Consolidated Financial Statements 2016

Consolidated Financial Statements 2016

of the Volksbanken Raiffeisenbanken Cooperative Financial Network

Income statement for the period January 1 to December 31, 2016

	Note no.	2016 € million	2015 € million	Change (percent)
Net interest income	2.	18,826	20,021	–6.0
Interest income and current income and expenses		26,926	28,792	–6.5
Interest expense		–8,100	–8,771	–7.7
Allowances for losses on loans and advances	3.	–522	–74	>100.0
Net fee and commission income	4.	5,963	5,798	2.8
Fee and commission income		7,313	7,292	0.3
Fee and commission expense		–1,350	–1,494	–9.6
Gains and losses on trading activities	5.	1,099	607	81.1
Gains and losses on investments	6.	33	–561	>100.0
Other gains and losses on valuation of financial instruments	7.	–190	363	>100.0
Premiums earned	8.	14,658	14,418	1.7
Gains and losses on investments held by insurance companies and other insurance company gains and losses	9.	3,783	3,013	25.6
Insurance benefit payments	10.	–15,400	–14,664	5.0
Insurance business operating expenses	11.	–1,922	–1,774	8.3
Administrative expenses	12.	–17,944	–17,234	4.1
Other net operating expense/income	13.	–76	–126	–39.7
Profit before taxes		8,308	9,787	–15.1
Income taxes	14.	–2,410	–2,820	–14.5
Net profit		5,898	6,967	–15.3
Attributable to:
Shareholders of the Cooperative Financial Network		5,748	6,761	–15.0
Non-controlling interests		150	206	–27.2

Statement of comprehensive income for the period January 1 to December 31, 2016

	2016 € million	2015 € million	Change (percent)
Net profit	5,898	6,967	–15.3
Other comprehensive income/loss	296	854	–65.3
Items that maybe reclassified to the income statement	313	219	42.9
Gains and losses on available-for-sale financial assets	336	103	>100.0
Gains and losses on cash flow hedges	–5	14	>100.0
Exchange differences on currency translation of foreign operations	17	44	–61.4
Gains and losses on hedges of net investments in foreign operations	–1	–24	–95.8
Share of other comprehensive income/loss of joint ventures and associates accounted for using the equity method	–14	17	>100.0
Income taxes relating to components of other comprehensive income/loss	–20	65	>100.0
Items that will not be reclassified to the income statement	–17	635	>100.0
Gains and losses arising on remeasurements of defined benefit plans	–30	905	>100.0
Share of other comprehensive income/loss of joint ventures and associates accounted for using the equity method	–	–1	100.0
Income taxes relating to components of other comprehensive income/loss	13	–269	>100.0
Total comprehensive income	6,194	7,821	–20.8
Attributable to:
Shareholders of the Cooperative Financial Network	6,027	7,589	–20.6
Non-controlling interests	167	232	–28.0

Balance sheet as at December 31, 2016

Assets	Note no.	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Cash and cash equivalents	15.	25,421	20,536	23.8
Loans and advances to banks	16.	41,433	32,988	25.6
Loans and advances to customers	16.	733,155	700,608	4.6
Allowances for losses on loans and advances	17.	–7,520	–7,631	–1.5
Derivatives used for hedging (positive fair values)	18.	1,549	1,050	47.5
Financial assets held for trading	19.	48,270	53,570	–9.9
Investments	20.	251,965	249,960	0.8
Investments held by insurance companies	21.	89,435	82,766	8.1
Property, plant and equipment, and investment property	22.	11,385	11,168	1.9
Income tax assets	23.	3,480	3,772	–7.7
Other assets	24.	17,207	13,732	25.3
Total assets		1,215,780	1,162,519	4.6

Equity and liabilities	Note no.	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Deposits from banks	25.	103,282	99,505	3.8
Deposits from customers	25.	774,302	739,218	4.7
Debt certificates issued including bonds	26.	71,122	70,248	1.2
Derivatives used for hedging (negative fair values)	18.	12,956	9,453	37.1
Financial liabilities held for trading	27.	44,139	45,397	–2.8
Provisions	28.	13,109	12,563	4.3
Insurance liabilities	29.	84,125	78,929	6.6
Income tax liabilities	23.	1,056	1,263	–16.4
Other liabilities	30.	8,140	7,569	7.5
Subordinated capital	31.	4,980	5,367	–7.2
Equity		98,569	93,007	6.0
Equity of the Cooperative Financial Network		95,886	90,088	6.4
Subscribed capital		11,443	10,922	4.8
Capital reserves		696	784	–11.2
Retained earnings		76,215	70,122	8.7
Revaluation reserve		1,720	1,444	19.1
Cash flow hedge reserve		–10	–7	42.9
Currency translation reserve		74	62	19.4
Unappropriated earnings		5,748	6,761	–15.0
Non-controlling interests		2,683	2,919	–8.1
Total equity and liabilities		1,215,780	1,162,519	4.6

Statement of changes in equity

€ million

	Subscribed capital	Capital reserves	Equity earned by the Cooperative Financial Network	Revaluation reserve	Cash flow hedge reserve	Currency translation reserve	Equity of the Cooperative Financial Network	Non-controlling interests	Total equity
Equity as at Jan. 1, 2015	10,762	754	70,362	1,258	–15	32	83,153	3,348	86,501
Net profit	–	–	6,761	–	–	–	6,761	206	6,967
Other comprehensive income/loss	–	–	627	163	8	30	828	26	854
Total comprehensive income	–	–	7,388	163	8	30	7,589	232	7,821
Issue and repayment of equity	160	30	–	–	–	–	190	–248	–58
Changes in the scope of consolidation	–	–	4	–	–	–	4	1	5
Acquisition/disposal of non-controlling interests	–	–	–304	23	–	–	–281	–351	–632
Dividends paid	–	–	–567	–	–	–	–567	–63	–630
Equity as at Dec. 31, 2015	10,922	784	76,883	1,444	–7	62	90,088	2,919	93,007
Net profit	–	–	5,748	–	–	–	5,748	150	5,898
Other comprehensive income/loss	–	–	–10	279	–3	13	279	17	296
Total comprehensive income	–	–	5,738	279	–3	13	6,027	167	6,194
Issue and repayment of equity	521	–88	–	–	–	–	433	226	659
Changes in the scope of consolidation	–	–	–2	1	–	–	–1	–2	–3
Acquisition/disposal of non-controlling interests	–	–	–127	–4	–	–1	–132	–579	–711
Dividends paid	–	–	–529	–	–	–	–529	–48	–577
Equity as at Dec. 31, 2016	11,443	696	81,963	1,720	–10	74	95,886	2,683	98,569

Breakdown of subscribed capital	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Cooperative shares	11,220	10,673	5.1
Share capital	138	144	–4.2
Capital of silent partners	85	105	–19.0
Total	11,443	10,922	4.8

Statement of cash flows

	2016 € million	2015 € million
Net profit	5,898	6,967
Non-cash items included in net profit and reconciliation to cash flows from operating activities
Depreciation, amortization, impairment losses, and reversal of impairment losses on assets, and other non-cash changes in financial assets and liabilities	–1,747	451
Non-cash changes in provisions	546	–1,102
Changes in insurance liabilities	8,493	7,262
Other non-cash income and expenses	66	366
Gains and losses on the disposal of assets and liabilities	–78	476
Other adjustments (net)	–16,614	–18,213
Subtotal	–3,436	–3,793
Cash changes in assets and liabilities arising from operating activities
Loans and advances to banks and customers	–41,478	–26,402
Other assets from operating activities	–863	350
Derivatives used for hedging (positive and negative fair values)	441	–835
Financial assets and financial liabilities held for trading	5,159	–748
Deposits from banks and customers	39,260	21,475
Debt certificates including bonds	753	3,132
Other liabilities from operating activities	–2,611	–3,145
Interest, dividends and operating lease payments received	27,825	31,997
Interest paid	–8,500	–7,153
Income taxes paid	–1,642	–1,897
Cash flows from operating activities	14,908	12,981
Proceeds from the sale of investments	34,670	6,742
Proceeds from the sale of investments held by insurance companies	20,330	18,764
Payments for acquisitions of investments	–37,296	–8,625
Payments for acquisitions of investments held by insurance companies	–25,613	–23,673

The consolidated statement of cash flows shows the changes in cash and cash equivalents during the financial year. Cash and cash equivalents consist of cash on hand, balances with central banks and other government institutions as well as treasury bills and non-interest bearing treasury notes. Cash and cash equivalents do not include any financial investments with a maturity of more than three months at the date of acquisition. Changes in cash and cash equivalents are broken down into operating, investing and financing activities.

