Annual Report (ESEF) • Mar 26, 2024
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2023 REPORT & ACCOUNTS Pursuant to CMVM Regulation 1/2023, please find herein the transcription of the 2023 Annual Report BANCO COMERCIAL PORTUGUÊS, S.A. Public limited company Registered Office: Praça D. João I, 28, 4000-295 Porto - Share Capital Euros 3,000,000,000.00 Registered at Porto Commercial Registry, under the single registration and tax identification number 501 525 882 The 2023 Annual Report is a translation of the “Relatório e Contas de 2023” document delivered by Banco Comercial Português, S.A. to the Portuguese Securities and Market Commission (CMVM), in accordance with Portuguese law. The sole purpose of the English version is to facilitate consultation of the document by English-speaking Shareholders, Investors and other Stakeholders, and, in case of any doubt or contradiction between the documents, the Portuguese version of the “Relatório e Contas de 2023” prevails. All references in this document to the application of any regulations and rules refer to the respective version currently in force. JOINT MESSAGE OF THE CHAIRMAN OF THE BOARD OF DIRECTORS AND OF THE CEO 5 INFORMATION ON BCP GROUP 9 MAIN HIGHLIGHTS OF RESULTS IN 20 23 9 MAIN HIGHLIGHTS 10 INFORMATION ON BCP GROUP 12 GOVERNANCE 14 MAIN EVENTS IN 2023 17 BCP SHARE 22 QUALIFIED HOLDINGS 31 BUSINESS MODEL 32 REGULATORY, ECONOMIC AND FINANCIAL SYSTEM ENVIRONMENT 32 BUSINESS MODEL 38 MILLENNIUM NETWORK 42 FINANCIAL INFORMATION 43 RESULTS AND BALANCE SHEET 44 BUSINESS AREAS 94 STRATEGY 110 STRATEGIC PLAN 2021-2024 110 RISK AND OUTLOOK 114 INTERNAL CONTROL SYSTEM 115 MAIN RISKS AND UNCERTAINTIES 121 RISK MANAGEMENT 124 RATINGS ASSIGNED TO BCP 166 CAPITAL 168 PENSION FUND 169 INFORMATION ON TRENDS 172 NON-FINANCIAL INFORMATION 173 REGULATORY INFORMATION 177 CONSOLIDATED FINANCIAL STATEMENTS 177 ALTERNATIVE PERFORMANCE MEASURES 179 APPLICATION OF RESULTS 182 GLOSSARY 184 ACCOUNTS AND NOTES TO THE CONSOLIDATED ACCOUNTS 187 ACCOUNTS AND NOTES TO THE INDIVIDUAL ACCOUNTS 465 DECLARATION OF COMPLIANCE 689 ANNUAL REPORT OF THE AUDIT COMMITTEE 691 OPINION OF THE AUDIT COMMITTEE 702 SUMMARY OF THE SELF-ASSESSEMENT REPORT 705 EXTERNAL AUDITORS' REPORT 710 CORPORATE GOVERNANCE REPORT 735 2023 REPORT & ACCOUNTS | 3 2023 REPORT & ACCOUNTS | 4 Joint Message of the Chairman of the Board of Directors and of the CEO In 2023, global economic activity evolved favourably, though highly conditioned by geopolitical instability, while benefiting from the easing of inflation in the main economic blocs after the strong rise observed in 2022. In Portugal, the 2.3% expansion of activity reflected the remarkable resilience of the national economy in the face of the strong slowdown in the euro area and the rise in interest rates. This performance was underpinned by dynamic tourist activity in the first half of the year and a significant acceleration in private consumption in the final quarter of the year. In 2024, a greater moderation in the growth rate of the Portuguese economy is expected, in a context of less dynamic external demand. In Poland, the economy stagnated in 2023, after the strong growth recorded in 2022. However, the improvement in domestic demand that has been observed, as a result of the decrease in inflation and the reduction in interest rates, should translate into a trajectory of accelerating activity in 2024. The Mozambican economy has seen remarkable levels of growth, supported by the expansion of the extractive industry, in particular the production of natural gas. In 2024, the economy is expected to maintain robust growth levels, in a context of falling inflation and less restrictive monetary policy. It should be noted, however, that in the north of the country concerns remain about the activity of destabilizing radical groups. The Angolan economy, in 2023, slowed from 3.0% to 1.3%, penalized by contraction in oil sector activity, with the kwanza depreciating significantly, particularly at the beginning of the third quarter. For 2024, the IMF projects an acceleration in Angolan economic activity to 3.3%. In Macau, the end of the zero-covid policy decreed in December 2022 led to a very significant increase in the number of tourists during 2023. The recovery in economic activity allowed GDP to grow 77.7%, in the first nine months of the year, with robust growth also expected in 2024. In a complex context, in which uncertainties at a macroeconomic and geopolitical level increased, Millennium bcp's activity in 2023 was also influenced by favourable factors, particularly those resulting from the normalization of monetary policy. Millennium bcp ended the year with a consolidated net profit of 856 million euros, a substantial increase compared to the 197.4 million euros achieved in 2022. Special emphasis is given to the significant reinforcement achieved organically in the capital position in 2023, reflecting the quality of Millennium bcp's business model, the discipline in capital management and the return to positive annual results in Poland. In December 2023, the CET1 capital ratio reached 15.4% and the total capital ratio 19.9%, both comfortably above regulatory requirements. It is worth remembering, however, that these results came in a context of extraordinary adverse effects in Poland, not directly related to loans in Swiss francs, which in 2022 affected that year's result. These were significant, including the contribution of 59 million euros for the Institutional Protection Fund (IPS), the charges of 282.8 million euros for moratoriums on housing loans, and the recording of impairment of 102.3 million euros related to Bank Millennium's goodwill. In 2023, consolidated results continued to be influenced by significant additional effects related to Bank Millennium in Poland. There were charges in the amount of 779.7 million euros relating to the portfolio of mortgage loans in Swiss francs, of which provisions amounting to 623 million euros reflect the application of more conservative adjustments to the provisioning model resulting from the decision of the Court of European Union Justice, and other costs, particularly settlements with customers. Conversely, the results benefited from 139.1 million euros recorded in the first quarter, related to the sale of an 80% stake in Millennium Financial Services within the scope of the strategic partnership in the bancassurance area. The increase in Millennium bcp’s consolidated net income, in the different geographies, was largely based on the bank's intense commercial activity, reflected in the 31.7% growth in core operating income, which amounted to 2022 REPORT & ACCOUNTS | 5 2.44 billion euros, driven by the 23.1% increase in core revenue and efficient management of operating costs, which grew 8.3% in a context still marked by inflation. Both in the activity in Portugal, where growth was more significant, and in the international activity, core income showed relevant growth, mainly resulting from the increase in net interest margin, which rose 31.4% in the Group and 54.2% in Portugal. Net commissions, in turn, remained practically stable compared to the previous year, conditioned by the fact that, in the context of a loss of consumer purchasing power as a result of inflation, a decision was made to made to limit alterations to banking fees as well as the fact that governments have promoted legislative measures restricting these fees. In the current context of higher interest rates, which encourages customers to use part of their savings to pay down loans, and with intense competition in the sector to attract deposits, the bank presented a positive variation of 2.5% in on-balance sheet customer funds, which reached 79.2 billion euros, a performance that reflects the bank’s ability to gain the preference and trust of customers. The restrictive monetary policy aimed at reducing inflation also translates into a lower demand for loans, with the gross customer credit portfolio recording a slight retraction, standing at 56.8 billion euros in December 2023. The net profit of the activity in Portugal was 724.9 million euros in 2023, an increase of 111% compared to the net profit of 343.5 million euros in the previous year, a performance that confirms Millennium bcp's leadership in multiple business fronts in the Portuguese market. In international activity, net profit amounted to 131.2 million euros in 2023, showing a significant improvement when compared to the negative 146.1 million euros recorded in 2022. In Poland, Bank Millennium, which recorded profits for the fifth consecutive quarter, contributed significantly with a net profit of 126.8 million euros in 2023, which compares with a loss of 223.5 million euros in 2022. This trajectory confirms the quality of Bank Millennium's business model and its ability to simultaneously manage the significant impacts arising from legal risks associated with loans in Swiss francs, successfully implementing the planned measures to strengthen capital and increase business volumes in a market with high potential. In Mozambique, the quality of the commercial franchise, operational efficiency, and prudent risk management, allowed Millennium bim to continue to make a relevant contribution to consolidated results, presenting sustainable levels of profitability, resilient to different contexts, translating into a net profit of 105.1 million euros in 2023, in line with previous years. Improving the quality of the balance sheet continued to be a priority for the bank, continuing the consistent trajectory of recent years, based on the skills developed, with a reduction of 394 million euros in non-productive assets in 2023, including a decrease of 266 million euros in NPE, which placed the NPE ratio at 3.4% at Group level and 2.9% in Portugal. Most credit quality indicators evolved favourably and were accompanied by an increase in NPE coverage due to credit impairments, which reached 81.8% in 2023, a level that positions Millennium bcp well in a comparative analysis of the European banking sector, maintaining a robust total coverage of 122.5% considering the remaining collateral. Despite the challenging context and the considerable level of uncertainty in the markets in which it operates, the bank maintained prudent risk management, allowing it to contain the cost of risk at around 50 bp, in line with the strategic plan presented to the market. Commercial intensity was also reflected in the ability to attract customers, an indicator of the vitality of Millennium bcp and its growth potential, reflected in the expansion of the customer base, with emphasis on the 10% increase in mobile customers, which represented 68% of total active customers in December 2023. The symbiotic relationship between people and technology, combined with a commercial network comprised of high-quality professionals and advanced technological solutions that provide superior user experiences, continues to constitute the central and differentiating element of Millennium bcp's business model. The priority given to investment and innovation in mobile platforms has made a decisive contribution on this front, reflected in significant increases in transactions and sales made through these platforms. Millennium bcp's annual results confirm the success of the strategy being implemented, signalling the year 2023 as the end of the bank's transition period. More than a year in advance, the targets for year-end 2024 were exceeded in the main metrics defined in the strategic plan. 2022 REPORT & ACCOUNTS 6 | The preparation and rigorous work in pursuit of the defined objectives are clearly evident in the robustness of the business model that allowed the bank to achieve the results presented and progress to a new phase in the bank's life, returning to the normalization of its activity, with appropriate levels of return on own capital, which in 2023 stood at 16% (ROE), a trajectory also decisive for the attribution, by the four main rating agencies, of the Investment Grade rating, after successive upward revisions. Millennium bcp begins 2024 as a reference in terms of quality customer service, both in person and through digital channels, with reinforced innovation capacity, standing apart from most peers in terms of operational efficiency. The bank has a healthy balance sheet, demonstrates high skills in risk management and has achieved very robust capital and liquidity ratios. In short, with the indispensable support of Customers, Shareholders, Employees and other Stakeholders, Millennium bcp is today a bank prepared for the future. Miguel Maya Nuno Amado Chairman of the Executive Committee Chairman of the Board of Directors Vice-Chairman of the Board of Directors 2022 REPORT & ACCOUNTS | 7 2022 REPORT & ACCOUNTS 8 | Main highlights of the Results in 2023 Profitability Robust Business Model A Bank prepared for the future • Net income of 856.0 million euros in 2023. • Group’s core operating profit increase of 31.7% to 2,434.8 million euros, supported by the increase of 23.1% on core income and by the strict management of operating costs, which grew 8.3% compared with 2022. • Effects1 related with Bank Millennium: 779.72 million euros of costs related with CHF mortgage loan portfolio, out of which 623.03 million euros related with provisions, resulting from the application of more conservative assumptions to the provisioning model after the Court of Justice of the European Union ruling; results benefited, this year, of 139.1 million euros related with the sale of Millennium Financial Services stake (80%) as a result of the strategic partnership in the bancassurance business. • Net income of 724.9 million euros in the activity in Portugal in 2023, corresponding to an increase of 381.4 million euros compared with 2022. • Substantial strengthening of capital ratios. CET14 ratio stood at 15.4% and total capital ratio4 at 19.9% (an increase of 293 bp and 310 bp, respectively, compared with last year), reflecting the strong capacity to generate organic capital. • Liquidity indicators5, well above regulatory requirements: LCR at 276%, NSFR at 167% and LtD at 71%. • On-Balance sheet customer funds grew 2.5% year on year to 79.2 billion euros. • Significant decrease of non-performing assets compared with December 2022: 266 million euros in NPE, 83 million euros in foreclosed assets and 45 million euros in restructuring funds, a combined reduction of 14.0% from December 2022. • Growth of the customer base, highlighting the increase in mobile Customers (10% from December 2022), which represent 68% of total Customers. • Investment grade by the 4 rating agencies, after successive upward revisions. 2022 REPORT & ACCOUNTS | 9 Main highlights (1) Million euros 2023 2022 (restated) 2021 2020 2019 Chg. % 23/22 BALANCE SHEET Total assets 94,380 89,877 92,905 85,715 81,643 5.0% Equity 7,299 5,937 7,062 7,386 7,381 23.0% Loans and advances to customers (net) 55,218 56,198 56,360 53,975 52,275 (1.7%) Total customer funds 95,295 92,808 90,097 84,492 81,675 2.7% Balance sheet customer funds 79,215 77,250 71,175 64,764 62,607 2.5% Deposits and other resources from customers 77,928 75,907 69,560 63,259 60,847 2.7% Loans to customers (net)/Deposits and other resources from customers (2) 71% 74% 81% 85% 86% RESULTS Net interest income 2,826 2,150 1,589 1,532 1,549 31.4% Net operating revenues 3,770 2,857 2,334 2,257 2,335 31.9% Operating costs 1,163 1,073 1,116 1,090 1,166 8.3% Operating costs excluding specific items (3) 1,147 1,057 1,025 1,044 1,100 8.6% Results on modification (19) (310) — — — 93.7% Impairment and Provisions 1,100 1,056 1,061 841 542 4.1% Income tax 537 304 204 132 239 76.6% Net income attributable to shareholders of the Bank 856 197 138 183 302 >200% PROFITABILITY AND EFFICIENCY Net operating revenues/Average net assets (2) 4.1% 3.0% 2.6% 2.7% 2.9% Return on average total assets (ROA) 1.0% 0.1% 0.0% 0.2% 0.5% Income before tax and non-controlling interests/Average net assets (2) 1.6% 0.4% 0.3% 0.4% 0.8% Return on average shareholders' equity (ROE) 16.0% 3.9% 2.4% 3.1% 5.1% Income before tax and non-controlling interests/Average equity (2) 23.8% 7.2% 3.3% 4.8% 8.9% Net interest margin 3.36% 2.46% 1.93% 2.00% 2.18% Cost to core income (3) 31.9% 36.2% 44.2% 47.3% 48.8% Cost to income (2) 30.8% 37.6% 47.8% 48.3% 49.9% Cost to income (2)(3) 31.6% 37.0% 43.9% 46.3% 47.1% Cost to income - activity in Portugal (2)(3) 29.5% 37.2% 42.6% 46.2% 47.4% Staff costs/Net operating revenues (2)(3) 17.0% 19.7% 24.1% 25.9% 26.9% CREDIT QUALITY Non-performing exposures 1,952 2,218 2,752 3,295 4,206 Non-performing exposures (loans to customers)/Loans to customers 3.4% 3.8% 4.7% 5.9% 7.7% Total impairment (balance sheet)/NPE (loans to customers) 81.8% 68.3% 68.0% 62.9% 58.2% Restructured loans 1,729 1,866 2,564 2,661 3,097 Restructured loans/Loans to customers 3.0% 3.2% 4.4% 4.7% 5.7% Cost of risk (net of recoveries) 42b.p. 52b.p. 60b.p. 92b.p. 72b.p. LIQUIDITY Liquidity Coverage Ratio (LCR) 276% 212% 269% 230% 216% Net Stable Funding Ratio (NSFR) 167% 154% 150% 140% 135% CAPITAL(4) Own funds fully-implemented 7,903 7,241 7,247 7,213 7,028 Risk Weighted Assets fully-implemented 39,725 43,106 45,863 46,322 44,972 Common equity tier I fully-implemented ratio 15.4% 12.5% 11.7% 12.2% 12.2% Total ratio fully implemented 19.9% 16.8% 15.8% 15.6% 15.6% Common equity tier I phased-in ratio 15.5% 12.6% 11.7% 12.2% 12.2% BCP SHARE Market capitalisation (ordinary shares) 4,147 2,213 2,130 1,862 3,065 #REF! Adjusted basic and diluted earnings per share (euros) 0.054 0.010 0.007 0.010 0.018 Market values per share (euros) High 0.3309 0.1982 0.1709 0.2108 0.2889 Low 0.1529 0.1218 0.1126 0.0697 0.1771 Close 0.2744 0.1464 0.1409 0.1232 0.2028 2023 REPORT & ACCOUNTS 10 | (1) Some indicators are presented according to management criteria of the Group, which concepts are described and detailed at the glossary and at alternative performance measures chapter, being reconciled with the accounting values in the respective chapters. From 31 May 2019, financial statements of the Group reflect the consolidation of Euro Bank S.A., the entity acquired by Bank Millennium S.A. Following the sale, in 2021, of the entire share capital of Banque Privée BCP (Suisse) S.A. to Union Bancaire Privée, UBP S.A. and the sale of 70% of the investment held in Seguradora Internacional de Moçambique, S.A. (“SIM”), now designated Fidelidade Moçambique - Companhia de Seguros, S.A., through its subsidiary BIM - Banco Internacional de Moçambique, S.A., the contribution of these subsidiaries to the consolidated results of the Group, till the date of disposal, is reflected as income from discontinued operations in the international activity and the historical information has been restated since January 2020, in order to ensure its comparability, as defined in the IFRS 5. The accounting of assets and liabilities of Banque Privée BCP (Suisse) S.A. and of SIM was not changed compared to the criteria considered in the financial statements published in previous periods. In this context and taking into account the immateriality of the balance sheet balances of these operations in the Group, the calculation of the indicators relating the performance of the profit and loss account to the balance sheet items was not adjusted, with the exception of net interest margin, that reflects the fact that the assets of those subsidiaries were no longer considered interest earning assets in historical information regarding 2021 and 2020. (2) According to Instruction no. 16/2004 from the Bank of Portugal, as the existing version as of 31 December 2023. (3) Excludes the impact of specific items. In 2023, the impact was positive in the amount of 124 million euros, including income of 139 million euros recognised in the international activity, related to the sale of 80% of the shares in Millennium Financial Services sp. z o.o. (128 million euros recognised as net trading income and 11 million euros recognised as other net operating income) and costs of 15 million euros recognised as staff costs in the activity in Portugal [(i) costs related to the compensation for the temporary reduction in employees remunerations during 2014-2017, as distribution of part of the Bank's results obtained in 2022; (ii) costs with employees terminations, namely early retirements; (iii) costs with mortgage financing to former employees; and (iv) income recognised after an agreement related to liabilities with former directors of the Bank]. In 2022, the impact was negative of 16 million euros, recognised in staff costs in the activity in Portugal, including: (i) distribution of part of the Bank's results obtained in 2021 by the employees of the Bank; (ii) costs with mortgage financing to former employees; (iii) discretionary remuneration paid to employees as a measure to offset the impacts of inflation; and iv) the recognition of a provision for other structure adaptation measures. In 2021, the impact was also negative, in the amount of 91 million euros, mainly related to the adjustment of headcount carried out by the Bank in that year, including a provision in the amount of 84 million euros. In 2020, the impact was also negative, in the amount of 46 million euros, of which 32 million euros related to headcount adjustment costs, compensation cost for temporary remuneration cuts of employees under the participation in the results and income arising from the agreement with a former director of the Bank, and 15 million euros related to acquisition, merger and integration of Euro Bank S.A. In 2019, the impact was also negative in the amount of 66 million euros, of which 40 million euros related to headcount adjustment costs and costs with compensation for temporary remuneration cuts, and 26 million euros related to acquisition, merger and integration of Euro Bank S.A. The profitability and efficiency indicators does not consider the specific items recognized in net operating revenues (1 million euros in 2019 and an immaterial amount in 2020), related to costs with the acquisition, merger and integration of Euro Bank S.A. (4) Presented figures include the cumulate net results of the respective periods. 2023 REPORT & ACCOUNTS |11 Information on BCP Group Brief description Banco Comercial Português, S.A. (BCP, Millennium bcp or Bank) is the largest Portuguese private sector bank. The Bank, with its decision centre in Portugal, operates and acts with respect for people and institutions, focusing on the Customer, pursuing a mission of excellence, trust, ethics and responsibility, and is a distinguished leader in various financial business areas in the Portuguese market and a reference institution on an international level. The Bank also holds a prominent position in Africa through its banking operation in Mozambique (in Angola, Banco Millennium Angola - BMA merged with Banco Privado Atlântico-BPA and currently the Bank holds a equity accounted shareholding) and in Europe through its banking operation in Poland. Since 2010, the Bank operates in Macau through a full branch. Bank History BCP was incorporated on 17 June 1985 as a limited liability company ("sociedade anónima") organised under the Portuguese laws, following the deregulation of the Portuguese banking industry. BCP was founded by a group of over 200 shareholders and a team of experienced banking professionals who sought to capitalise on the opportunity to form an independent financial institution that would serve the then underdeveloped Portuguese financial market more effectively than state-owned banks. While the Bank's development was initially characterised by organic growth, a series of strategic acquisitions helped solidify its position in the Portuguese market and increase its offering of financial products and services. In March 1995, BCP acquired control of Banco Português do Atlântico, S.A. ("Atlântico"), which was then the largest private sector bank in Portugal. This was followed by a joint takeover bid for the whole share capital of Atlântico. In June 2000, Atlântico was merged into BCP. In 2000, BCP also acquired Império, along with Banco Mello and Banco Pinto & Sotto Mayor. In 2004, with a view to strengthening its focus on the core business of distribution of financial products and optimising capital consumption, BCP sold insurers Império Bonança, Seguro Directo, Impergesto and Servicomercial to the Caixa Geral de Depósitos group. BCP also entered into agreements with Fortis (now named Ageas) for the sale of a controlling stake and management control of insurers Ocidental - Companhia Portuguesa de Seguros, S.A., Ocidental - Companhia Portuguesa de Seguros de Vida, S.A. and Médis - Companhia Portuguesa de Seguros de Saúde, S.A., as well as the pension fund manager PensõesGere - Sociedade Gestora de Fundos de Pensões, S.A. In 2004, the Bank sold its non-life insurance businesses and divested a portion of its life insurance business by entering into a joint venture with Ageas (formerly Fortis), named Millenniumbcp Ageas, of which 51% is held by Ageas and 49% by the Bank. After the consolidation of its position in the Portuguese banking market, the Bank focused on the development of its retail business in new regions, with the goal of attaining significant positions in emerging markets in Europe and in Africa. The Bank concentrated on businesses with strong growth prospects in foreign markets with a close historical connection to Portugal or that have large communities of Portuguese origin (such as Angola, Mozambique, the United States, Canada, France, Luxembourg and Macao), as well as in markets where the Bank's successful Portuguese business model could be effectively exported to and tailored to suit such local markets (such as Poland, Greece and Romania). The Bank has pursued a consistent strategy of market segmentation. Until 2003, these segments were served through autonomous distribution networks operating under a variety of brand names. In October 2003, BCP began the process of replacing these brands in Portugal with a single brand name: Millennium bcp. The rebranding in other markets was completed in 2006. All banking operations controlled by BCP are now carried out under the "Millennium" brand. In Portugal, the Bank also operates under the "ActivoBank" brand. In recent years, the Bank has refocused on operations that it considers core to its business. As part of this refocus, the Bank divested several of its international operations (in France, Luxembourg, United States, Canada, Greece, Turkey and Romania), while retaining commercial protocols to facilitate remittances from Portuguese emigrants in some markets. In 2010, the Bank transformed its Macao off-shore branch into an on-shore branch. In February 2012, the Bank adopted a management restructuring through the introduction of a one-tier management and supervisory model, in which the Board of Directors includes an Executive Committee and an Audit Committee (the latter comprising non- executive members, and with a majority of independent members, in accordance with the applicable law). In December 2012, the Bank prepared and presented to the Portuguese government a Restructuring Plan, required by national law and by the applicable European rules on matters of State aid. The Restructuring Plan was formally submitted by the Portuguese government to the EC and, In July 2013, the Bank agreed on the plan with the EC, entailing an improvement of the profitability of the 2023 REPORT & ACCOUNTS 12 | Bank in Portugal through continued cost reduction, among other drivers. On September 2013, the DG Comp announced its formal decision in connection with its agreement with the Portuguese authorities concerning the Bank's Restructuring Plan. Pursuant to the decision, the Bank's Restructuring Plan was found in compliance with the European Union's rules relating to State aid, demonstrating the Bank's viability without continued State support. The implemented Restructuring Plan aimed at strengthening the Bank's strategy by focusing on its core activities. In May 2014, as part of a process to refocus on core activities defined as a priority in its Strategic Plan, the Bank announced that it agreed with the international insurance group Ageas a partial recast of the strategic partnership agreements entered into in 2004, which included the sale of its 49% interest in the (currently jointly owned) insurance companies that operate exclusively in the non-life insurance business, i.e. Ocidental – Companhia Portuguesa de Seguros, S.A. and Médis – Companhia Portuguesa de Seguros de Saúde, S.A.. In April 2016, the Bank announced the conclusion of the merger between Banco Millennium Angola, S.A. with Banco Privado Atlântico, S.A., resulting in the second-largest private sector bank in Angola in terms of loans to the economy, with a market share of approximately 10% in business volume. The entity resulting from this merger ceased to be controlled by BCP. In January 2017, BCP announced a Euros 1.3bn rights issue with transferable pre-emptive subscription rights. The aim of this transaction was to bring forward the full repayment of remaining Government Subscribed Securities and the removal of key State-aid related restrictions, including the dividend ban, the risk of potential sale of core businesses and the tail risk of conversion. This transaction was designed to strengthening the balance sheet through the improvement of the CET1 FL ratio and Texas ratio, bringing them in line with new industry benchmarks and above regulatory requirements. On December 27, 2019, the merger deed of Banco de Investimento Imobiliário, S.A., a wholly-owned subsidiary of Banco Comercial Português, S.A., by incorporation into the latter, was signed, thus completing the incorporation process of Banco de Investimento Imobiliário, S.A. into Banco Comercial Português, S.A.. On 27 August 2019, the Extraordinary General Meeting of Bank Millennium S.A., in which 216 shareholders representing 78.53% of its share capital, participated, approved the merger of Bank Millennium S.A. with Euro Bank S.A.. The completion of the integration of Eurobank S.A. into Bank Millennium S.A. took place in November, with the Bank resulting from the merger now operating under a single brand, a single operating system and a single legal entity. On June 29, 2021 BCP entered into an agreement with Union Bancaire Privée, UBP SA regarding the sale of the entire share capital of Banque Privée BCP (Suisse) SA (“Banque Privée”). The sale of the entire share capital of Banque Privée BCP (Suisse) SA (“Banque Privée”) to Union Bancaire Privée, UBP SA was completed on November 2, 2021. The sale of Banque Privée allows BCP Group to pursue its strategy of focusing resources and management on core geographies, enhancing their development and thus creating value for stakeholders. On 29 December 2021, BIM – Banco Internacional de Moçambique, SA (a bank incorporated under Mozambican law in which BCP indirectly holds a stake of 66.69%) formalized the entry into force of a long-term agreement with Fidelidade – Companhia de Seguros, SA, with a view to strengthening capabilities and expanding the offer of insurance through the banking channel (bancassurance) in Mozambique. Under this partnership, the possibility of which was provided for in the memorandum of understanding signed between BCP and the Fosun Group in November 2016, BIM and Fidelidade also formalized the sale by BIM to Fidelidade of shares representing 70% of the share capital and voting rights of Seguradora Internacional de Moçambique, SA, with BIM maintaining approximately 22% of its share capital. BIM and Fidelidade also agreed call and put options with a view to enabling Fidelidade to acquire additional shares, and BIM's shareholding, as a result of these options, may be reduced to 9.9% of SIM's capital. Under the long- term exclusive distribution agreement, BIM will promote the distribution of SIM insurance through the banking channel, continuing to provide its customers with a wide range of competitive insurance products, which is reinforced by the partnership with Fidelidade, an Insurance Group of reference. In the 1st half of 2023, Bank Millennium concluded the sale of 80% of Millennium Financial Services, as part of the strategic partnership in the bancassurance area. 2023 REPORT & ACCOUNTS |13 Governance Banco Comercial Português, S.A. has a one-tier management and supervision model, composed of a Board of Directors (BD), which includes an Executive Committee (EC) and an Audit Committee composed of only non-executive directors. The Company also has a Remuneration and Welfare Board (RWB) and a Strategic Board. In addition, the Group uses a Statutory Auditor and an external auditing firm to audit the individual and consolidated accounts of the Bank, elected at the General Meeting. The General Meeting is the highest governing body of the company, representing all shareholders, and its resolutions are binding for all when adopted under the terms of law and the articles of association. The General Meeting is responsible for: • Electing and dismissing the Board, as well as the members of the management and supervisory bodies, and the RWB; • Approving amendments to the articles of association; • Resolving on the annual management report and accounts for the year and proposed appropriation of profits; • Resolving on matters submitted upon request of the management and supervisory bodies; • Resolving on all issues especially entrusted to it by the law or articles of association, or on those not included in the duties of other corporate bodies. The BD is the governing body of the Bank with the amplest powers of management and representation, pursuant to the law and the articles of association. Under the terms of the Bank's By-Laws, the Board is made up of a minimum of 15 and a maximum of 19 members with and without executive functions, elected by the General Meeting of Shareholders for a period of four years, with re-election permitted. As of December 31, 2023, the Board of Directors was made up of 17 members, of which 15 were elected at the General Meeting of Shareholders held on May 4, 2022 and 2 were co-opted by the Board of Directors on October 11, 2022, having the co-option was ratified at the General Assembly held on December 20, 2022, after authorization for the exercise of functions by the ECB (on December 7). Of the 17 members that make up the BD, 6 are executive and 11 are non-executive, with 5 qualified as independent. The BD began its functions on September 5, 2022 and appointed an EC, composed of six of its members, with the Chief Executive Officer being appointed by the General Meeting, with the two co- opted members starting their duties on February 4, 2023. The BD has delegated to the EC the day-to- day management of the Bank, which is assisted by several committees and subcommittees in the exercise of this management function, to which it monitors certain relevant matters. On January 5, 2024, non-independent non- executive Director Xiao Xu Gu (Julia Gu) submitted a letter of resignation from her position, taking effect on February 29. Banco Comercial Português, S.A. is in the process of identifying and selecting a new non-executive member to join the Board of Directors. The supervision of the company is ensured by an Audit Committee (AudC), elected by the General Meeting of Shareholders, and composed of a minimum of 3 and a maximum of 5 members, elected together with the other administrators, and the lists proposed for the BD must detail the members who are intended to form part of the Audit Committee and indicate the respective President. AudC is made up of 3 non-executive directors, the majority of whom are independent members as well as its president and also includes an alternate member. The RWB and the Strategic Council have the functions described in the By-Laws, with the latter Council being a non-permanent body. The Company Secretary and the Alternate Secretary are appointed by the Bank's BD, and their term-of- office matches that of the BD that appointed them. 2023 REPORT & ACCOUNTS 14 | Corporate Governance Model 2023 REPORT & ACCOUNTS |15 Identification and composition of the Corporate Bodies and Committees from the Board of Directors The Board of Directors and its Committees currently have the following composition: Board of Directors (BD) Executive Committee (EC) Audit Committee (AudC) Remuneration and Welfare Board (RWB) Committee for Corporate Governance, Ethics and Sustainability (CCGES) Committee for Nominations and Remunerations (CNR) Committee for Risk Assessment (CRA) Nuno Manuel da Silva Amado (Chairman of BD and of CGSES) Jorge Manuel Baptista Magalhães Correia (Vice- Chairman of BD and Member of RWB) Valter Rui Dias de Barros (Vice-Chairman of BD) Miguel Maya Dias Pinheiro (Vice- Chairman of BD) Ana Paula Alcobia Gray Cidália Maria da Mota Lopes (Chairman of AudC) Fernando da Costa Lima (Chairman of (CRA) João Nuno de Oliveira Jorge Palma Lingzi Yuan (Smilla Yuan) (Chairman of CNR) José Miguel Bensliman Schorcht da Silva Pessanha Lingjiang Xu Maria José Henriques Barreto de Matos de Campos Miguel de Campos Pereira de Bragança Rui Manuel da Silva Teixeira Xiao Xu Gu (Julia Gu) Altina de Fátima Sebastian Gonzalez ** José Pedro Rivera Ferreira Malaquias * Director resigned from her position on January 5, 2024, taking effect on February 29. ** Substitute member of the Audit Committee. The Remuneration and Welfare Board is chaired by José António Figueiredo Almaça and composed of the two vice-presidents mentioned above. The Strategic Council, as a consultative and non-permanent body, has a variable composition, with the President and Vice-Presidents of the Board of Directors being inherent members. The Board of the General Assembly has the following composition: President: Pedro Rebelo de Sousa Vice President: Octávio Castelo Paulo Secretary of the Board: Company Secretary (Ana Moniz Macedo) 2023 REPORT & ACCOUNTS 16 | Main events in 2023 During 2023 and under a challenging macroeconomic environment, the Bank kept its focus on supporting households and companies. BCP informed on December 18, 2023 that DBRS Morningstar rating agency upgraded the Bank's senior unsecured debt ratings from BBB (low) to BBB and deposits ratings from BBB to BBB (high), one notch above the Intrinsic Assessment, reflecting the legal framework in place in Portugal which has full depositor preference in bank insolvency and resolution proceedings. This upgrade of BCP's ratings by DBRS Morningstar reflected the improvement in profitability and the strengthening in capitalization levels while maintaining adequate asset quality. The stable trend reflects DBRS Morningstar expectations that the Bank will maintain adequate profitability levels and solid capital buffers. The stable trend also takes into consideration the Bank’s adequate funding structure coupled with solid liquidity buffers. Banco Comercial Português, S.A. announced on December 5, 2023, that, following the entry into force of Decree- Law no. 31/2022, of 6 May, approving the new legal regime of covered bonds and transposing Directive (EU) 2019/2162 (“Legal Regime of Covered Bonds”), the conversion of its existing covered bonds programme into a covered bonds programme compliant with the Legal Regime of Covered Bonds, in the total amount of €12,500,000,000 (the “Programme”), was approved on the present date by the Portuguese Securities Commission (Comissão do Mercado de Valores Mobiliários) (“CMVM”). Fitch Ratings has upgraded on January 17, 2023, BCP Portuguese mortgage covered bonds to 'AA+' from 'A'. BCP informed, on 4 December 2023, that it received the decision from the European Central Bank (ECB) under the context of the Supervisory Review and Evaluation Process (SREP), it has been notified of the decision of the European Central Bank (ECB) regarding minimum prudential requirements to be fulfilled on a consolidated basis from January 1, 2024. The minimum prudential requirements to be in force from January 2024 remained unchanged compared to the requirements in force in 2023. BCP, in that announcement, also informed the decision from Banco de Portugal on its capital buffer requirement as “other systemically important institution” (O-SII). Buffers include the conservation buffer (2.5%), the countercyclical buffer (0%) and the buffer for other systemically important institutions (O-SII: 1.0%). BCP informed that Moody’s rating agency on 22 November 2023, upgraded the Bank's senior unsecured debt ratings from Baa3 to Baa2 and deposits ratings from Baa2 to A3, positioning the rating assigned to deposits at the same risk level to that assigned to the Portuguese Republic. This upgrade of BCP's ratings by Moody’s reflected the reduction in the stock of non-performing assets (NPA), the improvement in capitalization levels as well as the improvement in domestic recurrent profitability. The rating action on BCP also reflects the recent upward revision of the Portuguese Republic's debt rating, from Baa2 to A3. In the scope of the review carried out by Moody’s, it was simultaneously communicated, the upgrade of the Baseline Credit Assessment (BCA) and Adjusted BCA from Ba2 to Ba1, the junior senior debt rating to (P)Ba1, the dated subordinated debt to (P)Ba2 and the preference shares rating to B1(hyb). Additionally, Moody’s informed, on the same date that the rating of BCP's covered bonds program was upgraded from Aa2 to Aaa. The Outlook on the long-term deposit and senior unsecured debt ratings is currently stable, reflecting Moody's view of the expected performance of the Bank over the next 12 to 18 months. BCP informed on November 17, 2023, that it was notified by the Banco de Portugal on the decision to implement a reserve for sectoral systemic risk, which aims to reinforce the resilience of the banking sector of a potential deterioration in economic conditions and/or unexpected significant correction in residential property prices. The reserve for sectoral systemic risk complements the current prudential recommendation and consists of a preventive measure to address the possible materialization of potential risks. The Banco de Portugal's decision translates into the requirement to comply with a reserve for sectoral systemic risk of 4% on the amount of risk exposures on the retail portfolio of loans to individuals collateralized by residential properties located in Portugal, calculated in pursuant to paragraph 3 of article 92 of Regulation (EU) 575/2013, from 1 October 2024, onwards, at the highest level of consolidation in Portugal, considering the applicable legal framework. 2023 REPORT & ACCOUNTS |17 Banco Comercial Português, S.A. informs that the decision to impose this measure, that aims to create a reserve for sectoral systemic risk, would translate on a pro forma basis into an estimated increase in own funds requirements of 26 basis points. BCP informed that on November 13, 2023, it has received permission from the ECB to reduce its Own Funds, through the exercise of the early redemption option of the currently outstanding Additional Tier 1 (“AT1”) instrument, considering that following the said reduction, BCP´s own funds and eligible liabilities, on a consolidated basis, are expected to exceed the requirements laid down in Regulation (EU) No 575/2013, Directive 2013/36/ EU of the European Parliament and of the Council and Directive2014/59/EU of the European Parliament and of the Council by a margin that the ECB considers necessary. On 25 September 2023, BCP has fixed the terms for a new issue of senior preferred debt securities eligible for MREL (Minimum Requirement for own funds and Eligible Liabilities), under its Euro Note Programme. The issue, in the amount of 500 million euros, has a tenor of 3 years, with the option of early redemption by the Bank at the end of year 2, an issue price of 99.825% and an annual interest rate of 5.625% during the first 2 years (corresponding to a spread of 1.90% over the 2-year mid-swap rate). The interest rate for the 3rd year was set at 3-month Euribor plus a 1.90% spread. Fitch Ratings upgraded on 21 September BCP's long-term senior unsecured debt ratings to Investment Grade. This upgrade reflects the Fitch Ratings’ view that BCP’ capital ratios have increased to levels considered adequate. This improvement has been supported by materially stronger profitability given higher interest rates, strong cost efficiency and a balance sheet with reduced credit risk. The upgrade also reflects reduced risks surrounding litigation costs coming from its Polish subsidiary in relation to legacy Swiss franc-denominated mortgage loans. The Outlook on the Long-Term IDR is Stable. Fitch Ratings also raised the ratings on BCP's Additional Tier 1 and Tier 2 instruments by one notch. S&P Global Ratings upgraded on 12 September BCP's senior unsecured debt ratings to Investment Grade. This upgrade reflects the view that BCP creditworthiness has gradually improved in absolute terms and relative to peers due to a combination of extraordinary measures and solid internal capital generation driven by improving profitability, based on better-than-peer efficiency levels and the expectation that a possible asset quality deterioration will be manageable. The rating on BCP also incorporates potential downside risks arising from the group’s Polish operations and its impact on earnings in 2023 and 2024. The Outlook is Stable. S&P Global Ratings also raised the ratings on BCP's Additional Tier 1 and Tier 2 instruments by two notches. Banco Comercial Português, S.A. was subject on 28 July 2023 to the 2023 EU-wide stress test conducted by the European Banking Authority (EBA), in cooperation with the Banco de Portugal (BdP), the European Central Bank (ECB), and the European Systemic Risk Board (ESRB). Banco Comercial Português, S.A. notes the announcements made on July 28 by the EBA on the EU-wide stress test and fully acknowledges the outcomes of this exercise, comprising 70 banks that together represent around 75% of total banking assets in the European Union. The 2023 EU-wide stress test does not contain a pass-fail threshold and instead is designed to be used as an important source of information for the purposes of the Supervisory Review and Evaluation Process (SREP). The results will assist competent authorities in assessing Banco Comercial Português, S.A. ability to meet applicable prudential requirements under stressed scenarios. The adverse stress test scenario was set by the ECB/ESRB and covers a three-year time horizon (2023-2025). The stress test has been carried out applying a static balance sheet assumption as of December 2022, and therefore does not take into account future business strategies and management actions. It is not a forecast of Banco Comercial Português, S.A. profits. When analysing the results, it should be taken into account that the projections made under the adverse scenario incorporated a significant increase in provisions associated with the legal risk related to credits indexed to Swiss Francs at Bank Millennium in Poland. Considering the results of Banco Comercial Português, S.A, in the stress test, it should be highlighted the following: • the application of the adverse scenario resulted in a reduction of 448 b.p. in the fully loaded CET1 capital ratio at the end of 2025 compared to December 2022, which compares with an average reduction of 459 b.p. in the universe of the 70 banks submitted to this exercise. • the application of the baseline scenario resulted in an increase of 256 b.p. in the fully loaded CET1 capital ratio at the end of 2025 compared to December 2022, which compares with an average increase of 136 b.p. Millennium bcp and the European Investment Fund (EIF) signed a guarantee agreement worth 405 million euros within the scope of InvestEU to support investment in the EU's main priorities. The new credit lines will facilitate financing for Portuguese SMEs. Millennium bcp was distinguished as climate leader in Europe by the Financial Times and Statista. For the third consecutive year, the Bank is part of the “Europe’s Climate Leaders 2023” ranking prepared by the two institutions. 2023 REPORT & ACCOUNTS 18 | BCP was notified on 12 July by Banco de Portugal, as the national resolution authority, about the update of its minimum requirement for own funds and eligible liabilities ("MREL" or "Minimum Requirement for own funds and Eligible Liabilities") as decided by the Single Resolution Board. The resolution strategy applied continues to be that of a multiple point of entry ("MPE"). The MREL requirements to be met by BCP Group of Resolution (consisting of BCP, S.A., Banco ActivoBank, S.A. and all the subsidiary companies of BCP apart from Bank Millennium S.A. and Banco Internacional de Moçambique and their respective subsidiaries), from 1 January 2024 is of: • 24.65% of the total risk exposure amount ("TREA") (to which adds further a combined buffer requirement ("CBR") of 3.5%, thus corresponding to total requirements of 28.15%); and • 6.71% of the leverage ratio exposure measure ("LRE"). The Resolution Group centred in Portugal is not subject to any subordination requirements. In accordance with the regulations in force, MREL requirements could be annually updated by the competent authorities, and therefore these targets replace those previously set. Banco Comercial Português, S.A. concluded on May 24, through electronic means and, simultaneously, at the Bank's facilities, with 64.29% of the share capital represented, the Annual General Meeting of Shareholders, with the following resolutions being highlighted: • Approval of the individual and consolidated Annual Report, the balance sheet and financial statements of 2022, and the Corporate Governance Report, which includes a chapter on the remuneration of the management and supervisory bodies, and the Sustainability Report, and the proposal for the appropriation of profit concerning the 2022 financial year. • Approval of the updating of the policy for the remuneration of Members of the Management and Supervisory Bodies and revoking the retirement regulation of the Executive Directors. • Approval of the update of the policy for selection and appointment of the Statutory Auditor or Audit Firm and the hiring of not prohibited non-audit services under the terms of the legislation in force. S&P Global Ratings, DBRS and Moody's revised the Outlook from Stable to Positive on April 17th, May 24th and May 26th, respectively. Fitch Ratings on March 17 upgraded BCP’s long-term deposits rating to ‘BBB-’ and the long-term Issuer Default Rating to ‘BB+’, with a stable Outlook. BCP's ratings upgrade primarily reflect the bank’s improved asset quality, the improvement in capitalisation and resilient pre-impairment profitability, due to a leading franchise in Portugal and sound cost efficiency. Bank Millennium S.A. on February 13 executed the agreement for the sale of 80% of the shares in Millennium Financial Services sp. z o.o. and concluded also certain agreements concerning an exclusive insurance distribution model, including a cooperation agreement and distribution and agency agreements. On 29 March 2023, Bank Millennium S.A. informed the completion of the transaction resulting in the recognition of the correspondent extraordinary positive financial result, in the first quarter of 2023, of 597 million Zlotys before taxes (127 million euros). AWARDS AND DISTINCTIONS • Millennium bcp and ActivoBank were elected “Consumer Choice” in 2024. Millennium was distinguished in the “Large Banks” and “Banking Apps” categories, respectively, and Activo Bank in the “Digital Banking” category. Millennium bcp was distinguished for the fourth consecutive year while ActivoBank has been in leadership for six years. • Millennium bcp distinguished in the 2024 “Cinco Estrelas” (Five Stars) Awards in the category of Large Banks. • Best Service in the treasury management category in Portugal by Euromoney magazine, within the scope of the 2023 Euromoney Cash Management Non-Financial Institutions Survey, which chooses the institutions that present the best services to their Customers. • Millennium bcp distinguished in the 2nd edition of the AERI-Iberian Equity Awards in the “Best IR Professional” category. • Millennium bcp was once again included in the Stoxx Europe 600 index, which is a reference for institutional investors in the capital markets. • Best Bank for Sustainable Finance in Portugal awarded by Global Finance magazine. 2023 REPORT & ACCOUNTS |19 • Leadership in the Inovadora COTEC Program for the third consecutive year with 54% market share. • Millennium bcp was included for the fourth year in the Bloomberg Gender-Equality Index, remaining in the elite group of companies, that worldwide, stand out for their implementation of policies and practices of gender equality, diversity, and inclusion. • Millennium bcp was distinguished as Local Market Member in Equity in the Euronext Lisbon Awards. • Millennium bcp was named “Best Investment Bank” in Portugal by Global Finance. • Millennium bcp was once again distinguished as the Best Bank in Marketing and Services on Social Networks (Best Consumer Social Media Marketing and Services) in Portugal in 2023, by Global Finance magazine. • Millennium bcp was once again distinguished as the Best Bank in Information Security and Fraud Management in Portugal in 2023 - (The Best Consumer Information Security and Fraud Management in Portugal for 2023), by Global Finance magazine. • Millennium bcp distinguished as "The Best Consumer Lending in Portugal in 2023” by Global Finance magazine. • Millennium bcp distinguished as the Best Bank in Portugal in the “Sustainable Finance Awards 2023” by Global Finance magazine. • Millennium bcp was named “Best Consumer Digital Bank” in Portugal, and the Millennium App also being considered “Best Consumer Mobile Banking App” by Global Finance. • Millennium App was distinguished with the “Product of the Year” and “Prémio Cinco Estrelas” awards, in the “Banking Apps” category, a distinction awarded by Five Star Consulting Portugal and Consumer Choice. • Millennium bcp is Europe’s “Best Private Bank for Self-Directed Investments” according to Professional Wealth Management, a publication of the Financial Times Group, in the PWM Wealth Tech Awards 2023. • Millennium bcp has won the APCC Contact Centers 2023 award in the category of Best Banking Contact Center in Portugal. • Millennium bcp has won award Marketeer in the category Banking and Finance. • IziBizi software, the first invoicing and management software with Bank Account that merges the Cloudware Business billing and management software with Millennium bcp's financial services and Open Banking API, was distinguished at the “Fosun Group 2023 Semi Annual Awarding” with the “Most Innovative Product Award”. IziBizi also won in the “Top Tech of the Future by a Bank” category of the PayTech Awards 2023. • ActivoBank was named for the second consecutive time as “Powerful Brand” in the “Online Banking” category. • Bank Millennium among the most trustworthy companies in the world in 2023. • Bank Millennium is the Best Bank in Poland according to Newsweek's Friendly Bank ranking. • Bank Millennium distinguished as “Best Bank in Poland” in 2023 by Global Finance. • Bank Millennium was distinguished as the “Best Digital Bank” in Poland in 2023, by Global Finance magazine. • Bank Millennium distinguished as the “Best Digital Bank” in Poland for SMEs ("The Best Bank for SMEs in Poland for 2023”) by Global Finance magazine. • Bank Millennium distinguished with the “Best Consumer Mobile App” in Poland 2023, by Global Finance magazine. • Bank Millennium's Contact Center was highlighted at the Polish Contact Center Awards 2023, having reached the podium six times, in what is the biggest event in the sector, which recognises the best contact centers and best customer service in Poland. • Bank Millennium was in the Top 10 in the 17th edition of the Ranking of Responsible Companies. Bank Millennium was once again among the best, occupying sixth position, in the prestigious list of the largest companies in Poland evaluated for the quality of responsible management in accordance with ESG guidelines. • Bank Millennium came in second place on the ranking list of best employers in the “Banking and Financial Services” category in the 3rd edition of the Best Employers Poland 2023 ranking prepared by Forbes Poland and Statista. • Bank Millennium has been awarded the Golden Bank 2023 title for the best multi-channel service quality in the Golden Banker 2023 ranking. This ranking, the largest in the banking sector in Poland, aims to identify the banking institutions that offer the highest standards of service quality, provide the best products and carry out activities that stand out from the competition. 2023 REPORT & ACCOUNTS 20 | • Bank Millennium wins the CSR Golden Leaf from Polityka Weekly for its consistent activities for sustainability and its measurable successes in limiting the consumption of resources. • Bank Millennium has joined the United Nations Global Compact (UNGC) as a direct participant. UNGC is the world's largest UN initiative for sustainable business. Accession to the UNGC means a commitment to comply with and implement the Ten Principles of the Compact, covering four areas: human rights, work standards, environmental protection and counteracting corruption. • Millennium bim distinguished as “Best Bank in Mozambique” in 2023 by Global Finance. • Millennium bim distinguished as “Best Private Bank” in Mozambique for the fourth year in a row. • Millennium bim distinguished as "The Best Consumer Digital Bank for Innovation and Transformation in Africa for 2023" by Global Finance magazine. • Millennium bim distinguished as “Best Consumer Digital Bank” in Mozambique in 2023 by Global Finance magazine. • Millennium bcp distinguished with “Best Consumer Mobile App” in Mozambique 2023 by Global Finance magazine. • Millennium bim distinguished as the “Best Digital Bank” in Mozambique in 2023 by Global Finance magazine. SUBSEQUENT EVENTS On March 12, 2024, S&P Global Ratings upgraded BCP's Outlook from Stable to Positive. BCP (“Millennium bcp”) informed that on January 11, 2024 it has set the conditions for a new issue of Additional Tier 1, in the amount of 400 million euros, with the option of early repayment by Millennium bcp from the end of 5th year onwards with a coupon of 8.125% per year for the first 5.5 years, which will be refixed from that date every 5 years, with reference to the then prevailing 5-year mid-swap rate plus a spread of 5.78%. The operation, which generated strong market interest, followed a series of meetings held yesterday involving more than 60 investors. Demand, in the final terms of the issue, reached an amount exceeding 3 billion euros (more than 7 times the amount issued), with orders from more than 250 institutional investors. On January 11, 2024, the EIB signs an agreement with Millennium bcp to provide 400 million euros in new loans to Portuguese companies. BCP informed, on January 5, 2024 under the terms and for the purposes of article 6 of CMVM Regulation No. 1/2023, that the Non-Executive Director Xiaoxu Gu (also known as Julia Gu) presented on that day its resignation to the position of non-executive member of the Board of Directors, effective from February 29, 2024. The Bank informed that it will begin the process of identifying and selecting a new non-executive member to join its Board of Directors in accordance with the applicable Bank's regulations. The conclusion of this process will be announced in due course and will not affect the regular functioning of the Board of Directors. BCP informed that it has decided to exercise its option to early redeem all of its Additional Tier 1 notes “Fixed Rate Reset Perpetual Temporary Write Down Additional Tier 1 Capital Notes” (ISIN: PTBCPFOM0043), issued on 31 January 2019, in accordance with Condition 9.2 of the terms and conditions of the Notes. The early redemption of the Notes shall take place on their first call date according with its terms and conditions, 31 January 2024, at their outstanding principal amount together with accrued interest. 2023 REPORT & ACCOUNTS |21 BCP Share In 2023, the return of global equity markets, measured by the MSCI World index, was +23.1% (+20.0% in euros). During 2023, central banks continued to apply more restrictive monetary policies. The Fed raised interest rates by 100bp in 2023, totalling 525bp since the start of the rate hike in March 2022 (from 0.25% to 5.25-5.5%). The ECB increased policy rates by 200bps in 2023, for a total of 450bps in the interest rate rise cycle (deposit rate went from -0.5% in July 2022 to 4.0% in December 2023). Global economic growth exceeded recession expectations, with US economic expansion exceeding estimates. In Europe, a recession was avoided, but GDP growth fell short of expectations, particularly in Germany. China recovered less than expected in the context of post-pandemic reopening and macroeconomic and financial stimuli. The global disinflation process gained traction in 2023, with inflation significantly slowing down in the USA and Europe. The year 2023 was also marked by the crisis of regional banks in the USA (with the bankruptcy of SVB and First Republic), with the Fed's intervention being crucial, which allowed the instability generated to be significantly reduced. Credit Suisse's resolution, with the purchase of the bank by UBS, for 3 billion USD, with investors in AT1 bearing a large part of the investment losses (17 billion USD), on March 19, 2023, was also a relevant factor in 2023. It should be highlighted the prolongation of the war in Ukraine and the emergence of instability in the Middle East with the outbreak of conflict between Hamas and Israel. 2023 REPORT & ACCOUNTS 22 | BCP SHARES INDICATORS Units 2023 2022 ADJUSTED PRICES Maximum price (€) 0.3309 0.1982 Average price (€) 0.2379 0.1549 Minimum price (€) 0.1529 0.1218 Closing price (€) 0.2744 0.1464 SHARES AND EQUITY Number of ordinary shares (outstanding) (M) 15,114 15,114 Shareholder's Equity attributable to the group (1) (M€) 6,312 5,155 VALUE PER SHARE Adjusted net income (EPS) (2) (€) 0.054 0.010 Book value (3) (€) 0.418 0.341 MARKET INDICATORS Closing price to book value (PBV) 0.66 0.43 Market capitalisation (closing price) (M€) 4,147 2,213 LIQUIDITY Turnover (M€) 5,049 3,728 Average daily turnover (M€) 19.8 14.5 Volume (M) 21,351 23,717 Average daily volume (M) 83.7 92.3 Capital rotation (4) (%) 141.3% 156.9% (1) Includes Other Equity Instruments (400 million euros of AT1 in 2023 and 2022). (2) Considering the average number of shares outstanding (3) Considering the average number of shares minus the number of treasury shares in portfolio (4) Total number of shares traded divided by the average number of shares issued in the period Despite the geopolitical context, the economic slowdown and uncertainty about the path of inflation and restrictive monetary policy measures, the performance of BCP's shares in 2023 reflected the improvement in profitability, operational efficiency, and the continued reduction of NPE and the strong organic capital generation capacity (CET1 at 15.4% at the end of December 2023). In December, BCP reinstated the Stoxx Europe 600 index, after being excluded in the third quarter of 2019, thus allowing gains in visibility, daily liquidity and market capitalization. The positive evolution of BCP led analysts who regularly follow BCP to revise upwards their estimates regarding the results generated by the Bank, which resulted in several upward revisions of target prices throughout the year. 2023 REPORT & ACCOUNTS |23 PERFORMANCE Index Change 2023 BCP share 87.4% Eurostoxx 600 Banks 20.3% PSI20 11.7% IBEX 35 22.8% CAC 40 16.5% DAX XETRA 20.3% FTSE 100 3.8% MIB FTSE 28.0% Dow Jones Indu Average 13.7% Nasdaq 53.8% S&P500 24.2% Source: Euronext, Reuters, Bloomberg Liquidity During 2023, 5,049 million euros in BCP shares were traded, which represented an average daily turnover of 19.8 million euros. In 2023, 21,351 million shares were traded, corresponding to an average daily volume of 83.7 million shares. The capital turnover ratio stood at 141.3% of the average annual number of shares issued. Follow-up with Investors During 2023, the Bank participated in several events, having been present at 5 conferences (all in person) and 8 roadshows, 4 of which were held in person, through which it held more than two hundred meetings with investors, the which reveals the interest in the Bank. Indexes listing BCP shares The BCP share is included in more than 50 national and international stock indices, including the Stoxx 600 Europe Banks, Euronext 150, the PSI and the PSI All-Share Index GR. Additionally, at the end of 2023, Millennium bcp was included in Standard Ethics' "European Banks Index" and, among the 26 “STOXX Indices” of which it is part, the “EURO STOXX Banks ESG-X”, the “STOXX Europe 600 Banks ESG-X”, the “EURO STOXX Total Market ESG-X” and the “STOXX Developed Markets Total Market ESG-X”. Bank Millennium in Poland is also part of the “WIG-ESG” of the Warsaw Stock Exchange. In 2023, the BCP Group was once again included, for the 4th consecutive year, in the Bloomberg Gender-Equality Index and the "Europe's Climate Leaders 2023" ranking of the Financial Times and Statista, in Portugal and Poland, as one of the European companies with the greatest progress in reducing GHG emissions. 2023 REPORT & ACCOUNTS 24 | Material information announced to the market and impact on the share price The following table summarizes the relevant facts directly related to Banco Comercial Português that occurred during the year 2023, as well as the changes in the share price, both on the following day and in the 5 subsequent days, and the relative evolution vis-à-vis the main national reference indices and European banking sector in the periods mentioned. Nr. Date Material Events Chg. +1D Chg. vs. PSI20 (1D) Chg. vs. STOXX® Europe 600 Banks (1D) Chg. +5D Chg. vs PSI20 (5D) Chg. vs STOXX® Europe 600 Banks (5D) 1 4/Jan Banco Comercial Português, S.A. informs about calendar of events in 2023 5.2% 5.0% 4.2% 8.7% 7.0% 7.2% 2 4/Jan Banco Comercial Português, S.A. informs about significant items impacting 4th quarter 2022 financial results of Bank Millennium, S.A. 5.2% 5.0% 4.2% 8.7% 7.0% 7.2% 3 5/Jan Banco Comercial Português, S.A. informs about notice of acquisition of securities 1.2% 0.7% 0.4% 8.5% 5.8% 6.9% 4 9/Jan Banco Comercial Português, S.A. releases additional information about Restructuring Funds 2.9% 2.4% 3.1% 9.2% 7.7% 7.4% 5 31/Jan Banco Comercial Português, S.A. informs about Bank Millennium (Poland) results in 2022 1.9% 1.6% 1.2% 4.4% 3.7% 3.7% 6 13/Feb Banco Comercial Português, S.A. informs about signing of conditional agreement concerning the sale of Millennium Financial Services sp. z.o.o. and strategic insurance cooperation 3.5% 3.6% 3.1% 4.4% 2.2% 3.2% 7 27/Feb Millennium bcp Earnings release as at 31 December 2022 1.9% 1.3% 0.5% 1.8% 1.5% 1.0% 8 17/Mar Banco Comercial Português, S.A. informs about upgrade of deposits rating to Investment Grade and Long-Term Issuer Default Rating to 'BB+' by Fitch Ratings 2.6% 1.8% 1.3% 1.4% 1.2% 3.0% 9 21/Mar Banco Comercial Português, S.A. informs about notice of acquisition of securities -0.8% -0.2% -0.7% -3.2% -2.5% 1.3% 10 5/Apr Banco Comercial Português, S.A. informs about additional provisions for FX- denominated mortgage loans booked by Bank Millennium, S.A. 2.4% 1.8% 0.7% 5.7% 4.6% 3.2% 11 28/Apr Banco Comercial Português, S.A. informs about Bank Millennium (Poland) results in Q1 2023 -3.9% -2.5% -2.5% -4.7% -3.1% -4.2% 12 15/May Millennium bcp Earnings release as at 31 March 2023 3.7% 3.4% 4.3% 2.4% 4.0% 1.4% (Continues) 2023 REPORT & ACCOUNTS |25 (Continuation) Nr. Date Material Events Chg. +1D Chg. vs. PSI20 (1D) Chg. vs. STOXX® Europe 600 Banks (1D) Chg. +5D Chg. vs PSI20 (5D) Chg. vs STOXX® Europe 600 Banks (5D) 13 24/May Banco Comercial Português, S.A. informs about resolutions of the Annual General Meeting -0.6% 0.6% -0.8% -3.5% 0.3% -0.9% 14 16/Jun Banco Comercial Português, S.A. informs about preliminary estimation of provisions against legal risk related to FX mortgage loans portfolio of Bank Millennium in 2Q 2023 1.0% 1.6% 1.0% -5.3% -1.8% -1.9% 15 27/Jun Banco Comercial Português, S.A. informs about the attribution of shares within the scope of the variable remuneration policy for Persons with Managing Responsibilities and Employees 1.5% 1.1% 1.0% 3.8% 2.9% 0.3% 16 29/Jun Banco Comercial Português, S.A. informs about notice of acquisition of securities by Fidelidade 0.4% 0.0% -0.8% -0.9% -0.4% 0.2% 17 12/Jul Banco Comercial Português, S.A. informs on notification by Banco de Portugal of its MREL requirements 0.4% -0.2% -0.4% 10.1% 7.9% 8.3% 18 26/Jul Banco Comercial Português, S.A. informs about Bank Millennium (Poland) results in H1 2023 0.0% 1.3% -0.4% -6.6% -1.9% -4.5% 19 27/Jul Millennium bcp Earnings release as at 30 June 2023 1.1% 1.5% 0.8% -4.8% -1.6% -3.1% 20 28/Jul Banco Comercial Português, S.A. informs about 2023 EU-Wide Stress Test Results -4.2% -3.8% -4.4% -4.8% -2.5% -3.4% 21 1/Aug Banco Comercial Português, S.A. informs about notice of sale of securities -3.2% -1.5% -1.2% -2.1% -1.3% 0.7% 22 4/Sep Banco Comercial Português, S.A. informs about notice of acquisition of securities -0.5% 0.0% -0.1% -5.3% -4.9% -3.9% 23 12/Sep Banco Comercial Português, S.A. informs about the upgrade to Investment Grade of senior debt ratings by S&P Global -0.7% -0.3% -1.2% -0.8% -0.8% -2.6% (Continues) 2023 REPORT & ACCOUNTS 26 | (Continuation) Nr. Date Material Events Chg. +1D Chg. vs. PSI20 (1D) Chg. vs. STOXX® Europe 600 Banks (1D) Chg. +5D Chg. vs PSI20 (5D) Chg. vs STOXX® Europe 600 Banks (5D) 24 21/Sep Banco Comercial Português, S.A. informs about the upgrade to Investment Grade of senior debt ratings by Fitch Ratings 1.7% 1.6% 2.3% 1.5% 3.3% 1.5% 25 25/Sep Banco Comercial Português, S.A. informs about issue of senior preferred debt securities eligible for MREL -2.7% -2.4% -2.5% -0.9% 0.0% -1.0% 26 28/Sep Banco Comercial Português, S.A. informs about notice of acquisition of securities -0.7% -1.3% -0.9% -0.6% 2.5% 1.3% 27 4/Oct Banco Comercial Português, S.A. informs about estimated provisions against legal risk related to FX mortgage loans portfolio booked by Bank Millennium, S.A. in 3Q 2023 0.6% -0.1% 0.1% 9.0% 3.5% 5.4% 28 10/Oct Banco Comercial Português, S.A. informs about notice of acquisition of securities 1.7% 0.3% 1.2% 2.9% 1.4% 3.3% 29 27/Oct Banco Comercial Português, S.A. informs about Bank Millennium (Poland) results in the first 9M 2023 1.3% 1.2% 1.2% 2.7% -0.3% -0.4% 30 30/Oct Millennium bcp Earnings release as at 30 September 2023 0.1% -0.6% -0.3% -0.2% -3.0% -3.3% 31 13/Nov Banco Comercial Português, S.A. informs about notice of sale of securities by Fidelidade -0.7% -1.3% -1.7% 1.6% 1.2% -0.9% 32 13/Nov BCP S.A. informs about the ECB's authorization to exercise the early redemption option of the currently outstanding Additional Tier 1 ("AT1") instrument with an outstanding amount of 400 million euros -0.7% -1.3% -1.7% 1.6% 1.2% -0.9% 33 17/Nov Banco Comercial Português, S.A. informs about notification from Banco de Portugal on the implementation of a reserve in own funds for sectoral systemic risk 1.9% 1.2% 1.9% 4.9% 4.0% 4.6% 34 22/Nov Banco Comercial Português, S.A. informs about the upgrade of deposits and senior unsecured debt ratings by Moody’s 2.2% 1.7% 1.5% 5.7% 3.2% 4.6% 35 4/Dec Banco Comercial Português, S.A. informs about minimum prudential requirements -1.0% -1.1% -1.4% -6.0% -5.1% -7.7% (Continues) 2023 REPORT & ACCOUNTS |27 (Continuation) Nr. Date Material Events Chg. +1D Chg. vs. PSI20 (1D) Chg. vs. STOXX® Europe 600 Banks (1D) Chg. +5D Chg. vs PSI20 (5D) Chg. vs STOXX® Europe 600 Banks (5D) 36 5/Dec Banco Comercial Português, S.A. informs about conversion of its existing covered bonds programme into a covered bonds programme compliant with the Legal Regime of Covered Bonds -0.5% -1.0% -1.4% -7.6% -5.3% -8.3% 37 18/Dec Banco Comercial Português, S.A. informs about the upgrade of senior unsecured debt and deposits ratings by DBRS Morningstar -1.7% -1.4% -1.8% -1.6% -2.2% -2.9% 38 28/Dec Banco Comercial Português, S.A. informs about calendar of events in 2024 0.5% 0.6% 0.2% 4.5% 3.2% 2.5% The following chart depicts BCP's share price performance in 2023: Dividend policy The BCP Group's dividend policy takes into account in particular: (i) the promotion of conditions for sustainable compliance with the capital ratios applicable to the Bank at any given time, as well as other applicable legal provisions, including the limitations applicable at any given time that result from the calculation of the maximum distributable amount; (ii) retention of own funds to promote consistency with the Risk Appetite Statement (RAS) and with the results of the internal capital adequacy self-assessment process (ICAAP); and (iii) safeguarding an appropriate safety margin over the values established by the regulator within the scope of its analysis and assessment regarding the adequacy of strategies, processes, capital and liquidity, to the risks to which the Bank is exposed (SREP). In the current context, it will naturally still be worth considering the guidance issued by the ECB mentioned above. 2023 REPORT & ACCOUNTS 28 | The decision on the application of profits for the year is the responsibility of the General Meeting, based on a proposal from the Board of Directors. Bearing in mind the permanent consideration of the Bank's capital needs to meet its strategic objectives, it is the intention of the Board of Directors, in a context of macroeconomic stability, to re-establish a distribution of net profits, determined in the individual accounts for each year, that goes to meeting the legitimate expectations of its shareholders and that, in the medium term, it is in line with the best practices of the reference banking sector. The Board of Directors will define the implications of these criteria in the maximum limit of prospective dividend payout resulting from the dividend policy, as well as the respective application period, which must be evidenced in the Bank's annual budgets. Shareholder structure According to information from Interbolsa, on December 31, 2023, the number of Shareholders of Banco Comercial Português amounted to 129,765. At the end of December 2023, there were two Shareholders with qualifying holdings holding more than 5% of the Bank's share capital. Shareholder structure Number of Shareholders % of share capital INDIVIDUAL SHAREHOLDERS Group Employees 1,824 0.30% Other 123,764 21.43% COMPANIES Institutional 308 24.49% Qualified Shareholders 2 45.48% Other companies 3,867 8.30% TOTAL 129,765 100% Chiado (Luxembourg) S.à r.l. reported on January 23, 2024 that it held, on that date, 3,027,936,381 BCP shares, corresponding to 20.03% of the respective share capital and voting rights. On December 31, 2023, Chiado (Luxembourg) S.