired assessed assessed amount assessed assessed amount collateral

Retail Lending 4,881,769 723,739 180,244 213,400 5,999,152 121,577 132,250 5,745,325 5,046,023
Mortgage 4,099,993 565,969 101,583 125,700 4,893,245 69,510 63,965 4,759,770 4,585,484
Consumer 706,717 146,434 78,534 84,494 1,016,179 51,941 64,623 899,615 457,933
Credit Card 72,060 11,336 127 3,121 86,644 126 3,615 82,903 -
Other (Incl.
SBL) 2,999 - - 85 3,084 - 47 3,037 2,606

Corporate
Lending 4,999,252 68,688 272,650 14,620 5,355,210 141,172 38,824 5,175,214 4,680,742

Large 4,528,086 50,305 263,287 3,787 4,845,465 136,079 29,580 4,679,806 4,284,305
SMEs 471,166 18,383 9,363 10,833 509,745 5,093 9,244 495,408 396,437

Public Sector 16,292 1,528 - - 17,820 - 24 17,796 17,795

Greece - - - - - - - - -
Other Countries 16,292 1,528 - - 17,820 - 24 17,796 17,795

Total 9,897,313 793,955 452,894 228,020 11,372,182 262,749 171,098 10,938,335 9,744,560

The amount of RON 433.8 million of impairment allowance is composed by: RON 74.8 million non-impaired loans and RON 359 million for impaired loans.

The accumulated impairment allowance for collectively assessed loans and advances includes an amount of RON 74.8 million concerning IBNR provisions related to
non-impaired loans.

F-130
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

II. Loans and advances to customers by asset quality (continued)

31.12.2016
Non impaired L&As Impaired L&As Impairment Allowance
Neither
past due Past due Total
nor but not Individually Collectively Gross Individually Collectively Total Net Value of
impaired impaired assessed assessed amount assessed assessed amount collateral

Retail Lending 4,551,808 599,912 195,018 270,756 5,617,494 131,144 210,790 5,275,560 4,619,047
Mortgage 3,827,709 451,888 111,335 119,242 4,510,174 74,713 85,465 4,349,996 4,150,753
Consumer 651,500 138,199 83,484 134,763 1,007,946 56,237 108,991 842,718 466,146
Credit Card 70,332 9,684 199 16,751 96,966 194 16,292 80,480 -
Other (Incl.
SBL) 2,267 141 - - 2,408 - 42 2,366 2,148

Corporate
Lending 4,601,151 30,287 1,039,107 62,269 5,732,814 653,467 70,043 5,009,304 5,138,161

Large 4,190,712 14,107 976,120 31,346 5,212,285 613,006 53,989 4,545,290 4,709,138
SMEs 410,439 16,180 62,987 30,923 520,529 40,461 16,054 464,014 429,023

Public Sector 50,032 1,768 - - 51,800 - 894 50,906 27,344

Greece - - - - - - - - -
Other Countries 50,032 1,768 - - 51,800 - 894 50,906 27,344

Total 9,202,991 631,967 1,234,125 333,025 11,402,108 784,611 281,727 10,335,770 9,784,552

The amount of RON 1,066.3 million of impairment allowance is composed by: RON 97.2 million non-impaired loans and RON 969.1 million for impaired loans.
The accumulated impairment allowance for collectively assessed loans and advances includes an amount of RON 97.2 million concerning IBNR provisions related to
non-impaired loans.

F-131
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

III. Analysis of neither past due nor impaired loans and advances to customers
31.12.2017
Watch
List Total neither
(higher past due nor Value of
Strong Satisfactory Risk) impaired collateral

Retail Lending 4,878,770 2,999 - 4,881,769 4,207,711

Mortgage 4,099,993 - - 4,099,993 3,918,001
Consumer 706,717 - - 706,717 287,189
Credit Card 72,060 - - 72,060 -
Other (Incl.
SBL) - 2,999 - 2,999 2,521

Corporate
Lending 649,565 4,314,742 34,945 4,999,252 4,356,159
Large 623,343 3,882,638 22,105 4,528,086 3,989,128
SMEs 26,222 432,104 12,840 471,166 367,031

Public Sector 741 15,551 - 16,292 16,267

Greece - - - - -
Other Countries 741 15,551 - 16,292 16,267

Total 5,529,076 4,333,292 34,945 9,897,313 8,580,137

The behavior scoring system for individuals applicable for IFRS9 is under implementation and will allow a
more granular classification of retail clients (individuals), including the ones neither past due, nor impaired.
Currently all clients are included in the Strong category, including the Forborne ones presented in note
4.b.iii.IX – Analysis of forborne loans and advances to customers. Out of the remaining, amounting RON
4,850 million, RON 10 million (0.21%) are included in the lowest rating categories and/ or unrated.

31.12.2016
Watch
List Total neither
(higher past due nor Value of
Strong Satisfactory Risk) impaired collateral

Retail Lending 4,549,541 2,267 - 4,551,808 3,905,705

Mortgage 3,827,709 - - 3,827,709 3,606,484
Consumer 651,500 - - 651,500 297,214
Credit Card 70,332 - - 70,332 -
Other (Incl. SBL) - 2,267 - 2,267 2,007

Corporate Lending 386,735 4,097,793 116,623 4,601,151 4,320,363

Large 385,123 3,704,177 101,412 4,190,712 3,981,425
SMEs 1,612 393,616 15,211 410,439 338,938

Public Sector 811 49,221 - 50,032 25,576

Greece - - - - -
Other Countries 811 49,221 - 50,032 25,576

Total 4,937,087 4,149,281 116,623 9,202,991 8,251,644

F-132
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

As of December 2016 all clients were included in the Strong category, including the Forborne ones presented in note 4.b.iii.IX – Analysis of forborne
loans and advances to customers. Out of the remaining, amounting RON 4,455 million, RON 8 million (0.18%) are included in the lowest rating
categories and/ or unrated.

IV. Analysis of Past due but not impaired loans and advances to customers

31.12.2017
Retail Lending Corporate Lending Public Sector Total Past
Other (Incl. Other due but not
Mortgage Consumer Credit Card SBL) Large SMEs Countries impaired

1-30 days 435,910 106,829 9,381 - 40,623 13,643 - 606,386

31-60 days 85,303 23,010 1,428 - 9,682 1,694 - 121,117
61-90 days 44,756 16,595 527 - - 3,046 1,528 66,452
91-180 days - - - - - - - -
181-360 days - - - - - - - -
>360 days - - - - - - - -

Total 565,969 146,434 11,336 - 50,305 18,383 1,528 793,955

Value of collateral 521,429 76,369 - - 47,367 14,145 1,528 660,838

F-133
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

31.12.2016
Retail Lending Corporate Lending Public Sector
Other Total Past
Credit (Incl. Other due but not
Mortgage Consumer Card SBL) Large SMEs Countries impaired

1-30 days 339,458 95,905 7,586 - 14,107 12,350 1,768 471,174

31-60 days 71,320 27,038 1,385 50 - 2,134 - 101,927
61-90 days 41,110 15,256 713 91 - 1,696 - 58,866
91-180 days - - - - - - - -
181-360 days - - - - - - - -
>360 days - - - - - - - -

Total 451,888 138,199 9,684 141 14,107 16,180 1,768 631,967

Value of collateral 401,273 77,291 - 141 10,322 13,183 1,768 503,978

F-134
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

V. Aging analysis of Impaired loans and advances to customer by product line

31.12.2017

Retail Lending Corporate Lending

Other
Mortgage Consumer Credit Card (Incl. SBL) Large SMEs Total

Not past due 20,731 15,645 16 - 64,530 848 101,770

1-30 days 9,006 5,841 9 - 8,795 915 24,566
31-60 days 4,197 1,936 17 - 262 3,329 9,741
61-90 days 20,542 10,867 3 - - 57 31,469
91-180 days 11,224 5,780 407 - 1,189 178 18,778
181-360 days 6,146 4,958 418 - - 4,304 15,826
>360 days 41,019 23,027 231 58 52,934 2,457 119,726

Total net amount 112,865 68,054 1,101 58 127,710 12,088 321,876

Value of collateral 146,054 94,375 - 85 247,810 15,261 503,585

F-135
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

31.12.2016
Retail Lending Corporate Lending
Credit Other
Mortgage Consumer Card (Incl. SBL) Large SMEs Total

Not past due 15,540 16,674 37 - 158,456 2,979 193,686

1-30 days 6,244 6,131 15 - 18,133 6,472 36,995
31-60 days 10,459 6,076 4 - 38,487 2,961 57,987
61-90 days 13,074 8,179 4 - 312 583 22,152
91-180 days 16,298 8,751 414 - 3,327 5,550 34,340
181-360 days 18,213 7,383 449 - 38,990 859 65,894
>360 days 25,063 20,858 987 - 117,184 22,869 186,961

Total net amount 104,891 74,052 1,910 - 374,889 42,273 598,015

Value of collateral 142,996 91,641 - - 717,391 76,902 1,028,930

F-136
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

VI. Loan-to value ratio (LTV) of mortgage lending

Mortgages 31.12.2017 31.12.2016

Less than 50% 414,342 317,106

50%-70% 695,642 516,217
71%-80% 770,728 405,696
81%-90% 724,685 709,362
91%-100% 926,214 964,507
101%-120% 677,425 796,105
121%-150% 348,910 391,523
Greater than 150% 335,299 409,658

Total exposure 4,893,245 4,510,174

Avg LTV 80% 88%

VII. Repossessed collaterals

Details of assets recognized by the Bank during the year by taking possession of collateral held as
security against loans and advances at the year-end are shown below:

31.12.2017
Balance Sheet balances Disposals during the year
Carrying
amount of
collaterals Net gain/
repossessed Of which in Net sale (loss) on
31.12.2017 2017 Disposals price disposal

Real estate 13,972 3,666 1,695 584 172

- Residential 12,469 3,666 1,695 584 172
- Commercial 1,503 - - - -
Other - - - - -

31.12.2016
Balance Sheet balances Disposals during the year
Market value of
collaterals Net gain/
repossessed Of which in Net sale (loss) on
31.12.2016 2016 Disposals price disposal

Real estate 12,001 968 75 98 23

- Residential 9,326 968 75 98 23
- Commercial 2,675 - - - -
Other - - - - -
(Please see note 19)

F-137
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

VIII. Breakdown of collateral and guarantees

31.12.2017
Value of collateral received
Real Total
estate Financial Other value of Guarantees
collateral collateral collateral collateral received

Retail Lending 4,274,222 30,442 741,359 5,046,023 32,735

Corporate Lending 3,230,332 567,141 883,269 4,680,742 5,421,228
Public Sector - - 17,795 17,795 300

Total 7,504,554 597,583 1,642,423 9,744,560 5,454,263

31.12.2016
Value of collateral received
Real Total
estate Financial Other value of Guarantees
collateral collateral collateral collateral received

Retail Lending 3,795,990 30,006 793,051 4,619,047 34,480

Corporate Lending 3,613,037 569,277 955,847 5,138,161 5,431,367
Public Sector 1,162 - 26,182 27,344 100

Total 7,410,189 599,283 1,775,080 9,784,552 5,465,947

Guarantees received include corporate and personal guarantees.

F-138
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)
iii) Exposure to credit risk (continued)
IX. Analysis of forborne loans and advances to customers
31.12.2017
Of which
Total amount Consumer
Total amount of of forborne Mortgage loans (incl. Large
L&As L&As loans Credit cards) Corporate SMEs
Neither past due nor impaired 9,897,313 127,355 16,309 12,441 95,406 3,199
Past due but not impaired 793,955 36,272 15,645 6,627 12,353 1,647
Impaired 680,914 434,911 156,887 118,846 153,391 5,787
Total Gross Amount 11,372,182 598,538 188,841 137,914 261,150 10,633
Individual Impairment Allowance 262,749 152,044 63,058 45,821 43,094 71
Collective Impairment Allowance 171,098 71,075 21,990 21,374 26,748 963
Total Net Amount 10,938,335 375,419 103,793 70,719 191,308 9,599
Value of collateral 9,744,560 424,894 121,677 88,144 205,181 9,892

31.12.2016
Of which
Total amount Consumer
Total amount of of forborne Mortgage loans (incl. Large
L&As L&As loans Credit cards) Corporate SMEs
Neither past due nor impaired 9,202,991 239,935 57,347 37,642 139,434 5,512
Past due but not impaired 631,967 59,991 31,988 25,324 - 2,679
Impaired 1,567,150 788,305 159,325 143,977 465,412 19,591
Total Gross Amount 11,402,108 1,088,231 248,660 206,943 604,846 27,782
Individual Impairment Allowance 784,611 343,162 65,965 49,011 227,105 1,081
Collective Impairment Allowance 281,727 84,920 29,320 41,012 9,541 5,047
Total Net Amount 10,335,770 660,149 153,375 116,920 368,200 21,654
Value of collateral 9,784,552 823,505 167,917 105,141 523,582 26,865

F-139
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

The other assets exposed to credit risk are classified based on counterparty’s country risk as following:

X. Credit quality per class of other financial assets

31.12.2017
Balances with Due from Derivative Available for Sale
Central Banks Banks Financial Assets (AFS) securities Total

AAA - - - - -
AA+ to AA- - 4,364 - 73 4,437
A+ to A- - 39,900 - 10,737 50,637
BBB+ to BBB- 1,791,280 181,345 - 1,312,598 3,285,223
Lower than BBB- - 689,062 1,566 77 690,705
Unrated - - - - -

Exposure before Impairment 1,791,280 914,671 1,566 1,323,485 4,031,002

Allowances for impairment - - - 143 143

Carrying amount 1,791,280 914,671 1,566 1,323,342 4,030,859

F-140
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

31.12.2016
Balances with Due from Derivative Available for Sale
Central Banks Banks Financial Assets (AFS) securities Total

AAA - - - - -
AA+ to AA- - 2,103 - 73 2,176
A+ to A- - 34,087 - 8,150 42,237
BBB+ to BBB- 2,263,731 131,635 - 1,244,256 3,639,622
Lower than BBB- - 369,670 3,106 77 372,853
Unrated - - - - -

Exposure before Impairment 2,263,731 537,495 3,106 1,252,556 4,056,888

Allowances for impairment - - - - -

Carrying amount 2,263,731 537,495 3,106 1,252,556 4,056,888

F-141
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

b) Credit Risk (continued)

iii) Exposure to credit risk (continued)

XI. Risk concentrations of the maximum exposure to credit risk

Concentration Risk is a specific form of credit risk and arises due to low degree of
diversification between counterparties or group of counterparties, sectors, geographic
regions, or collaterals.

The Bank monitors on a regular basis concentration risk through detail reporting which
informs Senior management and the Board of Directors. According to the supervisory
framework, the Bank complies with the regulatory directives regarding large exposures,
while the capital requirements for single name and sector concentration risks are estimated
in the context of Pillar 2 of Basel III.

An industry sector analysis of the Bank’s financial assets exposed to credit risk, before and after
taking into account all the collaterals held by the Bank is as follows.

31-Dec-17 31-Dec-16*
Gross Net Gross Net
maximum maximum maximum maximum
exposure exposure exposure exposure

Financial Institutions 2,978,272 2,719,419 3,040,493 2,844,991

Manufacturing 585,064 37,516 496,512 94,004
Real Estate & Construction 2,603,414 44,784 2,935,205 299,573
Wholesale and Retail Trade 864,850 13,766 922,389 112,316
Public Sector 1,329,364 1,311,568 1,264,762 1,213,856
Hotels & Tourism 219,194 2,076 172,296 6,821
Other Industries 1,079,785 81,797 1,012,254 209,773
Individuals 6,000,194 253,780 5,615,085 341,892

Total 15,660,137 4,464,706 15,458,996 5,123,226

*See note 2f)

XII. Exposure to higher risk Eurozone countries

For the purpose of this disclosure higher risk Eurozone country was considered Greece, therefore
the table below set out the Bank direct exposure to this country:

31-Dec 31-Dec
2017 2016

Due from other banks 688,996 369,581

Financial assets available-for-sale - 30,240

Total 688,996 399,821

As at 31 December 2017, the direct exposure refers to deposits placed to banks (mainly
placements with Alpha Bank A.E). No impairment was recorded for the above exposures.

F-142
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

c) Market risk

Market risk is the risk of reduction in economic value arising from unfavorable changes in the value
or volatility of interest rates, foreign exchange rates, stock exchange indices, equity prices and
commodities. Losses may also occur either from the trading portfolio or from the Assets-Liabilities
management.

The Bank identifies, measures, monitors and controls Market risk through established risk
management framework- policies, procedures and working directions. The Market Risk
Management Policy provides the framework and principles for the effective management of
market risks.

Within the scope of policy-making for financial risk management exposure limits and maximum loss
limits (stop loss) have been set. In particular, the following limits have been set for the following
risks:

 Foreign currency risk

 Interest rate risk on bond positions

 Credit risk regarding interbank transactions

Positions held are monitored on a daily basis and are examined for the corresponding limit
percentage cover and for any limit excess.

d) Currency risk

The Bank is exposed to currency risk (Foreign exchange risk) through transactions in foreign
currencies against RON. The Bank manages its exposure to movements in exchange rates by
modifying its assets and liabilities mix. The main foreign currencies held by the Bank are EUR and
USD. On the Romanian market, exchange rates have certain degree of volatility, therefore open
foreign exchange positions represent a source of currency risk. In order to limit losses arising from
adverse movements in exchange rates, the Bank is currently pursuing the policy of maintaining an
overall balanced foreign exchange position.

Foreign currency risk is the risk of reduction in economic value arising from adverse changes in the
value or volatility of foreign exchange rates to record losses for ON or OFF balance sheet positions
or not to achieve the estimated profits due to the fluctuations on the market of the foreign
exchange rate. The object of the identification, assessment, monitoring and management of the
foreign currency risk is represented, according to the Bank’s policies and procedures, by the
elements denominated in foreign currency.

F-143
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

d) Currency risk (continued)

Concentration of assets and liabilities:

2017 Local Other

Currency EUR Currencies Total
RON’000 RON’000 RON’000 RON’000
ASSETS
Cash and balances with National
Bank of Romania 719,365 1,296,224 28,725 2,044,314
Due from other banks 120,024 713,761 80,886 914,671
Available-for-sale securities and
Investments in associates 1,313,326 83 10,737 1,324,146
Loans and advances to customers 4,207,548 6,691,620 39,167 10,938,335
Derivative financial assets 1,566 - - 1,566
Property and equipment 91,803 - - 91,803
Intangible fixed assets 17,800 - - 17,800
Other assets 93,643 205,401 4,239 303,283

TOTAL ASSETS 6,565,075 8,907,089 163,754 15,635,918

2017 Local Other

Currencie
Currency EUR s Total
RON’000 RON’000 RON’000 RON’000
LIABILITIES
Due to banks 3,072 3,363,847 2,379 3,369,298
Due to customers 4,618,713 4,247,504 574,079 9,440,296
Other borrowed funds 234,546 (1,755) - 232,791
Derivative financial liabilities 1,714 - - 1,714
Subordinated debt - 723,978 - 723,978
Other liabilities and provisions 90,332 10,194 1,759 102,285
Deferred tax liabilities 1,346 - - 1,346

Total liabilities 4,949,723 8,343,768 578,217 13,871,708

Net balance sheet position 1,615,352 563,321 (414,463) 1,764,210

Derivative forward foreign
exchange position 109,081 (528,395) 420,561 1,247

Total foreign exchange position 1,724,433 34,926 6,098 1,765,457

F-144
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

d) Currency risk (continued)

2016* Local Other

Currency EUR Currencies Total
RON’000 RON’000 RON’000 RON’000
ASSETS
Cash and balances with National
Bank of Romania 622,095 1,801,548 21,973 2,445,616
Due from other banks 100,005 393,760 43,730 537,495
Available-for-sale securities and
Investments in associates 1,215,051 30,321 8,150 1,253,522
Loans and advances to customers 3,372,114 6,906,094 57,562 10,335,770
Derivative financial assets 3,106 - - 3,106
Property and equipment 96,552 - - 96,552
Intangible fixed assets 7,336 - - 7,336
Other assets 49,591 3,060 196 52,847

TOTAL ASSETS 5,465,850 9,134,783 131,611 14,732,244

LIABILITIES
Due to banks 9,285 4,461,667 1,090 4,472,042
Due to customers 4,526,265 2,904,450 487,771 7,918,486
Other borrowed funds 5,529 547 - 6,076
Derivative financial liabilities 2,870 1,378 - 4,248
Subordinated debt - 705,540 - 705,540
Other liabilities and provisions 59,376 14,058 801 74,235
Deferred tax liability 708 - - 708

Total liabilities 4,604,033 8,087,640 489,662 13,181,335

Net balance sheet position 861,816 1,047,143 (358,050) 1,550,909

Derivative forward foreign
exchange position 657,000 (869,837) 215,165 2,328

Total foreign exchange position 1,518,816 177,306 (142,885) 1,553,237

* See note 2f)

F-145
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

d) Currency risk (continued)

Sensitivity analysis – Foreign Exchange risk

Volumes as at Impact on net income

31/12/17 Changes in ER before tax
+ - + -

Assets 8,910,502 5.00% -5.00% 445,525 (445,525)

EUR Liabilities (8,875,466) 5.00% -5.00% (443,773) 443,773
Assets 460,403 5.00% -5.00% 23,020 (23,020)
USD Liabilities (460,783) 5.00% -5.00% (23,039) 23,039
Assets 6,674,176 5.00% -5.00% - -
RON Liabilities (4,949,811) 5.00% -5.00% - -

1,733 (1,733)

Volumes as at Impact on net income

31/12/16 Changes in ER before tax
+ - + -

Assets 9,134,783 5.00% -5.00% 456,739 (456,739)

EUR Liabilities (8,957,475) 5.00% -5.00% (447,874) 447,874
Assets 289,098 5.00% -5.00% 14,455 (14,455)
USD Liabilities (405,318) 5.00% -5.00% (20,266) 20,266
Assets 6,122,849 5.00% -5.00% - -
RON Liabilities (4,604,034) 5.00% -5.00% - -

3,054 (3,054)

The Foreign Exchange risk is measured by applying Value at Risk (VaR) methodology, scenario
analysis and stress testing. The method applied for calculating Value at Risk (VaR) is historical
simulation. The Bank uses a holding period of one and ten days, depending on the time which is
required to liquidate the portfolio.

Total Forex VaR, 99% confidence interval (1 year historical data)

Year 2017 2016

Daily 10 day Daily 10 day
EUR ths. EUR ths. EUR ths. EUR ths.

31 December 16.08 40.86 24.07 75.15

average daily value 32.17 26.63
maximum daily value 80.97 60.38
minimum daily value 9.95 7.89

The VaR methodology is complemented with scenario analysis and stress testing, in order to
estimate the potential size of losses that could arise from the trading portfolio for hypothetical as
well as historical extreme movements of market parameters.

F-146
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

e) Financial risks of the banking portfolio

The financial risks of the banking portfolio derive from the structure of assets and liabilities and
primarily from the portfolio of loans and deposits. The financial risks of the banking portfolio
concern the interest rate risk and the liquidity risk.

The Bank incurs interest rate risk from its financial intermediation activity, principally in the form of
exposure to adverse changes in the market interest rates. In the context of analysis of the banking
portfolio, Interest Rate Gap Analysis is performed. Assets and liabilities are allocated on time
buckets according to their re-pricing date for variable interest rate instruments, or according to their
maturity date for fixed rate instruments. Exceptions are made for assets and liabilities without
predefined maturities or other balance sheet items which exhibit strong behavioral characteristics.
For these products allocation on residual maturity buckets, conventions are applied according to
their transactional behavior (based on statistical models).

The main sources of interest rate risk arises when mismatches correlation exist between the
maturity (for fixed interest rates) or re-pricing date (for floating interest rates) of the interest-bearing
assets and liabilities, adverse evolution of the slope and shape of the yield curve (the unparalleled
evolution of the interest rate yields of the interest-earning assets and interest-earning liabilities),
mismatches correlation in the adjustments of the rates earned and paid on different instruments
with otherwise similar re-pricing characteristics and the options embedded in the Bank’s products.

Asset-liability risk management activities are conducted in the context of the Bank’s sensitivity to
interest rate changes. The Bank generally grants loans with floating interest rates, according to the
Bank’s policy and also with indexed interest rates (which re-price based on reference interest rates
like ROBOR, EURIBOR, LIBOR). On the deposit side, the Bank offers mainly products with fixed
interest rates.

The Bank is exposed to various risks associated with the effects of fluctuations in the prevailing
levels of market interest rates on its financial position and cash flows.

Interest margins may increase as a result of such changes but may reduce or create losses in the
event that unexpected movements arise. Within the Risk Appetite Framework the management
sets out level of risk for interest rate risk that the Bank is willing to take in pursuit of its business
objectives, which is monitored quarterly (emergency review mechanism).

F-147
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

e) Financial risks of the banking portfolio (continued)
The tables below analyze assets and liabilities of the Bank into relevant re-pricing groupings as at 31 December 2017:
Up to 1 1 to 3 3 to 12 Over 1 Non-interest
month months months Year bearing Total

Assets
Cash and balances with National Bank of
Romania 1,791,280 - - - 253,034 2,044,314
Due from other banks 680,806 233,865 - - - 914,671
Available-for-sale securities 314,026 109,623 762,522 125,373 11,798 1,323,342
Investments in associates - - - - 804 804
Loans and advances to customers 8,996,988 46,784 350,774 1,543,789 - 10,938,335
Property and equipment - - - - 91,803 91,803
Intangible fixed assets - - - - 17,800 17,800
Derivative financial assets - - - - 1,566 1,566
Other assets - - - - 303,283 303,283
Total assets 11,783,100 390,272 1,113,296 1,669,162 680,088 15,635,918
Liabilities
Due to banks 480,284 2,889,014 - - - 3,369,298
Due to customers 2,814,655 2,225,086 2,750,736 1,649,819 - 9,440,296
Other borrowed funds 2,558 230,233 - - - 232,791
Subordinated loan 233,026 490,952 - - - 723,978
Other liabilities - - - - 102,285 102,285
Derivative financial liabilities - - - - 1,714 1,714
Deferred tax liabilities - - - - 1,346 1,346

Total liabilities 3,530,523 5,835,285 2,750,736 1,649,819 105,345 13,871,708

Equity - - - - 1,764,210 1,764,210

Total liabilities and equity 3,530,523 5,835,285 2,750,736 1,649,819 1,869,555 15,635,918
Marginal Gap 8,252,577 (5,445,013) (1,637,440) 19,343 (1,189,467)
Cumulative Gap 8,252,577 2,807,564 1,170,124 1,189,467

F-148
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

e) Financial risks of the banking portfolio (continued)
The tables below analyze assets and liabilities of the Bank into relevant re-pricing groupings as at 31 December 2016:
Up to 1 1 to 3 3 to 12 Over 1 Non-interest
month months months Year bearing Total
Assets
Cash and balances with National Bank of
Romania 2,263,731 - - - 181,885 2,445,616
Due from other banks 537,294 - 201 - - 537,495
Available-for-sale securities 198,992 340,226 589,811 114,173 9,354 1,252,556
Investments in associates* - - - - 966 966
Loans and advances to customers 8,795,139 93,729 1,231,909 214,993 - 10,335,770
Property and equipment - - - - 96,552 96,552
Intangible fixed assets - - - - 7,336 7,336
Derivative financial assets - - - - 3,106 3,106
Other assets - - - - 52,847 52,847
Total assets 11,795,156 433,955 1,821,921 329,166 352,046 14,732,244
Liabilities
Due to banks 1,673,755 2,798,287 - - - 4,472,042
Due to customers 2,654,640 2,152,914 1,975,307 1,135,625 - 7,918,486
Other borrowed funds 6,076 - - - - 6,076
Subordinated loan 227,055 478,485 - - - 705,540
Other liabilities - - - - 74,235 74,235
Derivative financial liabilities - - - - 4,248 4,248
Deferred tax liabilities - - - - 708 708
Total liabilities 4,561,526 5,429,686 1,975,307 1,135,625 79,191 13,181,335
Equity - - - - 1,550,909 1,550,909

Total liabilities and equity 4,561,526 5,429,686 1,975,307 1,135,625 1,630,100 14,732,244
Marginal Gap 7,233,630 (4,995,731) (153,386) (806,459) (1,278,054)
Cumulative Gap 7,233,630 2,237,899 2,084,513 1,278,054
*See note 2f)

F-149
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

e) Financial risks of the banking portfolio (continued)

Average interest bearing assets

Average 2017 Average 2016

Cash and balances with National Bank of Romania 0.05% 0.09%

Due from other banks 1.65% 1.30%
Financial assets 2.32% 2.57%
Loans and advances to customers: 4.02% 4.00%
- Alpha Housing 3.79% 3.72%
- Investment Loans 3.49% 3.49%
- Alpha Personal 6.67% 6.18%
- Auto Loans 5.74% 5.94%
- Financial Institutions 2.15% 1.69%
- Treasury Loans 4.54% 4.60%
- Loans for equipment and stocks finance 3.25% 2.97%
- Other Loans 3.56% 3.81%

Sensitivity analysis – Interest rate risk

The sensitivity of the income statement is the effect of the reasonably possible changes in interest
rates on the net interest income (NII) for one year, based on the floating rate non-trading financial
assets and financial liabilities held at 31 December 2017.

In assessing the interest rate sensitivity analysis the assets without predefined maturities which
exhibit strong behavioral characteristics are allocated on residual maturity buckets considering
conventions according to their transactional behavior (based on statistical models).

Balances as at Changes in I/Y NII Sensitivity

31/12/17 + - + -

Fixed 2,337,374 2.00 (2.00)

Assets Floating 6,273,074 2.00 (2.00) 129,695 ( 35,493)
Fixed (4,829,152) 2.00 (2.00)
EUR Liabilities Floating (4,036,229) 2.00 (2.00) 129,362 ( 18,698)
Fixed 398,533 2.00 (2.00)
Assets Floating 36,982 2.00 (2.00) 8,511 ( 8,375)
Fixed (459,538) 2.00 (2.00)
USD Liabilities Floating - 2.00 (2.00) 7,617 ( 1, 805)
Fixed 2,034,981 2.00 (2.00)
Assets Floating 4,288,718 2.00 (2.00) 101,621 ( 96,755)
Fixed (4,607,812) 2.00 (2.00)
RON Liabilities Floating (234,545) 2.00 (2.00) 60,648 ( 42,470)
Fixed 105,620 2.00 (2.00)
Assets Floating 2,894 2.00 (2.00) 2,133 (105)
Fixed (120,333) 2.00 (2.00)
Other ccy. Liabilities Floating - 2.00 (2.00) 1,979 ( 948)

TOTAL NII 42,354 ( 76,807)

F-150
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

e) Financial risks of the banking portfolio (continued)

Balances as at Changes in I/Y NII Sensitivity

31/12/16 + - + -

Fixed 2,040,256 2.00 (2.00)

Assets Floating 7,107,542 2.00 (2.00) 131,020 ( 25,896)
Liabilitie Fixed (4,107,454) 2.00 (2.00)
EUR s Floating (5,071,053) 2.00 (2.00) 134,431 ( 14,541)
Fixed 337,039 2.00 (2.00)
Assets Floating 49,732 2.00 (2.00) 7,708 ( 3,303)
Liabilitie Fixed (404,533) 2.00 (2.00)
USD s Floating - 2.00 (2.00) 6,753 ( 2,454)
Fixed 2,266,052 2.00 (2.00)
Assets Floating 3,597,965 2.00 (2.00) 95,725 ( 55,617)
Liabilitie Fixed (4,550,165) 2.00 (2.00)
RON s Floating (5,530) 2.00 (2.00) 58,810 ( 41,023)
Fixed 76,624 2.00 (2.00)
Assets Floating 6,660 2.00 (2.00) 1,665 ( 730)
Other Liabilitie Fixed (84,328) 2.00 (2.00)
ccy. s Floating - 2.00 (2.00) 1,364 ( 586)

TOTAL NII 34,760 ( 26,942)

f) Liquidity risk

i) Management of liquidity risk

Liquidity risk is the risk that the Bank will encounter from the potential inability to meet all payments
obligations associated with its financial liabilities that are settled by delivering cash or another
financial asset when they come due.

Liquidity risk arises in the general funding of the Bank’s activities and in the management of the
asset positions. It includes both the risk of being unable to fund assets at appropriate maturities
and rates and the risk of being unable to liquidate an asset at a reasonable price and in an
appropriate time frame.

The Bank has access to a diverse funding base. Funds are raised using a broad range of
instruments including deposits, borrowings and share capital. This enhances funding flexibility,
limits dependence on one source of funds and generally lowers the cost of funds. The Bank
concentrates its efforts to maintain an adequate liquidity such as ensuring the necessary funds to
cover at all times its financial commitments on all time bands. The Bank continually assesses
liquidity risk by identifying and monitoring changes in funding on short and long term, and
diversifying the funding base.

The daily liquidity position is monitored and regular liquidity stress testing is conducted under a
variety of scenarios covering both normal and more severe market conditions. All liquidity policies
and procedures are subject to review and approval by ALCo or Executive Committee.

F-151
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

f) Liquidity risk (continued)

In the context of the Contingency Funding Plan, the Bank monitors on a daily basis Early Warning
Indicators/Triggers while any liquidity risk trigger event or limit breach of any liquidity indicator is
reported to the competent Committee, including proposed contingency measures in order to be
implemented.

Since April 2009, the Bank signed a stand-by agreement with Alpha Bank AE of EUR 130,000,000,
which was extended successively in following years. In 2017 the agreement was extended, also to
cover the possible temporary liquidity requirements of the Bank.

ii) Exposure to liquidity risk

Liquidity indicators are calculated on a regular basis while ALCo and Risk Management Committee
are informed accordingly.

Another indicator used by the Bank to monitor the short term liquidity is the Liquidity Coverage
Ratio (LCR). For this purpose there are considered the followings:

o the net inflow of liquidity for the next 30 days, determined on the basis of predefined
scenarios related to a liquidity crisis, named as short-term financial needs;
o the necessary liquidity buffer to cover the short-term financing needs.

The Liquidity Coverage Ratio calculated regularly, according to the Basel III Directives and local
regulatory requirements, was as follows:

31 December 2017 31 December 2016

779% 979%

The Bank maintains a portfolio of highly marketable and diverse assets that can be easily
liquidated in the event of an unforeseen interruption of cash flow. The Bank also has committed
lines of credit that it could access to meet liquidity needs.

The Bank’s financial liabilities are measured based on undiscounted contractual cash flows,
grouping up the principal amounts with the future interest payments.

Up to 1 1 to 3 3 to 12 Over 1
2017 month months months Year Total

Liabilities
Due to banks 55,293 232,985 948,742 2,132,279 3,369,299
Due to customers 4,592,594 2,097,727 2,552,396 222,577 9,465,294
Other borrowed
funds 384 2,695 9,237 268,599 280,915
Derivative financial
liabilities 1,714 - - - 1,714
Subordinated debt - 3,423 10,270 757,628 771,321
Finance lease
payable 15 16 21 58 110

Total undiscounted
liabilities 4,650,000 2,336,846 3,520,666 3,381,141 13,888,653

F-152
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

f) Liquidity risk (continued)

ii) Exposure to liquidity risk (continued)

Up to 1 1 to 3 3 to 12 Over 1
2016 month months months Year Total

Liabilities

Due to banks 107,127 - 2,775,547 1,589,385 4,472,059

Due to customers 4,060,859 2,051,246 1,819,019 5,088 7,936,212

Other borrowed funds 364 - 1,124 4,960 6,448
Derivative financial liabilities 2,871 - 1,378 - 4,249
Subordinated debt - 3,243 9,816 744,419 757,478
Finance lease payable 12 24 97 120 253

Total undiscounted
liabilities 4,171,233 2,054,513 4,606,981 2,343,972 13,176,699

The table below shows the contractual expiry by maturity of the Bank’s contingent liabilities and
commitments.

On Less than 3 to 12 1 to 5 Over 5

demand 3 months months years years Total
2017
Contingent
liabilities 4,263 127,065 127,449 165,068 5,528 429,373
Commitments 1,504 276,598 691,912 149,954 142,595 1,262,563

Total 5,767 403,663 819,361 315,022 148,123 1,691,936

2016
Contingent
liabilities 897 168,579 249,979 185,353 8,591 613,399
Commitments 145,436 263,803 489,725 155,698 97,996 1,152,658

Total 146,333 432,382 739,704 341,051 106,587 1,766,057

The Bank expects that not all of the contingent liabilities or commitments will be drawn before
expiry of the commitments.

The table below analyses the liquidity gap of the Bank into relevant maturity bands mainly based
on the remaining period at balance sheet date to the contractual maturity as at 31 December 2017.
Exceptions are made for assets and liabilities without predefined maturities or other balance sheet
items which exhibit strong behavioral characteristics. For these products allocation on residual
maturity buckets, conventions are applied according to their transactional behavior (based on
statistical models).

F-153
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

f) Liquidity risk (continued)
ii) Exposure to liquidity risk (continued)
The table below analyses the liquidity gap of the Bank as at 31 December 2017:
Without
contractual
Up to 1 month 1 to 3 months 3 to 12 months Over 1 year maturity Total
ASSETS
Cash and balances with National Bank of Romania 2,044,314 - - - - 2,044,314
Due from other banks 660,304 233,864 20,503 - - 914,671
Available-for-sale securities 314,026 109,623 762,522 137,171 - 1,323,342
Investments in associates - - - 804 - 804
Loans and advances to customers 237,904 400,587 1,889,287 8,410,557 - 10,938,335
Derivative financial assets 1,566 - - - - 1,566
Property and equipment - - - - 91,803 91,803
Intangible assets - - - - 17,800 17,800
Other assets - - - - 36,992 36,992
Assets held for sale - - - - 266,291 266,291
TOTAL ASSETS 3,258,114 744,074 2,672,312 8,548,532 412,886 15,635,918
Com. Lines from Group 745,552 - - - - 745,552
LIABILITIES
Due to banks 55,293 232,985 932,899 2,148,121 - 3,369,298
Other borrowed funds - - - 232,791 - 232,791
Due to customers 2,608,191 2,233,462 2,786,955 1,811,688 - 9,440,296
Derivative financial liabilities 1,714 - - - - 1,714
Subordinated debt - - - 723,978 - 723,978
Other Liabilities 15 16 21 58 102,175 102,285
Deferred tax liabilities - - - - 1,346 1,346
Equity - - - - 1,764,210 1,764,210
TOTAL LIABILITIES&EQUITY 2,665,213 2,466,463 3,719,875 4,916,636 1,867,731 15,635,918
Com. Lines to Group 37,480 - - 37,480 - 74,960
LIQUIDITY GAP
GAP 1,300,973 (1,722,389) (1,047,563) 3,594,416 (1,454,845) 670,592
Cumulated GAP 1,300,973 (421,416) (1,468,979) 2,125,437 670,592

F-154
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

f) Liquidity risk (continued)
ii) Exposure to liquidity risk (continued)
The table below analyses the liquidity gap of the Bank as at 31 December 2016:
Up to 1 3 to 12 Without contractual
month 1 to 3 months months Over 1 year maturity Total
ASSETS
Cash and balances with National Bank of Romania 2,445,616 - - - - 2,445,616
Due from other banks 521,400 - 16,095 - - 537,495
Available-for-sale securities 198,993 340,226 559,570 153,767 - 1,252,556
Investments in associates - - 966 - 966
Loans and advances to customers 269,655 491,806 2,768,384 6,805,925 - 10,335,770
Derivative financial assets 3,106 - - - - 3,106
Property and equipment - - - - 96,552 96,552
Intangible assets - - - - 7,336 7,336
Other assets - - - - 41,814 41,814
Assets held for sale - - - - 11,033 11,033
TOTAL ASSETS 3,438,770 832,032 3,344,049 6,960,658 156,735 14,732,244

Com. Lines from Group 726,576 - - - - 726,576

LIABILITIES
Due to banks 100,077 7,034 2,775,546 1,589,385 - 4,472,042
Other borrowed funds - - - 6,076 - 6,076
Due to customers 2,488,214 2,160,063 2,007,580 1,262,629 - 7,918,486
Derivative financial liabilities 4,248 - - - - 4,248
Subordinated debt - - - 705,540 - 705,540
Other Liabilities 12 24 97 120 73,982 74,235
Deferred tax liabilities - - - - 708 708
Equity - - - - 1,550,909 1,550,909
TOTAL LIABILITIES&EQUITY 2,592,551 2,167,121 4,783,223 3,563,750 1,625,599 14,732,244
Com. Lines to Group 65,413 - - 65,413 - 130,826
LIQUIDITY GAP
GAP 1,507,382 (1,335,089) (1,439,174) 3,331,495 (1,468,864) 595,750
Cumulated GAP 1,507,382 172,293 (1,266,881) 2,064,614 595,750
*See note 2f)

F-155
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

f) Liquidity risk (continued)

ii) Exposure to liquidity risk (continued)

Management believes that in spite of a substantial portion of deposits having contractual maturity
dates within three months, diversification of these deposits by number and type of deposits, and
the past experience of the Bank would indicate that these deposits provide a long - term and stable
source of funding.