	2016 € million	2015 € million
Net payments for acquisitions of property, plant and equipment, and investment property (excl. assets subject to operating leases)	–1,222	–1,433
Net payments for acquisitions of intangible non-current assets	–73	–15
Changes in the scope of consolidation	21	–13
Cash flows from investing activities	–9,183	–8,253
Proceeds from capital increases by shareholders of the Cooperative Financial Network	433	190
Proceeds from capital increases by non-controlling interests	226	–
Dividends paid to shareholders of the Cooperative Financial Network	–529	–567
Dividends paid to non-controlling interests	–48	–63
Other payments to non-controlling interests	–	–248
Net change in cash and cash equivalents from other financing activities (including subordinated capital)	–922	840
Cash flows from financing activities	–840	152

Cash and cash equivalents as at January 1	20,536	15,656
Cash flows from operating activities	14,908	12,981
Cash flows from investing activities	–9,183	–8,253
Cash flows from financing activities	–840	152
Cash and cash equivalents as at December 31	25,421	20,536

Cash flows from operating activities comprise cash flows mainly arising in connection with the revenue-generating activities of the Cooperative Financial Network or other activities that cannot be classified as investing or financing activities. Cash flows related to the acquisition and sale of non-current assets are allocated to investing activities. Cash flows from financing activities include cash flows arising from transactions with equity owners and from other borrowings to finance business activities.

Notes to the consolidated financial statements

A General information

Explanatory information on the consolidated financial statements

The consolidated financial statements of the Volksbanken Raiffeisenbanken Cooperative Financial Network prepared by the National Association of German Cooperative Banks (BVR) are based on the significant financial reporting principles set out in the annex. The cooperative shares and share capital of the local cooperative banks are held by their members. The local cooperative banks own the share capital of the central institution either directly or through intermediate holding companies. The Cooperative Financial Network does not qualify as a corporate group as defined by the International Financial Reporting Standards (IFRS), the German Commercial Code (HGB) or the German Stock Corporation Act (AktG).

These consolidated financial statements have been prepared for informational purposes and to present the business development and performance of the Cooperative Financial Network, which is treated as a single economic entity in terms of its risks and strategies. In addition, the financial statements were prepared in compliance with the provisions set out in article 113(7)(e) of Regulation (EU) No. 575/2013 of the European Parliament and of the Council of June 26, 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012 (Capital Requirements Regulation – CRR). These consolidated financial statements are not a substitute for analysis of the consolidated entities’ financial statements.

The underlying data presented in these consolidated financial statements is provided by the separate and consolidated financial statements of the entities in the Cooperative Financial Network and also includes data from supplementary surveys of the local cooperative banks. The consolidated financial statements of DZ BANK included in these consolidated financial statements have been prepared on the basis of IFRS as adopted by the European Union.

The financial year corresponds to the calendar year. The consolidated subsidiaries have generally prepared their financial statements on the basis of the financial year ended December 31, 2016. There is one subsidiary (2015: 1 subsidiary) included in the consolidated financial statements with a different reporting date for its annual financial statements. With 42 exceptions (2015: 25 exceptions), the separate financial statements of the entities accounted for using the equity method are prepared using the same balance sheet date as that of the consolidated financial statements.

In the interest of clarity, some items on the face of the balance sheet and the income statement have been aggregated and are explained by additional disclosures.

Information regarding significant financial reporting principles can be found in the annex to the consolidated financial statements.

Scope of consolidation

The consolidated entities included in these consolidated financial statements are 972 primary banks (2015: 1,018), the DZ BANK Group, Münchener Hypothekenbank eG (MHB), the BVR protection scheme, and BVR Institutssicherung GmbH. The consolidated primary banks include Deutsche Apotheker- und Ärztebank eG, the Sparda banks, the PSD banks, and specialized institutions such as BAG Bankaktiengesellschaft. In the previous year as well as until the merger date, the WGZ BANK Group was included in the consolidated financial statements. As a result of the business combination of DZ BANK AG and WGZ BANK AG, the WGZ BANK Group was merged into the DZ BANK Group. This business combination had no impact on the scope of consolidation in the consolidated financial statements.

The primary banks and MHB are the legally independent, horizontally structured parent entities of the Cooperative Financial Network, whereas the other companies and the DZ BANK Group are consolidated as subsidiaries. The cooperative central institution and a total of 476 subsidiaries (2015: 570, together with the WGZ BANK Group) have been consolidated in the DZ BANK Group. Further information on the shareholdings can be found in the list of shareholdings included in the annual report of the DZ BANK Group.

The consolidated financial statements include 22 joint ventures between a consolidated entity and at least one other non-network entity (2015: 24) and 37 associates (2015: 31) over which a consolidated entity has significant influence, which are accounted for using the equity method.

Volksbanken Raiffeisenbanken Cooperative Financial Network

B Selected disclosures of interests in other entities

Investments in subsidaries

Share in the business operations of the Cooperative Financial Network attributable to non-controlling interests

DZ BANK AG Deutsche Zentral-Genossenschaftsbank (DZ BANK) is included in the consolidated financial statements together with its respective subsidiaries as a subgroup. In the prior year, Westdeutsche Genossenschafts-Zentralbank AG (WGZ BANK) was also included in the consolidated financial statements together with its subsidiaries as a subgroup. In the year under review, WGZ BANK was merged with DZ BANK. DZ BANK is focused on its customers and owners, the local cooperative banks, as central institution, commercial bank and holding company. The objective of this focus is to sustainably expand the position of the Cooperative Financial Network as one of the leading bancassurance groups.

The shares of DZ BANK, with its headquarters in Frankfurt/Main, Germany, are held by the primary banks and by MHB, with ownership interests amounting to 94.6 percent (2015: 86.2 percent). Another 6.7 percent of the shares were held by WGZ BANK in the previous year. The remaining shares of 5.4 percent (2015: 7.1 percent) are attributable to shareholders that are not part of the Cooperative Financial Network. The pro-rata share in net profit attributable to non-controlling interests amounts to €150 million (2015: €191 million). The carrying amount of non-controlling interests amounts to €2,683 million (2015: €2,836 million). In the financial year under review, the dividend payment made to non-controlling interests amounts to €48 million (2015: €62 million).

In the prior year, the shares of WGZ BANK, with its headquarters in Düsseldorf, Germany, were held by the primary banks with ownership interests amounting to 98.1 percent. The remaining shares of 1.9 percent were attributable to shareholders that were not part of the Cooperative Financial Network. The pro-rata share in net profit attributable to non-controlling interests amounted to €15 million. The carrying amount of non-controlling interests amounted to €83 million. In the prior year, the dividend payment made to non-controlling interests amounted to €1 million.

Nature and extent of significant limitations

National regulatory requirements, contractual provisions, and provisions of company law restrict the ability of the DZ BANK Group companies included in the consolidated financial statements to transfer assets within the group. Where restrictions can be specifically assigned to individual line items on the balance sheet, the carrying amounts of the assets subject to restrictions on the balance sheet date are shown in the following table:


	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Assets	78,322	74,732	4.8
Loans and advances to customers	3,345	4,174	–19.9
Investments	308	–	–
Investments held by insurance companies	74,665	70,552	5.8
Other assets	4	6	–33.3
Liabilities	126,234	119,148	5.9
Deposits from banks	1,903	1,690	12.6
Deposits from customers	53,771	50,926	5.6
Provisions	915	653	40.1
Insurance liabilities	69,645	65,879	5.7

Nature of the risks associated with interests in consolidated structured entities

Risks arising from interests in consolidated structured entities largely result from loans to fully consolidated funds within the DZ BANK Group, some of which are extended in the form of junior loans.

Interests in joint arrangements and Investments in associates

Nature, extent and financial effects of interests in joint arrangements

The carrying amount of individually immaterial joint ventures accounted for using the equity method totaled €540 million as at the balance sheet date (2015: €564 million).

Aggregated financial information for joint ventures accounted for using the equity method that individually is not material:


	2016 € million	2015 € million	Change (percent)
Share of profit from continuing operations	109	110	–0.9
Share of other comprehensive income/loss	–14	24	>100.0
Share of total comprehensive income	95	134	–29.1

Nature, extent and financial effects of interests in associates

The carrying amount of individually immaterial associates accounted for using the equity method totaled €349 million as at the balance sheet date (2015: €410 million).

