UBI Banca Group

uncertainty surrounding the outcomes, despite the steps forward taken in recent days with
the approval of a budget discipline pact and a permanent stability fund (Fiscal Compact and
ESM – European Stability Mechanism). A final solution, which would therefore succeed in at
least partially restoring the confidence of investors, seems today to be only on the horizon, at a
difficult point in time when in the first half of 2012 alone, the euro area has to face substantial
government debt issuances.
The elements of uncertainty identified could manifest with impacts attributable primarily to
credit and business risk, but without affecting the capital strength of the Group.
In detail, the main uncertainties identified for 2012 are linked to the following aspects:
- developments in the macroeconomic situation. The persistent pressures on sovereign debt in
the euro area and the continuing uncertainty over the consolidation of United States finances,
is having repercussions on the outlook for growth in advanced economies. This is reflected in
Italy by heavily depressed domestic demand, accompanied by household incomes that are still
contracting, high and growing unemployment and the consolidation of government finances
which will further cool the economic climate.
In the light of these considerations, in 2012 the rate of defaults is expected to remain at the
same high levels reached during the crisis and credit risk will only be able to reduce
significantly at the end of the restructuring process that is affecting the whole national
economy and the industrial sector in particular;
- changes in the legislative and regulatory context. The regulatory context is subject to various
processes of change following both the issue of a number of legislative provisions at EU and
national level, with the introduction of the relative regulations to implement them, relating to
the provision of banking services, and also to the related jurisprudence and decisions by the
courts (e.g. the form, content and modification of contracts, interest, other items of
remuneration for credit lines and overdrafts and the sale of insurance policies). This scenario,
which has introduced discontinuities in operations and has at times directly affected the
profits of banks, and/or costs for customers, requires particular effort both in terms of
interpretation and implementation.
Recent provisions that should be underlined include the Save Italy and Liberalisations decrees
which may have negative impacts on profits. The Group is studying action to soften the
impacts of that legislation, which includes constant and attentive monitoring of operating
costs and a constant search for efficiency in internal processes.
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The risks and uncertainties described above were subject to a process of assessment designed,
amongst other things, to examine the impacts of changes in market parameters and conditions
on corporate performance. The Group does in fact possess instruments to measure the possible
impacts of risks and uncertainties on its operations (sensitivity analysis and stress tests in
particular), which allow it to rapidly and continuously adapt its strategies – in terms of its
distribution, organisation and cost management systems – to changes in the operating context.
Risks and uncertainties are also under constant observation through the implementation of the
policies and regulations to govern risk adopted by the Group: policies are updated in relation to
changes in strategy, context and market expectations. Periodic monitoring of policies is designed
to verify their state of implementation and their adequacy. The findings of the analyses
performed show that the Group is able to meet the risks and uncertainties to which it is exposed,
which therefore confirms the assumption that it is a going concern.
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