à r.l. held 3,927. 436,381 BCP shares, corresponding to 25.99% of the share capital and voting rights. Shareholders with more than 5 million shares represented 76.95% of the share capital. Number of shares per Shareholder Number of Shareholders % of share capital > 5,000,000 143 76.95% 500,000 a 4,999,999 1,166 8.91% 50,000 a 499,999 11,150 9.83% 5,000 a 49,999 32,985 3.82% < 5,000 84,321 0.49% TOTAL 129,765 100% 2023 REPORT & ACCOUNTS |29 The Bank’s shareholding structure remained stable in terms of geographical distribution in 2023. Domestic shareholders held 26.20% of the total shares of the Bank as of December 31, 2023. Nr. of Shares (%) Portugal 26.2% China 26.0% Africa 19.7% UK / EUA 16.9% Other 11.2% Total 100% Chiado (Luxembourg) S.à r.l. reported on January 23, 2024 that it held, on that date, 3,027,936,381 BCP shares, corresponding to 20.03% of the respective share capital and voting rights. On December 31, 2023, Chiado (Luxembourg) S.à r.l. held 3,927. 436,381 BCP shares, corresponding to 25.99% of the share capital and voting rights. 2023 REPORT & ACCOUNTS 30 | Qualified Holdings The following Shareholders held more than 5% of the share capital of Banco Comercial Português, S.A. as of December 31, 2023: 31 December 2023 Shareholder Nr. of shares % of share capital % of voting rights Chiado (Luxembourg) S.à.r.l. (Fosun Group) 3,927,436,381 25.99% 25.99% TOTAL FOR FOSUN GROUP 3,927,436,381 25.99% 25.99% Sonangol - Sociedade Nacional de Combustíveis de Angola, EP 2,946,353,914 19.49% 19.49% TOTAL FOR SONANGOL GROUP 2,946,353,914 19.49% 19.49% Total of Qualified Shareholdings 6,873,790,295 45.48% 45.48% Chiado (Luxembourg) S.à r.l. announced on January 23, 2024, that it held on that date, 3,027,936,381 BCP shares, corresponding to 20.03% of the respective share capital and voting rights. On December 31, 2023, Chiado (Luxembourg) S.à r.l. held 3,927. 436,381 BCP shares, corresponding to 25.99% of the share capital and voting rights. 2023 REPORT & ACCOUNTS |31 i Regulatory, economic and financial system environment Regulatory environment The banking system proved overall resilient to the turbulences faced in 2023, including the tightening of financial conditions, the geo- political tensions, the escalation of armed conflicts and localized bank failures that lead to frequent shifts in market confidence and added to an already uncertain outlook. Regulatory policies and supervisory actions focused on financial stability, notwithstanding sounder solvency levels and ample liquidity buffers held by banks, while working on the regulatory frameworks underpinning the Basel reform, ESG sustainability, digital finance, and consumer protection, to name a few. ECB’s supervisory priorities for 2023-25 were adjusted to cover the sectors most affected by the consequences of the war in Ukraine and by the macroeconomic environment, while also addressing digitalisation and climate change. Within this context, at the EU level in the domain of prudential and crisis management, highlight to the following initiatives:(i) the final agreement on the revision of the Capital Requirements Regulation and the Capital Requirements Directive (final approval expected by Q2.24 to enter into force Jan.25); (ii) the EBA’s EU-wide bank stress test exercise which showed that European banks remain resilient under an adverse scenario and the thematic stress tests in 2024 on climate and cyber resilience; (iii) several regulatory pieces and proposals under the European Commission’s Green Deal, including disclosures requirements and ESG ratings (iv) ongoing review of the bank crisis management and deposit insurance framework, overall recovery capacity and operationalization of resolution plans. On the AML front, the EU Council and Parliament reached a political agreement on the new Anti- Money Laundering Authority that, in an initial phase, will supervise ca. 40 groups and entities in the EU, and the provisional agreement on the AML Directive (AMLD 6) and Regulation, commonly referred as the EU 'single rulebook' on AML/CFT, laying requirements on supervised entities, on transparency of information and use of anonymised financial instruments. In Portugal, the Banco de Portugal's Notice No. 1/2023, which sets out the ML/TF prevention obligations, has entered into force within the scope of entities that carry out activities with virtual assets. On 24 May 2023, the European Commission adopted the Retail Investment Strategy as part of its capital markets union action plan. It revises the existing rules set out in the Markets in Financial Instruments Directive (MiFID II) – already adopted by the European Parliament - the Insurance Distribution Directive (IDD), the Undertaking for Collective Investment in Transferable Securities (UCITS) Directive, the Alternative Investment Fund Managers Directive (AIFMD), and the taking-up and pursuit of the business of Insurance and Reinsurance Directive (Solvency II), as well as amendments to the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation. The EU member states have until November 2025 to transpose the Consumer Credit Directive 2 to protect consumers from credit card debt, overdrafts and unsuitable loans, with extended scope application and addressing new digital finance services. Regulation (EU) 2023/1114 of the European Parliament and the Council, of 31 May 2023, on markets in crypto-assets (“Regulation MiCA”) aims at protecting consumers against abuse and market manipulation on these type of assets. The Directive concerning financial services contracts concluded at a distance has been adopted, establishing a level playing field for financial services remotely provided, including rules on information disclosure, pre-contractual information obligations and rights of consumers. On 28 June 2023, the European Commission proposed revised rules on payments services in the EU. The EC proposes to introduce a new regulation and a new directive developing on features such as strong Customer authentication, verification procedures and Open Banking. Relating to digital and operational resiliency, the Regulation (EU) 2022/2554 of the European Parliament and of the Council of 14 December 2022 ("DORA Regulation"), applicable from 17 January 2025, came into force in January 2023, establishing requirements for the security of network and information systems supporting the operational processes of financial institutions. The European Commission adopted a legislative proposal that lays the groundwork for the legal framework underpinning the digital euro and later in the year the ECB’s Governing Council endorsed the preparation phase of the digital euro project. 2023 REPORT & ACCOUNTS 32 | In Portugal, the potential impact of rising interest rates on households' financial capacity has motivated specific consumer protection regulations, such as Law No. 24/2023 of 29 May, Law No. 19/2022 of 21 October and Decree-Law no 91/2023, bringing new obligations for credit institutions in the marketing of mortgage loans, extending the services included in the minimum banking services account, introducing new restrictions on commissions, establishing exceptional measures to temporarily fix the instalment of mortgages, as well extending the extraordinary interest subsidy. At the Macro prudential level, further to the adjustment on borrower based measures given the higher level of interest rates, the countercyclical capital buffer applicable to credit exposures to the domestic non-financial private sector remained at 0% of the total amount of exposures, whereas Banco de Portugal decided for a 4% sectoral systemic risk buffer applicable to domestic RRE exposures for institutions using the internal ratings-based (IRB) approach. This measure will apply from 1 October 2024 and will be reviewed at least every two years. The Poland’s banking system remains under intense legislative pressure. The CHF denominated mortgage loans legal risk remains a key risk factor for the Polish banking sector, heavily weighing on provisioning. The European Court of Justice, regarding the event of the annulment of a mortgage loan agreement, decided that the EU law does not preclude, in the event of the annulment of a mortgage loan agreement vitiated by unfair terms, the consumers from seeking compensation from the bank but precludes banks from raising such claims. On relief measures for households, the credit holidays have now been extended into 2024, allowing borrowers to defer up to 4 instalments per year at no charge. The prudential financial sector authority is assessing the development of a long term financing requirement for mortgages to mitigate the risk of maturity mismatches. The countercyclical capital buffer remains at 0%. In May 2022, the Polish government announced that WIBOR would be replaced by a different (lower) rate from 1 January 2023. In June 2022, a Working Group was established, including market participants and competent authorities, with the objective to introduce a new interest rate benchmark. The WIRON index has been selected and originally a planned cessation of WIBOR for December 2024 was envisaged. However, in October 2023, a decision was made to delay such cessation event until the end of 2027, providing additional time for market participants to prepare for the transition. In Mozambique, the Banco de Moçambique (BM), early 2023, sharply raised the reserve requirement ratios for domestic and foreign currency liabilities to support the absorption of excess liquidity but at the beginning 2024 it has cut rates and mentioned entering into a sustained cycle of less restrictive monetary policy. On the Macro prudential front, it maintained the classification of Millennium bim as a Domestic Systemically Important Institution and kept the conservation buffers for systemically important and quasi-systemically important domestic banks unchanged at 2.0% and 1.0%, respectively. Meanwhile, BM is updating the banking system’s “rule book” and supervisory practices, including the BM’s organic law. Such review comprises initiatives on payments systems, bank accounts, crisis management (recovery plans, resolution planning, deposit guarantees), central credit registers, potential transition to Basel III, foreign exchange transactions, cybersecurity risks and plans to address AML/CFT issues. On the climate risk front, authorities have been keen on strengthening the institutional frameworks for managing natural resources and prevent and recover from natural disasters. 2023 REPORT & ACCOUNTS |33 Economic environment Global Economic Environment According to the International Monetary Fund (IMF), in 2023, the world economy is expected to have slowed down from 3.5% to 3.1%. This evolution reflects divergent performances among the main economies, with the acceleration of the United States (US) economy (from 1.9% to 2.5%) contrasting with the sharp slowdown of the euro area (from 3.4% to 0.5%) and a moderate expansion of the Chinese economy. In 2024, the effects associated with the restrictiveness of monetary policy and the reduction of fiscal stimulus measures that were in place in 2023 are expected to contribute to the maintenance of a global GDP growth rate of 3.1%, which corresponds to a historically low level. The risks to this projection are tilted to the downside and relate mainly to the possibility of worsening geopolitical tensions. Global Financial Markets In financial markets, 2023 was characterised by an environment of higher optimism, supported by the resilience of the US economy, alongside a decrease in global inflation, which was particularly noticeable in the second half of the year. In this context, the main central banks announced the end of the interest rate hike cycle initiated in 2022, with the reference interest rates stabilising at 5.50% in the US and at 4.50% in the euro area, from July and September 2023 onwards, respectively. The main global equity indices recorded significant valuations, with the S&P 500 index in the US rising by more than 20%. In turn, the Germany and US government bond yields rose, particularly in the third quarter of the year. The more favourable environment was reflected in the performance of emerging market asset classes, albeit to a less magnitude, and in a reduction of the risk premia of corporate debt, as well as of euro area periphery sovereign debt, namely in Portugal and Italy. On the foreign-exchange front, there was a slight appreciation of the Euro against the US dollar. Concerning the Euribor interest rates, the expectations of a less restrictive monetary policy during 2024 contributed to the six and twelve months Euribor interest rates starting a downward trajectory in the last quarter of 2023, while the three-month interest rates remained relatively stable. The Portuguese equity index benefited from the positive evolution of international financial markets and recorded a valuation of around 12% in 2023. Outlook for the Portuguese Economy In 2023, GDP grew by 2.3%, slightly above the forecasts of the main domestic and international institutions. The positive performance of the Portuguese economy resulted from a strong contribution of exports in the first half of the year, driven by the dynamism of the tourism sector. In the last quarter of the year, a significant acceleration of private consumption added to GDP growth, supported by the increase in real household disposable income, in a context of a lower inflation rate and expectations of decreasing financing costs. In 2024, Banco de Portugal expects Portuguese GDP to record a more moderate growth (1.2%), hindered by a slowdown in exports, after the strong growth observed in the previous year. Regarding inflation rate, it is expected to continue a downward trend, decreasing from 5.3% in 2023 to 2.9% in 2024. The favourable performance of economic activity contributed to a decrease in the ratio of public debt as a percentage of GDP, from 112.4% in 2022 to 99% in 2023, which corresponds to the lowest 2023 REPORT & ACCOUNTS 34 | value since 2010. Regarding external indebtedness, it is worth noting that the current account registered a historical maximum, ascending to 1.3% of GDP. Against this background, the main rating agencies improved the rating of the Portuguese Republic to a grade of "A". International Operations In Poland, economic activity slowed down in 2023, from 4.9% to 0.2%, penalised by the weakness of domestic demand in the first half of the year, in a context of high inflationary pressures and increased restrictiveness of monetary policy. In the second semester, the decline in the inflation rate, from a peak of 18.4% in February to 6.2% in December 2023, led to a decrease in the central bank's reference interest rate, from 6.75% in August to 5.75% in October 2023. Over the year, the Zloty appreciated, mainly in the fourth quarter. The rise in real household disposable income, which contributed to a recovery of domestic demand in the second half of the year, should continue to support economic activity in the short run. In this context, the IMF forecasts a GDP growth rate of 2.8% in 2024. In Mozambique, GDP growth accelerated in 2023, supported by the positive evolution of the extractive industry, particularly of natural gas production. In 2024, the economy is expected to maintain robust growth levels (5.0%). Despite the decrease in the inflation rate during 2023, the central bank kept its reference interest rate unchanged at 17.25%. In the foreign exchange market, it is worth noting the stability of the Metical throughout the year. In 2023, the Angolan economy is expected to have registered a slowdown, from 3.0% to 1.3%, driven by the contraction of the oil sector's activity, which hindered the evolution of the Kwanza. In 2024, the IMF projects an acceleration of GDP to 3.3%. GROSS DOMESTIC PRODUCT Annual growth rate (in %) 2021 2022 2023 2024 2025 EUROPEAN UNION 5.9 3.6 0.5 1.2 1.9 Portugal 5.5 6.7 2.3 1.5 2.2 Poland 6.9 5.3 0.2 2.8 3.2 SUB-SAHARAN AFRICA 4.7 4.0 3.3 3.8 4.1 Angola 1.2 3.0 1.3 3.3 3.4 Mozambique 2.4 4.4 6.0 5.0 5.0 Source: National Statistics Institutes. IMF, January 2024 for the EU, Poland and Sub-Saharan Africa. IMF, October 2023 for Portugal and Angola. IMF, January 2024 for Mozambique (Country Report no. 24/8). Estimates 2023 REPORT & ACCOUNTS |35 Financial system Inflation and Central Banks were the main protagonists of 2023. The year was also marked by the intensification of geopolitical risks due to the continuing conflict in Ukraine and the new Israel- Hamas conflict, with growing fears of it spreading to the whole Middle East region and with unpredictable political, social, economic, and financial consequences. Fossil fuel production and exports have not been directly affected, but they did trigger a rise in energy prices and once again undermined the confidence of households and companies, thereby affecting the economic recovery. Still, economic growth in the Euro-Zone was positive in 2023. The ECB continued the normalisation of monetary policy as a priority to ensure that inflation returns to the 2% target in the medium-term. Though decelerating, inflation levels remained high in 2023. In the last quarter of the year, the ECB signalled the end of the interest rate hiking cycle started in 2022, but deemed it premature to discuss interest rate cuts. Within the scope of the PEPP (‘Pandemic Emergency Purchase Programme’), the ECB announced that it intended to reduce the portfolio over the second half of 2024 and discontinue reinvestments at the end of 2024, noting that the current monetary policy instruments will continue to provide liquidity support to the Euro-Zone financial system and to preserve the regular transmission of monetary policy. The financial sector in 2023 was particularly affected by the turmoil experienced in the US during the first half of the year due to the collapse of several regional banks (e.g. SVB, Signature Bank, First Republic Bank, Silvergate) and the ratings downgrade of several banks due to the increase of liquidity risk. The situation experienced at Credit Suisse, where material weaknesses in the financial reporting control systems culminated in its merger with UBS, one of the measures implemented in that process being the write-off of its outstanding AT1 instruments, generated additional concerns in the sector. The regulatory framework in the financial sector remains very demanding, with ad-hoc reporting intensifying, along with legislative initiatives in each country (e.g. legal restrictions on retail commissions or sector-specific levies). Despite the current context, the results of the ‘EU- wide stress test’ carried out by the EBA in 2023 have raised confidence levels in the European financial sector by revealing that banks remain resilient in adverse economic and financial scenarios. In a still very uncertain economic context, the Portuguese banking system posted healthy levels of profitability, albeit based on comparatively high interest rate levels (which may not prevail in the short/medium term, given the prospect of a less restrictive monetary stance), as well as adequate management of operating costs and of asset risk. The evolution and performance of the banking system continued to be affected by demanding and costly supervision and regulation (e.g. contributions to the European and National Resolution Funds and contributions to the Banking Sector, in the latter two cases at a clear disadvantage compared to European peers). The Portuguese banking system continues to show strength both in terms of capital and liquidity, and improved asset quality indicators, reflecting the efforts made in recent years to reduce NPE and to raise loan loss coverage levels. This performance is also reflected in the generalised improvement in the ratings by the main agencies of Portuguese banks. After successive upgrades, reflecting the Bank’s normalisation, BCP is again ‘investment grade’ in the four main rating agencies (DBRS, Fitch, Moody's and S&P). The performance and evolution of the Portuguese banking system will continue to be influenced, among other factors, by the level of implementation of the Recovery and Resilience Plan (‘PRR’), created to mitigate the negative economic impacts of the Covid-19 pandemic and now also those resulting from the geopolitical context (e.g. invasion of Ukraine by Russia, the Israel-Hamas conflict, US-China tensions, the Middle East, globalisation), and also by the evolution of disposable income and of consumption behaviour and savings profile of households, on the back of rising inflation and interest rates, even when mitigated by income support from social security and from employers and by resilient employment levels. After Banks have adjusted their business and customer relationship models, making them more digital, proximate, simple, safe and sustainable, improving the overall quality of service provided to increasingly demanding customers, investment in new ways of operating will continue to be intense, particularly in Artificial Intelligence and the way it is already changing (and will continue to change) the way the financial sector operates at a global level. The persisting absence of a single regulatory framework applying to all entities that can operate in specific business segments, which would ensure a level playing field, will continue to force the banking system to maintain its focus on optimised efficiency levels in order to mitigate the impact of the loss of business and revenues to unregulated non-bank players and to continue adapting their business models to the new environment. Compliance risk (associated, for example, with money laundering and the financing of illicit activities, e.g. terrorism) and cybersecurity risk have required enhanced investment in appropriate operating and technological risk assessment and control policies, as well as in IT, and particularly data security systems and in risk control frameworks, together with the integration of ESG requirements (Environmental, Social & Governance) in daily management, so as to attain a more 2023 REPORT & ACCOUNTS 36 | resilient response of the financial system to the current and future economic context. 2023 REPORT & ACCOUNTS |37 Business Model Nature of operations and main activities The Group provides a wide variety of banking services and financial activities in Portugal and abroad, where it is present in the following markets: Poland, Mozambique, Angola (through its associate BMA) and China (Macao). All its banking operations develop their activity under the Millennium brand. The Group also ensures its international presence through representation offices and/or commercial protocols. The Bank offers a vast range of financial products and services: current accounts, payment systems, savings and investment products, private banking, asset management and investment banking, including mortgage loans, personal loans, commercial banking, leasing, factoring and insurance, among others. The back-office operations for the distribution network are integrated to benefit from economies of scale. In Portugal, Millennium bcp is focused on the retail and companies markets, providing services to its Customers in a segmented manner. The Bank makes products available to Customers through its network of branches, offering a wide range of products and services. Distinctive factors of the business model Largest private sector banking institution BCP is the largest private banking institution in terms of business volume in Portugal, assuming a leading and prominent position in various financial products and services as well as different market segments, with its activity based on a modern branch network with wide coverage at a national level. In addition, the Bank has remote banking channels (banking service by telephone, Mobile Banking and Internet), which act as distribution points for its financial products and services. The activity in the domestic market focuses on Retail Banking and Companies, which is segmented in order to best serve Customer needs, through a value proposition based on innovation and speed, targeting Mass-market Customers, and through the innovation and customized management of service for Prestige, Business, Companies, Corporate and Large Corporate Customers. Retail Banking is also developed through ActivoBank, a bank aimed specifically at Customers who are young in spirit, intensive users of new technologies and prefer a banking relationship based on simplicity and offering innovative products and services. At the end of December 2023, Millennium bcp continued to be the largest Portuguese privately- owned bank on business volumes and with a relevant position in the countries where it operates. On 31 December 2023, operations in Portugal accounted for 66% of total assets, 68% of total loans to Customers (gross) and 70% of total customer funds. The Bank had over 2.7 million active Customers and market shares of 16.8% of loans to Customers and 19.0% of customer deposits. International presence as a platform for growth At the end of December 2023, Millennium bcp had an international presence throughout the world through its banking operations, representative offices and/or commercial protocols, serving over 6.7 million active Customers. In Poland, Bank Millennium has a well distributed network of branches, supported by a modern multi-channel infrastructure, a service quality and with high brand recognition. In December 2023, Bank Millennium had a market share of 5.7% in loans to Customers and of 5.6% in deposits. Concerning the operations in Africa, Millennium bcp operates through Millennium bim, a universal bank that has been operating since 1995 in Mozambique, where it has about 1.2 million Active Customers and is the reference bank in this country, with market shares of 15.1% in loans and advances to Customers and of 23.2% in deposits, in the end of 2023. Millennium bim is a highly reputed brand in the Mozambican market, associated with innovation, strong penetration in terms of electronic banking and exceptional capacity to attract new Customers, as well as being a reference in terms of profitability. On 22 April 2016, the deed of the merger of Banco Millennium Angola, S.A. with Banco Privado Atlântico, S.A. was signed. The bank resulting from the merger is an associate of Banco Comercial Português. 2023 REPORT & ACCOUNTS 38 | The Group also operates in the Far East since 1993. The activity of the existing branch in Macau was expanded in 2010, through the attribution of a full license (onshore) aimed at establishing an international platform for business operations between Europe, China and Portuguese-speaking African countries. The Bank also has 6 representation offices (1 in the United Kingdom, 2 in Switzerland, 2 in Brazil and 1 in China, in Guangzhou) and 1 commercial protocol (France). Growth based on digital/mobile banking Since its incorporation, the Bank has been recognized by the innovation. The Bank was the first in Portugal to introduce specific innovative concepts and products, including direct marketing methods, branch formats based on Customer profiles, salary accounts, simplified branches ("NovaRede"), telephone banking services, through Banco 7, which later became the first online banking services platform, health insurance (Médis) and direct insurance, and a website dedicated to individual Customers and corporate banking. The Bank was also a pioneer in the launching of a new Internet Banking concept, based on the ActivoBank platform, which provides a simplified service to the Customer, including the opening of a current account using Mobile Banking solutions. In 2023, sales made through digital channels represented 82% of the Bank's total sales, an increase of 4p.p. compared to 2022. The Bank continued the development plan for a digital experience focused on mobile, with the application of an increasingly personalized and targeted communication strategy with Customers, highlighting the greater convenience of the products and services available on the Millennium App and seeking always simplifying the Customer's day-to-day life. Throughout the year, new features were launched in the personal credit journey on the App, with a strong impact on the user experience and the procedural level, highlighting the development of automatic reading of proof of income, thus making the journey even faster and more automated. The placement of Credit Cards on the App represented 87% of digital card sales in 2023. A new journey for ordering and issuing credit, debit and prepaid cards was also launched, with the digital version available for immediate use. In Savings constitutions and reinforcements, there was significant growth compared to December 2022 in the number of transactions, with the App representing more than 90% of the total. In terms of investments, the significant weight of digital continued to be maintained in most products sold on these channels: 62% of Investment Fund subscriptions, 93% of Millennium bcp Stock Exchange Certificate subscriptions and 97% of Stock Exchange Orders were placed on digital in 2023. A new Automated Investment solution was also launched in 2023, which allows the Customer to define their investment profile, with their investment management being ensured by the solution itself. In the online trading business, the weight of the MTrader platform stands out, with 79% of orders placed, with around 9,600 new additions recorded in 2023. In Risk Insurance, the Bank ended the year with digital sales representing 54% (+11 percentage points compared to December 2022). Following the trend of growing Customer demand for products related to their protection, the Bank made Móbis car insurance available on the App, which allows Customers to simulate and subscribe online, and protection insurance for pet dogs and cats -Pétis- with simulation and subscription also online. Customer-oriented relationship model Continuing with a strategy of proximity and the provision of products and solutions with an impact on Customers' lives, the Bank developed a permanent communication trough Campaigns such as Housing Credit - with the "offer" of Spread 0; Payroll Domiciliation – with 10% cashback on utilities and also offering “Getaways in Portugal”. Also noteworthy is the launch of “Let's GO” – an integrated solution which agregates several products for young people aged 0 to 17; the “M Vantagem+” add-on, assistance insurance for Customers between 55 and 90 years old, who have an integrated solution; along with strengthening communication with University students, with the redefinition of the UNNI offer; and with the dynamization of Digital within the Diaspora universe. In the Business segment, Millennium was recognized as the “Bank of Companies”. In 2023, the Factoring & Confirming Campaigns; Portugal 2030; COTEC Innovative Status; "PME Líder" and online opening of corporate accounts provide relationships, trust and presence with the Bank's corporate customers. The holding of Millennium Talks in several national districts made it possible to attract and promote the discussion of strategic themes fundamental to Portuguese business development. 2023 REPORT & ACCOUNTS |39 The organization of another edition of the Millennium Estoril Open allowed the Bank to undertake brand activation actions with Customers and non-Customers. Still in the area of sport, 2023 was marked by the renewal of sponsorship of the WSL Surfing competitions and the support for professional athletes who are the maximum expression of talent, dedication and excellence in their activities – João Sousa in Tennis, Teresa Bonvalot in Surfing and Marta Paço in adapted Surf – which motivated the Bank to launch the “Ambassadors” institutional campaign. The Bank kept its support to Millennium Festival in Largo, which this year edition allowed the Bank to strengthen its role as patron of the “Território" program (a platform for young dancers to begin their careers), demonstrating the message of commitment of BCP with art and with a focus on talent, making this project an example of its values and principles. Millennium bcp's continuous communication efforts had a direct impact on public recognition. In 2023, the Bank won the “Consumer Choice” and “Five Star” awards in the “Large Banks” and “Banking Apps” categories; the Millennium bcp brand won the Marketeer award in the “Banking and Finance” category; the “Payroll Domiciliation” campaign won the Bronze Efficacy Award in the “Financial Services and Insurance” category, making clear the Bank’s value, preponderance and relevance in a market that is constantly changing, dynamism and demanding. Also according to BASEF's 2023 annual report, Millennium bcp is a leader in Service Satisfaction. Business Model Sustainability Millennium bcp, with the aim of strengthening its proposal and performance in matters of Sustainability and responsible finance, in 2023 continued to lead an accelerated transformative dynamic of adapting to new ESG (Environmental, Social and Governance) requirements that allowed it to respond to the needs of its Customers, to the expectations of supervisors and, in general, to the ambitions of Stakeholders in these areas of activity. The Bank has, in this context and within the framework of its governance and decision-making model, a Committee of the Board of Directors for the topics of Corporate Governance, Ethics and Sustainability, a Sustainability Committee dependent on the Executive Committee and led by the CEO and a Sustainability Master Plan, a management instrument that coherently brings together the multidisciplinary actions to be developed within the scope of ESG dimensions across the operations integrated into the BCP Group. Millennium bcp's intervention is thus divided into three fundamental axes: (i) Environmental, aiming to implement measures that promote a fair and inclusive transition to decarbonized economic development models, including the incorporation of the climate dimension into the Bank's risk models and in the commercial offering of solutions, products and services; (ii) Social, which ensures and promotes, in conjunction with the Millennium bcp Foundation, involvement with the external and internal communities in the establishment of lasting relationships of proximity and cooperation and in the creation of shared value; and (iii) Corporate governance, promoting the integration of Sustainability principles in the Bank's decision-making and management processes and in the definition of its value proposition. This alignment is central to Sustainability at Millennium bcp, and organizations in general, remaining a privileged means of determining the social and environmental impact of the activity carried out and the expected corporate performance in these dimensions. The Bank is aware of the competitive, reputational and business advantage of incorporating environmental, social and governance factors, opportunities and risks into decision-making processes and reflecting them in the offering of solutions, products and services, a conviction that clearly results from the inclusion of Sustainability as one of the structuring vectors of the Strategic Plan "Overcoming 24", a document that summarizes Millennium bcp's vision, objectives and value proposition for the three-year period 2021-2024. 2023 REPORT & ACCOUNTS 40 | The deepening of a Responsible Business culture that promotes the creation of wealth and its fair distribution, and positively influences the organization's long-term value proposition, in balance with the well-being of people, the company and the communities in which is inserted and with respect for the preservation of natural resources, the climate and the environment, constitute the essence of the Sustainability strategy, policies and practices defined and implemented by the BCP Group in all its geographies. 2023 REPORT & ACCOUNTS |41 Millennium network 2023 REPORT & ACCOUNTS 42 | Financial information 2023 REPORT & ACCOUNTS |43 Results and Balance Sheet The consolidated Financial Statements were prepared under the terms of Regulation (EC) 1606/2002, of 19 July (in the version in force), and in accordance with the reporting model determined by the Bank of Portugal (Bank of Portugal Notice 5/2005, in the version in force), following the transposition into Portuguese law of Directive 2003/51/EC, of 18 June, of the European Parliament and Council in the version currently in force. To provide a better reading of the evolution of the Group’s financial situation and to ensure comparability with the information from previous periods, a set of concepts are described in this analysis that reflect the management criteria adopted by the Group in the preparation of the financial information, whose accounting correspondence is presented in the glossary and throughout the document, whenever applicable. Taking into the account that the Group owns 49% of Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Mbcp Ageas), being accounted for under the equity method, as Investments in associated companies and that on 1 January 2023 Mbcp Ageas adopted simultaneously IFRS9 - Financial Instruments and IFRS17 - Insurance Contracts, whose initial adoption requires comparative information, the consolidated accounts were restated. In fact, IFRS 17 replaces IFRS 4 - "Insurance Contracts" being applicable to all entities that issue insurance contracts, reinsurance contracts and investment contracts with discretionary participation features if they are also issuers of insurance contracts. In this sense, Mbcp Ageas made the transition exercise on 1 January 2022. The estimated impacts of the transition to IFRS 17 represent a reduction in the Equity of Mbcp Ageas, partially offset by the positive impact resulting from the adoption of IFRS9. The impacts resulting from the implementation of IFRS 17 by Mbcp Ageas led to the restatement of the accounts of the Group referring to 2022, as detailed in note 59. Adoption of IFRS 17 - Insurance Contracts and IFRS9 - Financial instruments by Millenniumbcp Ageas Group Segurador, SGPS, S.A. During 2023, some accounting reclassifications were carried out, in order to improve the quality of the information reported, namely regarding net commissions and operating costs. The historical amounts of such items are presented considering these reclassifications with the purpose of ensuring their comparability. The total amount of each heading disclosed in previous periods remains unchanged compared to those published in previous periods. In 2023, with the exception of the situations previously mentioned, no other changes were introduced in the way information regarding previous financial years was presented. On 13 February 2023, Bank Millennium signed an agreement for the sale of 80% of the shares in Millennium Financial Services sp. z o.o. to Towarzystwo Ubezpieczeń na Życie Europa S.A. which acquires 72% of that company shares and Towarzystwo Ubezpieczeń Europa S.A. which acquires 8%. Bank Millennium concluded also with the buyers and with Millennium Financial Services sp. z o.o. certain agreements concerning exclusive insurance distribution model, including a cooperation agreement, distribution agreements and agency agreements. The strategic cooperation provides for long term (10 years) bancassurance partnership in relation to specified insurance products linked to loans offered by Bank Millennium. On 29 March 2023, the transaction was concluded with the transfer of 80% of the shares of Millennium Financial Services sp. z o.o., as well as with the payment of the price for the shares to Bank Millennium S.A., resulting in the recognition of the corresponding positive financial result and triggering the commencement of the Strategic Insurance Cooperation between the Bank and the buyers, as described above. The macroeconomic context observed in 2023 had several repercussions on the financial statements of the Group, including the impacts resulting from the persistence of high levels of inflation and the evolution of interest rates. In fact, the generalised increase in prices had an impact on both an increase in other administrative costs and an increase in staff costs, resulting from salary updates, in the three geographies in which the Bank operates. Although relatively low unemployment rates have mitigated the extent of the impact of inflation on household disposable income and simultaneously on credit defaults, rising prices have caused a change in consumption and savings patterns. 2023 REPORT & ACCOUNTS 44 | Additionally, the evolution of interest rates led to an allocation of disposable income or use of savings, either to respond to the increase in credit instalments or loans early repayments. In this context, there is a temporary suspension of early repayment commissions, introduced by Decree-Law 80-A/2022, of 25 November, extended until the end of 2024, by Decree-Law 91/2023, of 11 October, within the framework of legislative measures aimed at mitigating the impact of rising interest rates. On the other hand, as a consequence of the increase in interest rates, there was also a decrease in the demand for new credit, both by individuals and companies, particularly for loans for investment. The evolution of inflation and interest rates is likely to affect the financial position of families and companies more exposed to those variables. The Bank has in place credit monitoring processes, with the aim of identifying and closely monitoring Customers potentially more affected by the prevailing macroeconomic context, anticipating possible difficulties in fulfilling their commitments and defining strategies adjusted to the specificities of each Customer or group of Customers. Despite these effects, in 2023 there was a reduction in the cost of risk and non-performing exposures and an increase in the coverage of these exposures by impairments. In addition to the impact of the evolution of interest rates on the reduction in the volumes of deposits and loans, it is important to mention the increase in the net interest income, resulting from the higher income generated by the credit and securities portfolios, which more than offset the higher costs incurred with customer deposits. The impacts mentioned above are mentioned/described in this chapter under the respective headings, namely in the analysis of net interest income, operating costs, credit and securities portfolios and customer funds. The credit monitoring procedures are referred to in the Risk Management chapter, as well as in the notes to the consolidated accounts, more specifically in note 54. Risk Management. The aforementioned chapter details the interest rate risk monitoring procedures. The consolidated net income of Millennium bcp amounted to 856 million euros in 2023, showing a very significant growth compared to the 197 million euros recorded in the previous year, driving return on equity (ROE) of the Group to increase from 3.9% to 16.0% in the last year. The 23.1% increase recorded in core income, from 2,922 million euros in 2022 to 3,597 million euros in 2023, contributed to a large extent to this performance, resulting from the 31.4% growth recorded in net interest income. The extraordinary gain of 139 million euros associated with the sale, by Bank Millennium, of 80% of the shares of Millennium Financial Services sp. z o.o., within the scope of the strategic partnership in the bancassurance business, also had a positive impact on the performance of the consolidated net income compared to the previous year. The evolution of net income of the Group was also influenced by extraordinary effects associated with the Polish subsidiary that had a negative impact in the previous year, such as the upfront recognition of the costs arising from the moratorium program (credit holidays) enacted in 2022, which had penalised the result associated with this subsidiary in 283 million euros. Also the recognition of total impairment of the goodwill associated with the acquisition by BCP Group of the percentage of control over Bank Millennium S.A. in the amount of 102 million euros on 30 June 2022, contributed to the favourable evolution of net income of the Group in 2023, compared to the previous exercise. The reduction in the cost of mandatory contributions, particularly relevant in the Polish subsidiary, also had a significant impact on the evolution of the results of the Group last year, as well as the evolution of the credit portfolio's risk profile, which resulted in a reduction of loans impairment charges (net of recoveries). On the other hand, the results of the Group continued to be strongly influenced by the increase in costs associated with the foreign exchange mortgage portfolio in the Polish subsidiary, that globally increased from 526 million euros in 2022, to 780 million euros at the end of 2023 (both before income taxes and non- controlling interests), mainly due to the additional provisions booked to face the legal risk implicit in this portfolio. On the other hand, despite the disciplined management of operating costs by the Group, the impact of inflation was felt in the three geographies in which the Bank operates (particularly in Poland and Mozambique), influencing the evolution of operating costs which, in consolidated terms, increased by 8.3%, from 1,073 million euros to 1,163 million euros. Millennium bcp’s consolidated balance sheet total assets amounted to 94,380 million euros as of 31 December 2023, showing an increase of 5.0% in comparison with the 89,877 million euros recorded by the 2023 REPORT & ACCOUNTS |45 end of 2022, with the increase in assets in the international activity, partially mitigated by the slight reduction in assets seen in the activity in Portugal. This increase was driven by the significant reinforcement of the securities portfolio, despite the reductions observed in deposits at central banks, in loans to customers portfolio (net of impairment), in non-current assets held for sale and in deferred tax assets. Total liabilities of the Group stood at 87,080 million euros at the end of 2023, a value higher than the 83,940 million euros recorded at the end of 2022, with this evolution being driven by increases in deposits and other resources from customers and in non-subordinated debt securities issued, despite the decrease in resources from central banks and from credit institutions. Millennium bcp's consolidated customer loan portfolio (gross loans, that is, before impairment and fair value adjustments) amounted to 56,814 million euros as of 31 December 2023, standing below the 57,713 million euros figure achieved at the end of the previous year. This evolution reflects the reduction in the activity in Portugal, although the increase in the international activity partially offset this reduction. On 31 December 2023, the consolidated total customer funds amounted to 95,295 million euros, showing a favourable evolution, increasing by 2,487 million euros compared to the 92,808 million euros obtained on the same date of the previous year, benefiting from the increase in the international activity, partially mitigated by the reduction in the activity in Portugal. Consolidated balance sheet customer funds amounted to 79,215 million euros on 31 December 2023, showing an increase of 1,965 million euros compared to the end of the previous year, with this evolution being explained mainly by the increase in deposits and other resources from customers of the Group. Consolidated off-balance sheet customer funds stood at 16,080 million euros as of 31 December 2023, showing an increase of 521 million euros compared to the figure posted in the same date in the prior year, with this evolution being explained by the increases recorded in assets placed with customers and assets under management and the decrease seen in insurance products (savings and investment). 2023 REPORT & ACCOUNTS 46 | PROFITABILITY ANALYSIS NET INCOME The consolidated net income of Millennium bcp amounted to 856 million euros in 2023, standing significantly above the 197 million euros achieved in the previous year. This evolution reflects the favourable performance of both the activity in Portugal and the international activity, driving return on equity (ROE) of the Group to increase from 3.9% to 16.0% in the last year. The 23.1% increase recorded in core income, from 2,922 million euros in 2022 to 3,597 million euros in 2023, contributed to a large extent to this performance. Both in the activity in Portugal, where the growth was more pronounced, and in the international activity, core income showed significant increases, resulting, in both cases, from the growth in net interest income. In fact, consolidated net interest income of the Group was 31.4% above the 2,150 million euros recorded in the previous year, rising to 2,826 million euros at the end of 2023, benefiting from the evolution of interest rates during last year. Net commissions, in turn, totalled 772 million euros in 2023, remaining in line with the amount achieved in the previous year. The extraordinary gain of 139 million euros resulting from the sale, by Bank Millennium, of 80% of the shares of Millennium Financial Services sp. z o.o., within the scope of the strategic partnership in the bancassurance business, also had a positive impact on the performance of consolidated net income compared to the previous year. This amount includes the gain determined in the first quarter of the current year (127 million euros), as well as an additional gain of 12 million euros recognised in the fourth quarter. The evolution of net income of the Group was also influenced by extraordinary effects associated with the Polish subsidiary that had a negative impact in the previous year. In this context, it should be noted, the upfront recognition of the costs arising from the moratoriums program (credit holidays) enacted by the President of the Republic of Poland in July 2022, which had penalised the result associated with this subsidiary in the previous year. The total estimated cost of credit moratoriums amounted to 283 million euros at the end of 2022, recognised under the heading results on modification. On the other hand, the favourable evolution of net income of the Group in 2023, compared to the previous year, was also influenced by the fact that the result associated with the Polish subsidiary in 2022 had been penalised by the recognition of total impairment of the goodwill associated with the acquisition by the BCP Group of the percentage of control over Bank Millennium S.A. in the amount of 102 million euros as at 30 June 2022. Also in the Polish subsidiary, the contribution to the Polish institutional protection fund (IPS - Institutional Protection Scheme), created in 2022 and non-existent in 2023, together with temporary exemptions in the current year for other contributions, resulted in a reduction of 108 million euros in the overall amount of contributions borne by the subsidiary, also contributing to the favourable evolution of consolidated net income. The risk profile evolution of the credit portfolio, in turn, allowed a reduction in loans impairment charges (net of recoveries), both in the activity in Portugal and in the international activity, determining the favourable performance of this item, which in consolidated terms, totalled 240 million euros, standing 61 million euros (20.2%) below the amount recorded in 2022. Conversely, the results of the Group continued to be strongly influenced by the increase in the costs associated with foreign exchange mortgage portfolio in the Polish subsidiary, that globally went from 526 million euros, in 2022, to 780 million euros, at the end of 2023 (both before taxes and non-controlling interests). The overall increase in these costs was mainly due to the additional provisions booked to face the legal risk implicit in this portfolio, following the unfavourable decision of the Court of Justice of the European Union, regarding remuneration for the use of capital on foreign exchange mortgage loans. In fact, in 2023 the Polish subsidiary recognised provisions in the amount of 623 million euros that compares to 394 million euros in the previous year (net of the amount related to loans originated by Euro Bank S.A., to be reimbursed by a third party). On the other hand, despite the disciplined management of operating costs by the Group, the impact of inflation was felt in the three geographies in which the Bank operates (particularly in Poland and Mozambique), influencing the evolution of operating costs that, in consolidated terms, increased 8.3%, from 1,073 million euros to 1,163 million euros. Both staff costs and other administrative costs were higher than a year earlier, both in the activity in Portugal and mainly in the international activity. Depreciations, in turn, decreased compared to the amount recorded in the previous year, although 2023 REPORT & ACCOUNTS |47 this impact was not significant within the evolution of operating costs. Finally, despite the insignificant impact on the net income of the Group, it is worth mentioning the evolution of net income from discontinued operations, from 6 million euros in 2022, to a negative amount of 3 million euros in 2023. Thus, in 2023, net income from discontinued operations is mainly due from the final adjustment of the sale price of Banque Privée BCP (Suisse) S.A. ("Banque Privée"), under previously agreed conditions. In fact, in the context of the sale of the entire share capital of Banque Privée, in the fourth quarter of 2021, the purchase price received was subject to adjustments, according to typical provisions in this kind of transactions, including the variation of the equity in the completion date, and the ones that may result from the variation of stocks and/or flows of assets under management, in pre- determined dates and specified portfolios. In 2022, in addition to the adjustment of the sale price of Banque Privée, in accordance with the conditions referred to above, the result of discontinued operations also incorporates the correction of the gain, at the end of 2021, from the sale of 70% of the investment held in Seguradora Internacional de Moçambique, S.A. (“SIM”) (currently known as Fidelidade Moçambique - Companhia de Seguros S.A.). NET INCOME Million euros Note: Following the adoption, on 1 January 2023, of IFRS9 - Financial Instruments and IFRS17 - Insurance Contracts, by Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Mbcp Ageas), an entity 49% owned by the Group, and complying with comparative information requirements, the accounts of the Group referring to 2022 were restated accordingly, corresponding to a negative impact of 10 million euros in 2022 results. In 2023, core operating profit of the Group amounted to 2,435 million euros, showing a significant growth of 31.7% from the 1,849 million euros achieved in the previous year, driven by the increase in core income, namely in net interest income. CORE OPERATING PROFIT Million euros The previous analysis does not exclude the specific items considered in these years. In 2023, specific items had a positive impact of 124 million euros (before taxes and non controlling interests), including income of 139 million euros recognised in the international activity, related to the sale of 80% of the shares in Millennium Financial Services sp. z o.o. (128 million euros recognised as net trading income and 11 million euros recognised as other net operating income) and costs of 15 million euros recognised as staff costs in the activity in Portugal: [(i) costs related to the compensation for the temporary reduction in employee remunerations during 2014-2017, as distribution of part of the Bank's results obtained in 2022; (ii) costs with employees leavings, namely early retirements; (iii) costs with mortgage financing to former employees and (iv) income recognised after an agreement related to liabilities with former directors of the Bank]. On the other hand, in 2022, the impact of specific items was negative in the amount of 16 million euros (before taxes), recognised in staff costs in the activity in Portugal, including: (i) distribution of part of the Bank's results obtained in 2021 by the employees of the Bank; (ii) costs with mortgage financing to former employees; (iii) discretionary remuneration paid to employees as a measure to offset the impacts of inflation; and (iv) the recognition of a provision for other structure adaptation measures. In 2021, the impact was also negative, in the amount of 91 million euros, mainly related to the adjustment of headcount carried out by the Bank in that year, including a provision in the amount of 84 million euros. Excluding specific items in both years, core operating profit of the Group amounted to 2,450 million euros, increasing 31.4% from the 1,865 million euros accounted for in the previous year. 2023 REPORT & ACCOUNTS 48 | QUARTERLY INCOME ANALYSIS Million euros 2023 1st quarter 2nd quarter 3rd quarter 4th quarter Total 2022 (restated) 2021 NET INTEREST INCOME 665 710 743 708 2,826 2,150 1,589 OTHER NET INCOME Dividends from equity instruments 0 1 0 1 2 10 1 Net commissions 195 192 191 193 772 772 728 Net trading income 132 (7) (20) 40 145 50 87 Other net operating income (6) (66) 16 18 (39) (183) (126) Equity accounted earnings 15 14 18 17 64 59 57 TOTAL OTHER NET INCOME 336 134 205 269 944 708 746 NET OPERATING REVENUES 1,000 844 948 977 3,770 2,857 2,334 OPERATING COSTS Staff costs 144 164 160 164 632 581 654 Other administrative costs 90 95 98 110 393 353 324 Depreciation 34 35 35 34 137 139 137 TOTAL OPERATING COSTS 269 293 293 308 1,163 1,073 1,116 RESULTS BEFORE PROVISIONS AND IMPAIRMENTS 732 551 655 669 2,607 1,784 1,219 Results on modification (6) (6) (3) (5) (19) (310) 0 Impairment for loans (net of recoveries) 80 65 66 29 240 301 349 Other impairment and provisions 238 165 200 257 860 756 712 INCOME BEFORE INCOME TAX 408 315 387 378 1,488 418 158 INCOME TAX Current 76 50 46 7 180 110 81 Deferred 80 40 95 143 358 195 122 NET (LOSS) / INCOME AFTER INCOME TAX FROM CONTINUING OPERATIONS 251 225 245 228 950 114 (46) Income from discontinued operations 0 0 0 (3) (3) 6 71 NET INCOME AFTER INCOME TAX 251 225 245 226 948 120 25 Non-controlling interests 35 18 18 20 92 (78) (113) NET INCOME ATTRIBUTABLE TO SHAREHOLDERS OF THE BANK 216 207 227 205 856 197 138 2023 REPORT & ACCOUNTS |49 MAIN GEOGRAPHIES Million euros International activity * Portugal Total Int Op Bank Millennium BIM Dec23 Dec22 restated Dec21 Dec23 Dec22 Dec21 Dec23 Dec22 Dec21 Dec23 Dec22 Dec21 NET INTEREST INCOME 1,467 951 831 1,359 1,199 757 1,157 996 595 202 202 159 OTHER NET INCOME Dividends from equity instruments 1 9 0 1 1 1 1 1 1 0 0 0 Net commissions 560 561 514 211 211 213 172 173 182 39 39 31 Net trading income 13 69 76 132 (19) 11 116 (40) (6) 16 21 17 Other net operating income (65) (76) (66) 26 (107) (60) 22 (109) (62) 5 2 3 Equity accounted earnings 60 58 58 5 1 (1) 0 0 0 2 2 0 TOTAL OTHER NET INCOME 569 620 582 375 87 164 311 24 115 62 64 51 NET OPERATING REVENUES 2,035 1,571 1,414 1,734 1,286 921 1,468 1,020 710 264 266 210 OPERATING COSTS Staff costs 355 339 436 277 242 218 227 194 179 50 47 39 Other administrative costs 189 184 176 205 169 148 147 118 107 58 51 40 Depreciation 73 79 80 64 60 57 47 45 44 18 16 13 TOTAL OPERATING COSTS 617 602 693 546 471 423 420 357 330 126 113 92 RESULTS BEFORE PROVISIONS AND IMPAIRMENTS 1,419 970 721 1,188 815 498 1,048 663 380 138 153 119 Results on modification 0 0 0 (19) (310) 0 (19) (310) 0 0 0 0 Impairment for loans (net of recoveries) 208 218 273 32 82 76 57 74 71 (25) 8 4 Other impairment and provisions 161 205 165 699 550 547 682 435 528 14 7 10 INCOME BEFORE INCOME TAX 1,050 546 282 437 (128) (124) 289 (156) (219) 149 138 105 INCOME TAX Current 13 17 11 167 92 70 135 56 44 32 36 27 Deferred 318 190 98 40 4 24 27 4 29 12 0 (5) NET (LOSS) / INCOME AFTER INCOME TAX FROM CONTINUING OPERATIONS 719 338 173 231 (224) (219) 127 (217) (292) 105 102 83 Income from discontinued operations 0 0 0 (3) 6 71 0 0 0 0 4 13 NET INCOME AFTER INCOME TAX 719 338 173 228 (219) (148) 127 (217) (292) 105 106 96 Non-controlling interests ** (6) (5) 0 97 (73) (113) 0 0 0 0 0 1 NET INCOME ** 725 343 173 131 (146) (35) 127 (217) (292) 105 106 96 * The international operations, in addition to the activity of Bank Millennium in Poland and Millennium Bim in Mozambique (BIM), also include the contribution of Banco Millennium Atlântico in Angola and until 2022, the activity of Millennium BCP Bank & Trust in the Cayman Islands. The presentation of the operations above is in accordance with the Consolidated Accounts of the Group, and there may be differences in relation to the accounts disclosed locally. The aggregate of international operations includes some amounts recorded in the consolidated accounts, with the recognition of impairment of the goodwill related to the Polish subsidiary, beeing the most significative. At the same time, this aggregate also includes, under the heading results of discontinued operations: the results of the Swiss subsidiary, till the date of the sale, as well as the impacts of the sale of the operation in each year, as well as the impacts arising from the sale of the SIM stake not included in the results of the subsidiary. ** The net result shown in the columns relating to Bank Millennium and BIM corresponds to the consolidated result calculated by each of those entities. Thus, the non-controlling interests presented in those same columns relate to subsidiaries of those entities, where applicable. 2023 REPORT & ACCOUNTS 50 | In the activity in Portugal, net income amounted to 725 million euros in 2023, well above the 343 million euros achieved in the previous year. NET INCOME Activity in Portugal Million euros For the performance of net income in the activity in Portugal, contributed above all the increase of 54.2% (516 million euros) in net interest income, which stood at 1,467 million euros at the end of 2023, compared to 951 million euros in 2022. This solid growth of net interest income mainly reflects the favourable evolution of the commercial business, benefiting from the increase of interest rates that started in 2022. On the other hand, the impact of the interest rates evolution in securities portfolio, namely in the greater contribution of the income generated by the sovereign debt portfolio, also had a positive impact on net interest income performance compared to the previous year. The evolution of net income in the activity in Portugal also benefited, albeit to a lesser extent, from the reduction in impairments and provisions during last year. In fact, mainly reflecting the lower provisioning needs associated with non- current assets held for sale, namely the foreclosed assets portfolio, other impairments and provisions showed a reduction of 21.7% (44 million euros) compared to the amount posted in the previous year, standing at 161 million euros at the end of 2023, while loans impairment, due to the improvement in the portfolio's risk profile, stood 5.0% (11 million euros) below the amount recognised in 2022, totalling 208 million euros, in 2023. Other net operating income, largely influenced by the reduction in mandatory contributions, and equity accounted earnings also contributed to the favourable evolution of net income in the activity in Portugal, growing 14.8% (11 million euros) and 3.3% (2 million euros), respectively. Conversely, net income in the activity in Portugal in 2023 was penalised by the strong reduction in net trading income which stood at 13 million euros, compared to 69 million euros posted in 2022. The performance of net income in the activity in Portugal was also influenced, albeit to a lesser extent, by the increase of 2.5% (15 million euros) recorded in operating costs. This evolution was mainly due to the increase in staff costs, although there was also an increase in other administrative costs, with these impacts being partially offset by the reduction in depreciations. It is also worth mentioning the reduction of 8 million euros, compared to the previous year, recorded in dividends from equity instruments. Net commissions, in turn, had no impact on the evolution of net income in the activity in Portugal, remaining stable compared to 2022, totalling 560 million euros at the end of the current year. Despite the fact that commissions remained in line with the amount recorded in 2022, the increase recorded in the net interest income was reflected in a significant growth in core income, which largely offset the higher operating costs, leading core operating profit in the activity in Portugal to grow 55.0%, from 910 million euros in 2022, to 1,410 million euros in 2023. Excluding the specific items mentioned above (negative impact of 15 million euros in 2023 and 16 million euros in 2022, both recognised in staff costs), core operating profit in the activity in Portugal increased by 53.9% from 926 million euros to 1,426 million euros. CORE OPERATING PROFIT Activity in Portugal Million euros In the international activity, net income stood at 131 million euros in 2023, improving significantly compared to the negative amount of 146 million euros recorded in the previous year. 2023 REPORT & ACCOUNTS |51 NET INCOME International activity Million euros The significant increase in net income of the international activity was due to the contribution associated with the Polish subsidiary, that presented, in the last quarter of the year, the fifth quarter in a row with positive results. On the other hand, the results of the international activity in 2022 were impacted by the recognition of the total impairment of the goodwill associated with the Group's stake in Bank Millennium SA in Poland in the amount of 102 million euros on 30 June 2022. Net income of Bank Millennium in Poland reached 127 million euros in 2023, showing a strong growth from the negative amount of 217 million euros recorded in the previous year. Net income of 2022 was significantly influenced by the upfront recognition of costs arising from the aforementioned moratorium program (credit holidays) enacted by the President of the Republic of Poland in July 2022, which amounted to 283 million euros at the end of 2022. The evolution of net income of the Polish subsidiary was also strongly influenced by the growth of 162 million euros (16.2%) recorded in net interest income, mainly reflecting the impact of the successive increases in the reference interest rates of the central bank of Poland observed between the last quarter of 2021 and the third quarter of 2022. The aforementioned extraordinary gain of 139 million euros, resulting from the sale, by Bank Millennium, of 80% of the shares of Millennium Financial Services sp. z o.o. as part of the strategic partnership in bancassurance business, also contributed largely to the favourable performance of net income of the Polish subsidiary. In addition, the reduction of 108 million euros in the overall amount of mandatory contributions borne by the Polish subsidiary, from 121 million euros to 13 million euros, also contributed largely to the growth of net income. This reduction reflects, on one hand, the impact of the contribution to the Institutional Protection Scheme (IPS), established in 2022 and with no additional contributions in 2023, and on the other the temporary exemptions in the current year for other mandatory contributions. The net income of the Polish subsidiary also benefited, albeit to a lesser extent, from the reduction in loans impairment, with net commissions remaining stable compared to the amount recorded a year earlier. On the other hand, the result of this subsidiary was penalised by the increase in costs associated with the portfolio of foreign exchange mortgage loans, that overall increased from 526 million euros to 780 million euros (before taxes), continuing to strongly influence the result of the subsidiary. The additional provisions booked to face the legal risk implicit in this portfolio, following the unfavourable decision of the Court of Justice of the European Union regarding remuneration for the use of capital on these loans, represent the most significant portion of these costs, increasing 229 million euros in the last year, from 394 million euros to 623 million euros (net of the amount originated by the operations of Euro Bank S.A., to be reimbursed by a third party). Although on a smaller scale, it is also worth mentioning the impact of the increase in operating costs, mainly in staff costs and in other administrative costs on the performance of the net income of the Polish subsidiary, mainly reflecting high inflation rates and, regarding staff cots, also the characteristics of the Polish labour market. It should be noted however that the efforts to continue with measures that allow the improvement of the efficiency of the Polish subsidiary, allowed to offset these impacts. In this sense, reference should be made to the optimisation of the physical distribution network, associated with the Bank's progress in the area of digitalisation of the commercial business, resulting in a reduction in the number of branches, from 635 to 612. The number of employees of the Polish subsidiary, also showed a reduction of 115 employees last year, to 6,872 employees at the end of 2023. It should be noted that the increase recorded in operating costs was more than offset by the increase in core income, namely in net interest income, leading the core operating profit of the Polish subsidiary to grow 12.1%, rising from 811 million euros in 2022, to 909 million euros in 2023. Millennium bim in Mozambique, in turn, showed a net income of 105 million euros, in line with the amount recorded in the previous year (-0.9%). It should be noted however that 2022 result incorporates, under the item results from discontinued operations, the positive impact of the correction of the gain resulted from the sale of 70% of the stake that the Group held in “SIM”, as 2023 REPORT & ACCOUNTS 52 | mentioned above. Income from continuing operations increased 3.2%. In the performance of the Mozambican subsidiary, it is important to highlight the favourable evolution of loans impairment, mainly reflecting the impact of the partial recovery of a credit in litigation, following an out-of-court settlement. It should also be noted that despite the rise in the reference interest rates, net interest income of the subsidiary remained in line with the amount recorded in 2022, due to the negative impact of the increase in the local requirement for non- remunerated cash reserves to be maintained with the central bank. Other net operating income, in turn, increased compared to the amount recorded in the previous year, while operating costs, other impairment and provisions and net trading income performed less favourably than a year earlier. In the particular case of operating costs, this performance was largely due to the levels of inflation in the country. Reflecting the increase in operating costs, core operating profit of the Mozambican subsidiary was 9.8% below the 128 million euros recorded in 2022, totalling 115 million euros at the end of 2023. Millennium bim ended the year with 2,574 employees, 70 more than in the previous year and with 195 branches, two less than in 2022. Despite its smaller relative weight within the scope of this analysis, the contribution of the Angolan operation evolved from a negative amount of 7 million euros in 2022, to a positive amount of 3 million euros in the current year. This performance was due, on the one hand, to the appropriation of the results of Banco Millennium Atlântico recognised in equity accounted earnings, and on the other, to the fact that the previous year's contribution was affected by impairments charges, including goodwill impairment, which did not exist this year. Net income of the international activity was also influenced, although not significantly, by the impact of the adjustment of the sale price of Banque Privée, reflected in the heading income from discontinued operations, in accordance with conditions previously established and already detailed above. Benefiting from the increase in core income and despite the impact of inflation levels on operating costs, core operating profit of international activity grew by 9.1%, from 939 million euros in 2022, to 1,025 million euros in 2023. CORE OPERATING PROFIT International activity Million euros 2023 REPORT & ACCOUNTS |53 NET INCOME OF INTERNATIONAL ACTIVITY Million euros 2023 2022 2021 Chg. 23/22 Bank Millennium in Poland (1) 127 (217) (292) 158.5% Costs associated with foreign exchange mortgage loans 735 505 534 45.7% Bank Millennium in Poland (exc. costs associated with foreign exchange mortgage loans) 862 288 242 199.3% Millennium bim in Mozambique (1)(2) 105 102 83 3.2% Banco Millennium Atlântico (BMA) (3) 3 (7) (11) 136,9% Other (4) (3) (102) 1 96,6% Income from discontinued operations (5) (3) 6 71 -151,3% Banque Privée BCP (Suisse) S.A. (3) 2 52 <-200% Fidelidade Moçambique - Companhia de Seguros S.A. — 4 19 -100.0% Non-controlling interests 97 (73) (113) >200% NET INCOME OF INTERNATIONAL ACTIVITY 131 (146) (35) 189.8% (1) The amounts showed are not deducted from non-controlling interests. (2) Corresponds to net income after income taxes from continuing operations. Net income does not include the net income generated by SIM, now designated Fidelidade Moçambique - Companhia de Seguros S.A. up to the date of disposal of 70% of the stake that the Group held in the insurance company, nor the gain recognised with the aforementioned disposal in 2021. The correction of the gain, accounted for in 2022, is also not included in the reported results. Income arising from discontinued operations is presented in the line "Income from discontinued operations". The non-controlling interests related to the insurance company, meanwhile disposed, are reflected in the line "Non-controlling interests". (3) Corresponds to the proportion of the results of Banco Millennium Atlântico appropriated by the Group, considering the equity method. In 2022 and 2021,the amounts presented also include provisions associated with the investment in this associate, also including in 2022 impairment of goodwill. (4) In 2023, includes provisions associated with BIM, recognised in the consolidated accounts. In 2022, includes the total impairment of the goodwill associated with the acquisition by the BCP Group of the percentage of control over Bank Millennium SA. and the net income of the operation in Cayman Islands, fully attributable to the Bank. In 2021, includes the net income of the operation in Cayman Islands, fully attributable to the Bank. (5) Income arising from discontinued operations includes the net income of Banque Privée up to the date of its disposal (1 million euros in 2021); the gain, in the amount of 51 million euros, generated with the sale of the participation in 2021 and the adjustment of that gain (2 million euros in 2022 and a negative amount of 3 million euros in 2023). Additionally, income from discontinued operations also includes the net income generated by SIM, now designated Fidelidade Moçambique - Companhia de Seguros S.A. up to the date of the sale of 70% of the stake that the Group held in the insurance company (7 million euros in 2021), as well as the gain generated with the sale, in that year, in the amount of 12 million euros net of taxes (of which 6 million euros reflected in the Millennium bim accounts). In 2022 is reflected in this heading, the correction made to that value (4 million euros). 