Aggregated financial information for associates accounted for using the equity method that individually is not material:


	2016 € million	2015 € million	Change (percent)
Share of profit from continuing operations	18	17	5.9
Share of profit/loss from discontinued operations	–	1	–100.0
Share of other comprehensive income/loss	–	22	–100.0
Share of total comprehensive income	18	40	–55.0

Interests in unconsolidated structured entities

Structured entities are entities that have been designed so that voting rights or similar rights are not the dominant factor in deciding who controls the entity. The Cooperative Financial Network mainly distinguishes between the following types of interests in unconsolidated structured entities, based on their design and the related risks; these entities largely concern companies of the DZ BANK Group:

Interests in investment funds issued by the Cooperative Financial Network
Interests in investment funds not issued by the Cooperative Financial Network
Interests in securitization vehicles
Interests in asset-leasing vehicles

Interests in investment funds issued by the Cooperative Financial Network

The interests in the investment funds issued by the Cooperative Financial Network largely comprise investment funds issued by entities in the Union Investment Group in accordance with the contractual form model without voting rights and, to a lesser extent, those that are structured as a company with a separate legal personality. Furthermore, the DVB Bank Group makes subordinated loans available to fully consolidated funds for the purpose of transport finance. In turn, these funds make subordinated loans or direct equity investments available to unconsolidated entities.

The maximum exposure of the investment funds issued and managed by the Cooperative Financial Network is determined as a gross value, excluding deduction of available collateral, and amounts to €10,628 million as at the reporting date (2015: €10,331 million). These investment fund assets resulted in losses of €22 million (2015: losses of €15 million) as well as income of €1,670 million (2015: €1,636 million).

Interests in investment funds not issued by the Cooperative Financial Network

The interests in the investment funds not issued by the Cooperative Financial Network above all comprise investment funds managed by entities in the Union Investment Group within the scope of their own decision-making powers that have been issued by entities outside the Cooperative Financial Network and parts of such investment funds. Their total volume amounted to €32,059 million (2015: €27,269 million). Moreover, loans to investment funds are extended in order to generate interest income. In addition, there are investment funds issued by entities outside the Cooperative Financial Network in connection with unit-linked life insurance of the R+V Group (R+V) amounting to €7,031 million (2015: €7,351 million) that, however, do not result in a maximum exposure.

The maximum exposure arising of the investment funds not issued by the Cooperative Financial Network is determined as a gross value, excluding deduction of available collateral, and amounts to €2,511 million as at the reporting date (2015: €2,095 million). Income generated from these investment fund assets in the financial year 2016 amounted to €111 million (2015: €108 million).

Interests in securitization vehicles

The interests in securitization vehicles are interests in vehicles where the Cooperative Financial Network involvement goes beyond that of an investor.

The material interests in securitization vehicles comprise the two multi-seller asset-backed commercial paper programs: CORAL and AUTOBAHN. DZ BANK acts as sponsor and program agent for both programs. It is also the program administrator for AUTOBAHN.

The maximum exposure of the interests in securitization vehicles in the Cooperative Financial Network is determined as a gross value, excluding deduction of available collateral, and amounts to €4,380 million as at the reporting date (2015: €3,459 million). Income generated from these interests in the financial year 2016 amounted to €64 million (2015: €84 million).

Interests in asset-leasing vehicles

The interests in asset-leasing vehicles comprise shares in limited partnerships and voting rights, other than the shares in limited partnerships established by VR LEASING for the purpose of real estate leasing (asset-leasing vehicles), in which the asset, and the funding occasionally provided by the DZ BANK Group, are placed.

The actual maximum exposure of the interests in asset-leasing vehicles in the Cooperative Financial Network is determined as a gross value, excluding deduction of available collateral, and amounts to €-12 million (2015: €1 million) as at the reporting date. Interest income and current income and expense generated from these interests in the financial year 2016 amounted to €4 million (2015: €5 million).

C Income statement disclosures

1. Information on operating segments Financial year 2016 € million	Bank	Retail	Real Estate Finance	Insurance	Other/Consolidation	Total
Net interest income	1,623	16,618	1,322	–	–737	18,826
Allowances for losses on loans and advances	–523	–51	45	–	7	–522
Net fee and commission income	603	6,034	–152	–	–522	5,963
Gains and losses on trading activities	851	211	–	–	37	1,099
Gains and losses on investments	77	–94	36	–	14	33
Other gains and losses on valuation of financial instruments	–106	–10	–46	–	–28	–190
Premiums earned	–	–	–	14,658	–	14,658
Gains and losses on investments held by insurance companies and other insurance company gains and losses	–	–	–	3,885	–102	3,783
Insurance benefit payments	–	–	–	–15,400	–	–15,400
Insurance business operating expenses	–	–	–	–2,454	532	–1,922
Administrative expenses	–2,059	–15,276	–754	–	145	–17,944
Other net operating expense/income	–42	–235	41	–8	168	–76
Profit/loss before taxes	424	7,197	492	681	–486	8,308
Cost/income ratio (percent)	68.5	67.8	62.8	–	–	67.0

Financial year 2015 € million	Bank	Retail	Real Estate Finance	Insurance	Other/Consolidation	Total
Net interest income	2,017	17,260	1,593	–	–849	20,021
Allowances for losses on loans and advances	–94	–7	27	–	–	–74
Net fee and commission income	586	5,911	–193	–	–506	5,798
Gains and losses on trading activities	458	189	–19	–	–21	607
Gains and losses on investments	110	–611	–53	–	–7	–561
Other gains and losses on valuation of financial instruments	7	–6	364	–	–2	363
Premiums earned	–	–	–	14,418	–	14,418
Gains and losses on investments held by insurance companies and other insurance company gains and losses	–	–	–	3,132	–119	3,013
Insurance benefit payments	–	–	–	–14,664	–	–14,664
Insurance business operating expenses	–	–	–	–2,287	513	–1,774
Administrative expenses	–1,830	–15,119	–700	–	415	–17,234
Other net operating expense/income	–98	–68	31	26	–17	–126
Profit/loss before taxes	1,156	7,549	1,050	625	–593	9,787
Cost/income ratio (percent)	59.4	66.7	40.6	–	–	63.6

Definition of operating segments

The Volksbanken Raiffeisenbanken Cooperative Financial Network is founded on the underlying principle of decentralization. It is based on the local primary banks, whose business activities are supported by the central institution – DZ BANK – and by specialized service providers within the cooperative sector. These specialized service providers are integrated into the central institution. The main benefit derived by the primary banks from their collaboration with these specialized services providers and the central institution is that they can offer a full range of financial products and services.

The Bank operating segment combines the activities of the Cooperative Financial Network in the corporate customers, institutional customers and capital markets businesses. The operating segment focuses on corporate customers. It essentially comprises DZ BANK, the VR LEASING Group and DVB Bank Group.

The Retail operating segment covers private banking and activities relating to asset management. The segment focuses on retail clients. It mainly includes primary banks as well as the DZ PRIVATBANK, TeamBank AG Nürnberg (TeamBank) and Union Investment Group.

The Real Estate Finance operating segment encompasses the home savings and loan operations, mortgage banking, and real estate business. The entities allocated to this operating segment include Bausparkasse Schwäbisch Hall Group (BSH), Deutsche Genossenschafts-Hypothekenbank AG, WL BANK AG Westfälische Landschaft Bodenkreditbank, and MHB.

Insurance operations are reported under the Insurance operating segment. This operating segment consists solely of R+V.

Other/Consolidation contains the BVR protection scheme as well as BVR Institutssicherung GmbH (BVR-ISG), whose task is to avert impending or existing financial difficulties faced by member institutions by taking preventive action or implementing restructuring measures. This operating segment also includes intersegment consolidation items.

Presentation of the disclosures on operating segments

The information on operating segments presents the interest income generated by the operating segments and the associated interest expenses on a netted basis as net interest income.

Intersegment consolidation

The adjustments to the figure for net interest income resulted largely from the consolidation of dividends paid within the Cooperative Financial Network.

The figure under Other/Consolidation for net fee and commission income relates specifically to the fee and commission business transacted between the primary banks, TeamBank, BSH, and R+V.

The figure under Other/Consolidation for administrative expenses includes the contributions paid to BVR-SE and BVR-ISG by member institutions of the Cooperative Financial Network.

The remaining adjustments are largely attributable to the consolidation of income and expenses.

