Principles underlying financial statement reporting and comments

The unaudited interim financial statements were drawn up in accordance with the International Financial Reporting Standards (IAS 34). The semi-annual financial statements are prepared applying the same accounting and valuation principles as were applied for the 2021 annual financial statements. 

Since 1 January 2022, the following new and revised standards and interpretations have taken effect and have no material impact on the consolidated financial statements of VP Bank Group:

Narrow-scope amendments to IFRS 3, IAS 16 and IAS 37 and several annual improvements to IFRS 1, IFRS 9, IAS 41 and IFRS 16. 

The Board of Directors reviewed and approved the semi-annual report and authorised it for publication in its meeting of 11 August 2022. 

As part of its ordinary banking activities, VP Bank Group is involved in various legal and regulatory proceedings. The legal and regulatory environment in which VP Bank Group operates involves significant litigation, compliance, reputational and other risks in connection with legal disputes and regulatory proceedings. The impact of these proceedings on the financial strength and/or profitability of VP Bank Group is dependent on the status of the proceedings and their outcome. VP Bank Group employs the relevant processes, reports and committees to monitor and manage these risks. It also establishes provisions for ongoing and threatened proceedings if the probability that such proceedings will entail a financial loss is judged to be greater than the probability of this not being the case. In isolated cases in which the amount cannot be reliably estimated, for instance because of the early stage or the complexity of the proceedings or other factors, no provision is established but a contingent liability may be created. The risks described below are not necessarily the only ones to which VP Bank Group is exposed. Additional risks which are presently unknown or risks and proceedings which are currently considered insignificant may equally impact the future course of business, operating results and the outlook of VP Bank Group.

The Deposit Insurance Agency of Russia (DIA), as part of the bankruptcy proceedings of two Russian banks, asserts that third-party pledges created in connection with the granting of loans to foreign companies shortly prior to the revocation of the banking licence and commencement of bankruptcy proceedings should not have been realised on the open market by VP Bank Group. Both proceedings are at different stages of development. In the first proceedings against VP Bank (Switzerland) Ltd involving a disputed amount of USD 10 million, the Ninth Arbitration Court of Appeal on 24 May 2017 upheld the nullity of the realisation pursuant to Russian bankruptcy law. The court obligated VP Bank (Switzerland) Ltd to pay an amount of approximately USD 10 million. The judgement became res judicata on 19 September 2017. All extraordinary legal remedies without suspensive effect were dismissed. The debt collection procedure opened on 7 June 2018 in Moscow has so far gone nowhere. In a letter dated 31 July 2019, the DIA, in its capacity as insolvency administrator, issued the first call for payment to VP Bank (Switzerland) Ltd. VP Bank Group has not complied with this request as it contests this ruling. Further developments will be monitored by local lawyers in Moscow. The second proceedings against VP Bank Ltd, and VP Bank (Switzerland) Ltd, in an amount in dispute of USD 15 million, are of a similar nature, but are not yet closed. On 16 March 2018, the Supreme Court confirmed the jurisdiction of the Russian courts and dismissed the case to the Arbitration Court for substantive judgement. On 22 May 2019, the Arbitration Court ruled in favour of VP Bank Ltd and VP Bank (Switzerland) Ltd. This judgement was confirmed by the Court of Appeal on 12 August 2019. On 19 November 2019, the Court of Cassation overturned the judgements of the lower-instance courts and dismissed the case to the court of first instance (Arbitration Court) for a new ruling. VP Bank Ltd and VP Bank (Switzerland) Ltd appealed to the Judicial Chamber of the Supreme Court against the ruling on 17 January 2020, which had not yet heard the appeal by 16 March 2020. The case, therefore, had to be heard again at the first instance. On 3 August 2020, the judge ordered the submission of various documents and requested the DIA to explain its claim in detail, which had been amended several times in the meantime. In the hearing of 13 November 2020, the relevant submissions were made and the litigation continued throughout several hearings in 2021. On 8 June 2021, the first-instance ruling was issued in which the action against VP Bank (Switzerland) Ltd was dismissed in its entirety and/or, with respect to VP Bank Ltd, upheld to a limited extent (20 per cent). As a result, the Bank was ordered to repay an amount of USD 2.9 million. The DIA and the two accused immediately appealed this decision to the next higher instance (Ninth Arbitration Court of Appeal), which confirmed the judgement of the Arbitration Court on 20 August 2021. This ruling was again appealed against to the Court of Cassation on 31 August 2021 on the grounds of nullity. At a hearing held on 21 October 2021, the judgements of the lower-instance courts were upheld. The reasons for this ruling were announced on 29 October 2021. The parties were entitled to a two-month period to appeal the case to the Supreme Court. The accused have instructed their Russian lawyer to pursue this course of action. In both cases, VP Bank Ltd considers the risk of outflow of funds to be small, which is why no provision has been formed.

In another case, the High Court of Justice in London served a civil suit on VP Bank (Switzerland) Ltd at the beginning of 2020. VP Bank Ltd is also named as a defendant and was notified of the action in March 2020. The main defendant is a former governing body of a foreign pension fund. The latter is said to have acted unlawfully in its role by accepting distribution remunerations for investment funds. The action names more than 38 defendants, among them various other banks and individuals that processed payments or paid distribution remunerations. VP Bank Ltd and VP Bank (Switzerland) Ltd are accused of a violation of due diligence obligations. They are also accused of involvement in the processing of questionable third-party fees and commissions of at least USD 46 million, meaning they would have to assume non-contractual collective liability for the damages incurred. VP Bank Group is disputing the accusations and the place of jurisdiction. Two defendant Swiss banks successfully challenged the UK jurisdiction in the first two instances. VP Bank Group considers the risk of outflow of funds to be small, which is why no provision has been formed.

The following exchange rates were used for the most important currencies: