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1 Financial Instruments A summary of IFRS 9 and its effects March 2017. IFRS 9 Financial Instruments Roadmap nancial assets Debt (including hybrid contracts) Derivatives Equity (at instrument level). Pass Fail Fail Fail Business model' test (at an aggregate level) Held for trading? No Hold-to-collect BM with objective that results in Neither (1) nor Yes contractual cash (2). Conditional fair value option (FVO) FVOCI option Overview of elected? elected ? No No No Yes IFRS 9 Financial Amortised FVOCI FVTPL FVOCI. cost Instruments (with recycling (no recycling).)

2 Financial asset classification based on business model and Impairment model Changes in contractual cash flows test Financial liability accounting credit risk largely unchanged Stage 1 Stage 2 Stage 3. Impairment model amended from incurred to expected credit losses Lifetime ECL Assessing Hedge accounting aligned to how increases the entity manages the risks in credit risk Loss allowance (credit losses that updated at each result from default Low' credit reporting date events that are risk equivalent possible within the to investment Use grade'. next 12-months) change in 12-month risk as approximation Lifetime ECL for change in criterion initial recognition lifetime risk (whether on an individual or collective basis) 30 days Credit-impaired past due backstop'.

3 Assessment Interest Effective Interest EIR on gross carrying EIR on amortised cost on a collective revenue Rate (EIR) on gross amount (gross carrying amount basis or at recognised carrying amount less loss allowance) counterparty level Set transfer threshold by determining maximum initial credit risk Change in credit risk since initial recognition Improvement Deterioration Businessmodel Business modeltest test Performance Performance evaluation evaluation & &. Change Change in in circumstances circumstances Relevant Relevant information information reporting reporting Risks Risks & risk & risk management management Remuneration Remuneration Residualcategory Residual category versuspositive versus positive Items Items managed managed together together Unit Unit of of account account Portfolio Portfolio segmentation segmentation Business Business Collection Collection of cash of cash model model assessment Type Type of of objective objective Relevance Relevance of sales of sales assessment (solelypayments)

4 (solely paymentsofofprincipal principaland andinterest). interest). Contractual Contractual Undiscounted Undiscounted undiscounted undiscounted Compare Compare thethe benchmark benchmark SPPI. SPPI Yes Yes Disregard Disregard dedeminimis minimisoror non-genuine? non-genuine? NoNo Yes Yes IsIsthe thetime timevalue valueelement ofof element the interest the rate interest rate Time value Time value NoNo component component NoNo different from different from Other benchmark? benchmark? Othercomponents componentsofof interest consistent interest with consistent basic with basic lending-type lending-typereturn?

5 Return? NoNo Is Is thethe interest interest rate regulated and Key terms and abbreviations IsIsthere therea aprepayment prepaymentfeature atat feature par? par? rate regulated and exception exception can bebe can Yes Yes Yes Yes Yes Yes applied? applied? FV: Fair value NoNo FVOCI: Fair value through other comprehensive income recognition? FVTPL: Fair value through profit or loss recognition? SPPI: Soley payments of principal and interest Yes FailFail EIR: Effective interest rate Pass Pass Yes ECL: Expected credit loss Background What you need to know The International Accounting Standards Board (IASB or The new standard contains substantial changes from Board) published the final version of IFRS 9 Financial the current Financial Instruments standard (IAS 39) with Instruments (IFRS 9) in July 2014.

6 This document regards to the classification, measurement, impairment provides a brief overview of IFRS 9, with an emphasis and hedge accounting requirements which will impact on the major changes from the current standard IAS 39 many entities across various industries. Financial Instruments : Recognition and Measurement (IAS 39). There are changes to the three main sections of IFRS 9: IFRS 9 is effective for annual periods beginning 1. Classification and measurement The new on or after 1 January 2018 and shall be applied classification requirements are based on both the retrospectively (with a few exceptions).

7 However, the entity's business model for managing the Financial Standard is available for early application. In addition, assets and the contractual cash flow characteristics the new requirements for presenting fair value changes of a Financial asset. The more principles-based due to an entity's own credit risk can be early applied in approach of IFRS 9 requires the careful use of isolation without adopting the remaining requirements judgment in its application. of the standard 2. Impairment - The IASB has sought to address a key concern that arose as a result of the Financial crisis, that the incurred loss model in IAS 39 contributed to the delayed recognition of credit losses.

8 As such, it has introduced a forward-looking expected credit loss model. 3. Hedge accounting The aim of the new hedge accounting model is to provide useful information about risk management activities that an entity undertakes using Financial Instruments , with the effect that Financial reporting will reflect more accurately how an entity manages its risk and the extent to which hedging mitigates those risks. IFRS 9 is effective for annual periods beginning on or after 1 January 2018 and 1 Financial Instruments | A summary of IFRS 9 and its effects shall be applied retrospectively (with a few exceptions).

9 Impact of adoption of IFRS 9. Retail and consumer products High Retail banking Level of impact on industry Other non- nancial institutions Investment banking Asset Management Insurance Low High Effort to comply Financial Instruments | A summary of IFRS 9 and its effects 2. Key principles of IFRS 9. 1. Classification and measurement of Financial assets nancial assets Debt (including hybrid contracts) Derivatives Equity (at instrument level). Pass Fail Fail Fail Business model' test (at an aggregate level) Held for trading? No Hold-to-collect BM with objective that results in Neither (1) nor Yes contractual cash (2).

10 Conditional fair value option (FVO) FVOCI option elected? elected ? No No No Yes Amortised FVOCI FVOCI. FVTPL. cost (with recycling (no recycling). Classification determines how Financial assets are Financial assets are classified in their entirety rather Impairment categorised and measured in the model Financial statements. Changes than being subject to complex bifurcation in requirements. Requirements for classification and measurement are thus the foundation of the accounting for Financial credit risk There is no separation of embedded derivatives from Financial assets under IFRS 9.)