2. Net interest income	2016 € million	2015 € million	Change (percent)
Interest income and current income and expense	26,926	28,792	–6.5
Interest income from	27,396	29,307	–6.5
Lending and money market business	23,253	24,307	–4.3
of which: Building society operations	1,036	1,031	0.5
Finance leases	150	184	–18.5
Fixed-income securities	3,139	3,646	–13.9
Other assets	–566	–538	5.2
Financial assets with a negative effective interest rate	–74	–19	>100.0
Current income from	1,061	1,267	–16.3
Shares and other variable-yield securities	947	1,023	–7.4
Investments in subsidiaries and equity investments	135	264	–48.9
Operating leases	–21	–20	5.0
Income/loss from using the equity method for	31	48	–35.4
Investments in joint ventures	17	41	–58.5
Investments in associates	14	7	100.0
Income from profit-pooling, profit-transfer and partial profit-transfer agreements	82	81	1.2
Interest expense	–8,100	–8,771	–7.7
Interest expense on	–7,811	–8,506	–8.2
Deposits from banks and customers	–6,258	–6,424	–2.6
of which: building society operations	–959	–820	17.0
Debt certificates issued including bonds	–1,384	–1,887	–26.7
Subordinated capital	–254	–241	5.4
Other liabilities	12	19	–36.8
Financial liabilities with a positive effective interest rate	73	27	>100.0
Other interest expense	–289	–265	9.1
Total	18,826	20,021	–6.0

The interest income from other assets and the interest expense on other liabilities result from gains and losses on the amortization of fair value changes of the hedged items in portfolio hedges of interest-rate risk. Owing to the current low level of interest rates in the money markets and capital markets, there may be a negative effective interest rate for financial assets and a positive effective interest rate for financial liabilities.

3. Allowances for losses on loans and advances	2016 € million	2015 € million	Change (percent)
Additions	–2,337	–2,143	–9.1
Reversals	1,747	1,906	–8.3
Directly recognized impairment losses	–148	–167	–11.4
Recoveries from loans and advances previously impaired	277	318	–12.9
Changes in the provisions for loans and advances as well as in the liabilities from financial guarantee contracts	-54	12	>100.0
Impairment losses on loans and advances available for sale	–7	–	–
Total	–522	–74	>100.0

4. Net fee and commission income	2016 € million	2015 € million	Change (percent)
Fee and commission income	7,313	7,292	0.3
Securities business	3,203	3,278	–2.3
Asset management	332	346	–4.0
Payments processing including card processing	2,481	2,398	3.5
Lending business and trust activities	246	262	–6.1
Financial guarantee contracts and loan commitments	182	181	0.6
Foreign commercial business	125	134	–6.7
Building society operations	11	5	>100.0
Other	733	688	6.5
Fee and commission expense	–1,350	–1,494	–9.6
Securities business	–499	–491	–8.6
Asset management	–104	–116	–10.3
Payments processing including card processing	–285	–284	0.4
Lending business and trust activities	–80	–165	–51.5
Financial guarantee contracts and loan commitments	–13	51	>100.0
Foreign commercial business	–25	–28	–10.7
Building society operations	–81	–103	–21.4
Other	–313	–358	–12.6
Total	5,963	5,798	2.8

5. Gains and losses on trading activities	2016 € million	2015 € million	Change (percent)
Gains and losses on trading in financial instruments	528	287	84.0
Gains and losses on trading in foreign exchange, foreign notes and coins, and precious metals	385	135	>100.0
Gains and losses on commodities trading	186	185	0.5
Total	1,099	607	81.1

6. Gains and losses on investments	2016 € million	2015 € million	Change (percent)
Gains and losses from securities	–61	–636	–90.4
Gains and losses from investments in subsidiaries and equity investments	94	75	25.3
Total	33	–561	>100.0

7. Other gains and losses on valuation of financial instruments	2016 € million	2015 € million	Change (percent)
Gains and losses from hedge accounting	–42	31	>100.0
Fair value hedges	–42	31	>100.0
Gains and losses on hedging instruments	–2,856	1,895	>100.0
Gains and losses on hedged items	2,814	–1,864	>100.0
Gains and losses on derivatives held for purposes other than trading	18	–86	>100.0
Gains and losses on financial instruments designated as at fair value through profit or loss	–166	418	>100.0
Total	–190	363	>100.0

8. Premiums earned	2016 € million	2015 € million	Change (percent)
Net premiums written	14,668	14,442	1.6
Gross premiums written	14,767	14,536	1.6
Reinsurance premiums ceded	–99	–94	5.3
Change in provision for unearned premiums	–10	–24	–58.3
Gross premiums	–8	–26	–69.2
Reinsurers’ share	–2	2	>100.0
Total	14,658	14,418	1.7

9. Gains and losses on investments held by insurance companies and other insurance company gains and losses	2016 € million	2015 € million	Change (percent)
Interest income and current income	2,534	2,575	–1.6
Administrative expenses	–132	–115	14.8
Gains and losses on valuation and disposals	1,244	478	>100.0
Other gains and losses of insurance companies	137	75	82.7
Total	3,783	3,013	25.6

10. Insurance benefit payments	2016 € million	2015 € million	Change (percent)
Expenses for claims	–10,601	–9,850	7.6
Gross expenses for claims	–10,670	–9,890	7.9
Reinsurers’ share	69	40	72.5
Changes in benefit reserve, reserve for premium refunds, and in other insurance liabilities	–4,799	–4,814	–0.3
Changes in gross provisions	–4,796	–4,808	–0.2
Reinsurers’ share	–3	–6	–50.0
Total	–15,400	–14,664	5.0

Claims rate trend for direct non-life insurance business including claim settlement costs

Gross claims provisions in direct business and payments made against the original provisions:

€ million	2016	2015	2014	2013	2012	2011	2010	2009	2008	2007	2006
At the end of the year	4,173	3,856	3,634	3,901	3,345	3,341	3,324	2,953	2,704	2,672	2,509
1 year later	–	3,767	3,523	3,847	3,336	3,359	3,135	2,901	2,623	2,601	2,414
2 years later	–	–	3,457	3,769	3,247	3,279	3,160	2,763	2,527	2,531	2,306
3 years later	–	–	–	3,731	3,220	3,254	3,139	2,756	2,533	2,472	2,268
4 years later	–	–	–	–	3,189	3,241	3,122	2,756	2,505	2,487	2,230
5 years later	–	–	–	–	–	3,250	3,139	2,768	2,513	2,478	2,245
6 years later	–	–	–	–	–	–	3,080	2,710	2,469	2,434	2,214
7 years later	–	–	–	–	–	–	–	2,685	2,466	2,422	2,210
8 years later	–	–	–	–	–	–	–	–	2,449	2,426	2,205
9 years later	–	–	–	–	–	–	–	–	–	2,419	2,207
10 years later	–	–	–	–	–	–	–	–	–	–	2,207
Settlements	–	89	177	170	156	91	244	268	255	253	302

Net claims provisions in direct business and payments made against the original provisions:

€ million	2016	2015	2014	2013	2012	2011	2010
At the end of the year	4,110	3,827	3,574	3,669	3,313	3,298	3,254
1 year later	–	3,736	3,460	3,613	3,300	3,317	3,056
2 years later	–	–	3,393	3,533	3,211	3,236	3,077
3 years later	–	–	–	3,490	3,180	3,208	3,057
4 years later	–	–	–	–	3,139	3,194	2,939
5 years later	–	–	–	–	–	3,191	3,049
6 years later	–	–	–	–	–	–	2,957
Settlements	–	91	181	179	174	107	297

Claims rate trend for inward reinsurance business

Gross claims provisions in inward reinsurance business and payments made against the original provisions:

€ million	2016	2015	2014	2013	2012	2011	2010	2009	2008	2007	2006
Gross provisions for claims outstanding	2,718	2,433	1,976	1,710	1,506	1,409	1,190	892	712	596	524
Cumulative payments for the year concerned and prior years
1 year later	–	622	464	481	385	463	437	282	232	127	138
2 years later	–	–	783	685	630	640	632	399	347	203	175
3 years later	–	–	–	897	764	345	739	468	410	250	212
4 years later	–	–	–	–	930	891	856	516	447	282	240
5 years later	–	–	–	–	–	1,029	922	588	475	307	252
6 years later	–	–	–	–	–	–	1,043	626	528	324	266
7 years later	–	–	–	–	–	–	–	652	555	366	283
8 years later	–	–	–	–	–	–	–	–	574	384	307
9 years later	–	–	–	–	–	–	–	–	–	396	321
10 years later	–	–	–	–	–	–	–	–	–	–	330
Gross provisions for claims outstanding and payments made against the original provision
At the end of the year	2,718	2,433	1,976	1,710	1,506	1,409	1,190	892	712	596	524
1 year later	–	2,434	2,157	1,840	1,593	1,536	1,401	1,026	779	583	541
2 years later	–	–	2,004	1,859	1,569	1,472	1,343	872	765	529	480
3 years later	–	–	–	1,779	1,628	1,014	1,338	826	696	518	432
4 years later	–	–	–	–	1,580	1,528	1,360	837	680	479	423
5 years later	–	–	–	–	–	1,501	1,396	858	691	470	396
6 years later	–	–	–	–	–	–	1,379	870	709	480	391
7 years later	–	–	–	–	–	–	–	876	719	498	399
8 years later	–	–	–	–	–	–	–	–	725	504	403
9 years later	–	–	–	–	–	–	–	–	–	505	407
10 years later	–	–	–	–	–	–	–	–	–	–	407
Settlements	–	–1	–28	–69	–74	–92	–189	16	–13	91	117