2023 REPORT & ACCOUNTS 54 | NET INTEREST INCOME In 2023, net interest income of the Group reached 2,826 million euros, showing a growth of 31.4% compared to the 2,150 million euros posted in the previous year. The favourable evolution of net interest income was observed both in the activity in Portugal, where there was a growth of more than 50%, and in the international activity. NET INTEREST INCOME Million euros In fact, net interest income, in the activity in Portugal, showed a growth of 54.2% from the 951 million euros recorded in 2022, rising to 1,467 million euros, at the end of 2023. The performance of net interest income in the activity in Portugal, in the last year, reflects above all, the favourable evolution of the commercial business, but also incorporating, on the one hand, the positive impact resulting from the management of the securities portfolio, and on the other, the increase in costs incurred with issued debt and subordinated debt. Thus, despite the decrease of the average balance of the customers credit portfolio, in relation to the previous year, in the activity in Portugal, there was an increase in the income generated by this portfolio, resulting from the increases recorded in interest rates. On the other hand, this impact was partially offset by the increase in the remuneration of the deposit portfolio, reflecting not only the evolution of interest rates, but also the increase in the average balance of interest- bearing deposits compared to the previous year. Regarding securities portfolio, although the other securities also generated higher income compared to 2022, the increased contribution of the income generated by the sovereign debt portfolio stands out, benefiting on the one hand, from the evolution of interest rates and on the other, from the portfolio turnover. Although on a smaller scale, reference should also be made to the positive impact on the domestic net interest income of income generated by other assets and liabilities in 2023, compared to the previous year. The evolution of net interest income in the activity in Portugal was negatively impacted by an increase, compared to 2022, of the costs incurred with issued debt and subordinated debt, arising not only from the increase in interest rates, but also from the impact of two issues of senior preferred debt securities, in the amount of 350 million euros and 500 million euros, launched in October 2022 and September 2023, respectively. These issues, under the Bank's Euro Note Programme, increase the capacity to meet the requirements known as “MREL” (Minimum Requirements for Own Funds and Eligible Liabilities). Following the full early repayment of Targeted Longer-Term Refinancing Operations (TLTRO) in December 2022 and a residual portion in January 2023, these refinancing operations no longer had a material impact in 2023, contrasting to the previous year, when net interest income reflected the income resulting from the negative interest rate applied. In contrast, reference should be made to the increase in net interest income resulting from liquidity deposited at the Bank of Portugal. Finally, it is worth mentioning the impact of the increase in the cost of resources from other credit institutions, net of interest income earned on liquidity surpluses placed with these institutions, reflecting the evolution of interest rates in the last year. 2023 REPORT & ACCOUNTS |55 NET INTEREST INCOME Activity in Portugal Million euros In the international activity, net interest income amounted to 1,359 million euros at the end of 2023, showing a growth of 13.4% from the 1,199 million euros accounted in 2022. This evolution was mainly due to the performance of the Polish subsidiary, driven by successive increases in the reference interest rates that have taken place between the last quarter of 2021 and the third quarter of 2022. In the subsidiary in Mozambique, despite being influenced by the significant increase in the local requirement for non-remunerated cash reserves to be maintained with the central bank, net interest income remained stable compared to the amount recorded in the previous year. NET INTEREST INCOME International activity Million euros In consolidated terms, net interest margin increased significantly, from 2.46% in 2022 to 3.36% in 2023, mainly reflecting the performance of the activity in Portugal. In fact, in the activity in Portugal, net interest margin evolved from 1.53% in 2022, to 2.59% in 2023, mainly influenced by the increase in interest rates underlying the credit and sovereign debt portfolios. Net interest margin in the international activity, in turn, recorded a more modest increase, from 4.77% in 2022, to 4.93% in 2023, limited by the impact of the reversal of the monetary policy of the central bank of Poland, which after a period of successive increases between the last quarter of 2021 and the third quarter of 2022, made the first interest rate cuts in September and October 2023. 2023 REPORT & ACCOUNTS 56 | AVERAGE BALANCES Million euros 2023 2022 (restated) 2021 Average Balance Yield Average Balance Yield Average Balance Yield INTEREST EARNING ASSETS Deposits in credit institutions 4,379 4.0 % 9,575 1.3 % 6,116 0.3 % Financial assets 22,979 3.3 % 19,742 1.8 % 20,116 0.8 % Loans and advances to customers 55,672 5.4 % 56,731 3.8 % 55,045 2.7 % TOTAL INTEREST EARNING ASSETS 83,031 4.8 % 86,048 3.0 % 81,277 2.0 % Discontinued operations (1) — — 726 Non-interest earning assets 8,009 9,837 8,481 TOTAL ASSETS 91,040 95,884 90,484 INTEREST BEARING LIABILITIES Amounts owed to credit institutions 1,295 3.9 % 8,805 (0.2 %) 9,110 (0.8 %) Deposits and other resources from customers 75,906 1.2 % 72,995 0.6 % 66,705 0.1 % Debt issued and financial liabilities 3,468 3.8 % 3,263 1.0 % 3,523 0.8 % Subordinated debt 1,388 7.8 % 1,377 5.1 % 1,248 4.5 % TOTAL INTEREST BEARING LIABILITIES 82,057 1.4 % 86,439 0.6 % 80,586 0.1 % Discontinued operations (1) — — 761 Non-interest bearing liabilities 2,345 3,127 1,890 Shareholders' equity and Non-controlling interests 6,637 6,318 7,247 TOTAL LIABILITIES, SHAREHOLDERS' EQUITY AND NON-CONTROLLING INTERESTS 91,040 95,884 90,484 NET INTEREST MARGIN (2) 3.4 % 2.5 % 1.9 % (1) Includes, in 2021, the activity of the Swiss subsidiary (adjusted from the inter group' movements) and from Seguradora Internacional de Moçambique, S.A. ("SIM"), until the date of the respective disposals. (2)Net interest income as a percentage of average interest earning assets. Note: Average balance calculated based on monthly average of end of month balances, accumulated in the period. Interest related to hedge derivatives were allocated, each year, to the respective balance item. The Group's interest earning assets totalled 83,031 million euros in 2023, standing below the 86,048 million euros recorded in 2022. This evolution was mainly due to the decrease of deposits in credit institutions, from 9,575 million euros in 2022, to 4,379 million euros in 2023. Loans to customers also decreased from 56,731 million euros to 55,672 million euros in the same period. Financial assets, in turn, grew from 19,742 million euros in 2022, to 22,979 million euros in 2023. It should be noted, however, that, in terms of profitability, the reduction in the average amount of interest-earning assets was more than offset by the increase in the implicit rate, reflecting the context of reference rates prevailing in Portugal, Poland and Mozambique. Regarding non-interest earning assets there was also a decrease compared to the 9,837 million euros recorded in 2022, totalling 8,009 million euros in 2023. In terms of average balance sheet structure, interest earning assets represented 91.2% of average net assets that compares to 89.7% in the previous year. Although showing an average balance lower than a year earlier, loans to customers increased its relative weight in the balance sheet structure from 59.2% to 61.2%, remaining the main aggregate in the interest-earning assets portfolio and increasing its relative weight in this heading from 65.9% to 67.1% in the last year. Financial assets portfolio, in turn, also reinforced its weight in the balance sheet structure, increasing from 20.6% in 2022, to 25.2% in 2023, while deposits in credit institutions, by contrast, decreased from 10.0% in 2022 to 4.8% in 2023. 2023 REPORT & ACCOUNTS |57 Interest bearing liabilities decreased from 86,439 million euros in 2022, to 82,057 million euros in 2023, mainly reflecting the reduction of amounts owed to credit institutions, resulting from the early repayment of the bulk of the financing that had been contracted with the European Central Bank within the scope of targeted longer-term refinancing operations (TLTRO III). As a result, there was a significant reduction in the relative weight of amounts owed to credit institutions in the average balance of interest-bearing liabilities, from 10.2% in 2022 to 1.6% in 2023. On the other hand, the average balance of customer deposits increased from 72,995 million euros in 2022 to 75,906 million euros in 2023, reinforcing its relative weight in the average balance of interest-bearing liabilities, from 84.4% to 92.5%, and thus remaining the main financing and activity support instrument. The remaining items that contribute to average interest-bearing liabilities did not show materially relevant changes, so that the structure of average interest-bearing liabilities also did not show significant changes compared to the previous year. As such, the relative weight of the aggregate of debt issued and financial liabilities in average interest-bearing liabilities increased from 3.8% para 4.2% in the last year, while subordinated debt represented 1.7% of the same aggregate (1.6% in 2022). OTHER NET INCOME Other net income, that aggregates dividends from equity instruments, net commissions, net trading income, other net operating income and equity accounted earnings, totalled 944 million euros in 2023, corresponding to a significant growth of 33.4% compared to the 708 million euros recorded in the previous year. The contribution of the Polish subsidiary was decisive for this performance, although its impact was offset by the lower results obtained in the activity in Portugal. In this sense, it is worth highlighting, on the one hand, the recognition, in 2023, of the gains obtained with the sale of 80% of the shares of Millennium Financial Services sp. z o.o., as part of the strategic partnership in bancassurance business, in the amount of 139 million euros, and on the other, the reduction by 108 million euros in mandatory contributions to which the Polish operation was subject. On the other hand, the evolution of other net income was penalised mainly by the reduction of 56 million euros in net trading income in the activity in Portugal. In 2023, in the activity in Portugal, other net income amounted to 569 million euros, that compares to 620 million euros posted in 2022. In addition to the aforementioned reduction in net trading income, this evolution also reflects, albeit to a lesser extent, on the one hand, the drop of 8 million euros recorded in dividends from equity instruments, and on the other, the increases of 11 million euros and 2 million euros recorded in other net operating income and equity accounted earnings, respectively. Net commissions, in turn, remained in line with the amount recorded in the previous year. In the international activity, other net income amounted to 375 million euros in 2023, showing a significant growth, from 87 million euros posted in the previous year, resulting from the contribution of the Polish subsidiary, as mentioned above. From the gains obtained with the sale of 80% of the shares of Millennium Financial Services sp. z o.o., considered specific items, 128 million euros referring to the gain, were recognised in net trading income, contributing decisively to the growth of 151 million euros recorded under this heading, in international activity. The remaining 11 million euros, associated with the revaluation of the 20% minority stake held by Bank Millennium after the completion of the operation, were recognised in other net operating income, an item that increased 133 million euros mainly from the reduction in cost of mandatory contributions to which the Polish operation was subject last year. Additionally, the evolution of other net income, in the international activity, also benefited, albeit to a lesser extent, from the increase of 4 million euros recorded in equity accounted earnings. Net commissions and dividends from equity instruments, in turn, remained in line with the amount recorded in the previous year. 2023 REPORT & ACCOUNTS 58 | OTHER NET INCOME Million euros 2023 2022 (restated) 2021 Chg. % 23/22 Dividends from equity instruments 2 10 1 (82.3 %) Net commissions 772 772 728 0.0 % Net trading income 145 50 87 189.9 % Other net operating income (39) (183) (126) 78.9 % Equity accounted earnings 64 59 57 9.6 % TOTAL 944 708 746 33.4 % of which: Activity in Portugal 569 620 582 (8.3 %) International activity 375 87 164 >200% DIVIDENDS FROM EQUITY INSTRUMENTS Dividends from equity instruments, which incorporates dividends and income from equity shares received from investments classified as financial assets at fair value through other comprehensive income and as financial assets held for trading, evolved from 10 million euros in 2022, to 2 million euros in 2023. This evolution mainly reflects the reduction of income associated with investments that are part of the shares portfolio of the activity in Portugal, which totalled 1 million euros in 2023, compared to the 9 million euros observed in the previous year. In the international activity, dividends from equity instruments arising exclusively from the activity of the Polish subsidiary remained in line with the amount recorded in 2022, totalling 1 million euros at the end of the current year. NET COMMISSIONS Net commissions include commissions related to the banking business and commissions more directly related to financial markets. In 2023, net commissions, as a whole, totalled 772 million euros, remaining in line with the amount recorded in the previous year, reflecting the performance of both the activity in Portugal and the international activity. In consolidated terms, both banking commissions and commissions related to financial markets remained at a similar level to that seen in 2022, with the slight changes recorded in each of the aggregates offsetting each other. In fact, banking commissions amounted to 663 million euros at the end of the current year, standing 1 million euros (0.2%) below the amount recorded in 2022, while commissions related to financial markets totalled 108 million euros, 1 million euros (1.1%) above the amount recorded a year earlier. Although the overall amount of the banking commissions of the Group remained stable compared to the amount recorded in the previous year, there were changes in the several types of commissions that make up this aggregate. In this sense, it is important to highlight the growth of 20 million euros (8.6%) recorded in commissions related to cards and transfers which, reflecting the performance of both activity in Portugal and international activity, increased from 228 million euros to 248 million euros. On the other hand, commissions related to credit and guarantees showed a reduction of 12 million euros (8.5%), standing at 129 million euros at the end of 2023, mainly reflecting the evolution of this type of commissions in the activity in Portugal, influenced, among other effects, by legislative restrictions, as in the international activity a growth was recorded compared to the previous year. Commissions related to management and maintenance of accounts, in turn, totalled 159 million euros, 6 million euros (3.9%) lower than the amount observed in 2022, with the increase in the activity in Portugal being more than offset by the drop in the international activity. Other bank commissions decreased from 11 million euros to 9 million euros (-17.7%) last year, mainly reflecting the performance of the international activity. Finally, it should be noted that bancassurance commissions, which incorporate commissions obtained from placing insurance products through the Bank's distribution networks operating in Portugal and Poland, were 1 million euros lower compared to the amount recorded in the previous 2023 REPORT & ACCOUNTS |59 year, due to the performance of the Polish subsidiary, totalling, in consolidated terms, 119 million euros, at the end of 2023. Commissions related to financial markets totalled 108 million euros, standing 1.1% above the amount recorded in 2022, with this evolution resulting, on the one hand, from the increase of 4 million euros (6.2%) in commissions associated with asset management and distribution, and on the other, the reduction of 3 million euros (-7.7%) recorded in commissions associated with securities. Each one of these commission headings totalled, respectively, 72 million euros and 36 million euros, at the end of 2023. In both cases, the evolution was determined by the performance of the activity in Portugal, since in the international activity changes in the last year were not materially relevant within the scope of this analysis. NET COMMISSIONS Million euros In the activity in Portugal, net commissions, in 2023, amounted to 560 million euros, remaining in line with the amount recorded a year earlier. Both banking commissions, which amounted to 471 million euros, and commissions related to markets, which totalled 89 million euros, were at a similar level to that achieved in 2022, only changing -0.3% e 1.4%, respectively. This evolution resulted, however, from different dynamics with regard to the several types of commissions that make up these two aggregates. Thus, regarding banking commissions, in the activity in Portugal, the growth of 11 million euros (7.2%) in commissions related to cards and transfers stands out, totalling 158 million euros, at the end of the current year. These commissions include amounts charged for transactions carried out with cards and the respective payment networks, for bank transfers and for the use of points of sale (POS), thus demonstrating the increase in transaction levels in the last year. Despite with smaller impact, the performance of commissions related to the banking business in the activity in Portugal also benefited from the growth in management and maintenance of account commissions, which increased by 2 million euros (1.4%), from 140 million euros in 2022, to 142 million euros in 2023, reflecting, on the one hand, the dynamics of new customers acquisition and, on the other, greater commercial dynamism and adequate management of value offers, with customers subscribing integrated solutions and service packages. Conversely, the performance of banking commissions, in the activity in Portugal, was influenced by the reduction in commissions associated with credit and guarantees, which together stood 14 million euros below the 96 million euros reached in 2022, standing at 81 million euros at the end of 2023. This evolution reflects the lower credit production in the current context and the legal restrictions imposed in the meantime. Commissions from the bancassurance activity, with regard to the activity in Portugal, remained in line with the amounts achieved in the previous year, totalling 84 million euros at the end of 2023, while other banking commissions amounted to 5 million euros, an increase of 2.8% from the amount recorded last year, not material within the scope of this analysis. NET COMMISSIONS Activity in Portugal Million euros 2023 REPORT & ACCOUNTS 60 | As previously mentioned, net commissions, in the international activity, remained in line with the amount recorded in 2022, standing at 211 million euros. Neither the Polish subsidiary nor the subsidiary in Mozambique showed significant changes in the overall amount of net commissions. Likewise, both commissions related to banking business and commissions related to markets in the international activity remained at identical levels to the previous year, totalling 192 million euros and 20 million euros, respectively at the end of 2023. NET COMMISSIONS International activity Million euros NET COMMISSIONS(1) Million euros 2023 2022 2021 Chg. % 23/22 BANKING COMMISSIONS Cards and transfers 248 228 186 8.6 % Credit and guarantees 129 141 152 (8.5 %) Bancassurance 119 119 116 (0.6 %) Management and maintenance of accounts 159 165 149 (3.9 %) Other commissions 9 11 12 (17.7 %) TOTAL BANKING COMMISSIONS 663 665 615 (0.2 %) MARKET RELATED COMMISSIONS Securities 36 39 37 (7.7 %) Asset management and distribution 72 68 76 6.2 % TOTAL MARKET RELATED COMMISSIONS 108 107 113 1.1 % TOTAL NET COMMISSIONS 772 772 728 0.0 % of which: Activity in Portugal 560 561 514 0.0 % International activity 211 211 213 0.0 % (1) In 2023, some commissions were reclassified, in order to improve the quality of the information reported. The historical amounts related to 2022 and 2021 of such items are presented considering these reclassifications with the purpose of ensuring their comparability. The overall amount of net commissions disclosed in previous periods remains unchanged compared to that published in previous periods. 2023 REPORT & ACCOUNTS |61 NET TRADING INCOME Net trading income includes results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations and results arising from derecognition of financial assets and financial liabilities not measured at fair value through profit or loss. In 2023, net trading income amounted to 145 million euros, showing a very significant growth compared to the 50 million euros achieved in the previous year. This performance was determined by the recognition, in 2023, of the gains obtained by the Polish subsidiary with the sale of 80% of the shares of Millennium Financial Services sp. z o.o., in the scope of the strategic partnership in the bancassurance business, which, as previously mentioned, totalled 128 million euros under this heading. In consolidated terms, this impact was partially offset by the reduction in net trading income in the activity in Portugal, compared to the amount recorded in 2022. NET TRADING INCOME Million euros In the activity in Portugal, net trading income stood well below the 69 million euros posted in 2022, amounting to 13 million euros at the end of 2023. In this performance, reference should be made to the contribution associated with the securities portfolio, reflecting on the one hand the gains recognised in the previous year with the sale of foreign sovereign debt securities, which did not occur in the current year, and on the other the favourable evolution of net trading income associated with Portuguese sovereign debt securities, as the losses recorded were significantly lower than those recorded a year earlier. The evolution of net trading income in the activity in Portugal was also influenced by the costs recognised in 2023 with the sale of credits, in contrast to the gains recorded in the previous year. In the international activity, net trading income showed a significant increase, from a negative amount of 19 million euros in 2022 to an income of 132 million euros at the end of the current year. This performance was determined by the already mentioned gains obtained with the sale of 80% of the shares of Millennium Financial Services sp. z o.o., that under this heading totalled 128 million euros in 2023, considered as specific items. It is important to note that this amount includes an additional gain of 10 million euros compared to the 118 million euros considered in the first quarter of the year, the recognition of which was subject to certain conditions. In addition, the reduction in costs incurred by the Polish subsidiary in converting mortgage loans granted in Swiss francs, following the agreements with customers holding these loans, that in 2023 penalised net trading income in 60 million euros compared to 82 million euros recognised in 2022, also contributed to the favourable evolution of this item. In the operation in Mozambique, net trading income was at a lower level than that achieved in 2022, despite having an immaterial impact within the scope of this analysis. 2023 REPORT & ACCOUNTS 62 | NET TRADING INCOME Million euros 2023 2022 2021 Chg. % 23/22 Net gains/(losses) from financial operations at fair value through profit or loss (7) 27 0 (124.0 %) Net gains/(losses) from foreign exchange 17 19 17 (9.9 %) Net gains/(losses) from hedge accounting operations 22 (2) 4 >200% Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss 112 5 n.a. >200% Net gains/(losses) from derecognition of financial assets and liabilities measured at amortised cost (only until 2021) n.a n.a. (4) n.a. Net gains/(losses) from derecognition of financial assets measured at fair value through other comprehensive income (only until 2021) n.a n.a. 69 n.a. TOTAL 145 50 87 189.9 % of which: Activity in Portugal 13 69 76 (81.4 %) International activity 132 (19) 11 >200% OTHER NET OPERATING INCOME Other net operating income includes other operating income, net of other operating costs, which includes, among others, the costs associated with the resolution and the deposit guarantee funds as well as with the other mandatory contributions, both in the activity in Portugal and in the international activity. In addition, other net operating income also includes the results from the sale of subsidiaries and other assets. In 2023, other net operating income totalled a negative amount of 39 million euros, showing a significant improvement compared to the also negative amount of 183 million euros recorded in the previous year. This evolution was mainly driven by the international activity, namely by the reduction of mandatory contributions to which the Polish subsidiary was subject. In the activity in Portugal, other net operating income went from a negative amount of 76 million euros in 2022, to an also negative amount of 65 million euros at the end of 2023. Similar to what happened in the international activity, it was also the reduction in costs with mandatory contributions that contributed mainly to this evolution, although this impact was offset by the lower gains recognised with the sale of non- current assets held for sale compared to the amount recognised in the previous year. In fact, last year, the overall amount of mandatory contributions, including the supervisory fee charged by the ECB, decreased from 91 million euros to 75 million euros. This evolution corresponds to a reduction of 17.2%, mainly reflecting the reduction in contributions for the National Resolution Fund (NRF) and the Single Resolution Fund (SRF). The contribution to the NRF decreased by around 50%, from 19 million euros in 2022, to 9 million euros in 2023, mainly due to the reduction in the contribution rate, from 0.057% to 0.029%. The cost of the contribution to the SRF, in turn, went from 26 million euros in 2022, to 18 million euros in the current year, reflecting on the one hand the lower reinforcement needs of the fund determined by the Single Resolution Board (SRB) and on the other the increase, from 15.0% to 22.5%, of the share of this contribution that can be delivered as irrevocable payment commitments, thus reducing the impact on the profit and loss account of the institutions. Conversely, the cost incurred with the contribution on the banking sector increased from 37 million euros to 38 million euros in the same period, influenced by the growth of the Bank's balance sheet with the corresponding increase on average liabilities comprised in the calculation of the amount of this contribution. It should be noted that the balance sheet reduction at the end of 2022 will only have an higher impact on contributions for 2024, since the calculation of the amount payable considers the average values of the balance sheet of the previous year to which the contribution relates, taking into account the month-end observations. The additional solidarity contribution on the banking sector, aiming to finance the costs with the public measures to address the crisis caused by the COVID-19 pandemic, amounted 2023 REPORT & ACCOUNTS |63 to 7 million euros in 2023, in line with the amount calculated in the previous year. The supervision fee charged by the ECB amounted to 3 million euros, increasing from the 2 million euros recorded in 2022, while the contribution to the deposit guarantee fund did not change significantly compared to the amount recorded in 2022, standing at 1 million euros in 2023. It should be noted that, in the activity in Portugal, of the total amount of costs recognised with mandatory contributions in the current year, 54 million euros refer to contributions for national entities (62 million euros in 2022). In the international activity, other net operating income improved considerably from a negative amount of 107 million euros recognised in 2022, to an income of 26 million euros at the end of 2023. This performance of other net operating income resulted from the reduction of about 90% of the costs with mandatory contributions that the Polish subsidiary was subject, from 121 million euros in 2022, to 13 million euros in 2023. Although the costs of all mandatory contributions borne by the Polish subsidiary were lower than those recognised in 2022, the evolution of the overall amount of these contributions in the last year was mainly due to the contribution, supported in 2022, associated with the then created Polish institutional protection fund (IPS - Institutional Protection Scheme), which amounted to 59 million euros, non-existent in 2023. This fund was set up with the aim of ensuring the stability of the local financial system by ensuring the liquidity and solvency of the member banks, while serving to support situations of forced restructuring carried out by the Bank Guarantee Fund in banks that are public companies. Thus, the Bank, together with the other participating financial institutions, created a company that, in turn, constituted a "aid fund" to which each bank contributed the equivalent of 0.4% of its deposits covered by the local Deposit Guarantee Fund. On the other hand following the contribution to the IPS, the contribution of Bank Millennium to the deposit guarantee fund has been suspended since the first quarter of 2022. As such, Bank Millennium only recorded costs of the deposit guarantee fund for the first quarter of 2022, which amounted to 8 million euros also contributing to the favourable evolution of the global amount of mandatory contributions compared to 2022. The evolution of mandatory contributions in the Polish subsidiary also benefited from the suspension of the payment of the special tax on the Polish banking sector, following the activation, at the beginning of the second half of 2022, of the Bank Millennium Recovery Plan. In 2022 this tax amounted to 36 million euros. Charges for the resolution fund recognised in 2023, in turn, totalled 13 million euros, below the 18 million euros recognised last year. In addition to the reduction of mandatory contributions in the Polish subsidiary, the evolution of other net operating income in the international activity also benefited, albeit to a lesser extent, from a gain of 11 million euros, considered a specific item, associated with the revaluation of the minority stake (20%) which Bank Millennium in Poland held following the sale of 80% of the shares of Millennium Financial Services sp. z o.o. The mentioned amount includes an additional gain amounting to 2 million euros, compared to the 9 million euros determined in the first quarter of the year. Conversely, other net operating income was negatively influenced by the impacts related to foreign exchange mortgage loan portfolio that under this item went from an income of 22 million euros in 2022 to an income of 16 million euros in 2023. This performance reflects both the increase arising from court costs related to the counterclaims filed by Bank Millennium and the costs arising from negotiation with customers. On the other hand, the income to be reimbursed from a third party, as compensation for costs incurred with the booking of provisions to address the legal risk implicit in foreign exchange mortgage loans, following the indemnity clauses and contractual guarantees provided for in the acquisition contract of Euro Bank S.A., evolved from 37 million euros in the last year, to 52 million euros this year. Finally, it should be noted that although other net operating income in the subsidiary in Mozambique almost doubled compared to the amount recognised in the previous year, its impact was not very significant on the evolution of this item. EQUITY ACCOUNTED EARNINGS Equity accounted earnings from associates include the results appropriated by the Group related to the entities where, despite exercising some influence, it does not have control over their financial and operating policies. In 2023, equity accounted earnings of the Group totalled 64 million euros, standing 9.6% above the 59 million euros posted in the previous year. 2023 REPORT & ACCOUNTS 64 | It should be noted that the amount for 2022 has been restated, thus diverging from the amount previously disclosed. In fact, following the simultaneous adoption of IFRS9 - Financial Instruments and IFRS17 - Insurance Contracts on 1 January 2023 by Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Mbcp Ageas), an entity 49% owned by the Group, and taking into account that the initial application of IFRS 17 and IFRS 9 requires comparative information, Mbcp Ageas made the transition exercise on 1 January 2022. The restatement of 2022 Group's accounts resulted in an adjustment of 10 million euros, from 40 million euros to 30 million euros in the equity accounted earnings results from Mbcp Ageas in 2022, as detailed in note 59. Adoption of IFRS 17 - Insurance Contracts and IFRS 9 - Financial Instruments by Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. In the activity in Portugal, equity accounted earnings evolved from 58 million euros in 2022, to 60 million euros at the end of the current year. This evolution was mainly due to the increase in results from Mbcp Ageas, including the impact of the restatement of the amounts posted in 2022, as previously mentioned. On the other hand, the lower income generated by the participation in SIBS and mainly in Unicre, compared to the amounts recorded in 2022, offset the growth in equity accounted earnings in the activity in Portugal. In the international activity, equity accounted earnings evolved from 1 million euros in 2022, to 5 million euros at the end of the current year. Decisive for this evolution was the appropriation of the results generated by Banco Millennium Atlântico in Angola, that went from a negative amount of 1 million euros in 2022 to a positive amount of 3 million euros in 2023. The appropriation of the results generated by Seguradora Internacional de Moçambique, S.A. (“SIM”), currently known as Fidelidade Moçambique - Companhia de Seguros S.A., in turn, did not change materially compared to the previous year. EQUITY ACCOUNTED EARNINGS Million euros 2023 2022 (restated) 2021 Chg. % 23/22 Millenniumbcp Ageas Grupo Segurador, SGPS, S.A. 40 30 38 36.1 % UNICRE - Instituição Financeira de Crédito, S.A. 7 12 5 (44.3 %) Banco Millennium Atlântico, S.A. 3 (1) (1) >200% Banque BCP, S.A.S. 3 5 4 (39.3 %) SIBS, SGPS, S.A. 10 12 11 (15.7 %) Other (1) 2 2 — 9.3 % TOTAL 64 59 57 9.6 % (1) The appropriation of the results generated by Fidelidade Moçambique - Companhia de Seguros S.A. justifies the entire amount of this heading in 2023 and almost its entirety in 2022. OPERATING COSTS Operating costs include staff costs, other administrative costs and depreciation. In 2023, operating costs continued to be strongly influenced by the inflation rates in the three geographies in which the Bank operates. In fact, despite the disciplined management of costs followed by the Group, operating costs as a whole increased by 8.3% compared to the 1,073 million euros recorded in 2022, totalling 1,163 million euros, at the end of the current year. The amounts presented do not exclude the specific items considered in each period in staff costs in the activity in Portugal. In 2023, specific items had a negative impact of 15 million euros, including costs related to the compensation for the temporary reduction in employees remunerations during 2014-2017, as distribution of part of the Bank's results obtained in 2022 by the Bank's employees, costs with employment terminations, namely with early retirements, costs with mortgage financing to former employees and an income recognised after an agreement related to 2023 REPORT & ACCOUNTS |65 liabilities with former directors of the Bank. In 2022 the impact was also negative in the amount of 16 million euros, including distribution of part of the 2021 results by the Bank's employees, costs with mortgage financing to former employees, discretionary remuneration paid to employees as a measure to offset the impacts of inflation and the recognition of a provision for other structure adaptation measures. Excluding specific items, operating costs of the Group amounted to 1,147 million euros, standing 8.6% above the 1,057 million euros accounted in the previous year. This performance was determined by the increase in both staff costs (9.3%, 52 million euros) and other administrative costs (11.4%, 40 million euros), in both cases more significant in the international activity, although activity in Portugal also showed an increase compared to the amount recorded in the previous year. Depreciations, in turn, were slightly below (1.3%, 2 million euros) the amount recorded in 2022, as the reduction recorded in the activity in Portugal was almost entirely offset by the increase in the international activity. Although operating costs were higher than in 2022, the increase shown in both net operating revenues and core income allowed a significant improvement in cost to income and cost to core income ratios. In fact, excluding the specific items mentioned above and also excluding the positive impact of 139 million euros, recognised in 2023, in the international activity, associated with the sale of 80% of the shares in Millennium Financial Services sp. z o.o. also considered specific items, cost to income evolved from 37.0% to 31.6% and cost to core income from 36.2% to 31.9% in the last year. Cost to income and cost to core income stated ratios evolved, respectively, from 37.6% to 30.8% and from 36.7% to 32.3%. OPERATING COSTS (excluding specific items) Million euros In the activity in Portugal, operating costs totalled 617 million euros in 2023, standing 2.5% above the 602 million euros posted in 2022. Excluding the specific items mentioned above, operating costs increased 2.8%, from 585 million euros to 601 million euros. This evolution of operating costs in the activity in Portugal, not considering the effect of specific items, reflects the increases of 5.4% (17 million euros) and 2.6% (5 million euros) recorded in staff costs and other administrative costs, respectively. Depreciations, in turn, contributed favourably to the evolution of operating costs in the activity in Portugal, standing 7.6% (6 million euros) below the amount recorded in 2022. Despite the increase in operating costs, cost to income and cost to core income ratios showed a favourable evolution last year, reflecting the increase recorded in net operating revenues and in core income, respectively. In fact, excluding the impact of specific items, cost to income ratio in the activity in Portugal stood at 29.5%, comparing favourably with the 37.2% recorded in 2022, while cost to core income ratio improved from 38.7% to 29.7%. Cost to income and cost to core income stated ratios stood at 30.3% and 30.4% in 2023, levels that compare respectively with 38.3% and 39.8% in the previous year. 2023 REPORT & ACCOUNTS 66 | OPERATING COSTS (excluding specific items) Activity in Portugal Million euros In the international activity, operating costs totalled 546 million euros at the end of 2023, standing 15.8% above the 471 million euros accounted in the previous year. This evolution was mainly due to the performance of the Polish subsidiary, although in the subsidiary in Mozambique operating costs were also higher than those recorded in 2022. In both cases, the inflation recorded in these geographies was decisive to this evolution. OPERATING COSTS International activity Million euros In the Polish subsidiary, the increase in operating costs resulted, above all, from the evolution of staff costs and other administrative costs, with depreciations showing a less significant increase. In addition to the inflation levels, it is also important to mention the impact that the characteristics of the labour market in Poland, with very low unemployment rates, had in operating costs, namely the increase in staff costs, as a way of retaining employees. In turn, in the operation in Mozambique, operating costs were also higher compared to the amount recorded in 2022, mainly reflecting the increase in other administrative costs, but also, although to a lesser extent, staff costs and depreciations. The evolution of operating costs in the international activity was thus due to the increases of 14.4% (35 million euros) in staff costs, of 21.0% (36 million euros) in other administrative costs and of 7.0% (4 million euros) in depreciations. Despite higher operating costs, the evolution of net operating revenues also allowed an improvement in the cost to income ratio of the international activity, from 36.6% para 31.5%. Excluding the positive impact, in the amount of 139 million euros recognised in 2023, associated to the sale of 80% of the shares of Millennium Financial Services sp. z o.o., considered as specific items, cost to income ratio of the international activity was 34.2%. Cost to core income ratio in the international activity, in turn, evolved from 33.4% to 34.8%. 2023 REPORT & ACCOUNTS |67 OPERATING COSTS Million euros 2023 2022 2021 Chg. % 23/22 ACTIVITY IN PORTUGAL (1) Staff costs 340 322 346 5.4 % Other administrative costs 189 184 176 2.6 % Depreciation 73 79 80 (7.6 %) 601 585 602 2.8 % INTERNATIONAL ACTIVITY Staff costs 277 242 218 14.4 % Other administrative costs 205 169 148 21.0 % Depreciation 64 60 57 7.0 % 546 471 423 15.8 % CONSOLIDATED (1) Staff costs 617 564 564 9.3 % Other administrative costs 393 353 324 11.4 % Depreciation 137 139 137 (1.3 %) 1,147 1,057 1,025 8.6 % SPECIFIC ITEMS 15 16 91 (7.4 %) TOTAL 1,163 1,073 1,116 8.3 % (1) Excludes the impact of specific items previously mentioned. 2023 REPORT & ACCOUNTS 68 | STAFF COSTS In 2023, staff costs totalled 632 million euros, standing 8.8% above the 581 million euros accounted in the previous year. These amounts include the specific items recognised in each period in the activity in Portugal. In 2023, specific items, related to staff costs, had a negative impact of 15 million euros, including the compensation for temporary reduction in employees remunerations in 2014-2017 as distribution of part of the Bank's results obtained in 2022 by the employees, costs with employees terminations, namely early retirements, costs with mortgage financing to former employees and an income recognised after an agreement related to liabilities with former directors of the Bank. In 2022, the impact was also negative in the amount of 16 million euros, including distribution of part of the 2021 results by the Bank's employees, costs with mortgage financing to former employees, discretionary remuneration paid to employees as a measure to offset the impacts of inflation and the recognition of a provision for other structure adaptation measures. Excluding specific items, staff costs of the Group amounted to 617 million euros, increasing 9.3% from the 564 million euros accounted for in the previous year, mainly influenced by the international activity. In the activity in Portugal, staff costs amounted to 355 million euros at the end of 2023, standing 4.8% above the 339 million euros recorded in the previous year. Not considering the impact of the specific items, staff costs in the activity in Portugal totalled 340 million euros in 2023, corresponding to an increase of 5.4% compared to the 322 million euros recorded a year before. After the implementation of the headcount adjustment plan that the Bank carried out in 2021, the number of employees in the activity in Portugal remained stable, standing at 6,242 employees at the end of 2023, ten less than on 31 December 2022. It should be noted, however, that the Bank continued to acquire the required capabilities to meet current needs namely by hiring new employees with specific skills, namely on digital, new technologies and internal control areas. In the international activity, staff costs amounted to 277 million euros at the end of 2023, standing 14.4% above the 242 million euros recorded in 2022. The Polish subsidiary was mainly responsible for this evolution, although the subsidiary in Mozambique also contributed to the increase in staff costs compared to the previous year, albeit to a lesser extent. In the Polish subsidiary, the evolution of staff costs continued to be determined by the strong pressure on basic wages, resulting both from levels of inflation and from the characteristics of the Polish labour market, in particular from the very low unemployment rates in the country, that reinforce the need to retain employees. Conversely it is worth mentioning the positive impact on the evolution of staff costs of the reduction in the total number of employees, which in the last year went from 6,987 employees (6,860 FTE - full-time equivalent) at the end of 2022, to 6,872 employees (6,747 FTE - full-time equivalent) on 31 December, 2023. The operation in Mozambique, in turn, increased its headcount, from 2,504 employees on 31 December 2022 to 2,574 employees at the end of 2023, which together with the salary update and the increase in bonuses paid, contributed to the growth in staff costs in the last year. As of 31 December 2023, the headcount of the international activity consisted of 9,446 employees, which compares to 9,491 employees at the end of 2022. EMPLOYEES 2023 REPORT & ACCOUNTS |69 STAFF COSTS Million euros 2023 2022 2021 Chg. % 23/22 Salaries and remunerations 508 462 455 10.0 % Social security charges and other staff costs 109 103 108 6.1 % TOTAL EXCLUDING SPECIFIC ITEMS 617 564 564 9.3 % of which: Activity in Portugal 340 322 346 5.4 % International activity 277 242 218 14.4 % SPECIFIC ITEMS 15 16 91 (7.4 %) TOTAL 632 581 654 8.8 % OTHER ADMINISTRATIVE COSTS In 2023, the evolution of other administrative costs continued to be strongly influenced by inflation in the three geographies in which the Bank operates, especially in operations abroad. Thus, notwithstanding the disciplined management of costs followed by the Group, other administrative costs, in consolidated terms, were 11.4% above the 353 million euros recorded in the previous year, totalling 393 million euros at the end of the current year. In the activity in Portugal, other administrative costs amounted to 189 million euros, standing 2.6% above the 184 million euros recorded in 2022. To a large extent, the increase in costs associated with outsourcing, related to banking operations, contributed to this performance. Influenced by the effect of inflation, others supplies and services and rents and leases were also higher compared to the amount recorded in the previous year. On the other hand, the investment in technology and cybersecurity inevitably led to an increase in the respective costs, particularly maintenance of hardware and software, with an impact on headings information technology services and maintenance and related services. On the other hand, the increasingly digital servicing model, with the increasing transfer of transactions to machines, resulted in the growth of the number of deposit machines installed in branches, which, along with the inclusion of a greater number of branches in the deposit centralisation service was reflected in the increase in costs associated with the transport of values (reflected under transportation item), despite the fact that the cost per transaction has decreased. Costs associated with advertising, travel, hotel and representations, legal expenses and training were also higher than the amounts observed in 2022, but had a smaller impact on the evolution of other administrative costs in the activity in Portugal. On the other hand, significant savings were obtained in water, electricity and fuel, resulting from the reduction in energy prices and from an efficient management of these consumptions. Costs associated with advisory services and other specialised services were also lower compared to the amounts recorded in the previous year, as well as, although with a smaller impact, costs associated to insurance, consumables, credit cards and mortgage and communications. On the other hand, the resizing of the branch network which, in the activity in Portugal, evolved from 408 branches, to 399 branches, although not very significant, had a positive impact on the evolution of most of the items of other administrative costs. Likewise, the pursuit of disciplined cost management and the consequent implementation of a series of recurrent measures has allowed the optimisation of the cost structure of the Bank. In the international activity, other administrative costs amounted to 205 million euros in 2023, representing a 21.0% increase from the 169 million euros posted in the previous year, largely reflecting the aforementioned general price increases with repercussions in both the Polish subsidiary and the subsidiary in Mozambique. The increase in costs was more noticeable in the Polish subsidiary, which, in addition to the impact of inflation, also reflects the increase in legal advice costs associated with foreign exchange mortgage loan portfolio. On the other hand, it should be noted that the evolution of other administrative costs, in the international activity, continues to benefit from the optimisation of the branch network in the Polish subsidiary, with the number of branches decreasing from 635 at the end of 2022, to 612 on 31 December 2023. The subsidiary in Mozambique, in turn, ended the year of 2023 with 195 branches, only two less than a year before. 2023 REPORT & ACCOUNTS 70 | BRANCHES OTHER ADMINISTRATIVE COSTS Million euros 2023 2022 2021 Chg. % 23/22 Water, electricity and fuel 15 18 13 (17.0 %) Consumables 8 8 6 0.6 % Rents and Leases 27 24 24 10.5 % Communications 25 24 21 5.3 % Travel, hotel and representation costs 7 5 3 36.9 % Advertising 28 25 24 11.5 % Maintenance and related services 18 17 14 10.5 % Credit cards and mortgage 9 9 8 0.2 % Advisory services 44 32 27 38.0 % Information technology services 26 28 25 (7.1 %) Outsourcing and independent labour 112 93 93 19.4 % Other specialised services 29 29 28 (0.3 %) Training costs 1 1 1 3.5 % Insurance 5 5 5 2.0 % Legal expenses 5 4 5 14.7 % Transportation 11 10 8 9.9 % Other supplies and services 24 21 19 13.5 % TOTAL 393 353 324 11.4 % of which: Activity in Portugal 189 184 176 2.6 % International activity 205 169 148 21.0 % (1) In 2023, some reclassifications were made, in order to improve the quality of the information reported. The historical amounts related to 2022 and 2021 of such items are presented considering these reclassifications with the purpose of ensuring their comparability, therefore diverging from the accounting values disclosed. The overall amount of other administrative costs disclosed in previous periods remains unchanged compared to that published in previous periods. DEPRECIATIONS Depreciations amounted to 137 million euros at the end of 2023, standing 1.3% below the amount recorded in 2022. This evolution mainly reflects the performance of the activity in Portugal, although its impact was largely absorbed by the increase recorded in the international activity. 2023 REPORT & ACCOUNTS |71 In the activity in Portugal, depreciations showed a reduction of 7.6%, evolving from 79 million euros in 2022 to 73 million euros in the current year. It is important, however, to note that this evolution was possible, despite the increased investment made in software and IT equipment, given the Bank's commitment to the digital transformation process. In the international activity, depreciations amounted to 64 million euros in 2023, standing 7.0% above the 60 million euros recorded in 2022, reflecting the performance of both the Polish subsidiary and the Mozambican subsidiary. RESULTS ON MODIFICATION In the fourth quarter of 2022, the Bank reviewed and reclassified the amount associated with costs arising from the moratorium program (credit holidays) in Poland, enacted in July of that year, which had been accounted for in other impairments and provisions, starting to recognise these costs as results on modification. Since then, this heading also started to include contractual modifications, namely those negotiated with customers with foreign exchange mortgage loans, in accordance with IFRS9. In 2023, results on modification totalled a negative amount of 19 million euros, which compares with an also negative amount of 310 million euros recorded in the previous year, with the amount recognised in 2022 resulting mainly from the recognition of costs arising from the aforementioned moratorium program (credit holidays). In this context, it should be noted that, following the signing by the President of the Republic of Poland of the Act of 7 July 2022 on crowdfunding for business ventures and assistance to borrowers, introducing, among others, access to credit holidays up to eight months in 2022-2023 for borrowers of mortgage loans denominated in Zlotys, the Bank estimated the maximum impact of implementing this Act if all eligible borrowers were to use this instrument, having recognised an upfront cost of 80% of the respective costs in the results of the third quarter of 2022, corresponding to 305 million euros. In the fourth quarter of 2022, a review of the effective cost and use of credit moratoriums by eligible borrowers in the second half of 2022 was carried out and ongoing requests to suspend mortgage loan instalments in Zlotys in the year 2023 were analysed. As a result of this review, taking into account the analysis of Customers behaviour, Bank Millennium's Group adjusted the estimates of the participation percentage to 68%. The total estimated cost of credit moratoria was consequently reduced to 283 million euros at the end of 2022. On the other hand, costs associated with contractual modifications negotiated with customers with foreign exchange mortgage loans, also in the Polish subsidiary, were lower compared to the amount recognised in 2022. 2023 REPORT & ACCOUNTS 72 | LOANS IMPAIRMENT Impairment of loans to customers includes impairment of financial assets at amortised cost for loans granted to customers and for debt securities associated with credit operations, net of reversals and recoveries of credit and interest. The reconciliation of the impairment of financial assets at amortised cost presented in the consolidated profit and loss account with the impairment of loans to customers considered for the purposes of this analysis is presented as follows: Loans impairment (P&L) Million euros 2023 2022 2021 Impairment of financial assets at amortised cost (accounting P&L) (1) 248 301 353 Impairment of Loans and advances to credit institutions (at amortised cost) (2) (1) 0 1 Impairment of financial assets at amortised cost not associated with credit operations (3) 9 1 3 Loans impairment considering management criteria (4)=(1)-(2)-(3) 240 301 349 148 151 182 In 2023, impairment for loan losses (net of recoveries) totalled 240 million euros, showing a reduction of 20.2% compared to the 301 million euros accounted for in the previous year, reflecting the favourable evolution recorded both in the activity in Portugal and mainly in the international activity. LOANS IMPAIRMENT (NET) Million euros In the activity in Portugal, loans impairment charges (net of recoveries), amounted to 208 million euros in 2023, standing 5.0% below the 218 million euros recognised in 2022. The lower level of provisioning, compared to the previous year, reflects, on the one hand, the improvement in the risk profile of the credit portfolio and, on the other, the recovery of relevant non-performing exposures. LOANS IMPAIRMENT (NET) Activity in Portugal Million euros In the international activity, impairment charges (net of recoveries) stood significantly below the 82 million euros recognised in 2022, standing at 32 million euros at the end of 2023, as a result of the performance of both the subsidiary in Poland and mainly from the Mozambican subsidiary. 2023 REPORT & ACCOUNTS |73 In the Polish subsidiary, the update of the impairment computation parameters for exposures guaranteed by the State, as well as the change in default definition, together with the impact of the sale of non-performing loans contributed to the improvement observed the last year. In the subsidiary in Mozambique, in turn, the evolution of loans impairment benefited from the partial recovery of a credit in litigation, following an out-of-court settlement. Additionally, the reversal of impairments booked in previous periods also contributed, albeit in a less significant way, to the favourable evolution of loans impairment in this subsidiary. LOANS IMPAIRMENT (NET) International activity Million euros The evolution of impairment charges (net of recoveries), in consolidated terms, allowed the cost of risk of the Group, net of recoveries, to record a significant improvement in relation to the 52 basis points observed in 2022, standing at 42 basis points in 2023. Excluding the impact of the recovery associated with the out-of-court settlement, previously mentioned, the cost of risk in 2023 stood at 48 basis points. In the activity in Portugal, the cost of risk (net of recoveries) remained stable compared to the previous year, standing at 54 basis points in 2023. In the international activity, the cost of risk net of recoveries improved significantly, evolving from 47 basis points to 18 basis points in the last year, benefiting from the impact of the recovery associated with the aforementioned out-of-court settlement. Excluding this impact, the cost of risk in 2023 stood at 37 basis points. LOANS IMPAIRMENT (NET OF RECOVERIES) Million euros 2023 2022 2021 Chg. 23/22 Loan impairment charges (net of reversions) 298 321 372 (7.4 %) Credit recoveries 58 21 23 177.1 % TOTAL 240 301 349 (20.2 %) of which: Activity in Portugal 208 218 273 (5.0 %) International activity 32 82 76 (60.5 %) COST OF RISK: Cost of risk (net of recoveries) 42 b.p. 52 b.p. 60 b.p. (10) b.p. 2023 REPORT & ACCOUNTS 74 | OTHER IMPAIRMENT AND PROVISIONS Other impairment and provisions include (i) impairment, net of reversals, for loans and advances of credit institutions classified at amortised cost; (ii) impairment for financial assets (classified at fair value through other comprehensive income and at amortised cost not associated with credit operations); (iii) impairment for other assets, namely assets received as payment in kind, investments in associated companies and goodwill of subsidiaries; and (iv) other provisions. In 2023, other impairment and provisions totalled 860 million euros, 13.8% above the 756 million euros recorded in the previous year. This evolution was, to a large extent, influenced by the reinforcement of the additional provision booked by the Polish subsidiary to face the legal risk of foreign exchange mortgage loans, which amounted to 675 million euros in the current year vs 431 million euros recognised in the previous year. It should be noted, however, that the evolution of other impairments and provisions was also considerably influenced by the recognition, in June 2022, of impairment of the goodwill of the Polish subsidiary, in the amount of 102 million euros. Other impairments and provisions, in the activity in Portugal, contributed favourably to the performance of this heading, as there was a significant reduction of 21.7% over the last year, from 205 million euros, to 161 million euros. This evolution mainly reflects the reduction in the impairment to non-current assets held for sale, namely the foreclosed assets portfolio, with provisions for other risks also showing a considerable reduction compared to the amount recognised in the previous year. Conversely, the impairment of other assets and other financial assets, as well as provisions for guarantees and other commitments were higher compared to the amount posted in 2022. In the international activity, other impairment and provisions amounted to 699 million euros at the end of 2023, standing 27.0% above the 550 million euros recorded a year earlier. As previously mentioned, this evolution essentially reflects the increase of 244 million euros in the provision booked by the Polish subsidiary to face the legal risk associated with foreign exchange mortgage loans, the impact of which on the evolution of this heading was largely offset by the impairment in the amount of 102 million euros, booked in June of the previous year, relating to the total goodwill associated with the participation that the Group holds in Bank Millennium. In fact, the unfavourable decision of the Court of Justice of the European Union with regard to remuneration for the use of capital on foreign exchange mortgage loans in the Polish subsidiary and the inclusion of adjustments in the calculation methodology, in order to anticipate potential negative trends associated to this portfolio led to the mentioned reinforcement of provisions. It should be noted that the impact of the reinforcement of these provisions was, however, offset by the recognition of income, reflected in the heading of other net operating income, corresponding to the amount receivable from a third party, following the indemnity clauses and contractual guarantees provided for in the acquisition contract of Euro Bank S.A. (52 million euros in 2023 and 37 million euros in 2022). Although other impairments and provisions, in the subsidiary in Mozambique, more than doubled compared to the amount recognised in 2022, their impact was not very significant on the evolution of this item in the international activity. The increases were essentially recorded in impairments associated with other financial assets and other assets, although there was a significant reduction in the impairment of non-current assets held for sale. Conversely, the impairments that had been recognised in 2022 to cover the investment in the participation in Banco Millennium Atlântico (including impairment for goodwill) were non-existent in 2023, favourably influencing the performance of other impairments and provisions in the international activity. INCOME TAX Income tax (current and deferred) amounted to 537 million euros in 2023, which compares to 304 million euros posted in the previous year. The recognised taxes include, in 2023, current tax of 180 million euros (110 million euros in 2022) and deferred tax of 358 million euros (195 million euros in 2022). 2023 REPORT & ACCOUNTS |75 Current tax expenses in 2023 were strongly influenced by provisions for legal risks related to the portfolio of foreign currency mortgage loans and by mandatory contributions to the banking sector, both of them non- deductible for tax purposes in the Polish subsidiary. Expenses with the reduction of deferred tax assets in 2023 mainly result from the income of the period of the activity in Portugal and are influenced by mandatory contributions levied on the banking sector and provisions for other risks, not deductible for tax purposes. It should be noted that, in 2022, the Group’ s income before tax included the expense of 102 million euros related to the impairment of the goodwill of the Polish subsidiary, which had no impact on current and deferred taxes. NON-CONTROLLING INTERESTS Non-controlling interests are the part attributable to third parties of the net income of the subsidiary companies consolidated under the full method in which the Group Banco Comercial Português does not hold, directly or indirectly, the entirety of their share capital. Non-controlling interests record mainly the income for the year attributable to third parties related to the shareholdings in Bank Millennium in Poland (49.9%) and in Millennium bim in Mozambique (33.3%). In 2023, non-controlling interests totalled 92 million euros, contrasting with the negative amount of 78 million euros recorded in the previous year. This evolution was mainly a result of the income for the year attributable to third parties via the consolidation of the Polish subsidiary, which went from a negative amount of 108 million euros to 63 million euros, following the better results obtained by Bank Millennium in 2023, compared to 2022. Income for the year attributable to third parties via the consolidation of the subsidiary in Mozambique, in turn, amounted to 34 million euros in 2023, which compares with 35 million euros in 2022. 2023 REPORT & ACCOUNTS 76 | REVIEW OF THE BALANCE SHEET Following the entry into force of the IFRS 9 – Financial Instruments on January 1, 2018 and the consequent impacts on the structure of the financial statements of Millennium bcp versus previous periods, some indicators were defined based on concepts that translate the management criteria adopted by the Group within the scope of preparation of financial information. The correspondence between the management approaches and the accounting information is described in the glossary and throughout the document, when applicable, especially the concepts related with loans to customers, balance sheet customer funds and the securities portfolio. BALANCE SHEET Million euros 31 Dec. 23 31 Dec. 22 restated 31 Dec. 21 Chg. 23/22 ASSETS Cash and deposits at central banks and loans and advances to credit institutions (1) 4,883 6,235 8,158 (21.7 %) Financial assets measured at amortised cost Loans and advances to credit institutions 908 963 453 (5.7 %) Loans and advances to customers 53,305 54,676 54,972 (2.5 %) Debt instruments 17,579 13,036 8,205 34.9 % Financial assets measured at fair value through profit or loss Financial assets held for trading 823 767 931 7.3 % Financial assets not held for trading mandatorily at fair value through profit or loss 467 553 991 (15.5 %) Financial assets designated at fair value through profit or loss 32 0 0 Financial assets measured at fair value through other comprehensive income 10,834 7,462 12,891 45.2 % Investments in associated companies 356 315 462 13.1 % Non-current assets held for sale 80 499 781 (84.0 %) Other tangible assets, goodwill and intangible assets 830 757 857 9.5 % Current and deferred tax assets 2,575 2,957 2,705 (12.9 %) Other (2) 1,706 1,657 1,497 3.0 % TOTAL ASSETS 94,380 89,877 92,905 5.0 % LIABILITIES Financial liabilities measured at amortised cost Resources from credit institutions 829 1,468 8,896 (43.5 %) Resources from customers 75,607 75,430 69,560 0.2 % Non subordinated debt securities issued 2,713 1,482 2,188 83.0 % Subordinated debt 1,397 1,333 1,395 4.8 % Financial liabilities at fair value through profit or loss Financial liabilities held for trading 207 242 231 (14.1 %) Financial liabilities measured at fair value through profit or loss 3,608 1,818 1,582 98.5 % Other (3) 2,718 2,167 1,990 25.4 % TOTAL LIABILITIES 87,080 83,940 85,843 3.7 % EQUITY Share capital 3,000 3,000 4,725 Share premium 16 16 16 Other equity instruments 400 400 400 Reserves and retained earnings (4) 2,040 1,541 840 32.4 % Net income for the period attributable to Bank's Shareholders 856 197 138 >200 % Non-controlling interests 987 782 943 26.3 % TOTAL EQUITY 7,299 5,937 7,062 23.0 % TOTAL LIABILITIES AND EQUITY 94,380 89,877 92,905 5.0 % (1) Includes Cash and deposits at central banks and Loans and advances to credit institutions. (2) Includes Hedging derivatives, Investment property and Other assets. (3) Includes Hedging derivatives, Provisions, Current and deferred income tax liabilities and Other liabilities. (4) Includes Legal and statutory reserves and Reserves and retained earnings. 2023 REPORT & ACCOUNTS |77 The reconciliation between the management criteria defined and the accounting values published in the consolidated financial statements are presented below. Loans to customers (gross) includes loans to customers at amortised cost before impairment, the debt securities at amortised cost associated with credit operations before impairment and loans to customers at fair value through profit or loss before fair value adjustments. The amount of balance sheet impairment considered for the purpose of calculating loans to customers (net) and the coverage ratio of the loan portfolio includes the balance sheet impairment associated with loans to customers at amortised cost, the balance sheet impairment related with debt securities at amortised cost associated with credit operations and the fair value adjustments associated with loans to customers at fair value through profit or loss. Loans to customers Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Loans to customers at amortised cost (accounting Balance Sheet) 53,305 54,676 54,972 Debt instruments at amortised cost associated to credit operations 1,908 1,501 1,308 Balance sheet amount of loans to customers at fair value through profit or loss 4 21 79 Loans to customers (net) considering management criteria 55,218 56,198 56,360 Balance sheet impairment related to loans to customers at amortised cost 1,583 1,502 1,849 Balance sheet impairment associated with debt instruments at amortised cost related to credit operations 9 5 7 Fair value adjustments related to loans to customers at fair value through profit or loss 5 8 14 Loans to customers (gross) considering management criteria 56,814 57,713 58,231 2023 REPORT & ACCOUNTS 78 | Regarding deposits and other resources from customers, the Bank continued to use the approach previously used for the item “Resources from customers and other loans”, aggregating resources from customers at amortised cost and customer deposits at fair value through profit and loss (non-existent on 31 December 2021). Balance sheet customer funds include, apart from deposits and other resources from customers, debt securities placed with customers either classified at amortised cost or designated at fair value through profit or loss. Balance sheet customer funds Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Financial liabilities at fair value through profit or loss (accounting Balance sheet) (1) 3,608 1,818 1,582 Debt securities at fair value through profit or loss and certificates (2) 1,287 1,341 1,582 Customer deposits at fair value through profit or loss considering management criteria (3)=(1)-(2) 2,321 477 0 Resources from customers at amortised cost (accounting Balance sheet) (4) 75,607 75,430 69,560 Deposits and other resources from customers considering management criteria (5)=(3)+(4) 77,928 75,907 69,560 Non subordinated debt securities issued at amortised cost (accounting Balance sheet) (6) 2,713 1,482 2,188 Debt securities at fair value through profit or loss and certificates (7) 1,287 1,341 1,582 Non subordinated debt securities placed with institutional customers (8) 2,713 1,480 2,155 Debt securities placed with customers considering management criteria (9)=(6)+(7)-(8) 1,287 1,343 1,615 Balance sheet customer funds considering management criteria (10)=(5)+(9) 79,215 77,250 71,175 2023 REPORT & ACCOUNTS |79 The securities portfolio includes debt securities at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding amounts related to credit operations and trading derivatives), and financial assets at fair value through other comprehensive income. Securities portfolio Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Debt instruments at amortised cost (accounting Balance sheet) (1) 17,579 13,036 8,205 Debt instruments at amortised cost associated to credit operations net of impairment (2) 1,908 1,501 1,308 Debt instruments at amortised cost considering management criteria (3)=(1)-(2) 15,671 11,535 6,897 Financial assets not held for trading mandatorily at fair value through profit or loss (accounting Balance sheet) (4) 467 553 991 Balance sheet amount of loans to customers at fair value through profit or loss (5) 4 21 79 Financial assets not held for trading mandatorily at fair value through profit or loss considering management criteria (6)=(4)-(5) 463 532 912 Financial assets held for trading at fair value through profit or loss (accounting Balance sheet) (7) 823 767 931 of which: trading derivatives (8) 414 376 431 Financial assets designated at fair value through profit or loss (accounting Balance sheet) (9) 32 0 0 Financial assets at fair value through other comprehensive income (accounting Balance sheet) (10) 10,834 7,462 12,891 Securities portfolio considering management criteria (11)=(3)+(6)+(7)- (8)+(9)+(10) 27,409 19,918 21,201 The year 2023 was characterised by an increase in Millennium bcp's consolidated balance sheet, with an increase, on the assets side, driven by the significant reinforcement of the securities portfolio, despite the reductions observed in deposits at central banks, in loans to customers portfolio (net of impairment), in non-current assets held for sale and in deferred tax assets. Additionally, there was also an increase in liabilities, mainly due to the increase observed in deposits and other resources from customers and in non-subordinated debt securities issued and also, in equity, mainly due to integration of the net result for the year. TOTAL ASSETS Million euros Note: Following the adoption, on 1 January 2023, of IFRS9 - Financial Instruments and IFRS17 - Insurance Contracts, by Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Mbcp Ageas), an entity 49% owned by the Group, and complying with comparative information requirements, the accounts of the Group referring to 2022 were restated accordingly, corresponding to a positive impact of 16 million euros in the 2022 consolidated balance sheet total assets. 