To manage liquidity risk, the Bank holds liquid assets comprising cash and cash equivalents and
investment securities for which there is an active liquid market. These assets can be readily sold to
meet liquidity requirements.

g) Operating environment

The process of risk re-pricing during crisis years in the international financial markets severely
affected the performance of those markets, including the Romanian financial and banking market,
and fostered uncertainty regarding future economic developments. The activities of the Bank are
also affected by the economic developments in Greece where the shareholder operates.

I. Greece macroeconomic trend and banking market

With respect to the economic environment in Greece, the operations of the Parent Bank have been
adversely affected, during the last years, by the crisis of the Greek public debt. The adverse effects
were mainly caused by the participation of the Parent Bank, in 2012, in the exchange program of
Greek Government bonds and loans guaranteed by the Hellenic Republic (PSI) under unfavorable
to their holders terms, and by the prolonged recession of the Greek economy which led to an
increase in non-performing loans and, consequently, to an increase in impairment losses on loans
and advances to customers.

During the first semester of 2015, the Greek economic environment was adversely affected by the
uncertainties that were created during the negotiations of the Hellenic Republic with the European
Commission, the European Central Bank and the International Monetary Fund for the financing of
the Hellenic Republic, a fact that led to significant outflows of deposits, to the imposition of capital
controls and of a bank holiday which was announced on 28.6.2015 and lasted until 19.7.2015.
Capital controls remain in place until the date of approval of the financial statements, while the
detailed provisions for their application are amended where appropriate by the adoption of a
legislative act.

At the same time the liquidity needs of Greek banks continue to be mostly satisfied by the
emergency liquidity mechanisms of the Bank of Greece.

The completion, in the third quarter of 2015, of the negotiations of the Hellenic Republic for the
coverage of the financing needs of the Greek economy, led to an agreement for new financial
support by the European Stability Mechanism.

As far as the course of the financial support program for the Greek economy is concerned, the first
two evaluations have already been completed with the disbursement of the respective installments,
while according to the Eurogroup announcement of 12.3.2018, all the prerequisites for the
completion of the third evaluation have been implemented. The fourth installment of the program
will be disbursed in two parts. The first part, amounting to € 5.7 billion, has been disbursed to cover
debt servicing needs, to allow the further clearance of arrears and to support the build-up of the
cash buffer of the Greek State.

F-156
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

g) Operating environment (continued)

The disbursement of the second part, amounting to € 1 billion, is expected to take place in spring,
provided that there is progress in the clearance of net arrears using own resources and that the
flow of electronic auctions will continue unimpeded. In parallel, the negotiations for the fourth
evaluation of the program have begun.

In addition to the above, during 2017, the Hellenic Republic successfully completed the exchange
of its bonds with new bonds, aiming at aligning the terms of the bonds with market standards for
sovereign securities in order to normalize the Republic’s yield curve and provide the market with a
limited series of benchmark securities which are expected to have significantly greater liquidity
than the existing series. This combined with the successful issuance by the Greek government of a
five-year bond in July 2017 and a seven-year bond in February 2018 constitute the first steps for
the gradual return to the markets. The positive course of the economic support program, as well as
the gradual return to the markets, are expected to contribute to the decrease of uncertainty and to
the enhancement of business community and investors’ confidence.

It is noted that at the same time the European stress testing exercise by the ECB is under way to
determine any capital needs of Eurozone credit institutions.

Based on the above and taking into account the Group’s high capital adequacy, as well as the
amount of available eligible collaterals through which liquidity is obtained through the mechanisms
of the euro system, the Group estimates that the conditions for the application of the going concern
principle for the preparation of its financial statements are met.

As described in the Note 15 “Financial Investments”, as of 31.12.2017, Alpha Bank Romania had
no exposure to Greek securities. Also the funding cost for the Bank in regards to amounts
borrowed from Alpha Bank A.E. remained at the level negotiated before December 2015 (please
refer to note 20 and 23).

Given the uncertainties surrounding the progress of the Greek economy management cannot
accurately estimate all of the above developments which could have an impact on the Romanian
banking sector and consequently what effect, if any, they could have on these financial statements.

II. Romania macroeconomic trends and banking market

Currently in Romania there are a number of legislative initiatives that may impact the local banking
system. Given the uncertainties surrounding these legislative projects evolution, management
cannot accurately estimate their impact on the Romanian banking sector and consequently what
effect, if any, they could have on these financial statements.

Management believes it is taking all the necessary measures to support the sustainability and
growth of the Bank’s business in the current circumstances by:

 preparing liquidity crisis strategy and establishing specific measures, including ensuring
measures for access to local funding, to address potential liquidity crisis;
 daily monitoring its liquidity position and over-dependence on specific funds;forecasting on
short-term basis its net liquidity position;
 obtaining commitment from the major shareholder regarding the latter’s continuous support
of the Bank’s operations in Romania;

F-157
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

g) Operating environment (continued)

 monitoring incoming and outgoing cash flows on daily basis and assessing the effects on its
borrowers of the limited access to funding and the sustainability of growing businesses in
Romania;

 examining terms and conditions of financing agreements and considering the implications
of obligations imposed and risks identified such as approaching maturity dates, or the
implications of any terms or covenants that may have been breached, or which may be
breached in the foreseeable future.

h) Taxation risk

The Romanian tax legislation provides for detailed and complex rules and has suffered various
changes in the recent years. Moreover local taxpayers carrying out transactions with related
parties must prepare and make available to Romanian Tax Authorities, at their written request, the
transfer pricing documentation file, within the period granted by the authorities. Failure to submit
transfer pricing documentation file or presentation of an incomplete file may give rise to application
of penalties for non-compliance.

Although the Bank is taking all measures to fully comply with tax laws, interpretation of the text and
practical implementation procedures of tax legislation could vary, and there is a risk that certain
transactions, for example, could be viewed differently by the tax authorities as compared to the
Bank's treatment. Furthermore, the conversion to IFRS of the Romanian banks raised additional
tax implications that are not yet fully clarified in the legislation and might generate potential tax
risks.

The Romanian Government has a number of agencies that are authorized to conduct audits of
companies operating in Romania. These audits are similar in nature to tax audits performed by tax
authorities in many countries, but may extend not only to tax matters but to other legal and
regulatory matters in which the applicable agency may be interested. It is likely that the Bank will
continue to be subject to regular controls as new laws and regulations are issued.

Bank management believes that it will not suffer material losses in case of a tax audit. However,
the impact of different interpretations of the tax authorities cannot be estimated reliably.

i) Operational risk

Definition of operational risk

Operational risk is the risk of the occurrence of an event, with or without financial impact, resulting
from inadequate or failed internal processes, IT systems, people (intentionally or unintentionally)
and from external events.

Operational risk also includes legal risk which is associated with legally flawed actions, uncertainty
regarding the definition of the law that may lead to inadequate interpretation and potential
inefficiencies in the legal framework.

F-158
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. RISK MANAGEMENT (CONTINUED)

i) Operational risk (continued)

Operational Risk Framework

Operational Risk framework is aligned with the operational risk strategy of the Group and
regulatory framework and is applied to all levels.

Identification and management of operational risk are performed so as to maintain a constant flow
of information and enhance the decision-making process.

The Bank primary defenses against operational risk are its policies, procedures and internal
controls.

Management and mitigation of operational risk

The Bank has developed an appropriate organizational structure, with clearly defined roles and
responsibilities for its Personnel and Units, in order to manage operational risk issues.
The main bodies are:

• Risk Management Committee mandated by the Board of Directors to have the oversight of
the risk management framework,

• Operational Risk Committee is delegated by the Risk Management Committee to supervise

operational risk management activities.

The Risk Management Unit develops the appropriate tools, processes, procedures and techniques
relevant to operational risk management, monitors the implementation of appropriate action plans
for its mitigation.
All Units have appointed an Operational Risk Coordinator and Operational Risk Initiator.

Operational Risk Management is performed through risk identification, assessment, monitoring,

reporting and mitigation.

Authority limits are established for managing operational risk events.

F-159
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

5. USE OF ESTIMATES AND JUDGMENTS

The estimates and judgments applied by the Bank in preparing the financial statements are based
on historical information and assumptions which at present are considered appropriate.

The estimates and assumptions are reviewed on an on-going basis to take into account current
conditions, and the effect of any revisions is recognized in the period in which the estimate is
revised.

Impairment losses on loans and advances to customers

In accordance with the internal impairment assessment methodology (refer to Note 3.o), the Bank
reviews its loan portfolios to assess impairment and determines whether an impairment loss
should be recorded in the income statement. The Bank makes judgments as to whether there is
any observable data indicating an objective evidence of impairment that has an impact on the
estimated future cash flows from an individual loan or a portfolio of loans. Management uses
estimates based on historical loss experience for loans with similar credit risk characteristics. The
individual assessment is based on management’s best estimate on the present value of the cash
flows that are expected to be received. In estimating these cash-flows, management makes
judgments about counterparty’s financial situation and the net realizable value of any underlying
collateral. 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.

Please refer also to note 16 for the sensitivity analysis on impairment collective allowance for loans
and advances to customers.

Impairment losses of non – financial assets

The Bank, at each year-end balance sheet date, assesses for impairment non–financial assets,
and in particular property, plant and equipment and assets held for sale. Internal estimates are
used to a significant degree to determine the recoverable amount of the assets, i.e. the higher
between the fair value less costs to sell and the value in use.

Provisions and contingent liabilities

The Bank recognizes provisions when it estimates that it has a present legal or constructive
obligation that can be estimated reliably, and it is almost certain that an outflow of economic
benefits will be required to settle the obligation. In contrast, when it is probable that an outflow of
resources will be required, or when the amount of liability cannot be measured reliably, the Bank
does not recognize a provision but it provides disclosures for contingent liabilities, taking into
consideration their materiality. The estimation for the probability of the outflow as well as for the
amount of the liability are affected by factors which are not controlled by the Group, such as court
decisions, the practical implementation of the relevant legislation and the probability of default of
the counterparty, for those cases which are related to the exposure to off-balance sheet items.

Fair value of financial instruments

The Bank measures fair values using the fair value hierarchy that reflects the significance of the
inputs used in making the measurements (refer to note 3.k).
Availability of observable market prices and model inputs reduces the need for management judgment
and estimation and also reduces the uncertainty associated with determination of fair values.
Availability of observable market prices and inputs varies depending on the products and markets and
is prone to changes based on specific events and general conditions in the financial markets.

F-160
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

5. USE OF ESTIMATES AND JUDGMENTS (CONTINUED)

Fair value of financial instruments (continued)

The fair value of financial instruments that are not traded in an active market is determined by
using valuation techniques. The management uses its judgment to select the valuation method and
make assumptions that are mainly based on market conditions existing at each balance sheet
date.

Valuation models that employ significant unobservable inputs require a higher degree of
management judgment and estimation in determination of fair value. Management judgment and
estimation are usually required for selection of the appropriate valuation model to be used,
determination of expected future cash flows on the financial instrument being valued, determination
of probability of counterparty default and prepayments and selection of appropriate discount rates.

In determining fair values, the Bank uses averages of reasonably possible alternative inputs. When
alternative assumptions are available within a wide range, judgments exercised in selecting the
most appropriate point in the range include evaluation of the sources quality (for example, the
experience and expertise of the brokers providing different quotes within a range, giving greater
weight to a quote from the original broker of the instrument who has the most detailed information
about the instrument) and the availability of corroborating evidence in respect of some inputs within
the range.

6. FAIR VALUE DISCLOSURES

The following table shows an analysis of financial instruments recorded at fair value, between
those whose fair value is based on quoted market prices, those involving valuation where the
model inputs are observable in the market and those where the valuation techniques involves the
use of market unobservable inputs.

Financial assets and liabilities measured at fair value:

31-Dec-17 31-Dec-16
1) 2.1) 2.2) 4) 1) 2.1) 2.2) 4)
Derivative Available Available Derivative Derivative Available Available Derivative
Financial for Sale for Sale Financial Financial for Sale for Sale Financial
Assets Equity Securities Liabilities Assets Equity Securities Liabilities

Level 1 - 10,737 1,311,544 - - 8,150 1,243,202 -

Level 2 1,566 - - 1,714 3,106 - - 4,248
Level 3 - 1,061 - - - 1,204 - -

Total 1,566 11,798 1,311,544 1,714 3,106 9,354 1,243,202 4,248

Available for sale: The Bank measures fair value for available for sale financial instruments using a
model based on bid quotations extracted from market.

At the end of 2017, the Bank disclosed the following assets and liabilities into fair value levels:

 Level 1 - The government bonds amounting to RON 1,312 million and equity instruments
amounting to RON 10.74 million.
 Level 2 - Derivatives assets and liabilities
 Level 3 - Equities classified as Available for Sale securities.

F-161
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

6. FAIR VALUE DISCLOSURES (CONTINUED)

The reconciliation for the movement of financial instruments measured at fair value in Level 3 is
depicted below:

Available for
sale equity

Opening balance 1.1.2017 1,204

Total gain or loss recognized in Income Statement (143)

Total gain or loss recognized in Equity -
Purchase/Issue -
Sales/Repayments/Settlements -
Transfers in Level 3 from Level 2 -

Balance at 31.12.2017 1,061

Derivative financial instruments: The Bank measures fair value for derivative financial assets using
observable prices or model inputs available in the market.

The table below sets out the carrying amounts and fair values of the Bank’s financial assets and
financial liabilities not measured at fair value:

31-Dec-2017
Loans and
Advances Other Total
to Amortized carrying
customers cost amount Fair value
Financial Assets
Loans and advances
to customers Level 3 10,938,335 - 10,938,335 10,796,234
Other non-current
Assets Held for Sale Level 2 - 256,953 256,953 256,953
Total financial assets 10,938,335 256,953 11,195,288 11,053,187

Financial Liabilities
Due to banks Level 3 - 3,369,298 3,369,298 3,355,421
Due to customers Level 3 - 9,440,296 9,440,296 9,436,838
Other borrowed funds Level 3 - 232,791 232,791 226,073
Subordinated loan Level 3 - 723,978 723,978 723,215

Total financial
liabilities - 13,766,363 13,766,363 13,741,547

F-162
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

6. FAIR VALUE DISCLOSURES (CONTINUED)

31-Dec-2016
Loans and Other Total
Advances to Amortized carrying
customers cost amount Fair value

Financial Assets
Loans and advances
to customers Level 3 10,335,770 - 10,335,770 10,449,783

Total financial
assets 10,335,770 - 10,335,770 10,449,783

Financial Liabilities
Due to banks Level 3 - 4,472,042 4,472,042 4,476,869
Due to customers Level 3 - 7,918,486 7,918,486 7,916,456
Other borrowed
funds Level 3 - 6,076 6,076 5,986
Subordinated loan Level 3 - 705,540 705,540 699,607

Total financial
liabilities - 13,102,144 13,102,144 13,098,918

The following summarizes the major methods and assumptions used in estimating the fair values
of financial instruments reflected in the table above that are not carried at fair value and which
belong to level 2 and level 3 within fair value hierarchy.

Loans and advances to customers: These are net of provisions for impairment losses. The
estimated fair value of loans and advances, with fixed and variable interest rate and with changes
in credit status since inception, is based on discounted cash flows method.

Other non-current Assets Held for Sale: The estimated fair value of loans and advances presented
as Assets Held for Sale in accordance with IFRS 5 is based on estimated cash flow to be received
from their sale.
Deposits from banks and customers: The estimated fair value is based on discounted cash flows
method for term deposits. The fair value of saving and demand deposits was considered the same
as the accounting value.

Customer loans and deposits are categorized as financial instruments level 3 since there are
instruments that are not based on observable market data and the Discounted Cash Flows (DCF)
method is used in order to determine their fair value.

The discounted cash flow (DCF) analysis is a method of valuing an asset or a liability using the
concepts of the time value of money. All future cash flows are estimated and discounted to give
their present values (PVs) - the sum of all future cash flows, both incoming and outgoing, is the net
present value (NPV), which is taken as the value or price of the cash flows.

F-163
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

6. FAIR VALUE DISCLOSURES (CONTINUED)

The components of the present value measurement include the following:

 An estimate of future cash flows up to the maturity for the customer loans and deposits,
using the respective implied forward yield curve;

 Estimations of the amount and timing of the cash flows of the products without contractual
maturity and reprising profile (i.e. revolving loans, sight deposits, current accounts) based
on conventions

 The time value of money, represented by the market rate that coincides with maturity dates
of the cash flows;

 The price for bearing the uncertainty inherent in the cash flows (liquidity risk premium);

 The credit risk (Expected loss) associated to the creditworthiness of the loans customer,
taking into consideration the Probability of Default (PD) and the Loss Given Default (LGD).

For Customer loans, the discount rate components are analyzed: Market Rate + Liquidity Premium
+ Expected loss.

For Customer Deposits, the discount rate components are analyzed: Market Rate + Liquidity
Premium.

Loans from banks and financial institutions: The fair value of loans from banks is based on the
present value of future cash flows, discounted at interest rates available at the balance sheet date
to the Bank for new debt with similar remaining maturity as no quoted market price is available.

7. NET INTEREST INCOME

Year ended Year ended

31 December 31 December
2017 2016

Interest income
Current account and sight deposits with the National
Bank of Romania 858 1,396
Loans and placements to banks 14,520 11,917
Loans and advances to customers including
unwinding effect 458,976 447,023
Available for sale securities 10,154 14,265
Other interest receivable 80 39

Total interest income 484,588 474,640

F-164
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

7. NET INTEREST INCOME (continued)

Year ended Year ended

31 December 31 December
2017 2016

Interest expense
Deposits and loans from banks (8,760) (6,624)
Sight and term deposits from customers (69,680) (73,287)
Subordinated debt (13,090) (13,423)

Total interest expense (91,530) (93,334)

Interest income related effect of derivative

transactions 9,148 9,999
Interest expense related effect of derivative
transactions 3,854 4,574

Total interest related effect of derivative

transactions 13,002 14,573

Total interest income 493,736 484,639

Total interest expense (87,676) (88,760)

Net Interest Income 406,060 395,879

In 2017 the interest income on impaired loans and advances to customers was RON 15,172 (2016:
RON 20,051).

8. NET FEE AND COMMISSION INCOME

Year ended Year ended

31 December 31 December
2017 2016

Lending commissions 1,710 1,527

Letters of guarantee commissions 5,104 5,117
Trade finance fees 358 249
Commissions from transactions with cash 21,540 20,111
Transfers of funds fees 38,370 34,623
Other fees and commissions 27,693 30,199

Fee and commission income 94,775 91,826

Inter-bank transactions fees and commissions (17,744) (15,353)

Other (47) (19)
Fee and commission expense (17,791) (15,372)

Net fee and commission income 76,984 76,454

F-165
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

8. NET FEE AND COMMISSION INCOME (CONTINUED)

Position “other fees and commissions” from the table above includes fees and commissions from
bancassurance activity.

The Bank has insurance contracts signed with Garanta Insurance SA, starting 2011, for selling
insurance products attached to bank products. Starting from September 2013, Alpha Bank
Romania SA has extended bancassurance activity through a partnership with GROUPAMA
ASIGURARI S.A. and a partnership with BNP CARDIF in 2014.

In November 2015 the Bank signed a bancassurance partnership with AEGON S.A. for a new
insurance product - Life Insurance with guaranteed interest rate, a complementary optional
insurance product linked to the current accounts, while in October 2016 the contract with AXA Life
Insurance SA, started in 2011, was no longer extended considering their plans to exit the
Romanian market.

9. GAINS LESS LOSSES ON FINANCIAL TRANSACTIONS

Year ended Year ended

31 December 31 December
2017 2016

Gain from dealing in foreign exchange, net 2,981 35,726

Gain/(loss) from foreign exchange derivatives, net (29,854) 15,194
Gain/ (loss) from the revaluation of foreign currency
58,282 (17,763)
assets and liabilities, net
Gain on transactions with financial assets available
6,266 1,004
for sale (i)
Gains from sales of shares available for sale - 54,191
Other Gain on financial assets (ii) 67,194 6,532

Net gain on transactions 104,869 94,884

i) For 2017, the amount of RON 6.3 million representing gain on transactions with financial assets
available for sale includes RON 6.1 million representing gain from recycling of available for sale
revaluation reserve (2016: RON 0.6 million realized gain from recycling) and RON 0.2 million
representing realised gain from sales of bonds available for sale (2016: RON 0.4 million realised
gain from sales of bonds available for sale).

ii) During 2017, the Bank recorded from sales of loans and advances to customers a net gain of
RON 68 million. From similar operations in 2016 the Bank obtained a net gain amounting to
RON 6.5 million.

F-166
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

10. NET IMPAIRMENT GAIN/ (LOSS) ON FINANCIAL ASSETS

Year ended Year ended
31 December 31 December
2017 2016

Net impairment gains/losses from loans to customers

(please see note 16 c.) 32,116 (91,504)
Recoveries from written-off loans 9,274 5,675

Total 41,390 (85,829)

11. STAFF COSTS

Year ended Year ended
31 December 31 December
2017 2016

Salaries (124,213) (116,795)

Social security contributions (29,166) (27,202)
Other staff costs (7,155) (5,735)

Total (160,534) (149,732)

The social security contributions represent contributions to the Romanian State defined pension
scheme. The Bank does not have any further obligations to its employees regarding post-
employment benefits or termination benefits.

12. OTHER OPERATING EXPENSES

Year ended Year ended
31 December 31 December
2017 2016

Rent (40,614) (42,676)

Insurance expenses (4,109) (5,105)
Various taxes (23,828) (22,970)
Stationery (3,419) (3,545)
Advertising (21,886) (10,628)
Telecommunications (7,930) (7,484)
Information Technology (10,551) (10,232)
Electricity supplies costs (5,359) (5,835)
Professional fees (25,069) (22,105)
Contributions to deposit guarantees and national
resolution schemes (12,353) (17,478)
Impairment losses and write offs of fixed assets
(please see note 17) (953) (1,964)
Gain/charge from provisions for litigations,
commitments, contingencies (please see note 24) 5,073 (6,449)
Other expenses (53,323) (47,879)

Total (204,321) (204,350)

F-167
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

13. CASH AND BALANCES WITH NATIONAL BANK OF ROMANIA

Year ended Year ended

31 December 31 December
2017 2016

Cash in hand 190,853 143,762

Cash in ATMs 62,181 38,123
Current account at National Bank of Romania (NBR) 1,791,280 2,263,731

Total 2,044,314 2,445,616

The balances per currency of the current accounts held with the NBR as at 31 December 2017
were: RON 591,777 thousand (31 December 2016: RON 534,382 thousand) and EUR 257,421
thousand (31 December 2016: EUR 380,822 thousands).The balance of the current account is
used for the mandatory reserves purposes and can vary on a daily basis. The mandatory reserve
can be used by the Bank for day to day activities providing the average balance for the month is
maintained within required formula.

At 31 December 2017 the minimum mandatory reserves rates established by the National Bank of
Romania for raised funds with maturity lower than 2 years and for raised funds with residual
maturity greater than 2 years which foresee contractual clauses regarding reimbursements,
withdrawals and anticipated transfers, are as follows: 8% for raised funds denominated in RON
and 8% for raised funds denominated in foreign currency (31 December 2016: 8% for raised funds
denominated in RON and 10% for raised funds denominated in foreign currency).

The mandatory reserve is denominated in EUR for the foreign currency deposits and loans and in
RON for domestic currency deposits. The interest rate paid by the National Bank of Romania
during 2017 for reserves held in RON was maintain at 0.10%, while for reserves held in EUR
decreased from 0.05% to 0.02% and for reserves held in USD increased from 0.06 % to 0.08%..

14. DUE FROM BANKS

31 December 31 December
2017 2016

Current accounts with other banks 101,367 52,325

Sight deposits with other banks - 50,001
Term deposits with other banks 787,314 413,332
Collateral deposits with banks 25,990 21,837

Total due from banks 914,671 537,495

Current accounts, sight and term deposits with banks are unencumbered and at the immediate
disposal of the Bank as at 31 December 2017 and 31 December 2016.

F-168
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

15. FINANCIAL INVESTMENTS

Available-for-sale securities and Investments in associates

I. Available for sale securities

31 December 2017 31 December 2016*

Government bonds and treasury bills (i) 1,311,544 1,212,962

Corporate bonds (ii) - 30,240
Investment in equity securities (iii) 11,798 9,354

Total 1,323,342 1,252,556

i. As at 31 December 2017, the Bank held government bonds with coupon and treasury bills with
discount, in RON, issued by the Romanian Ministry of Public Finance. Government portfolio in
RON carries coupon rates ranging from 0.65% to 5.60% as at 31 December 2017 (31
December 2016: 0.41% to 6.75%).

ii. As at 31 December 2017, the Bank did not held corporate bonds (31 December 2016: RON
30.2 million with variable interest rates of 0.54%, in EUR issued by international financial
institutions and companies, acquired from Alpha Bank A.E).

The weighted average yield for government bonds at the end of 31 December 2017 was 1.87%
(31 December 2016: 2.16%). As at 31 December 2017 all the financial assets of the Bank are
unencumbered and at the immediate disposal of the Bank (31 December 2016: RON 1.5
million in government bonds issued by Romanian Ministry of Finance were pledged in favor of
another Romanian Bank).

iii. Also included in financial assets available for sale are equity investments in shares of Alpha
Bank Group companies and other companies.

The movement and the breakdown of the investment equity securities as at 31 December 2017
were as follows:

31 December 31 December
Investment in equity securities 2017 2016

As at 1 January 9,354 5,152

Additions - investment equity securities - 8,151
Disposals - (3,949)
Other adjustments 2,444 -

At the end of period 11,798 9,354

F-169
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

15. FINANCIAL INVESTMENTS (CONTINUED)

I. Available-for-sale securities (continued)

31-Dec-17 31-Dec-16
Country of Ownership Value of Ownership Value of
Investment incorporation interest % owner ship interest % ownership
Biroul de Credite
S.A. Romania 3.85% 206 3.85% 206
Societatea de
Transfer de Fonduri
si Decontari
TransFonD S.A. Romania 2.98% 700 2.98% 700
Alpha Leasing
Romania IFN S.A. Romania 1.00% 77 1.00% 77
Casa de
Compensare
Bucuresti S.A. Romania 1.71% 5 1.71% 148
VISA Inc USA less than 1% 10,737 less than 1% 8,150
SWIFT SCRL Belgium less than 1% 73 less than 1% 73

With the exception of Visa Inc, all investments in equity securities are stated at cost and none of
them is listed. The investment in Visa Inc in 2016 resulted from acquisition of Visa Europe by Visa
Inc.

The balance of available for sale investments reserve (unrealized loss after taxation) as of 31
December 2017 was RON 2.4 million (gross RON 2.8 million, tax RON 0.4 million) (31 December
2016: RON 0.9 million):

Revaluation reserve on Available for sale 31 December 31 December

assets 2017 2016

Balance at 01 January (933) 5,295

Net gains/(losses) from fair value changes 4,402 (6,812)

Net amounts transferred to profit or loss (6,096) (602)
Deferred tax 271 1,186

Balance at 31 December (2,356) (933)

II. Investments in associates

31 December 31 December
2017 2016*

Investments in associates 804 966

Total 804 966

*See note 2f)

F-170
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

15. FINANCIAL INVESTMENTS (CONTINUED)

II. Investments in associates (continued)

The movement and the breakdown of the investment in associates as at 31 December 2017 were
as follows:

31-Dec-17 31-Dec-16
Country of Ownership Value of Ownership Value of
Investment incorporation interest % owner ship interest % ownership
SSIF Alpha Finance
Romania S.A. Romania 26.68% 1,182 26.68% 1,182

31 December 31 December
Investments in associates 2017 2016*

As at 1 January 966 57

Additions - 1,125
Changes related to application of the equity method (162) (216)

At the end of period 804 966

*See note 2f)

16. LOANS AND ADVANCES TO CUSTOMERS

31 December 31 December
2017 2016

Corporate 4,863,285 5,264,085

Small and medium enterprises (SMEs) 509,745 520,529
Small business loans (SBL) 3,084 2,408
Individuals 5,996,068 5,615,086
- Consumer loans 1,016,179 1,007,946
- Housing loans 4,893,245 4,510,174
- Credit Cards 86,644 96,966

Total loans, gross 11,372,182 11,402,108

Allowance for impairment losses (433,847) (1,066,338)

Total loans, net 10,938,335 10,335,770

Loans can be repaid before their scheduled maturity. In the event of repayment some loan
categories are subject to an early reimbursement commission.

F-171
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

16. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(a) Analysis by type of customer

31 December 31 December
2017 2016
Individuals
- in RON 2,649,079 1,984,045
- in foreign currencies 3,346,989 3,631,041
Legal entities
- in RON 1,721,877 1,677,091
- in foreign currencies 3,654,237 4,109,931

Total loans, gross 11,372,182 11,402,108

Allowance for impairment losses (433,847) (1,066,338)

Total loans, net 10,938,335 10,335,770

(b) Analysis by industry sector

31 December 2017 31 December 2016

% %

Individuals 5,996,068 52.73% 5,615,086 49.25%

Construction 2,478,995 21.80% 2,935,205 25.74%
Other 1,275,315 11.21% 1,182,376 10.38%
Trade 824,461 7.25% 922,389 8.09%
Manufacturing 547,266 4.81% 496,512 4.35%
Tourism 216,115 1.90% 172,296 1.51%
Public sector 17,820 0.16% 51,800 0.45%
Factoring 16,142 0.14% 26,444 0.23%

Total loans, gross 11,372,182 100% 11,402,108 100%

The Other Industries category contains the followings: agriculture, mining, energy and utilities, IT,
media and communications, shipping, transportation, services.

F-172
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

16. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(c) Allowances for impairment losses – loans and advances to customers

During 2017 the Bank has written off loans and advances to customers with gross exposure RON 30 million (2016: RON 224 million) and
corresponding allowance for loan losses.

The movement in allowance for impairment losses is analyzed as follows:

Mortgages Consumer Credit cards Corporate loans Total loans

Balance at 1/1/2016 149,196 256,188 17,093 799,097 1,221,574

Net impairment loss for the period (note 10) 32,904 3,393 1,466 53,741 91,504
Effect of correction of interest revenue on
impaired loans 2,124 3,808 - 19,286 25,218
Translation differences 782 409 (1,415) 2,432 2,208
Disposal/transfer of impaired loans - - - (49,722) (49,722)
Reclassification to assets held for sale - - - - -
Bad debts written-off (24,828) (98,570) (658) (100,388) (224,444)
Balance at 12/31/2016 160,178 165,228 16,486 724,446 1,066,338

Balance at 1/1/2017 160,178 165,228 16,486 724,446 1,066,338

Net impairment gain/(loss) for the period
(note 10) (17,565) 3,327 1,652 (19,530) (32,116)
Effect of correction of interest revenue on
impaired loans 825 1,734 - 15,239 17,798
Translation differences 3,450 2,367 (829) 13,393 18,381
Disposal/transfer of impaired loans (9,453) (45,146) (10,918) (7,155) (72,672)
Reclassification to assets held for sale - (1,879) (98) (531,730) (533,707)
Bad debts written-off (3,960) (9,067) (2,552) (14,596) (30,175)

Balance at 12/31/2017 133,475 116,564 3,741 180,067 433,847

F-173
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

16. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(d) Sensitivity Impairment

31 December 2017 31 December 2016

RON ths RON ths
Changes in
PDs LGDs Changes in impairment impairment
Worse economic environment +5% +8% 281,919 278,029
Better economic environment -5% -8% (28,480) (40,187)

17. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Furniture
Land and and EDP Tangible Intangible
Buildings Equipment Other fixed assets fixed assets

COST
1 January 2017 122,226 88,359 39,979 250,564 46,506

Additions 1,533 5,988 2,745 10,266 13,491

Disposals - - - - -
Write-off (1,654) (3,132) (1,008) (5,794) -
Reclassification - 886 (886) - -

31 December 2017 122,105 92,101 40,830 255,036 59,997

DEPRECIATION
1 January 2017 60,288 59,429 34,295 154,012 39,170
Depreciation charge 5,441 6,851 1,771 14,063 3,027
Impairment charge - - - - -
Disposals - - - - -
Write-off (805) (3,056) (981) (4,842) -
Reclassification - 1 (1) - -

31 December 2017 64,924 63,225 35,084 163,233 42,197

NET BOOK VALUE

31 December 2017 57,181 28,876 5,746 91,803 17,800

1 January 2017 61,938 28,930 5,684 96,552 7,336

F-174
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

17. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS (CONTINUED)

Furniture and
Land and EDP Tangible Intangible
Buildings Equipment Other fixed assets fixed assets

COST
1 January 2016 126,632 84,103 38,852 249,587 42,030
Additions 1,163 4,314 1,440 6,917 4,476
Disposals (243) (7) - (250) -
Write-off (4,628) (944) (118) (5,690) -
Reclassification (698) 893 (195) - -

31 December 2016 122,226 88,359 39,979 250,564 46,506

DEPRECIATION
1 January 2016 57,707 49,798 36,071 143,576 37,682
Depreciation charge 5,922 6,422 1,941 14,285 1,488
Impairment charge (626) - - (626) -
Disposals (116) (7) - (123) -
Write-off (2,250) (736) (114) (3,100) -
Reclassification (349) 3,952 (3,603) - -

31 December 2016 60,288 59,429 34,295 154,012 39,170

NET BOOK VALUE

31 December 2016 61,938 28,930 5,684 96,552 7,336

1 January 2016 68,925 34,305 2,781 106,011 4,348

In 2017 no branches were closed, while in 2016 the management decided to close 2 branches.
Fixed assets written-off during 2017, amounting to RON 1 million, were mainly related to relocation
or reorganization of some units and as a result of year end stock count, compared with 2016 when
fixed assets amounting to RON 2.6 million were written-off mainly related to closed units.

Intangible assets consist mainly of packaged software. Included within other fixed assets are motor
vehicles, furniture and fittings, household equipment, air conditioning equipment etc.

As at 31 December 2017, the carrying value of the fixed assets purchased under finance lease
agreements is RON 1,575 thousand (31 December 2016: RON 2,484 thousand).

F-175
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

18. DERIVATIVE FINANCIAL INSTRUMENTS

For derivative assets and liabilities held, no hedge accounting is applied, however they are held for
risk management purposes. As at 31 December 2017, the Bank has in balance only FX swaps; all
transactions are concluded with Alpha Bank AE (amounts in RON):

31 December 2017
Contractual nominal amount Fair value
Amount sold Amount bought Assets Liabilities

Foreign exchange swaps 330,098,477 331,346,000 1,566,380 1,713,833

Interest rate swaps - - - -

Total 330,098,477 331,346,000 1,566,380 1,713,833

As at 31 December 2016, the Bank had in balance the following FX swap and interest rate swaps
(IRS), all transactions are concluded with Alpha Bank AE (amounts in RON).

31 December 2016
Contractual nominal amount Fair value
Amount sold Amount bought Assets Liabilities

Foreign exchange swaps 869,837,060 872,165,000 3,105,830 2,870,754

Interest rate swaps - 75,440,118 - 1,377,544

Total 869,837,060 947,605,118 3,105,830 4,248,298

19. OTHER ASSETS AND ASSETS HELD FOR SALE

31 December 31 December
2017 2016

Sundry debtors 8,791 9,649

Prepaid Expenses 3,133 3,194
Income taxes to be received from state authorities - 16,581
Assets recovered by the Bank from customers in case of
terminated agreements (please see note 4.b.iii.VII) 4,634 968
Other cash receivable 2,149 2,015
Other assets 18,285 9,407

Total Other Assets 36,992 41,814

Fixed assets held for sale (please see note 4.b.iii.VII) 9,338 11,033
Other non-current assets held for sale (i) 256,953 -

Total Assets Held for Sale 266,291 11,033

Total Other Assets and Assets Held for Sale 303,283 52,847

F-176
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

19. OTHER ASSETS AND ASSETS HELD FOR SALE (CONTINUED)

(i) During 2017, the Bank started the process for the sale of a non-performing portfolio that
includes both individuals and corporate exposures. On 31.12.2017 the portion of that portfolio that
was not derecognized was presented as Assets Held for Sale in accordance with IFRS 5. For
financial reporting purposes as at 31.12.2017, as requested by IFRS 5 and IAS 39, the total of the
aforementioned loans were tested for impairment in accordance with the Bank’s current credit
impairment assessment methodology; their recoverable amount was calculated as the estimated
sale price less costs to sell, recognizing the difference as «net impairment losses from loans to
customers» in the income statement. On 31.12.2017, the carrying amount of this portfolio
amounted to RON 257 million (see note 4.b.iii).

20. DUE TO BANKS

31 December 31 December
2017 2016

Current account and sight deposits 55,293 100,076

Term deposits 1,776,720 2,391,112
Collateral deposits for loans to customers 1,537,285 1,980,854

Total due to banks 3,369,298 4,472,042

Funds attracted from other banks represent mainly deposits from Alpha Bank AE (Greece).

31 December 2017 31 December 2016

Shortest Longest Shortest Longest
Deposits from Alpha Bank period/ period/ period/ period/
Greece Lowest rate Highest rate Lowest rate Highest rate

Contractual
maturity 111 Days 4,018 Days 2,191 Days 3,622 Days

EUR Interest rate 0.00% 0.00% 2.95% 0.00%

21. DUE TO CUSTOMERS

31 December 31 December
2017 2016

Current accounts and sight deposits 2,525,034 1,979,005

Term deposits 6,742,893 5,760,817
Collateral deposits 172,203 178,300
Certificates of deposit 166 364

Due to customers 9,440,296 7,918,486

F-177
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

21. DUE TO CUSTOMERS (CONTINUED)

31 December 31 December
2017 2016
Individuals
- in RON 2,437,086 2,270,050
- in foreign currencies 2,989,107 2,611,251

Legal entities
- in RON 2,169,952 2,244,126
- in foreign currencies 1,822,974 775,533

Total deposits 9,419,119 7,900,960

Accrued interest 21,177 17,526

Total 9,440,296 7,918,486

Deposits can be withdrawn before their maturity, in which case the interest income is computed
based on current account interest rate prevailing at the date of withdrawal.
Interest Term Deposits

Customers CCY. 1 Month 3 Months 6 Months 9 Months 12 Months 24 Months

EUR 0.21% 0.37% 0.69% 0.88% 0.96% 0.84%

Individuals RON 0.66% 1.21% 1.46% 1.50% 1.72% 1.30%
USD 0.30% 0.57% 0.91% 1.03% 1.04% 0.60%

EUR 0.25% 0.48% 0.78% 0.82% 1.36% 1.50%

Legal entities RON 0.74% 1.31% 1.40% 1.46% 1.62% -
USD 0.25% 0.48% 0.82% 0.99% 1.05% -

The above table presents the weighted average interest rate for term deposits offered by the Bank
at the end of 2017.

22. OTHER BORROWED FUNDS

Other borrowed funds represent credit facilities from the European Bank for Reconstruction and
Development (“EBRD”) for financing small and medium size municipalities and a credit facility from
International Finance Corporation (“IFC”).

On 24 November 2005 the Bank signed a loan agreement with EBRD for financing small and
medium-size municipalities and/or municipally owned or controlled companies, in total amount of
EUR 20 million, maturing in April 2021. The Bank has only drawn EUR 0.3 million and RON 13.75
million from the initial contractual amount of EUR 20 million in 2009. The remaining available
amount has been cancelled under the Agreement’s provisions during 2010. As at 31 December
2017, the Bank has a remaining balance of EUR 0.09 million and RON 4.3 million from the above
drawn amounts.

F-178
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

22. OTHER BORROWED FUNDS (CONTINUED)

On 18 May 2017, the Bank signed a loan agreement with IFC, in amount of EUR 50 million,
maturing in March 2022, which has been fully drawn the Bank by the end of the year.

31 December 2017 31 December 2016

EBRD loans 4,749 6,076

IFC loans 228,042 -

Other borrowed funds 232,791 6,076

The changes in liabilities arised from financing activities, including the cash flow and non-cash flow
changes are presented in the table below:

Non cash flows

1 Foreign
Cash flow from financing January Cash Accrued exchange 31 December
activities 2017 flows interest differences 2017

Other borrowed funds -

EBRD 6,076 (1,346) 5 14 4,749
Other borrowed funds - IFC - 229,724 (1,682) - 228,042

23. SUBORDINATED DEBT

In November 2004, the Bank signed a loan agreement with Alpha Bank AE for a subordinated loan
of EUR 16,000,000 with a seven-year maturity. The subordinated loan was extended and is to be
fully repaid in one installment in November 2019. The interest rate is equal to EURIBOR 3 months
plus 2.0%.