Net claims provisions in inward reinsurance business and payments made against the original provisions:

€ million	2016	2015	2014	2013	2012	2011	2010
Net provisions for claims outstanding	2,710	2,428	1,970	1,695	1,491	1,389	1,164
Cumulative payments for the year concerned and prior years
1 year later	–	622	464	473	383	461	432
2 years later	–	–	782	677	620	636	625
3 years later	–	–	–	888	754	333	729
4 years later	–	–	–	–	919	878	839
5 years later	–	–	–	–	–	1,016	904
6 years later	–	–	–	–	–	–	1,025
Net provisions for claims outstanding and payments made against the original provision
At the end of the year	2,710	2,428	1,970	1,695	1,491	1,389	1,164
1 year later	–	2,429	2,152	1,827	1,576	1,519	1,377
2 years later	–	–	1,999	1,845	1,554	1,454	1,321
3 years later	–	–	–	1,766	1,612	997	1,314
4 years later	–	–	–	–	1,566	1,510	1,337
5 years later	–	–	–	–	–	1,484	1,372
6 years later	–	–	–	–	–	–	1,357
Settlements	–	–1	–29	–71	–75	–95	–193

11. Insurance business operating expenses	2016 € million	2015 € million	Change (percent)
Gross expenses	–1,944	–1,794	8.4
Reinsurers’ share	22	20	10.0
Total	–1,922	–1,774	8.3

12. Administrative expenses	2016 € million	2015 € million	Change (percent)
Staff expenses	–10,318	–10,160	1.6
General and administrative expenses	–6,679	–6,141	8.8
Depreciation/amortization and impairment losses	–947	–933	1.5
Total	–17,944	–17,234	4.1

13. Other net operating expense/income	2016 € million	2015 € million	Change (percent)
Gains and losses on non-current assets classified as held for sale and disposal groups	83	39	>100,0
Other operating income	816	868	–6.0
Other operating expenses	–975	–1,033	–5.6
Total	–76	–126	–39.7

14. Income taxes	2016 € million	2015 € million	Change (percent)
Current tax expense	–2,497	–2,680	–6.8
Income from/expense on deferred taxes	87	–140	>100.0
Total	–2,410	–2,820	–14.5

Current taxes in relation to the German limited companies are calculated using an effective corporation tax rate of 15.825 percent based on a corporation tax rate of 15.0 percent plus the solidarity surcharge. The effective rate for trade tax is 14.0 percent based on an average trade tax multiplier of 400 percent. The tax rates correspond to those for the previous year.

Deferred taxes must be calculated using tax rates expected to apply when the tax asset or liability arises. The tax rates used are therefore those that are valid or have been announced for the periods in question as at the balance sheet date.

	2016 € million	2015 € million	Change (percent)
Profit before taxes	8,308	9,787	–15.1
Notional rate of income tax of the Cooperative Financial Network (percent)	29,825	29,825
Income taxes based on notional rate of income tax	–2,478	–2,919	–15.1
Tax effects	68	99	–31.3
Tax effects of tax-exempt income and non-tax deductible expenses	312	233	33.9
Tax effects of different tax types, different trade tax multipliers, and changes in tax rates	8	5	60.0
Tax effects of different tax rates in other countries	–47	15	>100.0
Current and deferred taxes relating to prior reporting periods	147	56	>100.0
Change in deferred tax assets due to valuation adjustments	–28	17	>100.0
Other tax effects	–324	–227	42.7
Total	–2,410	–2,820	–14.5

The table shows a reconciliation from notional income taxes to recognized income taxes based on application of the current tax law in Germany.

D Balance sheet disclosures

15. Cash and cash equivalents	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Cash on hand	7,047	6,364	10.7
Balances with central banks and other government institutions	18,374	14,171	29.7
of which: with Deutsche Bundesbank	13,279	10,921	21.6
Public-sect or debt instruments and bills of exchange eligible for refinancing by central banks	–	1	–100.0
Total	25,421	20,536	23.8

16. Loans and advances to banks and customers	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Loans and advances to banks	41,433	32,988	25.6
Repayable on demand	27,786	17,534	58.5
Other loans and advances	13,647	15,454	–11.7
Mortgage loans and other loans secured by mortgages on real estate	61	19	>100.0
Local authority loans	7,045	8,577	–17.9
Finance leases	14	100	–86.0
Other loans and advances	6,527	6,758	–3.4
Loans and advances to customers	733,155	700,608	4.6
Mortgage loans and other loans secured by mortgages on real estate	284,637	272,199	4.6
Local authority loans	37,738	38,091	–0.9
Home savings loans advanced by building society	37,253	33,659	10.7
of which: from allotment( home savings loans)	3,031	3,651	–17.0
for advance and interim financing	32,219	27,905	15.5
other building loans	2,003	2,103	–4.8
Finance leases	3,153	3,575	–11.8
Other loans and advances	370,374	353,084	4.9

17. Allowances for losses on loans and advances	Specific loan loss allowance € million	Portfolio loan loss allowance € million	Total € million
Balance as at Jan. 1, 2015	7,454	1,065	8,519
Additions	2,027	116	2,143
Utilizations	–984	–	–984
Reversals	–1,758	–197	–1,955
Changes in the scope of consolidation	–14	–	–14
Other changes	–86	8	–78
Balance as at Dec. 31, 2015	6,639	992	7,631
Additions	2,103	234	2,337
Utilizations	–702	–1	–703
Reversals	–1,546	–218	–1,764
Changes in the scope of consolidation	14	–28	–14
Other changes	22	11	33
Balance as at Dec. 31, 2016	6,530	990	7,520

18. Derivatives used for hedging (positive and negative fair values)	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Derivatives used for hedging (positive fair values)	1,549	1,050	47.5
for fair value hedges	1,545	1,049	47.3
for cash flow hedges	2	1	100.0
for hedges of net investments in foreign operations	2	–	–
Derivatives used for hedging (negative fair values)	12,956	9,453	37.1
for fair value hedges	12,940	9,442	37.0
for cash flow hedges	16	10	60.0
for hedges of net investments in foreign operations	–	1	–100.0

19. Financial assets held for trading	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Derivatives (positive fair values)	23,587	24,665	–4.4
Interest-linked contracts	20,440	22,221	–8.0
Currency-linked contracts	1,794	1,253	43.2
Share- and index-linked contracts	298	320	–6.9
Credit derivatives	244	287	–15.0
Other contracts	811	584	38.9
Securities	10,378	14,424	–28.1
Bonds and other fixed-income securities	9,321	13,387	–30.4
Shares and other variable-yield securities	1,057	1,037	1.9
Loans and advances	13,963	14,117	–1.1
Inventories and trade receivables	342	364	–6.0
Total	48,270	53,570	–9.9

20. Investments	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Securities	248,491	246,591	0.8
Bonds and other fixed-income securities	191,003	193,932	–1.5
Shares and other variable-yield securities	57,488	52,659	9.2
Investments in subsidiaries	1,265	1,315	–3.8
Equity investments	2,209	2,054	7.5
Investments in joint ventures	543	548	–0.9
Investments in associates	355	413	–14.0
Other shareholdings	1,311	1,093	19.9
Total	251,965	249,960	0.8

21. Investments held by insurance companies	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Investment property	2,470	2,251	9.7
Investments in subsidiaries, joint ventures and associates	621	527	17.8
Mortgage loans	9,049	8,732	3.6
Promissory notes and loans	7,667	8,001	–4.2
Registered bonds	9,102	9,438	–3.6
Other loans	768	837	–8.2
Variable-yield securities	8,430	7,288	15.7
Fixed-income securities	40,769	36,598	11.4
Derivatives (positive fair values)	360	233	54.5
Deposits with ceding insurers	188	163	15.3
Assets related to unit-linked contracts	10,011	8,698	15.1
Total	89,435	82,766	8.1