2023 REPORT & ACCOUNTS 80 | The effect of the increase in deposits and other resources from customers on a consolidated basis combined with the decrease in loans to customers portfolio (net of impairment) led to a surplus increase of the commercial gap and, consequently, to the reduction of the loans-to-deposits ratio (measured by the ratio between net loans and deposits and other resources from customers), which evolved from 74.0% at the end of 2022 to 70.9% on 31 December 2023. Millennium bcp’s consolidated balance sheet total assets amounted to 94,380 million euros as of 31 December 2023, showing an increase of 5.0% in comparison with the 89,877 million euros recorded at the end of 2022, with the increase in assets in the international activity, partially mitigated by the slight reduction in assets seen in the activity in Portugal. MAIN GEOGRAPHIES Million euros International activity * Portugal Total Int Op Bank Millennium BIM Dec. 23 Dec.22 restated Dec. 21 Dec. 23 Dec. 22 Dec. 21 Dec. 23 Dec. 22 Dec. 21 Dec. 23 Dec. 22 Dec. 21 TOTAL ASSETS 62,725 63,284 67,216 31,655 26,593 25,689 28,897 23,697 22,669 2,711 2,824 2,527 LOANS TO CUSTOMERS (GROSS) 38,625 40,149 39,866 18,190 17,564 18,365 17,535 16,881 17,739 654 683 626 Mortgage loans 18,763 19,014 18,394 9,218 9,110 9,678 9,207 9,099 9,668 10 11 11 Personal loans 2,324 2,180 2,111 4,509 3,862 3,888 4,308 3,700 3,752 201 161 135 Companies 17,538 18,955 19,361 4,463 4,593 4,799 4,020 4,082 4,319 443 511 480 CUSTOMER FUNDS 66,672 68,262 66,290 28,623 24,546 23,806 26,547 22,315 21,912 2,075 2,232 1,894 BALANCE SHEET CUSTOMER FUNDS 52,450 54,077 49,319 26,765 23,173 21,856 24,690 20,941 19,962 2,075 2,232 1,894 Deposits and other resources from customers 51,163 52,734 47,712 26,765 23,173 21,848 24,690 20,941 19,954 2,075 2,232 1,894 Debt securities placed with customers 1,287 1,343 1,606 0 0 9 0 0 9 0 0 0 OFF BALANCE SHEET CUSTOMER FUNDS 14,222 14,185 16,972 1,858 1,373 1,950 1,858 1,373 1,950 0 0 0 Assets under management 4,351 4,307 4,629 1,210 806 1,143 1,210 806 1,143 0 0 0 Assets placed with customers 5,516 4,803 6,076 399 299 410 399 299 410 0 0 0 Insurance products (savings and investment) 4,355 5,075 6,267 248 268 397 248 268 397 0 0 0 The international operations, in addition to the activity of Bank Millennium in Poland and Millennium Bim in Mozambique, also include the activity of Banco Millennium Atlântico in Angola and until 2022 the activity of Millennium BCP Bank & Trust in the Cayman Islands. The presentation of the international activity operations is in accordance with the Consolidated Accounts of the Group, and there may be differences in relation to the accounts disclosed locally. In 2022, the aggregate of international operations includes the impairment of the goodwill related to the Polish subsidiary, recorded in the consolidated accounts. ** In Poland, loans to customers (gross) include: buy-sell back transactions (i.e. reverse repos) (31 December 2023: 3 million euros, 31 December 2022: 1 million euros; 31 December 2021: 59 million euros) and customer funds include sell-buy back transactions (i.e. repos) (31 December 2021: 4 million euros). 2023 REPORT & ACCOUNTS |81 The activity in Portugal recorded a slight decrease of 0.9% of total assets, compared to the 63,284 million euros posted as of 31 December 2022, standing at 62,725 million euros at the end of 2023. Regarding the evolution of the balance sheet items, there were reductions in loans to customers portfolio (net of impairment), in deposits at central banks, in non-current assets held for sale, particularly in the portfolio of real estate properties received as payment and in deferred tax assets. Conversely, there was an increase in the securities portfolio, mainly explained by the investment in public debt of euro zone countries. In the international activity, total assets amounted to 31,655 million euros as of 31 December 2023, showing an increase of 19.0% compared to the 26,593 million euros posted at the end of the previous year. This evolution is mainly due to the increases recorded in the securities portfolio and in loans to customers portfolio (net of impairments), despite the reduction observed in deposits at central banks. Total liabilities of the Group stood at 87,080 million euros at the end of 2023, a value higher than the 83,940 million euros recorded at the end of 2022, with this evolution being driven by increases in deposits and other resources from customers resources and in non-subordinated debt securities issued, despite the decrease in resources from central banks and from credit institutions. Deposits and other resources from customers stood at 77,928 million euros on 31 December 2023, 2,021 million euros above the figure recorded at the end of 2022, with this evolution being driven by the positive contribution of the international activity, partly offset by the decrease in deposits in the activity in Portugal. The non subordinated debt securities issued also contributed to the aforementioned evolution of liabilities, increasing from 1,482 million euros at the end of 2022 to 2,713 million euros at the end of 2023, mainly due to the issue of two preferred senior debts, one within the scope of the activity in Portugal (issued by Banco Comercial Português) and another in the international activity (issued by Bank Millennium), to reinforce the capacity to comply with MREL (Minimum Requirements for Own Funds and Eligible Liabilities). These aforementioned issues amounted in both cases to 500 million euros and were carried out in September. Equity showed an increase from 5,937 million euros figure recorded at the end of the previous year to 7,299 million euros at the end of 2023, with the positives impacts of the integration of net income for the year and the favourable evolution of the fair value reserve, influenced by the positive impact of cash flow hedging, being partially offset by the negative evolution of actuarial deviations associated with the pension fund. 2023 REPORT & ACCOUNTS 82 | LOANS TO CUSTOMERS Millennium bcp's consolidated customer loan portfolio (gross loans, that is, before impairment and fair value adjustments) amounted to 56,814 million euros as of 31 December 2023, standing below the 57,713 million euros figure achieved at the end of the previous year. This evolution reflects the reduction in the activity in Portugal, although the increase recorded in the international activity partially offset this reduction. The evolution of the loans to customers portfolio, compared to 31 December 2022, was mainly due to the reduction recorded in the loans to companies segment, mainly seen in the activity in Portugal, but also in the international activity, although in the latter case the reduction was less significant. In the opposite direction, there was a greater contribution from loans to individuals segment, due to the increase in personal loans, partly offset by the slight reduction seen in mortgage loans. It should also be noted that the good performance of individuals segment was driven by the increase observed in the international activity, as the activity in Portugal recorded a slight reduction. In the activity in Portugal, loans to customers (before impairment) amounted to 38,625 million euros as of 31 December 2023, standing below the 40,149 million euros recorded at the end of 2022. The decrease in loans to customers portfolio results, on the one hand, from a lower level of performing credit (minus 633 million euros compared to the amount recorded on the same date of the previous year) and, on the other hand, from a reduction in non-performing exposures (NPE) (minus 266 million euros compared to the same date of the last year). LOANS AND ADVANCES TO CUSTOMERS () Million euros () Before impairment and fair value adjustments In the international activity, loans to customers (gross) amounted to 18,190 million euros as of 31 December 2023, standing above the 17,564 million euros posted at the end of 2022. By geographies and comparing to the end of the previous year, there was a greater contribution from the Polish subsidiary (despite a reduction in local currency, loans to customers increased due to the favourable evolution of the Zloty) and a smaller contribution from the Mozambican subsidiary. LOANS AND ADVANCES TO CUSTOMERS GROSS Million Euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Chg. 23/22 INDIVIDUALS Mortgage loans 27,981 28,124 28,072 (0.5 %) Personal loans 6,833 6,042 5,999 13.1 % 34,813 34,165 34,071 1.9 % COMPANIES Services 7,528 8,037 8,297 (6.3 %) Commerce 3,834 4,055 4,231 (5.4 %) Construction 1,500 1,532 1,766 (2.1 %) Other 9,139 9,923 9,866 (7.9 %) 22,001 23,548 24,160 (6.6 %) TOTAL 56,814 57,713 58,231 (1.6 %) 2023 REPORT & ACCOUNTS |83 The structure of the consolidated (gross) loans to customers portfolio maintained balanced patterns of diversification, with an increase in loans to individuals (higher weight of personal loans and lower weight of mortgage loans) and a decrease in loans to companies recorded compared to last year. In terms of relative weights of credit in the total amount of the portfolio, loans to individuals stood at 61.3% as of 31 December 2023, 2.1 pp above the 59.2% recorded at the end of 2022 and loans to companies stood at 38.7% at the end of 2023, 2.1 pp below the 40.8% recorded as of 31 December 2022. Still regarding loans to individuals, at the end of the year 2023, mortgage loans represented 80.4% of loans to individuals, 1.9 pp below the 82.3% recorded at the end of the previous year and personal loans represented 19.6%, 1.9 pp above the 17.7% recorded in 2022. Consolidated loans to individuals, at 31 December 2023 amounted to 34,813 million euros, showing an increase of 1.9% compared to the 34,165 million euros recorded at the end of the previous year, mainly due to the evolution of the international activity, which showed an expansion, rising from 12,971 million euros on 31 December 2022 to 13,727 million euros at the end of 2023. Conversely, there was a small contraction in the activity in Portugal, with loans to individuals going from 21,194 million euros on 31 December 2022 to 21,087 million euros on the same date in 2023. Consolidated mortgage loan portfolio stood at 27,981 million euros on 31 December 2023, showing a slight reduction compared to the value recorded on the same date last year (28,124 million euros on 31 December 2022). In the activity in Portugal, a reduction of 1.3% was recorded compared to the same date of the last year, in a context of a lower demand for new credits due to high interest rates and higher loan repayments. Conversely, in the international activity, mortgage loans showed an increase of 1.2% compared to the same date of the last year, with an increase in mortgage loans being recorded in the Polish subsidiary and a reduction in the Mozambican subsidiary. Still with regard to the international activity, the reinforcement of provisioning and the agreements signed with customers were reflected in the continued reduction of the mortgage loan portfolio in foreign currency at the Polish subsidiary, which evolved from 1,504 million euros on 31 December 2022 to 721 million euros as of 31 December 2023, representing 8.9% and 4.1% of the total amount of credit recorded on the balance sheet of Bank Millennium and 2.6% and 1.3% of the total consolidated loan portfolio, at the end of 2022 and 2023, respectively. Excluding the portion relating to Euro Bank S.A. (the risk of which is fully covered by a third party, within the scope of the clauses set out in the acquisition contract of that entity) from that portfolio, the amount of the mortgage loan portfolio in foreign currency decreased from 1,373 million euros as of 31 December 2022 to 640 million euros on 31 December 2023, representing 8.1% and 3.6% of the total amount of credit recorded on the balance sheet of Bank Millennium and 2.4% and 1.1% of the total consolidated loan portfolio on the aforesaid dates, respectively. On the other hand, consolidated personal loans increased by 791 million euros compared to the end of the previous year, reaching 6,833 million euros at the end of 2023. In this context, it is important to highlight the contribution of the international activity, where personal loans increased by 647 million euros compared to the level recorded in the previous year (driven by the growth recorded in the Polish and Mozambican subsidiaries, with the most significant increase being recorded in the Polish subsidiary). In the activity in Portugal, personal loans registered an increase of 144 million euros compared to the figure recorded on the same date of 2022. LOANS AND ADVANCES TO CUSTOMERS () Million euros () Before impairment and fair value adjustments Loans to companies, in consolidated terms, totalled 22,001 million euros on 31 December 2023, remaining below the 23,548 million euros recorded at the end of 2022, with the evolution being influenced both by the reductions observed in the activity in Portugal (minus 1,417 million euros than on the same date of the last year) and in the international activity (minus 130 million euros than on the same date of the last year). 2023 REPORT & ACCOUNTS 84 | Loans to companies in the activity in Portugal fell by 7.5% compared to 2022, reaching 17,538 million euros at the end of 2023, in a context of lower demand for credit due to higher interest rates, postponements and delays in investment projects and also, reduction of NPE stock in this segment. The repayment of Covid lines also influenced this evolution, with increased impact at the Bank as it had assumed a leading role in granting this financing during the pandemic. Loans to companies in the international activity recorded a reduction of 2.8% compared to the 4,593 million euros recorded on 31 December 2022, reaching 4,463 million euros at the end of 2023. By geographies, there were similar reductions of loans to companies in the Polish subsidiary (explained in part by the optimisation plan to reduce risk weighted assets) and in the subsidiary in Mozambique. LOANS AND ADVANCES TO CUSTOMERS GROSS Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Chg. 23/22 MORTGAGE LOANS Activity in Portugal 18,763 19,014 18,394 (1.3 %) International Activity 9,218 9,110 9,678 1.2 % 27,981 28,124 28,072 (0.5 %) PERSONAL LOANS Activity in Portugal 2,324 2,180 2,111 6.6 % International Activity 4,509 3,862 3,888 16.8 % 6,833 6,042 5,999 13.1 % COMPANIES Activity in Portugal 17,538 18,955 19,361 (7.5 %) International Activity 4,463 4,593 4,799 (2.8 %) 22,001 23,548 24,160 (6.6 %) LOANS AND ADVANCES TO CUSTOMERS Activity in Portugal 38,625 40,149 39,866 (3.8 %) International Activity 18,190 17,564 18,365 3.6 % TOTAL 56,814 57,713 58,231 (1.6 %) The quality of the credit portfolio continues to benefit from the focus on selectivity and monitoring of the credit risk control processes, as well as from the initiatives carried out by the commercial and credit recovery areas, in order to recover non-performing loans over the recent years. The Bank has in place a credit portfolio management and monitoring processes, namely with regard to the assessment of the risk profile of the exposure in different portfolios/segments. These procedures have the purpose of identifying and closely monitoring the customers potentially more affected by the macroeconomic and/or geopolitical context, anticipating possible difficulties in meeting their commitments and defining credit and performance strategies adjusted to the specific specificities of each customer/group of customers, with a view to both maintaining support to customers considered viable and mitigating credit risk in cases where there are risks of loss in the exposure value. In this complex context, credit overdue for more than 90 days, on a consolidated basis, showed an increase compared to the 496 million euros recorded at the end of 2022, amounting to 512 million euros on 31 December 2023. The total volume of overdue credit, on a consolidated basis, also recorded an increase in relation to the 590 million euros recorded at the end of 2022, standing at 623 million euros on 31 December 2023, mainly due to the evolution seen in the activity in Portugal, where there was an increase from 201 2023 REPORT & ACCOUNTS |85 million euros recorded at the end of 2022 to 230 million euros at the end of 2023. The NPE stock, in consolidated terms, decreased to 1,952 million euros on 31 December 2023, showing a reduction of 266 million euros compared to the end of 2022. In the activity in Portugal, the NPE stock totalled 1,107 million euros at the end of 2023, with a significant reduction of 255 million euros being recorded in the same period. Regarding credit quality indicators, there was a stabilisation compared to the same date of the previous year in terms of the credit overdue for more than 90 days as a function of total credit, on a consolidated basis, and NPL ratio for more than 90 days, on a consolidated basis, that stood at 0.9% and 1.3%, respectively in both years. In turn, NPE ratio in percentage of the total credit portfolio, on a consolidated basis, decreased from 3.8% to 3.4% in that period. In the activity in Portugal, the NPE ratio as a percentage of the total credit portfolio evolved from 3.4% to 2.9% in the last year. Regarding coverage ratios by impairments, the NPL by more than 90 days coverage, in consolidated terms, evolved from 208.9% at the end of 2022 to 213.0% on 31 December 2023. The coverage ratio for credit overdue for more than 90 days by impairments, on a consolidated basis, was 312.1% on 31 December 2023, which compares with a ratio of 305.8% on the same date of 2022 and in the activity in Portugal the coverage level evolved from 519.5% at the end of year 2022 to 471.7% at the end of year 2023. The coverage of NPE by impairments, in consolidated terms, stood at 81.8% at the end of 2023, above the 68.3% recorded on 31 December 2022. In the activity in Portugal, the coverage of NPE by impairments stood at 89.3% on 31 December 2023, also at a level above the figure recorded in the previous year (68.6% on 31 December 2022). CREDIT QUALITY Million euros 2023 REPORT & ACCOUNTS 86 | CREDIT QUALITY INDICATORS Group Activity in Portugal Dec. 23 Dec. 22 Dec. 21 Chg. 23/22 Dec. 23 Dec. 22 Dec. 21 Chg. 23/22 STOCK (M€) Loans to customers (gross) 56,814 57,713 58,231 (1.6 %) 38,625 40,149 39,866 (3.8 %) Overdue loans > 90 days 512 496 949 3.2 % 210 180 586 16.5 % Overdue loans 623 590 1,080 5.5 % 230 201 605 14.6 % Restructured loans 1,729 1,866 2,564 (7.3 %) 1,186 1,341 2,069 (11.5 %) NPL > 90 days 750 725 1,237 3.4 % 360 333 776 8.0 % NPE 1,952 2,218 2,752 (12.0 %) 1,107 1,361 1,878 (18.7 %) Loans impairment (Balance sheet) 1,596 1,515 1,871 5.3 % 989 935 1,286 5.8 % NPE impairment (Balance sheet) 1,028 1,011 1,369 1.7 % 606 592 917 2.4 % CREDIT QUALITY Overdue loans > 90 days / Loans to customers (gross) 0.9% 0.9% 1.6% 0.5% 0.4% 1.5% Overdue loans / Loans to customers (gross) 1.1% 1.0% 1.9% 0.6% 0.5% 1.5% Restructured loans / Loans to customers (gross) 3.0% 3.2% 4.4% 3.1% 3.3% 5.2% NPL > 90 days / Loans to customers (gross) 1.3% 1.3% 2.1% 0.9% 0.8% 1.9% NPE / Loans to customers (gross) 3.4% 3.8% 4.7% 2.9% 3.4% 4.7% NPE ratio - EBA (includes debt securities and off-balance exposures) 2.2% 2.6% 3.2% 2.0% 2.4% 3.2% COVERAGE BY IMPAIRMENTS Coverage of overdue loans > 90 days 312.1% 305.8% 197.0% 471.7% 519.5% 219.5% Coverage of overdue loans 256.4% 256.7% 173.3% 429.9% 465.6% 212.6% Coverage of NPL > 90 dias 213.0% 208.9% 151.2% 274.8% 280.4% 165.8% Coverage of NPE 81.8% 68.3% 68.0% 89.3% 68.6% 68.5% Specific coverage of NPE 52.7% 45.6% 49.7% 54.7% 43.5% 48.8% Note: NPE include loans to customers only, as defined in the glossary. 2023 REPORT & ACCOUNTS |87 CUSTOMER FUNDS On 31 December 2023, the consolidated total customer funds amounted to 95,295 million euros, showing a favourable evolution, increasing by 2,487 million euros compared to the 92,808 million euros obtained on the same date of the previous year, benefiting from the increase in the international activity (4,076 million euros more than on the same date of the last year), partially mitigated by the reduction in the activity in Portugal (1,590 million euros less compared to the same date of the previous year). The evolution of total customer funds reflects the good performance of most items, with emphasis on the rise in deposits and other resources from customers, which increased by 2,021 million euros compared to 31 December 2022. TOTAL CUSTOMER FUNDS Million euros TOTAL CUSTOMER FUNDS Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Chg. 23/22 BALANCE SHEET CUSTOMER FUNDS Deposits and other resources from customers 77,928 75,907 69,560 2.7% Debt securities placed with customers 1,287 1,343 1,615 (4.1%) 79,215 77,250 71,175 2.5% OFF BALANCE SHEET CUSTOMER FUNDS Assets under management 5,561 5,114 5,773 8.8% Assets placed with customers 5,915 5,102 6,486 15.9% Insurance products (savings and investment) 4,603 5,343 6,663 (13.8%) 16,080 15,558 18,922 3.3% TOTAL 95,295 92,808 90,097 2.7% 2023 REPORT & ACCOUNTS 88 | In the activity in Portugal, total customer funds reached 66,672 million euros on 31 December 2023, which compares with the 68,262 million euros recorded on the same date in the previous year, with this evolution being justified almost entirely by the evolution of the balance sheet customer funds, more specifically by the reduction in deposits and other resources from customers (minus 1,571 million euros than on the same date of the last year). In the international activity, total customer funds increased by 4,076 million euros compared to the 24,546 million euros recorded on 31 December 2022, standing at 28,623 million euros at the end of 2023, mainly reflecting the positive contribution of the Polish subsidiary, slightly offset by the decrease recorded in the subsidiary in Mozambique. The aforementioned increase was mainly driven by the good performance of the balance sheet customer funds due to the rise of deposits and other resources from customers and also by the favourable evolution of the off balance sheet customer funds, although to a lesser extent in the latter case. Consolidated balance sheet customer funds, which comprise deposits and other resources from customers and debt securities placed with customers, amounted to 79,215 million euros on 31 December 2023, showing an increase of 1,965 million euros compared to the 77,250 million euros reached at the end of the previous year. This evolution results from the combined effect of the increase of 3,592 million euros recorded in the international activity and the reduction of 1,626 million euros recorded in the activity in Portugal. On 31 December 2023, balance sheet customer funds, on a consolidated basis, represented 83.1% of total customer funds (83.2% at the end of 2022), with deposits and other resources from customers, on a consolidated basis, representing 81.8% of total customer funds (percentage remained unchanged comparing to the one recorded at the end of 2022). Deposits and other resources from customers of the Group, totalled 77,928 million euros at the end of 2023, which compares with the 75,907 million euros obtained on 31 December 2022. In the international activity, at the end of 2023, the amount of deposits and other resources from customers increased by 3,592 million euros, benefiting from the increasing volumes of deposits in the Polish subsidiary, slightly mitigated by the decrease recorded in the Mozambican subsidiary. In turn, in the activity in Portugal, a reduction of 1,571 million euros was recorded, in a context of savings being drawn for the early repayment of credits and for other purposes. Debt securities placed with customers, which corresponds to the Group's issues of debt securities subscribed by clients (in 2023 and in 2022 existing only in the activity in Portugal) recorded a decrease of 56 million euros compared to the end of 2022, standing at 1,287 million euros at end of 31 December 2023. BALANCE SHEET CUSTOMER FUNDS Million euros As of 31 December 2023, consolidated off-balance sheet customer funds stood at 16,080 million euros, showing an increase of 521 million euros compared to the figure posted on the same date in the prior year. The increases recorded in assets placed with customers and assets under management, were partially offset by the decrease seen in insurance products (savings and investment). Off balance sheet customer funds recorded a significant rise in the international activity and a slight increase in the activity in Portugal. Assets under management, which result from the provision of the service of managing portfolios of clients under existing agreements for their placement and administration, amounted to 5,561 million euros on 31 December 2023, having shown an increase compared to the figure of 5,114 million euros recorded at the end of 2022, benefiting above all from the dynamism of the international activity. In the activity in Portugal, a slight increase was recorded. 2023 REPORT & ACCOUNTS |89 OFF BALANCE SHEET CUSTOMER FUNDS Million euros Assets placed with customers, which in turn correspond to the amounts held by customers within the scope of placing third-party products that contribute to the recognition of commissions, also recorded an increase compared to the 5,102 million euros recorded as of 31 December 2022, amounting to 5,915 million euros on 31 December 2023, having benefited from the dynamism of the activity in Portugal and to a lesser extent also of the international activity. Insurance products (savings and investment) amounted to 4,603 million euros on 31 December 2023, recording a decrease compared to the 5,343 million euros posted on the same date of the previous year, with this evolution being explained by the reductions recorded in the activity in Portugal and in the international activity, although in the latter case was of a smaller magnitude. TOTAL CUSTOMER FUNDS Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Chg. 23/22 BALANCE SHEET CUSTOMER FUNDS Activity in Portugal 52,450 54,077 49,319 (3.0%) International Activity 26,765 23,173 21,856 15.5% 79,215 77,250 71,175 2.5% OFF BALANCE SHEET CUSTOMER FUNDS Activity in Portugal 14,222 14,185 16,972 0.3% International Activity 1,858 1,373 1,950 35.3% 16,080 15,558 18,922 3.3% TOTAL CUSTOMER FUNDS Activity in Portugal 66,672 68,262 66,290 (2.3%) International Activity 28,623 24,546 23,806 16.6% TOTAL 95,295 92,808 90,097 2.7% 2023 REPORT & ACCOUNTS 90 | NON-CURRENT ASSETS HELD FOR SALE Non-current assets held for sale registered a decrease of 84.0% on 31 December 2023 compared to the same date of the last year, amounting to 80 million euros at the end of the current year (499 million euros at the end of 2022). Other assets (which mainly include equipment and financial assets) continue to have a small weight in the overall calculation of this item, with a decrease of 44.8% being recorded compared to 31 December 2022. NON-CURRENT ASSETS HELD FOR SALE Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Chg. 23/22 REAL ESTATE Arising from recovered loans 48 236 503 (79.7%) From investment funds and real estate companies 14 220 229 (93.6%) For own use 2 14 17 (85.7%) 64 470 748 (86.4%) OTHER ASSETS Equipment 4 16 17 (75.0%) Other assets 12 13 15 (7.7%) 16 29 32 (44.8%) TOTAL 80 499 781 (84.0%) The Group's properties received under customer credits recovery (foreclosed assets), held directly and held by investment funds and real estate companies, are classified under non-current assets held for sale and also under the heading of other assets. The aggregate value of these properties net of impairment recorded evolved from 385 million euros at the end of 2022 to 188 million euros at the end of 2023, as a result of the divestment strategy in this type of non-productive assets. 2023 REPORT & ACCOUNTS |91 SECURITIES PORTFOLIO The securities portfolio, as defined above, stood at 27,409 million euros as of 31 December 2023, showing an increase of 37.6% compared to the 19,918 million euros recorded on the same date of the previous year, representing 29.0% of total assets at the end of 2023 (22.2% at the end of 2022). For the mentioned evolution, the increase of 5,562 million euros in the public debt securities portfolio held by the Group was determinant. This portfolio increased from 16,531 million euros at the end of 2022 to 22,093 million euros at 31 December 2023, representing 80.6% of the total portfolio amount at the end of 2023, below the 83.0% recorded at the end of 2022. The portfolio allocated to the activity in Portugal increased from 14,561 million euros at the end of 2022 to 17,271 million euros existing on 31 December 2023, with this increase being associated with an increased diversification with public debt in the euro zone, namely Spanish, German, French and Belgian public debt, compensating for lower investment in Portuguese public debt. The securities portfolio allocated to the international activity showed a significant increase, rising from 5,357 million euros at the end of the previous year to 10,138 million euros on 31 December 2023 following the reinforcement of investment from Polish and Mozambican subsidiaries in local public debt and also in sovereign debt from other euro zone countries. Taking into account the type of portfolio, there was a more significant increase in the portfolio of financial assets at amortised cost and, also, an increase in the portfolio of financial assets measured at fair value through other comprehensive income, reflecting the objective of holding securities for a longer period of time. On the other hand, there was a slight reduction in the portfolio of financial assets at fair value through profit or loss. SECURITIES PORTFOLIO Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Chg. 23/22 Financial assets measured at amortised cost (1) 15,671 11,535 6,897 35.9 % Financial assets measured at fair value through profit or loss (2) 904 922 1,413 (2.0 %) Financial assets measured at fair value through other comprehensive income 10,834 7,462 12,891 45.2 % TOTAL 27,409 19,918 21,201 37.6 % of which: Activity in Portugal 17,271 14,561 16,128 18.6 % International activity 10,138 5,357 5,072 89.2 % (1) Corresponds to debt instruments not associated to credit operations, including treasury bills (2) Excluding the amounts related to loans to customers and trading derivatives. 2023 REPORT & ACCOUNTS 92 | CASH, DEPOSITS AND LOANS TO ADVANCES TO CENTRAL BANKS AND CREDIT INSTITUTIONS Cash and deposits at central banks and credit institutions and loans and advances to credit institutions (2023: 5,792 million euros; 2022: 7,199 million euros) net of resources from credit institutions, including central banks (2023: 829 million euros; 2022: 1,468 million euros) totalled a positive value of 4,963 million euros at the end of 2023, which compares with a positive value of 5,731 million euros at the end of 2022. OTHER ASSET ITEMS Other assets items, which includes hedging and trading derivatives, investments in associates, investment properties, other tangible assets, goodwill and intangible assets, current and deferred taxes assets and other assets, stood at 5,881 million euros on 31 December 2023, representing 6.2% of total consolidated assets. At the end of 2022, other asset items represented 6.7% of total consolidated assets, totalling 6,063 million euros. EQUITY On 31 December 2023, total equity amounted to 7,299 million euros, 1,363 million euros above the equity of 5,937 million euros existing at the end of the previous year. Non-controlling interests increased from 782 million euros at the end of the previous year to 987 million euros in 2023, in this case motivated mainly by the increase in the equity of the subsidiary in Poland, justified by the positive results generated in the year. The increase in equity resulted mainly from the integration of the net profit for the year which totalled 856 million euros, the positive impact of the fair value reserve net of income taxes, which increased by 456 million euros and the positive exchange rate consolidation differences, totalling 8 million euros. Conversely, equity was affected by the negative actuarial deviations associated with the pension fund in the net amount of 124 million euros and the interest from coupons of the Additional Tier 1 instruments, which amounted to 37 million euros. 2023 REPORT & ACCOUNTS |93 Business Areas Activity per Segments Millennium bcp conducts a wide range of banking activities and financial services in Portugal and abroad, with special focus on Retail Banking, Companies Banking and Private Banking business. BUSINESS SEGMENT PERIMETER Retail Banking Retail Network of Millennium bcp (Portugal) Retail Recovery Division Banco ActivoBank Companies and Corporate Companies and Corporate Network of Millennium bcp (Portugal) Specialised Recovery Division Large Corporate Network of Millennium bcp (Portugal) Specialised Monitoring Division Investment Banking () Interfundos () Specialized Credit and Real Estate Division () Treasury and Markets International Division () Private Banking Private Banking Network of Millennium bcp (Portugal) Millennium bcp Bank & Trust (Cayman Islands) () Foreign Business Bank Millennium (Poland) BIM - Banco Internacional de Moçambique Banco Millennium Atlântico () Millennium bcp Bank & Trust (Cayman Islands) () Other Comprises the activity carried out by Banco Comercial Português, S.A. not included in the commercial business in Portugal which corresponds to the segments identified above, including the activity carried out by Macao branch. Also includes all other business and unallocated values in particular centralized management of financial investments, corporate activities and insurance activity. () Units all together that serve mainly customers in the Companies & Corporate segment, but also customers in other segments, in which the corresponding income is recognized. The operating costs of those units are attributed to the Other segment. () For the purposes of business segments, Millennium bcp Bank & Trust (Cayman Islands) is included in the Private Banking segment. In terms of geographic segments, this operation is considered Foreign Business. It should be noted, however, the liquidation of this operation during the year 2022. () Consolidated by the equity method. The figures reported for each segment resulted from aggregating the subsidiaries and business units integrated in each segment. For the business units in Portugal, the aggregation process reflects the impact from capital allocation and balancing process in the balance sheet and income statement, based on average figures. The balance sheet headings for each business unit in Portugal was re- calculated, considering the replacement of the equity book values by the amounts assigned through the allocation process, based on the regulatory solvency criteria. Thus, as the process of capital allocation complies with the regulatory criteria of solvency in force, the risk weighted assets, and consequently the capital allocated to the business segments, are determined in accordance with the Basel III framework, pursuant to the CRD IV/CRR. The capital allocated to each segment resulted from the application of a target capital ratio to the risks managed by each segment, reflecting the application of the Basel III methodology previously referred. Each operation is balanced through internal transfers of funds, with impact on the net interest income and income taxes of each segment, hence with no impact on consolidated accounts. Each segment’s income includes the non-controlling interests, when applicable. Therefore, the values of net income presented incorporate the individual net income of the business units, regardless of the percentage stake held by the Group, and the impacts of the transfers of funds described above. The information presented below for the individually more relevant business areas in Portugal and aggregately for the international activity was based on the financial statements prepared in accordance with IFRS and on the organization of the Group's business areas as at 31 December 2023. 2023 REPORT & ACCOUNTS 94 | RETAIL Mass Market During 2023, the Mass Market segment focused its commercial activity on developing First Bank relationships, both with the current Customer base and with new Customers attracted. Through various marketing actions and the high proximity and quality of service to the Customer, it was possible to increase the number of paid orders, as well as the day-to-day transactional relationship and cross-selling. Taking into account the economic context of high inflation, a campaign was launched that remained active throughout the year and allowed Customers who paid their salary or pension to benefit from the refund of a percentage of the value of direct debits associated with their household expenses. In the youth segment, the focus on positioning in the University segment stands out, with the promotion of the “Unni” Value Proposition, which integrates an Integrated GO! University, non- financial offer aimed at the segment, preferential conditions on personal training credit, discounts on specialization courses at partner Universities and insurance with coverage for protection needs during exchange programs (Erasmus). The strategy of increasing Customers' digital engagement was also reinforced, through actions to encourage account opening on the App with Chave Móvel Digital; activating and encouraging the use and development of new functionalities and services. Prestige In 2023, the Prestige segment continued to increase its Customer base, leveraging targeted actions to attract customers, build loyalty and upgrades. Of particular note is the increase in the average involvement of the segment's Customers with the Bank. In the Investment component, the Bank sought to constantly adjust the offer of different investment instruments, adapting it to different profiles and objectives. The continuous improvement of the Prestige Customer experience continued to be a priority, highlighting the offer of local or remote personalized management service (monitoring by a Customer Manager), the “service password on the App” functionality with priority customer service Prestige and the features in the Millennium App that facilitate interaction with the Manager. In Remote Customer Management, several initiatives were implemented to optimize the “Prestige Direto” service model, a service aimed at Digital Prestige Customers, which allows dedicated remote management during extended hours. Portuguese Diaspora & Foreigners In 2023, the Portuguese Diaspora & Foreigners segment continued its strategy of increasing proximity and relationships, as well as growing and rejuvenating the Customer base. Given the particularities of the segment, we sought to develop the relationship with these Customers through a differentiated offer, which seeks to satisfy the specific needs of those who live or interact with the Bank abroad, as well as the promotion of the Bank's Digital channels, which allow greater proximity regardless of the geographic area where the Customer is located. In order to guarantee greater support to Customers abroad, Millennium bcp maintains a physical presence through the local Network of Representative Offices in Brazil (Rio de Janeiro and São Paulo), the United Kingdom (London) and Switzerland (Geneva and Zurich). Businesses Millennium bcp maintained a strong commercial dynamic throughout 2023, despite the challenging economic context, characterized by rising interest rates and international conflicts. Attracting new customers continued to be one of Millennium bcp's main priorities. 2023 REPORT & ACCOUNTS |95 Products Loans to individuals In 2023, the Bank sought to simplify and adjust the credit "offer" to Customers' needs. In Personal Credit, we highlight the continued focus on boosting digital channels (App and website) with diversified promotional actions adjusted to the profile and needs of Customers, as well as the simplification of the "offer". Recognizing a pressing need for energy conversion, the offer for investments aimed at improving the energy efficiency of residential buildings was reinforced. The Bank maintained support for training, through University Credit with Mutual Guarantee and Personal Training Credit. In Real Estate Credit, during the second half of the year, and in a context of higher interest rates, the “zero spread” campaign was launched, allowing the Customer to benefit from a lower instalment at an early stage of their loan. Fixed rate solutions were also made available, as well as the possibility of choosing the Euribor index at 3, 6 or 12 months. It is also worth highlighting the continuation of a strong investment in innovation, increasingly incorporating the Digital channel into the hiring journey in order to make the entire process simpler, more agile and faster. Bearing in mind the relevance of the Sustainability policy, the "offer" was maintained with advantageous conditions for the acquisition of properties with better energy efficiency. Throughout the year, the Bank also made available the possibility for the Customer to adhere to the different Government Support Measures aimed at Customers with Credit for their own and permanent Housing. In order to simplify and guarantee more comprehensive access, 100% Digital membership journeys were developed. Investment solutions In 2023, in the investment component, the Bank sought to adjust its offer of investment products to the new interest rate context. The commitment to digital continues to be clear with the launch of an automated investment service (Easy Invest) which is sold exclusively on the App and also the provision of a savings assistance service using the definition of objectives called Apparte Account. Insurance During 2023, the insurance sales partnership maintained a high dynamic, with new offerings, process improvements and considerable investment in digital channels, namely the App. “Insurance is at Millennium” and that is why, throughout 2023, we sought to increase the offer of protection available to the Bank's Customers. Also in Insurance, Digital has gained a very important role, with an increase in its weight in total interactions and sales, with the launch of subscription to various insurance policies through the App. The dynamics and improvements implemented resulted in a reinforcement of the bancassurance market share, which in Non-Life increased from 34.6% in 2022 to 35.5% in 2023 and in Life Risk from 18.8% to 21.1%. Integrated Solutions In 2023, the strategy of valuing the "offer" associated with having an integrated solution was reinforced with the launch of a savings product with exclusive remuneration for holders of these solutions. Positioning itself as the reference Bank for young people, Millennium bcp extended its university offer to €0 also for Customers with a degree, master's degree or doctorate under the age of 30 and who domicile their salary and sign up to the digital statement. At the end of the year, Millennium bcp made available a new banking solution aimed exclusively at Customers 55+ who have integrated solutions for banking products and services. Millenniumbcp thus continues its strategy of launching integrated solutions by segment, now allowing customization. Current Accounts Millenniumbcp has made new features available on the App, with a Digital Mobile Key that allows account opening without the need for video conferencing and uploading documents, as well as updating data without the need to send or upload documents. Microcredit Millennium bcp continued to be a reference bank in supporting Microcredit projects, having lines 2023 REPORT & ACCOUNTS 96 | available with European guarantees, namely from the European Investment Fund, for these operations. ActivoBank In 2023, ActivoBank reinforced its focus on the young digital segment, through the development of digital products and functionalities in order to respond to the financial needs of this segment. The bank attracted approximately 68 thousand new Customers, which allowed it to reach a base of 517 thousand Customers, with a very high degree of digitalization. These results are the result of a consistent strategy for developing brand awareness. Additionally, from a procedural point of view, the new account opening process with Digital Mobile Key was implemented and account opening methodologies were also reinforced, such as scheduling account opening at any Ponto Activo. The most significant notoriety actions were based on an influencer marketing strategy that ensured high levels of reach and specialization of audiences in digital media. During 2023, ActivoBank maintained an increasing focus on digital marketing actions that were present in the majority of the offer and that supported the business capture regime consistently. Regarding products, digital cards were made available on the App, which made it possible to make transactions immediately after opening a digital account. In the scope of savings and investment products, the strategy was focused on the deposit portfolio with the recreation of the entire offer taking into account the new objectives and market context of increasing rates. This strategy allowed significant growth in the term deposit portfolio and the availability of new products that allowed greater diversification of the term deposit portfolio. In terms of investments, we highlight the launch of a new product, "EasyInvest", a unit-linked insurance where, given the desired profile and strategy, the Customer can invest automatically in the ActivoBank App, and the reinforcement of the offer of funds investment distributed by ActivoBank. With regard to credit, new products were launched with new purposes, such as Health Credit and Automobile Credit and Advance Credit ordered with contracting via App. Still during 2023, ActivoBank continued its positioning in the area of Sustainability. In the context of financial literacy, the podcast No fim de contas was launched, where financial management suggestions were presented in each episode. During 2023, ActivoBank developed 12 social solidarity actions through its monthly item Dar Créditos, associating a Project or Social Cause that was supported with an amount of up to 2,000 euros. As part of the reinforcement of the digital experience, new contracting journeys were made available that allow for the continued growth of the digital business, including insurance subscription through the App, updating of Customer data, issuance of the letter of approval for mortgage credit digital form and EcoActivo Credit. ActivoBank's net profit in 2023 was 39.4 million euros, which represents an increase of 105.8% compared to the previous year. 2023 REPORT & ACCOUNTS |97 Million euros RETAIL BANKING in Portugal Dec 31, 2023 Dec 31, 2022 Chg. % 23/22 PROFIT AND LOSS ACCOUNT Net interest income 882 621 41.9% Other net income 450 446 0.9% 1332 1067 24.8% Operating costs 356 329 8.3% Impairment and provision 45 67 -34.2% Income before tax 931 671 38.8% Income taxes 291 210 38.8% Income after tax 640 461 38.8% SUMMARY OF INDICATORS Allocated capital 1,001 891 12.4% Return on allocated capital 63.9% 51.7% Risk weighted assets 7,251 7,127 1.7% Cost to income ratio 26.8% 30.8% Loans to Customers (net of impairment charges) 26,003 26,361 -1.4% Balance sheet Customer funds 39,079 39,739 -1.7% Notes: Allocated capital, Loans to customers (net of recoveries) and Balance sheet Customer funds figures based on average balance. Financial performance As at 31 December 2023, income after tax from Retail Banking segment of Millennium bcp in Portugal totalled 640 million euros, showing a 38.8% increase compared to 461 million euros in 2022, reflecting higher net interest income. Regarding the evolution of the main income statement headings, the following aspects should be highlighted: • Net interest income reached 882 million euros as at 31 December 2023, increasing 41.9% compared to the previous year (621 million euros), reflecting the effect of the normalization of interest rates, mainly benefiting from the net interest income arising from the deposit portfolio, which was penalized in the previous context of near zero or negative interest rates. • Other net income reached 450 million euros as at 31 December 2023, showing an increase of 0.9% compared to the amount attained in the previous year. This evolution reflects the positive performance of commissions, mainly from management and maintenance of accounts, cards and transfer fees, although partially mitigated by lower commissions on credit operations, as a result of the legal restrictions imposed. On the other hand, during the year 2023, the level of the gains recognized with the sale of non-current assets held for sale was lower compared to those observed during the year 2022. • Operating costs were 8.3% higher than the amounts recognized in 2022. Notwithstanding the disciplined management of costs and the commitment on improving efficiency, this evolution was strongly influenced by the inflation observed. • Impairment charges amounted to 45 million euros at the end of December 2023, remaining at a low level relative to the loan portfolio size of this segment, presenting a decrease of 34.2% compared to the amount of 67 million euros recorded in the same period of the previous year. • In December 2023, loans to customers (net) totalled 26,003 million euros, decreasing 1.4% from December 2022 (26,361 million euros), while balance sheet customer funds decreased by 1.7% in the same period, amounting to 39,079 million euros in December 2023 (39,379 million euros in December of the previous year), mainly explained by the decrease in customer deposits. 2023 REPORT & ACCOUNTS 98 | COMPANIES AND CORPORATE Millennium bcp reaffirmed its position in supporting Portuguese Companies and Entrepreneurs. New support lines were made available, with financial guarantee provided by Banco Português de Fomento. Also noteworthy is the leadership in placing guarantees from the European Investment Fund, with the execution of the largest national contract under the European InvestEU Program, around 400 million euros. A new guarantee was also signed with the European Investment Bank to grant credit worth 400 million euros to Medium and Large Companies and the Public Sector. Continuing the work implemented during the Portugal 2020 community framework, in 2023, the Bank maintained its focus on supporting Business Investment that benefits from European Incentives. Millennium bcp actively contributed to the successful closing of the Community Portugal 2020 framework, exceeding 6 thousand project support operations. In the Recovery and Resilience Plan, the Bank maintains a very important role in supporting entities that are responsible for executing the contracted investments by the end of 2026. At the start of the Portugal 2030 Community framework, the accumulated experience and the level of internal specialization make Millennium bcp fully prepared to support the economy and Companies that are awaiting the first approvals or preparing and submitting applications. Highlights include the Millennium Talks events, which brought issues such as Innovation, corporate financing, but also the way in which they can grow on sustainable foundations to the center of discussion.~ In 2023, Millennium bcp maintained close proximity to the primary sector. It has a specialized team with the capacity to monitor and respond to the specific financial needs of Entrepreneurs in the sector, it has dedicated financial solutions, such as credit lines registered with IFAP, it maintains a newsletter and regular presence at the main events national agricultural and livestock sectors, in which it gives up its space to give visibility to its Customers. Millennium bcp maintains leadership in Leasing, with 597 million euros of new production in 2023. As a privileged solution to support investment for SMEs, the Bank has carried out several operational optimization initiatives with an impact on the Customer experience. The Leasing offer is today an integral part of the Guarantee Lines of the European Investment Bank and the European Investment Fund provided by Millennium bcp, reinforcing the Bank's capacity to respond to the investment needs of Companies. In 2023, Millennium bcp once again surpassed 10 billion euros in turnover and led in this segment. In the Trade Finance business, Millennium bcp continued to reinforce its positioning as a partner bank for Exporting and Importing Companies: • Best Trade Finance Bank with "Best Service" and "Market Leader", according to Euromoney. • Maintaining leadership in credit for exporting companies; • Significant and sustained growth in credit insurance sales in partnership with COSEC, with emphasis on the contracting of new policies. During 2023, Millennium bcp reinforced the Sustainable Business Credit aspects, having an offer within the scope of Green Mobility, Credit for Green Real Estate Promotion and Credit for Investment Projects. Of particular note is the financing of affordable housing projects, within the Controlled Cost Housing regime and housing projects with a sustainable approach, which mainly resides in the energy efficiency of the installed systems. During 2023, Millennium bcp provided sustainable financing with European guarantees, namely from the European Investment Fund, and credit support from national entities such as Banco Português de Fomento and Turismo de Portugal should also be mentioned. Investment banking The Bank participated in several projects in Portugal and in international markets. • In Corporate Finance, the Bank providing financial advisory to its Customers and to the Bank itself in various projects, involving researching, developing and completing M&A operations, valuation of companies, corporate restructuring and reorganization processes, as well as research and economic-financial analysis of projects. In the mergers and acquisitions segment, special mention should be made of providing exclusive financial advice to the Saint-Gobain Group on the sale of 100% of Saint-Gobain's flat glass transformation operations in Portugal, operated by Covipor – Companhia Vidreira do Porto, Lda. • With regard to the Project Finance area, we highlight the participation in the financing of the construction of a portfolio of small solar production units with 157 MW of installed capacity and the refinancing of two solar 2023 REPORT & ACCOUNTS |99 photovoltaic parks with a total installed capacity of 4.4 MW. • In the Structured Finance area, we participated in the analysis, structuring, negotiation and setting up of new financing operations in Portugal, of which emphasis is given to financing the Electricity Company of Madeira and financing to the RNM group for the acquisition of two companies that allowed the expansion and diversification of its portfolio of products and services. • Regarding Capital Markets activity, the joint leadership of the “green” debt issue by EDP, worth 750 million euros, and an issue by the Autonomous Region of Madeira with the endorsement of the Republic, worth a total of 275 million euros, stands out. millions of euros. Several new Commercial Paper Programs were also contracted with a number of relevant national companies, including two NOS Sustainability Linked Commercial Paper Programs worth 75 and 80 million euros, respectively, stands out. 2023 REPORT & ACCOUNTS 100 | Real estate business Main areas of activity during 2023: Management of real estate assets available for sale - The Bank developed and deepened its property sales strategy, managing to exceed the objectives of reducing assets on the Balance Sheet, selling properties with a long history in the portfolio, and with strict control of financial impacts. The external environment required the Bank's teams to constantly anticipate trends, as well as adapt to new opportunities and needs, through the development of commercial approaches, based on the experience and commercial relationships accumulated over recent years, and supported by the trust essential to decision making by Customers and other Agents in the Market. In this line, the Bank positions itself as a partner that presents investment solutions, not limited to the simple sale of a real estate asset. Management of real estate assets not available for sale – The main objective continues to be to put properties up for sale in the shortest possible time, to this end the Bank continues to be demanding, rigorous and competent in its physical, legal and administrative regularization, in the thorough analysis of better alternatives to their appreciation, in the control and management of taxes related to properties, promoting their sale and disposal before the expiry of tax exemptions that some properties enjoy. These procedures have successfully contributed to the reduction of these assets in the portfolio. The Bank continued to manage the stakes controlled by the Bank in entities that manage real estate risk, Funds and Companies in a divestment strategy with value preservation. Interfundos As of December 31, 2023, Interfundos had under management 19 Alternative Real Estate Investment Organizations (Funds and Collective Investment Companies), corresponding to 881 million euros of net assets under management, which compares with 1,051 million euros recorded in the same period of 2022, showing a 16% decrease in the volume of assets managed compared to the same period last year. These assets guarantee to Interfundos a market share of 6.2% in all Real Estate Investment Organizations (OII). Interfundos continued its strategy of creating liquidity conditions for Participants and Shareholders of Alternative Real Estate Investment Organizations, a situation evidenced by the completion of six capital reduction operations. Following a deliberation by the respective Participant, Interfundos extended the duration of the Imosotto - Accumulation - Closed Real Estate Investment Fund. Interfundos also transferred the management of Multi24 - Sociedade Especial de Investimento Imobiliário de Capital Fixo, SICAFI, S.A. and liquidated Fundo Imopromoção – Portuguese Real Estate Development Fund, Oceânico II – Fundo de Investimento Imobiliário Fechado and Funsita – Fundo of Closed Real Estate Investment. On May 28, 2023, the Asset Management Regime (RGA) came into force, published as an Annex to Law Decree 27/2023, of April 28, which became the common regulatory framework for all Collective Investment Organizations. The RGA required the implementation of a set of changes to be implemented by the end of the adaptation period set at 180 days, counting from the date of its entry into force, with Interfundos having made the changes, capable of being carried out, within the deadline 180 days granted. In 2023, global sales amounted to 180 million euros, corresponding to a total of 259 properties. Interfundos' net profit in 2023 amounted to 1,724 thousand euros, which corresponds to a decrease of 17% compared to the value recorded in the same period last year (2,084 thousand euros). This performance is mainly attributable to the unfavourable evolution of net commissions of 15%, resulting from the 170 million euros reduction in assets under management. Operating costs recorded a decrease of 15%, essentially resulting from the reduction in Other Administrative Expenses resulting from the Value Added Tax recovery exercise and the adjustment of costs to the activity, despite the increase in the General Price Index. This cost containment allowed a favourable evolution of the efficiency ratio from 47.6% to 47.3%. Financial Institutions Group (FIG) - integrated into Treasury, Markets & Institutional Department The year 2023 was characterized by the persistence of events with an impact on international trade, resulting from conflicts and geopolitical tensions, along with regulatory and market changes. This framework, insofar as it tends to potentiate different types of risks - namely legal, reputational, operational and compliance - implied a continuous investment in improving business processes and in due diligence activities with counterparties, reinforcing the quality of business relationships. correspondence that the Bank maintains with the main financial entities in the countries with which it maintains economic relations. In the different lines of business, the following stand out: • In international payments and transfers, particularly those associated with international trade, progress continues towards greater efficiency, speed and transparency. 2023 REPORT & ACCOUNTS |101 • The Bank continues to deepen agreements and partnerships with leading international banks with a view to optimizing and maximizing efficiency in payments involving foreign exchange operations. • In the custody activity, the publication of Decree-Law no. 27/2023, of April 28, is highlighted, which approves the Asset Management Regime, which resulted in the opportunity to revisit processes and update contracts and procedures in line with the new regulatory requirements and simultaneously reinforce the value proposition in this specific business segment, in which the role of depository was reinforced. • In the multilateral segment, the Bank maintained close and fruitful collaboration with the EIB/FEI group, to the benefit of the national business community. Highlight is the signing of two guarantee agreements, one with the EIF under the InvestEU Program in the amount of 405 million euros and the other with the EIB in the amount of 400 million euros, to grant financing to Portuguese companies under preferential conditions. The agreement signed with the EIF aims to support the investment of micro, small and medium-sized companies in projects related to sustainability, innovation and digitalization, social entrepreneurship, microfinance, the cultural and creative sectors, skills and education, and competitiveness. On the other hand, the agreement signed with the EIB aims to support Midcap companies and Public Sector entities. 2023 REPORT & ACCOUNTS 102 | Million euros COMPANIES AND CORPORATE in Portugal Dec 31, 2023 Dec 31, 2022 Chg. % 23/22 PROFIT AND LOSS ACCOUNT Net interest income 207 203 1.9% Other net income 152 190 -19.9% 359 393 -8.6% Operating costs 62 58 7.5% Impairment and provision 155 150 3.3% Income before tax 142 185 -23.3% Income taxes 44 58 -23.3% Income after tax 98 127 -23.3% SUMMARY OF INDICATORS Allocated capital 1,276 1,494 -14.6% Return on allocated capital 7.7% 8.5% Risk weighted assets 11,662 11,950 -2.4% Cost to income ratio 17.3% 14.7% Loans to Customers (net of impairment charges) 11,097 11,751 -5.6% Balance sheet Customer funds 9,465 11,539 -18.0% Notes: Allocated capital, Loans to customers (net of recoveries) and Balance sheet Customer funds figures based on average balance. Financial performance Companies and Corporate segment in Portugal income after tax of 98 million euros in December 2023, compared unfavourably to an amount of 127 million euros presented in December 2022. This evolution results mostly from a lower other net income. As at December 2023 the performance of this segment is explained by the following changes: • Net interest income stood at 207 million euros as at 31 December 2023, 1.9% above the amount attained as at 31 December 2022 (203 million euros), as the lower net interest income arising from the loan portfolio was more than offset the improvement in the margin on deposits, enabled by the normalization of interest rates. • Other net income reached 152 million euros in December 2023, being 19.9% lower compared to the amount achieved in December 2022, which is mainly explained to the gains recognized with the sale of non-current assets held for sale recorded throughout 2022, substantially higher than those recorded in 2023. • Operating costs totalled 62 million euros by the end of December 2023, 7.5% above the overall amount of costs recorded in the same period of the previous year. • Impairments charges recorded 155 million euros in December 2023, increasing from 150 million euros in December 2022, an evolution explained by the higher level of recoveries recorded in 2022, with a higher incidence in the 4th quarter. • In December 2023, loans to customers (net) totalled 11,097 million euros, decreasing 5.6% from December 2022 (11,751 million euros), influenced by the environment of lower demand for credit due to higher interest rates and delays in investment projects and, also, by the reduction of stock of NPE. Balance sheet customer funds reached 9,465 million euros, 18.0% below the amount recorded in December 2022, particularly through the shrinkage of the client’s deposits base, mostly from institutional customers. 2023 REPORT & ACCOUNTS |103 PRIVATE BANKING In 2023, the Bank adjusted its investment “offer”, with the launch of new term deposit solutions, new structured deposits and an increase in the “offer” of funds, thus providing solutions for different objectives and risk profiles, allowing the diversification of Customers' assets, and increasing return opportunities. Throughout the year, permanent monitoring of Customer assets and knowledge sharing were ensured, keeping Customers informed about market developments. The positioning as the main Bank was reinforced, as a partner for Customers, not only in the management of their financial investments, but also in the management of their day-to-day activities, promoting the cross-selling of payment methods, risk insurance and savings and digital services. The focus on Digital resulted in the intensive use of remote channels and digital tools, a key component of business success, through the simultaneous use of digital and human channels. It continued to invest in the dissemination of digital channels among Customers, in increasing the use of these channels, and in the continuous improvement of the quality of service through the improvement of the online experience of Customers in their relationship with the Bank, either on a day-to-day basis either in the savings and investments component, with a special focus on the remote investment hubs of the Millennium App. In 2023, there was significant growth in the number of Customers with the Millennium App, which reached 60% and in the number of users of the Millennium website, which reached 90.5%. The number of execution customers using the Mtrader App reached 64%. 94.6% of Private Customers adhere to the digital statement. It is also worth highlighting the importance given to attracting Customers, as well as the onboarding of new Customers, providing Customers, from the outset, with products and services suited to their needs. Millennium bcp was elected, within the scope of the PWM Wealth Tech Awards 2023, “Best Private Bank For Self-Directed Investments” in Europe by Professional Wealth Management magazine, a publication of the Financial Times Group. Million euros PRIVATE BANKING in Portugal Dec 31, 2023 Dec 31, 2022 Chg. % 23/22 PROFIT AND LOSS ACCOUNT Net interest income 35 20 72.9% Other net income 32 33 -0.1% 67 53 27.8% Operating costs 15 14 4.1% Impairment and provision 0 0 Income before tax 52 39 34.2% Income taxes 16 12 34.2% Income after tax 36 27 34.2% SUMMARY OF INDICATORS Allocated capital 24 25 -6.5% Return on allocated capital >100% >100% Risk weighted assets 207 203 1.9% Cost to income ratio 22.2% 27.3% Loans to Customers (net of impairment charges) 333 345 -3.4% Balance sheet Customer funds 2,679 2,747 -2.5% Notes: Allocated capital, Loans to customers (net of recoveries) and Balance sheet Customer funds figures based on average balance. 2023 REPORT & ACCOUNTS 104 | Financial performance Income after tax from Private Banking business in Portugal, computed according to the geographic segmentation perspective, totalled 36 million euros in December 2023, showing an increase of 34.2% compared to the net profit reached in December 2022 (27 million euros). Considering the performance of the main items of the income statement, the relevant situations are highlighted as follows: • Net operating revenues stood at 67 million euros in December 2023, 27.8% up from the amount recorded in the previous year (53 million euros), driven by the growth shown in net interest income. Net interest income totalled 35 million euros in December 2023, comparing favourably to 20 million euros reached in December 2022, benefiting from the increase in interest rates and the corresponding improvement in the margin on deposits. Other net income amounted to 32 million euros in December 2023, reflecting a slightly decrease of 0.1% compared to the amount shown in the previous year, with lower commissions from asset management activity and from exchange and brokerage transactions offset by commissions from cards and transfer fees. • Operating costs amounted to 15 million euros in December 2023, being 4.1% above the operating costs recorded in December 2022. • The impairment and provision charges had no material impact in the income statement on both periods. • Loans to customers (net) amounted to 333 million euros in December 2023, showing a decrease of 3.4% compared to the figures accounted in December of the previous year, while balance sheet customer funds corresponded to 2,679 million euros in December 2023, 2.5% below the level achieved in December 2022. 2023 REPORT & ACCOUNTS |105 FOREIGN BUSINESS AND OTHERS Poland • In 2023, net income amounted to 126.8 million euros which compares to -223.5 million euros in 2022, excluding Foreign Exchange effect. • Bank Millennium, in Q4 2023 reported positive results of 26.2 million euros, thus presenting positive results for the last five consecutive quarters, after two years of negative results. Bank Millennium results in 2023 continued to be constrained by costs related to the mortgage loan portfolio denominated in Swiss francs that amounted to 735.3 million euros. • Net profit in 2023 without extraordinary items (mostly related to costs related to the mortgage loan portfolio denominated in Swiss francs and the gain associated to the sale of 80% of Millennium Financial Services stake as a result of the strategic partnership in the bancassurance business) increased from 493.2 million euros, excluding Foreign Exchange effect to 659.3 million euros, corresponding to a 34% change. • Net interest income (NII) increased by 12.9% y-o-y, excluding credit holidays impact. • Net fees and commissions decreased slightly by 3% y-o-y. • Operating costs decreased 4.8% y-o-y (costs excluding BFG/IPS, increased 14% y-o-y). • Operating income, excluding credit moratoria, increased by 14% y-o-y. • Impaired loans (stage 3) ratio stood at 4.58% which compares to 4.45% in the previous year. • Cost of Risk stood at 39 b.p. in 2023 which compares to 44 b.p. in 2022. • Loans to deposits ratio stood at 68.7% at the end of 2023. • Significant increase of Group’s capital ratios that stood at 18.06% for Total Capital Ratio (TCR) and at 14.73%% for T1 ratio, compared to 14.42% and 11.28%, respectively in 2022, above P2R requirements (12.21% and 9.85%, respectively). Mozambique • Net income stood at 105.1 million in 2023, an increase of 1.6% compared to the same period last year, on a comparable basis. • Net interest income increased by 2.3% and commissions by 3.2%, excluding Foreign Exchange effect. • Operating costs increased by 13.7%, excluding Foreign Exchange effect, in 2023. • Stated cost/income ratio increased from 42.6% in 2022 to 47.7% in 2023. • Loans to customers decreased by 0.9% to 654 million euros, while customer funds decreased by 3.8% to 2.1 billion euros. • Ratio of NPL more than 90 days overdue stood at 3.2% in December 2023, with coverage of 133% on the same date. • Cost of risk of -371 b.p. in 2023 (118 b.p. in the same period of 2022) resulting from the partial recovery of a credit in litigation. Without this effect, the cost of risk would be 161 b.p. • Capital ratio of 36.9%. Macao 1 • Net income reached euros 9.1 million in 2023, aligned with Macao Branch’s target, down 35%, on a comparable basis, versus 2022. This underperformance was mainly due to the increase in impairments for credit risk that more than offset the increases in net interest income, net trading income and commissions. Loans to customers originated by the Macao Branch increased by 12.8% compared to 2022. • The Branch acted as a support platform for companies doing business in Macao an in Mainland China. • Financing of local and Internacional corporate customers. • Trade finance operations to support companies with exports to and/or imports from China. • Attracting companies with international trade operations with China. • Attracting Chinese clients wishing to invest in Portugal, both individually and at the business. • Promoting contacts between the Investment Banking area of Millennium bcp and Chinese companies seeking investment opportunities in the Portuguese-speaking countries. 2023 REPORT & ACCOUNTS 106 | 1 For the purpose of the computation of the net income generated by business segments, Macao activity is included in the "Other" segment, since it is carried out through a branch. Milhões de euros Poland Dec 31, 2023 Dec 31, 2022 Chg. % 23/22 PROFIT AND LOSS ACCOUNT Net interest income 1,157 996 16.2% Other net income 311 24 1,468 1,020 43.9% Operating costs 420 357 17.7% Result on modification -19 -310 -93.7% Impairment and provision 740 509 45.2% Income before tax 289 -156 Income taxes 162 61 167.8% Income after income tax 127 -217 BALANCE SHEET Loans to Customers (net of impairment charges) 16,955 16,356 3.7% Balance sheet Customer funds 24,690 20,941 17.9% Note: The accounts presented are in accordance with the Consolidated Accounts of the Group, and may differ from the accounts disclosed locally. Milhões de euros Mozambique Dec 31, 2023 Dec 31, 2022 Chg. % 23/22 PROFIT AND LOSS ACCOUNT Net interest income 202 202 -0.2% Other net income 62 64 -3.0% 264 266 -0.9% Operating costs 126 113 11.0% Impairment and provision -11 15 -174.3% Income before tax 149 138 8.0% Income taxes 44 36 21.7% Income after tax from continuing operations 105 102 3.2% Income from discontinued operations — 4 -100.0% Income after income tax 105 106 -0.9% BALANCE SHEET Loans to Customers (net of impairment charges) 626 628 -0.2% Balance sheet Customer funds 2,075 2,232 -7.0% Note: The accounts presented are in accordance with the Consolidated Accounts of the Group, and may differ from the accounts disclosed locally. 