Page 44 - Consolidated Non Financial Statement

Banca Ifis

| 2020 Consolidated Non-Financial Statement
In the case of Trade Receivables, the Group's commitment to safeguarding its capital position and credit quality
translates into three levels of counterparty checks, so as to prevent the risks of default as well as of involvement in
transactions with potentially damaging reputational consequences:

• automated checks on both individuals and legal entities to determine whether the prospective customer is on
watch lists (terrorism, embargoes, etc.) or lists of “Politically Exposed Persons”; based on the level of risk, Anti-
Money Laundering also analyses press reports;
• individual assessment by the Transaction Assessment and Counterparty Assessment Teams of the
customer, the invoice sellers, and the factored exposure; system of delegation of authority to assume credit
risk based on the amounts and risk classes involved;
• continuous dialogue with the national network, which may provide reports and feedback on potential
clients.

As for salary- and/or pension-backed loans, the Banca Ifis Group, in accordance with privacy regulations, considers
also the family situation if relevant to assessing the reliability of customers.

The policies governing Leasing operations describe how to evaluate the future user of the asset based on reliability and
credibility criteria through a scoring system and the preliminary work carried out by specialised teams. Specifically, these
assess the soundness of the counterparty's credit position and whether the requested asset is consistent with its
operations.

Credit monitoring as well as the monitoring of individual exposures are conducted on a regular basis using effective
procedures that can provide timely warnings of potential issues and ensure the adequacy of impairment losses and
write-offs. Risk Management ensures the credit monitoring of individual exposures, specifically non-performing ones, is
properly carried out and evaluates the consistency of the classifications, the provisions set aside, and the adequacy of
the debt collection process at the central and peripheral level.

The Group companies operating in the Npl segment, which specialise in acquiring and managing non-performing loans,
focus on assessing whether the receivables can be recovered and preparing settlement plans compatible with the
specific debt situation by adopting several mechanisms throughout the various loan acquisition stages:

• first, it verifies whether the loans being acquired can be recovered, so as to exclude non-existing or time-barred
receivables and prevent the risk of non-payment as well as the reputational risk that trying to collect bad loans
would entail. After establishing a first contact with the account debtors, the Npl Area assesses the legitimacy
of any complaints and, if these are based on reasonable grounds, writes off the position or seeks
indemnification from the seller, if allowed by the contract;
• it prepares settlement plans suited to the customer's finances and tailored to each individual case;
• it assesses the probability the customer will actually settle its debts.

During the year, changes were made to the Operating Segments in order to fully implement the Group’s business
model:

• Commercial & Corporate Banking Segment, represents the commercial offer of the Group dedicated to
companies and consists of the Business Factoring, Leasing and Corporate Banking & Lending;
• Npl Segment, dedicated to non-recourse acquisition and managing distressed retail loans. The Segment's
results from 07 January 2019 also include the contribution of the business headed by the former Fbs Group,
which is mainly specialised in servicing and the management of non-performing secured loans;
• Governance & Non-Core Services Segment, which provides the segments operating in the Group's core
businesses with the financial resources and services necessary to perform their respective activities. The
Segment includes treasury and proprietary securities desk activities, the disbursement of salary- or pension-
backed loans and some portfolios of personal loans, as well as some corporate loans portfolio assigned for
run-off insofar as held to be non-strategic to the Group's growth.

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