22. Property, plant and equipment, and investment property	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Land and buildings	6,839	6,839	–
Office furniture and equipment	1,378	1,408	–2.1
Assets subject to operating leases	388	460	–15.7
Investment Property	253	264	–4.2
Other fixed assets	2,527	2,197	15.0
Total	11,385	11,168	1.9

23. Income tax assets and liabilities	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Income tax assets	3,480	3,772	–7.7
Current income tax assets	1,306	1,620	–19.4
Deferred tax assets	2,174	2,152	1.0
Income tax liabilities	1,056	1,263	–16.4
Current income tax liabilities	731	899	–18.7
Deferred tax liabilities	325	364	–10.7

	Deferred tax assets Dec. 31, 2016 € million	Deferred tax assets Dec. 31, 2015 € million	Deferred tax liabilities Dec. 31, 2016 € million	Deferred tax liabilities Dec. 31, 2015 € million
Tax loss carryforwards	59	35
Loans and advances to banks and customers(net)	82	91	203	520
Financial assets and liabilities held for trading, derivatives used for hedging (positive and negative fair values)	787	1,199	29	28
Investments	328	360	549	1,080
Investments held by insurance companies	147	26	589	449
Deposits from banks and customers	485	796	169	160
Debt certificates including bonds	119	111	11	14
Provisions	1,941	1,737	183	43
Insurance liabilities	73	118	395	287
Intangible assets	–	–	24	29
Other balance sheet items	102	132	122	207
Total (gross)	4,123	4,605	2,274	2,817
Netting of deferred tax assets and deferred tax liabilities	–1,949	–2,453	–1,949	–2,453
Total (net)	2,174	2,152	325	364

Deferred tax assets and liabilities are recognized for temporary differences in respect of the balance sheet items shown in the table as well as for tax loss carryforwards.

24. Other assets	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Other assets held by insurance companies	3,719	3,182	16.9
Goodwill	58	59	–1.7
Other intangible assets	423	350	20.9
Prepaid expenses	170	202	–15.8
Other receivables	3,115	2,803	11.1
Non-current assets and disposal groups classified as held for sale	182	198	–8.1
Fair value changes of the hedged items in portfolio hedges of interest-rate risk	9,098	6,512	39.7
Residual other assets	442	426	3.8
Total	17,207	13,732	25.3

The breakdown of other assets held by insurance companies is as follows:

	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Intangible assets	156	155	0.6
Reinsurers’ share of insurance liabilities	224	208	7.7
Provision for unearned premiums	6	8	–25.0
Benefit reserves	63	65	–3.1
Provisions for claims outstanding	155	135	14.8
Loans and advances	633	661	–4.2
Receivables arising out of direct insurance operations	362	419	–13.6
Receivables arising out of reinsurance operations	203	182	11.5
Other receivables	68	60	13.3
Credit balances with banks, checks and cash on hand	738	241	>100.0
Residual other assets	1,968	1,917	2.7
Property, plant and equipment	418	437	–4.3
Prepaid expenses	23	34	–32.4
Remaining assets held by insurance companies	1,527	1,446	5.6
Total	3,719	3,182	16.9

25. Deposits from banks and customers	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Deposits from banks	103,282	99,505	3.8
Repayable on demand	6,156	7,223	–14.8
With agreed maturity or notice period	97,126	92,282	5.2
Deposits from customers	774,302	739,218	4.7
Savings deposits and home savings deposits	240,802	238,345	1.0
Savings deposits with agreed notice period of three months	174,621	172,203	1.4
Savings deposits with agreed notice period of more than three months	12,411	15,216	–18.4
Home savings deposits	53,770	50,926	5.6
Other deposits from customers	533,500	500,873	6.5
Repayable on demand	417,210	379,985	9.8
With agreed maturity or notice period	116,290	120,888	–3.8

26. Debt certificates issued including bonds	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Bonds issued	44,813	48,489	–7.6
Mortgage Pfandbriefe	27,299	26,385	3.2
Public-sector Pfandbriefe	5,058	8,383	–39.7
Other bonds	12,526	13,721	–8.7
Other debt certificates issued	26,309	21,759	20.9
Total	71,122	70,248	1.2

27. Financial liabilities held for trading	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Derivatives (negative fair values)	25,123	27,822	–9.7
Interest-linked contracts	19,568	22,328	–12.4
Currency-linked contracts	1,171	1,259	–7.0
Share-and index-linked contracts	791	799	–1.0
Credit derivatives	101	166	–39.2
Other contracts	3,492	3,270	6.8
Short positions	508	849	–40.2
Bonds issued and other debt certificates	12,905	10,815	19.3
Liabilities	5,558	5,867	–5.3
Liabilities from commodities transactions and commodity lending	45	44	2.3
Total	44,139	45,397	–2.8

28. Provisions	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Provisions for defined benefit plans	8,225	8,186	0.5
Provisions for loans and advances	456	418	9.1
Provisions relating to building society operations	915	653	40.1
Residual provisions	3,513	3,306	6.3
Total	13,109	12,563	4.3

Funding status of defined benefit obligations	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Present value of defined benefit obligations not funded by plan assets	7,064	7,684	–8.1
Present value of defined benefit obligations funded by plan assets	2,400	1,703	40.9
Present value of defined benefit obligations	9,464	9,387	0.8
less fair value of plan assets	–1,239	–1,201	3.2
Defined benefit obligations (net)	8,225	8,186	0.5
Provisions for defined benefit plans	8,225	8,186	0.5

Changes in the present value of defined benefit obligations	2016 € million	2015 € million	Change (percent)
Present value of defined benefit obligations as at Jan. 1	9,387	10,303	–8.9
Current service cost	133	149	–10.7
Interest expense	206	206	–
Pension benefits paid including plan settlements	–330	–374	–11.8
Past service cost	6	–9	>100.0
Actuarial gains (-) / losses (+)	51	–911	>100.0
Other changes	11	23	–52.2
Present value of defined benefit obligations as at Dec. 31	9,464	9,387	0.8

Changes in plan assets	2016 € million	2015 € million	Change (percent)
Fair value of plan assets as at Jan. 1	1,201	1,215	–1.2
Interest income	26	24	8.3
Contributions to plan assets	43	26	65.4
Pension benefits paid	–62	–56	10.7
Return on plan assets (excluding interest income)	35	–21	>100.0
Other changes	–4	13	>100.0
Fair value of plan assets as at Dec. 31	1,239	1,201	3.2

Actuarial assumptions used for defined benefit obligations	Dec. 31, 2016 (percent)	Dec. 31, 2015 (percent)
Weighted discount rate	1.75	2.24
Weighted salary increase	1.83	1.89
Weighted pension increase	1.75	1.76

29. Insurance liabilities	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Provision for unearned premiums	1,119	1,104	1.4
Benefit reserve	55,167	52,634	4.8
Provision for claims outstanding	10,071	9,257	8.8
Provision for premium refunds	8,918	7,923	12.6
Other insurance liabilities	65	53	22.6
Reserve for unit-linked insurance contracts	8,785	7,958	10.4
Total	84,125	78,929	6.6

Change in provision for unearned premiums	2016 € million	2015 € million	Change (percent)
Balance as at Jan. 1	1,104	1,071	3.1
Additions	1,180	1,170	0.9
Utilizations / reversals	–1,172	–1,143	–2.5
Changes attributable to currency translation	7	6	16.7
Balance as at Dec. 31	1,119	1,104	1.4

Change in benefit reserve	2016 € million	2015 € million	Change (percent)
Balance as at Jan. 1	52,634	49,724	5.9
Additions	6,158	5,965	3.2
Interest component	1,128	1,392	–19.0
Utilizations / reversals	–4,753	–4,448	–6.9
Changes attributable to currency translation	–	1	–100.0
Balance as at Dec. 31	55,167	52,634	4.8

Supplementary change-in-discount-rate reserves totaling €2,162 million have been recognized for policies with a discount rate in excess of the reference rate specified in the DeckRV (December 31, 2015: €1,528 million).