2023 REPORT & ACCOUNTS |107 Million euros FOREIGN BUSINESS Dec 31, 2023 Dec 31, 2022 Chg. % 23/22 PROFIT AND LOSS ACCOUNT Net interest income 1,359 1,199 13.4% Other net income () 375 87 >200% 1,734 1,286 34.9% Operating costs 546 471 15.8% Result on modification -19 -310 -93.7% Impairment and provision 732 632 15.7% Income before tax 437 -127 Income taxes 206 97 113.2% Income after tax from continuing operations 231 -224 Income from discontinued operations -3 6 -151.3% Income after income tax 228 -218 SUMMARY OF INDICATORS Allocated capital () 1,942 2,036 -4.6% Return on allocated capital 11.8% -10.8% Risk weighted assets 14,325 16,821 -14.8% Cost to income ratio 31.5% 36.6% Loans to Customers (net of impairment charges) 17,582 16,983 3.5% Balance sheet Customer funds 26,765 23,173 15.5% () Includes equity accounted earnings related to the investment in Banco Millennium Atlântico. () Allocated capital figures based on average balance. Financial performance Income after tax from Foreign Business, computed in accordance with the geographic perspective, was 228 million euros in December 2023, comparing favourably with a negative amount of 218 million euros achieved by the end of December 2022. This favourable evolution is mostly explained by the higher level of the net operating income and the lower loss recorded in results on modification, partially offset by a higher level of impairment. Considering the different items of the income statement, the performance of Foreign Business can be analysed as follows: • Net interest income stood at 1,359 million euros in December 2023, which compares to 1,199 million euros achieved in December 2022. Excluding the impact arising from foreign exchange effects, it would have increased 11.0%, reflecting mainly the performance of the Polish subsidiary, driven by increases in the reference interest rates that have been taking place between the last quarter of 2021 and the third quarter of 2022, while net interest income at the subsidiary in Mozambique also increased, albeit to a lesser extent, constrained by an increase in the minimum level of non- remunerated cash reserves maintained with the central bank. • Other net income attained 375 million euros in December 2023, increasing significantly when compared to the 87 million euros recorded in the previous year. Excluding foreign exchange effects, other net income would have increased with the same significance level, determined by the recognition of the gain obtained with the sale of 80% of the shares of Millennium Financial Services sp. z o.o. by Bank Millennium in Poland and by the reduction of the mandatory contributions of this subsidiary. • Operating costs amounted to 546 million euros as at 31 December 2023, 15.8% up from December 2022. Excluding foreign exchange effects, operating costs would have increased 14.0%, reflecting similar evolutions in the subsidiaries in Poland and Mozambique. Wages increase in Poland impacted staff costs of the local subsidiary, although the subsidiary in Mozambique also recorded an increase in this item, albeit with a smaller magnitude. In other administrative expenses, the general price increase affected both the Polish subsidiary and 2023 REPORT & ACCOUNTS 108 | the subsidiary in Mozambique, despite the optimization of the branch network verified in the Polish subsidiary. • Results on modification totalled a negative amount of 19 million euros at the end of December of 2023, which compares with an also negative amount of 310 million euros recorded in the previous year. The amount recognised during 2022 results mainly from the potential costs arising from the moratorium program (credit holidays). In both periods, this item also includes the amount associated with contractual modifications, namely those negotiated with customers with foreign exchange mortgage loans. • Impairment and provision charges at the end of December of 2023 presented a 15.7% growth compared to the figures reported in 2022, which had been penalized by the recognition in June 2022 by the impairment for the goodwill of the Polish subsidiary. This growth corresponds essentially to the additional provisions booked by the Polish subsidiary to address the foreign exchange mortgage legal risk. • Results from discontinued operations, in 2022, reflects adjustments to the gain arising from the sale of Banque Privée BCP (Suisse) SA, and to the investment held in Seguradora Internacional de Moçambique, S.A.. In 2023, the adjustments correspond exclusively to the discontinued operation in Switzerland. • Loans to customers (net) stood at 17,582 million euros in December 2023, 3,5% up from the amount attained in December 2022 (16,983 million euros). Excluding foreign exchange effects, the loan portfolio decreased 3.6%, influenced by the evolution of the Polish subsidiary. The Foreign business’ balance sheet customer funds increased 15.5% from 23,173 million euros reported in December 2022 to 26,765 million euros in December 2023. Excluding the foreign exchange effects, balance sheet customer funds increased 8,2%, mainly driven by the performance of the subsidiary in Poland. 2023 REPORT & ACCOUNTS |109 Strategic Plan 2021-2024 The strategic cycle launched in 2021 reflects Millennium bcp's determination to accelerate transformation and strengthen its position for the future, preparing to face and overcome the challenges that are shaping both the macroeconomic environment and Bank's competitive landscape. Successfully executing on the key priorities and levers of Millennium bcp’s previous Strategic Plan cycle (2018-2021) was crucial for setting the Bank on a solid normalization path by significantly reducing its legacy exposures. It also laid important foundations for the future by substantially accelerating Bank’s level of digitization. This trajectory was particularly influenced by developments in Portugal (a 40% reduction of NPEs compared to 2018 and mobile Customers up by 48% in 2020) where the Bank managed to recover its volume growth trend (~5% p.a. growth in lending and customers' deposits over 2018-20) and increase its share of revenues (+0.6pp in 2018-20), despite the environment of margin compression and continued low interest rates. In Poland, despite a positive operational performance and the ability shown in the swift integration of EuroBank, the bottom-line result has been hindered by negative developments in FX mortgages (despite the Bank having stopped writing new FX mortgages in 2008). Entering in this cycle, the Bank faced an economic turmoil, whose recovery prospects were expected to bring promising growth opportunities. Greater customer expectations, more digital and e- commerce activity, the increasing threat of tech platforms and digital attackers and the overriding requirement of sustainability were factors that together presented significant challenges but also major opportunities. The Bank’s profitability performance was also constrained by legislative developments in Portugal, namely in relation to contributions to the National Resolution Fund and limitations regarding fair commissions and fees. The Strategic Plan update was designed to preserve relevant priorities from the previous strategic cycle, consolidating the progress made and adding elements consistent with the new framework. This Strategic Plan reflected Millennium bcp's aspiration to achieve robust profitability and balance sheet position levels and to manage the impact from the crisis caused by the pandemic, while accelerating its competitive differentiation in efficiency and Customer engagement levels, supported by targeted human touch and new mobile/digital solutions and business models, enabled by a highly skilled and effective talent base, while at the same time addressing societal sustainability challenges with a focus on climate change risks and the opportunities that may unfold from their mitigating. Therefore, the main strategic priorities for Millennium bcp in Portugal have been set out for this cycle, preserving a balance between continuity and the implementation of bolder initiatives to reinforce its competitive edge and innovation in Millennium bcp's positioning: • Serving the financial and protection needs of Customers with personalized solutions which combine targeted human touch with a leading mobile platform: aiming to expand relevance and develop high engagement relationships that empower our customers in their financial lives. This priority is about serving customers in meeting all of those profitable retail needs in which Millennium holds a leadership position: investment management, bancassurance and personal lending solutions. • Being a trusted partner for corporate recovery and transformation: supporting customers’ pursuit of opportunities driven by EU funds for economic recovery (PRR, PT 2030), while enabling solutions fit for a more digitized, competitive and export- oriented corporate landscape. • Capital and risk resilience: reinforcing balance sheet and ensuring readiness for the post- pandemic world, strengthening both our risk and capital management practices. • Best in class efficiency: realizing cost savings enabled by productivity gains already achieved in the previous Cycle by several transformational changes including the full exploitation of mobile and automated capabilities, increased efficiency in the branch network and tech and data-driven process reengineering and automation. • Data and technology edge: focusing efforts on the implementation of our next-generation data platform while scaling advanced analytics models to gain differentiating mass personalization capabilities, intelligent automation and informed and agile business and regulatory management. In parallel, the Bank will expand the deployment of 2023 REPORT & ACCOUNTS 110 | its new technology foundations by advancing its cloud platform, using modular IT building blocks augmented by the digital experience platform and new cybersecurity solutions, designed to deliver agility and speed to market, scale, resilience and cost efficiency. • Capability building and talent renewal: reinforcing Millennium bcp’s ability to attract, develop and retain the best talent to embrace modern challenges in critical domains and adapt working practices to reflect the new paradigm while promoting an equal-opportunity environment. • Sustainability-driven: adapting our business model to increase differentiation towards the communities and Customers’ rising expectations of sustainability while capturing associated business opportunities as well as addressing regulatory demands. • Lastly, Millennium bcp’s innovation initiatives enable the Bank to explore broader opportunities, going beyond traditional banking, not only in order to go on delivering a superior customer experience but also to support our income growth and cost-containment goals. The execution of these priorities in Portugal was combined with consistent initiatives to explore prudently the full growth potential of the international operations, continuously looking for ways to optimize their footprint. This plan will enable Millennium bcp to deliver against a set of bold targets for 2024. The Group aspires to improve C/I (to ~40% in 2024) and profitability (aiming at a ROE of ~10%). In parallel, Millennium bcp will focus on risk management, aiming to significantly lower the cost of risk (to ~50 bps) and the NPE ratio (to ~4%), while keeping a prudent CET 1 ratio (>12.5%). Additionally, the Bank continued to invest in increasing its mobile penetration (from 48% to more than 65%) and maintaining its leading digital customer satisfaction (#1 in digital NPS). 2023 REPORT & ACCOUNTS |111 Targets for 2024 In this Strategic Plan cycle Millennium bcp’s aims to speed up transition to a position of strength and ready for the future position in Portugal, notwithstanding the risks that shape the macroeconomic environment and the competitive landscape. Our aspiration can be synthesised as: i) Achieve robust levels of profitability, asset quality and capital, managing the impact of the crisis caused by the pandemic and the effects of the war in Ukraine and Middle East with consequent prices inflation; ii) Accelerate Millennium bcp's competitive differentiation in efficiency and Customer engagement, supported by targeted human touch, mobile/ digital solutions and in new business models supported in a talent base of excellence; iii) Address social, environmental and corporate governance challenges with a focus on the risks arising from climate change and the opportunities associated with the adoption of mitigation and adaptation solutions to this new reality. In the international business, Millennium bcp continued the journey started in 2018, making adjustments in the light of recent developments. In Poland, where it is implementing a resilience plan, the focus is on responding to the risks of exposure to mortgage loans in Swiss francs, actually reducing the need for provisions for this risk, ensuring the continued development of the commercial franchise and Customer satisfaction. In Mozambique, it will continue to adapt the business model to improve the service and address to the evolving needs of Customers, maintaining a strong commitment to profitability, efficiency and risk control. The successful execution of Millennium bcp''s strategic priorities will reinforce its franchise position and business model sustainability. By 2024, the Group’s bold ambition is to improve C/ I to ~40% and to grow ROE profitably to ~10%. In parallel, Millennium will focus on risk management, with the goal of reducing the cost of risk (to ~50 b.p.), its NPE ratio (to ~4%) and a prudent objective for the CET 1 ratio (>12.5%). Finally, there will be a continued investment around rising levels of mobile penetration (from 48 to >65%) and a focus on delivering leading digital Customer satisfaction. 2023 REPORT & ACCOUNTS 112 | Ambitious goals aligned with strategic priorities — Group level 2023 2024 C/I ratio 32%1 ~40% Cost of risk 42 b.p.2 ~50 b.p. ROE 16.0% ~10% CET1 ratio 15.4% >12.5% NPE ratio 3.4% ~4% Share of mobile customers 68% >65% Growth of high engagement customers (vs. 2020) +13.5% +12% Average ESG rating 67% >80% 1Adjusted cost to income: without the positive one-off effect related with the sale of 80% of Millennium Financial Services stake (international operations) and without the charge regarding mainly the compensation for the temporary reduction of remuneration in the period 2014/2017 in Portugal. 2Includes an impairment reversal in international operations, without this effect, the cost of risk would be 48 bps. 3Active Customers with card transactions in the previous 90 days or funds > €100 (>MZM 1,000 in Mozambique) 4Average of Top 3 indices (DJSI, CDP and MSCI) | NPE include loans to Customers only. 2023 REPORT & ACCOUNTS |113 Risk and Outlook 2023 REPORT & ACCOUNTS 114 | Internal Control System The internal control system governance model encompasses the organizational structure, the lines of reporting and levels of authority, the set of lines of responsibilities and processes, that result from the applicable laws and regulations, as well as the Bank’s by-laws and internal regulations, to ensure a prudent and effective management of the Bank and adequate checks and balances. The governance model promotes a conduct and risk culture across all the areas of the Bank, which is materialized in an overarching set of principles, strategies, policies, systems and functions. The Board of Directors promotes a strong governance and internal control culture, embedded in all levels of the organization, and based on high standards of ethical behaviour, with rules established in the Code of Conduct, available in the Bank’s site. The Board of Directors provides the Bank’s governance, guidance and oversight and sets the broad strategies and major policies of the organization, approves the overall organizational structure, and has the ultimate responsibility for ensuring that adequate governance and internal controls system are established and maintained, being supported in this function by the Audit Committee. The Audit Committee plays a central role in the development of a governance culture and an internal control system with a direct relation with the Board of Directors, the Bank’s internal control units and the external auditors. The current management of the Bank is delegated in the Executive Committee. This Committee established different specialized commissions, with the participation of two or more Executive Directors, and first line Managers who directly report to them. The organizational structure of the Group is based on the principle of the segregation of functions between the business units and internal control functions, aiming that any situations of potential conflict of interests are identified in advance, minimized and subject to careful and independent monitoring. The internal control system includes a set of principles, strategies, policies, systems, processes, rules, and procedures established in the Group aimed at ensuring: • Efficient and profitable performance of the activity, in the medium and long-term, ensuring the effective use of the assets and resources, the business continuity and survival of the Group, namely through an adequate management and control of the activity risks, through a prudent and correct assessment of assets and liabilities, as well as through the implementation of mechanisms for prevention and protection against errors and fraud. • The existence of financial and managerial information, which is complete, pertinent, reliable, and timely, to support decision-making and control processes, both at an internal and external level. • Observance of the applicable legal and regulatory provisions issued by the Supervision Authorities, including those relative to the prevention of money laundering and financing of terrorism, as well as professional and ethical codes of conduct, standards and practices, internal and statutory rules, guidelines of the Basel Banking Supervisory Committee and European Banking Authority (EBA), so as to preserve the image and reputation of the institution before its Customers, Shareholders, Employees and Supervisors. • An effective Risk Management Function (RMF) with well-defined processes to identify, manage, monitor, and report the risks that the Group is exposed. • A Compliance Function ensuring the alignment with legal, regulatory, and statutory requirements, and with internal rules, including rules of conduct and relationship with Clients, Investors, Supervisors’ Entities, and others, which rules are established in a Code of Conduct. • An Internal Audit Function ensuring the effectiveness and consistency of the internal control processes and mechanisms. • The alignment of subsidiaries operating model with the organizational and managerial principles defined by the Bank, as the consolidating Entity. • The adoption of sound sustainability principles, namely regarding Environmental, Social and Governance (ESG) factors, and its coherence with the Group’s activity. • The good image and reputation of the Bank towards its stakeholders. 2023 REPORT & ACCOUNTS |115 To achieve these objectives, the internal control system is based on the compliance function, the risk management function and internal audit function. The Heads of these three divisions are appointed by the Bank's Board of Directors, by proposal of the Committee for Nominations and Remunerations, after an opinion from the Audit Committee and of the Committee for Risk Assessment. The internal control system is based on: • A control environment supported by high integrity and honesty standards, promoting a strict compliance with the laws and regulations, by the effective enforcement of a ‘check and balance’ system, including adequate segregation of duties, with the objective of preventing conflicts of interest, and by process based operational management models and control activities, that allow for clear identification of the implemented controls and the assessment of their efficiency. • A solid risk management system, aimed at the identification, evaluation, follow-up, and control of all risks which might influence the Group's activities. • An efficient information and communication system, designed to guarantee the collection, processing and transmission of relevant, encompassing, and consistent data, within a timeframe and manner that allows for an effective and timely management and control of the institution's activity and risks. • An effective monitoring and correction process, implemented with a view to ensuring the adequacy and effectiveness of the actual internal control system over time, to immediately identify any flaws (defined as the group of existing, potential, or real defects, or opportunities for the introduction of improvements that will strengthen the internal control system), and ensuring the triggering of corrective action. • Strict compliance with all the legal and regulatory provisions by the Group's Employees in general, and by the people who hold senior or managerial positions, including members of the management bodies. • A governance model that defines that the business areas are responsible for risk taking, ensuring the effective monitoring, control and management of the risks assumed, and supporting the independent review of the risk levels incurred as compliant with the Risk Appetite Framework. The internal control system is consistently applied across all Group entities, supported on group codes issued by BCP defining global policies, principles, and rules, considering, and complying with local, legal or regulatory requirements of the countries where operations are based. Three lines of defence model The Bank’s internal control system is based on the “Three Lines of Defence Model”, aiming to ensure: • A clear accountability of the business areas for the respective assumption of risks. • The effective monitoring, control and management of the risks assumed. • An independent evaluation, to be reported to the Board of Directors and to the Executive Committee, of the levels of risk assumed, their compliance with the Risk Appetite Framework and the effectiveness of the established internal control systems. The business lines, as the first line of defence, take risks and are responsible for their operational management directly and on a permanent basis. For that purpose, business lines have appropriate processes and controls in place that aim to ensure that risks are identified, analysed, measured, monitored, managed, reported and kept within the limits of the institution’s risk appetite and that the business activities comply with the external and internal requirements. The risk management function and the compliance function form the second line of defence. The risk management function facilitates the implementation of a sound risk management framework throughout the institution and has responsibility for further identifying, monitoring, analyzing, measuring, managing, and reporting on risks and forming a holistic view on all risks on an individual and consolidated basis. It challenges and assists in the implementation of risk management measures by the business lines to ensure that the process and controls in place at the first line of defence are properly designed and are effective. The compliance function monitors the Bank’s compliance with legal, regulatory, and internal policies requirements, including the reputational protection of the Bank, comprising, among others, the prevention of financial crime activities. It provides advice on compliance matters to the management body and establishes policies and processes to manage compliance risks and to ensure an overall compliance culture within the Bank. 2023 REPORT & ACCOUNTS 116 | Both the risk management function and the compliance function intervene to ensure the improvement and strengthening of internal control and risk management systems interacting with the first line of defence whenever necessary. The internal audit function, as the third line of defence, conducts risk-based audits and reviews the internal governance arrangements, processes, and mechanisms to ascertain that they are sound and effective, implemented and consistently applied, to assess the suitability and efficiency of the organizational culture, of the risk management process, of the internal control system and of the governance models in place. The internal audit function performs its tasks fully independently of the other lines of defence. Internal Control subsystems The internal control system includes the following subsystems: the risk management system, the information and reporting system and the internal control monitoring system. Risk management system The risk management system corresponds to the set of integrated and permanent processes which enable the identification, assessment, monitoring and control of all risks, to which the Group's institutions are exposed, in order to keep them at levels that are predefined by the management and Supervisory Bodies, and takes into consideration the BCP risk taxonomy which includes the risks identified by the Regulatory and Supervisory Authorities, as well as all other risks which, in view of the specific situation of the Group's institutions, could become materially relevant. The Risk Office is responsible for keeping the BCP risks taxonomy updated as well as for promoting and conducting the regular risk identification process in the Group. The risk management system takes into consideration the credit risk, market risk, interest rate risk, foreign exchange rate risk, liquidity risk, compliance risk, operational risk, information technology risk, strategy risk and reputation risk, as well as all other risks that, in view of the institution’s specific situation, may prove material for its feasibility and sustainability. Environmental and social aspects are included in the assessment of these risks, once they are considered risk drivers that are transversal to all risk types. The risk management system ensures the segregation between the risk management function and the risk- generating business activities, respectively the second and first lines of defence. The internal audit, as third line of defence, ensures independent analysis concerning the risk activity of the first and second lines. The credit analysis and granting process ensure the segregation and independence between the credit analysis and rating structures and the business origination units. The risk management system ensures timely reaction to changing circumstances and conditions that engenders new risks and change the risk profile of the Bank. Management information and reporting system The management information and reporting system ensures the existence of information, which is substantive, up-to-date, understandable, consistent, timely and reliable, to enable an overall and encompassing view of the financial situation, the development of the business, the achievement of the defined strategy and objectives, the risk profile of the Group and the behaviour and prospective evolution of relevant markets and risks. The output of the system is an information flow enabling the management with a global and comprehensive view on the Group’s financial standing, non-financial information and risk data on the compliance with the obligations assumed before third parties, legal and regulatory, and the regular monitoring of the activity, the implementation of the defined strategy and objectives so as to support decision-making processes, and also on the Group’s overall risk profile, in aggregate terms and detailed by risk; and the performance, evolution and risk profile of the market(s) in which the Group operates. For this purpose, each entity of the Group develops, implements, and maintains formal processes for obtaining and processing information that is appropriate to the respective size, nature and complexity of the activity carried out, developing communication processes and reporting lines that ensure an adequate and swift transmission of relevant information to the due intervenient, both internal and external. An adequate organizational structure promotes the necessary data flow between the relevant parties in a process and ensures the necessary confidentiality in information flows. The financial information process is supported by the accounting and management support systems which record, classify, associate and archive, in a timely, systematic, reliable, complete, and consistent manner, 2023 REPORT & ACCOUNTS |117 all the operations carried out by the Bank and its subsidiaries, in accordance with the rulings and policies issued by the Board of Directors and the Executive Committee. Clear duties and responsibilities are set for each organizational unit in the information and communication processes and in the decision-making process. Planning process The Group planning process defines a long run sustainable strategy, compatible with the corporate vision and previously established goals, with its market positioning, approved risk profile and with the implemented internal control system. The planning process is based on properly grounded assumptions, subject to sensitivity analysis and on reliable and understandable information. As a result, clear, precise, and sustainable objectives are defined for the global activity and for each business area, including the products, activities, systems and processes of the Group and the human and material resources, namely the adequate levels of capital and liquidity, necessary to fulfill the defined strategy are identified. The planning process complies with the Risk Policy of the Group, as per the Risk Appetite Framework, ensuring that the profitability levels are aligned with the risks involved. The Group’s planning process includes the preparation of the annual and three-year budget, the verification of the sufficiency of capital and liquidity (ICAAP e ILAAP), the execution of stress tests within the internal or supervision scope, the preparation of the Funding and Capital Plan and of the Recovery Plan, the activities deriving from the resolution planning and remaining initiatives that, at each moment, are required to be implemented to comply with the requirements issued by the Supervision Authorities. The Chief Financial Officer and Chief Risk Officer of the BCP, are responsible for the different elements of the Group’s planning process, together with the Chief Financial Officers of the main subsidiaries. The Group’s strategy is communicated, by the adequate means and detail, to all the Employees of the Bank. Monitoring process The monitoring and correcting system includes all the control and assessment actions to ensure the permanent effectiveness and adequacy of the internal control system, namely, through the identification of deficiencies in the system - in terms of its design, implementation and/or use. This process is continuously executed and complemented by independent, periodical and or extraordinary evaluations made by the Internal Audit. The frequency of the control and assessment actions depend on the nature and magnitude of the risks inherent to the activity carried out and the effectiveness of the associated specific controls. All internal control of deficiencies and events of non-compliance are duly recorded in a deficiencies data base at Group level, documented, and reported to the appropriate management levels to enable the adoption of correction measures in line with the respective remediation plan. Processes for the follow-up and validation of the measures implemented are established with clear deadlines according to the inherent risk level. Internal control system governance The internal control system is supported by a governance model that defines the responsibilities for the assumption of risks by the Business Areas, and ensures an effective follow-up, control and management of the risks assumed, and an independent evaluation of the risk levels assumed as per the Risk Appetite Framework. The key pillars of the governance model implemented in the Bank are: • Clear, transparent, and understandable rules are set and communicated to all employees to enable supporting the development of the activity while ensuring an adequate broad and effective internal control system. • Coherent, clear, and objective definition of the competences and responsibilities of each structure unit and/or function, reporting lines and authority levels, information flows, are communicate across the organization, including an appropriate segregation of potentially conflicting functions or duties, also ensure that any potential conflict of interests is identified in advance, minimized and subject to an independent and careful monitoring. 2023 REPORT & ACCOUNTS 118 | • Sufficient and appropriate material and human resources are provided at all levels of the organization for the execution of the responsibilities, activities, and tasks inherent to the internal control system. • Physical and functional segregation of the business activities and the respective operational and control services, avoiding possible conflict of interests through ensure robust control activities, including regular reviews, physical controls, authorization, verification, and reconciliation. The Risk Office's activity is essentially focused on ensuring the effective application of the Group's risk management system, namely, by developing, proposing, implementing, and controlling the use of a set of assessment methodologies and metrics, that allow for a correct assessment of the risks incurred and arising from the Group's activities, which are documented by internal rules and regulations. It is also responsible for promoting and coordinating the policies and rules applicable to risk management and control at all entities of the Group, with the responsibility of ensuring the global monitoring of risk and the alignment of concepts, practices, and objectives on a consolidated basis. Under this framework, the Risk Office has access to all the sources of information of the Group entities that are necessary for the exercise of the identification, measurement, limitation, monitoring, mitigation and reporting of the various types of risk at consolidated level. The activity of the Compliance Office is transversal to all Institutions of the Group, in terms of applicable compliance policies, with observance of the legal specificities of each jurisdiction. The Compliance Office has access to the preventive information systems on money laundering and terrorism financing adopted by the different entities of the Group, being equally informed and giving an opinion on all changes to the IT alert systems and the processes for identifying Customers and communication of irregular cases verified in the Group's entities, within the scope of the control of money laundering and terrorism financing, in order to promote an alignment of systems, methodologies and criteria with those used by BCP. The Accounting Division and the Studies, Planning and ALM Division receive and centralize the financial information of all subsidiaries. The corporate areas of the Bank, namely the Research, Planning and ALM Division, Accounting and Consolidation Division, the Treasury, Markets and International Division, the Compliance Office, the Risk Office, and the Audit Division ensure the existence of the procedures necessary to obtain all relevant information for the consolidation, accounting and financial information and remaining elements supporting the management, as well as the supervision and control of the risks at Group’s level. These procedures include: • The definition of the contents, the terms, and the format of the information to be reported by the companies included in the consolidation perimeter of the parent-company, in accordance with the accounting policies and guidelines defined by the management body, as well as the dates when the reporting is required. • The identification and control of the intra-Group operations. • Assurance that the relevant accounting and financial information is consistent between the different subsidiaries, so that it is possible to measure and monitor the evolution and profitability shown by each business, verify the compliance with the objectives that have been established, as well as evaluate and control the risks incurred by each entity, both in absolute and relative terms. • Timely communication of extraordinary events which are relevant in terms of risk for the subsidiary or for the Group. • A financial information and reporting system that is supported by adequate contingency arrangements. • Validating and monitoring the implementation of the corrective measures to resolve internal control deficiencies that have a material potential impact. The Audit Department is responsible for an on-site control function of the internal system, exercising this function transversally on a permanent and independent basis, assessing, always and pursuant to the established plan, the adequacy and effectiveness of the different components of the internal control system, issuing recommendations based on the outcome of those assessments. The Audit Division is informed of the conclusions of the inspection and internal audit actions carried out in each entity of the Group, especially from those that assess the effectiveness and integrity of the entity's internal control system. Common principles across the Group To foster Group coherence, and keeping up with local laws and regulations, internal control system’s organizational models similar to that of the Bank are established in the Group’s subsidiaries abroad and in the entities in Portugal in which the Group participates and which are part of the Group, by anticipating the existence of an Audit Committee and a Risk Assessment Committee, or equivalent bodies. The local Supervisory Bodies have, in what the internal control system of each entity is concerned, the mission to 2023 REPORT & ACCOUNTS |119 verify its quality, integrity and effectiveness, as well as to evaluate its coherence and adherence with the internal control system of BCP and the Group. The Bank’s governance model and internal control system is extended to all subsidiaries, in a way which is compatible with their nature, complexity and business model, ensuring the maximum possible level of coherence and alignment: • The CRO of BCP is responsible for coordinating the risk management system at Group’s level through the Risk Officers and the Compliance Officers of each subsidiary. • The CFO of BCP is responsible for coordinating the financial and accounting information system as well as for the planning process at Group’s level. • There is always at least an Executive Board member of BCP representing the parent company in each subsidiary’s Board of Directors, being responsible for monitoring the overall performance of the entity. • Notwithstanding, to ensure the maximum consistency of the criteria, methods, processes, and models used in all subsidiaries, the CRO of BCP is appointed as a non-executive director of the subsidiary’s management body, with supervision functions, being also designated for the subsidiaries’ Audit Committee and Risk Assessment Committee when these governance bodies exist. The Bank, as the Group's parent company, ensure that all subsidiaries implement internal control systems that are coherent with each other, proportionate to the risks undertaken and with the local regulations and legislation in force. Whistleblowing The Group has in place and maintains a Whistleblowing Policy and procedures, which are available for staff or any person regardless of their relationship with any entity of the Group to report potential or actual breaches of regulatory or internal requirements, through specific, independent, and autonomous channels. The Whistleblowing Policy covers eventual or potential irregularities, the acts and omissions, both with malicious intent or negligence, related with management, accounting organization, internal supervision or serious evidence of breaches of duties that, in a serious manner, are susceptible namely of infringe the law, articles of association, the regulations and other rules in effect, endanger, directly or indirectly, the assets of the Customers, of the Bank and of the Shareholders or cause reputational damage to Bank. The Whistleblowing procedures ensure, among others the protection of the identity and personal data of both the person who reports the breach and the natural person who is allegedly responsible for the breach, through which the Entity shall adopt the highest form of anonymity legally available and that the person reporting the breach is appropriately protected from any negative impact (e.g. retaliation, discrimination or other types of unfair treatment). Any information about irregularities provided through the whistleblowing procedures is analyzed by the Audit Committee, supported by the Compliance Office and the Audit Division, ensuring that the potential or actual breaches raised are assessed and escalated, including as appropriate to the relevant competent authorities. 2023 REPORT & ACCOUNTS 120 | Main Risks and Uncertainties Risk Sources of Risk Level of Risk Trend Interactions/Mitigations Regulatory and legal * • Demanding or under review legislative and regulatory framework, including in emerging areas such as ESG and digital operational resilience, the implementation of the Basel III reform, bank recovery and resolution, and macroprudential policy with a potential impact on operational processes and compliance with regulatory requirements • Increasing regulatory requirements of an AML nature, the initial phase of a new supervisory framework and increased complexity of measures resulting from international sanctions • Possible impacts of Central Bank Digital Currency (CBDC) on the commercial banking model, if not correctly implemented • Impact of government measures to support households, notably in Poland Medium ▪ Culture of compliance and anticipation of regulatory and legal requirements ▪ Rigorous and efficient management of capital and liquidity and its implications on the business model ▪ Capital buffer growth vs regulatory minimum supported by strong organic capital generation. Robust liquidity buffers ▪ Assessment of the materiality of environmental factors in the Bank's risks and definition of mitigation measures ▪ Promotion of commercial strategies and solutions that promote the transition to low-carbon production models ▪ Development of more sophisticated AML models and adoption of practices in compliance with regulatory requirements, ensuring adequate prevention and compliance with restrictive measures Sovereign ▪ Volatile interest rates and confidence of the sovereign debt investors ▪ Uncertainty about the timing of the ECB's monetary policy normalisation: interest rates and quantitative easing ▪ Impacts on the budgets of European states resulting from support for Ukraine in the geopolitical conflict ▪ Size of exposure to Portuguese sovereign debt and those of other Eurozone, Polish and Mozambican countries ▪ Volatility of credit spreads ▪ Increased political instability High ▪ Implementation of contingency measures at European and national level ▪ Diversification of the sovereign debt portfolio ▪ Adoption of hedging measures of portfolio interest rate risk ▪ Relatively small size of the portfolio classified to fair value through other comprehensive income (FVOCI) ▪ Improvement of Portugal's rating and reduction of the share of public debt in GDP Operational ▪ Context with a greater propensity for cybersecurity threats (penetration, digital channels and geopolitical context) and new fraud formats ▪ Growing number of digital Customers and increase in internet and mobile transactions, requiring the maintenance of a high level of availability, security, timeliness and efficiency of the ICT systems (Information and Communication Technologies) ▪ Implications of the acceleration of automation, integration and digitalization of processes on the operational resilience of the banking sector ▪ Increase in reporting information needs, implying a greater rigour in data quality management and control Medium ▪ Increased capabilities to protect and mitigate cybersecurity risks ▪ Permanent monitoring of the alignment of the technological development plan with the business strategy ▪ Strengthening of the culture and awareness for an adequate internal control environment, with a focus on the training of Employees and awareness / information to Customers ▪ Implementation of a comprehensive technology renewal program ▪ Development of continuous improvement processes of Data Quality according to the principles of the BCBS239 ▪ Strengthening the structure and mechanisms for the protection of personal data Excluding litigation associated with the CHF loan portfolio in Poland 2023 REPORT & ACCOUNTS |121 Risk Sources of Risk Level of Risk Trend Interactions/Mitigations Credit ▪ Persistence of geopolitical conflict in Eastern Europe ▪ Conflict in the Middle East has aggravated geopolitical risks and could constrain global growth ▪ Prospect of a political context of greater instability in Portugal ▪ Uncertainty regarding the maintenance of high interest rates in the medium and long term ▪ Potential deterioration in the economic and financial situation of less robust firms, due in particular to the impacts of higher financing costs ▪ Slowdown in the growth of the world economy ▪ Delay in the implementation of the Recovery and Resilience Plan (RRP) ▪ Limitations on access to available and skilled labor ▪ Competitive pressure due to excess liquidity in the market ▪ Impact of ESG risk drivers on credit and collateral portfolio valuation High ▪ Positive and recurrent track record in the execution of the NPA reduction plan ▪ Reduction in the NPE Ratio, standing at 2.9% in Portugal ▪ Reinforcement of the level of coverage of the NPE portfolio due to impairments ▪ Additional support to the economy through the Recovery and Resilience Plan (RRP) ▪ Protected credit risk in a significant part of corporate credit exposures (including with state or multilateral entity guarantees) ▪ Rigorous approach to loan origination and monitoring ▪ Incorporation of ESG risk drivers into credit and collateral assessment policies ▪ Relatively low volume of exposures to sectors exposed to high climate transition risks ▪ Maintenance of impairment overlays to address the uncertainties of macroeconomic scenarios ▪ Proactivity in the monitoring and implementation of credit restructuring solutions, particularly in private individuals ▪ Increase in the weight of the fixed-rate loan portfolio ▪ Increase in the weight of the securitized loan portfolio Market ▪ Volatility in the capital markets ▪ Uncertainty about monetary policy, namely in the Eurozone ▪ Uncertainty about economic growth, the implications of continued geopolitical tensions. Low ▪ Limited exposure to trading portfolios ▪ Balance sheet hedging of interest rate risk ▪ Hedging of foreign exchange risk arising from financial participations ▪ Preference for placing lower risk products on Customers Liquidity and Funding ▪ Pressure on the average cost of customer funds after a cycle of rising interest rates and increased competition from banks and non-banks ▪ Restrictive monetary policy, with systemic impacts, particularly in Mozambique with high minimum reserve requirement ratios ▪ Change in the structure of customer deposits, with a greater weight of savings products Low ▪ Resources from balance sheet clients, mainly retail, which are decisive in the funding structure and its stability, with wholesale funding needs arising mainly from compliance with MREL requirements ▪ Increase in the cost of resources with no material impact on liquidity ▪ Large size of the portfolio of discountable assets with the ECB and the Polish and Mozambican central banks ▪ Improvement of the Bank's external rating, with an impact on the cost of wholesale funding. ▪ Rigorous management of the transformation ratio in Mozambique 2023 REPORT & ACCOUNTS 122 | Risk Sources of Risk Level of Risk Trend Interactions/Mitigations Litigation associated with the CHF loan portfolio in Poland ▪ Increasing in the number of court cases against the banking system in Poland ▪ Increasing participation of lawsuits with judicial decisions not favourable to the Banks ▪ Risks related to verdicts issued by Polish courts in lawsuits against Bank Millennium ▪ Complexity and uncertainty regarding the outcome of judicial proceedings High ▪ Decrease in Banco Millennium's CHF mortgage loan portfolio ▪ Increase in the level of coverage of the mortgage loan portfolio in CHF by provisions ▪ Agreements with debtors with mortgage claims in CHF Pension Fund ▪ Effect of rising inflation on the dynamics of wages, pensions and, consequently, on the volume of liabilities ▪ Portfolio valuation Medium ▪ Integrated management of assets and liabilities in order to obtain an adequate balance between risk and return ▪ Comfortable coverage ratio of the fund’s liabilities by the assets ▪ Review of the management policy of the Defined Benefit Fund. Real estate and other investments ▪ Uncertainty regarding the development of real estate activity ▪ Uncertainty related with market and regulatory trends in terms of environmental awareness ▪ Risks related to the Bank's collaterals and properties ▪ Impact of legislative measures for housing support ▪ Uncertainty about price developments in the real estate market Medium ▪ Positive track record in asset portfolio reduction ▪ Moderate expectation of entry of new assets as a result of execution processes ▪ Impact of Insurance Policies on Risk Mitigation with Real Estate Assets ▪ Reduction of exposure to Restructuring Funds ▪ Non-material value of real estate and other assets portfolio. Recurring profitability/ Business Model ▪ Regulatory limitations on fees and commissions ▪ Impact of economic deterioration on asset values ▪ Pressures on operating costs ▪ New global players and competition from Big Techs ▪ Cycle Reversal Net Interest Margin Rate Low ▪ Need for strict management of net interest margin ▪ Strict cost structure control ▪ Comfortable capital position of the Bank ▪ Exceeding the objectives of the Bank's strategic plan for 2024 in 2023 ▪ Update of the Bank's strategic plan scheduled for 2024 ▪ Judicious interest rate risk management 2023 REPORT & ACCOUNTS |123 Risk management 2023 REPORT & ACCOUNTS 124 | Framework Risk appetite The BCP Group carries out its business activities in a prudent and sustainable manner, always based on the adequacy and compatibility between the business objectives and the levels of risk tolerance defined in terms of sustainability and profitability, in the long-term. The Group establishes and implements controls and limits on the material risks to which its activities may be subject, based on its “Risk Appetite Statement” (RAS) which concurs for a standing of prudence and sustainability of the business, in view of its profitability, as well as of the satisfaction of the different stakeholders: Shareholders, Customers and Employees. The Group RAS is composed by a broad set of indicators of primary importance and representative of the risks assessed as "material", in the formal risks’ identification and quantification process, that is regularly updated. The RAS metrics are grouped in five blocs covering solvency, funding, profitability, reputation and franchise and sustainability risks. For each indicator, 2 levels of limitation are established: an 'alert level', up to which the level of risk is still acceptable, but from which corrective measures must be taken to make the level of risk regress to a level of comfort, and a 'level of excess', which requires immediate measures to reduce the level of risk. Stemming from the RAS indicators, other lower-level indicators (and respective limits) are established, with a higher level of granularity, ensuring a more detailed monitoring in the day-to-day approach to the risks’ control of business processes. All risk limits are approved by the competent Governance bodies defined in the internal regulations and are periodically reviewed and updated. For the main Entities of the Group, specific risk appetite indicators (“individual” RAS) are also established. The Group RAS involves indicators for Portugal, Poland and Mozambique, some of which are part of the Corporate RAS, which is a set of obligatory metrics for all Entities (but with appropriate limits for each of the operations and structure in question), disaggregating the Group’s risk appetite into the risk appetite of each Entity. Besides the Corporate RAS metrics, the RAS of each Entity can include other metrics aiming to measure, for instance, idiosyncratic risks in each geography. Risk strategy The delimitation of risk appetite, translated into the RAS, is one of the guiding vectors of the Group's "Risk Strategy", which is approved by BCP's Board of Directors, by proposal of the Executive Committee, after hearing the Risk Assessment Committee. In fact, from the RAS, the main lines of action to be developed are established in order to address the mitigation and/or control of all identified risks, which together constitute the Group's Risk Strategy. The RAS and the Risk Strategy are inseparable elements to the control and mitigation of the risks classified within the scope of the process of identifying them. In this context, it should be noted that the Group, in the revision of the RAS for 2024 has adopted a conservative approach in setting the risk tolerance by approving tighter thresholds than those in force in 2023, for circa 25% of the RAS indicators, reflecting a continuity orientation to promote the process of improving the Group's overall risk profile. Integration between the business and risk management The risk appetite framework – which includes the identification of material risks, the RAS and the Risk Strategy – is reviewed quarterly. The RAS and the risk strategy provide the reference framework for the establishment of business objectives, which will have to respect the risk appetite and strategy approved by the Board of Directors. The planning and risk appetite processes are the foundations for all the activities and business lines developed, also guiding the overall controls on the robustness of the Group, such as the stress tests and the internal processes for assessing the adequacy of Capital (ICAAP) and Liquidity (ILAAP), as well as the Recovery Plan and the activities within the scope of resolution planning. 2023 REPORT & ACCOUNTS |125 The following figure summarizes the relationships described above, providing a graphic representation of the integration of risk management within the scope of the business developed by the BCP Group. 1 Internal Capital Adequacy Assessment Process 2 Internal Liquidity Adequacy Assessment Process 3 Recovery and Resolution Planning 2023 REPORT & ACCOUNTS 126 | Risk management Governance The composition, capacities and responsibilities of the management and control bodies that intervene in the risk management governance are the following: Board of Directors The ultimate body of the BCP Group's risk management structure is the Board of Directors, which, within the scope of the functions assigned to it by the Bank's Articles of Association, has the leading role in the risk management and control structure. The Board of Directors is responsible for defining the Group's global strategic guidelines and objectives, the profile and risk appetite, promoting the risk culture and risk strategy, reserving for itself the approval of group codes that establish policies, principles, rules and risk limits. The Board of Directors monitors the evolution of metrics and risk indicators translated into the RAS (including the approval of remediation measures in case of breaches to the limits) approves the conclusions of the ICAAP and ILAAP processes, the performance of the Internal Control System, the Recovery Plan and the Funding and Capital Plan. Risk Assessment Committee The Risk Assessment Committee, appointed by the BoD, is composed by three to five non-executive Directors and has, among others, the following capacities: • Evaluate the integrity and adequacy of the Risk Management function, in line with the business strategy, corporate culture and values. • Advising the BoD on risk appetite and risk strategy, accompanying and intervening in the definition and review of the Group's Risk Appetite Framework and providing an opinion on its adequacy to the BoD. • Monitoring the evolution of the RAS metrics, verifying their alignment with the defined thresholds and levels and monitoring the action plans designed to ensure compliance with the established risk limits. • Advising the BoD on the policies regarding the risks’ identification, management and control within the Group, monitoring the global risk levels in order to ensure that those are compatible with the goals, the available financial resources and the approved strategies for the development of the Group’s activities. • Oversee the implementation of the strategies for capital and liquidity management as well as for all other relevant risks to the Group, such as market, credit, operational (including legal, IT and compliance), and reputational risks, in order to assess their adequacy against the approved risk appetite and strategy. • Monitoring the capital and liquidity planning processes (ICAAP and ILAAP), providing an opinion to the BoD concerning the respective conclusions, as well as analyzing and approving the conclusions of the regular follow-up on these processes. • Monitoring and intervening in the Recovery Plan review, the Liquidity Contigency Plan and the Business Continuity Pans, providing an opinion to the BoD on the respective adequacy. Within the resolution planning, the Committee for Risk Assessment approves its annual work plan and monitors its execution. The Risk Officer, maintains a functional reporting duty to this Committee and participates in its meetings, presenting the evolution of the key risk metrics and indicators, as well as all incidences, changes and evolutions relative to the Risk Management System (RMS). Audit Committee The BoD’s Audit Committee is elected by the Shareholders’ General Meeting and is composed by three to five non-executive Directors, mainly independent. Within the competences of this Committee, this Committee has global corporate supervising capabilities - e.g. in what concerns financial information, namely risk levels follow-up - as well as those that are attributed within the Internal Control System, namely: • Overseeing the management activity of the Bank. 2023 REPORT & ACCOUNTS |127 • Monitoring the suitability and effectiveness of the Bank's organizational culture, governance models and internal control and risk management systems, including the prevention of money laundering and terrorist financing. • Monitoring the accounting policies and processes adopted by the Bank, the financial reporting process and submit recommendations aimed at ensuring its integrity. • Overseeing the performance of the Compliance and Internal Audit functions. • Supervising and controlling the effectiveness of the risk management system, in conjunction with the Risk Assessment Committee; as well as the internal control system in its different aspects and also the internal audit system itself. • Issuing an opinion in relation to operations of acquisition of goods and services and involving related parties, aiming to avoid conflicts of interests. • Analyzing the information is received through the whistleblowing mechanism as well as the clients claims. • Monitor the activity of the External Auditor and periodically assess its independence and objectivity in the exercise of its activity. The Audit Committee holds regular meetings with the Heads of the Audit Division, the Risk Office and the Compliance Office. The Compliance Officer participates in the meetings of this Committee, presenting the evolution of the monitoring of compliance risks, as well as all developments and interactions with regulation/supervision in terms of regulatory compliance. The Risk Officer participates in this Committee’s regular meetings, reporting on the evolution of the main indicators and metrics concerning risks and credit impairment, as well as on the implementation status of the recommendations that concern the risk management system, issued within the scope of internal control or by the supervisory/regulatory authorities. The Head of Audit Division reports regularly to the Audit Committee on interactions and the status of the recommendations of the prudential supervision entities, as well as on the audits carried out on the Bank's processes. Committee for Corporate Governance, Ethics and Sustainability This Committee, appointed by the Board of Directors, is composed of a minimum of three and a maximum of five non-executive directors. Amongst other that may be delegated by the Board of Directors, the competences of the Committee for Corporate Governance, Ethics and Sustainability include: • Recommend the adoption by the Board of Directors of policies, that observe the ethical and professional conduct principles and best corporate governance practices and social responsibility. • Support the Board of Directors and its Committees in the evaluation of the systems that identify and solve conflicts of interest. • Assess the compliance function, analyzing the procedures in place and the identified non- compliances. • Issue opinions addressed to the Board of Directors on the Code of Conduct and on other documents defining business ethical principles. • Every time it deems necessary, submit to the Board of Directors a report on the evaluation and monitoring of the structure, ethical and professional conduct principles and corporate governance practices of the Bank and on the company's compliance with the legal, regulatory and supervisory requirements on these issues. • Issue an opinion for the Board of Directors on the Annual Corporate Governance Report. • Issue an opinion on the Annual Sustainability Report, concerning issues for which it is responsible. • Time it deems necessary, submit to the Board of Directors a proposal on the guidelines for the Company's policies, based on a culture identified with the ethical and professional conduct principles targeted at contributing for the pursuit of social responsibility and sustainability goals. Proposing, particularly, guidelines for the social responsibility and sustainability policies of the Company, 2023 REPORT & ACCOUNTS 128 | including, among other, the values and principles for safeguarding the interests of the shareholders, investors and of those interested in the institution and also principles of social charity and environmental protection. • Issue an opinion on the Group Codes and respective annexes whenever this competence has been delegated to it by the BoD. Committee for Nominations and Remunerations This Committee, appointed by the Board of Directors, is composed of a minimum of three and a maximum of five non-executive Directors. The Board of Directors delegates in the Committee for Nominations and Remunerations the monitoring on issues related with human resources, assessment and composition of the Board of Directors and of its Committees, reviewing the Remuneration Policies of the Directors and Employees, including the Key Function Holders (KFH), and monitoring their respective implementation, in accordance with the powers conferred to it by the law and its own Regulations. Other functions of this Committee: • Monitor the existence of specific policies related with selection and recruitment, evaluation of performance, promotion and career management, training, and development of competences. • Elaborate and report to the BoD recommendations on the candidates to members of the Governance and Supervisory bodies of the Bank, ensuring the Fit & Proper assessment process. • Issue an opinion to the BoD on the Selection, Assessment and Succession policies for members of the Governance and Supervisory bodies and responsible for control functions. • Prepare and maintain a succession plan for members of the Board of Directors and KFH. Executive Committee The Executive Committee is responsible for the daily management of the Bank aiming to pursue the corporate objectives within the risk limits approved and defined by the Board of Directors. Particularly regarding the risk management function, the Executive Committee is responsible for: • Implement the Bank's general business strategy and main policies, considering the Bank's long-term financial interests and solvency. • Implement the global risk strategy approved by the BoD and ensure that management devotes sufficient time to risk issues. • Ensuring an adequate and effective internal governance model and an internal control framework, including a clear organizational structure and independent internal risk management functions. • Promote the risk culture across the BCP Group, addressing risk awareness and appropriate risk-taking behaviour. • Promote a corporate culture and values that foster the ethical and responsible behaviour of employees. • Promote the development, implementation and maintenance of formal processes for obtaining, producing and processing substantive information, appropriate to the size, nature, scope and complexity of the activities carried out, as well as to the institution's risk appetite, which ensure its reliability, integrity, consistency, integrity, validity, timeliness, accessibility and granularity. The Executive Committee is supported, to carry out its responsibilities, by several management commissions in a wide range of dimensions: Business Activity; Credit Decisions; Risk and Compliance Management; Planning, Costs and Investments; Capital Structure and Liquidity Management; Human Resources Management; Operational Resilience. These management commissions can benefit from the presence of one or more internal control function units (Risk Office, Compliance Office and Internal Audit) which ensures timely detection of any potential internal control deficiencies. The Executive Committee delegates in the Risk Commission, the Compliance and Operations Risk Commission (CORC) and the Operational Resilience Commission, the mission of monitoring the risks the Group is exposed to, as well as the deficiencies identified regarding the internal control system. These commissions are also responsible for monitoring the adoption of corrective measures and the overall 2023 REPORT & ACCOUNTS |129 progress of open recommendations. Furthermore, the CORC may also evaluate and propose improvements to be introduced to the internal control system. Risk Commission This Commission is appointed by the Executive Committee and has the responsibility for defining, at an executive level, the framework and the risk management policies and instruments within the Group, establishing the respective principles, rules, limits and practices for the Group Entities, considering the defined risk thresholds by the Board of Directors. The Risk Commission monitors the overall levels of credit, market, liquidity and operational risk, as well as all other risks considered materially relevant for the Group, ensuring that the risk levels are compatible with the goals, available financial resources and strategies that have been approved for the development of the Group's activity. This Commission also validates the compliance of risk management with the applicable laws and regulations. Models Monitoring and Validation Sub-commission The Models Monitoring and Validation Sub-Commission monitors the performance and confirms the validity of the rating systems and models used by the Bank within the scope of its risk management functions and informs the Risk Commission on their adequacy. Moreover, it presents the model’s risk management results and suggests improvement measures to increase the model’s performance and adequacy. Credit and Non-Performing Assets Monitoring Commission This Commission is appointed by the EC and has the responsibility of monitoring the evolution of credit risk, under various aspects: • Monitoring of the evolution of the credit exposure and the credit underwriting process. • Monitoring the evolution of the credit portfolio’s quality and of the main performance and risk indicators. • Monitor the results achieved by the credit monitoring systems. • Follow-up the counterparty risk and the largest exposures concentration risk. • Monitoring the impairment evolution and the main cases of individual analysis. • Assessment of the recovery procedures performance. • Monitoring the divestment in the foreclosed assets portfolio. • Follow-up the execution of the operational plans to be developed within the scope of non performing exposures and reduction of certain asset classes. Pension Funds Risk Monitoring Commission This Commission is appointed by the EC and has the following competences: • Assessing the performance and risk of the Group’s Pension Funds in Portugal. • Establishing, for these, the appropriate investment policies and hedging strategies. • Approving changes to the Fund´s actuarial assumptions. • Issuing a opinion on material investment decisions. Compliance and Operational Risks Commission This Commission, appointed by the EC has a number of tasks and responsibilities, with a view to ensuring that the Bank's activity contributes to an adequate culture of risk and internal control, including ensuring and monitoring the adoption and compliance by all the Group's institutions with the internal and external rules that shape its activity, the relevant contractual commitments and ethical values of the organization, in order to contribute to the mitigation of compliance and operational risks, strengthening the internal control environment, mitigating or eliminating the imputation of significant sanctions or property or reputational losses. 2023 REPORT & ACCOUNTS 130 | Operational Resilience Commission This Commission is appointed by the EC and has the following capacities and responsibilities: • Definition of guidelines and approval of the management policies for IT systems, data management and quality, physical security, business continuity and data protection. • Regular review of the emerging threats and most relevant trends in terms of data security and information technologies, with a particular focus upon cyber-security. • Analysis of the periodical security incident’s reports (regarding systems/data and physical), identifying the appropriate remediation and improvement measures. • Monitoring of performance metrics of information security systems, physical security and protection and data quality. • Review of the results of information security evaluation and business continuity. • Follow-up of initiatives and projects in the area of systems/data security, physical security and data protection and monitoring of the respective performance metrics. • Approval of the annual plans for the exercises of security assessment, Disaster Recovery Plan (DRP) and business continuity, and their respective quantitative/qualitative evaluation. • Articulation with subsidiaries on the themes of physical security policies, information security, business continuity and protection and data quality. Corporate Risk Monitoring Commission This Commission is appointed by the EC and has the following duties and responsibilities: • Monitor the evolution recorded by the main performing corporate Clients credit exposures, focusing on the specific risk factors of each client (sector of activity, financial standing, cost structure, etc.), issuing opinions regarding the credit strategy to adopt. • Follow-up the counterparty risk and the largest exposures concentration risk. Sustainability Commission This Committee is responsible for defining and monitoring the initiatives that allow the implementation of the Sustainability Master Plan (SMP), in its strategic components (Environmental, Social and Corporate Governance), in compliance with the guidelines of the Plan approved by the Executive Committee. It has the following attributions and responsibilities: • To assist the EC in integrating the principles of Sustainability (Environmental, Social and Corporate Governance) in the decision and management processes of the Bank. • To assess and approve the initiatives required to implement the actions defined to materialize the strategic axes of the Sustainability Master Plan in force, as well as other changes or adaptations necessary to meet the defined objectives. • To follow-up and monitor the progress of approved initiatives, compliance with the respective deadlines and budgets and the evolution of the results achieved, as well as the key performance indicators of the plan’s dimensions. CALCO The Capital, Assets and Liabilities Management Commission is responsible for the management of the Group's overall capital, for assets and liabilities management and for the definition of liquidity management strategies at a consolidated level. Specifically, the CALCO is responsible for the structural management of interest rate and liquidity risks, including, among others, the following aspects: • Establishment of management guidelines for assets, liabilities and off-balance sheet items at consolidated level. • Definition of the capital allocation and risk premium policies. • Definition of transfer pricing policy, in particular with regard to liquidity premiums. 2023 REPORT & ACCOUNTS |131 • Monitoring of the capital and liquidity indicators, of the Recovery Plan indicators and of the execution of the Liquidity Plan. • Definition of policies and strategies to access wholesale funding markets and definition of the liquidity buffer composition. • Definition of the investment policy of the Investment Portfolio and monitoring of its performance. • Definition of the strategy and positioning within the scope of the interest rate risk and structural FX risk management, as well as of the respective policies and limits, taking into account the market conditions at any given moment. Credit Commission This Commission is appointed by the EC and its functions are to assess and decide on credit granting to Customers of Banco Comercial Português, in accordance with the competences established by internal Credit Granting, Monitoring and Recovery’ regulations. This commission may also issue advisory opinions on credit proposals from the subsidiary companies of the Group entities. Risk Office The Risk Office (ROFF) is the structure unit responsible for the risk control function at Group level, promoting the overall alignment of concepts and procedures concerning risk monitoring and assessment. The ROFF is responsible for informing the Board of Directors, the Executive Committee, the Risks Assessment Committee, and the Risk Commission on the general risk level, for proposing measures to improve the control environment and for the implementation of controls which assure compliance with the approved limits. The ROFF has the following functions: • Supporting the establishment of risk management policies and methodologies for the identification, measurement, limitation, monitoring, mitigation and reporting of the different types of risk. • Promoting the revision of the Group’s Risk Appetite and the risk identification process. • Issuing opinions related with the Group Strategic Plan and compatibility of the risk management decisions considering the approved RAS limits. • Participate in the definition of the risk strategy and decisions related with risk management. • Issuing opinions on the assumption of significant risks by the Bank and its subsidiaries, ensuring they are properly identified and adequately assessed. • Integrate the climate, social and internal governance (ESG) dimension into the risk management framework; • Coordinating the NPA (non-performing assets) Reduction Plan and of the ICAAP and ILAAP processes. • Ensuring the existence of a body of rules and procedures, of an effective IT platform and of a database for the robust and complete management of risk. • Controlling, on an ongoing basis, the evolution of the different risks and compliance with the applicable policies, regulations, and limits. • Participating in the Internal Control System. • Preparing information relative to risk management for internal and market disclosure. • Supporting the works of the following Commissions: Risk, NPA Monitoring, Pension Funds Risk Monitoring and participating in the Credit Commission, CALCO, Operational Resilience, Compliance, Operational Risk, Sustainability and Corporate Risk Monitoring Commission. The Risk Officer is appointed by the BoD, and reports to the CRO of the Group, with a functional reporting duty to the Risk Assessment Committee. Compliance Office The Compliance Office (COFF) is part of its organizational structure, construed upon “3 lines of defence model”. It ensures the compliance function assigned to the “second line of defence”, which includes control and regulatory compliance activities, analysing and advising the corporate bodies and the various Divisions of the Bank prior to the making of decisions that may involve the assumption of specific risks which are monitored by the compliance function. 