In September 2005, the Bank signed a second loan agreement with Alpha Bank AE for a
subordinated loan of EUR 60,000,000 with a seven-year maturity. The subordinated loan was
extended and is to be fully repaid in one installment in September 2019. The interest rate is equal
to EURIBOR 3 months plus 2.0%.

In February 2006, the Bank signed a third loan agreement with Alpha Bank AE for a subordinated
loan of EUR 4,300,000 with a seven-year maturity. The subordinated loan was extended and is to
be fully repaid in one installment in February 2019. The interest rate is equal to EURIBOR 3
months plus 2.0%.

In November 2006, the Bank signed a fourth loan agreement with Alpha Bank AE for a
subordinated loan of EUR 13,000,000 with a seven-year maturity. The subordinated loan was
extended and is to be fully repaid in one installment in October 2019. The interest rate is equal to
EURIBOR 3 months plus 2.0%.

In September 2009, the Bank signed a fifth loan agreement with Alpha Bank AE for a subordinated
loan of EUR 12,000,000 with a seven-year maturity. The subordinated loan was extended and is to
be fully repaid in one installment in September 2019. The interest rate is equal to EURIBOR 3
months plus 2.0%.

F-179
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

23. SUBORDINATED DEBT (CONTINUED)

In May 2011, the Bank signed a sixth subordinated loan agreement with Alpha Bank AE of EUR
80,000,000. The Bank has drawn only EUR 50,000,000 by 31 December 2017, under the
contractual provisions. The maturity schedule is based on monthly payments of interest and does
not comprise a final maturity date for the principal. The interest rate set for each monthly payments
of interest is based on EURIBOR 1 month plus 2.5%.

As at 31 December 2017 and 31 December 2016, subordinated debt balance was:

31 December 31 December
2017 2016

Subordinated debt 723,978 705,540

Total 723,978 705,540

The changes in liabilities arised from financing activities, including the cash flow and non-cash flow
changes are presented in the table below:

Non cash flows

01 Foreign 31
Cash flow from financing January Cash Accrued exchange December
activities 2017 flows interest differences 2017

Subordinated debt 705,540 - 20 18,418 723,978

24. PROVISIONS
Provisions includes: provisions for litigations, fraud cases and other contingencies amounting to
RON 10.5 million (31 December 2016: RON 7.5 million) and provisions for guarantees, letter of
credit and credit related commitments amounting to RON 3.1 million (31 December 2016: RON
11.1 million) (please see note 28).

The movement in the provisions was as follows:

Balance 1.1.2016 12,189

Changes for the period 1.1. - 31.12.2016

Provisions to cover credit risk relating to off-balance sheet items 6,449
Provisions for other contingent liabilities -
Provisions for pending legal cases or issues in progress -
Foreign exchange differences -

Balance 31.12.2016 18,638

Changes for the period 1.1. - 31.12.2017
Provisions to cover credit risk relating to off-balance sheet items (8,022)
Provisions for other contingent liabilities 2,836
Provisions for pending legal cases or issues in progress 113
Foreign exchange differences 62

Balance 31.12.2017 13,627

F-180
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

25. OTHER LIABILITIES

31 December 31 December
2017 2016

Social security liabilities 5,586 1,563

Finance lease payable (i) 110 253
Accrual sales incentive scheme 7,783 6,431
Amounts in transit 8,187 10,284
Income taxes to be paid to state authorities 24,184 -
Other liabilities 42,808 37,066

Other liabilities 88,658 55,597

(i) Finance lease payable is detailed as following:

31 December 31 December
2017 2016
Total minimum finance lease payments
Not later than 1 year 59 155
later than 1 year and not later than 5 years 58 114

117 269

less: Finance charge (7) (16)

Present value of finance lease payments 110 253

Not later than 1 year 55 146

Later than 1 year and not later than 5 years 55 107

26. TAXATION

Tax charge

The movements in net tax charge for the period were as follows:

Year ended Year ended

31 December 31 December
2017 2016

Current tax charge 40,764 881

Deferred tax charge 911 6,413

Total tax charge for the period 41,675 7,294

*See note 2f)

F-181
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

26. TAXATION (CONTINUED)

Deferred tax, net

31 December 31 December
2017 2016 *
708 (4,519)
At the beginning of the period (asset)/liability
Net charge for the period in income statement 911 6,413
Charged directly in equity (i) (273) (1,186)

Closing balance (asset)/liability, out of which 1,346 708

4,500 3,906
Deferred tax liability
Deferred tax asset 3,154 3,198

*See note 2f)

(i) The amount charged in equity is mainly the movement in the outstanding balance of deferred
tax related to unrealized gain/loss from available-for-sale financial assets (31 December 2017:
RON 0.3 million and 31 December 2016: RON 1.2 million).

The reconciliation of the tax on the Bank’s profit/(loss) before tax and the theoretical
amount that would arise using the basic tax rate of Romania is as follows:

Year ended Year ended

31 December 31 December
2017 2016*

Profit/(loss) before tax 256,409 121,672

Tax calculated at a tax rate of 16% 41,025 19,468
Increase/(decrease) due to:
- income not subject to tax (4,214) (4,354)
- expenses not deductible for tax purposes 9,828 9,103
- tax losses utilised - (11,976)
- other differences (4,964) (4,947)

Total income tax charge 41,675 7,294

*See note 2f)

F-182
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

26. TAXATION (CONTINUED)

1st Recognized
January in profit or Recognized 31 December
Movements in Deferred tax 2017 loss in Equity 2017
Deferred tax
(assets)/liabilities
Loans and advances to
customers (1,774) 1,275 - (499)
Property, plant and equipment 3,772 115 - 3,887
Unrealised gain/(loss) from
bonds (311) - (684) (995)
Unrealised gain/(loss) from
other securities 134 - 413 547
Deferred tax assets for fiscal
losses - - - -
Other temporary differences (1,113) (479) (2) (1,594)

708 911 (273) 1,346

1st Recognized
January in profit or Recognized 31 December
Movements in Deferred tax 2016 loss in Equity 2016*
Deferred tax
(assets)/liabilities
Loans and advances to
customers (742) (1,032) - (1,774)
Property, plant and equipment 3,482 290 - 3,772
Unrealised gain/(loss) from
bonds 1,009 - (1,320) (311)
Unrealised gain/(loss) from
other securities - - 134 134
Deferred tax assets for fiscal
losses (7,127) 7,127 - -
Other temporary differences (1,141) 28 - (1,113)

(4,519) 6,413 (1,186) 708

*See note 2f)

The Bank has not recognized deferred tax on the statutory reserves of RON 154,564 thousand (31
December 2016: 141,736 thousand), which were set-up under the Romanian Laws and Banking
Regulations and are non-distributable.

These reserves under the Romanian Fiscal legislation will remain untaxed until they are used (e.g.
transferred to distributable profits, covering losses, etc.). The Bank has no intention in the direction
of decrease or dissolving its activities and based on its current business plan it is unlikely that the
reserves will decrease.

F-183
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

26. TAXATION (CONTINUED)

As at 31 December 2017 the Bank recorded a deferred tax asset amounting to RON 3.2 million (31
December 2016: RON 3.2 million) out of which RON 2.1 million relates to other temporary
differences (31 December 2016: RON 2.9 million) and RON 1.1 relates to unrealised loss from
bonds and other securities (31 December 2016: RON 0.3 million unrealised loss from bonds).

The deferred tax liability recorded as at 31 December 2017 was RON 4.5 million (31 December
2016: RON 3.9 million) out of which RON 3.9 million relates to other temporary differences (31
December 2016: RON 3.8 million) and RON 0.6 million relates to unrealised gain from other
securities (31 December 2016: RON 0.1 million relates to unrealised gain from other securities).

The Bank envisages using the above amounts versus future taxable profit.

27. SHARE CAPITAL

31 December 31 December
2017 2016

Statutory value as per Constitutive Acts 958,811 958,811

Restatement of share capital in accordance with IAS 29
applied up to 31.12.2003 24,334 24,334

Total 983,145 983,145

The authorized, issued and fully paid share capital (as per Constitutive Acts) of the Bank as at 31
December 2017 is 8,323,016 shares with a par value of RON 115.2 (31 December 2016:
8,323,016 shares with a par value of RON 115.2).

All issued shares are fully paid.

The Bank’s ownership structure as per statutory accounts as of 31 December 2017 and 31
December 2016 is as follows:

31 December 2017
Number of Nominal
Shareholder shares % Amount

Alpha Bank A.E 8,316,223 99.91838% 958,029

Alpha Bank (Greece) 8,316,223 99.91838% 958,029

Other shareholders (Greek citizens) 6,793 0.08162% 782

Total 8,323,016 100% 958,811

F-184
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

27. SHARE CAPITAL (CONTINUED)

31 December 2016
Number of Nominal
Shareholder shares % Amount

Alpha Bank A.E 8,316,223 99.91838% 958,029

Alpha Bank (Greece) 8,316,223 99.91838% 958,029

Other shareholders (Greek citizens) 6,793 0.08162% 782

Total 8,323,016 100% 958,811

Alpha Bank has been listed on the Athens Exchange since 1925. In addition to the Greek stock
exchange, the share is traded over-the-counter on the New York exchange in the form of American
Depository Receipts (ADRs). The share is also included in international indexes such as the MSCI
Emerging Markets, MSCI Greece, FTSE All World and FTSE4Good Emerging Index.

28. COMMITMENTS AND CONTINGENCIES

Guarantees and letters of credit

The Bank issues guarantees and letters of credit on behalf of its customers. The primary purpose
of these instruments is to ensure that funds are available to a customer as required. Guarantees
and standby letters of credit, which represent irrevocable commitments 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 are collateralized and therefore
have significantly less credit risk. Cash requirements under guarantees and standby letters of
credit are considerably less than the amount of the commitment because the Bank does not
generally expect the third party to draw funds under the agreement. The market and credit risk on
these instruments, as well as the operating risk is similar to that arising from granting of loans. In
the event of a claim on the Bank as a result of a customer’s default on a guarantee, these
instruments also present liquidity risk to the Bank. All letters of credit and guarantees issued by the
Bank are partially backed-up by collateral guarantees, such as cash collateral and letters of
guarantee from Alpha Bank AE and other parties.

At 31 December 2017 in connection with guarantees and letters of credit the Bank estimated a
provision amounting to RON 3.1 million (31 December 2016: RON 11.1 million) (please see notes
12 and 24).

Credit related commitments

Commitments to extend credit represent unused portions of authorizations to extend credit in the
form of loans, 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 estimated by the Bank’s management to be considerably less
than the total unused commitments since most commitments to extend credit are contingent upon
customers maintaining specific credit standards. While there is some credit risk associated with the
remainder of commitments, the risk is assessed by the management as not significant, since it
results from the possibility of unused portions of loan authorizations being drawn by the customer
and, second, from these drawings subsequently not being repaid as due.

F-185
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

28. COMMITMENTS AND CONTINGENCIES (CONTINUED)

The aggregate amount of outstanding guarantees, letters of credit and commitments to extend
credit at the end of the period were:

31 December 31 December
2017 2016

Letters of guarantee issued in RON 184,899 290,446

Letters of guarantee issued in foreign currency 207,704 214,997

Total letters of guarantee issued 392,603 505,443

Letters of credit issued 36,770 107,956

Un-drawn credit facilities in RON 606,530 540,260

Un-drawn credit facilities in foreign currency 656,034 612,398

Total un-drawn credit facilities 1,262,564 1,152,658

Of which:
- committed 470,201 446,228
- uncommitted 792,363 706,430

Rent commitments

As at 31 December 2017 the Bank has rent commitments of RON 204,631 thousand (31
December 2016: RON 239,247 thousand) and to companies within the Group, the rent
commitments amounts to RON 7.2 million.

Future lease payments from operating lease contracts are as follows:

31 December 31 December
2017 2016

Less than one year 39,118 42,812

Between one and five years 102,891 86,140
More than five years 62,622 110,295

TOTAL 204,631 239,247

Litigations

The litigations in which the Bank is defendant as at 31 December 2017 and 31 December 2016
should not involve material claims on the Bank. The litigations provisions booked in this respect
amounts to RON 3,112 thousands (31 December 2016: RON 2,989 thousands).

Other contingencies

The Romanian Government has a number of agencies authorized to audit (control) companies that
operate in Romania. These controls are similar to tax audits in other countries, and can cover only
the tax issues and other legal and regulatory issues of interest to these agencies. It is possible that
the Bank continue to be subject to fiscal controls due to issuance of new tax rules. Last tax audit
covered the period up to 31 December 2006.

F-186
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

29. CAPITAL

The Bank maintains an actively managed capital base to cover risks inherent in the business. The
adequacy of the Bank’s capital is monitored using, among other measures, the rules and ratios
established by the European Banking Authority (“EBA”) and adopted by the National Bank of
Romania (“NBR”) in supervising the Bank.

The regulations require for capital adequacy ratios to be calculated on financial information
prepared in accordance with EU and NBR prudential requirements. To be “sufficiently capitalized”
under NBR regulations a banking institution must have a Common Equity Tier I ratio of at least
4.5% and 6% for Total Tier I, while the total capital adequacy limit was maintained at 8%.

As at 31 December 2017, capital adequacy ratio based upon the NBR’s regulation is 25.43% (31
December 2016: 23.46%).

During the past year, the Bank had complied in full with all its externally imposed capital
requirements.

Capital management

The primary objectives of the Bank’s capital management are to ensure that the Bank complies
with externally imposed capital requirement and that the bank maintains strong credit ratings and
healthy capital ratios in order to support its business and to maximize shareholders’ value.

The Bank manages its capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristic of its activities. In order to maintain or adjust the
capital structure, the Bank may adjust the amount of dividend payment to shareholders, return
capital to shareholders or issue capital securities. No changes were made in the objectives,
policies and processes from the previous years.

Regulatory capital

2017 2016
Actual Required Actual Required

Common Equity Tier 1 1,636,621 359,061 1,427,950 363,269

Tier 1 capital 1,636,621 478,748 1,427,950 484,358
Tier 2 capital 392,617 N/A 465,970 N/A

Total capital 2,029,238 638,331 1,893,920 645,811

Risk weighted assets 7,979,136 7,979,136 8,072,637 8,072,637

Common Equity Tier 1 20.51% 4.50% 17.69% 4.50%

Tier 1 capital 20.51% 6.00% 17.69% 6.00%
Total capital ratio 25.43% 8.00% 23.46% 8.00%

Regulatory capital consists of Tier 1 capital, share capital, retained earnings including current profit
for the year, reserves and accumulated other comprehensive income. The other component of
regulatory capital is Tier 2 capital, which includes subordinated debt and preferences shares.

F-187
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

30. RELATED PARTY TRANSACTIONS

According to IAS 24, a related party is a person or entity that is related to the entity that is
preparing its financial statements.

For the Bank, in particular, related parties are considered:

1. Parent company Alpha Bank and the entities that constitute for the Bank or the parent
company:
 a subsidiary,
 a joint venture,
 an associate
 a Post-Employment Benefit Plan
2. A person and his close family members, if that person is a member of the key
management personnel.
The Bank considers as key management personnel all the members of the Bank’s and the Parent
Company’s Board of Directors and Executive Committee, including close family members of the
above mentioned persons.

During 2017 the Bank entered into a number of banking transactions with Alpha Bank A.E. that
controls 99.92% of the Bank’s ordinary shares, and group companies (Alpha Bank London Ltd,
Alpha Finance A.E.P.E.Y., Alpha Asset Management A.E.D.A.K, Alpha Astika Akinita A.E., SSIF
Alpha Finance Romania S.A., Alpha Supporting Services A.E, Alpha Bank Cyprus Ltd , Alpha
Insurance Brokers S.R.L.(Romania), Alpha Leasing Romania IFN S.A., AGI-RRE Participations 1
L.T.D., Alpha Real Estate Services S.R.L., AGI - RRE Participations 1 S.R.L., AGI - RRE Poseidon
Ltd, S.C. Romfelt Real Estate S.A., AGI - RRE Zeus SRL, AGI - RRE Athena SRL, AGI - RRE
Poseidon SRL, AGI - RRE Hera SRL, AGI - BRE Participations 4 E.O.O.D., AGI - RRE Artemis
Ltd, SC Cordia Residence SRL, SC Carmel Residential SRL, AGI-RRE Venus SRL, AGI-RRE
Cleopatra SRL, AGI-RRE Hermes SRL, Asmita Gardens SRL, Ashtrom Residents SRL, Cubic
Center Development S.A., TH Top Hotels SRL) in the normal course of business. These
transactions were carried out on commercial terms and conditions and at market rate.
These include loans, deposits and foreign currency transactions. The volumes of related party
transactions, outstanding balances at the period/year-end, and relating expense and income for
the period are as follows:
Key management
personnel Parent Other
31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec
2017 2016 2017 2016 2017 2016

Assets
Due from other banks - - 688,996 369,581 66 88
Loans and advances
to customers, net 935 923 - - 269,163 251,691
Derivative held for
trading - - 1,566 3,106 - -
Available-for-sale
securities - - - - 77 77
Investments in
associates - - - 804 966
Other assets - - 265 331 28 14

Total assets 935 923 690,827 373,018 270,138 252,836

F-188
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

30. RELATED PARTY TRANSACTIONS (CONTINUED)

Key management
personnel Parent Other
31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec
2017 2016 2017 2016 2017 2016

Liabilities
Due to banks - - 3,366,947 4,471,152 147 127
Due to customers 7,123 5,899 - - 109,711 59,246
Subordinated loan - - 723,978 705,540 - -
Derivative held for
trading - - 1,714 4,248 - -
Other liabilities - - - - 9,238 10,901

Total liabilities 7,123 5,899 4,092,639 5,180,940 119,096 70,274

Interest income 23 24 22,475 21,942 6,292 4,283

Interest expense 58 58 9,292 12,380 76 85
Net commission
income 14 11 583 1,029 255 177
Other operating
income - 3 6 30 1,056 637
Other operating
expenses - 18 - - 17,568 11,191

Guarantees in favor
of third parties - - 46,023 56,611 384 72,754

Guarantees received - - 72,584 103,125 - 72,370

Undrawn credit
facilities 240 278 745,552 726,576 131,903 136,983

The “due to banks” position above includes collateral deposits received from Alpha Bank A.E. in
amount of RON 1,537,286 thousand (31 December 2016: RON 1,980,854 thousand).

Transactions with key management personnel

The remunerations for the period ended 31 December 2017 amounted to RON 6,954 thousand (31
December 2016: RON 6,442 thousand).

Transferred loans receivables

During 2017 and 2016 there have been no transfer transactions with related parties, involving
loans receivables.

F-189
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31. AUDITORS’ FEES

During 2017, the total fees of legal auditors of the Bank are analyzed below:

31 December 31 December
2017 2016

Statutory accounts audit services 395 313

Audit related services 80 56
Tax consultancy and compliance 118 134
Other non-audit services (consultancy etc.) - 1

Total 593 504

32. CASH AND CASH EQUIVALENTS

31 December 31 December
2017 2016

Due from banks 660,200 521,355

Cash and balances with the National Bank of Romania 2,044,314 2,445,616

Total 2,704,514 2,966,971

33. OPERATING SEGMENTS

As presented in note 3.b), the following operating segments have been determined:

• Retail Banking
• Wholesale Banking
• Treasury
• Other

The segments are detailed below:

Retail

This segment includes individuals, professionals, small and very small companies operating in
Romania and abroad. The Bank, offers all types of deposit products (term/sight deposits, savings
accounts, current accounts), loan facilities (mortgages, consumer, corporate loans) and debit and
credit cards of the above customers.

Wholesale

This segment includes all medium-sized and large companies, corporations with international
business activities. The Bank offers working capital facilities, corporate loans, and letters of
guarantee for the abovementioned corporations. This sector also includes factoring services.

F-190
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

33. OPERATING SEGMENTS (CONTINUED)

Treasury

It includes the activities of the Dealing Room in the interbank market (FX Swaps, Bonds, IRS,
Interbank placements – Loans etc.). It includes also stock exchange, advisory and brokerage
services relating to capital markets offered by the Bank.

Others

This segment consists of administration departments of the Bank and income and expenses that
are not related to its operating activities or are non-recurring and are due to external factors.

31 December 2017
Wholesale Retail Treasury Others Total

Net Interest Income 165,019 224,277 16,764 - 406,060

Net fee and
commission income 14,573 65,038 (2,627) - 76,984
Other income 20,034 82,734 11,101 51 113,920

TOTAL INCOME 199,626 372,049 25,238 51 596,964

Depreciation and
amortization (4,253) (12,822) (15) - (17,090)
Other Expenses (69,380) (284,095) (9,136) (2,244) (364,855)
Net impairment
gain/(loss) on financial
assets 27,859 9,791 3,740 - 41,390

TOTAL EXPENSES (45,774) (287,126) (5,411) (2,244) (340,555)

Profit/(loss) before
tax 153,852 84,923 19,827 (2,193) 256,409

Income tax expense - - - (41,675) (41,675)

NET PROFIT/(LOSS) 153,852 84,923 19,827 (43,868) 214,734

Wholesale Retail Treasury Others Total

Total Assets 4,724,773 6,325,118 4,283,326 302,701 15,635,918

Total Liabilities 1,775,893 7,664,403 4,326,006 105,406 13,871,708

Capital expenditure 5,896 17,826 35 - 23,757

F-191
 ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

33. OPERATING SEGMENTS (CONTINUED)

31 December 2016
Wholesale Retail Treasury Others Total

Net Interest Income 168,647 205,088 22,144 - 395,879

Net fee and
commission income 20,388 58,845 (2,779) - 76,454
Other income 19,053 19,923 66,004 43 105,023

TOTAL INCOME 208,088 283,856 85,369 43 577,356

Depreciation and
amortization (3,883) (11,804) (86) - (15,773)
Other Expenses (76,101) (270,724) (5,080) (2,177) (354,082)
Net impairment
gain/(loss) on financial
assets (49,104) (35,567) (1,158) - (85,829)

TOTAL EXPENSES (129,088) (318,095) (6,324) (2,177) (455,684)

Profit/(loss) before tax 79,000 (34,239) 79,045 (2,134) 121,672

Income tax expense - - - (7,294) (7,294)

NET PROFIT/(LOSS) 79,000 (34,239) 79,045 (9,428) 114,378

Wholesale Retail Treasury Others Total

Total Assets 4,617,581 5,823,923 4,236,819 53,921 14,732,244

Total Liabilities 1,894,108 6,024,380 5,183,622 79,225 13,181,335

Capital expenditure 2,840 8,533 20 - 11,393

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9

The new accounting standard IFRS 9 will replace IAS 39 for annual periods on or after 1 January
2018, which impose fundamental changes in the way financial instruments are classified and
measured. For the application of the new standard, the Bank has launched an Implementation
Program, which was organized around two main work streams, the classification and measurement
work stream and the impairment work stream. The Committees of the Board of Directors (the Audit
Committee and the Risk Management Committee) have assumed an active role including
involvement in the decision making process on key assumptions and decisions related to the
Implementation Program.

On the completion of the Implementation Program, new policies have been developed for the
classification, measurement and impairment of financial instruments that have been approved by
the Committees of the Board of Directors. New methodologies and procedures have also been
implemented to support these new policies.

F-192
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

Key decisions taken are briefly described in the following paragraphs:

Classification and measurement work stream

In line with the new standard, the IAS 39 classification categories of financial assets (fair value
through profit or loss, available for sale, held to maturity and amortized cost) will be replaced by:

 Financial assets measured at amortized cost

 Debt securities measured at fair value through other comprehensive income, with gain or
losses recycled to profit or loss on derecognition

 Equity instruments measured at fair value through other comprehensive income, with gain
or losses on derecognition not recycled to profit or loss

 Financial assets measured at fair value through profit and loss.

The criteria for classification in the above categories are presented in note 3.r).
Based on the above, the existing portfolio on 1 January 2018 has been classified as follows:

• Loans and advances to customers and due from banks will be included in business models that
permit the classification of instruments at amortized cost (hold to collect), to the extent that from
the assessment of their contractual terms it is concluded that their contractual cash flows meet
the definition of principal and interest as defined by the new Standard (SPPI test).

• For bonds and in general for fixed income investments, the following business models are
applied:

o business model that aims to hold the financial instruments in order to collect their
contractual cash flows (hold to collect),
o business model, that aims to both collect the contractual cash flows and sell the financial
asset (hold to collect and sell)
o trading portfolio

During the transition to the new standard, all of the bonds were classified into the business model
whose objective is achieved both by collecting contractual cash flows and by selling financial
assets and, therefore, to the extent that their cash flows were solely principal and interest on the
principal amount outstanding, were classified in the fair value through other comprehensive income
category. The Bank has opted to measure at fair value through other comprehensive income, its
equity instruments and long term equity holdings that meet the definition of an equity instruments.
The changes in fair value as well as any gains or losses are recognized directly in equity without
being recycled to profit or loss. Any dividends that will be received are recognized in profit or loss.

• Derivatives have not been affected as they are measured at fair value through profit or loss both
before and after the implementation of IFRS 9.

• The Bank has not opted to designate at initial recognition debt securities as measured at fair
value through profit or loss.
• Financial liabilities are measured at amortized cost; thus they are not affected by the
implementation of IFRS 9 and there was no need to separately measure or present changes in
fair value due to credit risk.

F-193
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

It is noted that the Bank will reassess the business models at each reporting date. The
reassessment of the business model has been established in order to verify whether there is a
change in the inputs that determine the classification of the financial instruments. In this context,
realized sales as well as expected future sales will be monitored and documented. Information on
the frequency, value and cause of sales is collected for further assessment. Disposals performed
due to credit risk deterioration do not affect the classification in the hold to collect business model.
It is noted that the business models are determined by the Asset Liability Committee (ALCo) or the
Executive Committee (ExCo) which decide on the potential identification of a new business model
for both the loan and the securities portfolio.

With regards to the assessment of retail loans contractual cash flows, these will be assessed at
product level due to the standardization of these loans. On the other hand, for loans in the
wholesale portfolio, the assessment will be performed at an individual level as part of the approval
process. With regard to treasury products, the assessment of the contractual cash flows is carried
out by the Operations Division/Back Office Unit in cooperation with the Treasury and Accounting
Divisions. It is noted that the granting of loans or the investment in debt securities, whose cash
flows are not solely principal and interest on the principal amount outstanding, require the approval
of the Asset Liability Committee (ALCo).

Impairment work stream

The application of IFRS 9 significantly modifies the method of calculating the Bank’s impairment
losses on financial instruments. IFRS 9 introduces a model of expected credit loss that replaces
the current IAS 39 incurred loss model. The new requirements eliminate the IAS 39 criterion
according to which credit risk losses were recognized only after the occurrence of a credit event.

In accordance with IFRS 9, the Bank should recognize an allowance for expected credit losses for
loans and other financial assets that are not classified in the fair value through profit and loss
category, as well as for off-balance sheet exposures (Letters of Guarantee, Letters of Credit, and
Undrawn Loan Commitments).

The loss allowance will be based on expected credit losses related to the probability of default
within the next twelve months, unless there has been a significant increase in credit risk from the
date of initial recognition.

In addition, if the financial asset falls under the definition of a purchased or originated credit-
impaired (POCI) financial asset, a loss allowance equal to the lifetime expected credit loss will be
recognized.

i. Loans and advances to Customers

a. Change in default definition

In the context of the transition to IFRS 9, the Bank has harmonized the definition of Default for both
accounting and regulatory purposes by adopting the definition of Non-Performing Exposures and
satisfying in this way the regulatory requirements. The definition of Non-Performing Exposures
takes into account the definition of default in accordance with Article 178 of the European Union
Regulation 575/2013 as well as the EBA Guidelines (GL / 2016/07), the full application of which is
applicable from the end of 2020.
The definition of default under IFRS 9 will be consistent with the one used for internal credit risk
management purposes, i.e. all exposures classified as Non-performing will be considered impaired
- and will be classified as Stage 3 or as credit-impaired at initial recognition.

F-194
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

The definition of Non-Performing Exposures is used to develop models for estimating credit risk
parameters (Probability of Default, Loss Given Default, Exposure at Default).

b. Classification of loans into stages based on credit risk (Staging)

The new standard uses a Stages approach that will reflect the changes in the credit risk of an
exposure since its initial recognition. The adoption of this approach aims at: a) the timely
recognition and measurement of credit losses before they incur, b) the classification of exposures
depending on whether there is a deterioration in credit risk.

Credit-impaired at initial recognition include the following:

 Exposures that at the time of acquisition meet the criteria to be classified as Non-
Performing Exposures.

 Exposures for which there has been a change in repayment terms, due to financial difficulty
or not, which resulted in derecognition and recognition of a new impaired asset (POCI). If
the exposure before derecognition was classified as impaired the new loan will also be
classified as POCI. However, especially for Wholesale Banking exposures, in the case
where the newly recognized loan is the result of a change of borrower whose overall
creditworthiness is better than the previous one, based on an assessment by the
competent Credit Committee, who does not present financial difficulties and simultaneously
has presented a viable Business plan, and for which no debt has been write-down, then the
exposure will not be classified as POCI.

It is noted that an exposure classified as POCI remains POCI throughout its life.

For the remaining exposures not classified as POCI, Stage allocation is determined as follows:

Stage 1: At initial recognition of a loan, a loss allowance is measured based on 12 months

Expected Credit Losses. Stage 1 includes exposures that do not have a significant increase in
credit risk since initial recognition. Stage 1 also includes exposures for which credit risk has
improved and the loan has been reclassified from Stages 2 or 3.

Stage 2: If a loan has a significant increase in credit risk since initial recognition and is not
classified as Non Performing Exposure, the Bank will measure Expected Credit Losses over its
lifetime.

Stage 3: Includes credit impaired exposures. In this stage, lifetime Expected Credit Loss are
recognised.

F-195
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

c. Significant Increase in Credit Risk

In determining the significant increase in credit risk of an exposure since initial recognition (SICR)
and the recognition of Lifetime expected Credit Losses instead of 12 months Expected Credit
Losses, the Bank assesses, at each reporting date, the risk of default compared to the risk of
default at initial recognition for all its performing exposures including those with no delinquencies.

The assessment of the significant increase in Credit Risk is based on the following:

• Quantitative Indicators: refers to the quantitative information used and more specifically to the
comparison of the probability of default (PD) between the reporting date and the date of initial
recognition.

• Qualitative Indicators: refers to the qualitative information used which is not necessarily reflected
in the probability of default, such as the classification of an Exposure as foreborne performing
(FPL, according to EBA ITS). Additional qualitative indicators, both for Corporate and Retail
portfolios are also reflected through the Early Warning indicators and depending on the underlying
assessment, an Exposure can be considered to have a significant increase in credit risk or not.
Especially for Corporate portfolio, additional qualitative indicators are captured through credit
ratings (financials evolution, sector data)

• Backstop Indicators: in addition to the above, and in order to capture cases for which there are no
triggers reflecting the increase in credit risk, based on qualitative and quantitative indicators, the 30
days past due indicator is used as a backstop.

d. Calculation of Expected Credit Loss

The Bank calculates impairment losses either on a collective (collective assessment) or on an

individual basis (individual assessment), taking into account the significance of an Exposure or the
Borrower’s limit.
The Bank will calculate the expected credit losses based on forward looking risk parameters
generated under three scenarios averaged by their probability of occurrence, in order to estimate
the expected cash flows, which will be discounted using the effective interest rate.

The mechanism for calculating expected credit loss is based on the following credit risk
parameters:

• Probability of Default (PD): It is an estimate of the probability of a Debtor to default over a

specific time horizon. A default may occur only at a specific time of the period under review, if the
exposure was not prior derecognised and if it remains in the loan portfolio.

• For assessing the probability of default, the credit risk rating models assess a series of
parameters that can be grouped as follows:

o Financial Analysis: The Borrower’s Financial Capacity (Liquidity Indicators, Debt to Revenue
etc.)
o Competitor’s analysis: the borrower’s comparative position in the market in which operates,
mainly in relation to its competitors (mainly applicable to debtors of Wholesale Banking)
o Current and historical debtor’s behavioural data either towards the Bank or towards third
parties (delinquencies, repayment behavior, etc.),
o Qualitative characteristics of the debtor (strong and sound management, management
succession, appropriate facilities and equipment, etc.).

F-196
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

Credit Ratings will constitute the main input in order to determine the probability of default. The
Bank will use statistical models in order to analyze the collected data and make estimates of the
remaining probability of default over the life of the exposures and how they will evolve over time
based, among other things, on macroeconomic variables (e.g. changes in GDP growth,
unemployment rate and property prices etc.)

Exposure at default (EAD): Exposure at Default is an estimate of the amount of the exposure at the
time of the default taking into account: (a) expected changes in the exposure after the reporting
date, including principal and interest payments; (b) the expected use of credit limits and (c)
accrued interest.

The approved credit limits that have not been fully disbursed represent a potential credit exposure
and are converted into a credit exposure equal to the approved undrawn credit limit multiplied by a
Credit Conversion Factor (CCF). The Credit Conversion factor of credit exposure is calculated
based on statistical models.

• Except for credit cards and other revolving exposures, the maximum period for which credit
losses are calculated is the remaining contractual maturity of a financial instrument unless the
Bank has the legal right to recall the financial instrument earlier.

• Loss given default (LGD): Loss given default is an estimate of the loss that will occur if the
default occurs at a given time. It is based on the difference between the contractual cash flows
due and those expected to be received, including the liquidation of collaterals. It is usually
expressed as a percentage of the exposure at default (EAD). The data used are based on
historically collected data and include a broad set of transactional characteristics (for example
product type and type of collateral) as well as debtor’s characteristics. Recent data and possible
future scenarios are also used to determine the IFRS 9 Loss Given Default (LGD) for each group
of financial instruments.

In determining the risk parameters, the Bank will take into account 3 scenarios, a Base Scenario,
an Upside Scenario and a Downside Scenario, as well as the cumulative probabilities of their
occurrence.

e. Undrawn commitments

Undrawn loan commitments were measured in accordance with IAS 39 at the higher value
between the amount of the provision (determined in accordance with IAS 37) when the outflow was
considered probable and a reliable estimate was available and the amount initially recognized less
accumulated amortization. According to IFRS 9, these contracts fall within the scope for expected
credit losses recognition.

In estimating the expected credit losses over the life of an undrawn loan commitment, the Bank will
assess the expected part of the loan commitment that will be used throughout its expected life.
Credit cards and revolving exposures include both a loan and an undrawn commitment, for which
the expected credit losses will be calculated together with the loan. However, for undrawn loan
commitments and letters of credit / letters of guarantee, the expected credit losses will be
recognized in Provisions.

F-197
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

g. Information on future conditions

The Chief Economist produce forecasts for the possible evolution of macroeconomic variables that
affect the level of expected credit losses of loan portfolios under a baseline and under alternative
macroeconomic scenarios and also generate the cumulative probabilities associated with these
scenarios.

The macroeconomic variables affecting the level of expected credit losses are the Gross Domestic
product growth (GDP), the unemployment rate, prices of residential and commercial real estate,
etc.

The production of the baseline scenario, supported by a consistent economic description, will
represent the starting point and will constitute the most likely scenario according to the current
economic conditions and the Bank’s basic assessment of the course of the economy.

h. Governance

The Credit Risk Committee is responsible for approving the Expected Credit Losses as well as the
methodologies developed by the Bank for calculating the expected credit loss (ECL Methodology)
for loan portfolio.

ii. Impairment on Treasury products

For debt treasury instruments that are measured at amortized cost or at fair value through other
comprehensive income under IFRS 9, the impairment loss will be based on the expected credit
losses associated with the probability of default within the next twelve months, unless there has
been a significant increase in credit risk since initial recognition in which case the impairment loss
recognized will be equal to the lifetime expected credit loss.

• Significant Increase in Credit Risk

The Bank defines as low credit risk all investment grade securities, which will be classified in Stage
1 provided that they remain in this grade. The Bank will apply specific methodology and criteria to
determine whether significant increase in credit risk has occurred since initial recognition for all
non-investment grade debt securities.

The classification into stages for the purpose of Expected loss computation it is based on the credit
rating of rating agencies or, for corporate securities issued by Romanian issuers which are also
included in loan portfolio, on the issuer’s internal rating.
Determining the significant credit risk increase for non-investment grade securities is based on the
following two conditions:
- Downgrade in the issuer / counterparty’s credit rating on the reporting dates compared to the
credit rating on the date of the initial recognition.
- Increase in the probability of default of the issuer / counterparty for the 12-month period
compared to the corresponding probability of default at initial recognition.
Additionally, the Bank will monitor the change in the credit spread since the initial recognition date.
A change in the credit spread at the reporting date that exceeds a specific threshold compared to
the credit margin prevailing at the date of initial recognition is a trigger for reviewing the securities
classification stage. Based on the result of the above review, the security remains in Stage 1 or is
transferred to Stage 2, regardless of whether the original Stage 2 criteria have been met or not.

F-198
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

• Calculation of Expected Credit Loss

For the calculation of the expected credit loss, the following parameters will be used:

- Probability of default (PD): the probability of default over the next 12 months will be used to
calculate the expected credit loss for 12 months, and the probability of default over the life of the
instrument will be used to calculate the lifetime expected credit losses.

- Exposure at default (EAD): In the case of securities, the Bank estimates the future unamortized
cost in order to calculate the EAD. In particular, for each period, EAD is the maximum loss that
would result from issuer / counterparty potential default.

- Loss given default (LGD) is the percentage of the total exposure that the Bank estimates as
unlikely to recover at the time of the default. The Bank distinguishes sovereigns from non-
sovereign issuers / counterparties as regards to the LGD estimation. In case, the Bank has also
granted a loan to the issuer / counterparty of the security, the estimated LGD should be in line with
the corresponding estimate for the loan portfolio (taking into account any potential collaterals the
loan portfolio is likely to have against the unsecured debt securities).

A debt security will be recognized as purchased or originated credit-impaired (POCI) in the

following cases:

- The debt instrument (or the issuer) has an external rating that corresponds to default at the time
of acquisition.

- Corporate bonds resulting from debt restructuring will be classified as credit impaired on initial
recognition, based on the guidelines applicable to the loan portfolio.

When a debt security has been purchased at a large discount and does not fall into any of the
categories mentioned above, the Bank examines the transaction in detail (transaction price,
recovery rate, issuer’s financial condition at the time of purchase, etc.) in order to determine
whether it should be recognized as a purchased or originated credit-impaired security (POCI).
Classification in this category requires documentation and approval by the relevant committees of
the Bank.

Capital and money market financial instruments are considered impaired when their rating is
equivalent to default. In the case, a debt security corporate issuer / counterparty has also been
granted a loan which has been classified as impaired, then the classification of the debt security is
aligned to the classification of the loan exposure.

Transition

The Bank will not restate the comparative information for 2017 for financial instruments that are
within the scope of IFRS 9 and the differences arising from the adoption of IFRS 9 will be
recognized directly in Equity as at 1 January 2018.

F-199
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

Estimated Impact from the implementation of IFRS 9

The following table presents the reconciliation of the transition from IAS 39 to IFRS 9 as of 1
January 2018:

Balance Balance
IAS 39 Remeasurements IFRS 9
31.12.2017 Reclassifications (Effect on Equity) 1.1.2018

ASSETS
Cash and balances
with National Bank of
Romania 2,044,314 - - 2,044,314
Derivative financial
assets 1,566 - - 1,566
Due from banks 914,671 - (24) 914,647
Investment securities: - - -
- Available for sale 1,323,342 (1,323,342) - -
- Fair value through
other comprehensive
income - 1,323,342 39 1,323,381
Investments in
associates 804 - 804
Loans and advances
to customers 10,938,335 - (28,211) 10,910,124
Assets held for sale 266,291 - (2,277) 264,014

LIABILITIES

Due to banks 3,369,298 - - 3,369,298

Derivatives financial
liabilities 1,714 - - 1,714
Due to customers 9,440,296 - - 9,440,296
Other borrowed funds 232,791 - - 232,791
Subordinated debt 723,978 - - 723,978
Provisions 13,627 - 8,241 21,688

The estimated impact of the transition to IFRS 9 on Total Equity amounts to a loss of RON 38.7
million.

The Fiscal Code does not currently regulate the tax impact resulted from change in accounting
policies as a result of IFRS 9 implementation. Currently this matter is considered by the fiscal
authorities, however no indication of their approach in this matter is available up to know.

F-200
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

The following table presents loans and advances to customers measured at amortised cost by IFRS 9 stage as reported after the estimated impact of
IFRS 9:

Loans impaired at Total loans and advances to

Stage 1 Stage 2 Stage 3 initial recognition customers at amortized cost
Expected Expected Expected Expected Expected Net Value
Gross Credit Gross Credit Gross Credit Gross Credit Gross Credit after
amount Losses amount Losses amount Losses amount Losses amount Losses impairment

Retail
lending 4,925,402 (3,785) 679,210 (18,760) 392,403 (210,208) 2,137 (905) 5,999,152 (233,657) 5,765,495
Corporate
lending 3,492,602 (16,748) 1,576,195 (66,511) 287,269 (145,702) - - 5,356,066 (228,961) 5,127,105
Public
sector 10,364 (81) 7,456 (215) - - - - 17,820 (297) 17,524

Total 8,428,368 (20,614) 2,262,861 (85,486) 679,672 (355,910) 2,137 (905) 11,373,038 (462,915) 10,910,124

Apart from estimated Expected credit losses presented in the above table, a provision for Expected credit losses for off-balance sheet items has been
accounted for amounting to RON 11.4 million.