Change in the provision for claims outstanding	2016 € million	2015 € million	Change (percent)
Balance as at Jan. 1	9,257	8,352	10.8
Claims expenses	5,827	5,463	6.7
Less payments	–4,983	–4,622	–7.8
Changes attributable to currency translation	–30	64	<–100.0
Balance as at Dec. 31	10,071	9,257	8.8

Change in the provision for premium refunds	2016 € million	2015 € million	Change (percent)
Balance as at Jan. 1	7,923	8,568	–7.5
Additions	670	665	0.8
Utilizations / reversals	–760	–797	4.6
Changes resulting from unrealized gains and losses on investments (through other comprehensive income)	367	–626	>100.0
Changes resulting from other remeasurements (through profit or loss)	718	99	>100.0
Changes attributable to currency translation	–	14	–100.0
Balance as at Dec. 31	8,918	7,923	12.6

The breakdown of maturities for insurance liabilities is shown in the following tables:

	≤ 1 year € million	> 1 year – 5 years € million	> 5 years € million	Indefinite € million
Balance as at December 31, 2016
Provision for unearned premiums	1,011	83	25	–
Benefit reserve	1,654	6,983	12,129	34,401
Provision for claims outstanding	4,297	3,273	2,501	–
Provision for premium refunds	701	646	754	6,817
Other insurance liabilities	43	15	3	4
Total	7,706	11,000	15,412	41,222
Balance as at December 31, 2015
Provision for unearned premiums	982	100	22	–
Benefit reserve	1,977	6,658	12,292	31,707
Provision for claims outstanding	3,855	3,090	2,312	–
Provision for premium refunds	739	607	854	5,723
Other insurance liabilities	39	9	3	2
Total	7,592	10,464	15,483	37,432

30. Other liabilities	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Other liabilities of insurance companies	4,948	4,255	16.3
Other liabilities and accruals	2,150	2,256	–4.7
Liabilities included in disposal groups	25	7	>100.0
Fair value changes of the hedged items in portfolio hedges of interest-rate risk	431	479	–10.0
Residual other liabilities	586	572	2.4
Total	8,140	7,569	7.5

The breakdown of other liabilities of insurance companies is as follows:

	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Residual provisions	329	327	0.6
Provisions for employee benefits	303	297	2.0
Provisions for share-based payment transactions	1	1	–
Other provisions	25	29	–13.8
Payables and residual other liabilities	4,619	3,928	17.6
Subordinated capital	76	73	4.1
Deposits received from reinsurers	85	78	9.0
Payables arising out of direct insurance operations	1,523	1,574	–3.2
Payables arising out of reinsurance operations	239	230	3.9
Debt certificates issued including bonds	30	29	3.4
Deposits from banks	613	524	17.0
Derivatives (negative fair values)	105	70	50.0
Liabilities from capitalization transactions	1,345	775	73.5
Other liabilities	197	198	–0.5
Residual other liabilities	406	377	7.7
Total	4,948	4,255	16.3

31. Subordinated capital	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Subordinated liabilities	4,800	4,851	–1.1
Profit-sharing rights	158	494	–68.0
Share capital repayable on demand	22	22	–
Total	4,980	5,367	–7.2

E Financial instruments disclosures

32. Fair value of financial instruments	Carrying amount Dec. 31, 2016 € million	Fair value Dec. 31, 2016 € million	Carrying amount Dec. 31, 2015 € million	Fair value Dec. 31, 2015 € million
Assets
Cash and cash equivalents	18,374	18,374	14,172	14,172
Loans and advances to banks¹	41,397	43,366	32,935	34,931
Loans and advances to customers¹	725,671	728,364	693,030	699,519
Derivatives used for hedging (positive fair values)	1,549	1,549	1,050	1,050
Financial assets held for trading²	47,928	47,928	53,206	53,206
Investments³	251,067	251,142	248,999	249,204
Investments held by insurance companies^2,3	76,749	77,787	71,614	72,688
Other assets²	13,018	13,042	9,645	9,074
Liabilities
Deposits from banks	103,282	105,325	99,505	101,724
Deposits from customers	774,302	776,260	739,218	743,352
Debt certificates issued including bonds	71,122	70,626	70,248	70,955
Derivatives used for hedging (negative fair values)	12,956	12,956	9,453	9,453
Financial liabilities held for trading²	44,094	44,094	45,353	45,353
Other liabilities²	2,810	2,630	2,882	2,408
Subordinated capital	4,980	5,717	5,367	5,633

1 Carrying amounts less loan loss allowances
2 Fair values and carrying amounts are only disclosed for financial instruments
3 Excluding investments in joint ventures and in associates

The above table shows the disclosures on the fair value of financial instruments included in the published annual reports of the DZ BANK Group and, in the previous year, the WGZ BANK Group. For all other companies included in the consolidated financial statements, the fair value was deemed to be equivalent to the carrying amount.

33. Maturity analysis	≤ 3 months € million	> 3months – 1 year € million	> 1 year € million	Indefinite € million
Balance as at December 31, 2016
Loans and advances to banks	19,512	3,272	23,076	501
Loans and advances to customers	37,800	56,874	636,339	19,599
Deposits from banks	27,553	8,148	69,347	962
Deposits from customers	627,400	24,076	73,794	54,042
Debt certificates issued including bonds	14,569	12,811	45,521	–
Balance as at December 31, 2015
Loans and advances to banks	14,574	3,296	20,617	413
Loans and advances to customers	39,645	56,021	602,025	19,987
Deposits from banks	30,207	8,867	62,828	349
Deposits from customers	589,240	27,995	76,732	51,192
Debt certificates issued including bonds	15,462	11,187	45,960	–

The contractual maturities shown in the above table do not match the estimated actual cash inflows and cash outflows.

F Other disclosures

34. Capital requirements and regulatory indicators	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Total capital	92,134	87,628	5.1
Tier 1 capital	75,006	69,174	8.4
of which: Common Equity Tier 1	74,170	68,233	8.7
Additional Tier 1 capital	836	941	–11.2
Tier 2 capital	17,128	18,454	–7.2
Total risk exposure	572,458	555,952	3.0

Common Equity Tier 1 capital ratio (percent)	13.0	12.3
Tier 1 capital ratio (percent)	13.1	12.4
Total capital ratio (percent)	16.1	15.8
Common Equity Tier 1 capital ratio incl. reserves pursuant to Section 340f HGB (for information, percent)¹	15.2	14.6
Tier 1 capital ratio incl. reserves pursuant to Section 340f HGB (for information, percent)¹	15.4	14.8

Leverage ratio (for information, percent)²	6.3	6.0
Leverage ratio incl. reserves pursuant to Section 340f HGB (for information, percent)³	7.3	6.9

1 The balance of reserves pursuant to Section 340f HGB is based on the financial statements data reported for regulatory purposes before additions and reversals within the scope of the 2016 and 2015 financial statements.
2 Disclosure of the leverage ratio of the bank-specific protection system using the transitional definition for Tier 1 capital.
3 Disclosure of ratio after full introduction of the new CRR provisions (fully loaded), subject to the assumption of full reclassification and inclusion of reserves pursuant to Section 340f HGB as Tier 1 capital from a business point of view.

35. Financial guarantee contracts and loan commitments	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Financial guarantee contracts	18,259	18,024	1.3
Loan commitments	71,528	65,965	8.4
Total	89,787	83,989	6.9

The amounts shown for financial guarantee contracts and loan commitments are the nominal values of the respective exposure.

36. Trust activities	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Trust assets	1,592	2,692	–40.9
of which: trust loans	595	1,679	–64.6
Trust liabilities	1,592	2,692	–40.9
of which: trust loans	595	1,679	–64.6

37. Asset management by the Union Investment Group	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Fund assets	258,956	230,685	12.3
Other types of asset management	44,839	40,714	10.1
Unit-linked asset management	909	696	30.6
Institutional asset management	10,951	10,342	5.9
Advisory and outsourcing	32,979	29,676	11.1
Accounts managed by third parties	–11,523	–10,597	8.7
Total	292,272	260,802	12.1

As at the balance sheet date, the Union Investment Group (through Union Asset Management Holding AG) had total assets under management of €292,272 million (December 31, 2015: €260,802 million). The fund assets comprise equity funds, fixed-income funds, money market funds, mixed funds, other securities funds, capital preservation funds, real estate funds, alternative investment funds and hybrid funds issued by Union Investment Group.

In addition, Union Investment Group has assets under management within the scope of institutional asset management, unit-linked asset management, and advisory and outsourcing. The fund volume of funds that have been issued by Union Investment Group but whose portfolio management has been outsourced is shown as a deduction. The definition of assets under management is based on the aggregate statistics from the Federal Association of German Fund Management Companies (BVI), Frankfurt/Main.

38. Leases Finance leases with the Cooperative Financial Network as lessor	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Gross investment	3,498	4,025	–13.1
Up to 1 year	1,111	1,188	–6.5
More than 1 year and up to 5 years	2,072	2,337	–11.3
More than 5 years	315	500	–37.0
less unearned finance income	–328	–397	–17.4
Net investment	3,170	3,628	–12.6
less present value of unguaranteed residual values	–70	–90	–22.2
Present value of minimum lease payment receivables	3,100	3,538	–12.4
Up to 1 year	971	1,038	–6.5
More than 1 year and up to 5 years	1,853	2,071	–10.5
More than 5 years	276	429	–35.7

As at the balance sheet date, the accumulated allowance for uncollectable minimum lease payments at lessor companies amounted to €32 million (December 31, 2015: €41 million).