2023 REPORT & ACCOUNTS 132 | Furthermore, the COFF has also the mission to: • Verify if the respective regulatory requirements are complied with, as well as the ethical values of the organization, fulfilling all the attributions that are legally conferred on it, ensuring the existence of a culture of internal control, thus contributing to the mitigation of the risk of attribution to the Group Entities of sanctions or significant assets or reputation damages. • Promoting the preparation, approval, application, verification of compliance and periodic updating of the Code of Conduct. • Ensure compliance with the regulatory framework on the prevention and fight against money laundering and terrorism financing (hereinafter “AML/CTF”). • Participate in the definition of policies and procedures related with Conflicts of Interest and transactions with Related Parties, following-up their implementation and effective application. • Ensure the management and controls adequacy of the whistleblowing process. • Provide support to the International Entities in the development of their activities, seeking to normalise their action principles, systems and processes, in compliance with local regulatory specifications. The Compliance Officer is appointed by the BoD, reports to the Executive Committee, through the CRO, with a functional reporting duty to the reports directly to the Executive Committee and, functionally, to the Audit Committee, exercising his/her functions in an independent, permanent and effective manner, defining the policies, guidelines and tools that are appropriate for a proactive and preventive risks’ assessment. As a second line of defence structure responsible for compliance risk, for the risks associated with money laundering and the financing of terrorism, with conduct and market abuse, with conflict of interests and for other risks of an operational nature, the COFF issues decisions, with binding force for its recipients, aiming at the legal and regulatory compliance of the various business and business support areas. The functions attributed to the COFF are exercised in accordance with the law or with other applicable normative source, as well as by the Bank’s corporate bodies, and the performance of the Compliance Office should be based on a risk approach, at the level of the business, Customers and transactions, allowing the identification, assessment, monitoring and control of compliance risks that may influence the strategy, reputation and objectives defined for the Bank. Within the scope of opinions and the associated analyses produced at request of several Group areas and Divisions, the COFF: • Identifies and evaluates the various types of risks – either concerning in what refers to products and services approval process, corporate processes and conflicts of interest. • Issues proposals for the correction of processes and risks mitigation. • Permanently analyses the general supervisory environment and, in general, provides specialised support in matters of control and regulatory compliance. Within the scope of its specific functions, the COFF also ensures an assessment and intervention in what concerns: • The control and monitoring of compliance risks. • The Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT). • The mitigation of reputation risk at all Group entities, aiming at the alignment of concepts, practices and goals in these matters. In compliance with the Principle of Coherence of the Group's internal control, the 1st responsible for the Compliance Officer of BCP is also responsible for the follow-up and monitoring of the compliance activities and Policies at Group level, highlighting the follow-up and monitoring of the AML/CFT risk through the International AML/CFT Committees, with the participation of the management and Compliance Bodies of the local units. The COFF is also responsible for coordinating the process of structuring, drafting and approving the annual self-assessment reports on the effectiveness of the organisational culture and the governance and internal control systems, both individual and consolidated, and on the ML/FT prevention system to be submitted to the Banco de Portugal and the Securities Market Commission, under the terms of the 2023 REPORT & ACCOUNTS |133 respective Notices and Regulations, and as well for the preparation and submission of reports to the management body, at least once a year, identifying the compliance flaws verified and the recommendations issued for their correction. The COFF fosters, intervenes and actively participates in the training policy of Employees, namely, through training actions in Compliance, for the entire universe of the Group, maintaining a large knowledge repository for matters of its competence, namely, in what concerns the AML/CFT. Audit Division The Audit Department (DAU) provides functions of the third line of defence, under the scope called "Model of the 3 lines of defence" and is responsible for assessing the adequacy and effectiveness of the risk management process, the internal control system and the governance models. DAU performs its function on a permanent and independent basis and in accordance with the internationally accepted principles and best practices of internal auditing, carrying out internal audit inspections to assess the systems and processes of internal control and risk management which can give rise to recommendations aimed at to improve its efficiency and effectiveness. The main functions of the DAU in the scope of risk management are to ensure that: • The Risks are properly identified and managed and that the controls implemented are correct, adequate and proportional to the Bank's risks. • The Bank's internal capital assessment system is adequate in terms of the risk exposure level. • Transactions are recorded correctly in the systems of the Bank, and the operational and financial information is true, appropriate, material, accurate, reliable and timely. • The Employees perform their duties in accordance with internal policies, codes of conduct, rules and procedures and with the legislation and other applicable regulations. • The goods and services necessary for the Bank's activity are purchased economically, are used efficiently and are properly protected. • The Legal and regulatory provisions with a significant impact on the organization are recognized, properly assimilated, and integrated into the operational processes. • The Bank's governance model is adequate, effective, and efficient. The Head of DAU reports hierarchically to the Chairman of the Board of Directors and functionally to Audit Commission, is responsible for the general supervision and coordination of the internal audit activities of the BCP Group subsidiaries and attends the meetings of the Audit Committee of the subsidiaries of the BCP Group. 2023 REPORT & ACCOUNTS 134 | Main developments and accomplishments in 2023 In 2023, the Risk Management Function maintained the focus on the improvement of the Group's risk control framework, permanently monitoring the risk levels in relation to the RAS tolerance limits, while ensuring, full compliance with regulatory and supervisory requirements, the update of the internal risk management and control policies and regulations. The most relevant activities developed during 2023 were, synthetically, as follows: • Monitoring the level of compliance with the risk limits, in particular the RAS, at the consolidated level and of the main entities; • Preparation of the Risk Management Function Independence Report; • Carrying out the Risk Identification Process with the revision of the RAS and the Risk Strategy for 2024; • Preparation of quarterly Risk Assessment Reports updating the perspectives on the evolution of the risks to which the Bank is subject in its activity and the risk strategy to address them; • Development and validation of new methodologies for calculating economic capital; • Completion of ICAAP and ILAAP reports, and their respective regular monitoring, ensuring the Group's capital and liquidity adequacy on an ongoing basis; • Continuous improvement of the internal governance, management, measurement and control of risk at Group level, with a special focus on strengthening credit risk monitoring and the inclusion of climate and environmental risk factors in the framework of risk management and monitoring of its implementation within the scope of the Bank's RAS; • Close monitoring of the financial situation of clients, with the aim of identifying situations potentially more affected by the macroeconomic context, anticipating possible difficulties in fulfilling their responsibilities; • Consolidation of the process of assigning credit strategies to corporate segment costumers, with different review periodicities, depending on the level of risk associated with the assigned strategy; • Revision of the parameters of the impairment models and update of the macroeconomic scenarios; • Approval by the ECB of applications for material changes to the IRB models, namely the Probability of Default (PD) and Loss Given Default models applicable to the Retail and Corporate segments; • Implementation of the approved models in the Bank's IT processes and systems, ensuring the start-up of the new PD models concomitantly with the introduction of a new Rating Master Scale as of January 2024; • Application to the ECB for authorisation to use a new Credit Conversion Factor (CCF) model; • Maintenance of the overlay policy to incorporate uncertainty associated with relevant risk factors in the current macroeconomic and geopolitical context; • Review, update and implementation of NPA/NPE and exposure to corporate restructuring funds reduction Plans; • Participation in the CDP questionnaires – Carbon Disclosure Project and Corporate Sustainability Assessment (S&P Global); • Update of the Climate and Environment materiality assessment; • Preparation of replies to the ECB's "Targeted Review on Digitalization" questionnaire; • Publication of the Annual Market Discipline Report and quarterly disclosures; • Execution of EBA's capital stress tests; • Participation in the ECB's Cyber Resilience Stress Testing; • Continuous improvement of liquidity and financing risk management and control systems at Group level; • Participation in the annual liquidity exercise of the SSM/SRB (Single Supervisory Mechanism/Single Resolution Board), followed by a self-assessment of the Bank's ability to report the data of the model (Joint Liquidity Template); • Consolidation of a liquidity management framework in the context of resolution planning; 2023 REPORT & ACCOUNTS |135 • Improvement of the interest rate risk control and management framework (IRRBB and CSRBB), in line with regulator guidance (EBA/GL/2022/14); • Implementation of a new platform to support core risk quantification processes (SAS Cloud); • Obtaining authorisation from the ECB for the application of Article 352(2) CRR for the exclusion of structural foreign exchange positions from the calculation of net open foreign exchange positions; • Submission of the report for the EBA Market Risk Benchmarking Exercise 2024; • Continuation of projects aimed at continuous improvement of the quality of decision support data and risk control metrics according to BCBS239 and the development of the upgrade of the technological platform to support risk management; • Presentation of the results of the 2022 annual exercise on risk self-assessment (RSA-Risk Self- Assessment) and execution of the corresponding exercise in 2023; • Execution of the annual Risk Self-Assessment (RSA) exercise of operational processes; • Consolidation of the framework for monitoring and controlling ICT (information, communication and technology) and cybersecurity risks, as well as outsourcing risk; • Participation in the project of renewal and reformulation of the Business Continuity Management System; • Participation in the update of the Group's recovery plan for 2023; • Continuous updating of the regulations of the risk management function at Group level; • Participation in the Budget and Plan for 2024/26; • Follow-up of several On-Site Inspections and Deep Dive exercises of the Supervisory Entities. In 2023, the compliance function maintained its focus on the continuous improvement of the Group's compliance risks´s control environment, ensuring, fulfilling regulatory and supervisory requirements and updating the internal regulation’s compliance risk management and control framework. The most relevant activities and initiatives developed during 2023 were, as follows: • Identification and due diligence, for the appropriate pre-validation, substantive and formal, of the opening and maintenance of entities and accounts and credit operations, in a context of increased risk, highlighting the effect of the war in Ukraine, with the issuance of successive sanctions packages. • Examination of operations, with emphasis on the filtering operations process, essential for complying with the sanctions and embargo regimes decreed by the competent national and supranational authorities, and their monitoring, with a view to detecting and preventing potentially irregular situations. • Control, by improving IT systems and monitoring mechanisms, adapting them to new regulatory requirements and new risk factors, contributing to the effectiveness of the AML/CFT risk management model. • Communication, adapting governance and processes in order to inform the competent authorities in a timely manner whenever there are suspicions or sufficient reasons to suspect that certain funds or other assets, regardless of the amount involved, come from criminal activities or are related to their financing, in a context of growing risk factors in this area. • Collaboration with all the supervisory and inspection bodies responsible for the activity of BCP and its Subsidiaries in Portugal. • Co-operation with Direção-Geral de Política Externa of the Foreign Office and with Gabinete de Planeamento, Estratégia, Avaliação e Relações Internacionais of the Ministry of Finance, ensuring compliance with the regulatory and legal framework on restrictive measures. • Training, through the fulfilment of a training and communication plan. This functional perimeter, based on dedicated technological solutions, also provides for the definition and management of risk models according to the evolution of the various competing variables for establishing the scorings to be applied to operations. Also noteworthy is the development of new, more effective and efficient solutions based on automation processes for analysing the risk factors inherent in new account openings and transaction screening, and the effort to update internal rules in order to bring them into line with recent changes in the legislative environment. Of the various initiatives undertaken in 2023, we would highlight: 2023 REPORT & ACCOUNTS 136 | • Reinforcement of automatic control processes relating to transaction filtering, in order to ensure permanent and timely compliance with the sanctions and embargoes decreed by the various international organisations, in a more demanding international context resulting from the war in Ukraine. • Strengthening AML/CFT risk control in the area of customer onboarding, in the segments and jurisdictions involved in business relationships. • Reinforcement of the model of an integrated view of Customers in the business relationship with the Bank and the inherent risk factors, in order to strengthen effectiveness in the fulfilment of AML/CFT duties, mainly identification and diligence, control, examination and communication. • Continued development of automatic solutions that promote alignment and cooperation between the Bank's first and second lines of defence in fulfilling the various AML/CFT duties. • Reinforcement of controls over Correspondent Banks, ensuring a timely periodic review of their AML/ CFT practices and policies according to their risk, the assessment of which now includes a set of new risk factors, in compliance with recent regulatory changes and restrictive measures related to the war in Ukraine. • Continuing to strengthen, train and specialise the Compliance Office teams in the various dimensions of PBC/FT. With regard to the effectiveness of the internal control system contribution, the role of the Compliance Office in monitoring the implementation of the internal control recommendations should be emphasised, namely through the issuing of periodic reports to the Bank's Management and Supervisory Bodies responsible for monitoring them and participation in a working group aimed at promoting their implementation. In 2023, promoting a culture of compliance was one of the Bank's important initiatives, both through the normal development of the Training Plan and through communication programmes close to all areas of the Bank, particularly the commercial networks. The "100% Compliance", "Expedients", "10 Compliance Commandments", "Prevention is better" and "Compliance Express" headings are some of the most visible aspects of the transformation that began in 2019. Through weekly headings addressed to all of the Bank's employees and commercial structures, the aim is to inform, clarify and support employees on the most important aspects to take into account, both in terms of the risk of financial crime and other compliance risks, using simple but informative and educational language. Innovative solutions were also used, including the participation of employees from the Bank's first line of defence on a wide range of compliance and conduct risks. As for the most important training activities, we would highlight: the Code of Conduct and the AML/CFT courses for all Bank employees, a set of training programmes to ensure the necessary certifications in the Markets in Financial Instruments Directive (MIFID II) and the sale of insurance on the Bank's networks, among others. In pursuit of aligning strategies and priorities in the risk management of the Group's Operations, efforts continued to update Group policies, also applicable to International Operations, ensuring that there were nodelayed documents and highlighting the adoption of Group policies on the Code of Conduct and Conflicts of Interest. In addition, the Compliance Office strengthened its monitoring of the activity of the Compliance function in those Operations, implementing a series of initiatives, including: • Continued efforts to adapt the Group's entities' response capacity to the challenges posed by compliance and regulatory issues, in particular by promoting training programmes for local compliance teams. • Consolidation of control procedures, particularly on new business relationships and high risk AML/CFT products. • Monitoring and collaborating in the resolution of control deficiencies identified by external auditors. • Collaboration in the implementation of new IT platforms to reinforce AML/CFT. • Reinforcement of the process of sharing information on risk clients, within the scope of AML/CFT, for greater harmonisation of their risk classification, promoting the effectiveness of the duty of examination and the completeness of information in the exercise of the duty of communication. It should be noted that monthly reports analysing the transactions of high-risk customers were issued. 2023 REPORT & ACCOUNTS |137 Credit risk The materialisation of this risk arises from the losses in the loan portfolio, due to the incapacity of borrowers (or their guarantors, when applicable), issuers of securities or contractual counterparts to comply with their credit obligations. The control and mitigation of this risk are carried out through a solid and reliable structure of risk analysis and assessment, based on internal rating systems suited to the different business segments, through a model for the early detection of potential default of the portfolio, through processes regarding the management and follow-up of the collateral value and through structural units that are exclusively dedicated to credit recovery. Evolution and breakdown of the loan portfolio The next table presents the evolution of the Group's portfolio subject to credit risk and counterparty credit risk between December 31, 2022 and December 31, 2023, in terms of EAD (Exposure at Default) (), in the three main geographies in which the Group operates - Portugal, Poland and Mozambique - which represented the Group's total EAD by December 31, 2023. (million euros) Geography Dec. 23 Dec. 22 Change Amount % Portugal 62,585 61,716 869 1.4% Poland 26,730 24,023 2,707 11.3% Mozambique 2,466 2,446 20 0.8% TOTAL 91,781 88,185 3,596 4.1% * The EAD represents the expected exposure if the customer defaults. For commitments and financial guarantees, the value of the EAD will consider both the amount of credit used and the expectation of future potential value that may be used in accordance with the agreement. Without impairment deduction to the exposures treated prudentially under the Standardized Approach (STD) and including all risk classes (i.e. besides credit to Customers, debt positions from Sovereign entities and Institutions are included). Considering the position on December 31, 2022 as a basis for comparison, the Group's loan portfolio, measured in euros (EUR), registered an increase of 4.1% during 2023, in contrast to 2022 (a decrease of 3.7%). This evolution is explained by growth in all geographies. The increase in the portfolio in Portugal is associated with the growth in Sovereign and Institutional exposures and the retail portfolio, as opposed to the decrease in the portfolio of the Corporate segments and Banco de Portugal deposits. Additionally, should be noted the decrease in non-performing loans, particularly in the Corporate segments, which contributed to NPE portfolio´s reduction in Portugal by 260 million euros (circa 19% of reduction) during 2023. In Poland's loan portfolio there was an increase of 11.3%, measured in euros, largely explained by the increase in Sovereign and Institutional exposures, which amounted to approximately 4.5 billion euros, countered by a decrease in credit exposure to Corporate and Retail credit, which amounted to 1.8 billion euros. With regard to Mozambique, there was a 0.8% increase in the loan portfolio, measured in euros, mainly due to the growth in exposure to the Banco de Moçambique. The portfolio composition by risk classes is illustrated by the following graphs, on December 31, 2023: 2023 REPORT & ACCOUNTS 138 | In what concerns the structure of portfolios by counterparty segment, in Portugal the most significant portion continues to be assumed by the retail segment with 41.5% of the total, 30.8% of which relates to exposures benefiting from mortgages. The Corporate segment has a weighting of around 27.7%, slightly lower than at the end of 2022, highlighting the increase in the weight of the Banks and Sovereigns segment, which recorded an increase in its representativity to a level close to 30.8%, from a weight of 29.7% at December 31, 2022. 2023 REPORT & ACCOUNTS |139 In Poland we highlight the Retail segment, with a weight of 50.3%, observing a decrease in the weight of exposures collateralized by mortgage guarantee to 28.1%, observed mainly in the CHF loan portfolio, a reduction in the representativeness of the Corporate segment and an increase in the Banks and Sovereigns component, ending 2023 with weightings of 8.9% and 40.8%, respectively. Regarding Mozambique, the structure remained stable, with emphasis on the relevance of the weight of the Banks and Sovereigns segment, which rose to 80.2% of the portfolio. The Corporate and Retail segments assumed a representativity of 10.4% and 9.4%, respectively. The Bank has performed the regular update of the sectors considered to be the most vulnerable in Portugal, taking into account the evolution of the prevailing environment, characterized by multiple geopolitical conflicts, with impacts on various aspects such as a more modest level of economic growth, budgetary pressures to cope with the impacts felt by economic agents, the need to allocate budget amounts to areas such as Defense, limitations on the movement of goods, pressure on energy costs, inflationary impacts, high levels of interest rates and rising unemployment rates. Probability of Default (PD) and Loss Given Default (LGD) The main parameters for credit risk assessment, used in the calculation of Risk Weighted Assets (RWA) within the scope of the Internal Ratings Based method (IRB) - the Probability of Default (PD) and the Loss Given Default (LGD) – assigned to the portfolio’s credit operations, have been registering a continuous positive evolution, reflecting a clear trend of improvement in the portfolio’s quality. The following graph illustrates the distribution of the portfolio amounts, in terms of Exposure at Default (EAD) by the risk grades (internal ratings) attributed to the holders of credit positions in Portugal and Poland, on December 31, 2023. These risk grades (RG) are defined on an internal scale, transversal to the Group (the Rating Master Scale), with 15 grades, corresponding to different levels of debtors' PD. Risk grades 13 to 15 are called “procedural” and correspond to problematic credit; RG 15 corresponds to the Default status. As shown in the above chart, the weight of the EAD corresponding to medium and higher quality risk grades, for the two geographies in consideration, represented 82.9% of total EAD at December 31, 2023, with the structure remaining close in both geographies, with an increase in the weight of risk grades between 1 and 6 in the case of Poland, where there was an increase in this segment, while in Portugal the weight of this segment remained at 64.2%. This weighting compares with year-on-year weights of 82.3%, 80.9%, 80.7% and 76.8% at the end of 2022, 2021, 2020 and 2019, respectively, reflecting a consistently favourable evolution. 2023 REPORT & ACCOUNTS 140 | Regarding the weight of exposure in the set of the two geographies corresponding to customers with procedural risk grades, it reached 4% on December 31, 2023, maintaining the downward trend in previous years: 4.2% (2022), 4.8% (2021), 5.9% (2020) and 7.8% (2019). In the case of Portugal, the trend of reduction is faster: 3.2% (2023), 3.7% (2022), 4.7% (2021), 6.1% (2020) and 8.8% (2019). Regarding the LGD parameters, representative of expected losses in case of Default and which, to a good extent, reflect not only the efficiency of credit recovery according to the different types of credit segments/products, but also the collateralization levels of credit operations, the following table shows the respective average values for Portugal (weighted by EAD) at the end of 2023 and 2022: Mortgages SME Retail Retail (other) Real Estate Promotion SME Corporate Corporate GLOBAL AVERAGE 2023 15.8% 31.9% 31.2% 26.5% 38.2% 37.4% 24.5% 2022 16,2% 32,1% 34,6% 37,0% 46,0% 32,4% 25,4% The LGD parameters improving overall, with the exception of the Corporate segments. It should also be noted that around 28% of the corporate loan portfolio in Portugal benefits from guarantees issued by various entities (Mutual Guarantee Societies; European Investment Fund and European Investment Bank), which provide an additional level of protection in the event of default. In Poland too, part of the corporate loan portfolio benefits from this type of guarantor (around 5%) 2023 REPORT & ACCOUNTS |141 Main credit risk indicators The following chart presents the quarterly evolution of the main credit risk indicators, between 31/12/2022 and December 31, 2023, for the Group and the portfolios of Portugal, Poland and Mozambique: Dec 23 Sep 23 Jun 23 Mar 23 Dec 22 CONSOLIDATED NPE/Gross credit 3.40% 3.60% 3.70% 3.80% 3.80% NPL > 90 days / Gross credit 0.90% 0.90% 0.90% 0.90% 0.90% Past due credit / Gross credit 1.10% 1.10% 1.10% 1.00% 1.00% Impairment / Gross credit 2.80% 2.70% 2.70% 2.70% 2.60% PORTUGAL NPE/Gross credit 2.90% 3.00% 3.20% 3.20% 3.40% NPL > 90 days / Gross credit 0.50% 0.60% 0.50% 0.40% 0.40% Past due credit / Gross credit 0.60% 0.60% 0.60% 0.50% 0.50% Impairment / Gross credit 2.60% 2.50% 2.40% 2.40% 2.30% POLAND NPE/Gross credit 4.60% 4.70% 4.60% 4.80% 4.50% NPL > 90 days / Gross credit 1.60% 1.70% 1.60% 1.60% 1.60% Past due credit / Gross credit 2.10% 2.20% 2.10% 2.10% 2.00% Impairment / Gross credit 3.30% 3.40% 3.30% 3.20% 3.10% MOZAMBIQUE NPE/Gross credit 5.30% 7.10% 11.80% 12.70% 13.50% NPL > 90 days / Gross credit 2.90% 3.60% 7.10% 7.40% 7.80% Past due credit / Gross credit 3.10% 3.90% 7.40% 7.60% 7.80% Impairment / Gross credit 4.30% 3.90% 8.20% 8.30% 8.10% Gross credit = Direct credit to clients, including credit operations represented by securities, before impairment and fair value adjustments. NPE include loans to Customers only. The evolution of the credit risk indicators during 2023 was favourable at consolidated level, particularly in Portugal. Overall, the evolution is positive, as shown by the 'NPE/Gross Credit' ratio, with a reduction of 0.4 percentage points at consolidated level and 0.5 percentage points in Portugal. The overdue loans and 90-day overdue loans to gross loans indicators remained close to the values of December 2022, with these indicators registering values of 0.9% and 1.1% at consolidated level and 0.5% and 0.6% in Portugal. The positive dynamics of these ratios are the result of the continued effort in recent years to reduce loans classified as non-performing. The low value of the overdue credit ratio in Portugal (0.6%) when compared to the NPE ratio (2.9%) shows that a very significant part of the NPE ́s portfolio is associated with "unlikeness to pay" situations". It should also be noted that between the end of 2022 and 2023 the consolidated 'Impairment/Gross Credit' ratio increased by 0.2 percentage points, remaining below 3%, despite the reduction in the relative weight of the portfolio of loans in default in 2023. In Poland, there was a slightly reduction of 0.2 percentage points in the 'NPE/Gross Credit' indicator, a maintenance of the ‘Past due 90 days/Gross Credit' ratio and a slight increase of 0.1 percentage points in the 'Past Due/Gross Credit' ratio. Reflecting the persistence of a challenging economic and financial environment, the operation in Mozambique saw a deterioration in the NPE/Gross Credit ratio by 0.7 percentage points and an improvement in the other credit risk indicators during 2023, as a result of a prudent policy for granting new loans. 2023 REPORT & ACCOUNTS 142 | NPA Reduction Plan The implementation of the Group's NPA (non-performing assets) Reduction Plan remained a priority throughout 2023, in its two components - problem loans (NPE-non performing exposures) and assets received in credit repayment (FA-foreclosed assets) - focusing mainly on the NPE loan portfolios and FA properties held for sale in Portugal. The NPA Reduction Plan is framed by a specific governance model and a robust management framework, based on specialized credit recovery areas and systematized recovery strategies - both resulting from automatic analysis and decision models (for Retail) and based on the relationship of the recovery managers with their Corporate Clients, with tailor-made solutions. In order to respond to the challenges posed by changes in the business environment, particularly the impact resulting from a challenging geopolitical backdrop and increased financing costs for customers, the Bank has been developing and strengthening the methodologies and installed capacity of the monitoring and recovery areas, in order to ensure adequate monitoring of the most potentially impacted exposures and to minimize expected losses. The FA management is based on a specialized structure, privileging circuits and procedures oriented towards the speed of the reception-preparation-sale cycle and the enhancement of the properties’ values, in order to facilitate the sale of these assets. The NPA Reduction Plan is supported by a set of operational initiatives designed with the objective of promoting an increasing effectiveness in the management of credit processes and foreclosed assets. The fulfilment of the reduction targets of each area involved in the reduction of NPA is measured on a monthly basis and reported to senior management, namely to the Credit and Non-performing Assets Commission. The following table presents the evolution of NPE volumes between December 31, 2022 and December 31, 2023, for the Group and for Portugal: Dec 23 Jun 23 Dec 22 CONSOLIDATED 1,952 2,142 2,218 Change YoY -266 -76 -539 PORTUGAL 1,107 1,262 1,361 Change YoY -255 -100 -521 Comparing the size of the exposure of Customers classified as NPE at the end of 2023 with that seen at the end of 2022, we see a positive evolution, with a reduction of 266 million euros at consolidated level and 255 million euros in the activity in Portugal, which corresponds to a contraction of 12% and 18.7%, respectively. This result reflects the continued success achieved over the last few years in identifying and implementing solutions to reduce these non-productive assets, even in an adverse context. Regarding the type of operations that explain the reduction in NPE in Portugal during 2023, the following graph highlights the contribution of write-offs, which amounted to 100 million euros. The gross value of sales amounted to 143 million euros, and the combined effect of the other sources of NPE reduction and new entries had a downward impact of 11 million euros, with a small number of larger exposure cases that were classified as NPEs. 2023 REPORT & ACCOUNTS |143 (million euros) The reduction of NPE was accompanied by an effort to reinforce the coverage ratio of the NPE portfolio by impairment in Portugal to increased to 89%. The following graph, which refers to domestic evolution, shows the decrease of four percentage points in the NPE´s total coverage (by impairments + collaterals) to 126% at the end of 2022, explained by the reduction in the weight of collateral coverage. The trend observed in 2022 regarding assets on the balance sheet resulting from credits repayment (foreclosed assets - FA) was favourable, as shown in the following table, which presents the evolution of the total stock of FA in Portugal and its breakdown into the different types of assets, as well as the aggregate value of assets of this nature of subsidiaries abroad (amounts before impairment): 2023 REPORT & ACCOUNTS 144 | (Million euros) Dec. 23 Dec. 22 Dec. 21 Dec. 20 Real estate properties 169 262 565 809 Real estate Funds and companies 75 182 205 246 Other assets (non-Real estate) 57 73 81 92 SUB-TOTAL - Portugal 300 517 851 1,146 Other geographies Foreclosed Assets 57 65 65 40 GROUP TOTAL 357 582 916 1,186 Compared to the position at the end of 2022, there was a 38.6% reduction in the FA portfolio on December 31, 2023. The overall reduction in Portugal amounted to 217 million euros, explained by the reduction in the Real estate properties and Real estate Funds Companies components, which amounted to 93 million euros and 107 million euros, respectively. In this year, the decrease in the stock of these real state assets by a gross amount of 225 million euros should be highlighted, based on the commercial dynamics of sales and relatively low volumes of new entries. This reduction can be explained by the shrinking size of the NPE credit portfolio, the sale of credit portfolios to companies with real estate collaterals, and the proper functioning of judicial sales instruments to third parties. The assets received in 2023 amounted to approximately €14 million, primarily consisting of residential properties. It should also be noted that the reduction in the gross value of the foreclosed assets portfolio was accompanied by an increase in the level of impairment coverage, with this ratio rising from 38% in December 2022 to 46% in December 2023, therefore, the value of this net impairment portfolio represents only 237 million euros at the consolidated level and 196 million euros in Portugal. 2023 REPORT & ACCOUNTS |145 Credit concentration risk The following chart presents the weights, in total exposure, of the Group’s 20 largest performing exposures (non-NPE), as at December 31, 2023, in terms of EAD and using the concept of “Groups of Clients/Corporate Groups”, excluding the risk classes of “Banks and Sovereigns”: Dec. 23 Dec. 22 Client Groups Exposure weight in total (EAD) Exposure weight in total (EAD) Client group 1 0.9% 0.9% Client group 2 0.8% 0.8% Client group 3 0.5% 0.7% Client group 4 0.4% 0.4% Client group 5 0.3% 0.3% Client group 6 0.3% 0.3% Client group 7 0.3% 0.3% Client group 8 0.3% 0.3% Client group 9 0.3% 0.3% Client group 10 0.2% 0.3% Client group 11 0.2% 0.3% Client group 12 0.2% 0.2% Client group 13 0.2% 0.2% Client group 14 0.2% 0.2% Client group 15 0.2% 0.2% Client group 16 0.2% 0.2% Client group 17 0.2% 0.2% Client group 18 0.1% 0.1% Client group 19 0.1% 0.1% Client group 20 0.1% 0.1% Total 6.0% 6.4% Overall, the 20 largest productive exposures represented 6.0% of total EAD on December 31, 2023, compared with a weight of 6.4% on December 31, 2022. Hence, there was a decrease in the concentration of credit in the 20 largest productive exposures, measured in terms of EAD. It should be noted that, in addition to complying with the regulatory limits on Large Exposures, the Group defines specific objectives for controlling credit concentration, materialized into RAS metrics. Furthermore, other indicators are periodically monitored for various types of credit concentration: single- name, by sectors of activity, by country, for Institutions and for Sovereign risks. In the case of the single-name concentration, the limits are defined for performing Clients, since the NPE are covered by the NPA Reduction Plan. For Clients with exposure above the established limit excess, specific reduction plans are drawn-up. 2023 REPORT & ACCOUNTS 146 | Operational risk Operational risk materializes in the occurrence of losses resulting from failures or inadequacies of internal processes, systems or people, or resulting from external events. In the management of this type of risk, the Group adopts duly documented principles and practices, promoting the continued improvement of the control environment. This framework has a variety of features, such as: functions segregation, definitions for lines of responsibility and respective authorisations’ levels, tolerance limits for exposure to risks, appropriate internal regulations’ framework (including ethical codes and codes of conduct), risks self-assessment (RSA) exercises, assessment and monitoring of the risks over technological assets, information security and Outsourcing, key risk indicators (KRI), access controls (physical and logical), reconciliation activities, exception reports, loss events data capture, a structured process for new products and services approval, contingency plans, contracting of insurance (for the total or partial transfer of risk), follow-up of the Bank’s outsourcing contracts and internal training on processes, products and systems. The operational risk management framework encompasses the three relevant Group geographies – Portugal, Poland and Mozambique – and the operational risk management system adopts the 3 lines of defence model, based on an end-to-end processes' structure. Each geography adapts its own processes' structure, which is regularly reviewed/updated. This approach, transversal to the functional units of the organisational structure, is appropriate for the perception of risks and to implement the corrective measures for their mitigation. Furthermore, this processes’ structures also support other initiatives, such as the actions to improve operating efficiency and the management of business continuity. The responsibility for the day-to-day management of operational risk lies with the 1st line of defence, with special relevance of the operations’ areas and the process owners (seconded by process managers), whose mission - beyond the management of their processes’ effectiveness and efficiency - is to characterise the operational losses captured under their processes, to monitor the respective KRI, to perform the RSA exercises, as well as to identify and implement appropriate actions to mitigate operational risk exposures, thus contributing to the strengthening of control mechanisms and the improvement of the internal control environment. Operational Risks Self-assessment (RSA) The RSA exercises are based on workshops, attended by the Risk Office and with the participation of the process owners (and process managers), or performed through answers to questionnaires sent to the process owners, for a review of previous RSA results, according to predefined updating criteria. The aim of the RSA exercises is to promote the identification and mitigation (or elimination) of risks, either actual or potential, in each process, through the assessment of each of the 20 subtypes of operational risk considered: R1 Internal fraud and theft R11 Monitoring and reporting errors R2 Execution of unauthorised transactions R12 Customer related errors R3 Employee relations R13 Products or services flaws/errors R4 Issues of workplace health and safety R14 External fraud and theft R5 Discrimination over employees R15 Property and disasters risks R6 Loss of key staff R16 Regulatory and tax risks R7 Hardware and Software R17 Inappropriate market and business practices R8 Communications infrastructure R18 Project risks R9 Systems security R19 Outsourcing related problems R10 Transaction, capture, execution & maintenance R20 Other third parties’ related problems The assessments are positioned in a risk tolerance matrix, considering the ‘worst-case event’ that might occur in each process, for three different scenarios: Inherent Risk (without considering the existing/ implemented controls), Residual Risk (considering the existing/implemented controls) and Target Risk (the desirable risk level). These exercises are typically carried out in the second half of each year. The 2023 RSA exercise for operational risk processes incorporated: • The results of the Information and Communication Technology (ICT) 2022 RSA, computed in 2023, as input information to process owners, regarding 3 of the 20 risks assessed (R7/R8/R9). The ICT risks RSA was made over 172 critical technological assets – hardware, software and communication lines and infrastructures – under 3 evaluation dimensions: availability/integrity/confidentiality; 2023 REPORT & ACCOUNTS |147 • The input stemming from the CORPE (Compliance and Operational Risk Process Evaluation) factors, which introduce and highlight operational risk components that result from the compliance and internal control status of the processes; • With the Process Owners' assessment of the relevance of the most severe information security scenarios, resulting from the self-assessment exercise carried out by the Information Security Division (DSI) over identified risk scenarios (vulnerabilities/threats). In 2023, the results of the RSA covering the operational processes of Portugal, Poland and Mozambique, for the 20 risk sub-types assessed, point to moderate operational risk levels. In Portugal, on a total of 2164 applicable risks, only 18 residual risks were classified as medium or high (score of 3 or 4, in a scale of 0 to 5, in which 0 = risk not applicable and 5 = catastrophic risk). In Poland and Mozambique, the number of medium/high residual risks was of, respectively, 52 (out of 1646 applicable risks) and 21 (out of 499 applicable risks). Operational losses capture The operational losses data capture (i.e. the identification, registration and typification) of operational losses and of the originating events aims at the strengthening of the awareness to this risk and to provide relevant information for process owners to incorporate within their process management. As such, it is an important instrument to assess risk exposures as well as for a generic validation of the RSA results. The detection and reporting of operational losses is a responsibility of all Employees of the Group, the process owners playing a crucial role in the promotion of these procedures within the context of the processes for which they are responsible. The identified events in which the losses, effective or potential, exceed the defined materiality limits (for each geographical area) are characterised by the process owners and process managers of the processes to which the losses are related, including the description of the respective cause-effect and, when applicable, the valuation of the loss and the description of the improvement action identified to mitigate the risk (based on the analysis of the loss cause). For losses of amounts exceeding certain thresholds, “Lessons Learned” reports are presented to and discussed at the specialised Compliance and Operational Risks Commission). The lessons learned reports include an action plan to mitigate the risks that led to the losses, where appropriate. The following graphs present the profile of the losses captured in the respective database in 2023: LOSSES AMOUNTS DISTRIBUTION By cause 2023 REPORT & ACCOUNTS 148 | LOSSES AMOUNTS DISTRIBUTION # of events by amount range LOSSES AMOUNTS DISTRIBUTION By business line Regarding the distribution of losses by cause, the weight of those relating to 'External risks' and 'People risks' totalled around 72.5%, corresponding essentially to external and internal fraud events, respectively. This distribution of losses does not include the accruals relating to legal cases of foreign currency mortgage loans from Bank Millennium (Poland), which are allocated to the year of registration of the global event in question (2022) and was influenced by a significant increase in losses due to external fraud in 2023, caused by events related to frauds in credit operations in Poland and Mozambique. In what concerns the distribution of losses by amount range (in number of losses), there was no change on the typical profile of the distribution of operating losses in 2023. Finally, regarding the distribution of losses by business line, the weight of losses for 'Retail banking' was much lower than in 2022 (which was of 90.2%), in contrast to the weight of ‘Payments and settlements’ and ‘Trading and sales’ which, together, reached a weight of around 21.3% (c. 5.0% in 2022). The increase in the weight of these segments was caused, mainly, by an event in Poland relating to a product with high FX risk that has been discontinued for some years. 2023 REPORT & ACCOUNTS |149 Key risk indicators (KRI) KRI provide alerts concerning changes in the profile of the operational risks or in the effectiveness of controls, thus enabling to identify the need to introduce corrective actions within the processes, in order to prevent potential risks from materialising into losses. These indicators currently encompass all processes in the main Group operations (Portugal, Poland and Mozambique). Processes management also uses Key Performance Indicators (KPI) and Key Control Indicators (KCI), the monitoring of which, even if oriented towards the assessment of operative efficiency, also contributes for the detection of risks. Business continuity management At the beginning of 2023 in Portugal, the Bank began a project to renew and overhaul its Business Continuity Management System (SGCN), with the aim of simplifying and optimising its operating and governance models. The initiatives developed required the necessary participation of the various areas of the Bank that play a relevant role in Business Continuity Management (BCM): information and communication technologies (IT Division), information security (Information Security Division), corporate and customer communications (Communication Division), operational risk (Risk Office) and other business and/or support areas. The following activities were completed as part of the project: • The assessment of the SGCN's current level of maturity in relation to best practices and current regulations; • Review of risk scenarios to be considered in business continuity planning; • The redesign of the operating and governance models in line with the latest developments and threats identified; • Definition of a new BIA (business impact analysis) methodology for analysing/assessing the severity of potential impacts and inclusion of an intermediate phase for assessing the impact of risk associated with critical resources (RIA – risks’ impact analysis); • The development of a 'proof of concept' to test the suitability of the ongoing reformulation, specifically in terms of the degree of scenarios considered and the priorities defined for recovery; • The revision and creation of normative documents to support the SGCN. At the end of 2023, the following activities of this revamping were still in deployment: • Definition and approval of the test plan (in accordance with the revised BCM definitions), aligned with the areas responsible for critical resources; • Creation of training content and definition of a global training plan for employees, together with the Human Resources Department; • Finalising the preparation and publication of business continuity plans associated with scenarios and the respective critical resources affected. The revamping of the SGCN is expected to be concluded within the first half of 2024. In Poland, as usual and along the established lines, business continuity management was assessed in the 1st half of 2024 by carrying out a business impact analysis (BIA) for the risks of 91 operational processes (including 2 new ones), the results of which were presented to Bank Millennium's Processes and Operational Risk Commission. This exercise resulted in no changes in the severity of the impacts analysed. In the first half of the year there was also an inspection visit by the Polish Central Securities Depository (KDPW), which resulted in a positive assessment of the Bank's alternative spaces for continuing its operations. In the last quarter of the year, tests and workshops were carried out on the backup facilities and infrastructure (equipped with 17 workstations, 2 hot desks and printers), which were completed with no remarks. In what concerns the remote-working tests (which covered entire units and not just their critical positions, in order to achieve results without any involuntary influence from those who remained at the office), these involved 293 employees from 72 units and were completed with a 96.93% level A assessment (without any restrictions in terms of the full execution of current activities) and a 3.07% level B (normal execution of activities, despite some minor limitations, relative to systems or equipment). 2023 REPORT & ACCOUNTS 150 | In Mozambique, in the first half of 2023, the business continuity team of Millennium bim was mainly involved in documentation management, pursuing the review the Business Recovery Plans of the organisational units involved in critical processes, in terms of human and technological resources. Regarding the equipment of alternative spaces, efforts were made to provide IT capabilities for those premises, along with the capacity to mobilise employees in up to 24 hours (as it existed before the pandemic), as a recognition of the need to proceed with integrated exercises, with evacuation drills and the provision of technological means, within the defined recovery period. In the second half of the year, business continuity management at Millennium bim focussed on reviewing and validating the BIA of critical processes with the respective Process Owners, with a view to align process recovery requirements for the units involved in those processes. An analysis of cybersecurity was also carried out during the second half of 2023, to take specific preventive actions against this disruptive threat within the scope of the SGCN. 17 Millennium bim units were involved in the two recovery exercises carried out in 2023 (alternative location, each lasting 3 days), using alternative technological processing resources for the processing of Cards, POS and of the Accounting Control Centre team that manages the electronic currency interoperability process. Insurance contracting The contracting of insurance for risks related to assets, persons or third-party liability is another important instrument in the management of operational risk, where the objective is the transfer - total or partial - of risks. The proposals for the contracting of new insurance are submitted by the process owners under their respective duties for the management of the operational risk inherent to their processes, or are presented by the head of area or organic unit, and then analysed by the Compliance and Operational Risks Commission and approved by the EC. 2023 REPORT & ACCOUNTS |151 Legal, Compliance, Conduct and Financial Crime risks Banco Comercial Português´s activity is governed by operating principles and rules that ensure a good conduct, following the best international practices and adopting the appropriate measures in terms of preventing compliance and conduct risks. With the purpose of permanently adapt its internal practices to the best market practices, to the evolution of Banking activity, and to society as a whole, the Bank regularly reviews its internal regulations and procedures to safeguard that the conduct of its Employees is always guided by highest ethical principles, of satisfaction and protection of the interests of the client and the Bank, in the pursuit of sustainable profitability. The Compliance Office strengthened the monitoring of the Bank’s activity and internal conduct, by implementing a system for monitoring potential situations of conflicts of interest, covering various aspects of this issue such as operations with related parties, credit operations, development of extra-professional activities and the receipt of gifts by Employees. To comply with the relevant legal and regulatory norms related with Anti Money Laundering and Counter Terrorism Financing (AML/CFT), as well as to safeguard the compliance with best international practices on this matter, the Bank has a set of policies, procedures and systems that ensure an effective control of the financial crime risk prevention, also ensuring an operational model that allows the Bank to identify, assess and mitigate the potential risks inherent to the activity of its Clients, non-Clients and business relationships established with one or the other. The impact and relevance of this risk in the Banking activity developed, compels the Bank to address this risk in multiple dimensions and on a continuous basis, whether in the establishment of new business relationships or in the continuous evaluation of an already established business relationship. Through a risk-based approach (RBA) for the assessment and monitoring of its business relationships or occasional transactions execution, the Bank complies with all the required duties enshrined in Law no. 83/2017, of 18 of August, like for example, due diligence, abstention, refusal or communication. For an effective and efficient AML/CFT activity, the Bank defines a set of policies and procedures that are supported by a wide range of information systems, of which it is worth highlighting: • Business Relations monitoring and alerts system; • Financial transactions monitoring system; • Entity filtering system; • New Business relationships validation system; • External information platforms. Pursuing the continuous improvement of the internal control processes, these risks’ management system was enhanced along 2022, to enable the Bank to respond adequately to the demands of the future Banking business with origin in market dynamics changes and regulation evolution. From the set of initiatives, it is worth mentioning the following: • The continued strengthening, training and specialization of the Compliance Office teams within the scope of AML/CFT model, in its various dimensions. • The main legislative and regulatory highlights focused on the conflict resulting from the invasion of Ukraine by Russia, due to the continued establishment of sanctions and embargoes and in preventing new and emerging ML/CFT risks. • As a result of the establishment of the referred sanctions and embargoes, development of enhanced controls to identify transactions and risk entities, ensuring compliance with restrictive measures. • Reinforcement of the model of an integrated view of Customers in the business relationship with the Bank and the inherent risk factors, in order to strengthen effectiveness in the fulfilment of AML/CFT duties, mainly identification and diligence, control, examination and communication. • Continued development of automatic solutions that promote alignment and cooperation between the Bank's first and second lines of defence in fulfilling the various AML/CFT duties. • Changes to the internal rules governing the approval of new products, including the concept of "grouped approval" for Investment Funds and ETFs, a review of the concepts of Investment Product and Target Market (positive and negative), scenario analyses of financial products and structured deposits produced by the Bank detailed in the rules, and the obligation to present concrete quantitative data on sales outside the positive target market, i.e. within the product's negative target 2023 REPORT & ACCOUNTS 152 | market in the annual formal monitoring process, among other small improvements aimed at strengthening the process. • Updating of the Group's Code of Conduct, with the following most significant changes: • Two general principles of conduct have been added for the entities covered by the Code: sustainability and confidentiality. • Reinforcement of corruption prevention practices, formalising new internal regulations on the prevention of corruption and related offences in line with the latest practices in the industry. • Adjustments to the criteria relating to "liberalities", making them more demanding by seeking to differentiate between liberalities in accordance with social custom and strictly prohibited liberalities related to the Bank's activity. • Added point on training, so that employees are always up to date through the internal training and dissemination provided by the Bank. • A new provision has been added on the pricing of each product, namely that it must be drawn up on the basis of public information, reinforcing the prohibition of any practices typified in the law that are intended to distort or restrict competition in an appreciable way. • The way in which communications with clients and other external organisations should be carried out was reviewed. • Adjustment of the requirements for exclusivity in the provision of work, bringing the Code into line with article 129 of the Labour Code. • Reinforcement of the Bank's regulatory framework on the subject of corruption prevention, with a Plan for the prevention of corruption risks and related offences of BCP Group entities in Portugal, which defines, among other provisions, the governance model, prevention mechanisms, training and culture of corruption prevention, corruption circuits and reporting and evaluation system. • As provided for in the evaluation system of the aforementioned plan, the annual report on the implementation of the internal control system for combating corruption was issued and is available in the public information section. • Updating, within the scope of Banco de Portugal Notice 3/2020, information on the matters provided for in its Annex, in a format accessible to all employees, including matters on the Bank such as its shareholder, organisational and governance structure, its internal control system, its key function holders, the characterisation of its business, its Code of Conduct, among others. • Implementation of the Training and Communication Plans on compliance matters for all the Bank's Employees and commercial structures, with the most important aspects to be considered, both in terms of the risk of financial crime and in terms of other compliance and regulatory risks. 2023 REPORT & ACCOUNTS |153 Market risks Market risks are the potential losses that may arise within a portfolio as a result of changes in interest or exchange rates, and/or in the prices of the different financial instruments within the portfolio, taking into account not just the correlations that exist between those instruments but also their volatility. The following management areas are defined for each Group entity for the objectives of profitability analysis and market risk measurement and control: • Trading - Management of positions aimed at achieving short-term gains, through sale or revaluation. These positions are actively managed, tradable without restriction and may be valued frequently and accurately. These positions include securities and derivatives resulting from of sales activities; • Funding - Management of institutional funding (wholesale funding) and money market positions; • Investment - Management of all positions in securities to be held to maturity (or for an extended period) or positions not tradable on liquid markets; • Commercial - Management of positions arising from commercial activities with Customers; • Structural - Management of balance sheet items or operations which, due to their nature, are not directly related to any of the management areas referred to above; and • ALM - Assets and Liabilities Management. The definition of these management areas enables effective management separation between trading and banking books, as well as a proper allocation of each transaction to the most suitable management area, based on its context and strategy. To guarantee that the risk levels incurred in the Group’s various portfolios conform to the specified levels of risk tolerance, various market risks limits are established, at least yearly, and are applicable to all portfolios of the risk management areas where the risks are incident. The Risk Office monitors these limits daily (and intra-daily in the case of financial markets areas). Stop loss limits are also set for the financial markets’ areas, based on multiples of the risk limits defined for those areas, aimed at limiting the maximum losses that might occur. If these limits are breached, a review of the strategy and of the assumptions relative to the management of the positions in question is mandatory. Trading Book market risks The daily measurement of generic market risk (relative to interest rate risk, exchange rate risk, equity risk and price risk of credit default swaps) uses a VaR (value-at-risk) model, considering a time horizon of 10 business days and a significance level of 99%. Additionally, the Group uses an integrated market risk measurement that monitors all relevant risk subtypes. This measure includes the assessment of generic risk, specific risk, non-linear risk and commodity risk. Each risk subtype is measured individually using appropriate risk models and the integrated measurement is built from the measurements of each subtype without considering any kind of diversification between the subtypes (worst-case scenario approach). For non-linear risk, an internally developed methodology is applied, replicating the effect of main non- linear elements of options on P&L results of the different portfolios in which these are included, similarly to what is considered by the VaR methodology, using the same time horizon and significance level. Specific and commodity risks are measured using standard methodologies defined in the applicable regulations, with an appropriate change of the time horizon considered. The table below presents the amounts at risk for the Trading Book, in December 31, 2022 and December 31, 2023, as measured by the methodologies referred to above: 2023 REPORT & ACCOUNTS 154 | (Thousand of euros) 31 December 2023 Max of global risk in the period Min of global risk in the period 31 December 2022 Generic Risk (VaR) 888 4,251 684 1,322 Interest rate risk 587 4,458 555 1,011 FX risk 551 1,438 566 841 Equity risk 499 218 80 585 Diversification effects -748 -1,864 -518 -1,114 Specific Risk 624 428 16 13 Non-linear Risk 0 0 0 0 Commodities Risk — — — — Global Risk 1,512 4,679 700 1,335 VaR model monitoring and validation Validation of the internal VaR model’s appropriateness for assessment of risks involved in the positions held is conducted over time, with different scopes and frequency, including back testing, diversification effects estimation and analysis of risk factor comprehensiveness. The VaR model’s hypothetical back testing exercise for the Portugal’s Trading Book, during 2023, resulted in four negative excesses (and four positive) over the results predicted by the model in 257 days of observation. Hence, in terms of the frequency of excesses verified, the back-testing results validate the model as appropriate for measuring the risk at stake. Trading Book Stress Tests In addition to VaR assessment, the Group continuously tests a broad range of stress scenarios, analysing the respective results to identify risk concentrations not captured by the VaR model. The results of these tests on the Group's Trading Book, as of December 30, 2023, in terms of impacts over this portfolio’s results, were the following: (Thousand EUR) Negative impact scenario Impact STANDARD SCENARIOS Parallel shift of the yield curve by +/- 100 bps + 100 bps -2,193 Change in the slope of the yield curve (for maturities from 2 to 10 years) up to +/- 25 bps - 25 bps -14 4 combinations of the previous 2 scenarios + 100 bps & + 25 bps -2,181 + 100 bps & - 25 bps -2,206 Variation in the main stock market indices by +/- 30% +30% -2,069 Variation in foreign exchange rates (against the euro) by +/- 10% for the main currencies and by +/- 25% for other currencies -10%, -25% -429 Variation in swap spreads by +/- 20 bps +20 bps -49 NON-STANDARD SCENARIOS Widening/narrowing of the bid-ask spread Widening -1,009 Significant vertices (1) VaR w/o diversification -1,165 VaR w/ diversification -464 Historical scenarios (2) 15 July, 2011 -2,873 27 January, 2012 -3,577 (1) Scenarios in which the more adverse variations of the last seven years, relative to the portfolio's five most significant risk factors for VaR, are applied to the current portfolio. (2) Scenarios in which past extreme markets variations are applied to the current portfolio; in this case, the significant dates refer to the Eurozone Sovereign Debt crisis (from 2010 onward) These results show that the exposure of the Group’s trading book to the different risk factors considered remains relatively limited and that the main adverse scenarios to be taken into account refer to a general 2023 REPORT & ACCOUNTS |155 increase in interest rates, either a parallel shift or accompanied by a change in the slope of the yield curve. In what concerns the non-standard scenarios, the main loss case refers to the historical scenarios. Interest rate risk in the Banking Book The interest rate risk arising from the Banking Book operations is assessed by the Bank in two complementary ways: the portfolio’s economic value method (EVE) and the financial margin sensitivity method (NII), through a risk sensitivity analysis carried out every month, for the universe of operations included in the consolidated balance sheet of the Group, broken down by the currency of exposure. Variations of market interest rates influence the Group's net interest income and the economic value of the Group, both in the short term – affecting the Bank’s NII – and in the medium/long term, affecting the balance sheet economic value (EVE method). The main risk factors arise from the repricing mismatch of the portfolio positions (gap risk) which may cause direct or indirect financial losses in the Banking Book, due to changes in interest rates that have different impacts over assets and liabilities’ classes, making the Bank vulnerable to variations of the yield curve. In turn, the changes in interest rates may alter the behaviour profile of Clients, inducing pre- payments/withdrawals in assets and liabilities, including the exercise of options’ rights incorporated in the products’ design (behavioural and optional risk). Additionally, there is the risk of unequal variations in different reference rates with the same repricing period (basis risk). In order to identify the exposure of the Group's Banking book to these risks, the monitoring of the interest rate risk takes into consideration the financial characteristics of each of the relevant contracts, with the respective expected cash-flows (principal and interest, without the spread component, being projected according to the repricing dates, thus calculating the impact on economic value resulting from alternative scenarios of change of market interest rate curves. The impacts stemming from the Clients’ behaviour are also considered, in particular, for the products for which this is especially relevant – namely, for products without defined term (checking accounts, revolving credit, fixed rate credit lines) – as well as the impacts resulting from changes in contractual cash flows (credits prepayments) and impacts of any potential prepayments on credits with defined maturity. The result of this analysis for a +100 basis points (b.p.) change in the level of Euro interest rates (for all maturities, i.e., assuming a parallel shift of the yield curve), in the Banking Book portfolio as at 31 December 2023, found a positive impact on the balance sheet´s economic value of around €19.1 million. On the other hand, the impact of a generalized decrease in euro rates of -100 bps would be around -27.2 million euros. Complementing the previous approach, the Bank calculates monthly the impact on net interest margin projected for the following 12 months, due to changes in market interest rates (NII method). For this purpose, all assets, liabilities and off-balance products that generate interest are considered and the calculation of interest cash flows is performed based on the repricing and amortization characteristics of the products and on yield curves for 12 months. This exercise assumes a static balance for 12 months in which, for each amortization, an exposure with the same features of original maturity and price is generated. To capture the net interest margin sensitivity, several simulations are processed, corresponding to 10 different scenarios of the market’s interest rates evolution. Considering a variation in market interest rates combined with the scenario for the coefficients that transmit the market variations over the deposit´s rates and other interest-generating liabilities ('betas'), the evolution of the sensitivity of the net interest margin is assessed. Hence, for a variation in interest rates of +100 b.p. on December 31, 2023, on a consolidated basis, the net interest income would increase by around 131.7 million euros, with the sensitivity to a decrease of 100 b.p. of about -132 million euros. The presented values are indicative and very dependent on the pace of transmission of the interest rate increase to balance sheet items whose price is not directly indexed to a market benchmark. 2023 REPORT & ACCOUNTS 156 | Foreign exchange and equity risks of the banking book The foreign exchange risk of the banking book is transferred internally to the Trading area, in accordance with the Group’s risk specialization model for the management of balance sheet foreign exchange risk. Structural foreign exchange exposures, including those resulting from financial holdings in subsidiaries, are not transferred and may be covered by market operations, in line with the defined strategy for managing structural foreign exchange risk, aiming at hedging against volatility in the CET1 ratio stemming from exchange rates changes. On 24 March 2023, the Group has been formally granted permission to exclude these positions of a structural nature, deliberately taken or maintained by the Group to hedge against the adverse effect of exchange rates on the capital ratio, from the calculation of the net open currency positions used for calculating the capital requirement for foreign exchange risk. Excluding the financial holdings from the participations in the foreign subsidiaries, the exposure to FX risk is quite limited, corresponding to 4.3 million euros in terms of VaR, as of December 31, 2023. Regarding equity risk, the Group maintains a set of small size and low risk equity positions, primarily in the investment portfolio, mainly resulting from execution processes as payment. Management of these positions is conducted by a specialized area of the Group, with risk controlled through defined metrics and limits for market risks’ control. 