F-201
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

The following table presents Financial Assets by IFRS 9 stage as reported after the estimated
impact of IFRS 9.

Loans
impaired at
Stage initial
Stage 1 Stage 2 3 recognition Total
Balance as at 1.1.2018 in
accordance with IFRS 9 before
Expected Credit Losses 3,839,741 183,970 - - 4,023,711
Expected Credit Losses (16) (8) - - (24)

However, the Bank is continuing to assess, test and refine the new accounting processes, internal
controls and governance framework necessitated by the adoption of IFRS 9. The new accounting
policies, assumptions, judgments and estimations remain subject to change until the Bank finalizes
its audited financial statements as at 31.12.2018. Therefore, the impact disclosed in these financial
statements may be amended during 2018.

Supervisory impact of the implementation of IFRS 9

On 25 October 2017 the European Parliament, the Council and the Commission agreed on the
proposed amendment of the Regulation (EU) No 575/2013 as regards transitional arrangements
for mitigating the impact of the introduction of IFRS 9 on own funds. The agreed Regulation
(2395/2017) was approved by the European Parliament and the Council and published in the
Official Journal of the European Union on 12 December 2017.

According to the transitional arrangements, institutions are allowed, beginning from the date of
initial application of IFRS 9 and for a duration of 5 years, to add back to their CET1 capital the after
tax amount of the difference between the loss allowances as of the date of transition to IFRS 9 and
the loss allowances as of 31.12.2017 in accordance with IAS 39 (“static” amount).

The amount of the difference that would be added to the ratio should decrease on an annual basis
based on scaling factors, in order for the amount of loss allowances to decrease over time down to
zero to deliver full implementation of the IFRS 9 impact after the end of the 5-year period (phase-
in). The factors to be applied per year are the following:

• 0.95 the 1st year,

• 0.85 the 2nd,
• 0.7 the 3rd,
• 0.5 the 4th and
• 0.25 the last year.

In addition, the institutions are allowed, for a duration of 5 years beginning from the date of initial
application of IFRS 9, to add back to the CET1 capital the amount, weighted by the
aforementioned scaling factors, of the after tax loss allowances of impairment stages 1 and 2 as of
the reporting date to the extent that this amount exceeds the amount of the respective allowances
as of the initial application of IFRS 9 (1.1.2018). Stages 1 and 2 are defined respectively as the 12
month expected credit losses and lifetime expected credit losses excluding credit impaired financial
assets.

F-202
ALPHA BANK ROMANIA SA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

34. ESTIMATED IMPACT OF THE IMPLEMENTATION OF IFRS 9 (CONTINUED)

Alpha Bank Romania intends to make use of Article 473a of the above Regulation and apply the
transitional arrangements foreseen for the calculation of Capital Adequacy on an individual basis.
Based on the above, the Common Equity Tier 1 (CET 1) ratio is estimated not to be affected, the
expected outcome being of +16bps to a total of 20.68% for the opening balances of 2018, while
the impact from full implementation (under hypothesis of transitional arrangements not applied)
was estimated at approximately -31 bps. This would have set the ratio to 20.21% for 2018 opening
balances. The positive impact mentioned earlier is given by the fact that at the end of 2017, the
prudential filter has been still applied while starting 2018 the transitional provisions of prudential
filter ended. The Bank is adequately capitalized to meet the needs arising from the application of
the new standard as the Common Equity Tier 1 (CET 1) ratio stood at 20.51% as at 31.12.2017
(please refer to note 29).

35. SUBSEQUENT EVENTS

On 04.01.2018 Alpha Bank Romania signed a contract for selling of a non-performing corporate
loans portfolio.

Following this transaction, as at 31.12.2017 a portfolio of loans with a net book value of RON 252.8
million was reclassified and presented under assets held for sale (please see notes 4.b.iii, 16.c,
19).

F-203
 ALPHA BANK ROMANIA S.A.

SEPARATE FINANCIAL STATEMENTS

For the year ended 31 December 2016

Prepared in accordance with

International Financial Reporting Standards
as endorsed by the European Union

F-204
CONTENTS PAGE

Independent auditors report

Separate Income Statement

Separate Statement of Profit or Loss and Other Comprehensive Income

Separate Statement of Financial Position

Separate Statement of Changes in Equity F-210 – F-213

Separate Statement of Cash Flows F-214

Notes to the Separate Financial Statements F-215 – F-306

F-205
KPMG Audit SRL
Victoria Business Park
DN1, Soseaua Bucuresti-Ploiesti nr. 69-71
Sector 1

P.O. Box 18-191

Bucharest 013685
Romania
Tel: +40 (21} 201 22 22
+40 (372) 377 800
Fax: +40 (21) 201 22 11
+40 (372) 377 700
www.kpmg .ro

Independent Auditors' Report

To the shareholders of
Alpha Bank Romania S.A.

Opinion

1. We have audited the accompanying separate financial statements of Alpha Bank Romania S.A.
("the Bank"), which comprise the separate statement of financial position as at 31 December
2016, and the separate income statement, the separate statements of profit or loss and other
comprehensive income, changes in equity and cash flows for the year then ended, and a
summary of significant accounting policies and other explanatory notes.

2. In our opinion, the accompanying separate financial statements as at and for the year ended 31
December 2016 give a true and fair view of the unconsolidated financial position of the Bank as
at 31 December 2016 and its unconsolidated financial performance and its unconsolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards as
adopted by the European Union.

Basis for Opinion

3. We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditors' Responsibilities for
the Audit of the Separate Financial Statements section of our report. We are independent of the
Bank in accordance with the ethical requirements that are relevant to our audit of the separate
financial statements in Romania, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.

c:>2017 KPt.1G Audit SRL, a Rotnonian limit<ld iabmty company and a

member ti1m of the KPMG netv.ort of Independent membe, fiem• atflliated
Ytith KPMG International Cooperative ("KPMG lntem1tlon1tr), a S'l'ofiss
Fi&C81rog. nlion}}
R012997279
Trade Registry
ontl!y. All rights ,eseivod.PDC no.15632 no.J40/4439/2000
Share Capital 2 .000 R

F-206
Other Information - Administrators' Report

4. The Other information comprises the Administrators' Report. The Administrators are responsible
fer the preparation and presentation of the Administratois' Report in accordance with the
requirements of the Order of the President of the Board of the National Bank of Romania No.
27/2010 and related amendments, articles no. 11 - 14 of the accounting regulations In
accordance with International Financial Reporting Standards applicable to credit institutions and
for such internal control as Administrators determine is necessary to enable the preparation and
presentation of Administrators' Report that is free from material misstatement, whether due to
fraud or error.

The Administrators 'Report presented from page 1 to 38 is not part of the separate financial
statements.

Our opinion on the separate financial statements does not refer to the Administrators 'Report.

In connection with our audit of the separate financial statements as at and for the year ended 31
December 2016, our responsibility is to read the Administrators' Report attached to the separate
financial statements and, in doing so, consider whether there is a material inconsistency
between the Administrators' Report and the separate financial statements, whether the
Administrators' Report includes, in all material respects, the information required by the
requirements of the Order of the President of the Board of the National Bank of Romania No.
27/2010 and related amendments, articles no. 11 - 14 of the accounting regulations in
accordance with I ntemational Financial Reporting Standards applicable to credit institutions and
whether, based on our knowledge and understanding of the Bank obtained during our audit of
the separate financial statements, the information included in the Administrators' Report contains
a material error. We are required to report in respect of these matters. Based on the work
performed we report that:

a) in the Administrators' Report we have not identified information which is not in accordance,
in all material respects, with the information presented in the accompanying separate
financial statements;
b) the Administrators' Report identified above include, in a!! material respects, the information
required by the requirements of the Order of the President of the Board of the National Bank
of Romania No. 27/2010 and related amendments, ari.:clas no. 11 - 14 of the accounting
regulations in accordance with International Financial Reporting Standards applicable to
credit institutions.

In add ition, based on our knowledge and understanding of the entity and its environment
acquired during our audit of the separate financial statements as at and for the year ended 31
December 2016, we have not identified information included in the Administrators' Report that
contains a material error.

Responsibilities of Management and Those Charged with Governance for the Separate Financial
Statements

F-207
5 . Management is responsible for the preparation and fair presentation of these separate financial
statements in accordance with the International Financial Reporting Standards as adopted by
the European Union, and for such internal control as management detennines is necessary to
enable the preparation of separate financial statements that are free from material misstatement,
whether due to fraud or error.

6. In preparing the separate 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.

7. Those charged with governance are responsible for overseeing the Bank's financial reporting
process.

Auditors' Responsibilities for the Audit of the Separate Financial Statements

8. Our objectives are to obtain reasonable assurance about whether the separate financial
statements as a whole are free from material misstatement, whether due to fraud or error, and
to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs 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 separate financial
statements.

9. As part of an audit in accordance with JSAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the separate financial statements,
whether due to fraud or error, design and perfonn audit procedures responsive to those rtsks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk 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 internal 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 material uncertainty 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
s

F-208
 our auditors' report to the related disclosures in the separate 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 auditors' report. However, future events or conditions
may cause the Bank to cease to continue as a going concern.

o Evaluate the overall presentation, structure and content of the separate financial statements,
including the disclosures, and whether the separate financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.

10. 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 internal control that we identify during our audit.

Other Matters

11. This report is made solely to the Bank's shareholders, as a body. Our audit work has been
undertaken so that we might state to the Bank's shareholders those matters we are required
to state to them in an auditors' report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Bank and the
Bank's shareholders as a body, for our audit work, for the report on separate financial
statements or for the opinion we have formed.

For and on behalf of KPMG Audit S.R.L.:

Grecu Tudor-Alexandru

\(?Kq L5L_...{- sR.L

Registered with the Chamber of Financial
Auditors of Romania under no 9/2001

Bucharest, 7 April 2017

F-209
ALPHA BANK ROMANIA SA
Separate Statement of Changes in Equity
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Year ended Year ended

31 December 31 December
Note 2016 2015
RON’000 RON’000

Interest and similar income 7 484,639 556,288

Interest expense 7 (88,760) (142,657)
Net interest income 395,879 413,631

Fee and commission income 8 91,826 89,414

Fee and commission expense 8 (15,372) (18,353)
Net fee and commission income 76,454 71,061

Dividend income 3,035 506

Gains less losses on financial

94,884 (24,297)
transactions 9
Other operating income 7,320 8,853

Net operating income 577,572 469,754

Net impairment loss on financial

10 (85,829) (111,372)
assets
Staff costs 11 (149,732) (153,027)
Depreciation and amortization
(15,773) (16,619)
expenses 17
Other operating expenses 12 (204,350) (214,977)

Operating expenses (455,684) (495,995)

Profit/(loss) before tax 121,888 (26,241)

Income tax expense 26 (7,329) (509)

Net profit/(loss) for period 114,559 (26,750)

F-210
ALPHA BANK ROMANIA SA
Separate Statement of Changes in Equity
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Year ended Year ended

31 December 31 December
2016 2015
RON’000 RON’000

Net profit/(loss) for the period 114,559 (26,750)

Other comprehensive income:

Items that may be reclassified to profit or loss
Fair value reserve (available-for-sale financial assets):
Net change in fair value (6,812) (236,695)
Net amount transferred to profit or loss (602) 393,950
Income tax 1,186 (25,161)
Other comprehensive income, net of tax (6,228) 132,094

Total comprehensive income 108,331 105,344

F-211
 ALPHA BANK ROMANIA SA
Separate Statement of Changes in Equity
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31 December 31 December
Note 2016 2015
RON’000 RON’000

ASSETS

Cash and balances with National

Bank of Romania 13 2,445,616 1,879,320
Derivative financial assets 18 3,106 -
Due from banks 14 537,495 1,258,405
Available-for-sale securities and
1,253,738 1,322,291
Investments in associates 15
Loans and advances to customers 16 10,335,770 10,395,455
Property and equipment 17 96,552 106,011
Intangible assets 17 7,336 4,348
Deferred tax assets 26 - 4,519
Other assets 19 52,847 41,458

TOTAL ASSETS 14,732,460 15,011,807

LIABILITIES AND EQUITY

Due to banks 20 4,472,042 6,499,462

Derivative financial liabilities 18 4,248 3,769
Due to customers 21 7,918,486 6,294,959
Other borrowed funds 22 6,076 7,429
Subordinated debt 23 705,540 702,976
Provisions 24 18,638 12,189
Deferred tax liabilities 26 743 -
Other liabilities 25 55,597 48,264
Total liabilities 13,181,370 13,569,048

Share capital 27 983,145 983,145

Reserve on available for sale financial
(933) 5,295
assets 15
Other reserves 141,736 135,642
Retained earnings 427,142 318,677
Shareholders' equity 1,551,090 1,442,759

TOTAL LIABILITIES AND EQUITY 14,732,460 15,011,807

F-212
ALPHA BANK ROMANIA SA
Separate Statement of Changes in Equity
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Reserves on
Share available for sale Other Retained
Capital financial assets reserves Earnings Total

Balance
As at 01 January 2015 983,145 (126,799) 135,642 345,427 1,337,415

Changes for the period 1.1.-

31.12.2015
- (26,750) (26,750)
Net loss for the period - -
Other comprehensive income,
net of income tax
Net change in available-for-sale
132,094 - -
financial assets, net of tax - 132,094

Total other comprehensive

132,094
income - - - 132,094
Total comprehensive income
- 132,094 - (26,750) 105,344
for the period

Balance
As at 31 December 2015 983,145 5,295 135,642 318,677 1,442,759

Balance
As at 01 January 2016 983,145 5,295 135,642 318,677 1,442,759

Changes for the period 1.1.-

31.12.2016
Net profit for the period - - - 114,559 114,559
Other comprehensive income,
net of income tax
Net change in available-for-sale
- (6,228) - - (6,228)
financial assets, net of tax
Appropriation of legal reserves 6,094 (6,094) -

Total other comprehensive

- (6,228) 6,094 (6,094) (6,228)
income
Total comprehensive income
- (6,228) 6,094 108,465 108,331
for the period

Balance
As at 31 December 2016 983,145 (933) 141,736 427,142 1,551,090

As at 31 December 2016 statutory non-distributable reserves set-up in accordance with

Romanian law amount to RON 141,736 thousand (31 December 2015: RON 135,642 thousand).

F-213
ALPHA BANK ROMANIA SA
Separate Statement of Cash Flows
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

Year ended Year ended

Note 31 December 2016 31 December 2015

Cash flow from operating activities

Profit/(loss) before taxation 121,888 (26,241)
Adjustments:
Net impairment loss on financial assets 10 91,504 112,942
Dividend and similar income (3,035) (506)
Depreciation and amortization 17 15,773 16,619
Fixed assets written-off and impairment 17 1,964 5,506
(Gain) from transactions of equity investments 15 (5,327) -
(Gain) from sales of tangible assets (127) -
(Gain) from sales of assets recovered from customers (23) -
Other adjustments 6,110 56,924
Operating profit before changes in operating assets and
228,727 165,244
liabilities

Changes in operating assets:

Decrease/(increase) in amounts due from other banks 1,078 (17,120)
Decrease/(increase) in loans and advances to customers (22,546) (15,010)
Decrease/(increase) in other assets (1,664) (3,119)
Total changes in operating assets (23,132) (35,249)

Changes in operating liabilities

(Decrease)/increase in amounts due to banks (2,026,500) (714,075)
(Decrease)/increase in amounts due to customers 1,621,318 (1,353,853)
(Decrease)/Increase in other borrowed funds (1,353) (1,364)
(Decrease)/increase in other liabilities 13,782 2,023
Total changes in operating liabilities (392,753) (2,067,269)

Net cash from operations (187,158) (1,937,274)

Income tax paid (8,565) -
Net cash flows from operating activities (195,723) (1,937,274)

Cash flow from investing activities

Purchase of property and equipment and intangibles 17 (11,393) (9,148)
Proceeds from sale of property and equipment 17 127 -
Proceeds from sale of AFS securities 2,011,635 4,129,221
Purchase of AFS securities (2,012,686) (1,867,114)
Proceeds from sale of equity investments 52,707 -
Purchase of equity investments (1,125) -
Dividends received 3,035 506
Net cash flows from investing activities 42,300 2,253,465

Cash flow from financing activities

Finance lease repayments (151) (107)
Subordinated loan 15 45
Net cash flows from financing activities (136) (62)

Net increase / (decrease) in cash and cash equivalents (153,559) 316,129

Cash and cash equivalents at 1 January 32 3,120,530 2,804,401
Cash and cash equivalents at 31 December 32 2,966,971 3,120,530

Interest received 489,579 576,275

Interest paid 87,486 154,687

F-214
 ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

1. Reporting entity

Alpha Bank Romania SA (the "Bank") was incorporated in Romania in 1994 and is licensed by
the National Bank of Romania to conduct banking activities. The Bank is principally engaged in
wholesale and retail banking operations in Romania. Currently, the Bank operates through its
head office located in Bucharest and 130 branches (31 December 2015: 132). As of 31
December 2016, 36 were located in Bucharest (31 December 2015: 37) and 94 in other cities in
Romania (31 December 2015: 95).

The registered office of the Bank is:

Alpha Bank Romania SA
Calea Dorobantilor no. 237B, District 1
Bucharest
Romania

As of 31 December 2016, the members of Board of Directors were as follows:

 Mr. Christos Giampanas, Chairman

 Mr. Sergiu Bogdan Oprescu, Member and Executive President
 Mr. Evangelos Kalamakis, Member
 Mr. Nikolaos Zagorisios, Member
 Mr. Lazaros Papagaryfallou, Member
 Mr. Georgios Michalopoulos, Member
 Mr. Stelios Louisides, Member
 Mrs. Irene Rouvitha Panou, Independent Member
 Mr. Radu Gheorghe Deac, Independent Member

The Bank serves a broad client base that includes corporations and individuals and offers
banking services to local and international entities which include but are not limited to wholesale
and retail banking operation, issuing of cards under the VISA and MasterCard network,
mortgage and consumer loans, money transfers, trade finance.

The number of employees as at 31 December 2016 was 1,895 (31 December 2015: 1,954).

Alpha Bank AE, the parent company of the Bank, based in Greece, 40 Stadiou Street 102 52
Athens, prepares a set of consolidated financial statements in accordance with International
Financial Reporting Standards as endorsed by the European Union for the year ended 31
December 2016, available on the following web site www.alpha.gr.
As at 31 December 2016 and 31 December 2015, the Bank had no subsidiaries.

F-215
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

2. Basis of presentation

a) Statement of compliance

These separate financial statements relate to the financial year ended 31 December 2016 and
they have been prepared in accordance with International Financial Reporting Standards
(IFRS) as endorsed by the European Union and sanctioned by the Order no. 27/2010 issued by
National Bank of Romania.
The accounts of the Bank are maintained in RON.

b) Basis of measurement
The separate financial statements of the Bank have been prepared on the historical cost basis
except for the available for sale debt instruments and derivative financial instruments which
were measured at fair value. Available for sale equity instruments are measured at cost where
fair value cannot be reliably measured. The Bank applied the going concern principle for the
preparation of the separate financial statements as at 31.12.2016

c) Functional and presentation currency

The Bank’s management considers that the functional currency, as defined by IAS 21, The
Effects of Changes in Foreign Exchange Rates, is RON. The separate financial statements are
presented in Romanian Lei (“RON”), rounded to the nearest thousand, unless otherwise
indicated.

d) Use of estimates and judgments

The preparation of separate financial statements in conformity with IFRS requires management
to make judgments, estimates and assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and expenses. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the estimates are
revised. In particular, information about significant areas of estimation uncertainty and critical
judgments’ in applying accounting policies that have the most significant effect on the amount
recognized in the separate financial statements are described in Notes 4 and 5.

e) Changes in accounting policies

All changes in accounting policies represent the effect of changes in relevant International
Financial Reporting Standards as endorsed by the European Union.

f) Consolidated entities: Associates

In 2016 the Bank increased its participation in Alpha Finance Romania up to the level of
26.68% from capital, as can be seen in note 15.
The participation in Alpha Finance Romania has not been accounted using the equity method
given that all the exemption criteria required by IAS 28 “Investments in Associates and Joint
Ventures” are satisfied. In particular, the Bank is a partially owned subsidiary of Alpha Bank AE,
an entity that prepares IFRS consolidated financial statements that are available for public use.
Furthermore, minority shareholders of the Bank do not object to it not applying the equity
method and the Bank has no debt or equity instruments traded in a public market, nor is it in the
process of issuing such instruments.
Giving the exemption criteria required by IAS 28, presented above, and the provisions of IAS 27
“Separate financial statements”, the Bank prepared separate financial statements for year
ending 31 December 2016, in which investments in associates are carried at cost.

F-216
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in
these separate financial statements, and have been applied consistently by the Bank.
a) Foreign currency
Transactions in foreign currencies are translated into the functional currency of the Bank at
exchange rates at the dates of the transaction. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are retranslated into the functional currency at the
exchange rate at that date. Foreign exchange differences arising on translation are recognized
in the separate income statement, except when deferred in equity as qualifying cash flow
hedges and qualifying net investments hedges. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are translated using the exchange
rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to the functional currency at exchange
rates at the dates the fair value was determined. Foreign currency differences arising on
retranslation are recognized in profit or loss, except for differences arising on the retranslation
of non-monetary available-for-sale financial assets which are included in the fair value reserve
in equity.

The exchange rates of major foreign currencies were:

Currencies 31 December 2016 31 December 2015 % Increase/(Decrease)
Euro (EUR) 1: RON 4.5411 1: RON 4.5245 0.37%
US Dollar (USD) 1: RON 4.3033 1: RON 4.1477 3.75%

b) Segment reporting
An operating segment is a component of the Bank that engages in business activities from
which it may earn revenues and incur expenses, including revenues and expenses that relate to
transactions with any of the Bank’s other components, whose operating results are reviewed
regularly by the chief operating decision maker to make decisions about resources allocated to
each segment and assess its performance.
The Bank is not required to disclose information about segments, as it does not have equity or
debt securities publicly traded.

c) Interest income and expense

Interest income and expense are recognized in the separate income statement for all interest
bearing instruments on an accrual basis using the effective interest method. The effective
interest method is a method of calculating the amortized cost of a financial asset or a financial
liability and of allocating the interest income or interest expense over the relevant period. 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 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.
Interest income on impaired loans is recognized based on the carrying value of the loan net of
impairment, at the original effective interest rate.

F-217
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

c) Interest income and expense (continued)
Loan origination fees, such as evaluating the borrowers’ financial condition, collateral and other
security arrangements, and related direct incremental expenses are deferred and subsequently
recognized in income as an adjustment to the effective yield.
Interest income and expense presented in the separate statement of comprehensive income
include:
 interest on financial assets and financial liabilities measured at amortized cost calculated on
an effective interest basis;
 interest on available-for-sale investment securities calculated on an effective interest basis
 interest on other interest bearing financial instruments
d) Fees and commission
Fees and commissions income and expenses that are integral to the effective interest rate as a
financial asset or liability are included in the measurement of the effective interest rate.
Other fee and commission income arising on the financial services provided by the Bank
including cash management services, brokerage services, investment advice, financial
planning, are recognized in the separate income statement as the related service is provided.
Other fees and commission expenses relate mainly to transaction and service fees, which are
expensed as the services are received.
e) Net gain on transactions with securities and foreign exchange transactions
Net income from other financial instruments comprises gains and losses related to assets and
liabilities and it includes all realized and unrealized fair value changes, gain and losses from the
sale of loans and foreign exchange differences.
Net foreign exchange gain/loss component of derivatives held for risk management and from
other financial instruments at fair value is included in the separate statement of comprehensive
income under “Net gain on transactions with securities and foreign exchange transactions”.
Net foreign exchange gain includes dealing foreign exchange profits and exchange differences
from the revaluation of foreign currency positions and included in the separate statement of
comprehensive income under “Net gain on transactions with securities and foreign exchange
transactions”.
f) Dividends
Dividend income is recognized in the separate income statement when the right to receive
income is established.
g) Lease payments
Assets held by the Bank under leases that transfer to the Bank substantially all of the risks and
rewards of ownership are classified as finance leases. The leased asset is initially measured at
an amount equal to the lower of its fair value and the present value of the minimum lease
payments. Subsequent to initial recognition, the asset is accounted for in accordance with the
accounting policy applicable to that asset. Assets held under other leases are classified as
operating leases and are not recognized in the Bank’s separate statement of financial position.
Payments made under operating leases are recognized in profit or loss on a straight-line basis
over the term of the lease. Lease incentives received are recognized as an integral part of the
total lease expense, over the term of the lease.

F-218
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

g) Lease payments (continued)

Minimum lease payments made under finance leases are apportioned between the interest
expense and the reduction of the outstanding liability. The interest expense is allocated to each
period during the lease term so as to produce a constant periodic rate of interest on the
remaining balance of the liability. Contingent lease payments are accounted for by revising the
minimum lease payments over the remaining term of the lease when the lease adjustment is
confirmed.
h) Income tax expense
Income tax for the period comprises current and deferred tax. Income tax is recognized in the
separate income statement except to the extent that it relates to items recognized directly to
equity, in which case it is recognized in equity.
Current tax is the expected tax payable or receivable on the taxable income for the year, using
tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax
payable in respect of prior periods.
Deferred tax is recognized using the balance sheet method, providing for all temporary
differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The amount of deferred tax recognized
is based on the expected manner of realization or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits
will be available against which the unused tax losses and credits can be utilized. Deferred tax
assets are reduced to the extent that it is no longer probable that the related tax benefit will be
realized.
Additional income taxes that arise from the distribution of dividends are recognized at the same
time as the liability to pay the related dividend.
The tax rate used to calculate the current and deferred tax position at 31 December 2016 is
16% (2015: 16%).

i) Financial assets and liabilities

i) Recognition
The Bank initially recognizes loans and advances, deposits, debt securities issued and
subordinated liabilities on the date that they are originated. All other financial assets and
liabilities (including assets and liabilities designated at fair value through profit or loss) are
initially recognized on the trade date at which the Bank becomes a party to the contractual
provisions of the instrument.
A financial asset or financial liability is measured initially at fair value plus, for an item not at fair
value through profit or loss, transaction costs that are directly attributable to its acquisition or
issue.

F-219
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

i) Financial assets and liabilities (continued)
ii) Classification, initial recognition and subsequent measurement
The Bank classifies its financial assets in the following categories:

A. Financial assets at fair value through profit or loss. This category has two sub-
categories: financial assets held for trading and those designated at fair value through profit or
loss at inception. A financial instrument is classified in this category if acquired principally for
the purpose of short term profit-taking or if so designated by management. Financial assets at
fair value through profit or loss include derivatives held by the Bank for risk management and
trading assets.
 Derivatives held for risk management
Derivative financial instruments held for risk management include currency swaps and interest
rate swaps. The Bank uses derivative financial instruments to hedge risks associated with
exchange rate fluctuations.
These derivatives are recognized in the balance sheet at fair value. Fair values are estimated
using quoted market prices, discounted cash flow models and options pricing models, as
appropriate. Derivatives are carried as assets when their fair value is positive. Any gains or
losses arising from changes in fair values are recognized in the separate income statement.
 Trading assets
Trading assets are those assets that the Bank acquires or incurs principally for the purpose of
selling or repurchasing in the near term, or holds as part of a portfolio that is managed together
for short-term profit or position taking. Trading assets are initially recognized and subsequently
measured at fair value in the balance sheet with transaction costs taken directly to profit or loss.
All changes in fair value are recognized as part of net trading income in profit or loss.
Reclassification out of the “held-for-trading” category to the “loans and receivables” category,
“held-to-maturity investments” category or “available-for-sale” category is permitted only when
there are rare circumstances and the financial assets are no longer held for sale in the
foreseeable future. In addition, reclassification out of the “held-for-trading” category to either
“loans and receivables” or “available-for-sale” is permitted, even when there are no rare
circumstances, only if the financial assets meet the definition of loans and receivables and there
is the intention to hold them for the foreseeable future or until maturity. On reclassification of a
financial asset out of the “fair value through profit or loss” category, all embedded derivative will
be (re)assessed and, if necessary, separately accounted for in financial statements.
B. Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market, other than those that the Bank intends to sell
immediately or in the near term, those that the Bank, upon initial recognition, designates as “at
fair value through profit and loss”, those that the Bank, upon initial recognition, designates as
“available for sale” or those for which the holder may not recover substantially all of its initial
investment, other than because of credit deterioration. Loans and receivables comprise loans
and advances to banks and customers.
Loans and advances are initially measured at fair value plus incremental direct transaction
costs, and subsequently measured at their amortized cost using the effective interest method.

F-220
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

i) Financial assets and liabilities (continued)
ii) Classification, initial recognition and subsequent measurement (continued)
C. Held-to-maturity investments are non-derivative financial assets with fixed or
determinable payments and fixed maturities that the Bank’s management has the positive
intention and ability to hold to maturity, and which are not designated as ”at fair value through
profit or loss” or as “available-for-sale” and the asset shall not meet the definition of a “loan and
receivable”.
Held-to-maturity investments are carried at amortized cost using the effective interest method.
Any sale or reclassification of a significant amount of held-to-maturity investments not close to
their maturity would result in the reclassification of all held-to-maturity investments as available-
for-sale, and prevent the Bank from classifying investment securities as held-to-maturity for the
current and the following two financial years.
However, sales and reclassifications in any of the following circumstances would not trigger a
reclassification:
 sales or reclassifications that are so close to maturity that changes in the market rate of
interest would not have a significant effect on the financial asset’s fair value
 sales or reclassifications after the Bank has collected substantially all of the asset’s original
principal
 sales or reclassifications attributable to non-recurring isolated events beyond the Bank’s
control that could not have been reasonably anticipated.
D. Available-for-sale financial assets are those financial assets that are designated as
available for sale or are not classified as loans and advances, held-to-maturity investments or
financial assets at fair value through profit or loss. Available-for-sale instruments include
treasury bonds and other bonds eligible for discounting with central banks, corporate bonds
investments in unit funds and other investment securities that are not at fair value through profit
and loss or held-to-maturity.
Debt securities such as bonds and treasury bills issued by the Ministry of Public Finance of
Romania and corporate bonds are classified as available-for-sale assets and measured at fair
value using bid market quotations from active markets. Securities such as investments in
mutual funds are classified as available-for-sale assets and are carried at their market prices.
Equity investments are classified as available-for-sale assets and are carried at the fair value.
Where no reliable estimate of fair value is available, equity investments are stated at cost less
impairment.
Interest income is recognized in profit or loss using the effective interest method. Dividend
income is recognized in profit or loss when the Bank becomes entitled to the dividend. Foreign
exchange gains or losses on available-for-sale debt security investments are recognized in
profit or loss.
Other fair value changes are recognized directly in other comprehensive income until the
investment is sold or impaired and the cumulative gains and losses previously recognized in
other comprehensive income are reclassified to profit or loss as a reclassification adjustment.

F-221
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

i) Financial assets and liabilities (continued)
ii) Classification, initial recognition and subsequent measurement (continued)
The Bank classifies its financial liabilities in the following categories:
A. Financial liabilities at fair value through profit or loss. This category has two sub-
categories: financial liabilities designated by the entity as a liability at fair value through profit or
loss upon initial recognition and financial liabilities held for trading. A financial instrument is
classified in this category if acquired principally for the purpose of short term profit-taking or if
so designated by management.
Financial assets or liabilities (other than those held for trading) may be classified upon initial
recognition at fair value through profit or loss, if they either:
 eliminate or significantly reduce a measurement or recognition inconsistency (“accounting
mismatch”) that would otherwise arise from measuring assets and liabilities or recognizing the
gains or losses on them on different bases;
 the assets or liabilities are managed, evaluated and reported internally on a fair value basis;
or
 the asset or liability contains an embedded derivative that significantly modifies the cash flows
that could otherwise be required under the contract.
 Derivatives held for risk management
Derivative financial instruments held for risk management include currency swaps and interest
rate swaps. The Bank uses derivative financial instruments to mitigate risks associated with
exchange rate fluctuations and interest rate fluctuations.
These derivatives are recognized in the balance sheet at fair value. Fair values are estimated
using quoted market prices, discounted cash flow models and options pricing models, as
appropriate. Derivatives are carried as liabilities when their fair value is negative. Any gains or
losses arising from changes in fair values are recognized in the separate income statement.
 Trading liabilities
Trading liabilities are those liabilities that the Bank acquires or incurs principally for the purpose
of selling or repurchasing in the near term, or holds as part of a portfolio that is managed
together for short-term profit or position taking.
Trading liabilities are initially recognized and subsequently measured at fair value in the
balance sheet with transaction costs taken directly to profit or loss. All changes in fair value are
recognized as part of net trading income in profit or loss.

B. Other financial liabilities are measured at amortized cost using the effective interest rate
method. All financial instruments that don’t qualify to be classified as financial liabilities at fair
value through profit or loss are classified in this category.
 Deposits from customers and from banks, loans from banks and other financial
institutions, subordinated liabilities.
Deposits from customers and from banks, loans from banks and subordinated liabilities are
initially measured at fair value plus incremental direct transaction costs, and subsequently
measured at amortized cost using the effective interest method. When the Bank sells a financial
asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset)
at a fixed price on a future date (“repo”), the arrangement is accounted for as “Due to banks”,
and the underlying asset continues to be recognized in the Bank’s separate financial
statements.

F-222
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

i) Financial assets and liabilities (continued)
ii) Classification, initial recognition and subsequent measurement (continued)
 Financial guarantees
Financial guarantees are contracts that require the Bank to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when
due in accordance with the terms of a debt instrument. Financial guarantee liabilities are initially
recognized at their fair value, and the initial fair value is amortized over the life of the financial
guarantee. The guarantee liability is subsequently carried at the higher of this amortized
amount and the present value of any expected payment (when a payment under the guarantee
has become probable). Financial guarantees are included within “other liabilities”.
iii) Derecognition
The Bank derecognizes a financial asset when the contractual rights to the cash flows from the
asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards of ownership of the financial
asset are transferred. Any interest in transferred financial assets that is created or retained by
the Bank is recognized as a separate asset or liability.
On derecognition of a financial asset, the difference between the carrying amount of the asset
(or the carrying amount allocated to the portion of the asset transferred), and the sum of (i) the
consideration received (including any new asset obtained less any new liability assumed) and
(ii) any cumulative gain or loss that had been recognized in other comprehensive income is
recognized in profit or loss.
The Bank derecognizes a financial liability when the obligation specified in the contract is either
discharged or cancelled or expires. Where there is an exchange between an existing borrower
and lender of debt instruments with substantially different terms, or there is a substantial
modification of the terms of an existing financial liability, this transaction is accounted for as
derecognition of the original financial liability and recognition of a new financial liability. Any gain
or loss from extinguishment of the original financial liability is recognized in profit or loss. The
terms are considered substantially different if the discounted present value of the cash flows
under the new terms (including any fees paid net of any fees received), discounted using the
original effective interest rate, is at least 10% different from the present value of the remaining
cash flows of the original financial liability.
When the Bank enters into transactions whereby it transfers assets recognized on its balance
sheet, but retains either all risks or rewards of the transferred assets or a portion of them, if all
or substantially all risks and rewards are retained, then the transferred assets are not
derecognized from the balance sheet. Transfers of assets with retention of all or substantially all
risks and rewards include, for example, securities lending and repurchase transactions.
When assets are sold to a third party with a concurrent total rate of return swap on the
transferred assets, the transaction is accounted for as a secured financing transaction similar to
repurchase transactions. In transactions where the Bank neither retains nor transfers
substantially all the risks and rewards of ownership of a financial asset, it derecognizes the
asset if control over the asset is lost.
The rights and obligations retained in the transfer are recognized separately as assets and
liabilities as appropriate. In transfers where control over the asset is retained, the Bank
continues to recognize the asset to the extent of its continuing involvement, determined by the
extent to which it is exposed to changes in the value of the transferred asset.

F-223
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

i) Financial assets and liabilities (continued)
iv) Offsetting
Financial assets and liabilities are offset and the net amount reported in the separate statement
of financial position when and only when there is a legally enforceable right to set off the
recognized amounts and there is an intention to settle on a net basis, or realize the asset and
settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted by the accounting
standards, or for gains and losses arising from a Bank of similar transactions such as in the
Bank’s trading activity.
v) Amortized cost measurement
The amortized cost of a financial asset or liability is the amount at which the financial asset or
liability is measured at initial recognition, minus principal repayments, plus or minus the
cumulative amortization using the effective interest method of any difference between the initial
amount recognized and the maturity amount, minus any reduction for impairment.
vi) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or, in
its absence, the most advantageous market to which the Bank has access at the date. The fair
value of a liability reflects its nonperformance risk.
When available, the Bank measures the fair value of an instrument using the quoted price in an
active market for that instrument. A market is regarded as active if transactions for the asset or
liability take place with sufficient frequency and volume to provide pricing information on an
ongoing basis.

If there is no quoted price in an active market, then the Bank uses valuation techniques that
maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
The chosen valuation technique incorporates all of the factors that market participants would
take into account in pricing a transaction.
The best evidence of a fair value of a financial instrument at initial recognition is normally the
transaction price – the fair value of a consideration given or received. If the Bank determines
that the fair value at initial recognition differs from the transaction price and the fair value is
evidenced neither by a quoted price in an active market for an identical asset or liability nor
based on a valuation technique that uses only data from observable markets, then the financial
instrument is initially measured at the fair value, adjusted to defer the difference between the
fair value at initial recognition and the transaction price. Subsequently, that difference is
recognized in profit or loss on an appropriate basis over the life of an instrument but not later
than when the valuation is wholly supported by observable market data or the transaction is
closed out.
If an asset or liability measured at fair value has a bid price and an ask price, then the Bank
measures assets and long positions at a bid price and liabilities and short positions at an ask
price.
The Bank recognizes transfers between levels of the fair value hierarchy as of the end of the
reporting period during which the change has occurred.

F-224
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

i) Financial assets and liabilities (continued)
vi) Fair value measurement (continued)

Where the Bank has positions with offsetting risks, mid-market prices are used to measure the
offsetting risk positions and a bid or asking price adjustment is applied only to the net open
position as appropriate. Fair values reflect the credit risk of the instrument and include
adjustments to take account of the credit risk of the Bank entity and the counterparty where
appropriate. Fair value estimates obtained from models are adjusted for any other factors, such
as liquidity risk or model uncertainties, to the extent that the Bank believes a third-party market
participant would take them into account in pricing a transaction.
j) Cash and cash equivalents
For the purposes of the separate cash flow statement, cash and cash equivalents comprise
balances with less than 90 days maturity including: cash, bonds and treasury bills and other
eligible bills with maturities under 90 days, current accounts with banks, short term placements
with and due from banks. Cash are carried at nominal value and cash equivalents are carried at
amortized cost in the separate statement of financial position, except for bonds and treasury
bills which are classified as available-for-sale assets and measured at fair value using bid
market quotations from active markets.

k) Property and equipment

(i) Recognition and measurement
Items of property and equipment are measured at their cost less accumulated depreciation
value and impairment losses. Capital expenditure on property and equipment in the course of
construction is capitalized and depreciated once the assets enter into use. Cost includes
expenditures that are directly attributable to the acquisition of the asset.
Leases in term of which the Bank assumes substantially all the risks and rewards of ownership
are classified as finance leases. Plant and equipment acquired by way of finance lease is stated
at an amount equal to the lower of its fair value and the present value of the minimum lease
payments at inception of the lease, less accumulated depreciation and impairment losses.
(ii) Subsequent costs
The Bank recognizes in the carrying amount of an item of property, plant and equipment the
cost of replacing part of such an item when that cost is incurred, if it is probable that the future
economic benefits embodied with the item will flow to the Bank and the cost of the item can be
measured reliably. All other costs are recognized in the separate income statement as an
expense as incurred. Expenditure incurred to replace a component of an item of property and
equipment that is accounted for separately, including major inspection and overhaul
expenditure, is capitalized. Other subsequent expenditure is capitalized only when it increases
the future economic benefits embodied in the item of property and equipment. All other
expenditure is recognized in the separate income statement as an expense as incurred.
(iii) Depreciation
Depreciation is charged to the separate income statement on a straight-line basis over the
estimated useful lives of each part of an item of property, plant and equipment. The estimated
useful lives for the current and comparative periods are as follows:
Buildings 33 years
Equipment 3 – 18 years
Motor vehicles 5 - 9 years
Other tangible fixed assets 3 – 24 years

F-225
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

k) Property and equipment (continued)

Depreciation methods, useful lives and residual values are reassessed periodically and
adjusted if appropriate.

l) Intangible assets
Intangible assets consist of purchased and in-house developed software.
Costs associated with developing or maintaining software programs are recognized as an
expense when incurred. Costs that are directly associated with 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 recognized as intangible assets. Subsequent
expenditure on software assets is capitalized only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as
incurred. Amortization is recognized in profit or loss on a straight-line basis over the estimated
useful life of the software, from the date that it is available for use. The estimated useful life of
the software is three to five years.

m) Assets held for sale

Non-current assets or disposal groups that are expected to be recovered principally through a
sale transaction, along with the related liabilities, are classified as held-for-sale. The above
classification is used if the asset is available for immediate sale in its present condition and its
sale is highly probable. Assets held for sale are initially recognized and subsequently
remeasured at the lower of their carrying amount and fair value less cost to sell. Any loss
arising from the above measurement is recorded in profit or loss and can be reversed in the
future.
Non - current assets that are acquired through enforcement procedures but are not available for
immediate sale or are not expected to be sold within a year are included in Other Assets and
are measured at the lower of cost (or carrying amount) and fair value. Non-current assets held
for sale, that the Bank subsequently decides either to use or to lease, are reclassified to the
categories of property, plant and equipment or investment property respectively. During their
reclassification, they are measured at the lower of their recoverable amount and their carrying
amount before they were classified as held for sale, adjusted for any depreciation, amortization
or revaluation that would have been recognized had the assets not been classified as held for
sale.
n) Identification and measurement of impairment
i) Impairment losses for financial assets
At each balance sheet date the Bank assesses whether there is objective evidence that
financial assets not carried at fair value through profit or loss are impaired. Financial assets are
impaired when objective evidence demonstrates that a loss event has occurred after the initial
recognition of the asset, and that the loss event has an impact on the future cash flows on the
asset that can be estimated reliably.
If there is objective evidence that an impairment loss on loans and receivables carried at
amortized cost has been incurred, the amount of the loss is measured as the difference
between the asset's carrying amount and the present value of estimated future cash flows
discounted at the financial asset's original effective interest rate (i.e. the effective interest rate
computed at initial recognition). If a loan, receivable or held-to-maturity investment has a
variable interest rate, the discount rate for measuring any impairment loss is the variable
interest rate at reporting date.