The DVB Bank Group and the VR LEASING Group are active as finance lessors in the Cooperative Financial Network. The entities in the DVB Bank Group primarily enter into leases for ships, ship containers, and aircraft. Entities in the VR LEASING Group mainly enter into equipment leases with their customers.

39. Changes in the contract portfolios held by Bausparkasse Schwäbisch Hall	Not allocated Number of contracts	Not allocated Home savings sum € million	Allocated Number of contracts	Allocated Home savings sum € million	Total Number of contracts	Total Home savings sum € million
Balance as at Dec. 31, 2015	7,704,599	263,769	827,806	22,375	8,532,405	286,144
Additions in 2016 as a result of
New contracts (redeemed contracts)¹	656,465	28,171	–	–	656,465	28,171
Transfers	23,471	660	951	22	24,422	682
Allocation waivers and cancellations	9,411	414	–	–	9,411	414
Splitting	220,051	–	63	–	220,114	–
Allocations and acceptance of allocations	–	–	356,533	9,398	356,533	9,398
Other	84,399	2,865	25	1	84,424	2,866
Total	993,797	32,110	357,572	9,421	1,351,369	41,531
Disposals in 2016 as a result of
Allocations and acceptance of allocations	–356,533	–9,398	–	–	–356,533	–9,398
Reductions	–	–899	–	–	–	–899
Termination	–345,920	–8,460	–277,482	–7,110	–623,402	–15,570
Transfers	–23,471	–660	–951	–22	–24,422	–682
Pooling¹	–57,939	–	–1	–	–57,940	–
Expiration	–	–	–155,187	–4,073	–155,187	–4,073
Allocation waivers and cancellations	–	–	–9,411	–414	–9,411	–414
Other	–84,399	–2,865	–25	–1	–84,424	–2,866
Total	–868,262	–22,282	–443,057	–11,620	–1,311,319	–33,902
Net addition/disposal	125,535	9,828	–85,485	–2,199	40,050	7,629
Balance as at Dec. 31, 2016	7,830,134	273,597	742,321	20,176	8,572,455	293,773

1 Including increases

Volume of unredeemed contracts	Number of contracts	Home savings sum € million
Contracts signed prior to Jan. 1, 2016	62,451	2,615
Contracts signed in 2016	197,805	11,074

40. Changes in the allocation assets of Bausparkasse Schwäbisch Hall	2016 € million
Additions
Amounts carried forward from 2015 (surplus)
Amounts not yet disbursed	48,783
Additions in 2016
Savings deposits (including credited residential construction bonuses)	9,206
Repayable amounts (including credited residential construction bonuses)¹	1,628
Interest on home savings deposits	706
Total	60,323
Withdrawals
Withdrawals in 2016
Amounts allocated (if disbursed)
Home savings deposits	5,277
Building loans	993
Repayment of deposits on non-allocated home savings contracts	1,445
Building society guarantee fund	350
Surplus of additions
(Amounts not yet disbursed) at the end of 2016²	52,258
Total	60,323

1 Amounts repaid are the portion of the loan principal actually repaid.
2 The surplus amounts allocated include:
a undisbursed home savings deposits from allocated home savings contracts: €97 million
b undisbursed home savings loans from funds allocated: €4,191 million

41. Cover statement for the mortgages and local authority loans extended by the mortgage banks	Mortgage Pfandbriefe Dec. 31, 2016 € million	Mortgage Pfandbriefe Dec. 31, 2015 € million	Mortgage Pfandbriefe Change (percent)	Public-sector Pfandbriefe Dec. 31, 2016 € million	Public-sector Pfandbriefe Dec. 31, 2015 € million	Public-sector Pfandbriefe Change (percent)
Ordinary cover	51,148	47,484	7.7	26,319	31,131	–15.5
Loans and advances to banks	33	37	–10.8	741	1,048	–29.3
of which: Mortgage loans	33	37	–10.8	–	–	–
Local authority loans	–	–	–	741	1,048	–29.3
Loans and advances to customers	50,969	47,300	7.8	20,934	22,945	–8.8
of which: Mortgage loans	50,969	47,300	7.8	74	84	–11.9
Local authority loans	–	–	–	20,860	22,861	–8.8
Investments consisting of bonds and other fixed-income securities	–	–	–	2,603	4,839	–46.2
Property, plant and equipment	146	147	–0.7	2,041	2,299	–11.2
Extended cover	1,784	2,353	–24.2	187	507	–63.1
Loans and advances to banks	–	150	–100.0	18	358	–95.0
Investments consisting of bonds and other fixed-income securities	1,784	2,203	–19.0	169	149	13.4
Total cover	52,932	49,837	6.2	26,506	31,638	–16.2
Pfandbriefe requiring cover	–46,344	–44,558	4.0	–23,275	–28,250	–17.6
Nominal excess cover	6,588	5,279	24.8	3,231	3,388	–4.6
Present value of excess cover	10,199	8,839	15.4	3,938	4,316	–8.8
Risk-related present value of excess cover	9,095	7,016	29.6	3,498	3,628	–3.6

The present value of excess cover is higher than the nominal excess cover because it includes an interest component.

Maturity structure of mortgage Pfandbriefe and public-sector Pfandbriefe in issue	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Mortgage Pfandbriefe	46,344	44,558	4.0
<= 6 months	1,735	4,560	–62.0
> 6 months and <= 12 months	1,937	1,305	48.4
> 12 months and <= 18 months	1,368	1,664	–17.8
> 18 months and <= 2 years	1,981	1,886	5.0
> 2 years and <= 3 years	4,207	2,773	51.7
> 3 years and <= 4 years	3,574	3,671	–2.6
> 4 years and <= 5 years	3,424	3,555	–3.7
> 5 years and <= 10 years	16,131	13,818	16.7
> 10 years	11,987	11,326	5.8
Public-sector Pfandbriefe	23,275	28,250	–17.6
<= 6 months	1,909	1,722	10.9
> 6 months and <= 12 months	1,112	3,479	–68.0
> 12 months and <= 18 months	711	1,900	–62.6
> 18 months and <= 2 years	1,950	1,129	72.7
> 2 years and <= 3 years	2,064	2,666	–22.6
> 3 years and <= 4 years	2,209	2,129	3.8
> 4 years and <= 5 years	1,390	2,270	–38.8
> 5 years and <= 10 years	5,234	5,910	–11.4
> 10 years	6,696	7,045	–5.0

Fixed-interest periods of cover assets	Dec. 31, 2016 € million	Dec. 31, 2015 € million	Change (percent)
Mortgage Pfandbriefe	52,932	49,837	6.2
<= 6 months	1,896	2,969	–36.1
> 6 months and <= 12 months	2,978	2,540	17.2
> 12 months and <= 18 months	2,225	2,203	1.0
> 18 months and <= 2 years	2,624	2,725	–3.7
> 2 years and <= 3 years	4,688	4,909	–4.5
> 3 years and <= 4 years	4,695	4,497	4.4
> 4 years and <= 5 years	4,423	4,630	–4.5
> 5 years and <= 10 years	19,331	17,525	10.3
> 10 years	10,072	7,839	28.5
Public-sector Pfandbriefe	26,506	31,638	–16.2
<= 6 months	1,492	1,693	–11.9
> 6 months and <= 12 months	1,575	2,175	–27.6
> 12 months and <= 18 months	1,128	1,523	–25.9
> 18 months and <= 2 years	916	2,181	–58.0
> 2 years and <= 3 years	2,002	2,115	–5.3
> 3 years and <= 4 years	1,780	2,008	–11.4
> 4 years and <= 5 years	1,378	1,717	–19.7
> 5 years and <= 10 years	6,443	6,530	–1.3
> 10 years	9,792	11,696	–16.3

124 properties (December 31, 2015: 150) were in forced administration as at the reporting date. The mortgage loans held as cover include past-due payments for interests to be paid in the amount of €1 million (December 31, 2015: €1 million).

42.
Board of Managing Directors of the National Association of German Cooperative Banks (BVR)

Uwe Fröhlich (President)
Gerhard P. Hofmann
Dr. Andreas Martin

Berlin, July 12, 2017

National Association of German Cooperative Banks (BVR)
BVR

Board of Managing Directors

Uwe Fröhlich Gerhard P. Hofmann Dr. Andreas Martin

< Management Report 2016

Annex >

Consolidated Financial Statements 2016