2023 REPORT & ACCOUNTS |157 Liquidity risk Liquidity risk consists of the Group's potential inability to meet its financing repayment obligations without incurring significant losses, either due to onerous financing conditions (funding risk) or by selling assets at lower than market values (risk of market liquidity). The Consolidated Liquidity Plan, which forms an integral part of the annual budgeting process and is formulated at the level of the Group and for the main subsidiaries, includes the projection of the wholesale funding structure, including the use of market financing, and also the forecast of the internal and regulatory liquidity indicators, ensuring its compliance with the regulatory and internally defined requirements. The preparation of this plan is coordinated by the Group Treasurer, and its execution is continuously monitored throughout the year, with the respective revision being carried out whenever necessary. Throughout 2023, the Group's three operations - BCP, Bank Millennium e Millennium Bim - maintained robust liquidity positions, supported mainly by retail deposit bases with proven stability and which allowed all liquidity indicators, regulatory and internal, to be maintained comfortably above the minima required. At the end of the year and on a consolidated basis, the regulatory liquidity coverage ratio (LCR: Liquidity Coverage Ratio) reached 276%, vs 212% in December 2022, representing a surplus of 16 billion euros (compared to 10 billion euros on December 31, 2022), well above the minimum regulatory requirement of 100%. The other short-term liquidity indicator included in the group's Risk Appetite Statement (RAS), which represents the degree of coverage of customer deposits by the liquidity buffers available for discount at European central banks, also had a positive evolution, from 42% to 45%. From a structural liquidity perspective, the Group continued to reinforce its stable funding base, characterized by the high weight of customer deposits in the funding structure, complemented by medium and long-term instruments, mostly composed by MREL related issuances. The relevant regulatory ratio (NSFR: Net Stable Funding Ratio; Article 428 of Regulation (EU) 2019/876) reached 167% in December 2023, vs 154% one year before, largely above the regulatory minimum of 100%. The loan to deposits ratio, also a RAS indicator evolved in the same manner towards greater conservatism, with a reduction from 73% to 70%. In Portugal, following the significant migration of deposits to non-bank savings products that occurred mainly in the first quarter of 2023, the volume of customer funds showed a stable behaviour throughout the 2nd half of the year, allowing the Bank to protect its market share. In what concerns the wholesale funding structure, BCP carried out in January 2023 the early repayment of the second tranche of the Targeted Longer-Term Refinancing Operation III (TLTRO III, "T LTRO III" in the English abbreviation, in the gross amount of 600 million euros), with no significant impact on the liquidity risk indicators. In September 2023, after regaining investment grade status by the four main rating agencies, BCP returned to the market, placing an issue of senior preferred debt eligible for MREL (Minimum Requirements for Own Funds and Eligible Liabilities) under its Euro Note Program, in accordance with its Liquidity Plan for 2023. The issue, in the amount of 500 million euros, has a term of 3 years, with an option for early repayment by the Bank at the end of the second year, an issue price of 99.825% and a fixed interest rate of 5.625%, per year, during the first 2 years (corresponding to a spread of 1.90% over the 2-year mid-swaps rate). In the third year, the interest rate will result from the sum of the 3-month Euribor with a spread of 1.90%. The issue was placed among a very diversified base of institutional investors, with demand exceeding the transaction amount by more than 3 times. The high demand and profile of investors involved in the issue made it possible to narrow the spread by 30 basis points during the execution phase, also reflecting an excellent market response to the Bank's recent rating upgrades. The evolution described above is reflected in the table below, which represents the evolution of the wholesale funding (net) in 31 December 2022 and 31 December 2023, in terms of each of the instruments used: 2023 REPORT & ACCOUNTS 158 | Dec. 23 Dec. 22 (Millions euros) Interbank monetary market (Net) -103 -157 -34.4% ECB (Net) -2051 -2574 -20.3% Repos -267 0 —% Loan agreements 325 377 -13.8% Senior Debt 2350 1350 74.1% Subordinated Debt 1802 1777 1.4% Credit-Linked Notes 232 0 —% Total 2289 773 196.2% The liquidity buffer available for discount with the ECB stood at 27.9 billion euros at the end of 2023, 1.4 billion euros higher than a year earlier, to which contributed the favourable evolution of cash flow from operations, the reduction in derivative margin accounts, the placement of the MTN issuance and the market price increase of assets integrated in the portfolio of assets discountable with the ECB, which offset the impacts in the opposite direction of the evolution of the commercial gap and the reversal of haircuts applicable to eligible assets at the values in force before the extraordinary measures taken by the ECB following the COVID-19 pandemic. At the end of 2023, the liquidity buffer comprised a long position of 2.1 billion euros on the ECB, slightly lower than that observed a year earlier (2.6 billion euros). ECB liquidity buffer (Billion Euros) Throughout 2023, Bank Millennium showed significant growth of 11% in its retail deposit base. The operation's liquidity position was further reinforced by the placement on the market of a senior non- preferred issue of 500 million euros. Initially placed with an amount of 400 million euros, it was subsequently increased by an additional amount of 100 million euros. It has a maturity of four years and a remuneration of 9.875% and qualifies for MREL purposes, thus representing the fulfilment of another stage of the institution's recovery plan. Millennium bim continues to display a resilient liquidity position, supported by a robust buffer discountable at the respective central bank, despite the strong increase in minimum mandatory reserve rates in national and foreign currency imposed by the respective central bank in the first half of 2023. In consolidated terms, the refinancing risk of medium and long-term instruments will remain at low levels over the next three years, with annual values with no material expression. The conclusions of the ILAAP process reiterate the adequacy of the liquidity and is low risk management process, as well as the compliance of its practices with the requirements defined by the supervision. 2023 REPORT & ACCOUNTS |159 Pension Fund risk This risk arises from the potential devaluation of the assets of the Fund associated with the Defined Benefit Plan or from the reduction of its expected returns as well as from actuarial differences that may occur from the evolution of demographical factors, in relation to the actuarial assumptions considered. Confronted with such scenarios, the Group may have to make unplanned contributions in order to maintain the benefits defined by the Fund. The responsibility for the regular monitoring of this risk and the follow-up of its management lie with the Pension Funds Risk Monitoring Commission. In 2023 the BCP Group Pension Fund had a net performance in commissions of +7%. All asset classes contributed positively to this performance, with equity and fixed-rate securities performance standing out, with a contribution of 2.1% and 4.5%, respectively. In the equity component, European equities showed a return of +5.7% and international equities +19%. The portfolio made a significant change in terms of investment policy, where exposure to equities was reduced to 20%, which represented a reduction of 5% compared to the previous central allocation, although, with the exception of January, the tactical positioning throughout the year showed a slight overexposure to this class. In terms of the Fixed Rate component, it is also worth noting the change in investment policy with a substantial increase in both the level of exposure and the level of its composition, now composed of public debt (49.5%) and a corporate debt component (5%). In this way, the portfolio has reduced its profile and risk, since the long-term interest rate is one of the main vectors for determining liabilities. With reference to the evolution of the 10-year rate in Germany, which went from 2.57% to 2%, the discount rate for the calculation of the Fund's liabilities has also been updated. Thus, the discount rate on 31 December 2022 stood at 4.17%, falling to 4% in June 2023 and to 3.53% at the end of 2023. As at 31 December 2023, the pension fund's liabilities coverage was over €390 million, corresponding to 13% of total liabilities. 2023 REPORT & ACCOUNTS 160 | Integration of ESG Factors in Risk Management In its risk classification, Millennium BCP recognises the ESG category which includes factors associated with the climate and environmental components, and also with social and governance aspects. These factors are not considered separately; in fact, they are seen as elements likely to affect positively or negatively the financial performance and solvency of the Bank's customer’s and counterparties. This way, the materialisation of their impacts occurs by means of the “traditional” categories: credit risk, market risk, operational & reputation risk, liquidity and financing risks. Within this context, and with the purpose of promoting the integration of ESG factors in risk management, the Bank implemented a set of processes and methodologies to identify, assess, manage and monitor the impact of the ESG category in overall risk, in accordance with the framework and policies already established for the remaining financial and non-financial risks. Governance Model The governance model for risks arising from ESG factors follows a structure based on three lines of defence which, under the leadership of the Board of Directors (and respective delegations on the Executive Committee), ensure its adequate assessment and management. The first-line functions comprise all the departments and business areas that interact with the Bank’s customers, counterparties and suppliers, collect the information and data that support the assessment of their risk profiles (and of their respective operations) and structure the commercial solutions with characteristics associated with the ESG or with the promotion of control of their impacts on the Bank's risk profile. The Sustainability Function fits in the first line of defense and its responsibilities include: • the overall management of the sustainability strategy and plans of Millennium BCP and of its financial group; • the development of policies, methodologies, analyses and reports that address ESG issues; • the management of commitments and external communications by the Bank and the Group in this area; and • the direct orientation and operational support to the first and second lines of defence in the performance of their main responsibilities in this scope. In the second line of defence, the responsibility for risk control, is assumed by the Risk Office and by the Compliance Office. These functions ensure the procedures for the design, implementation of the policies/ methodologies/ risk management models, which are paramount in keeping the risk profile of the Group in appropriate levels. Among other, these responsibilities, include: • Integration of the ESG dimension in risk appetite (Risk Appetite Framework - RAF); • Syndicating with the Sustainability Function the proposal of ESG metrics to be included in the Risk Appetite Statement (RAS); • Carry out stress tests focused on climate and environmental risk factors; • Introduction of the ESG dimension in capital and liquidity adequacy exercises; Specifically in terms of compliance, we emphasise the following controls: • Reporting, disclosure and prudential obligations; • Design and approval of new products, especially in the cases of ESG product design and labelling; • Incorporation of ESG-related conditions and requirements into the forms and contracts; • Ensuring the timely application of the legal and regulatory dispositions related to ESG; • Potential for conflicting interest or litigation in the provision of ESG-related services and products. The third line of defence assumes responsibility for the independent review of all ESG aspects through the annual work plans of the Internal Audit Function. 2023 REPORT & ACCOUNTS |161 The Executive Committee is responsible for ensuring that ESG policies and strategies are followed, through the mobilization of resources and execution of the necessary business and operational actions. The Sustainability Commission assists the Executive Committee in integrating the principles of sustainability in the decision and management processes, being also responsible for assessing and approving the Sustainability Master Plan initiatives, its alteration and adaptation whenever requires for its implementation, and its monitoring. Within the scope of the Committees of the Board of Directors, the Committee for Corporate Governance, Ethics and Sustainability is the body responsible for recommending the adoption by the Board of Directors of policies in line with ethical principles and social responsibility and best practices in matters of corporate governance and sustainability, but also for monitoring the evolution of the Sustainability Master Plan and the Corporate Social Responsibility Plan and issuing an opinion on the annual corporate governance and sustainability reports. The Committee for Risk Assessment, among its competences and attributions, is also responsible for monitoring ESG risks, including climate risks and advise the Board of Directors in terms of the identification, management and control of ESG risk factors, while monitoring the Group’s risk appetite and underlying performance, as well as supervising the adequacy of the ESG internal control system, with special focus on a) the effectiveness of the risk management system to deal with the ESG risk drivers; and b) dealing with any instance of reputational risk related to ESG to which the Group may be associated to (directly or indirectly). Identification of ESG risks Climate change and environmental degradation factors are elements that can affect economic activity through the mitigation and adaptation effort, as well as the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and the protection/restoration of biodiversity (cf. EU Taxonomy). The materialisation of these risks fundamentally stems from the exposure of Millennium BCP's banking portfolio to customers, counterparties and invested assets whose performance may be affected or contribute to the negative impacts of climate change and other environmental factors. These factors may generate negative financial impacts which are identified and assessed by means of two main dimensions: • Physical risks factors: arising from the physical effects of climate change and environmental degradation. They should be categorized as a) severe risks, if they arise from extreme weather events such as wildfires or floods; b) chronic risks, if they arise from progressive changes in weather and climate patterns or from a gradual loss of natural ecosystems. • Transition risk factors: are the risks of any negative financial impact arising from the effort, in progress or to happen in the future, of transition into a low-carbon and environmentally sustainable economy. These may result, for example, from technological changes, the impact of public policies or behavioural changes in terms of demand for goods or services (including banking services). • The biodiversity or nature-related risks: The depreciation of natural capital, which in this context encapsulates the environmental-driven risks, is another key component of a holistic approach to C&E concerns. Natural capital refers to the world’s stocks of natural assets which include geology, soil, air, water and all living things as well as the organization and distribution of ecosystems. The depreciation of natural capital undermines the ability of nature to provide ecosystem services (provisioning services, such as food, raw materials and fresh water; maintenance and regulating services, such as climate, water and air quality regulation, pollination, and pest and disease control; and cultural services, supporting recreation, mental and physical health, and spiritual and religious values) on which the Human society, economies and other species rely. Natural capital degradation can have chronic as well as acute economic effects. The materialisation of social risks is also assessed, considering the issues related with rights, well-being and interests of persons and communities and include factors such as (in)equality, health, diversity, inclusion, labour relations, workplace health and safety, human capital and communities. In addition, the governance risk factors are also identified by Millennium BCP, through issues relating to leadership, executive remuneration, shareholder rights, corruption and bribery, management and prevention of conflicts of interest, quality of internal control and independent reviews/auditing, transparency and good tax practices, for example. A methodology for assessing the materiality of ESG risks was developed in order to determine the potential impact of those risks on the Bank’s profile. 2023 REPORT & ACCOUNTS 162 | Management and monitoring principles ESG risks management and respective strategy follows a different logic compared to 'traditional' risks, which are based on short-term timeframes. In contrast, the materialization of ESG risks is expected to occur over extended timeframes, which is why the establishment of strategy and risk appetite follows different timeframes. For example, if the assessment of physical (severe) risks can determine an action strategy more focused on the short term (e.g., considering the establishment of additional mitigation measures, at the level of policies for granting credit and insurance policy), the transition risks justify a more structural approach, based on collecting information, evaluating customers and monitoring their performance over time. From this perspective, Millennium BCP's management of ESG impacts follows the following principles: • Establishment of a responsible corporate financing policy, which excludes or conditions the Group's operations in sectors and/or activities with greater environmental and social impact. • Integration of the strategy for managing risks arising from ESG factors into the Bank's global sustainability plan, which steers the integration of the ESG dimension into business processes, establishing goals, timelines and a model for controlling proper observance. • Communication Transparency: The Bank publicly discloses its sustainability objectives and key practices, as well as its management of ESG (Environmental, Social, and Governance) impact factors. This allows all stakeholders to assess the robustness of its approach, including its exposure to risks arising from ESG factors. • Regular Monitoring of Exposure to Risks Arising from ESG Factors: This is done through established management information routines for each risk category. • Internal Standardization of ESG References: This involves implementing a corporate taxonomy that enables the identification and classification of exposures demonstrating characteristics that actively support the transition of the Portuguese and European economies. • Focus on Credit Risk Management: This is achieved through models that facilitate the integration of the ESG dimension in the risk assessment of the bank's key companies/clients. This ensures that business decisions incorporate an evaluation of the primary impacts of ESG factors. • Collection and Structuring of Information: Utilizing public sources and information provided directly by clients, this approach aims to enhance understanding of clients' environmental performance and potential financial impacts associated with any limitations in that performance. The operationalization of these principles is facilitated through an internal policy for managing risks arising from ESG factors, which establishes the following key risk tools: • Regular assessment of the materiality of risks arising from ESG factors to confirm alignment with risk appetite and the need for implementing mitigation actions. • Methodologies for assessing risks arising from ESG factors integrated into credit risk assessment models. • Risk classification methodologies at the portfolio level, allowing the identification of sectors, companies, and exposures most susceptible to transition and/or physical risks and/or nature-related. • Models for quantifying financed greenhouse gas emissions, fostering strategic discussions regarding the management of these emissions and their alignment (in the long term) with the goals of the Paris Agreement. • Sensitivity analyses and stress tests focusing on climate risks. Stress testing with a focus on climate risk The Bank uses sensitivity analysis methodologies and stress tests on the risks arising from ESG factors (with a focus on the climate risk component). Considering the horizons of materialization of ESG risks, this is an important risk management technique, which allows the assessment of the impacts of climate change (and respective scenarios) on the financial variables that affect the value of Millennium bcp's banking portfolio. Based on their results, new exposures at risk may be identified that require the Bank to take additional management measures to mitigate the impacts of climate risks. 2023 REPORT & ACCOUNTS |163 Models validation and monitoring This function is ensured by the Models Monitoring and Validation Office (GAVM), reporting to the Chief Risk Officer. GAVM acts as the second line of defence, within the scope of the model risk management framework, functionally independent from the areas that are responsible for the models (model owners and developers) and from the Internal Audit Division. Hence, an adequate functions’ segregation is assured. Its mission consists in monitor and validate risk quantification methodologies and internal models used in BCP and other Group entities in Portugal, as well as to independently ensure the assessment of the quality and adequacy of the risk management framework in what concerns internal models, metrics and completeness of the associated data, according to the Model Risk Management (MRM) framework. GAVM scope of action encompasses, inter alia, the validation of the methodologies and internal models for credit risk (including Probability of Default (PD), Loss Given Default (LGD), Credit Conversion Factors (CCF) and Expected Credit Loss (ECL) models, under the IFRS scope), market risk (in the trading book), interest rate risk in the banking book (IRRBB) and for the risks included in the ICAAP, as well as the regular monitoring of their performance and evolution. The results of the monitoring and validation exercises are reported to the Models Monitoring and Validation Sub-Commission and to the Risk Commission. Additionally, GAVM participates occasionally, depending on the agenda, in the Risk Assessment Committee (CAvR) to report the unit’s activity and annual plan’s execution. Besides the activities directly related with the monitoring and validation of models, in terms of their performance and quality, GAVM is responsible for the coordination of the MRM activities, including the maintenance of a complete repository of the internal risk models used by the Bank and its permanent monitoring and updating through the use of a model management and risk assessment tool implemented at the Bank to support the MRM framework. In 2023, several actions were carried out to monitor and validate the internal models in use by the Bank, including the regulatory report of the templates with the validation results of the credit risk internal models, according to the ECB instructions (“Instructions for reporting the validation results of internal models”). These actions aim, inter alia, to reinforce the confidence in the models, to monitor their performance and evolution, verifying their business adequacy and their compliance with the applicable regulatory requirements and best practices, as well as to reinforce the identification and adaptability to changes in their predictive quality. GAVM has the responsibility to maintain a robust and documented validation processes for internal risk methodologies and models, in line with current regulations. For this, it develops and applies validation procedures and methodologies capable of ensuring proper model assessments and the alignment with the applicable regulatory requirements, by reinforcing (i) the scope of validation exercises, (ii) the depth of analysis and (iii) the transparency and auditability of the work performed. As part of the model’s monitoring activities, GAVM also ensured, among others, the quarterly report to the Risk Commission regarding the performance and quality of the internal models used under the IRB and IMA approaches for, respectively, credit and market risk, the annual Model Risk Assessment (MRA) exercise applicable to all current IRB, IMA (Internal Models Approach) and IRRBB models, as well as the reporting of the regulatory Credit Risk Benchmarking exercise promoted by EBA. 2023 REPORT & ACCOUNTS 164 | Recovery Plan Complying with the applicable law - Directive 2014/59/EU and its transposition to the Regime Geral das Instituições de Crédito e Sociedades Financeiras (RGICSF) through Decree-Law 23-A/2015, from the 26th of March – the Group annually revises the Recovery Plan for its business and activities, in which a set of recovery options that could be implemented in a timely manner to respond to financial stress circumstances that may be originated by events of both idiosyncratic and/ or systemic order is identified. Considering that the Recovery Plan aims to restore the financial viability of the Group, several scenarios are defined, supported on hypothetical and forward-looking events, against which the impacts of recovery options, the Recovery Plan feasibility and the overall recovery capacity are tested. In order to monitor the performance of the Group’s business activity, a set of quantitative and qualitative key indicators is presented in the Recovery Plan, in line with the guidelines defined by the European Banking Authority (EBA). This set of indicators is permanently monitored, allowing for immediate management action whenever there are deviations that exceed pre-defined thresholds (also defined in the Plan), the report of which, to the Group’s management and Supervision Bodies, is mandatory. The priorities, responsibilities and specific measures to be taken in a capital and/or liquidity contingency situation are established in the Recovery Plan, which complements the Early Warning Signals (EWS) system, for the anticipation of the occurrence of possible crises, namely, of liquidity. Simultaneously, the Recovery Plan contains a ‘playbook’, intended to provide key information for rapid decision-making in a crisis, and prescribes the performance of dry-run exercises, with the aim of testing parts of the Plan and raising the Bank’s preparedness to implement it in a possible crisis scenario. The Recovery Plan includes components of Bank Millennium’s Recovery Plan (Poland) and information from Millennium bim’s Recovery Plan (Mozambique). It is aligned with the definition of the business continuity framework and its respective plans (see the Operation Risk section), the Communication Plan – towards the market and stakeholders (in contingency situations) and the results from the capital and/or liquidity adequacy assessment processes already mentioned (ICAAP e ILAAP). 2023 REPORT & ACCOUNTS |165 Ratings assigned to BCP The prospects for the Portuguese banking sector benefited from the significant improvement in Portuguese Republic's rating to the "A" rating category by the five Rating Agencies that assign rating to Portugal, reflecting, besides GDP growth above Euro area average coupled with low levels of unemployment and positive external balance developments, positive developments in the budgetary balance as well as public debt as percentage of GDP falling to below 100% in 2023 to which should be added the improvement of conditions in the Portuguese banking sector. The Portuguese banking sector’s asset quality and capitalisation have significantly improved since 2016, and this has materially strengthened the resilience of banks’ credit profiles. The banking sector is therefore less sensitive to foreign- investor confidence and asset-quality shocks than in the past. There was no material evidence of asset-quality deterioration for the Portuguese banks in 2023, despite a more challenging macro-economic environment than in 2022, due to slowdown in GDP growth, inflation-led pressure and the higher interest-rate environment. Profitability is expected to compare well with other southern European peers in 2024, due to high net interest margins, strong cost efficiency, and moderate cost of risk. Net interest income has been significantly boosted in 2023 due to a high share of variable-rate lending and limited repricing of deposits due to higher euro interest rates. Despite the expected interest rates decrease, Portuguese banks’ profitability should remain significantly higher in 2024 than in recent years. Portuguese banks’ capitalisation has strengthened on the back of significantly higher profitability and lower balance-sheet risks. Most Portuguese banks have generally been restrictive with capital distributions in the most recent years. BCP has made very significant progress in recent years: Asset Quality – Continuous improvement despite macroeconomic challenges. The NPE ratio in Portugal stood below the 3% at the end of 2023. Profitability – Strong operational efficiency supports improved profitability, despite the still high legal risk charges associated to CHF denominated loans in Poland. BCP's operational result compares well with most other medium- sized peers in southern Europe due to high operational efficiency and an efficient business model. Funding and Liquidity - Stable funding and adequate liquidity profile. Capitalization - Improved organic capital generation and adequate buffers over SREP requirements. Substantial strengthening of capital ratios. At the end of 2023, CET1 ratio stood at 15.4% and total capital ratio at 19.9%, representing an increase of 293bp and 310bp compared with the same period of 2022, reflecting the strong capacity to generate organic capital. Developments in 2023: BCP become Investment Grade by the four Rating Agencies that assign rating to BCP, after consecutive upgrade revisions during the year, which reflect BCP’s normalisation path. 2023 REPORT & ACCOUNTS 166 | Moody’s Standard & Poor's Baseline Credit Assessment ba1 Stand-alone credit profile(SACP) bbb- Adjusted Baseline Credit Assessment Ba1 Counterparty Risk Assessment LT/ ST A3 (cr)/ P-2 (cr) Resolution Counterparty Credit Rating LT/ ST BBB/A-2 Counterparty Risk LT / ST A3 / P-2 Issuer Credit Rating LT/ ST BBB-/A-3 Deposits LT / ST A3 / P-2 Senior Debt BBB- Senior Debt Baa2 / P-2 Senior Non Preferred BB+ Senior Non Preferred Ba1 Outlook Stable Outlook deposits / senior Stable Subordinated Debt - MTN (P)Ba2 Subordinated Debt BB Subordinated Debt Ba2 Additional Tier 1 B+ Additional Tier 1 B1(hyb) Other Short Term Debt P(NP) Covered Bonds Aaa Rating Actions Rating Actions On May 26, 2023, Moody's Rating Agency revised the Outlook from stable to positive. On November 22, 2023, Moody's Rating Agency upgraded the BCP's rating of deposits and senior unsecured debt. On April 17, 2023, S&P Global Rating Agency revised the Outlook from stable to positive. On September 12, 2023, S&P Global Rating Agency upgraded the senior debt rating to Investment Grade. Fitch Ratings DBRS Viability Rating bbb- Intrinsic Assessment(IA) BBB Support ns Critical obligations A (low) / R-1 (low) Support Floor No Floor Deposits LT/ ST BBB/F3 Deposits LT/ST BBB(high)/R-1 (low) Senior Debt LT/ST BBB-/F3 Senior Debt LT/ ST BBB / R-1 (low) Senior Non Preferred BB+ Senior Non Preferred BBB (low) Outlook Stable Trend Estável Subordinated Debt Lower Tier 2 BB Dated Subordinated Notes BB (high) Additional Tier 1 B+ Additional Tier 1 B (high) Covered Bonds AA+ Covered Bonds A Rating Actions Rating Actions On March 17, 2023, Fitch Ratings upgraded BCP's long-term deposit rating to 'BBB-' and the long-term Issuer Default Rating to 'BB+', with a stable outlook. On September 21, 2023, Fitch Ratings upgraded BCP's Issuer Default Rating to 'BBB-' (Investment Grade category). On May 24, 2023, the Rating Agency DBRS revised the trend from stable to positive. On December 18, 2023 the Rating Agency DBRS upgraded BCP’s long-term Issuer Rating to BBB. 2023 REPORT & ACCOUNTS |167 Capital The estimated CET1 ratio as at 31 December 2023 stood at 15.5% phased-in and 15.4% fully implemented, reflecting a change of +286 and +293 basis points, respectively, compared to the 12.6% and 12.5% phased-in and fully implemented ratios reported in the same period of 2022, comfortably above the minimum regulatory ratios defined within the scope of SREP(Supervisory Review and Evaluation Process) for the year 2023 (CET1 9.41%, T1 11.38% and Total 14.00%) and in line with the medium-term solvability targets. The evolution of capital ratios in the period continued to be significantly conditioned by the impacts on Bank Millennium, related to the increase in provisions for legal risks associated with loans in foreign currency. These effects were, however, more than offset by the positive performance of the recurrent activity in Portugal and by the careful and proactive management of capital, which includes shareholder remuneration, on a convergent trajectory towards the levels set out in the strategic plan. SOLVABILITY RATIOS (Euro million) 31 Dec. 23 31 Dec. 22 31 Dec. 23 31 Dec. 22 PHASED-IN FULLY IMPLEMENTED OWN FUNDS Common Equity Tier 1 (CET1) 6,157 5,442 6,124 5,382 Tier 1 6,642 5,939 6,608 5,875 TOTAL CAPITAL 7,906 7,279 7,903 7,241 RISK WEIGHTED ASSETS 39,751 43,103 39,725 43,106 CAPITAL RATIOS () CET1 15.5% 12.6% 15.4% 12.5% Tier 1 16.7% 13.8% 16.6% 13.6% Total 19.9% 16.9% 19.9% 16.8% () Includes the cumulative net income recorded in each period. 2023 REPORT & ACCOUNTS 168 | Pension Fund The liabilities assumed by the Group Banco Comercial Português with pensions on retirement and other benefits are related with the payment to Employees of pensions on retirement and permanent disability and orphan and window benefits. As at 31 December 2023, the Group’s liabilities stood at 3,080 million euros, which compares with the 2,791 million euros recorded at the end of previous year. The Pension Fund’s assets which are financing the above mentioned liabilities reached 3,470 million euros by the end of 2023, above the 3,384 million euros recorded as at 31 December 2022. As at 31 December 2023 and 31 December 2022, the main asset categories in the Pension Fund’s portfolio presented the following distribution: STRUCTURE OF THE PENSION FUND’S ASSETS AS AT 31 DECEMBER 2023 (xx%) Proportion as at 31 December 2022 As at 31 December of 2023, the structure of the Pension Fund's asset portfolio shows, compared to the prior year, increases in investment bonds and other fixed income securities and in shares and reductions in loans and advances to credit institutions and other, in investment funds and properties and real estate investment funds. 2023 REPORT & ACCOUNTS |169 The actuarial assumptions considered by the Group for calculating the liabilities with pension obligations were based on market indicators, particularly long-term debt yield of Euro Zone issuers considered to be of good risk, as well as the demographic characteristics of its employees. The main actuarial assumptions used to determine the Pension Fund’s liabilities over the last three financial years are shown below: Assumptions 31 Dec. 23 31 Dec. 22 31 Dec. 21 Discount rate 3.53% 4.17% 1.35% Increase in future compensation levels (a) 2.65% in 2024; 1.9% in 2025 and 1.15% in the following years 3.75% in 2023; 2.25% in 2024 and 1% in the following years 0.75% Rate of pensions increase (a) 2.25% in 2024; 1.5% in 2025 and 0.75% in the following years 3.0% in 2023; 2.0% in 2024 and 0.75% in the following years 0.50% Projected rate of return on fund's assets 3.53% 4.17% 1.35% Mortality tables Men TV 88/90 less 1 year TV 88/90 less 1 year TV 88/90 Women (b) TV 99/01 less 2 years TV 99/01 less 2 years TV 88/90 less 3 years Disability rate Non applicable Non applicable Non applicable Turnover rate Non applicable Non applicable Non applicable Normal retirement age (c) 66 years and 4 months 66 years and 7 months 66 years and 6 months Total salary growth rate for Social Security purposes 1.75% 1.75% 1.75% Revaluation rate of wages / pensions of Social Security 1.00% 1.00% 1.00% (a) This rate refers to the growth for the years following the reporting year. (b) The mortality table considered for women corresponds to TV 99/01 adjusted in less than 2 years (which implies an increase in hope life expectancy compared to that which would be considered in relation to their effective age). (c) Retirement age is variable. The normal retirement age increases one month for each civil year and cannot be higher than the normal retirement age in force in the General Social Security Regime (RGSS). The normal retirement age in the RGSS is variable and depends on the evolution of the average life expectancy at 65 years of age. In 2022 the retirement age was 66 years and 7 months. For 2023 and 2024, the normal retirement age in the RGSS is 66 years and 4 months. The reduction in the retirement age was due to the evolution of the average life expectancy at 65 years in Portugal. For the projection of life expectancy’s increment, it was considered an increase of one year in every 10 years, with the maximum retirement age being set at 67 years and 2 months. The actuarial differences recorded at the end of the year 2023 were negative by 223 million euros, before taxes (positive in 376 million euros, before taxes, as at 31 December 2022) and include 226 million euros of actuarial gains, as a consequence of the decrease in the discount rate from 4.17% as at 31 December 2022 to 3.53% as at 31 December 2023 and 54 million euros of actuarial losses following the change of rate of salaries and pensions increase. The actuarial deviations recognised in 2023 also incorporate 100 million euros of positive financial deviations related to the pension fund’s return, in particular referring to the gap between the expected income and the effective income of the Pension Fund. Finally, negative deviations of 43 million euros were also recorded as a result of differences between expected and actual liabilities. 2023 REPORT & ACCOUNTS 170 | The main indicators of the Pension Fund over the last three financial years are as follows: Million euros Main indicators 31 Dec. 23 31 Dec. 22 31 Dec. 21 Liabilities with pensions 3,080 2,791 3,498 Minimum level of liabilities to cover 3,042 2,757 3,445 Value of the Pension Fund 3,470 3,384 3,700 Coverage rate 112.7% 121.3% 105.8% Coverage rate of the minimum level of liabilities 114.1% 122.7% 107.4% Return on Pension Fund 7.1% (5.1%) 1.9% Actuarial (gains) and losses 223 (376) (135) * According to the Bank of Portugal requirements (assuming the application of the minimum requirement to all Group companies) As of 31 December 2023, the Group’s responsibilities showed a 112.7% coverage level, being funded at a higher level than the minimum set by Banco de Portugal. In 2023, negotiations continued with all the unions subscribing to the Group's Collective Labour Agreements, for the conclusion of the full review of the respective clauses, negotiations which are still ongoing. At the same time, negotiations took place with all the unions that subscribed the Group's Collective Labour Agreements, for the review of the Salary Tables and remaining pecuniary clauses relating to the year 2023, having been agreed on 9 and 17 October with all the Unions subscribing to the Group's Collective Labour Agreements, the update of the Salary Tables in 2023 with differentiated increases by contractual level between 4.00% and 7.80%. An increase of 4.50% was agreed for the Bank's Contributions to SAMS and other pecuniary clauses, such as study subsidies, longevity payments, among others, and an increase of 21.43% was agreed for the lunch subsidy, whose daily value increased to 12.75 euros. The agreed updates took effect on 1 January 2023, with the exception of remuneration related to subsistence and travel allowances, which were updated after the agreed updates were operationalised. Regarding the unions SNQTB – Sindicato Nacional dos Quadros e Técnicos Bancários e SIB – Sindicato Independente da Banca, an agreement was also reached regarding the revision of the Salary Tables and other pecuniary clauses relating to the year 2022, as already agreed in 2022 with the remaining unions. 2023 REPORT & ACCOUNTS |171 Information on trends Framework The Bank of Portugal forecasts that Portuguese GDP will growth moderately in 2024 (1.2%), mainly due to the slowdown in exports. With regard to the inflation rate, it is expected that the downward trend will continue, diminishing from 5.3% in 2023 to 2.9% in 2024. The favourable evolution of economic activity contributed to a decrease in the public debt ratio as a percentage of GDP, from 112.4% in 2022 to 99% in 2023, which corresponds to the lowest value since 2010. With regard to external debt, there was also an improvement, with the current account balance recording the highest value in the last ten years, standing at 1.3% of GDP. In this context, the main Rating Agencies decided to upgrade the credit rating of the Portuguese Republic to an "A" grade. The interest rate increase moves by the FED and the ECB, in 2023, maintained the focus recorded during 2022. Thus, the FED carried out four increases of 25 basis points in 2023, while the ECB carried out six increases, two of 50 basis points and four of 25 basis points. Until March 2024, the ECB kept reference interest rates unchanged. The President of the ECB stated that it was still premature to discuss rate cuts, having, however, signalled the possibility of reductions in key rates in the second half of the year. The US Federal Reserve has explicitly removed the bias towards a more restrictive monetary policy. However, the Federal Reserve will be cautious in lowering interest rates, which could happen in the second half of 2024. The profitability of Portuguese banks is expected to remain robust in 2024, despite a decline in interest rates in the second half of 2024 and a slight decrease in net interest income. Operating costs are expected to increase, reflecting the current inflationary context. However, Portuguese banks should remain efficient, with the system's cost-to- income ratio below 50%. The cost of risk is expected to maintain its normalization trend, with no significant impact expected from a possible deterioration in asset quality in 2024. Portuguese banks have solid credit granting policies due to the Bank of Portugal's macro prudential recommendations issued in 2018. Portuguese banks have improved their funding profile over the last decade, with bank deposits representing the majority of their funding structures. The ratio between credit and deposits is expected to remain below 80% in 2024. The sector has improved its asset quality and capitalization since 2016 and is now more resilient. Impact on the Group's activity In 2024, BCP should maintain a high level of profitability, benefiting from the environment of normalized interest rates in the geographies in which it operates, and strict control over the evolution of operating costs. The cost of risk should maintain the normalization trend, even in a context of slowdown in the Portuguese economy, given the level close to full employment. BCP reinforced its liquidity position in 2023. The Group's balance sheet resources grew 2.5% in December 2023 compared to the same period last year. Liquidity indicators were in December 2023 well above regulatory requirements: LCR at 276%, NSFR at 167% and Loans-to-Deposits ratio at 71%. The assets available for financing with the ECB stood at 25.8 billion euros. At Group level, the Customer base increased by 3.4%, to more than 6.7 million, with emphasis on the 10% increase in mobile Customers compared to December 2022, which represent 68% of the Group's total active Customers (58% in Portugal). As a result of the higher interest rate environment, loan demand is remaining moderate. In 2024, the Bank should continue to present a solid liquidity position. The BCP Group has been improving asset quality, particularly in Portugal, with the NPE ratio remaining below 3% at the end of December 2023, which compares with 4% of the objective set in the Strategic Plan. A significant deterioration in asset quality is not expected even in a scenario of slowing economic activity. In 2024, BCP managed to demonstrate its ability to generate organic capital, with the CET1 ratio standing at 15.4% and the total capital ratio at 19.9%, representing an increase of 293bps and 310bps compared to the same period of 2022, exceeding the strategic objective established for 2024. In 2024, the Bank does not anticipate any adverse effects in terms of the evolution of the capital ratio, and should continue to generate capital organically, allowing a dividend and shareholder distribution policy aligned with sector practices. 2023 REPORT & ACCOUNTS 172 | Non-financial information The BCP Group pursues dynamic strategies that it adapts to the new challenges imposed by the various stakeholders with which it interacts. The main objective of the adopted sustainability policies, which foster a culture of Corporate Social Responsibility, has been to positively influence the organization's long-term value proposition, in balance with the well-being of people, the company and the communities in which it operates. inserted and with the preservation of natural resources, climate, biodiversity and the environment. In this context, it is possible to divide the Bank's intervention into three fundamental axes: • Environment – implementation of measures that promote a fair and inclusive transition to decarbonized economic development models, including the incorporation of the environmental aspect in the Bank's risk models and in the offering of solutions, products and services; • Social – involvement, in conjunction with the Millennium bcp Foundation, with the external and internal community in establishing lasting relationships of proximity and cooperation and in the creation of shared value; • Corporate governance – integration of sustainability principles into the Bank's decision-making and management processes and in the definition of its value proposition. Millennium bcp thus assumes, as an integral part of its business model, the purpose of creating social value, developing actions for - and with - the various groups of Stakeholders with the aim of contributing to the development of the countries in which it operates. Throughout the Bank's Sustainability journey, several external commitments have been made, of which the following stand out: • Principles of the United Nations Global Compact and recognition of the importance of the Sustainable Development Goals (SDGs) and the United Nations 2030 Agenda; • United Nations (UNEP FI) Principles of Responsible Banking (PRB), a commitment that aims to ensure the alignment of the Bank's strategy and practice with the SDGs and the goals and objectives of the Paris Climate Agreement. The framework proposed by the PRB considers six principles that cover all business areas, at the strategic, portfolio and transactional levels, constituting a holistic tool for integrating sustainability into the different dimensions of the organization's activity; • “Letter of Commitment for Sustainable Financing in Portugal”, an aspirational document produced within the scope of the “Reflection Group for Sustainable Financing in Portugal” promoted by the Ministries of the Environment, Finance and Economy, which seeks to highlight the importance of integrating risks environmental, social and governance in decision-making and risk management processes in the financial sector; • “CEO Guide on Human Rights”, an initiative of the World Business Council for Sustainable Development (WBCSD) and the Business Council for Sustainable Development (BCSD Portugal). The Guide incorporates reference policies and practices and aims to contribute to the implementation and promotion of human rights in organizations and their value chains; • “Statement from Business Leaders for Renewed Global Cooperation” from the United Nations Global Compact, an international declaration that aims to demonstrate commitment to ethical leadership, based on good governance practices, materialized through values, strategy, policies, operations and business relationships. proximity and involvement with all Stakeholders; • “Women’s Empowerment Principles” of the United Nations Global Compact, an international platform for promoting gender equality that highlights BCP's long-term vision and the desire to integrate – and promote – a collective dynamic based on cooperation and trust. The BCP Group's guidance on these matters is translated into corporate Policies and Principles applicable to the various areas of activity and business (available at https://ind.millenniumbcp.pt/pt/Institucional/sistência/ Pages/cod_internos. aspx) and is implemented in the Sustainability Master Plan (PDS), through which we intend to respond to the expectations, ambitions and needs of the Bank's Stakeholders and contribute to sustainable development. 2023 REPORT & ACCOUNTS |173 PDS 2023, a plan structured around dimensions selected to respond to the themes contained in the Bank's materiality matrix and under which the Bank successfully implemented a large number of initiatives and concrete actions, included the following lines of action: Actuation axis Dimension a. Positive impact through responsible and sustainable management i. ESG risk management ii. Compensation policies iii. ESG Strategy iv Corporate policies and commitments v. Sustainable Purchasing vi. ESG corporate performance analysis viii. ESG Compliance viii. Training and development of top management ix. Knowledge x. Resource management b. Positive impact through sustainable "offer" i. Responsible and Sustainable Investment ii ESG product development iii. Offer ESG risk management c.Positive impact on the environment i. Climate change and energy transition i. Regulations and reporting frameworks iii. Environmental training and awareness d.Positive impact on people and communities i. Training and development ii. Corporate Volunteering iii. Human rights iv. Financial Literacy v. Partnerships for Sustainability The implementation of the SDP has made it possible to improve the Bank's performance with regard to the main sustainability axes, in particular: Economic / Governance Social Environmental Total number of customers 7,450 thousand. vs. 7,203 thousand. in 2022 % of payments to local suppliers 90.3% vs.90.5% in 2022 Total number of digital customers 5,091 thousand. vs. 4,768 thousand. in 2022 Total number of employees 15,688 vs. 15,747 in 2022 Training (Hours) 728.681 vs. 715.837 in 2022 Donations 2.4 vs. 2.3 million in 2022 11.813 tCO2e emitted vs. 12.710 in 2022 47.760 MWh of electricity consumed vs. 46,424 in 2022 2,252 MWh of renewable energy produced by the Bank 2023 REPORT & ACCOUNTS 174 | In order to promote transparency in communication with its Stakeholders, monitor the evolution of performance, identifying opportunities for improvement, and communicate the evaluation carried out by recognized entities, the Bank responded to several specialized indices: Scope Index Performance in 2023 Performance in 2022 BCP Group MSCI A = A BCP Group CSA S&P (before DJSI) 56% ↓ 62% BCP Group Carbon Disclosure Project B = B BCP Group Bloomberg Gender-Equality Index 85% ↑ 81% BCP Group Vigeo Eiris 46% (88% disclosure) = 46% (88% disclosure) BCP Group EthiFinance (antes Gaïa Rating) 70% = 70% BCP Group LSEG (before Refinitiv) 74% ↓ 78% BCP Group Sustainalytics 1970% ↑ 2160% BCP Group ISS ESG C- ↑ D+ In the cycle corresponding to the Strategic Plan - Overcoming 2021/2024 -, Millennium bcp continues to seek to identify business opportunities related to sustainability, as well as manage the physical and transition risks of its portfolio, but also promote the creation of solutions, products and innovative services with green and social rating aimed at all customer segments. Detailed information and indicators on the BCP Group's Sustainability performance are available, in an aggregated view and by geography, in the 2023 Sustainability Report, at: https://ind.millenniumbcp.pt/pt/Institucional/consciente/Pages/relatorios_anuais.aspx. 2023 REPORT & ACCOUNTS |175 Correspondence table between the Management Report and Decree-Law 89/2017 Decree-law no. 89/207 of July 28 Chapter/Section Page/s Artº3º (Referred to No. 2 of Article 508-G of the CSC) The non-financial statement must contain enough information for an understanding of the evolution, performance, position and impact of its activities, referring, at a minimum, to environmental, social and worker-related issues, equality between women and men, the non- discrimination, respect for human rights, combating corruption and attempted bribery, including: a) Brief description of the company's business model SR 2022 | Creating Value 10 SR 2022 | Introduction > Governance Model 25-26 Report and Accounts 2022| Business Model 39-42 b) Description of the policies followed by the company in relation to these matters, including the due diligence processes applied c) Results of these policies ENVIRONMENTAL: SR 22 | Introduction > Commitments 28-29 272-274 SR 22 | Introduction > ESG Risk Management 32 SR 22 | V- Environmental Responsibility 156-179 SR 22 | Table TCFD 180-186 241 SOCIAL AND WORKER-RELATED: SR 22 | Introduction > ESG Risk Management 32 SR 22 | Economic and Governance Responsibility > Employees 55-61 SR 22 | Social Responsibility > Employee Benefits 126-134 EQUALITY BETWEEN WOMEN AND MEN AND NON-DISCRIMINATION: SR 22 | Introduction > Commitments 28-29 SR 22 | Economic and Social Responsibility and Governance > Employees 55-75 HUMAN RIGHTS: SR 22 | Introduction > Commitments 28-29 SR 22 | Social Responsibility > Human Rights 135-137 FIGHTING CORRUPTION AND BRIBERY ATTEMPTS: SR 22 | Economic and Governance Accountability > Ethics and Professional Conduct 76-81 d) Main risks associated with these issues, linked to the company's activities, including, where relevant and proportionate, its business relationships, its products or services likely to have negative impacts in these areas and the way in which those risks are managed by the company ENVIRONMENTAL: SR 22 | Introduction > ESG Management 32 SR 22 | TCFD 180-186 SOCIAL AND WORKER-RELATED: SR 22 | Introduction > ESG Risk Management 32 SR 22 | Economic and Governance Accountability > Employees 55-75 EQUALITY BETWEEN WOMEN AND MEN AND NON-DISCRIMINATION: SR 22 | Economic and Governance Accountability > Employees 55-75 HUMAN RIGHTS: SR 22 | Social Responsibility > Human Rights 135-137 Tabela UNGP- Quadro de Relatórios dos Princípios Orientadores da ONU 238-240 FIGHTING CORRUPTION AND BRIBERY ATTEMPTS: SR 22 | Introduction > ESG Risk Management 32 SR 22 | Economic and Governance Accountability > Ethics and Professional Conduct 76-81 e) Key performance indicators relevant to your specific activity ENVIRONMENTAL: SR 22 | Environmental Responsibility 156-179 SOCIAL AND WORKER-RELATED: SR 22 | Economic and Governance Accountability > Employees 55-75 SR 22 | Social Responsibility > Employee Benefits 126-129 EQUALITY BETWEEN WOMEN AND MEN AND NON-DISCRIMINATION: SR 22 | Economic and Governance Accountability > Employees 55-75 2023 REPORT & ACCOUNTS 176 | Consolidated financial statements BANCO COMERCIAL PORTUGUÊS CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022 (Thousands of euros) 2023 2022 (restated) Interest and similar income 4,371,289 2,737,235 Interest expense and similar charges (1,545,565) (587,463) NET INTEREST INCOME 2,825,724 2,149,772 Dividends from equity instruments 1,783 10,086 Net fees and commissions income 771,673 771,908 Gains/(losses) on financial operations at fair value through profit or loss (6,550) 27,306 Foreign exchange gains/(losses) 17,469 19,390 Gains/(losses) on hedge accounting 21,808 (2,233) Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss 112,088 5,497 Other operating income / (losses) (60,415) (193,112) TOTAL OPERATING INCOME 3,683,580 2,788,614 Staff costs 631,806 580,807 Other administrative costs 393,246 352,961 Amortisations and depreciations 137,499 139,250 TOTAL OPERATING EXPENSES 1,162,551 1,073,018 NET OPERATING INCOME BEFORE PROVISIONS AND IMPAIRMENTS 2,521,029 1,715,596 Results on modification (19,426) (309,865) Impairment of financial assets at amortised cost (247,992) (300,829) Impairment of financial assets at fair value through other comprehensive income (1,322) 5,023 Impairment of other assets (56,374) (192,059) Other provisions (794,158) (568,297) NET OPERATING INCOME 1,401,757 349,569 Share of profit of associates accounted for using the equity method 64,266 58,611 Gains/(losses) on disposal of subsidiaries and other assets 21,809 10,167 NET INCOME BEFORE INCOME TAXES 1,487,832 418,347 Income taxes Current (179,857) (109,632) Deferred (357,514) (194,688) NET INCOME AFTER INCOME TAXES FROM CONTINUING OPERATIONS 950,461 114,027 Net income from discontinued or discontinuing operations (2,852) 5,537 NET INCOME AFTER INCOME TAXES 947,609 119,564 Net income for the year attributable to: Bank's Shareholders 856,050 197,386 Non-controlling interests 91,559 (77,822) NET INCOME FOR THE YEAR 947,609 119,564 Earnings per share (in Euros) Basic 0.054 0.010 Diluted 0.054 0.010 2023 REPORT & ACCOUNTS |177 BANCO COMERCIAL PORTUGUÊS CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2023 AND 2022 (Thousands of euros) 2023 2022 (restated) ASSETS Cash and deposits at Central Banks 4,545,526 6,022,001 Loans and advances to credit institutions repayable on demand 337,687 213,460 Financial assets at amortised cost Loans and advances to credit institutions 908,477 963,434 Loans and advances to customers 53,305,159 54,675,793 Debt securities 17,579,136 13,035,582 Financial assets at fair value through profit or loss Financial assets held for trading 822,904 766,597 Financial assets not held for trading mandatorily at fair value through profit or loss 467,254 552,679 Financial assets designated at fair value through profit or loss 32,004 — Financial assets at fair value through other comprehensive income 10,834,291 7,461,553 Hedging derivatives 40,628 59,703 Investments in associated companies 356,259 314,919 Non-current assets held for sale 80,317 499,035 Investment property 39,100 15,217 Other tangible assets 606,447 574,697 Goodwill and intangible assets 223,105 182,687 Current tax assets 20,469 17,945 Deferred tax assets 2,554,331 2,938,986 Other assets 1,626,684 1,582,455 TOTAL ASSETS 94,379,778 89,876,743 LIABILITIES Financial liabilities at amortised cost Resources from credit institutions 829,126 1,468,360 Resources from customers 75,606,813 75,430,143 Non subordinated debt securities issued 2,712,682 1,482,086 Subordinated debt 1,397,425 1,333,056 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 207,387 241,506 Financial liabilities at fair value through profit or loss 3,608,487 1,817,678 Provisions 753,103 561,786 Current tax liabilities 197,085 23,680 Deferred tax liabilities 8,795 11,708 Other liabilities 1,691,552 1,391,973 TOTAL LIABILITIES 87,080,280 83,939,976 EQUITY Share capital 3,000,000 3,000,000 Share premium 16,471 16,471 Other equity instruments 400,000 400,000 Legal and statutory reserves 316,375 268,534 Reserves and retained earnings 1,723,175 1,272,262 Net income for the year attributable to Bank's Shareholders 856,050 197,386 Non-controlling interests 987,427 782,114 TOTAL EQUITY 7,299,498 5,936,767 TOTAL LIABILITIES AND EQUITY 94,379,778 89,876,743 2023 REPORT & ACCOUNTS 178 | Alternative performance measures The BCP Group prepares financial information in accordance with International Financial Reporting Standards (IFRS) endorsed by European Union. As a complement to that information, the BCP Group uses a set of alternative performance measures that allow monitoring the evolution of its activity over the time. Following the guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on October 2015 (ESMA/2015/1415), the BCP Group presents some indicators related to the assessment of profitability and efficiency and the quality of the credit portfolio, among others, which are intended to facilitate comprehension of the evolution of the economic and financial position of the Group. The information presented in this context does not, under any circumstance, replace the financial information prepared in accordance with IFRS. It should also be noted that the definitions and concepts used by the BCP Group for the calculation of these indicators may differ from those used by other entities in the determination of other similar measures and may therefore not be directly comparable. In accordance with the aforementioned guidelines, in addition to the alternative performance measures, detailed below, additional information is presented throughout this document, in the respective chapters, that reconciles the accounting figures presented in the consolidated financial statements prepared in accordance with IFRS and financial information reflecting the management criteria adopted by the BCP Group. These indicators and their components are also described in more detail in the glossary. 1) Loans to customers (net) / Balance sheet customer funds Relevance of the indicator: the loans-to-deposits ratio is an indicator of liquidity that allows the evaluation of the Group's retail funding structure. Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Loans to customers (net) (1) 55,218 56,198 56,360 Balance sheet customer funds (2) 79,215 77,250 71,175 (1) / (2) 69.7% 72.7% 79.2% 2) Return on average assets (ROA) Relevance of the indicator : allows measurement of the capacity of the Group to generate results with the volume of available assets. Million euros 2023 2022 (restated) 2021 Net income (1) 856 197 138 Non-controlling interests (2) 92 (78) (113) Average total assets (3) 91,040 95,884 90,484 [(1) + (2), annualised] / (3) 1.0% 0.1% 0.0% 2023 REPORT & ACCOUNTS |179 3) Return on average equity (ROE) Relevance of the indicator: allows assessment of the capacity of the Group to remunerate its shareholders, assessing the level of profitability generated by the funds invested by the shareholders in the Group. Million euros 2023 2022 (restated) 2021 Net income (1) 856 197 138 Average equity (2) 5,350 5,106 5,847 [(1), annualised] / (2) 16.0% 3.9% 2.4% 4) Cost to income Relevance of the indicator: it allows for the monitoring of the level of efficiency of the Group (excluding specific items), evaluating the volume of operating costs to generate net operating revenues. Million euros 2023 2022 (restated) 2021 Operating costs (1) 1,163 1,073 1,116 of which: specific items (2) 15 16 91 Net operating revenues (3) 3,770 2,857 2,334 of which: specific items (4) 139 — — [(1) - (2)] / [(3) - (4)] 31.6% 37.0% 43.9% * Specific items: positive impact of 124 million euros, recognised in 2023, including income of 139 million euros related to the sale of 80% of the shares in Millennium Financial Services sp. z o.o. recognised in the international activity, mainly as net trading income and costs of 15 million euros recognised as staff costs in the activity in Portugal. In 2022 the impact was negative in the amount of 16 million euros, recognised as staff costs in the activity in Portugal. In 2021, the impact was also negative, in the amount of 91 million euros, mainly related to the adjustment of headcount carried out by the Bank in that year, including a provision in the amount of 84 million euros. 5) Cost of risk, net of recoveries (expressed in basis points, annualised) Relevance of the indicator: allows assessment of the quality of the loan portfolio by evaluating the ratio between impairment charges recognised in the period (net of reversals and recoveries of credit and interest) and the stock of loans to customers at the end of that period. Million euros 2023 2022 2021 Loans to customers at amortised cost, before impairment (1) 56,805 57,684 58,137 Loan impairment charges (net of recoveries) (2) 240 301 349 [(2), annualised] / (1) 42 52 60 6) Non-performing exposures (NPE) / Loans to customers (gross) Relevance of the indicator : allows the assessment of the level of credit risk to which the Group is exposed based on the proportion of the NPE loan portfolio in the loans-to-customers portfolio (gross). Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Non-Performing Exposures (1) 1,952 2,218 2,752 Loans to customers (gross) (2) 56,814 57,713 58,231 (1) / (2) 3.4% 3.8% 4.7% 2023 REPORT & ACCOUNTS 180 | 7) Coverage of non-performing exposures (NPE) by balance sheet impairment Relevance of the indicator: it allows the assessment of the level of coverage of the NPE portfolio by balance sheet impairment. Million euros 31 Dec. 23 31 Dec. 22 31 Dec. 21 Non-Performing Exposures (1) 1,952 2,218 2,752 Loans impairment (balance sheet) (2) 1,596 1,515 1,871 (2) / (1) 81.8% 68.3% 68.0% 2023 REPORT & ACCOUNTS |181 Application of Results Considering: A. The provisions of the law and of the articles of association concerning the applicable legal reserve; B. The dividends policy of Banco Comercial Português (BCP) currently in force, as approved at the General Meeting of Shareholders held on May 20,2021; C. That according to the financial statements to be submitted to the approval of the Shareholders, in the 2023 financial year BCP recorded consolidated net earnings amounting to 856,049,865.67 Euros and individual net earnings amounting to 680,275,978.32 Euros; D. That the above-mentioned Dividends Policy sets forth as its Guidelines: i. The promotion of conditions for the sustainable observance of the capital ratios at any moment applicable to Bank, as well as the remaining applicable legal requirements, including the limitations that are applicable at any moment, resulting from the calculation of the maximum amount to be distributed; ii. The retention of own funds that enable to promote coherence with the Risk Appetite Statement (RAS) and with the results of the internal capital adequacy assessment process (ICAAP); iii. The safeguard of an appropriate safety margin on the values established by the regulator within the scope of its assessment and evaluation on the adequacy of strategies, processes, capital, and liquidity that are appropriate to the risks to which the Bank is or might be exposed to (SREP); E. That the strengthening of the capital position, the levels of provisioning and risk coverage, achieved, in particular, by the improvement in profitability, allow the Bank to envisage solvency levels with a margin of safety considered broad and consistent with the Risk Appetite Statement, even in scenarios still marked by uncertain factors in the countries where the Group operates, and distributing a relevant portion of earnings (even if below the long-term pay-out objectives and the current market standards for reference credit institutions); The Board of Directors Proposes: I In accordance with article 66 (5) (f) and for purposes of article 376 (1) (b), both of the Companies Code, and article 54 of the Bank’s articles of association, the following application of year-end results amounting to 680,275,978.32 Euros: a) For the reinforcement of legal reserve: 68,027,597.84 Euros; b) For dividends distribution: 256,937,829.19 Euros; c) 355,310,551.29 Euros, that is, the remaining, to Retained Earnings. 2023 REPORT & ACCOUNTS 182 | II Considering that the overall amount proposed for the distribution of dividends in the amount of 256,937,829.19 Euros was calculated on the basis of a unit dividend per share issued (in the case, 0.0170 Euros per share) and although it is not expected that BCP will have own shares on the date of the payment of dividends, it is herein proposed that, if that happens, it is also resolved that: a) For each share issued, a unit dividend of 0.0170 Euros is paid, which was the basis for the preparation of the proposal; b) The non-payment of the unit quantitative corresponding to the shares that, on the first day of the dividend payment period, belong to BCP, being transferred to Retained Earnings. Lisbon, 25 March 2024 THE BOARD OF DIRECTORS 2023 REPORT & ACCOUNTS |183 Glossary Assets placed with customers – amounts held by customers in the context of the placement of third-party products that contribute to the recognition of commissions. Balance sheet customer funds – deposits and other resources from customers and debt securities placed with customers. Business Volumes - corresponds to the sum of total customer funds and loans to customers (gross). Commercial gap – loans to customers (gross) minus on-balance sheet customer funds. Core income - net interest income plus net fees and commissions income. Core operating profit - net interest income plus net fees and commissions income deducted from operating costs. Cost of risk, net (expressed in basis points) - ratio of loans impairment (P&L) accounted in the period to loans to customers at amortised cost and debt instruments at amortised cost related to credit operations before impairment at the end of the period. Cost to core income - operating costs divided by core income. Cost to income – operating costs divided by net operating revenues. Coverage of non-performing exposures by impairments – loans impairments (balance sheet) divided by the stock of NPE. Coverage of non-performing loans by impairments – loans impairments (balance sheet) divided by the stock of NPL. Coverage of overdue loans by impairments - loans impairments (balance sheet) divided by overdue loans. Coverage of overdue loans by more than 90 days by impairments - loans impairments (balance sheet) divided by overdue loans by more than 90 days. Debt instruments – non-subordinated debt instruments at amortised cost and financial liabilities measured at fair value through profit or loss (debt securities and certificates). Debt securities placed with customers - debt securities issued by the Bank and placed with customers. Deposits and other resources from customers – resources from customers at amortised cost and customer deposits at fair value through profit or loss. Dividends from equity instruments - dividends received from investments classified as financial assets at fair value through other comprehensive income and from financial assets held for trading. Equity accounted earnings - results appropriated by the Group related to the consolidation of entities where, despite having some influence, the Group does not control the financial and operational policies. Insurance products – includes unit linked saving products and retirement saving plans (“PPR”, “PPE” and “PPR/E”). Loans impairment (balance sheet) – balance sheet impairment related to loans to customers at amortised cost, balance sheet impairment associated with debt instruments at amortised cost related to credit operations and fair value adjustments related to loans to customers at fair value through profit or loss. Loans impairment (P&L) – impairment (net of reversals and net of recoveries - principal and accrual) of financial assets at amortised cost for loans to customers and for debt instruments related to credit operations. Loans to customers (gross) – loans to customers at amortised cost before impairment, debt instruments at amortised cost associated to credit operations before impairment and loans to customers at fair value through profit or loss before fair value adjustments. Loans to customers (net) - loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations net of impairment and balance sheet amount of loans to customers at fair value through profit or loss. Loan to Deposits ratio (LTD) – loans to customers (net) divided by deposits and other resources from customers. 2023 REPORT & ACCOUNTS 184 | Loan to value ratio (LTV) – mortgage amount divided by the appraised value of property. Net commissions - net fees and commissions income. Net interest margin (NIM) - net interest income for the period as a percentage of average interest earning assets. Net operating revenues - net interest income, dividends from equity instruments, net commissions, net trading income, other net operating income and equity accounted earnings. Net trading income – results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations and results arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss (results from derecognition of financial assets and financial liabilities measured at amortised cost and results from derecognition of financial assets measured at fair value through other comprehensive income until 2021). Non-performing exposures (NPE) – non-performing loans and advances to customers (includes loans to customers at amortised cost, loans to customers at fair value through profit or loss and, from 2023, debt instruments at amortised cost associated to credit operations before impairment) more than 90 days past- due or unlikely to be paid without collateral realisation, if they recognised as defaulted or impaired. Non-performing loans (NPL) – overdue loans (includes loans to customers at amortised cost, loans to customers at fair value through profit or loss and, from 2023, debt instruments at amortised cost associated to credit operations before impairment) more than 90 days past due including the non-overdue remaining principal of loans, i.e. portion in arrears, plus non-overdue remaining principal. Off-balance sheet customer funds – assets under management, assets placed with customers and insurance products (savings and investment) subscribed by customers. Operating costs - staff costs, other administrative costs and depreciation. Other impairment and provisions – impairment (net of reversals) for loans and advances of credit institutions classified at amortised cost, impairment for financial assets (classified at fair value through other comprehensive income and at amortised cost not associated with credit operations), impairment for other assets, namely assets received as payment in kind, investments in associated companies and goodwill of subsidiaries and other provisions. Other net income – dividends from equity instruments, net commissions, net trading income, other net operating income and equity accounted earnings. Other net operating income – net gains from insurance activity (only until 2019), other operating income/(loss) and gains/(losses) arising from sales of subsidiaries and other assets. Overdue loans – total outstanding amount of past due loans to customers (loans to customers at amortised cost, debt instruments at amortised cost associated to credit operations and loans to customers at fair value through profit or loss), including principal and interests. Overdue loans by more than 90 days – total outstanding amount of past due loans to customers by more than 90 days (loans to customers at amortised cost, debt instruments at amortised cost associated to credit operations and loans to customers at fair value through profit or loss), including principal and interests. Performing loans - loans to customers (gross) deducted from Non-performing exposures (NPE). Profit before impairment and provisions – net operating revenues deducted from operating costs. Resources from credit institutions – resources and other financing from Central Banks and resources from other credit institutions. Return on average assets (Instruction from the Bank of Portugal no. 16/2004) – net income (before tax) divided by the average total assets (weighted average of the average of monthly net assets in the period). Return on average assets (ROA) – net income (before minority interests) divided by the average total assets (weighted average of the average of monthly net assets in the period). Return on equity (Instruction from the Bank of Portugal no. 16/2004) – net income (before tax) divided by the average equity (weighted average of the average of monthly equity in the period). Return on equity (ROE) – net income (after minority interests) divided by the average equity, deducted from preference shares and other capital instruments (weighted average of the average of monthly equity in the period) minus non-controlling interests. 