UBI Banca Group

The table summarises direct Group exposures in ABS instruments: none of the positions listed
contained underlying assets linked to subprime or Alt-A loans.
Direct exposure in ABS
Figures in millions of euro
Classifications 31.12.2011
31.12.2010
Hedged by
Hedged by
Counterparty Type of exposure Rating Seniority Accounting Gross of Net of techniques to Gross of Net of techniques to
relationship Classification impairment impairment reduce impairment impairment reduce
losses losses counterparty/ losses losses counterparty/
credit risk
credit risk
investor ABS HFT 0.3 0.3 no 0.5 0.5
investor ABS AAA Senior AFS - - - 88.7 89.1
investor Other structured HFT - - - 2.6 2.6
no
no
no
TOTAL 0.3 0.3 91.8 92.2
Own securitisations, eliminated when consolidating the accounts, totalled €12.1 billion (€11.1
billion at the end of 2010) and related mainly to ABS instruments (including €9.5 billion of
senior securities) used as collateral for advances from the ECB. Further details are provided in
the previous section “The interbank market and the liquidity situation”, which may be
consulted.
In addition to the direct exposures, hedge funds or funds of hedge funds were identified among
the assets present in Group portfolios with exposures to structured credit products of the CDO
and CMBS type. Investment in these funds as at 31 st December 2011 amounted to
approximately €105 million (net of impairment losses/reversals) and presented low
percentages of exposure. Total indirect exposure to CDOs and CMBSs amounted to
approximately €0.3 million (€0.1 million in December 2010).
Other subprime and Alt-A exposures
Again at the end of the 2011, indirect exposures to subprime and Alt-A mortgages existed that
were contained in hedge funds or funds of hedge funds held by the Parent. The percentages of
exposure to subprime and Alt-A mortgages were again low (no fund had a percentage exposure
of greater than 1%), with total exposure to subprime and Alt-A loans of approximately €0.3
million (€0.3 million as at 31 st December 2010).
Exposures to monoline insurers
Indirect exposures to monoline insurance companies exist in hedge funds or funds of hedge
funds held by UBI Banca. The percentages of exposure remained very modest with an overall
amount of less than €0.1 million, unchanged compared to December 2010.
Leveraged Finance
The term leveraged finance is used in the UBI Banca Group to refer to finance provided for a
company or an initiative which has debt that is considered higher than normal on the market
and is therefore considered a higher risk. Usually this finance is used for specific acquisition
purposes (e.g. the acquisition of a company by other companies – either directly or through
vehicles/funds – owned by internal [buy-in] or external [buy-out] management teams). They
are characterised by “non investment grade” credit ratings (less than BBB-) and/or by
remuneration that is higher than normal market levels.
Leveraged finance business is performed by Centrobanca and is regulated by the Group Credit
Risk Policy designed to combine the achievement of budget targets in terms of business
volumes and profits with appropriate management of the attached risks.
Briefly, operations are based on a maximum investment ceiling, reviewed annually and
allocated on the basis of rating classes for operations according to predefined maximum
percentages. The system of limits is calculated to seek appropriate diversification both in
terms of sector and the concentration of risk on single company or Group counterparties.
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