F-226
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

n) Identification and measurement of impairment (continued)
i) Impairment losses for financial assets (continued)
When a subsequent event causes the amount of impairment to decrease, the impairment loss
is reversed through profit and loss.

Loans and advances to customers

The Bank considers evidence of impairment for loans and advances to customers at both at
specific asset and collective level.
The Bank implemented the Impairment methodology that is in line with Alpha Bank Group IFRS
Impairment Framework, according to which it proceeds to impairment assessment when
specific quantitative or qualitative trigger events come to its attention, such as:
a) significant financial difficulty of the borrower or issuer;
b) default or delinquency over 90 days past due by a borrower;
c) the lender, for economic or legal reasons relating to the borrower's financial difficulty, is
granting to the borrower a concession that the lender would not otherwise consider such as
the rescheduling of the interest or principal payments;
d) indications that a borrower or issuer will enter bankruptcy;
e) the disappearance of an active market for a security; or
f) observable data relating to a group of assets such as adverse changes in the payment
status of borrowers or issuers in the group, or economic conditions that correlate with
defaults in the group.
The Bank first assesses whether objective evidence of impairment exists as described above,
individually for loans to customers that are individually significant, and individually or collectively
for loans that are not individually significant. If the Bank determines that no objective evidence
of impairment exists for an individually assessed financial asset, whether significant or not, it
includes the loans to customers in a group of loans with similar credit risk characteristics and
collectively assesses them for impairment.
Individual assessment
The outstanding balance is the basic factor in determining whether the assessment of
impairment will be performed on an individual basis or on a collective basis.
More specifically the Bank includes in the individual assessment exposures that exceed the
established threshold, which as of 31 December 2016 amounts to EUR 450,000 or equivalent
and for which evidence of impairment exists (e.g. past due amounts, forborne facilities,
significant deterioration of client’s financial standing etc.). If no objective evidence of impairment
existed for the individually assessed assets, these assets have been included in the collective
impairment assessment for any impairment that has been incurred but not yet identified.
The above-mentioned exposures are individually assessed and the Bank decides whether an
objective evidence of impairment exists individually for these financial assets or not. If this is the
case, these assets will be subject to provisions calculation based on individually determined
future cash flows related to the transaction. The cash flows are discounted at the loans’ original
effective interest rate.
Collective impairment
For the purpose of a collective evaluation of impairment, loans to customers are grouped on the
basis of similar credit risk characteristics that are determined based on the borrower’s type
(large corporate, commercial corporate, or small and medium sized entity) for companies loans,
and the type of loan (consumer, credit cards, mortgage etc.) for retail loans. The Bank assesses
for collective impairment the forborne loans in separate categories for companies and retail
loans. Each category presented above is further detailed in buckets of overdue days.

F-227
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

n) Identification and measurement of impairment (continued)
i) Impairment losses for financial assets (continued)
Management considers that these characteristics chosen are the best estimate of similar credit
risk characteristics by being indicative of the debtors’ ability to pay all amounts due according to
the contractual terms of the assets being evaluated.
For impairment computation the collective assessment factors (PD and LGD) are estimated on
the basis of historical loss experience for loans with credit risk characteristics. The loan
impairment assessment considers the visible effects on current market conditions on the
individual / collective assessment of loans and advances to customers’ impairment.
During its ordinary course of business the Bank makes commitments and guarantees that
constitute off-balance sheet credit risks. A provision is established to provide for management’s
estimate of the credit losses inherent in off-balance sheet credit risks using the same
methodology as applied for loans.
Write-offs
Write-offs are defined as the accounting reduction of a debt, which does not entail waiving the
legal claim against the debtors and, hence, the debt may be revived.
Proposals for writing-off a part or the whole of the debts may be submitted to the competent
committee on condition that the following have been carried out:
 The relevant agreements with the clients have been terminated.
 Payment Orders have been issued against all the liable parties.
 The procedure for the registration of compulsory encumbrances has
commenced.
 At least one real estate property has been auctioned, in order for the privileged
claims (through the final creditors priority list) and, as a result, for the possible
losses of the Bank to be finalized. Equal Impairment Provision at least during the
quarter preceding the one of the proposal.
Write downs
Write-downs are defined as the permanent accounting reduction of a debt, as a result of a
legally binding decision or agreement (court judgment, contractual agreement etc.), which is no
further claimable and, hence, is considered as definitively non-revivable, whereas it also entails
the fact that the Bank definitively and irrevocably waives its right to claim the written-down debt,
unless (in case of settlement) it is ascertained that the terms set by virtue of the aforementioned
decision or agreement were violated.

Available for sale financial assets

For financial assets classified as available-for-sale, when a decline in the fair value of an
available-for-sale financial asset has been recognized directly in other comprehensive income
and there is objective evidence that the asset is impaired, the cumulative loss that had been
recognized directly in equity shall be removed from equity and recognized in profit or loss even
though the financial asset has not been derecognized.
At each reporting date an impairment test of financial assets is performed, if the case, as
follows:
1. The respective securities are separated to be tested for impairment.
2. Securities are reviewed for events that constitute objective evidence for impairment
losses.
3. Impairment provisions are calculated on an individual basis per each security, for which
there are objective evidences that impairment losses exist as the difference between
acquisition costs and current fair value, less the impairment loss which has already been
recognized in income statement for securities classified as available for sale.

F-228
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

n) Identification and measurement of impairment (continued)
i) Impairment losses for financial assets (continued)
For equity instruments a significant or prolonged decline in fair value below the cost of the
investment is considered objective evidence of impairment. According to group policy a
significant decline is represented by a decrease of over 20% compared to the cost of the equity
investment while prolonged decline is a decrease in the fair value below amortized cost for a
continuous period exceeding one year. The above criteria are assessed in conjunction to the
general market conditions and in specific circumstances a smaller decline or a shorter period
may be appropriate.
Impairment losses recognized in profit or loss for an investment in an equity instrument
classified as available for sale shall not be 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
increase can be objectively related to an event occurring after the impairment loss was
recognized in profit or loss, the impairment loss shall be reversed, with the amount of the
reversal recognized in profit or loss.
Financial assets carried at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity
instrument that is not carried at fair value because its fair value cannot be reliably measured, or
on a derivative asset that is linked to and must be settled by delivery of such an unquoted
equity instrument, the amount of the impairment loss is measured as the difference between the
carrying amount of the financial asset and the present value of estimated future cash flows
discounted at the current market rate of return for a similar financial asset. Such impairment
losses are not reversed. The carrying amounts of the Bank’s non-financial assets, other than
deferred tax assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists then the asset’s recoverable amount is
estimated.
For goodwill and intangible assets that have indefinite useful lives or that are not yet available
for use, the recoverable amount is estimated each year at the same time. The recoverable
amount of an asset or cash-generating unit is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset.
ii) Impairment losses for non-financial assets
For the purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows of other assets or groups of assets (the “cash
generating unit” or “CGU”). The Bank’s corporate assets do not generate separate cash inflows.
If there is an indication that a corporate asset may be impaired, then the recoverable amount is
determined for the CGU to which the corporate asset belongs. An impairment loss is
recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount.
Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of
CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGUs
and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro
rata basis.
Impairment losses recognized in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if
there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed

F-229
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

n) Identification and measurement of impairment (continued)
ii) Impairment losses for non-financial assets (continued)
the carrying amount that would have been determined, net of depreciation or amortization, if no
impairment loss had been recognized. An impairment loss in respect of goodwill is not
reversed.
o) Provisions

A provision is recognized if, as a result of a past event, the Bank has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the
liability. A provision for restructuring is recognized when the Bank has approved a detailed and
formal restructuring plan, and the restructuring either has commenced or has been announced
publicly. Future operating losses are not provided for.

p) Employee benefits

i) Short term service benefits

Short-term employee benefits include wages, salaries, bonuses and social security
contributions. Short-term employee benefits are measured on an un-discounted basis and
recognized as expense when services are rendered. Short term employee benefits include
items expected to be settled wholly before twelve months after the end of the period in which
the employees rendered the related services.
A liability is recognized for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Bank has a present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and the obligation can be estimated
reliably.

ii) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay
further amounts.
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. All
employees of the Bank are members and are also legally obliged to make defined contributions
(included in the social security contributions) to the Romanian State pension plan (a State
defined contribution plan). All relevant contributions to the Romanian State pension plan are
recognized as an expense in the separate income statement as incurred. The Bank does not
have any further obligations.
The Bank does not operate any independent pension scheme and, consequently, have no
obligation in respect of pensions. The Bank does not operate any other post retirement benefit
plan. The Bank has no obligation to provide further services to former employees.

F-230
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

p) Employee benefits (continued)
iii) Termination benefits
When the Bank decides to terminate the employment before retirement or the employee
accepts the Bank’s offer of benefits in exchange for termination of employment, the liability and
the relative expense for termination benefits are recognized at the earlier of the following dates:
 when the Bank can no longer withdraw the offer of those benefits; and
 when the Bank recognizes restructuring costs which involve the payment of termination
benefit.

q) Other standards and interpretations

The accounting policies for the preparation of the separate financial statements have been
consistently applied by the Bank to the years 2015 and 2016, after taking into account the
following amendments to standards which were issued by the International Accounting
Standards Board (IASB), adopted by the European Union and applied on 1.1.2016:
 Amendment to International Financial Reporting Standard 10 “Consolidated Financial
Statements”, to International Financial Reporting Standard 12 “Disclosure of Interests in
Other Entities” and to International Αccounting Standard 28 “Investments in Associates
and Joint Ventures”: Investment Entities: Applying the Consolidation Exception (Regulation
2016/1703/22.9.2016)

On 18.12.2014, the International Accounting Standards Board issued an amendment to the

above standards with which it clarified that the exception provided in IFRS 10 and IAS 28, for
the preparation of consolidated financial statements and the application of the equity method
respectively, applies also to a parent entity that it is a subsidiary of an investment entity which
measures all of its subsidiaries at fair value according to IFRS 10. In addition, with the
aforementioned amendment it was clarified that the disclosure requirements of IFRS 12 apply
to the investment entities which measure all of their subsidiaries at fair value through profit or
loss.
The adoption of the above amendment by the Bank had no impact on its separate financial
statements.

 Amendment to International Financial Reporting Standard 11 “Joint Arrangements”:

Accounting for acquisition of interests in joint operations (Regulation 2015/2173/24.11.2015)

The adoption of the above amendment by the Bank had no impact on its separate financial
statements.

 Amendment to International Accounting Standard 1 “Presentation of Financial

Statements”: Disclosure Initiative (Regulation 2015/2406/18.12.2015)

On 18.12.2014 the International Accounting Standards Board issued an amendment to IAS 1 in

the context of the project it has undertaken to analyze the possibilities for improving the
disclosures in IFRS financial reporting. The main amendments are summarized below:
• the restriction to disclose only a summary of significant accounting policies is removed;
• it is clarified that even when other standards require specific disclosures as minimum
requirements, an entity may not provide them if this is considered immaterial. In addition, in
case the disclosures required by the IFRS are insufficient to enable users to understand the
impact of particular transactions, the entity shall consider whether to provide additional
disclosures;

F-231
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

q) Other standards and interpretations (continued)
• it is clarified that the line items that IFRS require to be presented in the balance sheet and the
statements of profit or loss and other comprehensive income are not restrictive and that the
entity may present additional line items, headings and subtotals;
• it is clarified that in the Statement of Comprehensive Income the share of other
comprehensive income of associates and joint ventures accounted for using the equity
method shall be separated into:
- amounts that will not be reclassified subsequently to profit or loss and
- amounts that will be reclassified subsequently to profit or loss;
• it is clarified that the standard does not specify the presentation order of the notes and that
each entity shall determine a systematic manner of presentation taking into account the
understandability and comparability of its financial statements.
The adoption of the above amendment by the Bank had no impact on its separate financial
statements.
 Amendment to International Accounting Standard 16 “Property, Plant and Equipment”
and to International Accounting Standard 38 “Intangible Assets”: Clarification of
Acceptable Methods of Depreciation and Amortization (Regulation 2015/2231/2.12.2015)

On 12.5.2014 the International Accounting Standards Board issued an amendment to IAS 16

and IAS 38 with which it expressly prohibits the use of revenue as a basis for the depreciation
and amortization method of property, plant and equipment and intangible assets respectively.
An exception is provided only for intangible assets and only when the following conditions are
met:
• when the intangible asset is expressed as a measure of revenue, i.e. when the right over the
use of the intangible asset is expressed as a function of revenue to be generated in such a
way that the generation of a specific amount of revenue determines the end of the right of
use, or
• when it can be demonstrated that the revenue and the consumption of the economic benefits
are highly correlated.
The adoption of the above amendment by the Bank had no impact on its separate financial
statements.
 Amendment to International Accounting Standard 16 “Property, Plant and Equipment”
and to International Accounting Standard 41 “Agriculture”: Bearer Plants (Regulation
2015/2113/23.11.2015)
The above amendment does not apply to the activities of the Bank.

 Amendment to International Accounting Standard 27 “Separate Financial Statements”:

Equity Method in Separate Financial Statements (Regulation 2015/2441/18.12.2015)
On 12.8.2014 the International Accounting Standards Board issued an amendment to IAS 27
with which it provides the option to use the equity method to account for investments in
subsidiaries, joint ventures and associates in an entity’s separate financial statements. In
addition, with the above amendment it is clarified that the financial statements of an investor
that does not have investments in subsidiaries but has investments in associates or joint
ventures, which under IAS 28 are accounted for with the equity method, do not constitute
separate financial statements.
The adoption of the above amendment by the Bank had no impact on its separate financial
statements.

F-232
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

q) Other standards and interpretations (continued)

 Improvements to International Accounting Standards – cycle 2012-2014 (Regulation

2015/2343/15.12.2015)

As part of the annual improvements project, the International Accounting Standards Board
issued, on 25.9.2014, non-urgent but necessary amendments to various standards.
The adoption of the above amendments had no impact on the separate financial statements of
the Bank.
Except for the standards mentioned above, the European Union has adopted the following new
standards which are effective for annual periods beginning after 1.1.2016 and have not been
early adopted by the Bank.

 International Financial Reporting Standard 9 “Financial Instruments” (Regulation

2016/2067/22.11.2016)

Effective for annual periods beginning on or after 1.1.2018

On 24.7.2014, the International Accounting Standards Board completed the issuance of the
final text of IFRS 9: Financial Instruments, which replaces the existing IAS 39. The new
standard provides for significant differentiations in the classification and measurement of
financial instruments as well as in hedge accounting. An indication of the new requirements is
presented below:
Classification and measurement
Financial instruments shall be classified, at initial recognition, at either amortized cost or at fair
value. The criteria that should be considered for the initial classification of the financial assets
are the following:
i. The entity’s business model for managing the financial assets and
ii. The contractual cash flow characteristics of the financial assets.
In addition, IFRS 9 permits, at initial recognition, equity instruments to be classified at fair value
through other comprehensive income. The option precludes equity instruments held for trading.
Moreover, with regards to embedded derivatives, if the hybrid contact contains a host that is
within the scope of IFRS 9, the embedded derivative shall not be separated and the accounting
treatment of the hybrid contact should be based on the above requirements for the classification
of the financial instruments.
With regards to the financial liabilities, the main difference is that the change in the fair value of
a financial liability initially designated at fair value through profit or loss shall be recognised in
profit or loss with the exception of the effect of change in the liability’s credit risk which shall be
recognised directly in other comprehensive income.
Impairment
Contrary to the existing IAS 39, under which an entity recognizes only incurred credit losses,
the new standard requires the recognition of lifetime expected credit losses if the credit risk of
the financial instrument has increased significantly since initial recognition. If the credit risk has
not increased significantly since initial recognition, 12-month expected credit losses shall be
recognized.

F-233
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

q) Other standards and interpretations (continued)
International Financial Reporting Standard 9 (continued)

Hedging
The new requirements for hedge accounting are more aligned with the entity’s risk
management. The main changes in relation to the current requirements of IAS 39 are
summarized below:
• more items become eligible for participating in a hedging relationship either as hedging
instruments or as hedged items,
• the requirement for hedge effectiveness tests to be within the range of 80%-125% is
removed. Hedge effectiveness test is performed progressively only and under certain
circumstances a qualitative assessment is considered adequate,
• in case that a hedging relationship ceases to be effective but the objective of risk
management regarding the hedging relationship remains the same, the entity shall rebalance
the hedging relationship in order to satisfy the hedge effectiveness criteria.
It is noted that the new requirements for hedge accounting do not include those that relate to
macro hedging, since they have not been finalized yet.
Except for the aforementioned modifications, the issuance of IFRS 9 has resulted in the
amendment to other standards and mainly to IFRS 7 where new disclosures were added.

IFRS 9 Implementation Project

The Bank, in order to ensure proper application of the new standard, has embarked on the
IFRS 9 Implementation Project, within the framework of principles and policies set by the
Group.
For the management of the Project a Steering Committee has been established, consisting of
members of the General Management and senior management from Accounting and Risk
Management. The Steering Committee meets on a regular basis to confirm key assumptions,
approve decisions and policies as well as to monitor the progress of the implementation. The
program is organized around two main work streams, the impairment work stream and the
classification and measurement work stream.
In addition, the Board of Directors, the Audit Committee and the Risk Management Committee
have assumed an active role, which includes the involvement in the decision making process
for key assumptions and decisions of the IFRS 9 Program.
To date, the Project has been directed towards determining the classification of its financial
instruments based on the new criteria, developing key methodologies regarding IFRS 9
concepts, designing the operating model and the systems operating model will be maintained
and developing risk modeling methodologies for the calculation of impairment.

Classification and measurement work stream

The Bank is in the process of assessing the existing and defining the new business models,
where necessary, that will be compatible with the Bank’s business strategy. The result of the
assessment will be the mapping of Bank’s financial assets to the new business models.
Additionally, the Bank is in the process of assessing its financial assets in order to determine
whether the SPPI criterion (i.e. cash flows represent Solely Payments of Principal and Interest)
is met. For standardized retail loans, the assessment is based on product characteristics while
for non-standardized (mainly corporate) loans and debt securities the assessment is based on
the characteristics of the individual asset.

F-234
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

q) Other standards and interpretations (continued)
International Financial Reporting Standard 9 (continued)

Finally, the Bank is in the process of updating policies and designing new classification
processes that shall be applied for the classification of financial assets from 01.01.2018.

Impairment work stream

The Bank will be required to record an allowance for expected losses for all loans and other
debt financial assets not held at fair value through profit or loss, together with loan
commitments and financial guarantee contracts.
The allowance is based on the expected credit losses associated with the probability of default
in the next twelve months unless there has been a significant increase in credit risk since
origination, in which case, the allowance is based on the probability of default over the life of the
asset. When determining whether the risk of default has significantly increased since initial
recognition, the Bank intends to consider reasonable and supportable information, both
quantitative and qualitative, that could vary between portfolios.
The Bank is currently developing its detailed methodologies for assessing when there is an
increase in credit risk.
The key inputs to the measurement of the expected credit loss are the following variables:
- Probability of default
- Loss Given default
- Exposure at default
The Bank expects to derive these parameters from internally developed statistical models and
other historical data that will be adjusted to reflect forward looking information. The Bank
intends to develop at least two scenarios to estimate future economic environment.
Finally, the Bank is designing the processes and the governance framework for impairment
calculations, including the new elements introduced by IFRS 9, with the aim to establish
detailed process flow to be implemented in the system for impairment calculations and to
update accordingly policy and process manuals.

Hedge accounting
The Bank is still examining whether it will exercise the accounting policy choice to continue
applying IAS 39 hedge accounting.
The current intention is to continue to apply IAS 39.

Transition approach
The classification and measurement and impairment requirements are applied retrospectively
by adjusting the opening balance sheet at the date of initial application, with no requirement to
restate comparative periods. The current intention of the Bank is not to restate comparatives.

Quantitative Impact
It is estimated that until IFRS 9 Implementation Project has progressed to such a degree that
important decisions affecting implementation have been taken and incorporated in the models
for the calculation of impairment losses there would be no reliable estimate of the impact of
IFRS 9, especially with regards to the interaction with regulatory capital requirements.

F-235
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

q) Other standards and interpretations (continued)
International Financial Reporting Standard 9 (continued)

Therefore, no reliable information can be disclosed regarding expected impact on the Bank’s
financial position and regulatory capital.
The Bank, however, intends to quantify the potential impact of IFRS 9 once allowed by the
degree of Project Implementation and no later than the audited annual financial statements of
31.12.2017.

 International Financial Reporting Standard 15 “Revenue from Contracts with Customers”

(Regulation 2016/1905/22.9.2016)

Effective for annual periods beginning on or after 1.1.2018

IFRS 15 “Revenue from Contracts with Customers” was issued on 28.5.2014 by the
International Accounting Standards Board. The new standard is the outcome of a joint project
by the IASB and the Financial Accounting Standards Board (FASB) to develop common
requirements as far as the revenue recognition principles are concerned.
The new standard shall be applied to all contracts with customers, except those that are in scope
of other standards, such as financial leases, insurance contracts and financial instruments.
According to the new standard, an entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
A new revenue recognition model is introduced, by applying the following five steps:
 Step 1: Identify the contract(s) with a customer
 Step 2: Identify the performance obligations in the contract
 Step 3: Determine the transaction price
 Step 4: Allocate the transaction price to the performance obligations in the contract
 Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
The performance obligation notion is new and in effect represents a promise in a contract with a
customer to transfer to the customer either: (a) a good or service (or a bundle of goods or
services) that is distinct; or (b) a series of distinct goods or services that are substantially the
same and that have the same pattern of transfer to the customer.
The new IFRS 15 supersedes:
(a) IAS 11 “Construction Contracts”;
(b) IAS 18 “Revenue”;
(c) IFRIC 13 “Customer Loyalty Programmes”;
(d) IFRIC 15 “Agreements for the Construction of Real Estate”;
(e) IFRIC 18 “Transfers of Assets from Customers”; and
(f) SIC-31 “Revenue—Barter Transactions Involving Advertising Services”.

The Bank is examining the impact from the adoption of IFRS 15 on its separate financial
statements.

F-236
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

q) Other standards and interpretations (continued)

In addition, the International Accounting Standards Board has issued the following standards
and amendments to standards as well as IFRIC 22 which have not yet been adopted by the
European Union and they have not been early applied by the Bank.
 Amendment to International Financial Reporting Standard 2 “Share-based Payment”:
Classification and Measurement of Share-based Payment Transactions;
 Amendment to International Financial Reporting Standard 4 “Insurance Contracts”:
applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts;
 International Financial Reporting Standard 14 “Regulatory deferral accounts”;
 Amendment to International Financial Reporting Standard 10 “Consolidated Financial
Statements” and to International Accounting Standard 28 “Investments in Associates and
Joint Ventures”: Sale or contribution of assets between an investor and its associate or joint
venture.
The Bank is examining the impact from the adoption of the above amendment on its separate
financial statements.

 Amendment to International Financial Reporting Standard 15 “Revenue from Contracts

with Customers”: Clarifications to IFRS 15 Revenue from Contracts with Customers
Effective for annual periods beginning on or after 1.1.2018
On 12.4.2016 the International Accounting Standards Board issued an amendment to IFRS 15
with which it mainly clarified the following:
 when a promised good or service is separately identifiable from other promises in a
contract, which is part of an entity’s assessment of whether a promised good or service
is a performance obligation,
 how to apply the principal versus agent application guidance to determine whether the
nature of an entity’s promise is to provide a promised good or service itself (i.e., the
entity is a principal) or to arrange for goods or services to be provided by another party
(i.e., the entity is an agent),
 for a licence of intellectual property, which is a factor in determining whether the entity
recognises revenue over time or at a point in time.
Finally, two practical expedients to the transition requirements of IFRS 15 were added for
completed contracts under full retrospective transition approach as well as for contract
modifications at transition.

The Bank is examining the impact from the adoption of the above amendment on its separate
financial statements.

 International Financial Reporting Standard 16 “Leases”

Effective for annual periods beginning on or after 1.1.2019
The Bank is examining the impact from the adoption of IFRS 16 on its separate financial
statements.

F-237
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

q) Other standards and interpretations (continued)

 Amendment to International Accounting Standard 7 “Statement of Cash Flows”:

Disclosure Initiative
Effective for annual periods beginning on or after 1.1.2017
On 29.1.2016 the International Accounting Standards Board issued an amendment to IAS 7
according to which an entity shall provide disclosures that enable users of financial statements
to evaluate changes in liabilities for which cash flows are classified in the statement of cash
flows as cash flows from financing activities. The changes that shall be disclosed, which may
arise both from cash flows and non-cash changes, include:
 changes from financing cash flows,
 changes arising from obtaining or losing control of subsidiaries or other businesses,
 the effect of changes in foreign exchange rates,
 changes in fair values and
 other changes.
The Bank is examining the impact from the adoption of the above amendment on its separate
financial statements.

 Amendment to International Accounting Standard 12 “Income Taxes”: Recognition of

Deferred Tax Assets for Unrealised Losses

Effective for annual periods beginning on or after 1.1.2017

On 19.1.2016 the International Accounting Standards Board issued an amendment to IAS 12
with which the following were clarified:
 Unrealised losses on debt instruments measured at fair value for accounting purposes and
at cost for tax purposes may give rise to a deductible temporary difference regardless of
whether the debt instrument’s holder expects to recover the carrying amount of the asset by
sale or by use;
 The recoverability of a deferred tax asset is assessed in combination with other deferred tax
assets. However, if tax law offsets specific types of losses only against a particular type of
income, the relative deferred tax asset shall be assessed in combination with other deferred
tax assets of the same type;
 During the deferred tax asset recoverability assessment, an entity compares the deductible
temporary differences with future taxable profit that excludes tax deductions resulting from
the reversal of those deductible temporary differences;
 The estimate of probable future taxable profit may include the recovery of some of an
entity’s assets for more than their carrying amount if there is sufficient evidence that it is
probable that the entity will achieve this.
The Bank is examining the impact from the adoption of the above amendment on its separate
financial statements.

F-238
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

3. Significant accounting policies (continued)

q) Other standards and interpretations (continued)

 Amendment to International Accounting Standard 40 “Investment Property”: Transfers of

Investment Property

Effective for annual periods beginning on or after 1.1.2018

On 8.12.2016 the International Accounting Standards Board issued an amendment to IAS 40
with which it clarified that an entity shall transfer a property to, or from, investment property
when, and only when, there is a change in use. A change in use occurs when the property
meets, or ceases to meet, the definition of investment property and there is evidence of the
change in use. In isolation, a change in management’s intentions for the use of a property does
not provide evidence of a change in use. In addition, the examples of evidence of a change in
use were expanded to include assets under construction and not only transfers of completed
properties.
The Bank is examining the impact from the adoption of the above amendment on its separate
financial statements.

 Improvements to International Accounting Standards – cycle 2014-2016

Effective for annual periods beginning on or after 1.1.2017 and 1.1.2018
As part of the annual improvements project, the International Accounting Standards Board
issued, on 8.12.2016, non- urgent but necessary amendments to various standards.
The Bank is examining the impact from the adoption of the above amendments on its separate
financial statements.

 IFRIC Interpretation 22 “Foreign Currency Transactions and Advance Consideration”

Effective for annual periods beginning on or after 1.1.2018

On 8.12.2016 the International Accounting Standards Board issued IFRIC 22. The
Interpretation covers foreign currency transactions when an entity recognizes a non-monetary
asset or liability arising from the payment or receipt of advance consideration before the entity
recognizes the related asset, expense or income. The Interpretation clarified that the date of the
transaction, for the purpose of determination of exchange rate to use on initial recognition of the
asset, the income or expense, is the date of initial recognition of the non-monetary asset or
liability (i.e. advance consideration). Additionally, if there are multiple payments or receipts in
advance, the entity shall determine a date of the transaction for each payment or receipt of
advance consideration.
The Bank is examining the impact from the adoption of the above Interpretation on its separate
financial statements.

F-239
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management
a) Introduction and overview
The Bank has exposure to the following main risks:
 credit risk
 liquidity risk
 market risk, comprising interest rate risk and foreign currency risk
 financial risk of the banking portfolio
 taxation risks
 operational risks
This note presents information about the Bank’s exposure to each of the above risks, the
Bank’s objectives, policies and processes for measuring and managing risk, and the Bank’s
management of capital.

Risk management framework

The Bank Chief Risk Officer supervises the Risk Management Division and reports on a
regular basis and ad hoc to the Management Committees, the Risk Management Committee
and to the Board of Directors. As far as credit risk is concerned the reporting to the above
mentioned committees and to the Credit Risk Committee covers the following areas:
 The portfolio risk profile by rating grade
 The transition among rating grades and / or states (migration matrices)
 The estimation of the relevant risk parameters by rating grade, group of clients, etc.
 The estimation of PD’s for impairment purposes based on migration of states
 The changes in the rating process, in the criteria or in each specific parameter.
 The concentration risk (by risk type, industry sector, country, currency, collateral and
portfolio etc.)
Under the supervision of the Bank Chief Risk Officer the Risk Management Division has been
assigned with the responsibility of implementing the risk management framework, according to
the directions of the Risk Management Committee:
 Capital Management and Planning Department
 Wholesale Banking Credit Risk Department
 Retail Banking Credit Risk Department
 Market and Liquidity Risk Department
 Operational Risk Department
Risk Management Division ensures compliance and monitors the implementation of the risk
policies in line with the Group and local regulatory requirements. The Bank’s Audit Committee
is responsible for monitoring compliance with the Bank’s risk management policies and
procedures, and for reviewing the adequacy of the risk management framework in relation to
the risks faced by the Bank. The Bank’s Audit Committee is assisted in these functions by
Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management
controls and procedures, the results of which are reported to the Audit Committee.

F-240
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk
i) Management of credit risk
Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Bank’s loans
and advances to customers and other banks and investment securities. For risk management
reporting purposes, the Bank considers and consolidates all elements of credit risk exposure.
A. Legal entities portfolios
Credit facilities belonging to Legal entities are included in the following categories subject to the
characteristics of the credit facility and the obligor, as shown in the table below:
Portfolio Characteristics
Obligors under the competence of Corporate Companies with turnover > Euro 50 million
Wholesale Banking
Euro 2.5 million < Companies with turnover < Euro 50 million
SME or companies with credit limit > Euro 1 million
Obligors under the competence SME Companies with turnover < Euro 2.5 million and credit limit <
of Retail Banking Euro 1 million

1. Credit Risk Approval Process

The limits of the Credit Committees are determined in accordance to Total Credit Exposure,
defined as the sum of all credit facilities of the obligor (single company or group of associated
companies) which can be approved by the Bank and include the following:
 Total credit requested exposure;
 Working Capital limits and credit lines;
 Letters of Credit/Letters of Guarantee limits;
 Credit Cards prepayment limit;
 Corporate Cards limits;
 Medium and long-term loans (current outstanding/exposure for facilities that have been
fully drawn or limit amount of undrawn facilities);
 Special credit limits or loans, or any form of personal financing to the company’s
business owners (mortgage loans, consumer loans, shares’ purchase, credit cards etc.)
1.1 Credit Approval Limits - Credit Committees
For legal entities, the Bank’s Credit Committees Structure is the following:
- Country Credit Committee
- Credit Committee I
- Credit Committee II
In addition to Credit Approval Limits per Credit Committee competence, the Bank has set
Country credit limits for direct and indirect exposures, used when assessing foreign
counterparties credit risk.
1.2. Credit Limit Expiry/Renewal date
The credit limits’ expiry/renewal date is determined by the competent Credit Committees. The
basic factor for the determination of the credit limit expiry is the client’s credit rating, which is not
a standalone approval or rejection criterion, but the basis for determining the minimum
security/collateral required and the respective pricing. As a rule, for clients that have been rated
in the Low, Medium and Acceptable credit risk zones, reviews are carried out on an annual
basis, for moderate risk - Watch List clients, on a semi-annual basis while obligors that have

F-241
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
i) Management of credit risk (continued)
been rated as in the High Risk zone are reviewed on a quarterly basis. Deviations from the
above rule are not allowed, except when the request by the responsible Business Units is
approved by the competent Credit Committees.
1.3. Environmental and social risk
Within Credit Risk Management Framework and Credit Policy, it has been integrated the
assessment of the strict compliance of the principles of an environmentally and socially
responsible financing towards legal entities. The main purpose is the management of potential
risk arising from the operations of obligors that may be connected with damage to the
environment or the society or with any direct threat of such damage, having as a result a
negative impact on the business operations and financial results of the Bank.

2. Credit Risk Measurement and Internal Ratings

The assessment of the obligors’ creditworthiness and their rating in credit risk scales is
established through rating systems.
The rating of the Bank’s obligors with the use of credit risk rating systems constitutes a basic
tool for:
 The decision-making process of Credit Committees for the approval/ renewal of credit
limits and the implementation of the appropriate pricing policy (interest rate spreads
etc.).
 The estimation of the future behavior of obligors which belong to a group with similar
characteristics.
 The early recognition of potential troubled facilities (early alert mechanism) and the
prompt, effective action for the minimization of the expected loss for the Bank.
 The assessment of the quality of the Bank’s loan portfolio and the credit risk undertaken.
The aim of the credit risk rating systems is the estimation of the probability that the obligors will
not meet their contractual obligations to the Bank.
The rating systems employed by the Bank are the Alpha Bank Rating System (ABRS) and the
Moody’s Risk Advisor (MRA) which incorporate different credit rating models.
All current and prospective clients of the Bank are assessed based on the appropriate credit
risk rating model and within pre-specified time frames.
For the estimation of the obligor’s credit risk, the Bank uses credit rating models to evaluate a
series of parameters, which can be grouped as follows:
 Financial Analysis: obligor’s financial ability (liquidity ratios, debt to income etc.).
 Peers’ Analysis: Obligor’s comparative position in the market in which it operates mostly
compared to its peers.
 Behavioral status and history of the obligor with the Bank and with third parties (debt in
arrears, adverse transaction records, etc.).
 Obligor’s qualitative characteristics (solid and healthy administration, management
succession, appropriate infrastructure and equipment etc.).

F-242
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
i) Management of credit risk (continued)
The credit rating models which are currently employed by the Bank are differentiated according
to:
 The turnover of the company.
 The level of the total credit exposure.
 The credit facility’s specific characteristics.
 The available information for the obligor’s assessment. Specifically, for the financial
analysis the differentiation relates to the type of the local accounting standards and
the International Financial Reporting Standards.
For each of the credit rating models, different parameters may be used, each of which
contributes in a specific manner to the relevant assessment.

Obligors Rating Scale

Obligors are rated in the following rating scales:
AA, A+, A, A-, BB+, BB, BB-, B+, B, B-, CC+, CC, CC-, C, D, D0, D1,D2, E.
For presentation purposes of the table “Analysis of neither past due nor impaired Loans and
Advances to customers”, the “strong” rating includes the rating scales AA, A+, A, A- and BB+,
“satisfactory” rating includes the rating scales BB, BB-, B+, B, B-, CC+ and CC and “watch list”
(higher risk) includes the rating scales CC- and lower than CC-.
B. Retail banking portfolio
Retail banking involves the lending facilities offered to borrowers covering traditional banking
products and services such as:
 Housing loans/Mortgages
 Consumer Loans and Credit Cards
 Very small entities (VSE), i.e. personal or family businesses regardless of the credit
limit and annual turnover
1. Credit Risk Approval Process
Alpha Bank monitors customer Total Credit Risk Exposure (For Individuals and Small
Businesses), which refers to the sum of all revolving limits of an obligor, all the balances of long
term facilities and for the case of legal entities the total exposure of facilities given to
stakeholders of customer companies. Additionally, facilities for which the customer is guarantor
or co-debtor are also taken into account.
Individuals:
 Requested loan amount or limit.
 Limits of credit/charge cards, revolving loans and overdraft facilities, as well as
outstanding balances of Consumer loans.
 Housing loans (the outstanding balances of the loans which have been fully disbursed
or the initial approved loan amount for cases of loans which have not been fully
disbursed).
2. Credit Risk Measurement
A fundamental parameter in assessing Retail Banking Credit Risk is the existence of Credit
Rating Models that are developed and employed throughout the credit cycle at Bank level. The
aforementioned models are segmenting population in homogenous risk groups (pools) and are
categorized, as follows, in:

F-243
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
i) Management of credit risk (continued)
 Behavior Models, which assess the customer’s performance and predict the probability
of going default within the following months.
 Application Credit Scoring Models, which assess application data – mainly
demographic- and predict the probability of going default within the following months.

These models and the probabilities of default that derive from them, contribute a significant role
in risk management and decision making throughout Alpha Bank.

Specifically, the models are used in the following segments:

 In decision making of credit assessment and credit limit assignment.
 In predicting future performance of customers belonging to the same pool of common
characteristics.
 In identifying high risk accounts in time to schedule all necessary actions so as to
reduce expected losses for the Bank.
 In assessing the Bank’s portfolio quality and credit risk.
The parameters taken into consideration vary, according to the model’s type and product
category that it assesses. Indicatively, the following factors are listed:
 Personal/ demographic: data the customer’s age, profession, marital status
 Loan characteristics: product that he applied for, loan term, loan amount, financing
purpose.
 Behavior data: payments during latest period of time, max delinquency, outstanding loan
balance versus loan limit, transaction type.
Moreover, the models are reviewed, validated and updated on an annual basis and are subject
to continuous quality control so as to ensure at any time their predictive power.
Furthermore, on a regular basis the Bank conducts exercises simulating crisis situations (Stress
Tests) where the potential impact on the financial results of the Bank are explored due to
unfavorable developments both in obligors’ transactional behavior as well as in the broader
financial - macroeconomic environment.
C. Impairment Policy
The Bank has defined as ‘significant for individual assessment’ customers loans that are over
the significance value of EUR 450,000.
Also under individual assessment fall clients whose exposures have been restructured at least
twice or for which legal actions have been initiated. The materiality threshold for such
customers is of EUR 200,000.
The assessment for individual impairment is performed on regular basis, as follows:
The Bank assesses whether objective evidence for individual assessment for impairment exists.
In cases which have been assessed individually but no impairment allowance was estimated,
these loans are assessed for impairment on a collective basis, grouped in pools based on
similar credit risk characteristics. The process for identifying impairment for loans and
estimating their impairment allowance consists of the following steps:
1. Identification of loans which will be individually assessed and for which events exist
which constitute objective evidence that an impairment loss has occurred.
2. Impairment calculation on an individual basis for the loans identified in the previous
step, as the difference between the recoverable amount and the carrying amount of
the loan.

F-244
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
i) Management of credit risk (continued)
3. In cases where the impairment allowance under individual assessment was zero,
these loans will be assessed for impairment on a collective basis, based on similar
credit risk characteristics. For example, groups of loans are created per collateral
coverage, days in arrears etc., where the corresponding impairment factor will be
applied.
4. Identification of the portfolios to be collectively assessed for loss events that have
been incurred but not reported ("IBNR").
The Bank performs controls in order to identify objective evidence that there is a need for
impairment for the loans that are significant and for which a trigger event for impairment exists.
The individual assessment for impairment is performed by the responsible Business Units, is
reviewed by the Credit Division and, together with the collective impairment, is approved by the
Executive Committee.
Trigger events for legal entities
Significant legal entities loans are assessed individually if at least one of the following
conditions is met:
1. Clients with credit risk rating D, D0, D1, D2 and E;
2. Clients with credit risk rating CC- and C;
3. Exposures with restructuring measures due to financial difficulties;
4. Significant deterioration in the industry outlook in which the borrower operates;
5. Insolvency;
6. Difficulties in paying other obligations (e.g. payment orders, bounced cheques, auctions,
bankruptcies, overdue payments to the State, to Social Security Funds, or to employees);
7. Occurrence of unexpected, extreme events such as natural disasters, fraud, etc.;
8. Interventions and actions by regulatory bodies/local authorities against the borrower (e.g.
AFS, fiscal authorities etc.);
9. Breach of contractual terms and conditions;
10. Adverse changes in the shareholders’ structure or the management of the company or
serious management issues/ problems;
11. Significant adverse changes in cash flows potentially due to ceased cooperation with a
key/major customer, significant reduction in demand of a main product or service, ceased
cooperation with a key/major supplier or suppliers cut credit, etc.
12. Significant deterioration of financial ratios of the obligor (Reduction of equity due to
losses, debt ratio etc.) and of estimated future cash flows of the obligor.

Trigger Events for Individuals

1. Customers with nonperforming exposures;
2. Customers with loans past due more than 90 days;
3. Customers with loans past due more than 30 days and less than 90 days;
4. Customers with restructured (forborne) loans;
5. Deceased or fraudulent Customers;
6. Occurrence of unexpected, extreme events such as fraud, natural disasters, etc.;
7. Stakeholders of Companies classified as nonperforming, in insolvency or in financial
difficulty with restructuring measures or with interventions and actions of regulatory
bodies/local authorities against their companies;
8. Customers who are Freelancers, Professionals and similar categories without activity or
in bankruptcy procedure;

F-245
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
i) Management of credit risk (continued)
9. Customers Freelancers, Professionals and similar categories for whom there is
significant deterioration of their financial capabilities either due to serious management
issues, or bad reputation, or cease of important co-operations, or significant deterioration
in the outlook of the industry in which the obligor operates.

Collective Assessment for Impairment

The collective assessment is performed as follows:
a. Exposures that have been individually assessed and therefore were found not to be
impaired on an individual basis -the impairment allowance estimated was zero- are
subsequently assessed for impairment on a collective basis, after they are grouped in
pools based on common credit risk characteristics.
b. Exposures with no impairment triggers are assessed collectively in pools based on
similar credit risk characteristics. The future cash flows of a group of exposures that are
collectively evaluated for impairment are calculated on the basis of the estimated
contractual cash flows and historical loss experience for exposures with credit risk
characteristics similar to those in the group.
Trigger Events for the Collective assessment per portfolio
The specific trigger events for the collective assessment are the following:
- Accounts up to 90 days past due with signs of unlikeliness to pay;
- Accounts more than 90 days past due;
- Forborne exposures with financial difficulties;
- Significant deterioration of the industry segment in which the borrower operates;
- Significant increases in overdue amounts in the financial sector in which the borrower
operates;
- Emergence of serious or unforeseen events (calamities, etc.).
Incurred but not reported losses
The need for objective evidence in order for the loss to be recognized and effectively the
impairment loss to be identified on individual loans, may lead to a delay in the recognition of a
loan’s impairment, which has already occurred. Within this context and in accordance with IAS
39, it is appropriate to recognize impairment losses for those losses "which have been incurred
but have not yet been reported» (Incurred But Not Reported - IBNR).
ii) Credit risk mitigation
1. Collaterals
The regular repayment of credit facilities is directly connected with the obligors’ viability and
prospects, the strength of the companies and their shareholders, the sector in which they
operate and the current market conditions, as well as other unforeseeable factors that may
arise during the companies’ operating cycle and influence their operations in a positive or
negative way.
Collaterals are received both for Wholesale and Retail lending in order to mitigate credit risk
that may arise from the obligor’s inability to fulfill their contractual obligations.

F-246
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
ii) Credit risk mitigation (continued)
The mitigation tools applied by the Bank include two broad categories: intangible and tangible
collaterals.
2. Intangible Collaterals
Intangible collaterals encompass the protection commitments and mechanisms and form the
framework of the obligations and rights that are typically included and described in specific
contractual documents that bind the Bank and the borrowers during the lending process with
specific commitments. The commitments undertaken involve a third party to substitute for the
primary debtor in the event of the latter’s default or the primary debtor itself (natural or legal
entities) to honor the contractual loan agreements and their prompt repayment to the Bank and
on the other hand the Bank has the right to claim them.
The main type of intangible collateral that the Bank uses to protect the bank against the risk of
losses due to debtor insolvency is the Guarantee (i.e. personal guarantee, corporate guarantee,
letter of guarantee etc.)
3. Tangible Collaterals
Tangible collaterals provide the Bank with the right of possessing ownership on an asset
(movable or immovable).
Tangible collaterals are distinguished between mortgages registered over immovable properties
and mortgages (pledges) on movable assets (e.g., commodities, checks, bills of exchange) or
on claims and rights.
In order to better secure credit facilities granted, mortgage and pledged assets are covered by
an insurance contract, with assignment of the relevant insurance contract to the Bank.
3.1. Mortgages
Mortgages are registered on real estate or immovable assets which can be liquidated as
indicatively reported below:
- Residential Real Estate
- Commercial Real Estate
- Industrial Buildings
- Land
- Ships and aircrafts.
Periodic revaluation of mortgaged property
According to Alpha Bank Credit Policy, the existence and the valuation of mortgaged property is
closely monitored. The frequency of the appraisal is usually not exceeding one year, except for
residential real estate properties, for which the reassessment is carried out in an interval of up
to 3 years.
All valuations are carried out by certified appraisers (ANEVAR members).
3.2. Pledges
A Pledge is tangible collateral which provides seniority right from a movable asset whose
ownership remains with a third party.
Pledges can be registered on movable assets or on rights that have not been excluded or
banned from exchanges and are liquid as indicatively indicated below:
- Raw materials, products or commodities
- Machinery (movable)

F-247
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
ii) Credit risk mitigation (continued)
- Bill of Lading,
- Bill of exchange
- Cheques and promissory notes
- Securities
- Deposit
- Any type of claim that can be pledged
Periodic revaluation of pledges
Depending on the right or the underlying asset on which a pledge is registered, the periodic
revaluation varies from one month to one year.
4. Acceptable Value
The Bank calculates the value of the received securities/collaterals based on the potential
proceeds that could arise if and when these are liquidated. This calculation refers to the
acceptable value/haircut of the securities/collaterals provided to the Bank by its obligors.
For the calculation of the forced-sale value, the following need to be considered:
 The quality of the securities/assets
 Their market value
 The degree of ability to liquidate
 The time required for their liquidation
 Their liquidation cost

 The current charges on the assets

 The privileged priority of third parties on the product of liquidation (e.g. Public Sector,
employees, etc.)
The above have to be accounted for when determining the haircuts for each collateral/security.
Haircuts, depending on their nature are expressed as a percentage of their market value, their
nominal value or their weighted average value.
iii) Exposure to credit risk
Forbearance
Maintaining a healthy loan portfolio depends on the constant monitoring and assessment of the
borrowers in order to allow early identification and detection of future liquidity problems, which
will affect the normal repayment of their obligations to the Bank.
The credit tools which are normally used by the Bank for managing the liquidity problems that
borrowers are facing for repaying their obligations are the restructuring of debt through the
renegotiation of the original terms and conditions of the loan agreement they have entered into.
In the context of the Commission Implementing Regulation (EU) 227/2015 of the European
Committee dated 9 January 2015 and the executive technical standards of European Banking
Authority, translated in NBR Order 6/2014, the Bank assumes the resulting regulatory
obligations for forborne exposures.
Forbearance measures should be applied on the basis of the risk, cooperativeness and viability
of each debtor and consist of concessions that are robust and sustainable, through the
renegotiation of the initial terms and conditions of the debt contract duly taking into account the
causes of the debtor’s financial difficulties.

F-248
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
iii) Exposure to credit risk (continued)
The existence of more favorable terms for renegotiating and modifying the terms and conditions
of the bilateral arrangement between the Bank and the debtor, who is facing or is about to face
difficulties in meeting his financial commitments (“financial difficulty”), are defined with respect
to:
 Difference in favor of the debtor between the modified and the previous terms of the
contract.
 Cases where a modified contract includes more favorable terms than other debtors with
a similar risk profile could have obtained from the same institution.

Monitoring of forborne exposures

Following the Alpha Bank Group guidance, the Bank has undertaken a series of actions to
ensure adherence to the supervisory obligations and requirements.
 Adaptation of Information Systems of the Bank.
 Amendments of the existing processes, e.g. customization of new types of forborne
exposures.
Write-offs and write-downs of bad debts
1. Write-offs
Write-offs are defined as the accounting reduction of a debt, which does not entail waiving the
legal claim against the debtors and, hence, the debt may be revived.
Proposals for writing-off a part or the whole of the debts may be submitted to the competent
committee on condition that the following have been carried out:
 The relevant agreements with the clients have been terminated.
 Payment Orders have been issued against all the liable parties.
 The procedure for the registration of compulsory encumbrances has commenced.
 At least one real estate property has been auctioned, in order for the privileged claims
(through the final creditors priority list) and, as a result, for the possible losses of the
Bank to be finalized.
 Equal Impairment Provision at least during the quarter preceding the one of the
proposal.
2. Write downs
Write-downs are defined as the permanent accounting reduction of a debt, as a result of a
legally binding decision or agreement (court judgment, contractual agreement etc.), which is no
further claimable and, hence, is considered as definitively non-revivable, whereas it also entails
the fact that the Bank definitively and irrevocably waives its right to claim the written-down debt,
unless (in case of settlement) it is ascertained that the terms set by virtue of the aforementioned
decision or agreement were violated.
Definitions
The following definitions are applied in order to complete the following tables:
The Public Sector includes:
 The Central Government (all departments or Ministries and Public Administration)
 Local Authorities
 Companies dedicated to public sector activities

F-249
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
iii) Exposure to credit risk (continued)
Past Due Exposures
Past due exposures are defined as exposures that are more than one day past due.
Non-Performing Exposures
An exposure is considered as non-performing when one of the following criteria is satisfied:
 The exposure is more than 90 days past due
 An exposure against which legal actions have been undertaken by the Bank.
 The debtor is assessed as unlikely to pay its credit obligations in full without realization
of collateral.
 The exposure is classified as impaired (as defined below)
 The exposure is classified as forborne non-performing exposure, as defined in the
Implementing Regulation (EU) 575/09.01.2015, amending Implementing Regulation
(EU) No 680/2014 laying down implementing technical standards with regard to
supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the
European Parliament.
More specifically, a non-performing exposure with forbearance measures includes the following:
 exposures which were non-performing prior to the extension of forbearance measures
 forborne exposures which have been reclassified from the performing exposures
category, including exposures under probation (forborne performing having been
reclassified out of the Forborne Non Performing Loan (FNPL) status) having been re-
forborne or that are more than 30 days past-due.
Performing Exposures
An exposure is considered as performing when the following criteria are met:
 The exposure is less than 90 days past due
 No legal actions have been undertaken against the exposure.
 The situation of the debtor has improved to the extent that full repayment, according to
the original or when applicable the modified conditions, is likely to be made.
 The exposure is not classified as impaired or
 The exposure is classified as forborne performing exposure, as defined in the
aforementioned Implementing Regulation (EU) 575/09.01.2015.
Unlikely to Pay Exposures For the Legal Entities Portfolios, the following exposures are
considered as unlikely to pay:
 Debtors that have been denounced in the competent Non-Performing Loans Unit and
their exposures are less than 90 days past due;
 Debtors with exposures for which an impairment amount has been allocated following
the individual assessment for impairment and with exposures of less than 90 days past
due.
For the retail Banking Portfolio, the following exposures are considered as unlikely to pay:
 Customers under the protection of the Law 151/2015. (Bankruptcy Law for Individuals);
 Customers that have notified the Bank their intent to give in the immovable property to
the bank in order to close the debt from the mortgage contract, based on the provisions
of the Law No. 77/ 2016 regarding the give in of the immovable property in order to
close the loans obligations;
 Fraudulent cases;

F-250
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
iii) Exposure to credit risk (continued)
 Deceased Customers or Customers with heavy health problems;
 The legal entity is no longer active.
Impaired Exposures
Impaired exposures are defined as follows:
a. Exposures for which an impairment amount has been allocated following the individual
assessment for impairment;
b. Exposures in arrears more than 90 days or under legal workout/ actions status, for
which an impairment amount has been allocated following the collective assessment for
impairment;
c. Exposures of debtors assessed as unlikely to pay;
d. Forborne nonperforming exposures belonging to individuals, with delays of up to 90
days.
Allowances for impairment
The Bank estimates an allowance for impairment losses on assets carried at amortized cost
that represents its estimate of incurred losses in its loan. Assets carried at fair value through
profit and loss are not subject to impairment testing as the measure of fair value reflects the
credit quality of each asset. The allowance for impairment is determined both through individual
and collective assessment, in accordance with internal methodology described in accounting
policy 3.n).
During 2016, the Bank followed the same approach with respect to the estimates and
judgments used in computation of allowances for impairment for exposures on insolvent
customers. Thus the haircuts applied to the collaterals were the maximum allowed by the
internal procedure, and the only cash-flow considered was from liquidation or foreclosure of
collaterals.
As of 31 December 2016, the Bank’s portfolio of loans to companies undergoing insolvency
procedures (excluding exposures for which insolvency request is not yet approved) had total
gross exposure of RON 628.6 million (31 December 2015: RON 626 million) for which the Bank
recorded allowances for impairment amounting RON 428.6 million (31 December 2015: RON
497 million). These exposures are covered with collaterals (value of collaterals discounted
based on recovery rates and recovery periods) totaling RON 197 million (31 December 2015:
RON 129 million).
Following the enactment of Law 77/2016 on full settlement of mortgage/home equity loans (“the
Law”) on 13 May 2016, the Bank performed a reassessment of the probability of default and
loss given default for the loan exposures subject to the Law. Also, all exposures with a valid
settlement notification received were marked as default.
The Bank made use of historical evidence when estimating the probabilities of default for loans
subject to the law, and of expert judgment when estimating the loss given default, local
validation of the probabilities of default and loss given default will be performed when relevant
history is available.
As of 31 December 2016, the Bank’s portfolio of loans to individuals with valid settlement
notification received had a total gross exposure of RON 66.4 million, for which the Bank
recorded allowances for impairment amounting RON 36.4 million. These exposures are
covered with collaterals (current market value) totaling RON 38.5 million.
As a note, at December 2016 no property has been taken in property by the Bank as a result of
the settlement following the Law provisions.

F-251
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit risk (continued)
iii) Exposure to credit risk (continued)

On 25 October 2016 the Romanian Constitutional Court accepted the unconstitutional

exception and declared that Art.11 in the Law is constitutional only to the extent that a court of
law verifies the conditions related to the existence of the unpredictability concept under the Civil
Code from 1864 (that is applicable up to the enactment of the new Civil Code in 2011). In
substance, unpredictability occurs when an exceptional event took place and that could not be
reasonably foreseen by the parties as at the contract date, fact that makes the enforcement of
the contract to be an excessively onerous obligation for the debtor. The verification of these
conditions is to be done by a Court of Law, on a case by case basis, by ruling either the
application or termination of the contract.
Additionally, the Romanian Constitutional Court declared unconstitutional the following part of
Art.11 of the Law “as well as the devaluation of real estates”, considering that in substance, the
object of the loan contract is represented by amounts of money and not by real estate assets.

F-252
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)
4. Risk management (continued)
b) Credit Risk (continued)
iii) Exposure to credit risk (continued)
I. Financial instruments credit risk
31.12.2016 31.12.2015
Exposure Net Exposure Net
before Impairment exposure to before Impairment exposure to
impairment credit risk impairment credit risk

Α. Credit risk exposure relating to balance sheet items

Balances with Central Banks 2,263,732 - 2,263,732 1,686,347 - 1,686,347
Due from Banks 537,495 - 537,495 1,258,405 - 1,258,405
Loans and advances to customers 11,402,108 1,066,338 10,335,770 11,617,029 1,221,574 10,395,455
Derivative Financial Assets 3,106 - 3,106 - - -
Available for sale securities and Investments in
associates
- Available for sale (Government bonds) 1,212,962 - 1,212,962 1,107,549 - 1,107,549
- Available for sale securities (other) and Investments in
40,776 - 40,776
associates 214,742 - 214,742
Total 1,253,738 - 1,253,738 1,322,291 - 1,322,291
Total carrying amount of on balance sheet items exposed
to credit risk (a) 15,460,179 1,066,338 14,393,841 15,884,072 1,221,574 14,662,498

Other on balance sheet items not exposed to credit risk 338,619 - 338,619 349,309 - 349,309
Total assets 15,798,798 1,066,338 14,732,460 16,233,381 1,221,574 15,011,807

B. Credit risk exposures relating to off balance sheet

items:
Letters of guarantee and letters of credit (Note 28) 613,399 11,087 602,312 479,037 4,641 474,396
Undrawn credit facilities (Note 28) 1,152,658 - 1,152,658 1,079,735 - 1,079,735
Total carrying amount of off balance sheet items exposed
to credit risk (b) 1,766,057 11,087 1,754,970 1,558,772 4,641 1,554,131

Total credit risk exposure (a+b) 17,226,236 1,077,425 16,148,811 17,442,844 1,226,215 16,216,629

F-253
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit Risk (continued)
iii) Exposure to credit risk (continued)

II. Loans and advances to customers by asset quality

31.12.2016
Non impaired L&As Impaired L&As Impairment Allowance
Total
Neither past Past due Total Net Value of
Individually Gross Individually Collectively
due nor but not Collectively amount collateral
assessed amount assessed assessed
impaired impaired assessed

Retail Lending 4,551,808 599,912 195,018 270,756 5,617,494 131,144 210,790 5,275,560 4,619,047
Mortgage 3,827,709 451,888 111,335 119,242 4,510,174 74,713 85,465 4,349,996 4,150,753
Consumer 651,500 138,199 83,484 134,763 1,007,946 56,237 108,991 842,718 466,146
Credit Card 70,332 9,684 199 16,751 96,966 194 16,292 80,480 -
Other (Incl. SBL) 2,267 141 - - 2,408 - 42 2,366 2,148
Corporate Lending 4,601,151 30,287 1,039,107 62,269 5,732,814 653,467 70,043 5,009,304 5,138,161
Large 4,190,712 14,107 976,120 31,346 5,212,285 613,006 53,989 4,545,290 4,709,138
SMEs 410,439 16,180 62,987 30,923 520,529 40,461 16,054 464,014 429,023
Public Sector 50,032 1,768 - - 51,800 - 894 50,906 27,344
Greece - - - - - - - - -
Other Countries 50,032 1,768 - - 51,800 - 894 50,906 27,344
Total 9,202,991 631,967 1,234,125 333,025 11,402,108 784,611 281,727 10,335,770 9,784,552

The accumulated impairment allowance for collectively assessed loans and advances includes an amount of RON 97.2 million concerning
IBNR provisions related to non-impaired loans.

F-254
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)
4. Risk management (continued)
b) Credit Risk (continued)
iii) Exposure to credit risk (continued)

II. Loans and advances to customers by asset quality (continued)

31.12.2015
Non impaired L&As Impaired L&As Impairment Allowance
Total
Neither past Past due Total Net Value of
Gross
due nor but not Individually Collectively Individually Collectively amount collateral
amount
impaired impaired assessed assessed assessed assessed

Retail Lending 4,449,496 537,598 227,505 332,424 5,547,023 152,278 270,211 5,124,534 4,460,944
Mortgage 3,717,374 384,632 130,059 92,147 4,324,212 87,746 61,450 4,175,016 3,953,363
Consumer 657,550 142,881 97,253 222,720 1,120,404 64,345 191,843 864,216 504,887
Credit Card 71,590 10,085 193 17,557 99,425 187 16,906 82,332 -
Other (Incl. SBL) 2,982 - - - 2,982 - 12 2,970 2,694
Corporate Lending 4,631,922 14,190 1,302,622 60,403 6,009,137 756,758 42,131 5,210,248 5,262,484
Large 4,301,119 386 1,218,020 30,683 5,550,208 703,470 23,353 4,823,385 4,864,564
SMEs 330,803 13,804 84,602 29,720 458,929 53,288 18,778 386,863 397,920
Public Sector 60,869 - - - 60,869 - 196 60,673 36,036
Greece - - - - - - - - -
Other Countries 60,869 - - - 60,869 - 196 60,673 36,036
Total 9,142,287 551,788 1,530,127 392,827 11,617,029 909,036 312,538 10,395,455 9,759,464

The accumulated impairment allowance for collectively assessed loans and advances includes an amount of RON 51.4 million concerning
IBNR provisions related to non-impaired loans.

F-255
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit Risk (continued)
iii) Exposure to credit risk (continued)

III. Analysis of neither past due nor impaired loans and advances to customers

31.12.2016
Watch List Total neither
Value of
Strong Satisfactory (higher past due nor
collateral
Risk) impaired
Retail Lending 4,549,541 2,267 - 4,551,808 3,905,705
Mortgage 3,827,709 - - 3,827,709 3,606,484
Consumer 651,500 - - 651,500 297,214
Credit Card 70,332 - - 70,332 -
Other (Incl. SBL) - 2,267 - 2,267 2,007
Corporate Lending 386,735 4,097,793 116,623 4,601,151 4,320,363
Large 385,123 3,704,177 101,412 4,190,712 3,981,425
SMEs 1,612 393,616 15,211 410,439 338,938
Public Sector 811 49,221 - 50,032 25,576
Greece - - - - -
Other Countries 811 49,221 - 50,032 25,576

Total 4,937,087 4,149,281 116,623 9,202,991 8,251,644

31.12.2015
Total
Watch List
neither past Value of
Strong Satisfactory (higher
due nor collateral
Risk)
impaired
Retail Lending 4,446,514 2,982 - 4,449,496 3,823,068
Mortgage 3,717,374 - - 3,717,374 3,489,492
Consumer 657,550 - - 657,550 330,882
Credit Card 71,590 - - 71,590 -
Other (Incl. SBL) - 2,982 - 2,982 2,694
Corporate Lending 326,279 4,122,201 183,442 4,631,922 4,218,763
Large 324,478 3,813,068 163,573 4,301,119 3,923,180
SMEs 1,801 309,133 19,869 330,803 295,583
Public Sector 885 35,125 24,859 60,869 36,036
Greece - - - - -
Other Countries 885 35,125 24,859 60,869 36,036

Total 4,773,678 4,160,308 208,301 9,142,287 8,077,867

F-256
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit Risk (continued)
iii) Exposure to credit risk (continued)

IV. Analysis of Past due but not impaired loans and advances to customers

31.12.2016
Corporate Lending Public
Retail Lending Total
Sector
Past due
Other
Credit Other but not
(Incl. Large SMEs
Mortgage Consumer Card Countries impaired
SBL)
1-30 days 339,458 95,905 7,586 - 14,107 12,350 1,768 471,174
31-60 days 71,320 27,038 1,385 50 - 2,134 - 101,927
61-90 days 41,110 15,256 713 91 - 1,696 - 58,866
91-180 days - - - - - - - -
181-360 days - - - - - - - -
>360 days - - - - - - - -
Total 451,888 138,199 9,684 141 14,107 16,180 1,768 631,967
Value of
401,273 77,291 - 141 10,322 13,183 1,768 503,978
collateral

31.12.2015
Retail Lending Corporate Lending Public
Total Past
Sector
due but
Other
Credit Other not
Mortgage Consumer (Incl. Large SMEs
Card Countries impaired
SBL)
1-30 days 277,713 93,670 8,382 - 5 8,890 - 388,660
31-60 days 72,286 30,291 1,206 - 381 2,220 - 106,384
61-90 days 34,633 18,920 497 - - 2,694 - 56,744
91-180 days - - - - - - - -
181-360
- - - - - - - -
days
>360 days - - - - - - - -
Total 384,632 142,881 10,085 - 386 13,804 - 551,788
Value of
338,080 75,707 - - 384 12,702 - 426,873
collateral

V. Aging analysis of Impaired loans and advances to customer by product line

31.12.2016
Retail Lending Corporate Lending
Credit Total
Mortgage Consumer Large SMEs
Card
Not past due 15,540 16,674 37 158,456 2,979 193,686
1-30 days 6,244 6,131 15 18,133 6,472 36,995
31-60 days 10,459 6,076 4 38,487 2,961 57,987
61-90 days 13,074 8,179 4 312 583 22,152
91-180 days 16,298 8,751 414 3,327 5,550 34,340
181-360 days 18,213 7,383 449 38,990 859 65,894
>360 days 25,063 20,858 987 117,184 22,869 186,961
Total net amount 104,891 74,052 1,910 374,889 42,273 598,015
Value of collateral 142,996 91,641 - 717,391 76,902 1,028,930

F-257
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit Risk (continued)
iii) Exposure to credit risk (continued)

V. Aging analysis of Impaired loans and advances to customer by product line

31.12.2015
Retail Lending Corporate Lending
Total
Consumer Credit Card Large SMEs
Mortgage
Not past due 15,234 23,448 86 362,912 10,857 412,537
1-30 days 11,952 10,203 31 7,007 86 29,279
31-60 days 11,416 7,811 6 8,962 1,030 29,225
61-90 days 10,386 7,062 45 137 401 18,031
91-180 days 5,009 5,268 358 - 3,416 14,051
181-360 days 2,900 4,329 339 26,391 3,779 37,738
>360 days 29,373 24,834 1,280 129,866 26,518 211,871
Total net amount 86,270 82,955 2,145 535,275 46,087 752,732
Value of collateral 125,791 98,298 - 941,000 89,635 1,254,724

VI. Loan-to value ratio (LTV) of mortgage lending

Mortgages 31.12.2016 31.12.2015

Less than 50% 317,106 281,611
50%-70% 516,217 424,966
71%-80% 405,696 360,985
81%-90% 709,362 696,693
91%-100% 964,507 1,146,134
101%-120% 796,105 603,941
121%-150% 391,523 360,693
Greater than 150% 409,658 449,189
Total exposure 4,510,174 4,324,212
Avg LTV 88% 88%

VII. Repossessed collaterals

Details of assets recognized by the Bank during the year by taking possession of collateral held
as security against loans and advances at the year-end are shown below:
31.12.2016
Balance Sheet balances Disposals during the year
Carrying amount of Net gain/
Of which in Net disposal
collaterals repossessed (loss) on
2016 value
31.12.2016 disposal
Real estate 12,001 968 98 23
- Residential 9,326 968 98 23
- Commercial 2,675 - - -
Other - - - -
(Please see note 19)

F-258
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit Risk (continued)
iii) Exposure to credit risk (continued)
VII. Repossessed collaterals (continued)

31.12.2015
Balance Sheet balances Disposals during the year
Carrying amount of Net gain/
Of which in Net disposal
collaterals repossessed (loss) on
2015 value
31.12.2015 disposal
Real estate 11,107 2,786 - -
- Residential 8,432 2,786 - -
- Commercial 2,675 - - -
Other - - - -

VIII. Breakdown of collateral and guarantees

31.12.2016
Value of collateral received
Total Guarantees
Real estate Financial Other received
value of
collateral collateral collateral
collateral
Retail Lending 3,795,990 30,006 793,051 4,619,047 34,480
Corporate Lending 3,613,037 569,277 955,847 5,138,161 5,431,367
Public Sector 1,162 - 26,182 27,344 100
Total 7,410,189 599,283 1,775,080 9,784,552 5,465,947

31.12.2015
Value of collateral received
Total Guarantees
Real estate Financial Other received
value of
collateral collateral collateral
collateral
Retail Lending 3,647,121 31,334 782,489 4,460,944 36,518
Corporate Lending 3,645,126 568,135 1,049,223 5,262,484 5,348,295

Public Sector 806 - 35,230 36,036 -

Total 7,293,053 599,469 1,866,942 9,759,464 5,384,813

Guarantees received include corporate and personal guarantees.

F-259
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)
4. Risk management (continued)
b) Credit Risk (continued)
iii) Exposure to credit risk (continued)

IX. Analysis of forborne loans and advances to customers

31.12.2016
Of which
Total amount Consumer
Total amount of Mortgage Large
of forborne loans (incl. SMEs
L&As loans Corporate
L&As Credit cards)
Neither past due nor impaired 9,202,991 239,935 57,347 37,642 139,434 5,512
Past due but not impaired 631,967 59,991 31,988 25,324 - 2,679
Impaired 1,567,150 788,305 159,325 143,977 465,412 19,591
Total Gross Amount 11,402,108 1,088,231 248,660 206,943 604,846 27,782
Individual Impairment Allowance 784,611 343,162 65,965 49,011 227,105 1,081
Collective Impairment Allowance 281,727 84,920 29,320 41,012 9,541 5,047
Total Net Amount 10,335,770 660,149 153,375 116,920 368,200 21,654
Value of collateral 9,784,552 823,505 167,917 105,141 523,582 26,865

31.12.2015
Of which
Consumer
Total amount of Total amount of Mortgage Large
loans (incl. SMEs
L&As forborne L&As loans Corporate
Credit cards)
Neither past due nor impaired 9,142,287 261,563 58,503 38,124 151,888 13,048
Past due but not impaired 551,788 72,966 34,362 31,195 - 7,409
Impaired 1,922,954 678,357 166,963 185,568 311,986 13,840
Total Gross Amount 11,617,029 1,012,886 259,828 254,887 463,874 34,297
Individual Impairment Allowance 909,036 287,005 75,776 54,138 154,837 2,254
Collective Impairment Allowance 312,538 113,241 29,980 67,475 10,850 4,936
Total Net Amount 10,395,455 612,640 154,072 133,274 298,187 27,107
Value of collateral 9,759,464 701,137 168,515 116,631 382,316 33,675

F-260
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)
4. Risk management (continued)
b) Credit Risk (continued)
iii) Exposure to credit risk (continued)
The other assets exposed to credit risk are classified based on counterparty’s country risk as following:
X. Credit quality per class of other financial assets
31.12.2016
Available for Sale (AFS)
Balances with Due from Derivative securities and
Total
Central Banks Banks Financial Assets Investments in
associates
AAA - - - - -
AA+ to AA- - 2,103 - 73 2,176
A+ to A- - 34,087 - 8,150 42,237
BBB+ to BBB- 2,263,731 131,635 - 1,244,256 3,639,622
Lower than BBB- - 369,670 3,106 1,259 374,035
Unrated - - - - -
Exposure before Impairment 2,263,731 537,495 3,106 1,253,738 4,058,070
Allowances for impairment - - - - -
Carrying amount 2,263,731 537,495 3,106 1,253,738 4,058,070

31.12.2015
Available for Sale (AFS)
Balances with Due from Derivative securities and
Total
Central Banks Banks Financial Assets Investments in
associates
AAA - - - - -
AA+ to AA- - 622 - 73 695
A+ to A- - 665,876 - 178,240 844,116
BBB+ to BBB- 1,686,347 279,688 - 1,139,912 3,105,947
Lower than BBB- - 312,219 - 134 312,353
Unrated - - - 3,932 3,932
Exposure before Impairment 1,686,347 1,258,405 - 1,322,291 4,267,043
Allowances for impairment - - - - -
Carrying amount 1,686,347 1,258,405 - 1,322,291 4,267,043

F-261
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit Risk (continued)
iii) Exposure to credit risk (continued)
XI. Risk concentrations of the maximum exposure to credit risk
Concentration Risk is a specific form of credit risk and arises due to low degree of
diversification between counterparties or group of counterparties, sectors, geographic regions,
or collaterals.
The Bank monitors on a regular basis concentration risk through detail reporting which informs
Senior management and the Board of Directors. According to the supervisory framework, the
Bank complies with the regulatory directives regarding large exposures, while the capital
requirements for single name and sector concentration risks are estimated in the context of
Pillar 2 of Basel III.
An industry sector analysis of the Bank’s financial assets exposed to credit risk, before and
after taking into account all the collaterals held by the Bank is as follows.

31-Dec-16 31-Dec-15
Gross Net Gross Net
maximum maximum maximum maximum
exposure exposure exposure exposure

Financial Institutions 3,041,676 2,846,174 3,364,129 3,159,738

Manufacturing 496,512 94,004 478,526 144,253
Real Estate & Construction 2,935,205 299,573 2,955,098 333,415
Wholesale and Retail Trade 922,389 112,316 935,225 137,507
Public Sector 1,264,762 1,213,856 1,168,418 1,107,745
Hotels & Tourism 172,296 6,821 174,247 7,066
Other Industries 1,012,254 209,773 1,264,389 176,416
Individuals 5,615,085 341,892 5,544,040 422,477

Total 15,460,179 5,124,409 15,884,072 5,488,617

F-262
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

b) Credit Risk (continued)
iii) Exposure to credit risk (continued)

XII. Exposure to higher risk Eurozone countries

Significant concerns about the creditworthiness of certain Eurozone countries persisted during
2016 leading to speculations as to the long-term sustainability of the Eurozone.
The Greek debt crisis continued in 2016, as is explained in note 4.g.
For the purpose of this disclosure higher risk Eurozone countries were considered Greece and
France, therefore the table below set out the Bank direct exposure to these countries:

31-Dec 31-Dec
2016 2015

Due from other banks 369,581 251,132

Financial assets available-for-sale 30,240 42,948

Total 399,821 294,080

As at 31 December 2016, the direct exposure refers to deposits placed to banks (mainly
placements with Alpha Bank A.E) and to corporate bonds issued by financial institutions from
France. No impairment was recorded for the above exposures.

F-263
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

c) Market risk

Market risk is the risk of reduction in economic value arising from unfavorable changes in the
value or volatility of interest rates, foreign exchange rates, stock exchange indices, equity prices
and commodities. Losses may also occur either from the trading portfolio or from the Assets-
Liabilities management.
The Bank identifies, measures, monitors and controls Market risk through established risk
management framework- policies, procedures and working directions. The Market Risk
Management Policy provides the framework and principles for the effective management of
market risks.

Within the scope of policy-making for financial risk management exposure limits and maximum
loss limits (stop loss) have been set. In particular, the following limits have been set for the
following risks:
 Foreign currency risk
 Interest rate risk on bond positions
 Credit risk regarding interbank transactions
Positions held are monitored on a daily basis and are examined for the corresponding limit
percentage cover and for any limit excess.

d) Currency risk
The Bank is exposed to currency risk (Foreign exchange risk) through transactions in foreign
currencies against RON. The Bank manages its exposure to movements in exchanges rates by
modifying its assets and liabilities mix. The main foreign currencies held by the Bank are EUR
and USD. On the Romanian market, exchange rates have certain degree of volatility, therefore
open foreign exchange positions represent a source of currency risk. In order to limit losses
arising from adverse movements in exchange rates, the Bank is currently pursuing the policy of
maintaining an overall balanced foreign exchange position.
Foreign currency risk is the risk of reduction in economic value arising from adverse changes in
the value or volatility of foreign exchange rates to record losses for ON or OFF balance sheet
positions or not to achieve the estimated profits due to the fluctuations on the market of the
foreign exchange rate. The object of the identification, assessment, monitoring and
management of the foreign currency risk is represented, according to the Bank’s policies and
procedures, by the elements denominated in foreign currency.

F-264
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

d) Currency risk (continued)

Concentration of assets and liabilities:

2016 Local Other

Currency EUR Currencies Total
RON’000 RON’000 RON’000 RON’000
ASSETS
Cash and balances with National Bank of
622,095 1,801,548 21,973 2,445,616
Romania
Due from other banks 100,005 393,760 43,730 537,495
Available-for-sale securities and
1,215,267 30,321 8,150 1,253,738
Investments in associates
Loans and advances to customers 3,372,114 6,906,094 57,562 10,335,770
Derivative financial assets 3,106 - - 3,106
Property and equipment 96,552 - - 96,552
Intangible fixed assets 7,336 - - 7,336
Other assets 49,591 3,060 196 52,847
TOTAL ASSETS 5,466,066 9,134,783 131,611 14,732,460

LIABILITIES
Due to banks 9,285 4,461,667 1,090 4,472,042
Due to customers 4,526,265 2,904,450 487,771 7,918,486
Other borrowed funds 5,529 547 - 6,076
Derivative financial liabilities 2,870 1,378 - 4,248
Subordinated debt - 705,540 - 705,540
Other liabilities 59,376 14,058 801 74,235
Deferred tax liabilities 743 - - 743
Total liabilities 4,604,068 8,087,640 489,662 13,181,370

Net balance sheet position 861,998 1,047,143 (358,051) 1,551,090

Derivative forward foreign exchange
657,000 (869,837) 215,165 2,328
position
Total foreign exchange position 1,518,998 177,306 (142,886) 1,553,418

F-265
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

d) Currency risk (continued)

2015 Local Other

Currency EUR Currencies Total
RON’000 RON’000 RON’000 RON’000
ASSETS
Cash and balances with National
Bank of Romania 642,389 1,213,953 22,978 1,879,320
Due from other banks 175,008 762,598 320,799 1,258,405
Available-for-sale securities and
1,108,895 209,613 3,783 1,322,291
Investments in associates
Loans and advances to customers 2,659,018 7,672,431 64,006 10,395,455
Derivative financial assets - - - -
Deferred tax assets 4,519 - - 4,519
Property and equipment 106,011 - - 106,011
Intangible fixed assets 4,348 - - 4,348
Other assets 40,495 810 153 41,458
TOTAL ASSETS 4,740,683 9,859,405 411,719 15,011,807

LIABILITIES
Due to banks 4,048 6,494,891 523 6,499,462
Due to customers 3,693,869 2,202,306 398,784 6,294,959
Other borrowed funds 6,763 666 7,429
Derivative financial liabilities 1,256 2,513 3,769
Subordinated debt 702,976 702,976
Other liabilities 48,546 11,181 726 60,453
Total liabilities 3,754,482 9,414,533 400,033 13,569,048

Net balance sheet position 986,201 444,872 11,686 1,442,759

Derivative forward foreign exchange 436,000 (435,435) (1,732) (1,167)
position
Total foreign exchange position
1,422,201 9,437 9,954 1,441,592

F-266
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

d) Currency risk (continued)

Sensitivity analysis – Foreign Exchange risk

Volumes as at 31/12/16 Changes in ER Impact on net income before

tax
+ - + -

Assets 9,134,783 5.00% -5.00% 456,739 (456,739)

EUR Liabilities (8,957,475) 5.00% -5.00% (447,874) 447,874
Assets 289,098 5.00% -5.00% 14,455 (14,455)
USD Liabilities (405,318) 5.00% -5.00% (20,266) 20,266
Assets 6,123,066 5.00% -5.00% - -
RON Liabilities (4,604,068) 5.00% -5.00% - -
3,054 (3,054)

Volumes as at 31/12/15 Changes in ER Impact on net income before

tax
+ - + -

Assets 9,859,405 5.00% -5.00% 492,970 (492,970)

EUR Liabilities (9,414,533) 5.00% -5.00% (470,727) 470,727
Assets 333,505 5.00% -5.00% 16,675 (16,675)
USD Liabilities (331,559) 5.00% -5.00% (16,578) 16,578
Assets 4,740,683 - -
RON Liabilities (3,754,482) - -
22,340 (22,340)

The Foreign Exchange risk is measured by applying Value at Risk (VaR) methodology,
scenario analysis and stress testing. The method applied for calculating Value at Risk (VaR) is
historical simulation. The Bank uses a holding period of one and ten days, depending on the
time which is required to liquidate the portfolio.

Total Forex VaR, 99% confidence interval (1 year historical data)

Year 2016 2015
Daily 10 day Daily 10 day
EUR ths. EUR ths. EUR ths. EUR ths.

31 December 24.07 75.15 31.5 83.1

average daily value 26.63 39.44
maximum daily value 60.38 336.7
minimum daily value 7.89 8.7

The VaR methodology is complemented with scenario analysis and stress testing, in order to
estimate the potential size of losses that could arise from the trading portfolio for hypothetical as
well as historical extreme movements of market parameters.

F-267
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

e) Financial risks of the banking portfolio

The financial risks of the banking portfolio derive from the structure of assets and liabilities and
primarily from the portfolio of loans and deposits. The financial risks of the banking portfolio
concern the interest rate risk and the liquidity risk.
The Bank incurs interest rate risk from its financial intermediation activity, principally in the form
of exposure to adverse changes in the market interest rates. In the context of analysis of the
banking portfolio, Interest Rate Gap Analysis is performed. Assets and liabilities are allocated
on time buckets according to their re-pricing date for variable interest rate instruments, or
according to their maturity date for fixed rate instruments.
The main sources of interest rate risk arises when mismatches correlation exist between the
maturity (for fixed interest rates) or re-pricing date (for floating interest rates) of the interest-
bearing assets and liabilities, adverse evolution of the slope and shape of the yield curve (the
unparalleled evolution of the interest rate yields of the interest-earning assets and interest-
earning liabilities), mismatches correlation in the adjustments of the rates earned and paid on
different instruments with otherwise similar re-pricing characteristics and the options embedded
in the Bank’s products.
Asset-liability risk management activities are conducted in the context of the Bank’s sensitivity
to interest rate changes. The Bank generally grants loans with floating interest rates, according
to the Bank’s policy and also with indexed interest rates (which re-price based on reference
interest rates like ROBOR, EURIBOR, LIBOR). On the deposit side, the Bank offers mainly
products with fixed interest rates.
The Bank is exposed to various risks associated with the effects of fluctuations in the prevailing
levels of market interest rates on its separate financial position and cash flows.

Interest margins may increase as a result of such changes but may reduce or create losses in
the event that unexpected movements arise. The management sets thresholds on the level of
mismatch of interest rate re-pricing that may be undertaken, which is monitored monthly
(emergency review mechanism).

F-268
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

e) Financial risks of the banking portfolio (continued)

The tables below analyze assets and liabilities of the Bank into relevant re-pricing groupings as at 31 December 2016:
Non-
Up to 1 1 to 3 3 to 12 Over 1
interest
month months months Year bearing Total

Assets
Cash and balances with National Bank
2,263,731 - - - 181,885 2,445,616
of Romania
Due from other banks 537,294 - 201 - - 537,495
Available-for-sale securities and
198,992 340,226 589,811 114,173 10,536 1,253,738
Investments in associates
Loans and advances to customers 8,795,139 93,729 1,231,909 214,993 - 10,335,770
Property and equipment - - - - 96,552 96,552
Intangible fixed assets - - - - 7,336 7,336
Derivative financial assets - - - - 3,106 3,106
Other assets 52,847 52,847
Total assets 11,795,156 433,955 1,821,921 329,166 352,262 14,732,460

Liabilities
Due to banks 1,673,755 2,798,287 - - - 4,472,042
Due to customers 3,957,894 2,121,506 1,834,055 5,031 - 7,918,486
Other borrowed funds 6,076 - - - - 6,076
Subordinated loan 227,055 478,485 - - - 705,540
Other liabilities - 253 - - 73,982 74,235
Derivative financial liabilities - - - - 4,248 4,248
Deferred tax liabilities - - - - 743 743
Total liabilities 5,864,780 5,398,531 1,834,055 5,031 78,973 13,181,370
Equity - - - - 1,551,090 1,551,090

Total liabilities and equity 5,864,780 5,398,531 1,834,055 5,031 1,630,063 14,732,460
Marginal Gap 5,930,376 (4,964,576) (12,134) 324,135 (1,277,801) -
Cumulative Gap 5,930,376 965,800 953,666 1,277,801 - -

F-269
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

e) Financial risks of the banking portfolio (continued)

The tables below analyze assets and liabilities of the Bank into relevant re-pricing groupings as at 31 December 2015:

Up to 1 1 to 3 3 to 12 Over 1 Non-interest
month months months Year bearing Total

Assets
Cash and balances with National Bank
1,686,347 - - - 192,973 1,879,320
of Romania
Due from other banks 1,257,068 - 1,137 200 - 1,258,405
Available-for-sale securities and
296,356 411,616 430,870 178,240 5,209 1,322,291
Investments in associates
Loans and advances to customers 8,483,701 38,693 261,678 1,611,383 10,395,455
Property and equipment - - - - 106,011 106,011
Intangible fixed assets - - - - 4,348 4,348
Deferred tax assets - - - - 4,519 4,519
Other assets - - - - 41,458 41,458
Total assets 11,723,472 450,309 693,685 1,789,823 354,518 15,011,807

Liabilities
Due to banks 78,651 6,385,934 - 34,877 - 6,499,462
Due to customers 3,281,008 1,945,286 1,060,833 7,832 - 6,294,959
Other borrowed funds 7,429 - - - - 7,429
Subordinated loan 226,239 476,737 - - - 702,976
Other liabilities - 402 - - 60,051 60,453
Derivative financial liabilities - - - - 3,769 3,769
Total liabilities 3,593,327 8,808,359 1,060,833 42,709 63,820 13,569,048
Equity - - - - 1,442,759 1,442,759

Total liabilities and equity 3,593,327 8,808,359 1,060,833 42,709 1,506,579 15,011,807
Marginal Gap 8,130,145 (8,358,050) (367,148) 1,747,114 (1,152,061) -
Cumulative Gap 8,130,145 (227,905) (595,053) 1,152,061 - -

F-270
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

e) Financial risks of the banking portfolio (continued)

Average interest bearing assets

Average 2016 Average 2015

Cash and balances with National Bank of Romania 0.09% 0.20%

Due from other banks 1.30% 0.34%
Financial assets 2.57% 3.62%
Loans and advances to customers: 4.00% 4.17%
- Alpha Housing 3.72% 4.10%
- Investment Loans 3.49% 3.32%
- Alpha Personal 6.18% 6.28%
- Auto Loans 5.94% 7.24%
- Financial Institutions 1.69% 1.75%
- Treasury Loans 4.60% 5.08%
- Loans for equipment and stocks finance 2.97% 3.05%
- Other Loans 3.81% 3.78%

Sensitivity analysis – Interest rate risk

The sensitivity of the separate income statement is the effect of the reasonably possible
changes in interest rates on the net interest income (NII) for one year, based on the floating rate
non-trading financial assets and financial liabilities held at 31 December 2016.
In assessing the interest rate sensitivity analysis the assets without predefined maturities which
exhibit strong behavioral characteristics are allocated on residual maturity buckets considering
conventions according to their transactional behavior (based on statistical models).

Balances as at Changes in I/Y NII Sensitivity

31/12/16 + - + -
Fixed 2,040,256 1.00 (1.00)
Assets 65,510 (13,134)
Floating 7,107,542 1.00 (1.00)
EUR
Fixed (4,107,454) 1.00 (1.00)
Liabilities 77,591 (11,718)
Floating (5,071,053) 1.00 (1.00)
Fixed 337,039 1.00 (1.00)
Assets 3,854 (2,907)
Floating 49,732 1.00 (1.00)
USD
Fixed (404,533) 1.00 (1.00)
Liabilities 3,376 (1,924)
Floating - 1.00 (1.00)
Fixed 2,266,052 1.00 (1.00)
Assets 47,862 (36,670)
Floating 3,597,965 1.00 (1.00)
RON
Fixed (4,550,165) 1.00 (1.00)
Liabilities 37,925 (25,013)
Floating (5,530) 1.00 (1.00)
Fixed 76,624 1.00 (1.00)
Assets 833 (377)
Other Floating 6,660 1.00 (1.00)
ccy. Fixed (84,328) 1.00 (1.00)
Liabilities 682 (457)
Floating - 1.00 (1.00)
TOTAL NII 1,515 (13,976)

F-271
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

e) Financial risks of the banking portfolio (continued)

Balances as at Changes in I/Y NII Sensitivity

31/12/15 + - + -

Fixed 4,008,290 1.00 (1.00)

Assets 76,196 (5,433)
Floating 5,838,611 1.00 (1.00)
EUR
Fixed (2,773,557) 1.00 (1.00)
Liabilities 81,644 (13,756)
Floating (7,164,733) 1.00 (1.00)
Fixed 259,180 1.00 (1.00)
Assets 2,767 (122)
Floating 56,927 1.00 (1.00)
USD
Fixed (330,860) 1.00 (1.00)
Liabilities 2,313 (2,033)
Floating - 1.00 (1.00)
Fixed 2,448,324 1.00 (1.00)
Assets 39,010 (27,026)
Floating 2,516,872 1.00 (1.00)
RON
Fixed (3,699,173) 1.00 (1.00)
Liabilities 31,704 (25,098)
Floating (6,763) 1.00 (1.00)
Fixed 62,535 1.00 (1.00)
Assets 639 (8)
Other Floating 6,163 1.00 (1.00)
ccy. Fixed (73,127) 1.00 (1.00)
Liabilities 513 (410)
Floating - 1.00 (1.00)
TOTAL NII 2,438 8,708

f) Liquidity risk

i) Management of liquidity risk

Liquidity risk is the risk that the Bank will encounter from the potential inability to meet all
payments obligations associated with its financial liabilities that are settled by delivering cash or
another financial asset when they come due.
Liquidity risk arises in the general funding of the Bank’s activities and in the management of the
asset positions. It includes both the risk of being unable to fund assets at appropriate maturities
and rates and the risk of being unable to liquidate an asset at a reasonable price and in an
appropriate time frame.
The Bank has access to a diverse funding base. Funds are raised using a broad range of
instruments including deposits, borrowings and share capital. This enhances funding flexibility,
limits dependence on one source of funds and generally lowers the cost of funds. The Bank
concentrates its efforts to maintain an adequate liquidity such as ensuring the necessary funds
to cover at all times its financial commitments on all time bands. The Bank continually assesses
liquidity risk by identifying and monitoring changes in funding on short and long term, and
diversifying the funding base.
The daily liquidity position is monitored and regular liquidity stress testing is conducted under a
variety of scenarios covering both normal and more severe market conditions. All liquidity
policies and procedures are subject to review and approval by ALCO or Executive Committee.
In the context of the Contingency Funding Plan, the Bank monitors on a daily basis Early
Warning Indicators/Triggers while any liquidity risk trigger event or limit breach of any liquidity
indicator is reported to the competent Committee, including proposed contingency measures in
order to be implemented.
Since April 2009, the Bank signed a stand-by agreement with Alpha Bank AE of EUR
130,000,000, which was extended successively in following years. In 2016 the agreement was
extended, also to cover the possible temporary liquidity requirements of the Bank.

F-272
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

f) Liquidity risk (continued)
ii) Exposure to liquidity risk
Liquidity indicators are calculated on a regular basis while ALCO and Risk Management
Committee are informed accordingly.
The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to
deposits from customers. For this purpose net liquid assets are considered as including cash
and cash equivalents and investment grade debt securities for which there is an active and
liquid market less any deposits from Banks, debt securities issued, other borrowings and
commitments maturing within the next month.
Another indicator used by the Bank to monitor the short term liquidity is the Liquidity Coverage
Ratio (LCR). For this purpose there are considered the followings:
o the net inflow of liquidity for the next 30 days, determined on the basis of predefined
scenarios related to a liquidity crisis, named as short-term financial needs;
o the necessary liquidity buffer to cover the short-term financing needs.
The Liquidity Coverage Ratio calculated regularly, according to the Basel III Directives and local
regulatory requirements, was as follows:

31 December 2016 31 December 2015

979% 963%
The Bank maintains a portfolio of highly marketable and diverse assets that can be easily
liquidated in the event of an unforeseen interruption of cash flow. The Bank also has committed
lines of credit that it could access to meet liquidity needs.
The ratio of net liquid assets to customer liabilities to reflect the market conditions during the
year was as follows:
31 December 2016 31 December 2015
% %
Lowest 46.05% 47.09%
Highest 64.44% 70.71%
Average during the period 52.70% 60.99%

The Bank’s financial liabilities are measured based on undiscounted contractual cash flows,
grouping up the principal amounts with the interest payments.
Up to 1 1 to 3 3 to 12 Over 1
2016 month months months Year Total

Liabilities
Due to banks 107,127 - 113,528 4,251,404 4,472,059
Due to customers 4,060,859 2,051,246 1,819,019 5,088 7,936,212
Other borrowed funds 364 - 1,124 4,960 6,448
Derivative financial liabilities 2,871 - 1,378 - 4,249
Subordinated debt - 3,243 9,816 744,419 757,478
Finance lease payable 12 24 97 120 253
Total undiscounted liabilities 4,171,233 2,054,513 1,944,962 5,005,991 13,176,699

F-273
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

f) Liquidity risk (continued)
ii) Exposure to liquidity risk (continued)

Up to 1 1 to 3 3 to 12 Over 1
2015 month months months Year Total

Liabilities
Due to banks 79,414 181 2,943,782 3,492,326 6,515,703
Due to customers 3,282,030 1,952,436 1,071,134 7,966 6,313,566
Other borrowed funds 391 - 1,156 6,466 8,013
Derivative financial liabilities 1,256 - - 2,513 3,769
Subordinated debt 419 2,710 11,224 754,311 768,664
Finance lease payable 12 23 95 272 402
Total undiscounted liabilities 3,363,522 1,955,350 4,027,391 4,263,854 13,610,117

The table below shows the contractual expiry by maturity of the Bank’s contingent liabilities and
commitments.

On Less than 3 3 to 12 Over 5

demand months months 1 to 5 years years Total
2016
Contingent liabilities 897 168,579 249,979 185,353 8,591 613,399
Commitments 145,436 263,803 489,725 155,698 97,996 1,152,658
Total 146,333 432,382 739,704 341,051 106,587 1,766,057

2015
Contingent liabilities 8,308 145,777 228,702 86,934 9,316 479,037
Commitments 129,663 218,263 530,047 153,339 48,423 1,079,735
Total 137,971 364,040 758,749 240,273 57,739 1,558,772

The Bank expects that not all of the contingent liabilities or commitments will be drawn before
expiry of the commitments.
The table below analyses the liquidity gap of the Bank into relevant maturity bands mainly
based on the remaining period at balance sheet date to the contractual maturity as at 31
December 2016. Exceptions are made for assets without predefined maturities or other balance
sheet items which exhibit strong behavioral characteristics. For these products allocation on
residual maturity buckets, conventions are applied according to their transactional behavior
(based on statistical models).
Additionally, securities are distributed taking into account relevant factors (haircuts). The Bank
splits the Treasury securities issued by the Romanian Public Ministry of Finance 90% on the
first maturity band and 10% over 1 year. The liquid corporate bonds rated investment grade are
included 80% in the first maturity band and 20% over 1 year.

F-274
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

f) Liquidity risk (continued)
ii) Exposure to liquidity risk (continued)

Without
Up to 1 1 to 3 3 to 12 Over 1
contractual Total
month months months year
maturity
ASSETS
Cash and balances
with National Bank of 2,445,616 - - - - 2,445,616
Romania
Due from other banks 521,400 - 16,095 - - 537,495
Available-for-sale
securities and
1,115,858 - - 137,880 - 1,253,738
Investments in
associates
Loans and advances to
269,655 491,806 2,768,384 6,805,925 - 10,335,770
customers
Derivative financial
3,106 - - - - 3,106
assets
Property and
- - - - 96,552 96,552
equipment
Intangible assets - - - - 7,336 7,336
Other assets - - - - 52,847 52,847

TOTAL ASSETS 4,355,635 491,806 2,784,479 6,943,805 156,735 14,732,460

Com. Lines from Group 726,576 - - - - 726,576

LIABILITIES

Due to banks 100,077 7,034 2,775,546 1,589,385 - 4,472,042

Other borrowed funds - - - 6,076 - 6,076
Due to customers 3,950,073 2,122,924 1,840,458 5,031 - 7,918,486
Derivative financial
4,248 - - - - 4,248
liabilities
Subordinated debt - - - 705,540 - 705,540
Other Liabilities 12 24 97 120 73,982 74,235
Deferred tax liabilities - - - - 743 743
Equity - - - - 1,551,090 1,551,090
TOTAL
4,054,410 2,129,982 4,616,101 2,306,152 1,625,815 14,732,460
LIABILITIES&EQUITY
Com. Lines to Group 65,413 - - 65,413 - 130,826
Without
Up to 1 1 to 3 3 to 12 Over 1
LIQUIDITY GAP contractual Total
month months months year
maturity
GAP 962,388 (1,638,176) (1,831,622) 4,572,240 (1,469,080) 595,750
Cumulated GAP 962,388 (675,788) (2,507,410) 2,064,830 595,750

F-275
 ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

f) Liquidity risk (continued)
ii) Exposure to liquidity risk (continued)

The table below analyses the liquidity gap of the Bank as at 31 December 2015:
Without
Up to 1 1 to 3 3 to 12 Over 1
contractual Total
month months months year
maturity
ASSETS
Cash and balances
with National Bank of 1,879,320 - - - - 1,879,320
Romania
Due from other banks 1,241,232 - 16,973 200 - 1,258,405
Available-for-sale
securities and
1,164,420 - - 157,871 - 1,322,291
Investments in
associates
Loans and advances
242,427 305,527 1,286,072 8,561,429 - 10,395,455
to customers
Derivative financial
- - - - - -
assets
Deferred tax assets - - - - 4,519 4,519
Property and
- - - - 106,011 106,011
equipment
Intangible assets - - - - 4,348 4,348
Other assets - - - - 41,458 41,458

TOTAL ASSETS 4,527,399 305,527 1,303,045 8,719,500 156,336 15,011,807

Com. Lines from
633,360 - - - - 633,360
Group
LIABILITIES

Due to banks 78,651 - 2,940,925 3,479,886 - 6,499,462

Other borrowed funds - - - 7,429 - 7,429
Due to customers 3,281,008 1,945,285 1,060,833 7,833 - 6,294,959
Derivative financial
3,769 - - - - 3,769
liabilities
Subordinated debt - - - 702,976 - 702,976
Other Liabilities 12 23 95 272 60,051 60,453
Equity - - - - 1,442,759 1,442,759
TOTAL
3,363,440 1,945,308 4,001,853 4,198,396 1,502,810 15,011,807
LIABILITIES&EQUITY
Com. Lines to Group 62,286 - - 62,286 - 124,572
Without
Up to 1 1 to 3 3 to 12 Over 1
LIQUIDITY GAP contractual Total
month months months year
maturity
GAP 1,735,033 (1,639,781) (2,698,808) 4,458,818 (1,346,474) 508,788
Cumulated GAP 1,735,033 95,252 (2,603,556) 1,855,262 508,788

F-276
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

f) Liquidity risk (continued)
ii) Exposure to liquidity risk (continued)
Management believes that in spite of a substantial portion of deposits having contractual
maturity dates within three months, diversification of these deposits by number and type of
deposits, and the past experience of the Bank would indicate that these deposits provide a long
- term and stable source of funding.
To manage liquidity risk, the Bank holds liquid assets comprising cash and cash equivalents
and investment securities for which there is an active liquid market. These assets can be readily
sold to meet liquidity requirements.

g) Operating environment

I. Greece macroeconomic trend and banking market

The process of risk re-pricing during crisis years in the international financial markets severely
affected the performance of those markets, including the Romanian financial and banking
market, and fostered heightened uncertainty regarding future economic developments. The
activities of the Bank are also affected by the economic developments in Greece where the
shareholder operates.
In particular, with respect to the economic environment in Greece, the operations of the Parent
Bank have been adversely affected, during the last years, by the crisis of the Greek public debt.
The adverse effects were mainly caused by the participation of the Parent Bank, in 2012, in the
exchange program of Greek Government bonds and loans guaranteed by the Hellenic Republic
(PSI) under unfavorable to their holders terms, and by the prolonged recession of the Greek
economy which led to an increase in non-performing loans and, consequently, to an increase in
impairment losses on loans and advances to customers.
During 2014 several reforms were introduced that had a positive effect on Greek economy. .
In 2015, as a result of the uncertainties in the internal economic environment, mainly regarding
the outcome of the negotiations of the Hellenic Republic with the European Commission, the
European Central Bank and the International Monetary Fund, there were significant outflows of
deposits in the first half of 2015. These outflows had been reduced during the second semester
of 2015 when it was recorded a slight increase in the level of Bank’s customer deposits.
Despite some economic and political turmoil during first half of 2015, during the third quarter the
negotiations of the Hellenic Republic for the coverage of the financing needs of the Greek
economy were completed, resulting in an agreement for a new financial support by the
European Stability Mechanism, a three-year funding (which amount up to EUR 86 billion),
provided that specific commitments such as the achievement of the financial targets and the
implementation of reforms in the Greek economy will be met.
At its meeting on 25 May 2016, the Eurogroup agreed on a package of debt measures which
will be phased in progressively, as necessary to meet the agreed benchmark on gross financing
needs and will be subject to the pre-defined conditionality of the ESM programme. The
measures seek to address a general concern that future debt payments will pose an undue
burden on budget spending and thus stifle the economy. The measures are divided into short-,
medium- and long-term. Some of them are to be implemented before the end of the
programme, and others - upon successful conclusion of the programme. The scope of the latter
will be determined based on an updated debt sustainability analysis.

F-277
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

g) Operating environment (continued)
I. Greece macroeconomic trend and banking market (continued)

On 23 January 2017, the Eurogroup adopted the rules on the full set of short-term debt relief
measures for Greece. These measures will have a positive impact on the sustainability of
Greece's public debt. They include:
 smoothing Greece's repayment profile within the current weighted average maturity of
loans up to 32,5 years
 reducing interest rate-related risk using EFSF and ESM funding strategy, without
incurring additional costs for the former programme countries
 waiving the step-up interest rate margin for 2017, related to the debt buy-back tranche
of the 2nd Greek programme.

At the Eurogroup meeting of 7 April 2017, in Malta, an agreement, in principle was reached that
included cuts in pensions (1% of GDP) and income tax-free threshold (1% of the GDP) to take
place in 2019 and 2020 respectively. A “global agreement” is expected by the end of May that
could contain more specification the medium-term debt relief measures. Nevertheless, the
prolonged negotiations of the second review may further delay (i) the inclusion of Greek
government bonds to QE programme, (ii) the lift of capital controls, (iii) the specification of
medium and long term debt relief measures, and therefore, the return to the markets.
With respect to the major shareholder, Alpha Bank A.E., according to the Agreement for
Financial Support to be provided by the European Stability Mechanism, a comprehensive
assessment ("CA") was conducted for the four Greek systemic financial institutions, by the
Single Supervisory Mechanism - SSM. The assessment was performed during the third quarter
of 2015 and included both an Asset Quality Review (AQR) and a stress test. According to C.A.
results, which were announced on 31.10.2015, Alpha Bank Group presented zero capital needs
as a result of the AQR, and also presented low capital needs amounting to EUR 262.6 million
under the base scenario. Under the adverse scenario the capital needs amounted to EUR
2,563 million. The Group covered the total of its capital needs through an exchange offer for
securities issued and share capital increase of the Bank with cash. As a result the Group did
not receive capital support for preventive recapitalization purposes. The Group prepared the
31.12.2016 Financial Statements based on the going concern principle. The main factors that
cause uncertainties regarding the application of this principle relate to the unstable economic
environment in Greece and abroad and to the liquidity levels of the Hellenic Republic and the
banking system. Taking into account the fact that the second evaluation of the Hellenic
Republic Support program is expected to be completed in the near term, that the continuation of
reforms and measures for the enhancement of the sustainability of Greek debt are expected to
contribute to the gradual improvement of the economic environment in Greece, the Group’s
high capital adequacy and Alpha Bank’s ability to access the liquidity mechanisms of the
eurosystem, the Group estimates that the conditions for the application of the going concern
principle are met.
As described in the Note 15 “Financial Investments”, as of 31.12.2016, Alpha Bank Romania
had no exposure to Greek securities. Also the funding cost for the Bank in regards to amounts
borrowed from Alpha Bank A.E. remained at the level negotiated before December 2015
(please refer to note 20 and 23).
Given the uncertainties surrounding the progress of the Greek economy management cannot
accurately estimate all of the above developments which could have an impact on the
Romanian banking sector and consequently what effect, if any, they could have on these
separate financial statements.

F-278
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

g) Operating environment (continued)
I. Greece macroeconomic trend and banking market (continued)
Management believes it is taking all the necessary measures to support the sustainability and
growth of the Bank’s business in the current circumstances by:
 preparing liquidity crisis strategy and establishing specific measures, including ensuring
measures for access to local funding, to address potential liquidity crisis;
 daily monitoring its liquidity position and over-dependence on specific funds;forecasting
on short-term basis its net liquidity position;
 obtaining commitment from the major shareholder regarding the latter’s continuous
support of the Bank’s operations in Romania;
 monitoring incoming and outgoing cash flows on daily basis and assessing the effects
on its borrowers of the limited access to funding and the sustainability of growing
businesses in Romania;
 examining terms and conditions of financing agreements and considering the
implications of obligations imposed and risks identified such as approaching maturity
dates, or the implications of any terms or covenants that may have been breached, or
which may be breached in the foreseeable future.
II. Romania macroeconomic trends and banking market
Currently in Romania there are a number of legislative initiatives that may significantly impact
the local banking system in the next financial year, which refer to the followings:
 National Authority for Consumer Protection (NACP) project law according to which the
loan contract will no longer stand as enforceable title, consequently banking and non-
banking financial institutions will be required to obtain a court sentence in order to
initiate enforcement procedures. This project law refers only to consumers.
NACP project law that transpose the requirements of Directive 2008/48/CE of the
European Parliament and of the Board from 23 April 2008: refers to loans granted to
consumers in foreign currency for which, where the exchange rate varies more than
20% as at a certain date during the loan tenor compared to the granting date, the
banking or non-banking financial institutions are required to grant consumers certain
options to sustain them and reduces their loan costs.
 Individuals insolvency law no. 151/2015 published in the Official Gazette of Romania in
June 2015: the law comes into force as at 01 August 2017 and refers to sustaining
individuals with financial difficulties in the process of debts payment.

Given the uncertainties surrounding this legislative project evolution, management cannot
accurately estimate all of the above developments which could have an impact on the
Romanian banking sector and consequently what effect, if any, they could have on these
financial statements.

h) Taxation risk

The Romanian tax legislation provides for detailed and complex rules and has suffered various
changes in the recent years. Moreover local taxpayers carrying out transactions with related
parties must prepare and make available to Romanian Tax Authorities, at their written request,
the transfer pricing documentation file, within the period granted by the authorities. Failure to
submit transfer pricing documentation file or presentation of an incomplete file may give rise to
application of penalties for non-compliance.

F-279
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

h) Taxation risk (continued)

Although the Bank is taking all measures to fully comply with tax laws, interpretation of the text
and practical implementation procedures of tax legislation could vary, and there is a risk that
certain transactions, for example, could be viewed differently by the tax authorities as compared
to the Bank's treatment. Furthermore, the conversion to IFRS of the Romanian banks raised
additional tax implications that are not yet fully clarified in the legislation and might generate
potential tax risks.
The Romanian Government has a number of agencies that are authorized to conduct audits of
companies operating in Romania. These audits are similar in nature to tax audits performed by
tax authorities in many countries, but may extend not only to tax matters but to other legal and
regulatory matters in which the applicable agency may be interested. It is likely that the Bank
will continue to be subject to regular controls as new laws and regulations are issued.
Bank management believes that it will not suffer material losses in case of a tax audit. However,
the impact of different interpretations of the tax authorities cannot be estimated reliably.

i) Operational risk
Definition of operational risk
Operational risk is the risk of the occurrence of an event, with or without financial impact,
resulting from inadequate or failed internal processes, IT systems, people (intentionally or
unintentionally) and from external events.
Operational risk also includes legal risk which is associated with legally flawed actions,
uncertainty regarding the definition of the law that may lead to inadequate interpretation and
potential inefficiencies in the legal framework.

Operational Risk Framework

Operational Risk framework is aligned with the operational risk strategy of the Group and
regulatory framework and is applied to all levels.
Identification and management of operational risk are performed so as to maintain a constant
flow of information and enhance the decision-making process.
The Bank primary defenses against operational risk are its policies, procedures and internal
controls.
Management and mitigation of operational risk
The Bank has developed an appropriate organizational structure, with clearly defined roles and
responsibilities for its Personnel and Units, in order to manage operational risk issues.
The main bodies are:
• Risk Management Committee mandated by the Board of Directors to have the oversight
of the risk management framework,
• Operational Risk Committee is delegated by the Risk Management Committee to
supervise operational risk management activities.

F-280
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

4. Risk management (continued)

i) Operational risk (continued)
The Risk Management Unit develops the appropriate tools, processes, procedures and
techniques relevant to operational risk management, monitors the implementation of
appropriate action plans for its mitigation.
All Units have appointed an Operational Risk Coordinator and Operational Risk Initiator.
Operational Risk Management is performed through risk identification, assessment, monitoring,
reporting and mitigation.
Authority limits are established for managing operational risk events.

5. Use of estimates and judgments

The estimates and judgments applied by the Bank in preparing the separate financial
statements are based on historical information and assumptions which at present are
considered appropriate.

The estimates and assumptions are reviewed on an on-going basis to take into account current
conditions, and the effect of any revisions is recognized in the period in which the estimate is
revised.

Impairment losses on loans and advances to customers

In accordance with the internal impairment assessment methodology (refer to Note 3.n), the
Bank reviews its loan portfolios to assess impairment and determines whether an impairment
loss should be recorded in the separate income statement. The Bank makes judgments as to
whether there is any observable data indicating an objective evidence of impairment that has an
impact on the estimated future cash flows from an individual loan or a portfolio of loans.
Management uses estimates based on historical loss experience for loans with similar credit
risk characteristics. The individual assessment is based on management’s best estimate on the
present value of the cash flows that are expected to be received. In estimating these cash-
flows, management makes judgments about counterparty’s financial situation and the net
realizable value of any underlying collateral. 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.
Please refer also to note 16 for the sensitivity analysis on impairment collective allowance for
loans and advances to customers.

Impairment losses of non – financial assets

The Bank, at each year-end balance sheet date, assesses for impairment non–financial assets,
and in particular property, plant and equipment and assets held for sale. Internal estimates are
used to a significant degree to determine the recoverable amount of the assets, i.e. the higher
between the fair value less costs to sell and the value in use.
Provisions and contingent liabilities
The Bank recognizes provisions when it estimates that it has a present legal or constructive
obligation that can be estimated reliably, and it is almost certain that an outflow of economic
benefits will be required to settle the obligation. In contrast, when it is probable that an outflow
of resources will be required, or when the amount of liability cannot be measured reliably, the
Bank does not recognize a provision but it provides disclosures for contingent liabilities, taking
into consideration their materiality. The estimation for the probability of the outflow as well as for

F-281
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

5. Use of estimates and judgments (continued)

Provisions and contingent liabilities (continued)
the amount of the liability are affected by factors which are not controlled by the Group, such as
court decisions, the practical implementation of the relevant legislation and the probability of
default of the counterparty, for those cases which are related to the exposure to off-balance
sheet items.
Fair value of financial instruments
The Bank measures fair values using the following fair value hierarchy that reflects the
significance of the inputs used in making the measurements:
 Level 1: Quoted market price in an active market for an identical instrument.
 Level 2: Valuation techniques based on observable inputs. This category includes
instruments valued using: quoted market prices in active markets for similar instruments;
quoted prices for similar instruments in markets that are considered less than active; or
other valuation techniques where all significant inputs are directly or indirectly observable
from market data.
 Level 3: Valuation techniques using significant unobservable inputs. This category includes
all instruments where the valuation technique includes inputs not based on observable data
and the unobservable inputs could have a significant effect on the instrument’s valuation.
This category includes instruments that are valued based on quoted prices for similar
instruments where significant unobservable adjustments or assumptions are required to
reflect differences between the instruments.

The Bank measures fair value for available for sale financial instruments using a model based
on bid quotations extracted from market.
The objective of valuation techniques is to arrive at a fair value determination that reflects the
price of the financial instrument at the reporting date that would have been determined by
market participants acting at arm’s length.
Availability of observable market prices and model inputs reduces the need for management
judgment and estimation and also reduces the uncertainty associated with determination of fair
values. Availability of observable market prices and inputs varies depending on the products and
markets and is prone to changes based on specific events and general conditions in the financial
markets.
The fair value of financial instruments that are not traded in an active market is determined by
using valuation techniques. The management uses its judgment to select the valuation method
and make assumptions that are mainly based on market conditions existing at each balance
sheet date.
Valuation models that employ significant unobservable inputs require a higher degree of
management judgment and estimation in determination of fair value. Management judgment
and estimation are usually required for selection of the appropriate valuation model to be used,
determination of expected future cash flows on the financial instrument being valued,
determination of probability of counterparty default and prepayments and selection of
appropriate discount rates.
In determining fair values, the Bank uses averages of reasonably possible alternative inputs.
When alternative assumptions are available within a wide range, judgments exercised in
selecting the most appropriate point in the range include evaluation of the sources quality (for
example, the experience and expertise of the brokers providing different quotes within a range,
giving greater weight to a quote from the original broker of the instrument who has the most
detailed information about the instrument) and the availability of corroborating evidence in
respect of some inputs within the range.

F-282
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

6. Fair value disclosures

The following table shows an analysis of financial instruments recorded at fair value, between
those whose fair value is based on quoted market prices, those involving valuation where the
model inputs are observable in the market and those where the valuation techniques involves
the use of market unobservable inputs
Financial assets and liabilities measured at fair value:
31-Dec-16 31-Dec-15

1) 4) 1) 4)
2.1) Available 2.2) Available 2.1) Available 2.2) Available
Derivative Derivative Derivative Derivative
for Sale for Sale for Sale for Sale
Financial Financial Financial Financial
Equity Securities Equity Securities
Assets Liabilities Assets Liabilities
Level 1 - 8,150 1,243,202 - - - 1,274,134 -
Level 2 3,106 - - 4,248 - - - 3,769
Level 3 - 1,204 - - - 5,209 42,948 -
Total 3,106 9,354 1,243,202 4,248 - 5,209 1,317,082 3,769

Available for sale: The Bank measures fair value for available for sale financial instruments
using a model based on bid quotations extracted from market.
At the end of 2016, the Bank disclosed the following assets and liabilities into fair value levels:
Level 1 - The government bonds amounting to RON 1,213 million, corporate bonds amounting
to RON 30.24 million and equity instruments amounting to RON 8.15 million.
Level 2- derivatives assets and liabilities
Level 3 – Equities classified as Available for Sale securities.
The change in the carrying amount of Available for Sale equity securities during the year was
due to purchases, as depicted in note 15.
Derivative financial instruments: The Bank measures fair value for derivative financial assets
using observable prices or model inputs available in the market.

The table below sets out the carrying amounts and fair values of the Bank’s financial assets and
financial liabilities not measured at fair value:
31-Dec-2016

Loans and Other Total

Advances to Amortized carrying Fair value
customers cost amount

Financial Assets

Loans and advances to customers Level 3 10,335,770 - 10,335,770 10,449,783

Total financial assets 10,335,770 - 10,335,770 10,449,783

Financial Liabilities
Due to banks Level 3 - 4,472,042 4,472,042 4,476,869
Due to customers Level 3 - 7,918,486 7,918,486 7,916,456
Other borrowed funds Level 3 - 6,076 6,076 5,986
Subordinated loan Level 3 - 705,540 705,540 699,607

Total financial liabilities - 13,102,144 13,102,144 13,098,918

F-283
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

6. Fair value disclosures (continued)

31-Dec-2015

Loans and Other Total

Advances to Amortized carrying Fair value
customers cost amount

Financial Assets

Loans and advances to customers Level 3 10,395,455 - 10,395,455 10,455,797

Total financial assets 10,395,455 - 10,395,455 10,455,797

Financial Liabilities
Due to banks Level 3 - 6,499,462 6,499,462 6,487,569
Due to customers Level 3 - 6,294,959 6,294,959 6,292,782
Other borrowed funds Level 3 - 7,429 7,429 7,284
Subordinated loan Level 3 - 702,976 702,976 678,865

Total financial liabilities - 13,504,826 13,504,826 13,466,500

The following summarizes the major methods and assumptions used in estimating the fair
values of financial instruments reflected in the table above that are not carried at fair value and
which belong to level 3 within fair value hierarchy.
Loans and advances to customers: These are net of provisions for impairment losses. The
estimated fair value of loans and advances, with fixed and variable interest rate and with
changes in credit status since inception, is based on discounted cash flows method.
Deposits from banks and customers: The estimated fair value is based on discounted cash
flows method for term deposits. The fair value of saving and demand deposits was considered
the same as the accounting value.
Customer loans and deposits are categorized as financial instruments level 3 since there are
instruments that are not based on observable market data and the Discounted Cash Flows
(DCF) method is used in order to determine their fair value.
The discounted cash flow (DCF) analysis is a method of valuing an asset or a liability using the
concepts of the time value of money. All future cash flows are estimated and discounted to give
their present values (PVs) - the sum of all future cash flows, both incoming and outgoing, is the
net present value (NPV), which is taken as the value or price of the cash flows.
The components of the present value measurement include the following:
 An estimate of future cash flows up to the maturity for the customer loans and deposits,
using the respective implied forward yield curve;
 Estimations of the amount and timing of the cash flows of the products without
contractual maturity and reprising profile (i.e. revolving loans, sight deposits, current
accounts) based on conventions
 The time value of money, represented by the market rate that coincides with maturity
dates of the cash flows;
 The price for bearing the uncertainty inherent in the cash flows (liquidity risk premium);
 The credit risk (Expected loss) associated to the creditworthiness of the loans customer,
taking into consideration the Probability of Default (PD) and the Loss Given Default
(LGD).

F-284
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

6. Fair value disclosures (continued)

For Customer loans, the discount rate components are analyzed: Market Rate + Liquidity
Premium + Expected loss.
For Customer Deposits, the discount rate components are analyzed: Market Rate + Liquidity
Premium.
Loans from banks and financial institutions: The fair value of loans from banks is based on the
present value of future cash flows, discounted at interest rates available at the balance sheet
date to the Bank for new debt with similar remaining maturity as no quoted market price is
available.

7. Net Interest Income

Year ended Year ended
31 December 2016 31 December 2015

Interest income
Current account and sight deposits with the National Bank
1,396 2,492
of Romania
Loans and placements to banks 11,917 2,492
Loans and advances to customers including unwinding
447,023 480,161
effect
Available for sale securities 14,265 45,924
Other interest receivable 39 -

Total interest income 474,640 531,069

Interest expense
Deposits and loans from banks (6,624) (22,192)
Sight and term deposits from customers (73,287) (102,919)
Subordinated debt (13,423) (15,019)

Total interest expense (93,334) (140,130))

Interest income related effect of derivative transactions 9,999 25,219

Interest expense related effect of derivative transactions 4,574 (2,527)

Total interest related effect of derivative transactions 14,573 22,692

Total interest income 484,639 556,288

Total interest expense (88,760) (142,657)

Net Interest Income 395,879 413,631

In 2016 the interest income on impaired loans and advances to customers was RON 20,051
(2015: RON 39,879).

F-285
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

8. Net fee and commission income

Year ended Year ended
31 December 31 December
2016 2015

Lending commissions 1,527 1,897

Letters of guarantee commissions 5,117 6,766
Trade finance fees 249 407
Commissions from transactions with cash 20,111 21,859
Transfers of funds fees 34,623 35,623
Other fees and commissions 30,199 22,862
Fee and commission income 91,826 89,414

Inter-bank transactions fees and commissions (15,353) (18,056)

Other (19) (297)
Fee and commission expense (15,372) (18,353)

Net fee and commission income 76,454 71,061

Position “other fees and commissions” from the table above includes fees and commissions
from bancassurance activity.
The Bank has assurance contracts signed with Garanta Insurance SA, starting 2011, for selling
insurance products attached to bank products. Starting from September 2013, Alpha Bank
Romania SA has extended bank assurance activity through a partnership with GROUPAMA
ASIGURARI S.A. and a partnership with BNP CARDIF in 2014.
In November 2015 the Bank signed a bank assurance partnership with AEGON S.A. for a new
insurance product - Life Insurance with guaranteed interest rate, a complementary optional
insurance product linked to the current accounts, while in October 2016 the contract with AXA
Life Insurance SA, started in 2011, was no longer extended considering their plans to exit the
Romanian market.

9. Gains less losses on financial transactions

Year ended Year ended
31 December 2016 31 December 2015

Gain from dealing in foreign exchange, net 35,726 26,501

Gain/(loss) from foreign exchange derivatives, net 15,194 (969)
Gain/ (loss) from the revaluation of foreign currency
(17,763) (7,112)
assets and liabilities, net
Gain/ (loss) on transactions with financial assets
1,004 (45,800)
available for sale (i)
Gains from sales of shares available for sale (ii) 54,191 -
Other Gain on financial assets (iii) 6,532 3,083

Net gain on transactions 94,884 (24,297)

i) For 2016, the amount of RON 1 million representing gain on transactions with financial assets
available for sale includes RON 0.6 million representing gain from recycling of available for sale
revaluation reserve for bonds (2015: RON 394 million realised loss from recycling) and RON 0.4
million representing realised gain from sales of bonds available for sale (2015: RON 348 million
realised gains from sales).

F-286
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

9. Gains less losses on financial transactions (continued)

ii) In 2016, the Bank sold the shares owned in BC VICTORIABANK SA Chisinau (3,125,000 shares with
carrying amount of RON 3.93 million as at 31.12.2015, please see note 15) from which the Bank
recognized in gains less losses on financial transactions the amount of RON 21.9 million.
In addition, on June 21, 2016, Visa Inc. completed the acquisition of Visa Europe. According to the
agreement, on the date of completion of the transaction, Visa Inc. purchased the shares held from
member firms of Visa Europe. The price for this acquisition consists of:
 The payment of a total amount of RON 23 million upon completion of the transaction.
 The distribution of preferred shares, classified as available for sale portfolio and recognized by the
Bank at fair value of RON 7.3 million
 The payment of an amount of RON 2 million on the third anniversary of the closing of the
transaction plus interest.
The transaction price was calculated based on Visa Europe's net revenue contributed by each
member for a specific period of time.
Therefore, within the year, the Bank recognized in gains less losses on financial transactions from
VISA shares the amount of RON 32.3 million.

iii) During 2016, the Bank recorded from transfers and sales of loans and advances to customers a net
gain of RON 6.5 million. From similar operations in 2015 the Bank obtained a net gain amounting to
RON 3.1 million.

10. Net impairment loss on financial assets

Year ended Year ended
31 December 2016 31 December 2015

Net impairment losses from loans to customers

(please see note 16 c.) (91,504) (112,942)
Recoveries from written-off loans 5,675 1,570

Total (85,829) (111,372)

11. Staff costs

Year ended Year ended

31 December 2016 31 December 2015

Salaries (116,795) (119,299)

Social security contributions (27,202) (27,813)
Other staff costs (5,735) (5,915)

Total (149,732) (153,027)

The social security contributions represent contributions to the Romanian State defined pension
scheme. The Bank does not have any further obligations to its employees regarding post-
employment benefits or termination benefits.

F-287
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

12. Other operating expenses

Year ended Year ended
31 December 2016 31 December 2015

Rent (42,676) (46,271)

Insurance expenses (5,105) (5,527)
Various taxes (22,970) (26,300)
Stationery (3,545) (3,398)
Advertising (10,628) (10,482)
Telecommunications (7,484) (8,269)
Information Technology (10,232) (9,870)
Electricity supplies costs (5,835) (6,659)
Professional fees (22,105) (20,462)
Contributions to deposit guarantees and national resolution
(17,478) (27,158)
schemes
Impairment losses and write offs of fixed assets (please
(1,964) (5,506)
see note 17)
Provisions for litigations, commitments, contingencies
(6,449) (582)
(please see note 24)
Other expenses (47,879) (44,493)

Total (204,350) (214,977)

13. Cash and balances with National Bank of Romania

Year ended Year ended
31 December 2016 31 December 2015

Cash in hand 143,762 151,113

Cash in ATMs 38,123 41,860
Current account at National Bank of Romania (NBR) 2,263,731 1,686,347

Total 2,445,616 1,879,320

The balances per currency of the current accounts held with the NBR as at 31 December 2016
were: RON 534,382 thousand (31 December 2015: RON 563,828 thousand) and EUR 380,822
thousand (31 December 2015: EUR 248,098 thousands).The balance of the current account is
used for the mandatory reserves purposes and can vary on a daily basis. The mandatory
reserve can be used by the Bank for day to day activities providing the average balance for the
month is maintained within required formula.

At 31 December 2016 the minimum mandatory reserves rates established by the National Bank
of Romania for raised funds with maturity lower than 2 years and for raised funds with residual
maturity greater than 2 years which foresee contractual clauses regarding reimbursements,
withdrawals and anticipated transfers, are as follows: 8% for raised funds denominated in RON
and 10% for raised funds denominated in foreign currency (31 December 2015: 8% for raised
funds denominated in RON and 14% for raised funds denominated in foreign currency).
The mandatory reserve is denominated in EUR for the foreign currency deposits and loans and
in RON for domestic currency deposits. The interest rate paid by the National Bank of Romania
during 2016 decreased from 0.14% to 0.10% for reserves held in RON, from 0.09% to 0.05%
for reserves held in EUR and from 0.07 % to 0.06% for reserves held in USD.

F-288
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

14. Due from banks

31 December 31 December
2016 2015

Current accounts with other banks 52,325 714,346

Sight deposits with other banks 50,001 285,057
Term deposits with other banks 413,332 236,089
Collateral deposits with banks 21,837 22,913

Total due from banks 537,495 1,258,405

Current accounts, sight and term deposits with banks are unencumbered and at the immediate
disposal of the Bank as at 31 December 2016 and 31 December 2015.

15. Financial investments

Available-for-sale securities and Investments in associates

31 December 31 December
2016 2015

Government bonds and treasury bills (i) 1,212,962 1,107,549

Corporate bonds (ii) 30,240 209,533
Investment in equity securities (iii) 9,354 5,209
Investments in associates (iv) 1,182 -

Total 1,253,738 1,322,291

i. As at 31 December 2016, the Bank held government bonds with coupon and treasury bills
with discount, in RON, issued by the Romanian Ministry of Public Finance. Government
portfolio in RON carries coupon rates ranging from 0.41% to 6.75% as at 31 December
2016 (31 December 2015: 0.63% to 6.00%).
ii. As at 31 December 2016, the Bank held corporate bonds in EUR issued by international
financial institutions and companies, acquired from Alpha Bank A.E, in amount of RON 30.2
million (31 December 2015: RON 209.5 million) with variable interest rates of 0.54% (31
December 2015: 0.94% and fixed interest rate (coupon, not EIR) from 0% to 4.50%). The
weighted average yield for government and corporate bonds at the end of 31 December
2016 was 2.16% (31 December 2015: 3.30%). As at 31 December 2016 the Bank held
government bonds issued by Romanian Ministry of Finance amounting to RON 1.5 million
(nominal value) as pledge for undrawn guarantee letters issued to another Romanian Bank
(31 December 2015: RON 1.4 million and RON 4.9 million pledge as a collateral deposit).
The rest of government and corporate bonds are unencumbered and at the immediate
disposal of the Bank.
iii. Also included in financial assets – available for sale are equity investments in shares of
Alpha Bank Group companies and other companies.
iv. Investments in associates – starting 2016 the Bank has investments in associates (please
see note 2.f)

The movement and the breakdown of the investment equity securities and investments in
associates as at 31 December 2016 were as follows:
31 December 2016 31 December 2015

As at 1 January 5,209 5,093

Additions - investments in associates 1,125 -
Additions - investment equity securities 8,151 116
Disposals (3,949) -
At the end of period 10,536 5,209

F-289
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

15. Financial investments (continued)

Available-for-sale securities and Investments in associates (continued)
Country of Ownership interest %
Investment
incorporation 31 December 2016 31 December 2015

SSIF Alpha Finance Romania S.A. Romania 26.68% 1.00%

BC Victoriabank S.A. Chişinău Moldova - 12.50%
Biroul de Credite S.A. Romania 3.85% 3.85%
Societatea de Transfer de Fonduri si Decontari Romania
2.98% 2.98%
TransFonD S.A.
Casa de Compensare Bucuresti S.A. Romania 1.71% 1.71%
Alpha Leasing Romania IFN S.A. Romania 1.00% 1.00%
VISA Europe Limited Great Britain - less than 1%
VISA Inc. United States of
less than 1% -
America
SWIFT SCRL Belgium less than 1% less than 1%
Bursa Romana de Marfuri S.A. Romania - less than 1%

With the exception of Visa Inc, all investments are stated at cost and none of them is listed. The
investment in Visa Inc in 2016 resulted from acquisition of Visa Europe by Visa Inc.

The balance of available for sale investments reserve (unrealized loss after taxation) as of 31
December 2016 was RON 0.9 million (gross RON 1.1 million, tax RON 0.2 million), while as of
31 December 2015 the net reserve was RON 5.3 million (unrealized gain):

31 December 2016 31 December 2015

Revaluation reserve on Available for sale assets
Balance at 01 January 5,295 (126,799)

Net gains/(losses) from fair value changes (6,812) (236,695)

Net amounts transferred to profit or loss (602) 393,950

Deferred tax 1,186 (25,161)

Balance at 31 December (933) 5,295

16. Loans and advances to customers

31 December 31 December
2016 2015
Corporate 5,264,085 5,611,077
Small and medium enterprises (SMEs) 520,529 458,929
Small business loans (SBL) 2,408 2,982
Individuals 5,615,086 5,544,041
- Consumer loans 1,007,946 1,120,404
- Housing loans 4,510,174 4,324,212
- Credit Cards 96,966 99,425
Total loans, gross 11,402,108 11,617,029

Allowance for impairment losses (1,066,338) (1,221,574)

Total loans, net 10,335,770 10,395,455

Loans can be repaid before their scheduled maturity. In the event of repayment some loan
categories are subject to an early reimbursement commission.

F-290
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

16. Loans and advances to customers (continued)

(a) Analysis by type of customer
31 December 31 December
2016 2015
Individuals
- in RON 1,984,045 1,472,540
- in foreign currencies 3,631,041 4,071,501
Legal entities
- in RON 1,677,091 1,455,997
- in foreign currencies 4,109,931 4,616,991

Total loans, gross 11,402,108 11,617,029

Allowance for impairment losses (1,066,338) (1,221,574)

Total loans, net 10,335,770 10,395,455

(b) Analysis by industry sector

31 December 2016 31 December 2015
RON’000 % RON’000 %

Individuals 5,615,086 49.25% 5,544,041 47.72%

Construction 2,935,205 25.74% 2,955,098 25.44%
Other 1,182,376 10.38% 1,390,746 11.97%
Trade 922,389 8.09% 935,225 8.05%
Manufacturing 496,512 4.35% 478,526 4.12%
Tourism 172,296 1.51% 174,247 1.50%
Leasing - 0.00% 18,100 0.16%
Factoring 26,444 0.23% 60,177 0.52%
Public sector 51,800 0.45% 60,869 0.52%

Total loans, gross 11,402,108 100% 11,617,029 100%

The Other Industries category contains the followings: agriculture, mining, energy and utilities,
IT, media and communications, shipping, transportation, services.

F-291
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

16. Loans and advances to customers (continued)

(c) Allowances for impairment losses – loans and advances to customers

During 2016 the Bank has written off loans and advances to customers with gross exposure RON 224 million (2015: RON 201.3 million) and
corresponding allowance for loan losses.

The movement in allowance for impairment losses is analyzed as follows:

CREDIT CORPORATE
MORTGAGES CONSUMER CARDS LOANS TOTAL LOANS

Balance at 1/1/2015 137,776 253,049 16,955 978,470 1,386,250

Net impairment loss for the period (note 10) 9,190 4,962 578 98,212 112,942
Effect of correction of interest revenue on
849 2,719 1 20,651 24,220
impaired loans
Translation differences 1,430 2,237 (422) 7,598 10,843
Disposal/transfer of impaired loans (49) - - (111,302) (111,351)
Bad debts written-off - (6,779) (19) (194,532) (201,330)

Balance at 12/31/2015 149,196 256,188 17,093 799,097 1,221,574

Balance at 1/1/2016 149,196 256,188 17,093 799,097 1,221,574

Net impairment loss for the period (note 10) 32,904 3,393 1,466 53,741 91,504
Effect of correction of interest revenue on
2,124 3,808 - 19,286 25,218
impaired loans
Translation differences 782 409 (1,415) 2,432 2,208
Disposal/transfer of impaired loans - - - (49,722) (49,722)
Bad debts written-off (24,828) (98,570) (658) (100,388) (224,444)

Balance at 12/31/2016 160,178 165,228 16,486 724,446 1,066,338

F-292
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

16. Loans and advances to customers (continued)

(d) Sensitivity Impairment
31 December 2016 31 December 2015
RON ths RON ths
PDs LGDs Total impairment Total impairment
Worse economic environment +5% +8% 1,344,367 1,500,320
Better economic environment -5% -8% 1,026,151 1,173,379

17. Property and equipment and intangible assets

Land and Furniture and EDP Tangible Intangible
Buildings Equipment Other fixed assets fixed assets

COST
1 January 2016 126,632 84,103 38,852 249,587 42,030
Additions 1,163 4,314 1,440 6,917 4,476
Disposals (243) (7) - (250) -
Write-off (4,628) (944) (118) (5,690) -
Reclassification (698) 893 (195) - -
31 December 2016 122,226 88,359 39,979 250,564 46,506

DEPRECIATION
1 January 2016 57,707 49,798 36,071 143,576 37,682
Depreciation charge 5,922 6,422 1,941 14,285 1,488
Impairment charge* (626) - - (626) -
Disposals (116) (7) - (123) -
Write-off (2,250) (736) (114) (3,100) -
Reclassification (349) 3,952 (3,603) - -
31 December 2016 60,288 59,429 34,295 154,012 39,170

NET BOOK VALUE

31 December 2016 61,938 28,930 5,684 96,552 7,336
1 January 2016 68,925 34,305 2,781 106,011 4,348

Land and Furniture and EDP Tangible Intangible

Buildings Equipment Other fixed assets fixed assets

COST
1 January 2015 135,156 89,306 40,699 265,161 40,456
Additions 36 4,819 752 5,607 3,541
Disposals - (7) (66) (73) -
Write-off (8,560) (10,396) (2,152) (21,108) (1,967)
Reclassification - 381 (381) - -
31 December 2015 126,632 84,103 38,852 249,587 42,030

DEPRECIATION
1 January 2015 54,258 54,734 35,230 144,222 38,059
Depreciation charge 6,617 5,426 2,986 15,029 1,590
Impairment charge 626 - - 626 -
Disposals - (7) (66) (73) -
Write-off (3,794) (10,355) (2,079) (16,228) (1,967)
Reclassification - - - - -
31 December 2015 57,707 49,798 36,071 143,576 37,682

NET BOOK VALUE

31 December 2015 68,925 34,305 2,781 106,011 4,348
1 January 2015 80,898 34,572 5,469 120,939 2,397

*The release of impairment for 2016 mainly relate to items of closed units in previous period for
which the recoverable amount was determined to be null.

F-293
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

17. Property and equipment and intangible assets (continued)

In 2016 the management decided to close 2 branches while in 2015 17 branches were closed.
Fixed assets written off in 2016, amounting to RON 2.6 million were mainly related to closed
units, relocation or reorganization of some units and as a result of year end stock count,
compared with 2015 when fixed assets amounting to RON 4.9 million were written off mainly
related to closed units.
Intangible assets consist mainly of packaged software. Included within other fixed assets are
motor vehicles, furniture and fittings, household equipment, air conditioning equipment, etc.
As at 31 December 2016, the carrying value of the fixed assets purchased under finance lease
agreements is RON 2,484 thousand (31 December 2015: RON 3,461 thousand).

18. Derivative Financial Instruments

For derivative assets and liabilities held, no hedge accounting is applied, however they are held
for risk management purposes. As at 31 December 2016, the Bank has in balance the following
FX swaps and interest rate swaps (IRS); all transactions are concluded with Alpha Bank AE
(amounts in RON):

31.12.2016
Contractual nominal amount Fair value
Amount sold Amount bought Assets Liabilities
Foreign exchange swaps 869,837,060 872,165,000 3,105,830 2,870,754
Interest rate swaps - 75,440,118 - 1,377,544
Total 869,837,060 947,605,118 3,105,830 4,248,298

As at 31 December 2015, the Bank has in balance the following FX swap and interest rate
swaps (IRS), all transactions are concluded with Alpha Bank AE (amounts in RON).

31.12.2015
Contractual nominal amount Fair value
Amount sold Amount bought Assets Liabilities
Foreign exchange swaps 438,891,128 437,724,137 - 1,256,052
Interest rate swaps - 75,164,347 - 2,512,556
Total 438,891,128 512,888,484 - 3,768,608

19. Other Assets

31 December 31 December
2016 2015
Sundry debtors 9,649 9,999
Prepaid Expenses 3,194 3,276
Income taxes to be received from state authorities 16,581 8,896
Assets recovered by the Bank from customers in case of terminated
12,001 11,107
agreements (please see note 4.b.iii.VII)
Other cash receivable 2,015 -
Other assets 9,407 8,180

Other assets 52,847 41,458

F-294
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

20. Due to banks

31 December 31 December
2016 2015

Sight deposits 100,076 78,650

Term deposits 2,391,112 4,447,123
Collateral deposits for loans to customers 1,980,854 1,973,689

Total due to banks 4,472,042 6,499,462

Funds attracted from other banks represent mainly deposits from Alpha Bank AE (Greece).

31 December 2016 31 December 2015

Deposits from Alpha Shortest Longest Shortest Longest
Bank Greece period/Lowest period/Highest period/Lowest period/Highest
rate rate rate rate

Contractual
2,191 Days 3,622 Days 2,191 Days 3,622 Days
maturity
EUR
Interest rate 2.95% 0% 0.12% 2.95%

21. Due to customers

31 December 31 December
2016 2015

Sight deposits 1,979,005 1,564,056

Term deposits 5,760,817 4,556,893
Collateral deposits 178,300 173,558
Certificates of deposit 364 452

Due to customers 7,918,486 6,294,959

31 December 31 December
2016 2015
Individuals
- in RON 2,270,050 1,870,594
- in foreign currencies 2,611,251 2,060,174

Legal entities
- in RON 2,244,126 1,812,949
- in foreign currencies 775,533 535,925
Total deposits 7,900,960 6,279,642

Accrued interest 17,526 15,317

7,918,486
Total 6,294,959

F-295
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

21. Due to customers (continued)

Deposits can be withdrawn before their maturity, in which case the interest income is computed
based on current account interest rate prevailing at the date of withdrawal.
Interest Term Deposits

Customers CCY. 1 Month 3 Months 6 Months 9 Months 12 Months 24 Months

EUR 0.32% 0.67% 0.92% 0.97% 1.09% 1.19%

Individuals RON 0.76% 1.28% 1.58% 1.63% 1.98% 2.16%
USD 0.30% 0.60% 0.91% 1.02% 1.10% 0.61%

EUR 0.40% 0.63% 0.93% 1.07% 1.25% -

Legal entities RON 0.88% 1.21% 1.49% 1.57% 1.59% -
USD 0.32% 0.61% 0.93% 1.00% 1.18% -

The above table presents the weighted average interest rate for term deposits offered by the
Bank at the end of 2016.

22. Other borrowed funds

Other borrowed funds represent credit facilities from the European Bank for Reconstruction and
Development (“EBRD”) for financing small and medium size municipalities.
On 24 November 2005 the Bank signed a loan agreement with EBRD for financing small and
medium-size municipalities and/or municipally owned or controlled companies, in total amount
of EUR 20 million, maturing in April 2021. The Bank has only drawn EUR 0.3 million and RON
13.75 million from the initial contractual amount of EUR 20 million in 2009. The remaining
available amount has been cancelled under the Agreement’s provisions during 2010. As at 31
December 2016, the Bank has a remaining balance of EUR 0.12 million and RON 5.5 million
from the above drawn amounts.
31 December 2016 31 December 2015

EBRD loans 6,076 7,429

Other borrowed funds 6,076 7,429

23. Subordinated debt

In November 2004, the Bank signed a loan agreement with Alpha Bank AE for a subordinated
loan of EUR 16,000,000 with a seven-year maturity. The subordinated loan was extended and
is to be fully repaid in one installment in November 2019. The interest rate is equal to EURIBOR
3 months plus 2.0%.
In September 2005, the Bank signed a second loan agreement with Alpha Bank AE for a
subordinated loan of EUR 60,000,000 with a seven-year maturity. The subordinated loan was
extended and is to be fully repaid in one installment in September 2019. The interest rate is
equal to EURIBOR 3 months plus 2.0%.
In February 2006, the Bank signed a third loan agreement with Alpha Bank AE for a
subordinated loan of EUR 4,300,000 with a seven-year maturity. The subordinated loan was
extended and is to be fully repaid in one installment in February 2019. The interest rate is equal
to EURIBOR 3 months plus 2.0%.
In November 2006, the Bank signed a fourth loan agreement with Alpha Bank AE for a
subordinated loan of EUR 13,000,000 with a seven-year maturity. The subordinated loan was
extended and is to be fully repaid in one installment in October 2019. The interest rate is equal
to EURIBOR 3 months plus 2.0%.

F-296
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

23. Subordinated debt (continued)

In September 2009, the Bank signed a fifth loan agreement with Alpha Bank AE for a
subordinated loan of EUR 12,000,000 with a seven-year maturity. The subordinated loan was
extended and is to be fully repaid in one installment in September 2019. The interest rate is
equal to EURIBOR 3 months plus 2.0%.
In May 2011, the Bank signed a sixth subordinated loan agreement with Alpha Bank AE of EUR
80,000,000. The Bank has drawn only EUR 50,000,000 by 31 December 2016, under the
contractual provisions. The maturity schedule is based on monthly payments of interest and
does not comprise a final maturity date for the principal. The interest rate set for each monthly
payments of interest is based on EURIBOR 1 month plus 2.5%.
As at 31 December 2016 and 31 December 2015, subordinated debt balance was:
31 December 2016 31 December 2015
Subordinated debt 705,540 702,976
Total 705,540 702,976

24. Provisions

Provisions includes: provisions for litigations, fraud cases and other contingencies amounting to
RON 7.5 million (31 December 2015: RON 7.5 million) and provisions for guarantees, letter of
credit and credit related commitments amounting to RON 11.1 million (31 December 2015: RON
4.6 million) (please see note 28).

The movement in the provisions was as follows:

Balance 1.1.2015 11,577

Changes for the period 1.1. - 31.12.2015

Provisions to cover credit risk relating to off-balance sheet items (1,035)

Provisions for other contingent liabilities 842
Provisions for pending legal cases or issues in progress 775
Foreign exchange differences 30
Balance 31.12.2015 12,189
Changes for the period 1.1. - 31.12.2016

Provisions to cover credit risk relating to off-balance sheet items 6,449

Provisions for other contingent liabilities -
Provisions for pending legal cases or issues in progress -
Foreign exchange differences -
Balance 31.12.2016 18,638

F-297
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

25. Other liabilities

31 December 31 December
2016 2015
Social security liabilities 1,563 2,782
Finance lease payable (i) 253 402
Accrual sales incentive scheme 6,431 7,128
Amounts in transit 10,284 12,838
Other liabilities 37,066 25,114
Other liabilities 55,597 48,264

(i) Finance lease payable is detailed as following:

31 December 31 December
2016 2015
Total minimum finance lease payments
Not later than 1 year 155 160
later than 1 year and not later than 5 years 114 277
269 437

less: Finance charge (16) (35)

Present value of finance lease payments 253 402

Not later than 1 year 146 142

Later than 1 year and not later than 5 years 107 260

26. Taxation

Tax charge
The movements in net tax charge for the period were as follows:
Year ended Year ended
31 December 2016 31 December 2015

Current tax charge 881 -

Deferred tax charge/(release) 6,448 509

Total tax charge/(release) for the period 7,329 509

Deferred tax, net

31 December 31 December
2016 2015
At the beginning of the period (asset)/liability (4,519) (30,189)
Net charge for the period in income statement 6,448 509
Charged directly in equity (i) (1,186) 25,161

Closing balance (asset)/liability, out of which 743 (4,519)

Deferred tax liability 3,906 4,491
Deferred tax asset 3,163 9,010

(i) The amount charged in equity is the movement in the outstanding balance of deferred tax
related to unrealized gain/loss from available-for-sale financial assets.

F-298
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

26. Taxation (continued)

The reconciliation of the tax on the Bank’s profit/(loss) before tax and the theoretical amount
that would arise using the basic tax rate of Romania is as follows:

Year ended Year ended

31 December 31 December
2016 2015

Profit/(loss) before tax 121,888 (26,241)

Tax calculated at a tax rate of 16%
19,502 (4,199)
Increase/(decrease) due to:
- income not subject to tax (4,354) (2,650)
- expenses not deductible for tax purposes 9,103 8,926
- tax losses utilised (11,976) -
- other differences (4,946) (1,568)

Total income tax charge 7,329 509

1st January Recognized in Recognized 31 December

Movements in Deferred tax
2016 profit or loss in Equity 2016
Deferred tax (assets)/liabilities
Loans and advances to
customers (742) (1,032) - (1,774)
Property, plant and equipment 3,482 290 - 3,772
Unrealised gain/(loss) from bonds 1,009 - (1,320) (311)
Unrealised gain/(loss) from other
securities - - 134 134
Deferred tax assets for fiscal
losses (7,127) 7,127 - -
Other temporary differences (1,141) 63 - (1,078)

(4,519) 6,448 (1,186) 743

Recognized
1st January Recognized 31 December
Movements in Deferred tax in profit or
2015 in Equity 2015
loss
Deferred tax (assets)/liabilities
Loans and advances to
customers (905) 163 - (742)
Property, plant and equipment 2,986 496 - 3,482
Unrealised gain/(loss) from bonds (24,152) - 25,161 1,009
Unrealised gain/(loss) from other
securities - - - -
Deferred tax assets for fiscal
losses (7,127) - - (7,127)
Other temporary differences (991) (150) - (1,141)
(30,189) 509 25,161 (4,519)

F-299
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

26. Taxation (continued)

The Bank has not recognized deferred tax on the statutory reserves of RON 141,736 thousand
(31 December 2015: 135,642 thousand), which were set-up in the past under the Romanian
Banking Laws and Regulations as they are non-distributable.
These reserves under the Romanian Fiscal Code are exempt from income taxes and will remain
untaxed until they are used (e.g. transferred to distributable profits, covering losses, etc.). The
Bank has no intention in the direction of decrease or dissolving its activities and based on its
current business plan it is unlikely that the reserves will decrease.
As at 31 December 2016 the Bank recorded a deferred tax asset amounting to RON 3.2 million
(31 December 2015: RON 9 million out of which RON 7.1 million related to the 2012 fiscal loss
to be recovered) out of which RON 2.9 million relates to other temporary differences (31
December 2015: RON 1.9 million) and RON 0.3 relates to unrealised loss from bonds available
for sale. As the Bank recorded profit tax at 31 December 2016, the associated deferred tax
assets for fiscal losses (RON 7.1m) was reversed.
The deferred tax liability recorded as at 31 December 2016 was RON 3.9 million (31 December
2015: RON 4.5 million) out of which RON 3.8 million relates to other temporary differences and
RON 0.1 million relates to unrealised gain from other securities (31 December 2015: RON 1
million relates to unrealised gain from bonds available for sale).
The Bank envisages using the above amounts versus future taxable profit.

27. Share Capital

31 December 31 December
2016 2015

Statutory value as per Constitutive Acts 958,811 958,811

Restatement of share capital in accordance with IAS 29 applied up
24,334 24,334
to 31.12.2003

Total 983,145 983,145

The authorized, issued and fully paid share capital (as per Constitutive Acts) of the Bank as at
31 December 2016 is 8,323,016 shares with a par value of RON 115.2 (31 December 2015:
8,323,016 shares with a par value of RON 115.2).
All issued shares are fully paid.
The Bank’s ownership structure as per statutory accounts as of 31 December 2016 and 31
December 2015 is as follows:

31 December 2016
Shareholder Number of Nominal
shares % Amount

Alpha Bank A.E 8,316,223 99.91838% 958,029

Alpha Bank (Greece) 8,316,223 99.91838% 958,029

Other shareholders (Greek citizens) 6,793 0.08162% 782

Total 8,323,016 100% 958,811

F-300
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

27. Share Capital (continued)

31 December 2015
Shareholder Number of Nominal
shares % Amount

Alpha Bank A.E 8,316,223 99.91838% 958,029

Alpha Bank (Greece) 8,316,223 99.91838% 958,029

Other shareholders (Greek citizens) 6,793 0.08162% 782

Total 8,323,016 100% 958,811

The ultimate shareholder of the Bank is Alpha Bank A.E. (“Alpha Bank Greece”), listed on the
Athens Stock Exchange and also in Global Depository Receipt (GDR), on the London Stock
Exchange, with no majority shareholder.

28. Commitments and contingencies

Guarantees and letters of credit
The Bank issues guarantees and letters of credit on behalf of its customers. The primary
purpose of these instruments is to ensure that funds are available to a customer as required.
Guarantees and standby letters of credit, which represent irrevocable commitments 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 are
collateralized and therefore have significantly less credit risk. Cash requirements under
guarantees and standby letters of credit are considerably less than the amount of the
commitment because the Bank does not generally expect the third party to draw funds under
the agreement. The market and credit risk on these instruments, as well as the operating risk is
similar to that arising from granting of loans. In the event of a claim on the Bank as a result of a
customer’s default on a guarantee, these instruments also present liquidity risk to the Bank. All
letters of credit and guarantees issued by the Bank are partially backed-up by collateral
guarantees, such as cash collateral and letters of guarantee from Alpha Bank AE and other
parties.
At 31 December 2016 in connection with guarantees and letters of credit the Bank estimated a
provision amounting to RON 11.1 million (31 December 2015: RON 4.6 million) (please see
notes 12 and 24).

Credit related commitments

Commitments to extend credit represent unused portions of authorizations to extend credit in
the form of loans, 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 estimated by the Bank’s management to be
considerably less than the total unused commitments since most commitments to extend credit
are contingent upon customers maintaining specific credit standards. While there is some credit
risk associated with the remainder of commitments, the risk is assessed by the management as
not significant, since it results from the possibility of unused portions of loan authorizations
being drawn by the customer and, second, from these drawings subsequently not being repaid
as due.
The aggregate amount of outstanding guarantees, letters of credit and commitments to extend
credit at the end of the period were:

F-301
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

28. Commitments and contingencies (continued)

31 December 31 December
2016 2015

Letters of guarantee issued in RON 290,446 207,999

Letters of guarantee issued in foreign currency 214,997 236,476

Total letters of guarantee issued 505,443 444,475

Letters of credit issued 107,956 34,562

Un-drawn credit facilities in RON 540,260 452,572

Un-drawn credit facilities in foreign currency 612,398 627,163

Total un-drawn credit facilities 1,152,658 1,079,735

Of which:
- committed 446,228 365,776
- uncommitted 706,430 713,959

Rent commitments

As at 31 December 2016 the Bank has rent commitments of RON 239,247 thousand (31
December 2015: RON 249,018 thousand).

Future lease payments from operating lease contracts are as follows:

31 December 31 December
2016 2015

Less than one year 42,812 41,183

Between one and five years 86,140 69,353
More than five years 110,295 138,482

TOTAL 239,247 249,018

Litigations

The litigations in which the Bank is defendant as at 31 December 2016 and 31 December 2015
do not involve material claims on the Bank. The litigations provisions booked in this respect
amounts to RON 2,989 thousands (31 December 2015: RON 2,987 thousands).

Other contingencies
The Romanian Government has a number of agencies authorized to audit (control) companies
that operate in Romania. These controls are similar to tax audits in other countries, and can
cover only the tax issues and other legal and regulatory issues of interest to these agencies. It
is possible that the Bank continue to be subject to fiscal controls due to issuance of new tax
rules. Last tax audit covered the period up to 31 December 2006.

F-302
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

29. Capital
The Bank maintains an actively managed capital base to cover risks inherent in the business.
The adequacy of the Bank’s capital is monitored using, among other measures, the rules and
ratios established by the European Banking Authority (“EBA”) and adopted by the National Bank
of Romania (“NBR”) in supervising the Bank.
The regulations require for capital adequacy ratios to be calculated on financial information
prepared in accordance with EU and NBR prudential requirements. To be “sufficiently
capitalized” under NBR regulations a banking institution must have a Common Equity Tier I ratio
of at least 4.5% and 6% for Total Tier I, while the total capital adequacy limit was maintained at
8%.
As at 31 December 2016, capital adequacy ratio based upon the NBR’s regulation is 22.08%
(31 December 2015: 23.58%)
During the past year, the Bank had complied in full with all its externally imposed capital
requirements.

Capital management

The primary objectives of the Bank’s capital management are to ensure that the Bank complies
with externally imposed capital requirement and that the bank maintains strong credit ratings
and healthy capital ratios in order to support its business and to maximize shareholders’ value.

The Bank manages its capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristic of its activities. In order to maintain or adjust the
capital structure, the Bank may adjust the amount of dividend payment to shareholders, return
capital to shareholders or issue capital securities. No changes were made in the objectives,
policies and processes from the previous years.

Regulatory capital

2016 2015
Actual Required Actual Required

Common Equity Tier 1 1,319,485 363,926 1,324,915 362,118

Tier 1 capital 1,319,485 485,235 1,324,915 482,824
Tier 2 capital 465,970 N/A 572,619 N/A

Total capital 1,785,455 646,980 1,897,534 643,765

Risk weighted assets 8,087,246 8,087,246 8,047,063 8,047,063

Common Equity Tier 1 16.32% 4.50% 16.46% 4.50%

Tier 1 capital 16.32% 6.00% 16.46% 6.00%
Total capital ratio 22.08% 8.00% 23.58% 8.00%

Regulatory capital consists of Tier 1 capital, share capital, retained earnings without current
profit for the year, reserves and accumulated other comprehensive income. The other
component of regulatory capital is Tier 2 capital, which includes subordinated debt and
preferences shares.

F-303
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

30. Related party transactions

According to IAS 24, a related party is a person or entity that is related to the entity that is
preparing its separate financial statements.
For the Bank, in particular, related parties are considered:
1. Parent company Alpha Bank and the entities that constitute for the Bank or the
parent company:
 a subsidiary,
 a joint venture,
 an associate
 a Post-Employment Benefit Plan
2. A person and his close family members, if that person is a member of the key
management personnel.
The Bank considers as key management personnel all the members of the Bank’s and the
Parent Company’s Board of Directors and Executive Committee, including close family
members of the above mentioned persons.
During 2016 the Bank entered into a number of banking transactions with Alpha Bank A.E. that
controls 99.92% of the Bank’s ordinary shares, and group companies (Alpha Bank London Ltd,
Alpha Leasing Romania IFN S.A., AGI - RRE Participations 1 S.R.L., AGI - RRE Zeus SRL, AGI
- RRE Poseidon SRL, SC Cordia Residence SRL, Asmita Gardens SRL, Ashtrom Residents
SRL, AGI - BRE Participations 4 E.O.O.D., SSIF Alpha Finance Romania S.A., Alpha Real
Estate Services S.R.L., Alpha Insurance Brokers S.R.L.(Romania), Alpha Bank Cyprus Ltd ,
Alpha Finance A.E.P.E.Y., AGI-RRE Participations 1 L.T.D., AGI - RRE Poseidon Ltd, S.C.
Romfelt Real Estate S.A., AGI - RRE Athena SRL, AGI - RRE Hera SRL, AGI - RRE Artemis
Ltd, SC Carmel Residential SRL, AGI-RRE Venus SRL, AGI-RRE Cleopatra SRL, AGI-RRE
Hermes SRL, Cubic Center Development S.A., Alpha Supporting Services A.E, Alpha Asset
Management A.E.D.A.K, Alpha Αstika Αkinita A.E.) in the normal course of business. These
transactions were carried out on commercial terms and conditions and at market rate.
These include loans, deposits and foreign currency transactions. The volumes of related party
transactions, outstanding balances at the period/year-end, and relating expense and income for
the period are as follows:

F-304
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

30. Related party transactions (continued)

Directors Parent Other

31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec
2016 2015 2016 2015 2016 2015
Assets
Due from other banks - - 369,581 249,373 88 1,760
Loans and advances to
923 983 - - 251,691 254,196
customers, net
Derivative held for trading - - 3,106 - - -
Available-for-sale securities
and Investments in - - - - 1,259 134
associates
Other assets - - 331 227 14 11

Total assets 923 983 373,018 249,600 253,052 256,101

Liabilities
Due to banks - - 4,471,152 6,499,198 127 158
Due to customers 5,899 6,312 - - 59,246 23,820
Subordinated loan - - 705,540 702,976 - -
Derivative held for trading - - 4,248 3,769 - -
Other liabilities - - - - 10,901 5,659

Total liabilities 5,899 6,312 5,180,940 7,205,943 70,274 29,637

Interest income 24 30 21,942 27,323 4,283 8,866

Interest expense 58 115 12,380 36,150 85 170
Net commission income 11 14 1,029 859 177 530
Other operating income 3 4 30 - 637 615
Other operating expenses 18 23 - 7 11,191 10,422

Guarantees in favor of third

- - 56,611 57,332 72,754 385
parties
Guarantees received - - 103,125 89,410 72,370 385

Undrawn credit facilities 278 259 726,576 633,430 136,983 124,572

The “due to banks” position above includes collateral deposits received from Alpha Bank A.E. in
amount of RON 1,980,854 thousand (31 December 2015: RON 1,973,613 thousand).

Transactions with key management personnel

Director’s remunerations for the year period ended 31 December 2016 amounted to RON 6,055
thousand (31 December 2015: RON 5,817 thousand).
Transferred loans receivables
During 2016 there have been no transfer transactions with related parties, involving loans
receivables.
In 2015 the Bank transferred loans receivables to Alpha Bank A.E. London Branch with a net
exposure of RON 329 million (EUR 72.5 million) for a price of RON 329 million (EUR 72.5
million) and received loans receivables from Alpha Bank A.E. London Branch with a book value
of RON 330 million (EUR 72.9 million) for a price of RON 330 million (EUR 72.9 million).

F-305
ALPHA BANK ROMANIA SA
Notes to the Separate Financial Statements
for the year ended 31 December 2016
(all amounts are expressed in RON thousand (“RON ’000”), unless otherwise stated)

31. Auditors’ fees

During 2016, the total fees of legal auditors of the Bank are analyzed below:

31 December 31 December
2016 2015

Statutory accounts audit services 313 313

Audit related services 56 -
Tax consultancy and compliance 134 10
Other non-audit services (consultancy etc.) 1 70

Total 504 393

32. Cash and cash equivalents

31 December 31 December
2016 2015

Due from banks 521,355 1,241,210

Cash and balances with the National Bank of Romania 2,445,616 1,879,320

Total 2,966,971 3,120,530

33. Subsequent events

On 20.03.2017, the Court rejected the appeal filled by the Bank against NACP before 31
December 2016, being maintained the decision of first Court. The lawsuit had as object abusive
clauses included by the Bank in credit contracts concluded with individuals secured with real
guarantees. According with the decision, the Court has rendered that the clauses assessed
were partially abusive and obliged the Bank to eliminate similar clauses from all contracts
concluded with individuals secured with real guarantees; these clauses are mainly related to the
mechanism revision of interest rate, mechanism revision of risk commission, as well as
financing of the administration commission by the Bank. Commissions above mentioned have
not qualified as abusive clauses, being further in force in relation with counterparties. Also, the
Court decision does not compel to the Bank to pay back to the clients any amounts related to
abusive clauses identified. Nevertheless, based on this Court decision, the individuals could sue
the Bank in the future and specifically request the potential amounts paid to the Bank according
with these clauses, qualified as abusive.
Currently the Bank is in process of analyzing the future possible outflows related to this court
decision and started the process of revision of contracts by elimination of these clauses,
following further to notify clients in this regard. However, the amount of the future possible
outflows is not expected to be material.

F-306
 ISSUER
Alpha Bank Romania S.A.
237 B Calea Dorobantilor, 1st District
010566 Bucharest
Romania

ARRANGER AND DEALER

Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London
E14 4BB

PRINCIPAL PAYING AGENT AND SECURITY TRUSTEE

ACCOUNT BANK BNY Mellon Corporate
The Bank of New York Mellon, London Trustee Services Limited
Branch One Canada Square
One Canada Square London E14 5AL
London E14 5AL

TRANSFER AGENT REGISTRAR

The Bank of New York Mellon SA/NV, The Bank of New York Mellon SA/NV,
Luxembourg Branch Luxembourg Branch
Vertigo Building – Polaris Vertigo Building – Polaris
2-4 rue Eugène Ruppert 2-4 rue Eugène Ruppert
L-2453 Luxembourg L-2453 Luxembourg

LEGAL ADVISERS

To the Arranger, the Covered Bondholders To the Arranger, the Covered Bondholders
Representative and the Dealer as to English law Representative and the Dealer as to Romanian
Allen & Overy LLP law
One Bishops Square Radu Tărăcilă Pădurari Retevoescu SCA
London E1 6AD Charles de Gaulle Plaza, 5th floor
15 Charles de Gaulle Square
011857 Bucharest 1
Romania

To the Issuer as to English law To the Issuer as to Romanian law

Clifford Chance LLP Clifford Chance Badea SPRL
10 Upper Bank Street 28-30 Academiei Street
London E14 5JJ 010016 Bucharest 1
Romania
 INDEPENDENT AUDITORS OF THE ISSUER
Deloitte Audit S.R.L.
4-8 Sos. Nicolae Titulescu
East Entrance, 2nd Floor – Deloitte area and 3rd Floor
011141 Bucharest
Romania

LUXEMBOURG LISTING AGENT

The Bank of New York Mellon SA/NV, Luxembourg Branch
Vertigo Building – Polaris
2-4 rue Eugène Ruppert
L-2453
Luxembourg

AND

BUCHAREST LISTING AGENT

Alpha Finance Romania S.A.
237 B Calea Dorobantilor, 2nd floor, 1st District
010566 Bucharest
Romania