2023 REPORT & ACCOUNTS |185 Securities portfolio - debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to customers and trading derivatives), financial assets at fair value through other comprehensive income and assets with repurchase agreement. Specific coverage of NPE - NPE impairments (balance sheet) divided by the stock of NPE. Spread - increase (in percentage points) to the index used by the Bank in loans granting or fund raising. Total customer funds - balance sheet customer funds and off-balance sheet customer funds. 2023 REPORT & ACCOUNTS 186 | Accounts and Notes to the Consolidated Accounts 2023 REPORT & ACCOUNTS |187 CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022 (Thousands of euros) Notes 2023 2022 (restated) Interest and similar income 2 4,371,289 2,737,235 Interest expense and similar charges 2 (1,545,565) (587,463) NET INTEREST INCOME 2,825,724 2,149,772 Dividends from equity instruments 3 1,783 10,086 Net fees and commissions income 4 771,673 771,908 Gains/(losses) on financial operations at fair value through profit or loss 5 (6,550) 27,306 Foreign exchange gains/(losses) 5 17,469 19,390 Gains/(losses) on hedge accounting 5 21,808 (2,233) Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss 5 112,088 5,497 Other operating income/(losses) 6 (60,415) (193,112) TOTAL OPERATING INCOME 3,683,580 2,788,614 Staff costs 7 631,806 580,807 Other administrative costs 8 393,246 352,961 Amortisations and depreciations 9 137,499 139,250 TOTAL OPERATING EXPENSES 1,162,551 1,073,018 NET OPERATING INCOME BEFORE PROVISIONS AND IMPAIRMENTS 2,521,029 1,715,596 Results on modification 10 (19,426) (309,865) Impairment of financial assets at amortised cost 11 (247,992) (300,829) Impairment of financial assets at fair value through other comprehensive income 12 (1,322) 5,023 Impairment of other assets 13 (56,374) (192,059) Other provisions 14 (794,158) (568,297) NET OPERATING INCOME 1,401,757 349,569 Share of profit of associates accounted for using the equity method 15 64,266 58,611 Gains/(losses) on disposal of subsidiaries and other assets 16 21,809 10,167 NET INCOME BEFORE INCOME TAXES 1,487,832 418,347 Income taxes Current 31 (179,857) (109,632) Deferred 31 (357,514) (194,688) NET INCOME AFTER INCOME TAXES FROM CONTINUING OPERATIONS 950,461 114,027 Net income from discontinued or discontinuing operations 17 (2,852) 5,537 NET INCOME AFTER INCOME TAXES 947,609 119,564 Net income for the year attributable to: Bank's Shareholders 856,050 197,386 Non-controlling interests 44 91,559 (77,822) NET INCOME FOR THE YEAR 947,609 119,564 Earnings per share (in Euros) Basic 18 0.054 0.010 Diluted 18 0.054 0.010 CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the consolidated financial statements. 2023 REPORT & ACCOUNTS 188 | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022 (Thousands of euros) 2023 Attributable to Continuing operations Discontinued operations Total Bank's Shareholders Non- controlling interests NET INCOME FOR THE YEAR 950,461 (2,852) 947,609 856,050 91,559 ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME STATEMENT (NOTE 43) Debt instruments at fair value through other comprehensive income Gains / (losses) for the year 210,878 — 210,878 141,812 69,066 Reclassification of (gains) / losses to profit or loss (note 5) 12,642 — 12,642 11,287 1,355 Cash flows hedging Gains / (losses) for the year 507,098 — 507,098 470,043 37,055 Other comprehensive income from investments in associates and others (5,910) — (5,910) (5,907) (3) Exchange differences arising on consolidation 58,989 — 58,989 8,307 50,682 IAS 29 application Effect on equity of Banco Millennium Atlântico, S.A. 8,268 — 8,268 8,268 — Fiscal impact (201,272) — (201,272) (181,062) (20,210) 590,693 — 590,693 452,748 137,945 ITEMS THAT WILL NOT BE RECLASSIFIED TO THE INCOME STATEMENT Equity instruments at fair value through other comprehensive income Gains / (losses) for the year Subsidiaries (note 43) 7,326 — 7,326 6,782 544 Associates 7,073 — 7,073 7,073 — 14,399 — 14,399 13,855 544 Changes in own credit risk of financial liabilities at fair value through profit or loss (note 43) (2,778) — (2,778) (2,778) — Actuarial gains / (losses) for the year BCP Group Pension Fund (note 50) (222,880) — (222,880) (222,880) — Pension Funds of foreign subsidiaries and associated companies 1,775 — 1,775 2,837 (1,062) Fiscal impact 94,751 — 94,751 94,665 86 (114,733) — (114,733) (114,301) (432) Other comprehensive income / (loss) for the year 475,960 — 475,960 338,447 137,513 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,426,421 (2,852) 1,423,569 1,194,497 229,072 CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the consolidated financial statements. 2023 REPORT & ACCOUNTS |189 (Thousands of euros) 2022 (restated) Attributable to Continuing operations Discontinued operations Total Bank's Shareholders Non- controlling interests NET INCOME FOR THE YEAR 114,027 5,537 119,564 197,386 (77,822) ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME STATEMENT (NOTE 43) Debt instruments at fair value through other comprehensive income Gains / (losses) for the year (271,021) — (271,021) (250,622) (20,399) Reclassification of (gains) / losses to profit or loss (note 5) 13,386 — 13,386 13,501 (115) Cash flows hedging Gains / (losses) for the year (1,646,366) — (1,646,366) (1,644,333) (2,033) Other comprehensive income from investments in associates and others 8,448 — 8,448 8,445 3 Exchange differences arising on consolidation 12,616 — 12,616 18,184 (5,568) IAS 29 application Effect on equity of Banco Millennium Atlântico, S.A. 5,745 — 5,745 5,745 — Fiscal impact 589,842 — 589,842 585,630 4,212 (1,287,350) — (1,287,350) (1,263,450) (23,900) ITEMS THAT WILL NOT BE RECLASSIFIED TO THE INCOME STATEMENT Equity instruments at fair value through other comprehensive income Gains / (losses) for the year Subsidiaries (note 43) (3,796) — (3,796) (3,183) (613) (3,796) — (3,796) (3,183) (613) Changes in own credit risk of financial liabilities at fair value through profit or loss (note 43) (63) — (63) (63) — Actuarial gains / (losses) for the year BCP Group Pensions Fund (note 50) 375,689 — 375,689 375,689 — Pension Funds of foreign subsidiaries and associated companies 8,372 — 8,372 6,885 1,487 Fiscal impact (136,759) — (136,759) (136,681) (78) 243,443 — 243,443 242,647 796 Other comprehensive income / (loss) for the year (1,043,907) — (1,043,907) (1,020,803) (23,104) TOTAL COMPREHENSIVE INCOME FOR THE YEAR (929,880) 5,537 (924,343) (823,417) (100,926) CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the consolidated financial statements. 2023 REPORT & ACCOUNTS 190 | CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2023 AND 2022 (Thousands of euros) Notes 2023 2022 (restated) ASSETS Cash and deposits at Central Banks 19 4,545,526 6,022,001 Loans and advances to credit institutions repayable on demand 20 337,687 213,460 Financial assets at amortised cost Loans and advances to credit institutions 21 908,477 963,434 Loans and advances to customers 22 53,305,159 54,675,793 Debt securities 23 17,579,136 13,035,582 Financial assets at fair value through profit or loss Financial assets held for trading 24 822,904 766,597 Financial assets not held for trading mandatorily at fair value through profit or loss 24 467,254 552,679 Financial assets designated at fair value through profit or loss 24 32,004 — Financial assets at fair value through other comprehensive income 24 10,834,291 7,461,553 Hedging derivatives 25 40,628 59,703 Investments in associated companies 26 356,259 314,919 Non-current assets held for sale 27 80,317 499,035 Investment property 28 39,100 15,217 Other tangible assets 29 606,447 574,697 Goodwill and intangible assets 30 223,105 182,687 Current tax assets 31 20,469 17,945 Deferred tax assets 31 2,554,331 2,938,986 Other assets 32 1,626,684 1,582,455 TOTAL ASSETS 94,379,778 89,876,743 LIABILITIES Financial liabilities at amortised cost Resources from credit institutions 33 829,126 1,468,360 Resources from customers 34 75,606,813 75,430,143 Non subordinated debt securities issued 35 2,712,682 1,482,086 Subordinated debt 36 1,397,425 1,333,056 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 37 207,387 241,506 Financial liabilities at fair value through profit or loss 38 3,608,487 1,817,678 Hedging derivatives 25 67,825 178,000 Provisions 39 753,103 561,786 Current tax liabilities 31 197,085 23,680 Deferred tax liabilities 31 8,795 11,708 Other liabilities 40 1,691,552 1,391,973 TOTAL LIABILITIES 87,080,280 83,939,976 EQUITY Share capital 41 3,000,000 3,000,000 Share premium 41 16,471 16,471 Other equity instruments 41 400,000 400,000 Legal and statutory reserves 42 316,375 268,534 Reserves and retained earnings 43 1,723,175 1,272,262 Net income for the year attributable to Bank's Shareholders 856,050 197,386 Non-controlling interests 44 987,427 782,114 TOTAL EQUITY 7,299,498 5,936,767 TOTAL LIABILITIES AND EQUITY 94,379,778 89,876,743 CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the consolidated financial statements. 2023 REPORT & ACCOUNTS |191 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022 (Thousands of euros) 2023 2022 (restated) CASH FLOWS ARISING FROM OPERATING ACTIVITIES Interests received 3,574,550 2,297,720 Commissions received 995,405 1,019,734 Fees received from services rendered 124,601 101,771 Interests paid (1,354,351) (363,636) Commissions paid (175,850) (176,465) Recoveries on loans previously written off 57,732 20,837 Payments (cash) to suppliers and employees () (1,185,258) (1,220,319) Income taxes (paid) / received (84,618) (65,340) 1,952,211 1,614,302 Decrease / (increase) in operating assets: Receivables from / (Loans and advances to) credit institutions (137,542) (227,767) Deposits held with purpose of monetary control 197,388 (280,418) Loans and advances to customers receivable / (granted) 554,467 (656,569) Short term trading securities 125,787 136,605 Increase / (decrease) in operating liabilities: Loans and advances to credit institutions repayable on demand (21,127) (25,447) Deposits from credit institutions with agreed maturity date (624,255) (7,518,189) Loans and advances to customers repayable on demand (3,624,247) (274,554) Deposits from customers with agreed maturity date 5,549,721 6,652,456 3,972,403 (579,581) CASH FLOWS ARISING FROM INVESTING ACTIVITIES Assignment of investments in subsidiaries and associates which results in loss of control 115,089 — Dividends received 10,504 54,263 Interest income from financial assets at fair value through other comprehensive income and at amortised cost 605,181 342,405 Sale of financial assets at fair value through other comprehensive income and at amortised cost 3,246,396 7,922,631 Acquisition of financial assets at fair value through other comprehensive income and at amortised cost (131,539,734) (50,657,550) Maturity of financial assets at fair value through other comprehensive income and at amortised cost 120,612,565 42,276,068 Acquisition of tangible and intangible assets (124,883) (126,189) Sale of tangible and intangible assets 6,925 9,434 Decrease / (increase) in other sundry assets 469,310 (386,643) (6,598,647) (565,581) CASH FLOWS ARISING FROM FINANCING ACTIVITIES Issuance of subordinated debt — 133,700 Reimbursement of subordinated debt — (133,700) Issuance of debt securities 1,181,735 402,264 Reimbursement of debt securities (233,366) (1,156,473) Issuance of commercial paper and other securities 32,137 34,505 Reimbursement of commercial paper and other securities (33,623) (12,374) Dividends paid to Bank's shareholders — (13,603) Dividends paid to non-controlling interests (23,719) (59,572) Interest paid of the issue of Perpetual Subordinated Bonds (Additional Tier 1) (37,000) (37,000) Increase / (decrease) in other sundry liabilities and non-controlling interests () 328,843 52,175 1,215,007 (790,078) Exchange differences effect on cash and equivalents 58,989 12,616 Net changes in cash and equivalents (1,352,248) (1,922,624) Cash (note 19) 593,033 601,772 Deposits at Central Banks (note 19) 5,428,968 7,194,527 Loans and advances to credit institutions repayable on demand (note 20) 213,460 361,786 CASH AND EQUIVALENTS AT THE BEGINNING OF THE YEAR 6,235,461 8,158,085 Cash (note 19) 688,501 593,033 Deposits at Central Banks (note 19) 3,857,025 5,428,968 Loans and advances to credit institutions repayable on demand (note 20) 337,687 213,460 CASH AND EQUIVALENTS AT THE END OF THE YEAR 4,883,213 6,235,461 (*) In 2023, this balance includes the amount of Euros 1,440,000 (2022: Euros 590,000) related to short-term lease contracts and the amount of Euros 2,612,000 (2022: Euros 2,402,000) related to lease contracts of low value assets. () In 2023, this balance includes the amount of Euros 54,952,000 (2022: Euros 53,330,000) corresponding to principal payments on lease liabilities. CHIEF ACCOUNTANTTHE EXECUTIVE COMMITTEE See accompanying notes to the consolidated financial statements. 2023 REPORT & ACCOUNTS 192 | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022 (Thousands of euros) Share capital Share premium Other equity instruments Legal and statutory reserves Reserves and retained earnings Net income for the year attributable to Bank's Shareholders Non- controlling interests (note 44) Total equity BALANCE AS AT 31 DECEMBER 2021 4,725,000 16,471 400,000 259,528 580,304 138,082 942,672 7,062,057 Transition adjustments - Adoption of IFRS 17 and IFRS 9 (note 59) — — — — (89,858) — — (89,858) BALANCE AS AT 1 JANUARY 2022 4,725,000 16,471 400,000 259,528 490,446 138,082 942,672 6,972,199 Net income for the year — — — — — 197,386 (77,822) 119,564 Other comprehensive income — — — — (1,020,803) — (23,104) (1,043,907) TOTAL COMPREHENSIVE INCOME — — — — (1,020,803) 197,386 (100,926) (924,343) Results application Legal reserve — — — 9,006 (9,006) — — — Transfers for reserves and retained earnings — — — — 138,082 (138,082) — — Dividends paid — — — — (13,603) — — (13,603) Reduction of the share capital (1,725,000) — — — 1,725,000 — — — Interest of Perpetual Subordinated Bonds (Additional Tier 1) — — — — (37,000) — — (37,000) Dividends (a) — — — — — — (59,572) (59,572) Other reserves — — — — (854) — (60) (914) BALANCE AS AT 31 DECEMBER 2022 3,000,000 16,471 400,000 268,534 1,272,262 197,386 782,114 5,936,767 Net income for the year — — — — — 856,050 91,559 947,609 Other comprehensive income — — — — 338,447 — 137,513 475,960 TOTAL COMPREHENSIVE INCOME — — — — 338,447 856,050 229,072 1,423,569 Results application Legal reserve (note 42) — — — 47,841 (47,841) — — — Transfers for reserves and retained earnings — — — — 197,386 (197,386) — — Interests of perpetual subordinated bonds (AT1) — — — (37,000) — — (37,000) Dividends (a) — — — — — — (23,719) (23,719) Other reserves — — — — (79) — (40) (119) BALANCE AS AT 31 DECEMBER 2023 3,000,000 16,471 400,000 316,375 1,723,175 856,050 987,427 7,299,498 (a) Dividends of BIM - Banco Internacional de Moçambique, S.A. CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the consolidated financial statements. 2023 REPORT & ACCOUNTS 193 | 1. Accounting policies A. Basis of presentation Banco Comercial Português, S.A. (the ‘Bank’) is a private capital bank, established in Portugal in 1985. It started operating on 5 May 1986, and these consolidated financial statements reflect the results of the operations of the Bank and all its subsidiaries (together referred to as the ‘Group’) and the Group’s interest in associates, for the years ended on 31 December 2023 and 2022. In accordance with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of 19 July 2002, and Bank of Portugal Notice no. 5/2015 (which revoked Bank of Portugal Notice no. 1/2005), the Group’s consolidated financial statements are required to be prepared, since 2005, in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU). IFRS comprise accounting standards issued by the International Accounting Standards Board (IASB), as well as interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and its predecessor bodies. The consolidated financial statements and the accompanying notes were approved on 25 March 2024 by the Bank's Board of Directors and are presented in thousands of euros, rounded to the nearest thousand. All the references in this document related to any normative always report to the respective current version. The consolidated financial statements for the year ended on 31 December 2023 were prepared for the purpose of recognition and measurement, in accordance with the IFRS approved by the EU that are effective on that date. These consolidated financial statements are a translation of the financial statements originally issued in Portuguese. In the event of discrepancies, the Portuguese version prevails. A1. Comparative information The Group has adopted IFRS and interpretations mandatory for accounting periods beginning on or after 1 January 2023. The accounting policies were applied consistently to all entities of the Group and are consistent with those used in the preparation of the financial statements of the previous period, except for the changes resulting from the adoption of IFRS 17 - Insurance Contracts with reference to 1 January 2023. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 - Insurance Contracts. IFRS 17 outlines a general model, which is modified for insurance contracts with direct participation features, described as the variable fee approach. The general model is simplified if certain criteria are met by measuring the liability for remaining coverage using the premium allocation approach. The general model uses current assumptions to estimate the amount, timing and uncertainty of future cash flows and it explicitly measures the cost of that uncertainty. It takes into account market interest rates and the impact of policyholders’ options and guarantees. As the Group owns 49% of Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A., which is dedicated to the management of life insurance and pension funds, on 1 January 2023 Millenniumbcp Ageas made the simultaneous adoption of IFRS 9 - Financial Instruments and IFRS 17 - Insurance Contracts. It opted for the possibility given to Insurance Companies to defer the application of IFRS 9, since the combined implementation with IFRS 17 would minimize the distortion of results. Initial application of IFRS 17 and IFRS 9 requires comparative information. Therefore, Millenniumbcp Ageas made the transition exercise on 1 January 2022, and the impacts resulting from its implementation are detailed in note 59. Application of IFRS 17 – Insurance Contracts, and IFRS 9 - Financial Instruments by Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. In order to ensure the comparability of information, the Group made the appropriate adjustments in the 2022 consolidated balance sheet and income statement, as detailed in note 59. The Group's financial statements were prepared under the going concern assumption, the accrual-based accounting regime and under the historical cost convention, as modified by the application of fair value for derivative financial instruments, financial assets and liabilities at fair value through profit or loss and financial assets at fair value through other comprehensive income. Financial assets and liabilities that are covered under hedge accounting are stated at fair value in respect of the risk that is being hedged, if applicable. Other financial assets and liabilities and non-financial assets and liabilities are stated at amortised cost or historical cost. Non-current assets and disposal groups held for sale are stated at the lower of carrying amount or fair value less costs to sell. The liability for defined benefit obligations is recognised as the present value of the past liabilities with pensions net of the value of the fund's assets. 2023 REPORT & ACCOUNTS 194 | The preparation of the financial statements in accordance with IFRS requires the Board of Directors, under advice of the Executive Committee, to make judgments, estimations and assumptions that affect the application of the accounting policies and reported amounts of assets, liabilities, income and expenses. The estimations and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances and form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimations. The issues involving a higher degree of judgment or complexity or for which assumptions and estimations are significant are presented in note 1.Y. B. Basis of consolidation As from 1 January 2010, the Group began to apply IFRS 3 (revised) for the accounting of business combinations. The changes in the accounting policies resulting from the application of IFRS 3 (revised) are applied prospectively. The consolidated financial statements now presented reflect the assets, liabilities, income and expenses of the Bank and its subsidiaries (the Group), and the results attributable to the Group financial investments in associates. B1. Investments in subsidiaries Subsidiaries are entities controlled by the Group (including structure entities and investment funds). The Group controls an entity when it holds the power to direct the relevant activities of the entity, and when it is exposed, or has rights, to variable returns from its involvement with the entity and can take possession of these results through the power it holds over the relevant activities of that entity (de facto control). The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Accumulated losses are attributed to non-controlling interests in the respective proportion, implying that the Group can recognise negative non-controlling interests. On a step acquisition process resulting in the acquisition of control, the revaluation of any participation previously acquired is recorded against the profit and loss account when goodwill is calculated. On a partial disposal resulting in loss of control over a subsidiary, any participation retained is revalued at market value on the sale date and the gain or loss resulting from this revaluation is booked against the income statement. B2. Investments in associates Investments in associated companies are registered by the equity method from the date that the Group acquires significant influence until the date it ceases to exist. Associates are those entities in which the Group has significant influence but not control over the financial and operating policy decisions of the investee. It is assumed that the Group has significant influence when it holds, directly or indirectly, more than 20% or of the voting rights of the investee. If the Group holds, directly or indirectly, less than 20% of the voting rights of the investee, it is presumed that the Group does not have significant influence, unless such influence can be clearly demonstrated. The existence of significant influence by the Group is usually evidenced in one or more of the following ways: -representation on the Board of Directors or equivalent governing body of the investee; -participation in policy-making processes, including participation in decisions about dividends or other distributions; -material transactions between the Group and the investee; -interchange of the management team; -provision of essential technical information. The consolidated financial statements include the part that is attributable to the Group of the total reserves and results of associated companies accounted on an equity basis. When the Group’s share of losses exceeds its interest in the associate, the carrying amount is reduced to zero and recognition of further losses is discontinued, with exception of the part in which the Group incurs in a legal obligation to assume these losses on behalf of an associate. 2023 REPORT & ACCOUNTS | 195 B3. Goodwill Business combinations are accounted under the purchase method. The acquisition cost corresponds to the fair value, determined at the acquisition date, of the assets given and liabilities incurred or assumed. Costs directly attributable to the acquisition of a subsidiary are recorded directly in the income statement. Positive goodwill arising from acquisitions is recognised as an asset carried at acquisition cost and is not subject to amortisation, however, it is subject to impairment tests. Goodwill arising from the acquisition of subsidiaries and associates is defined as the difference between the cost of acquisition and the total or corresponding share of the fair value of the net assets and contingent liabilities acquired, depending on the option taken. Negative goodwill arising from an acquisition is recognised directly in the income statement of the period in which the business combination occurs. Goodwill is not adjusted due to changes in the initial estimation of the contingent purchase price, being the difference recorded in the income statement or in equity, when applicable. According to IFRS 3 – Business combinations, if the initial accounting of a business combination is not concluded until the end of the first financial reporting period in which the combination occurs, it is recorded at the respective provisional values. These provisional values can be adjusted over the measurement period, which can’t exceed a year since the acquisition date. Over this period, the Group should retrospectively adjust the amounts recognised previously on the acquisition date, to reflect newly obtained information about facts and circumstances that existed at the acquisition date and that, if they were known by then, would have impacted the measurement of the amounts recognised at that date. During this period, the Group should also recognise additional assets and liabilities in the case of obtaining new information about facts and circumstances that existed at the acquisition date and that, if they were known by then, would have resulted in the recognition of those assets and liabilities at that time. The recoverable amount of the goodwill registered in the Group's asset is assessed annually in the preparation of the accounts with reference to the end of the year or whenever there are indications of eventual loss of value. Impairment losses are recognised in the income statement. The recoverable amount is determined based on the higher of the asset value in use and the market value after deducting selling costs, calculated using valuation methodologies supported by discounted cash flow techniques, considering market conditions, the time value of money and the business risks. B4. Purchases and dilution of non-controlling interests The acquisition of non-controlling interests that do not impact the control position of a subsidiary is accounted as a transaction with shareholders and, therefore, no additional goodwill resulting from this transaction is recognised. The difference between the acquisition cost and the fair value of non-controlling interests acquired is recognised directly in reserves. On this basis, the gains and losses resulting from the sale of controlling interests that do not impact the control position of a subsidiary are always recognised against reserves. B5. Loss of control The gains or losses resulting from the dilution or sale of a financial position in a subsidiary, with loss of control, are recognised by the Group in the income statement. B6. Investments in foreign subsidiaries and associates The financial statements of foreign subsidiaries and associates of the Group are prepared in their functional currency, defined as the currency of the primary economic environment in which they operate or the currency in which the subsidiaries obtain their income or finance their activity. In the consolidation process, assets and liabilities, including goodwill, of foreign subsidiaries are converted into euros at the official exchange rate on the balance sheet date. 2023 REPORT & ACCOUNTS 196 | Regarding the investments in foreign operations that are consolidated under the full consolidation or equity methods, exchange differences, between the conversion to euros of the equity at the beginning of the year and its value in euros at the exchange rate on the balance sheet date in which the consolidated accounts are reported, are recognised against “Reserves - exchange differences”. The changes in fair value resulting from instruments that are designated and qualified as hedging instruments related to foreign operations are recorded in equity under "Reserves and retained earnings". Whenever the hedge is not fully effective, the ineffective portion is accounted against profit and loss of the year. The income and expenses of these subsidiaries are converted to euros at an approximate rate of the rates on the dates of the transactions, using a monthly average considering the initial and final exchange rates of each month. Exchange differences from the conversion to euros of the profits and losses for the reporting period, arising from the difference between the exchange rate used in the income statement and the exchange rate prevailing at the balance sheet date, are recognised in "Reserves and retained earnings - exchange differences resulting from the consolidation of Group's companies". The exchange rates used by the Group are detailed in note 54. On disposal of investments in foreign subsidiaries for which there is loss of control, exchange differences related to the investment in the foreign operation and to the associated hedge transaction previously recognised in reserves are transferred to profit and loss, as part of the gains or loss arising from the disposal. The Group applies IAS 29 – Financial reporting in hyperinflationary economies in financial statements of entities that present accounts in functional currency of an economy that has hyperinflation. In applying this policy, non-monetary assets and liabilities are adjusted based on the price index from the date of acquisition or the date of the last revaluation until 31 December 2021. The restated values of assets are reduced by the amount that exceeds their recoverable amount, in accordance with the applicable IFRS. Equity components are also updated considering the price index from the beginning of the period or date of the contribution if it is earlier. When the classification as a hyperinflationary economy is applied to associated companies, its effects are included in the Group's financial statements by applying the equity method of accounting on the financial statements restated in accordance with the requirements of IAS 29. The effects of the application of IAS 29 with impact on capital items are recognised against the item "Reserves and retained earnings". In accordance with the requirements provided in IAS 29, Angola was considered as a hyperinflationary economy until 31 December 2018. This classification is no longer applicable as of 1 January 2019. B7. Transactions eliminated on consolidation The balances and transactions between Group's companies, as well as any unrealised gains and losses arising from these transactions, are eliminated in the preparation of the consolidated financial statements. Unrealised gains and losses arising from transactions with associates and jointly controlled entities are eliminated in the proportion of the Group's investment in these entities. C. Financial instruments (IFRS 9) C1. Financial assets C1.1. Classification, initial recognition and subsequent measurement At the initial recognition, financial assets are classified into one of the following categories: – “Financial assets at amortised cost”; – “Financial assets at fair value through other comprehensive income”; or, – “Financial assets at fair value through profit or loss”. The classification is made taking into consideration the following aspects: – the Group's business model for the management of the financial asset; and, – the characteristics of the contractual cash flows of the financial asset. 2023 REPORT & ACCOUNTS | 197 Business Model Evaluation With reference to 1 January 2018, the Group carried out an evaluation of the business model in which the financial instruments are held at portfolio level, since this approach reflects how assets are managed and how that information is made available to management bodies. The information considered in this evaluation included: – the policies and purposes established for the portfolio and the practical operability of these policies, including how the management strategy focuses on receiving contractual interest, maintaining a certain interest rate profile, adjusting the duration of financial assets to the duration of liabilities that finance these assets or on the realization of cash flows through the sale of the assets; – how the performance of the portfolio is evaluated and reported to the Group's management bodies; – the evaluation of the risks that affect the performance of the business model (and of the financial assets held under this business model) and the way these risks are managed; – the remuneration of business managers, i.e., in what way the compensation depends on the fair value of the assets under management or on contractual cash flows received; and, – the frequency, volume and sales periodicity in previous periods, the reasons for these sales and the expectations about future sales. However, sales information should not be considered individually, but as part of an overall assessment of how the Group establishes financial asset management objectives and how cash flows are obtained. Financial assets held for trading and financial assets managed and evaluated at fair value by option are measured at fair value through profit or loss because they are not held either for the collection of contractual cash flows (HTC), nor for the collection of cash flows and sale of these financial assets (HTC and Sell). Evaluation if the contractual cash flows correspond to Solely Payments of Principal and Interest (SPPI) For the purposes of this assessment, "principal" is defined as the fair value of the financial asset at initial recognition. "Interest" is defined as the counterparty for the time value of money, for the credit risk associated with the amount owed over a given period and for other risks and costs associated with the activity (e.g., liquidity risk and administrative costs), as well as for a profit margin. In the evaluation of the financial instruments in which contractual cash flows refer exclusively to the receipt of principal and interest, the Group considered the original contractual terms of the instrument. This evaluation included the analysis of the existence of situations in which the contractual terms can modify the periodicity and the amount of the cash flows so that they do not fulfil the SPPI condition. In the evaluation process, the Group considered: – contingent events that may change the periodicity and the amount of the cash flows; – characteristics that result in leverage; – terms of prepayment and extension of maturity; – terms that may limit the right of the Group to claim cash flows in relation to specific assets (e.g., contracts with terms that prevent access to assets in case of default – non-recourse asset); and, – characteristics that may change the time value of money. In addition, an advance payment is consistent with the SPPI criterion if: – the financial asset is acquired or originated with a premium or discount in relation to the contractual nominal value; – the prepayment represents substantially the nominal amount of the contract plus accrued contractual interest, but not paid (may include reasonable compensation for prepayment); and, – the prepaid fair value is insignificant at initial recognition. 2023 REPORT & ACCOUNTS 198 | C1.1.1. Financial assets at amortised cost Classification A financial asset is classified under the category "Financial assets at amortised cost" if both of the following conditions are met: – the financial asset is held within a business model whose objective is to hold financial assets in order to collect their contractual cash flows; and, – its contractual cash flows occur on specific dates and are solely payments of principal and interest on the principal amount outstanding (SPPI). The "Financial assets at amortised cost" category includes loans and advances to credit institutions, loans and advances to customers and debt instruments managed based on a business model whose purpose is to receive their contractual cash flows (government bonds, bonds issued by companies and commercial paper). Initial recognition and subsequent measurement Loans and advances to credit institutions and loans and advances to customers are recognised at the date the funds are made available to the counterparty (settlement date). Debt instruments are recognised on the trade date, that is, on the date the Group accepts to acquire them. Financial assets at amortised cost are initially recognised at fair value plus transaction costs and are subsequently measured at amortised cost. In addition, they are subject, at their initial recognition, to the measurement of impairment losses for expected credit losses (note C1.5), which are recognised in "'Impairment of financial assets measured at amortised cost". Interest of financial assets at amortised cost is recognised under "Interest and similar income", based on the effective interest rate method and in accordance with the criteria described in note C3. Gains or losses generated at the time of derecognition are registered in "Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss". C1.1.2. Financial assets at fair value through other comprehensive income Classification A financial asset is classified under the category of "Financial assets at fair value through other comprehensive income" if both of the following conditions are met: – the financial asset is held within a business model whose objective is both to collect its contractual cash flows and to sell this financial asset; and, – its contractual cash flows occur on specific dates and are solely payments of principal and interest on the principal amount outstanding (SPPI). In addition, at the initial recognition of an equity instrument that is not held for trading, nor a contingent retribution recognised by an acquirer in a business combination to which IFRS 3 applies, the Group may irrevocably choose to classify it in the category of "Financial assets at fair value through other comprehensive income" (FVOCI). This option is exercised on a case-by-case basis and is only available for financial instruments that comply with the definition of equity instruments provided in IAS 32 and cannot be used for financial instruments whose classification as an equity instrument under the scope of the issuer is made under the exceptions provided in paragraphs 16A to 16D of IAS 32. Initial recognition and subsequent measurement Debt instruments at fair value through other comprehensive income are initially recognised at fair value plus transaction costs and are subsequently measured at fair value. Changes in the fair value of these financial assets are recognised against other comprehensive income and, at the time of their disposal, the respective gains or losses accumulated in other comprehensive income are reclassified to a specific income statement item designated "Gains or losses on derecognition of financial assets at fair value through other comprehensive income”. 2023 REPORT & ACCOUNTS | 199 Debt instruments at fair value through other comprehensive income are also subject from their initial recognition to the measurement of impairment losses for expected credit losses (note C1.5). Impairment losses are recognised in the income statement under "Impairment of financial assets at fair value through other comprehensive income", against “Other comprehensive income”, and do not reduce the carrying amount of the financial asset in the balance sheet. Interest, premiums or discounts on financial assets at fair value through other comprehensive income are recognised in "Interest and similar income", based on the effective interest rate method and in accordance with the criteria described in note C3. Equity instruments at fair value through other comprehensive income are initially recognised at fair value plus transaction costs and are subsequently measured at fair value. The changes in the fair value of these financial assets are recognised against “Other comprehensive income”. Dividends are recognised in the income statement when the right to receive them is attributed. Impairment is not recognised for equity instruments at fair value through other comprehensive income, and the respective accumulated gains or losses recognised in “Fair value changes” are transferred to “Retained earnings” at the time of their derecognition. C1.1.3. Financial assets at fair value through profit or loss Classification A financial asset is classified in the category "Financial assets at fair value through profit and loss" if the business model defined by the Group for its management or the characteristics of its contractual cash flows do not meet the conditions described above to be measured at amortised cost or at fair value through other comprehensive income (FVOCI). In addition, the Group may irrevocably designate a financial asset at fair value through profit or loss that meets the criteria to be measured at amortised cost or at FVOCI at the time of its initial recognition if this eliminates or significantly reduces an inconsistency in measurement or recognition (accounting mismatch), that will otherwise arise from measuring assets or liabilities or recognising their gains and losses in different bases. The Group classified "Financial assets at fair value through profit and loss" in the following items: a) “Financial assets held for trading” These financial assets are acquired with the purpose of short-term selling; at the initial recognition, they are part of a portfolio of identified financial instruments and for which there is evidence of profit-taking in the short-term; or they can be defined as derivatives (except for hedging derivatives). b) “Financial assets not held for trading mandatorily at fair value through profit or loss” This item classifies debt instruments whose contractual cash flows do not correspond only to repayments of principal and interest on the principal amount outstanding (SPPI). c) “Financial assets designated at fair value through profit or loss” (Fair Value Option) This item includes the financial assets that the Group has chosen to designate at fair value through profit or loss to eliminate accounting mismatch. Initial recognition and subsequent measurement Considering that the transactions carried out by the Group in the normal course of its business are in market conditions, financial assets at fair value through profit or loss are initially recognised at their fair value, with the costs or income associated with the transactions recognised in profit and loss at the initial moment. Subsequent changes in the fair value of these assets are recognised in profit and loss. The accrual of interest and of the premium/discount (when applicable) is recognised in "Net interest income", based on the effective interest rate of each transaction, except the accrual of interest from trading derivatives that are recognised in “Gains/(losses) on financial operations at fair value through profit or loss”. Dividends are recognised in profit and loss when the right to receive them is attributed. Trading derivatives with a positive fair value are included in the item "Financial assets held for trading", while trading derivatives with negative fair value are included in "Financial liabilities held for trading". 2023 REPORT & ACCOUNTS 200 | C1.2. Reclassification between categories of financial assets Financial assets should be reclassified into other categories only if the business model used in their management has changed. In this case, all financial assets affected must be reclassified. The reclassification must be applied prospectively from the date of reclassification and any gains, losses (including the ones related to impairment) or interest previously recognised should not be restated. The reclassification of investments in equity instruments measured at fair value through other comprehensive income is not allowed, nor of financial instruments designated at fair value through profit or loss. C1.3. Modification and derecognition of financial assets General principles i) The Group shall derecognise a financial asset when, and only when: – the contractual rights to the cash flows from the financial asset expire; or, – it transfers the financial asset as set out in notes ii) and iii) below and the transfer qualifies for derecognition in accordance with note iv). ii) The Group transfers a financial asset if, and only if, it either: – transfers the contractual rights to receive the cash flows of the financial asset; or, – retains the contractual rights to receive the cash flows of the financial asset but assumes a contractual obligation to pay the cash flows to one or more recipients in an arrangement that meets the conditions presented in note iii). iii) When the Group retains the contractual rights to receive the cash flows of a financial asset (the 'original asset'), but assumes a contractual obligation to pay these cash flows to one or more entities (the 'eventual recipients'), the Group shall treat the transaction as a transfer of a financial asset if all the following three conditions are met: – the Group does not have any obligation to pay amounts to the eventual recipients, unless it collects equivalent amounts from the original asset. Short-term advances with the right of full recovery of the amount lent, plus accrued interest at market rates, do not violate this condition; – the Group is contractually prohibited from selling or pledging the original asset other than as a security to the eventual recipients due its obligation to pay them cash flows; and, – the Group has an obligation to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, it is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents (as defined in IAS 7 – Statement of Cash Flows) during the short settlement period from the collection date until the date of required remittance to the eventual recipients, and interest earned on such investments is passed to the eventual recipients. iv) When the Group transfers a financial asset (see note ii) above), it shall evaluate the extent to which it retains the risks and benefits arising from owning the financial asset. In this case: – if the Group transfers substantially all the risks and benefits arising from owning the financial asset, it shall derecognise the financial asset and recognise separately any rights and obligations created or retained in the transfer, as assets or liabilities; – if the Group retains substantially all the risks and benefits arising from owning the financial asset, it shall continue to recognise the financial asset; – if the Group neither transfers nor retains substantially all the risks and benefits arising from owning the financial asset, it shall determine whether it retained control of the financial asset. In this case: a) if the Group did not retain control, it shall derecognise the financial asset and recognise separately, as assets or liabilities, any rights and obligations created or retained in the transfer; b) if the Group retained control, it shall continue to recognise the financial asset to the extent of its continued involvement in the financial asset. 2023 REPORT & ACCOUNTS | 201 v) The transfer of risks and benefits (see prior note) is evaluated by comparing the Group’s exposure, before and after the transfer, with the variability in the amounts and timing of the net cash flows of the transferred asset. vi) The question of whether the Group retained or not control (see note iv) above) over the transferred asset depends on the transferee's ability to sell the asset. If the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and can exercise that ability unilaterally without needing to impose additional restrictions on the transfer, the entity did not retain control. In all other cases, the entity retained control. Derecognition criteria In the context of the general principles listed in the previous section, and considering that contract modification processes may lead, in some circumstances, to the derecognition of the original financial assets and recognition of new ones (subject to POCI identification), the purpose of this section is to set the criteria and circumstances that may lead to the derecognition of a financial asset. The Group considers that a modification of the terms and conditions of a credit exposure will result in derecognition of the transaction and in recognition of a new transaction when the modification translates into at least one of the following conditions: – Creation of a new exposure that results from a debt consolidation, without any of the derecognized instruments having a nominal value higher than 90% of the nominal amount of the new instrument; – Double extension of the residual maturity, provided that the extension is not shorter than 3 years compared to the residual maturity in the moment of the modification; – Increase of on balance exposure by more than 10% compared to the nominal amount (refers to the last approved amount on the operation subject to modification); – Change in qualitative features, namely: i) Change of currency, unless the exchange rate between the old and the new currency is pegged or managed within limits restricted by law or the relevant monetary authorities; ii) Exclusion or addition of a substantial equity conversion feature to a debt instrument, unless it is not reasonably possible that it will be exercised over its term; iii) Transfer of the instrument’s credit risk to another borrower, or a significant change in the structure of borrowers within the instrument. iv) Deletion or addition to the debt instrument of features of the "Pay If You Can" type or dependent on the financial performance of the debt instrument. In the case of a restructuring due to financial difficulties of the debtor, only the criteria set out in items ii, iii and iv of the above paragraphs should be checked (the other criteria listed in this paragraph are not relevant in such situations). Under the regulatory changes that occurred in Poland and the negotiations with customers holding mortgage loans in foreign currency described in note 57, and which correspond to contractual modifications made in accordance with IFRS 9, when the cash flows resulting from the agreement are subject to modification and a given asset is not derecognised, Bank Millennium adjusts the gross book value of the financial asset and recognises the profit or loss due to the modification in the Income Statement - Results on modification. The adjustment to the gross carrying amount of a financial asset is the difference between the discounted cash flows before and after contract modification. Loans written-off The Group writes off a loan when it does not have reasonable expectations of recovering a financial asset in its entirety or partially. Loans written-off are recognised in off-balance sheet accounts. 2023 REPORT & ACCOUNTS 202 | C1.4. Purchased or originated credit-impaired assets Purchased or originated credit-impaired (POCI) assets are assets that present objective evidence of credit impairment in the moment of their initial recognition. An asset is credit-impaired if one or more events have occurred with a negative impact on the estimated future cash flows of the asset. The two events that lead to the origin of a POCI exposure are presented as follows: – financial assets arising from a recovery process, where there have been changes to the terms and conditions of the original agreement, which presented objective evidence of impairment that resulted in its derecognition (note C1.3) and recognition of a new contract that reflects the credit losses incurred; – financial assets acquired with a significant discount, where the existence of a significant discount reflects credit losses incurred at the time of their initial recognition. At initial recognition, POCI assets do not carry an impairment allowance. Instead, lifetime expected credit losses (ECL) are incorporated into the calculation of the effective interest rate (EIR). Consequently, at initial recognition, the gross book value of POCI (initial balance) is accounted for at fair value and it's equal to the net book value before being recognised as POCI (difference between the initial balance and the total discounted cash flows). C1.5. Impairment losses C1.5.1. Financial instruments subject to impairment losses recognition The Group recognises impairment losses for expected credit losses on financial instruments recognised in the following accounting items: C1.5.1.1. Financial assets at amortised cost Impairment losses on financial assets at amortised cost reduce the balance sheet value of these financial assets against the item "Impairment of financial assets at amortised cost" (in the income statement). C1.5.1.2. Debt instruments at fair value through other comprehensive income Impairment losses for debt instruments at fair value through other comprehensive income are recognised in the income statement under "Impairment of financial assets at fair value through other comprehensive income", against other comprehensive income (they do not reduce the balance sheet amount of these financial assets). C1.5.1.3. Credit commitments, documentary credits and financial guarantees Impairment losses associated with credit commitments, documentary credits and financial guarantees are recognised in liabilities, under the balance "Provisions for guarantees and other commitments", against "Other provisions" (in the income statement). C1.5.2. Classification of financial instruments by stages Changes in credit risk since the initial recognition Stage 1 Stage 2 Stage 3 Classification criterion Initial recognition Significant increase in credit risk since initial recognition Impaired Impairment losses 12-month expected credit losses Lifetime expected credit losses 2023 REPORT & ACCOUNTS | 203 The Group determines the expected credit losses of each operation as a result of the deterioration of credit risk since its initial recognition. For this purpose, operations are classified into one of the following three stages: – Stage 1: the operations in which there is no significant increase in credit risk since its initial recognition are classified in this stage. Impairment losses associated with operations classified in this stage correspond to expected credit losses resulting from a default event that may occur within 12 months after the reporting date (12-month expected credit losses); – Stage 2: the operations in which there is a significant increase in credit risk since its initial recognition (note C1.5.3) but are not impaired (note C1.5.4) are classified in this stage. Impairment losses associated with operations classified in this stage correspond to the expected credit losses resulting from default events that may occur over the expected residual life of the operations (lifetime expected credit losses); – Stage 3: impaired operations are classified in this stage. Impairment losses associated with operations classified at this stage correspond to lifetime expected credit losses. C1.5.3. Significant increase in credit risk (SICR) Significant increase in credit risk (SICR) is determined according to a set of mostly quantitative, but also qualitative criteria. These criteria are mainly based on the risk grades of customers, according to the Bank's Rating Master Scale, and on its evolution, in order to detect significant increases in Probability of Default (PD), complemented by other information regarding the customers’ behaviour towards the financial system. C1.5.4. Definition of financial assets in default and impaired All customers who meet at least one of the following conditions are marked as default and, consequently, in NPE: a) Delay over 90 days of material payment: - Amounts of principal, interest or fees not paid on the due date that, cumulatively, represent: i) more than Euros 100 (retail) or more than Euros 500 (non-retail); and, ii) more than 1% of the total debt (direct liabilities). After these two conditions are met, the counting of days of delay begins: if more than 90 consecutive days in which the customer is in this situation have been counted, it is classified as default (or GR15). The existence of a material payment delay gives rise to the default setting (GR15) of all holders of the operation (or operations). b) Signs of low probability of payment: i. Credit restructuring due to financial difficulties with loss of value; ii. Delay after restructuring due to financial difficulties; iii. Recurrence of restructuring due to financial difficulties; iv. Credit with signs of impairment (or stage 3 of IFRS 9); v. Insolvency or equivalent proceedings; vi. Litigation; vii. Guarantees of operations in default; viii. Credit sales with losses; ix. Credit fraud; x. Unpaid credit status; xi. Breach of covenants in a credit agreement; xii. Spread of default in an economic group; xiii. Cross default in BCP Group. 2023 REPORT & ACCOUNTS 204 | C1.5.5. Estimates of expected credit losses - Individual analysis 1. Customers who are in one of the following conditions are subject to individual analysis: Customers in default Customers in litigation or insolvency, if the total exposure of the group members in these situations exceeds Euros 1 million Customers integrated into groups with an exposure over Euros 5 million, if they have a risk grade 15 Groups or customers who are not in default Other customers belonging to groups in the above conditions Groups or customers with an exposure over Euros 5 million, if a group member has a risk grade 14 Groups or customers with an exposure over Euros 5 million, if a member of the group has a restructured loan and a risk grade 13 Groups or customers with an exposure over Euros 10 million, if at least one member of the group is in stage 2 Groups or customers not included in the preceding paragraphs, whose exposure exceeds Euros 25 million 2. Regardless of the criteria described in the previous point, the individual analysis is only performed for customers with a credit exposure over Euros 500,000, while customers with exposure below this limit are not considered for the purpose of determining the exposure referred to in the previous point. 3. Other customers that do not meet the criteria defined in 1 will also be subject to individual analysis, if under the following conditions: – they have impairment as a result of the latest individual analysis; – are classified in stage 2 as a result of the last revision of the questionnaire analysing the indications of financial difficulties; – according to recent information, they show a significant deterioration in risk levels; or, – are a Special Purpose Vehicle (SPV). 4. The individual analysis includes the following procedures: – for customers that are not in default, the analysis of financial difficulties indicators to determine whether the customer has objective signs of impairment, or whether it should be classified in stage 2 given the occurrence of a significant increase in credit risk, considering for this purpose a set of predetermined signs; – for customers in default or for which the previous analysis has allowed to conclude that the customer has objective signs of impairment, determination of the loss. 5. For the situations identified in the first paragraph of the previous point involving corporate clients, the analysis is the responsibility of the Rating Division, and the responsibility of the Credit Division for the remaining clients. 6. For the situations identified in the second paragraph of the previous point, the individual analysis to determine the loss is the responsibility of the client's management divisions and of the Credit Division, the latter with regard to the customers managed by the Commercial Networks. The assessment of existence of impairment losses in individual terms is determined through an analysis of the total credit exposure on a case-by-case basis. For each loan considered individually significant, the Group assessed at each balance sheet date the existence of objective evidence of impairment. In the assessment of impairment losses in individual terms, the following factors were considered: – total exposure of each customer towards the Group and the existence of overdue loans; – viability of the customer’s business and its capacity to generate enough cash flows to service debt obligations in the future; – the existence, nature and estimated value of the collaterals associated to each loan; – significant deterioration of the customer's rating; – the customer’s available assets in liquidation or insolvency situations; – the existence of preferential creditors; – the amount and expected recovery term. 7. Each of the units referred to in the previous point is responsible for assigning an expectation and a recovery period to exposures relating to customers subject to individual analysis, which must be transmitted to the Risk Office as part of the regular process of collecting information, accompanied by detailed justification of the proposed impairment. 2023 REPORT & ACCOUNTS | 205 8. The expected recovery shall be represented by a recovery rate of the total outstanding exposure, which may be a weighted rate considering the different recovery prospects for each part of the customer's liabilities. 9. The recovery estimation referred to in the previous point should be influenced by future prospects (forward- looking), contemplating not only a more expected scenario but also alternative scenarios (an unbiased and probability-weighted amount). The application and weighting of the scenarios should be carried out both in a global perspective and in an individualized perspective, the latter when cases that, due to their specificity, have a high degree of uncertainty regarding the expected recovery estimation are identified. 10. The macroeconomic adjustment set out in point 8 should be analysed annually and weighted according to the type of recovery strategy associated with the exposure under analysis: – for Going Concern strategies (i.e., the estimation is based on the cash flows of the business), the possibility of applying the 2 additional macroeconomic scenarios (optimistic and pessimistic) should be analysed in a global way, to ascertain if there is the risk of a skewed view of the expected losses from the consideration of only one scenario; – for Gone Concern strategies (i.e., the recovery estimation is based on the realization of the collateral), the impact of the macroeconomic scenario on collaterals should be analysed, for example, to what extent the projected real estate index indicates significant changes ahead for the current valuation values. 11. It is the responsibility of the units referred to in point 5 to consider in their projection macroeconomic expectations that may influence the recoverability of the debt. 12. For the purposes of the preceding paragraphs, the Economic Studies, Sustainability and Cryptoassets Department shall disclose the macroeconomic data that allow the estimations to be made. 13. The decision to consider global impacts related to the going and gone concern scenarios should be made by the Risk Committee, as proposed by the Risk Office. 14. For specific cases with a high degree of uncertainty, the allocation of alternative scenarios should be considered casuistically. Examples of recovery situations with a degree of uncertainty include: – recovery of collateral in geographies in which the Bank has no relevant recovery experience; – recovery of debt related to geographies in which there is strong political instability; – recovery of non-real estate collateral for which there is no evidence of market liquidity; – recovery of related collateral or government guarantees in a currency other than the country's own; – recovery of debt related to debtors for whom there is a strong negative public exposure. 15. The Risk Office is responsible for reviewing the information collected and for clarifying all identified inconsistencies, as well as for the final decision on the customer's impairment. 16. Customers that have objective signs of impairment, but an individual impairment amount is equal to zero, are included in the collective analysis, assuming a PD 12-month equivalent to the risk grade 12 of the Master Scale. 17. The individual impairment analysis must be carried out annually, and may be lower for clients who fall into certain situations of possible increased risk. In case significant signs of deterioration or improvement in the customer’s economic and financial situation are detected, as well as the macroeconomic conditions affecting the customer's ability to accomplish debt, it is the responsibility of the Risk Office to promote the review of the expected impairment of this customer. 2023 REPORT & ACCOUNTS 206 | C1.5.6. Estimates of expected credit losses - Collective analysis Transactions that are not subject to an individual impairment analysis are grouped considering their risk characteristics and subject to a collective impairment analysis. The Group's credit portfolio is divided by internal risk grades and according to the following segments: a) Segments with a reduced history of defaults, designated ‘low default’: Large corporate exposures, Project finance, Institutions (banks/financial institutions) and Sovereigns; b) Segments not ‘low default’: - Retail: Mortgages; Overdrafts; Credit cards; Small and medium enterprises - Retail (‘SME Retail’); and Others - Corporate: Small and medium enterprises - Corporate (‘Large SME’); and Real Estate. The Group performs statistical tests in order to prove the homogeneity of the segments mentioned above, with a minimum period of one year. Expected credit losses are estimates of credit losses that are determined as follows: – financial assets with no signs of impairment at the reporting date: the present value of the difference between the contractual cash flows and the cash flows that the Group expects to receive; – financial assets with impairment at the reporting date: the difference between the gross book value and the present value of the estimated cash flows; – unused credit commitments: the present value of the difference between the resulting contractual cash flows if the commitment is made and the cash flows that the Group expects to receive; – financial guarantees: the current value of the expected repayments less the amounts that the Group expects to recover. The main inputs used to measure ECLs on a collective basis should include the following variables: – Probability of Default – PD; – Loss Given Default – LGD; and, – Exposure at Default – EAD. These parameters are obtained through internal statistical models and other relevant historical data, considering the already existing regulatory models adapted to the requirements of IFRS 9. PDs are estimated based on a certain historical period and will be calculated based on statistical models. These models are based on internal data including both quantitative and qualitative factors. If there is a change in the risk of the counterparty or exposure, the estimate of the associated PD will also vary. The PDs will be calculated considering the contractual maturities of exposures. The risk grades are a highly relevant input for determining the PD associated with each exposure. The Group collects performance and default indicators about their credit risk exposures with analysis by types of customers and products. LGD is the magnitude of the loss that is expected to occur if an exposure goes into default. The Group estimates the LGD parameters based on the historical recovery rates after entry into counterparty defaults. The LGD models consider the associated collaterals, the counterparty activity sector, the default time, as well as the recovery costs. In the case of contracts secured by real estate, it is expected that the LTV (loan-to-value) ratios are a parameter of high relevance in the determination of LGD. The EAD represents the expected exposure if the exposure and/or customer defaults. The Group obtains the EAD values from the counterparty's current exposure and potential changes to its current value as a result of the contractual conditions, including amortisations and prepayments. For commitments and financial guarantees, the value of the EAD will consider both the amount of credit used and the expectation of future potential value that may be used in accordance with the agreement. 2023 REPORT & ACCOUNTS | 207 As described above, except for financial assets that consider a 12-month PD as they do not present a significant increase in credit risk, the Group will calculate the ECL value considering the risk of default during the maximum contractual maturity period of the contract, even if, for the purpose of risk management, it is considered to be a longer period. The maximum contractual period shall be considered as the period up to the date on which the Group has the right to require payment or end the commitment or guarantee. The Group adopted as a residual term criterion for renewable operations, when in stage 2, a term of 5 years. This term was determined based on the behavioural models of this type of product applied by the Bank in the liquidity risk and interest rate (ALM) analysis. According to these models, the maximum period of repayment of these operations is the 5 years considered conservatively in the scope of the calculation of credit impairment. The Group uses models to forecast the evolution of the most relevant parameters for the expected credit losses, namely probability of default, which incorporate forward-looking information. This incorporation of forward-looking information is carried out in the relevant elements considered for the calculation of expected credit losses (ECL). In particular, the PD point-in-time (PDpit) considered for the determination of the probability of performing exposures at the reference date becoming defaulted exposures considers the expected values for a set of macroeconomic variables, based on three scenarios (Central, Upside and Downside Scenario) prepared by the Bank's Economic Studies area. These scenarios, which are used across the Bank for various purposes besides calculating impairment, consider existing projections by reference entities. In December 2023 the Bank carried out an update of the macroeconomic scenarios and of the corresponded adjustment of the parameters considered in the collective impairment model. C2. Financial liabilities C2.1. Classification, initial recognition and subsequent measurement At initial recognition, financial liabilities are classified in one of the following categories: – “Financial liabilities at amortised cost”; – “Financial liabilities at fair value through profit or loss”. C2.1.1. Financial liabilities at fair value through profit or loss Classification Financial liabilities classified under "Financial liabilities at fair value through profit or loss" include: a) “Financial liabilities held for trading” In this balance the issued liabilities are classified with the purpose of repurchasing in the near term, those that form part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or is a derivative (except for a derivative classified as hedging instrument). b) “Financial liabilities designated at fair value through profit or loss” The Group may irrevocably assign a financial liability at fair value through profit or loss at the time of its initial recognition if at least one of the following conditions is met: – the financial liability is managed, evaluated and reported internally at its fair value; or, – the designation eliminates or significantly reduces the accounting mismatch of transactions. 2023 REPORT & ACCOUNTS 208 | Initial recognition and subsequent measurement Considering that the transactions carried out by the Group in the normal course of its business are made in market conditions, financial liabilities at fair value through profit or loss are initially recognised at fair value with the costs or income associated with the transactions recognised in profit or loss at the initial moment. Subsequent changes in the fair value of these financial liabilities are recognised as follows: – the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income; – the remaining amount of change in the fair value of the liability shall be presented in profit or loss. The accrual of interest and the premium/discount (when applicable) is recognised in "Interest expense and similar charges" based on the effective interest rate of each transaction. C2.1.2. Financial guarantees If they are not designated at fair value through profit or loss at the time of initial recognition, the financial guarantee contracts are subsequently measured at the highest of the following amounts: – the provision for losses determined according to the criteria described in note C1.5; – the amount initially recognised deducted, when appropriate, from the accumulated amount of income recognised according to IFRS 15 - Revenue from contracts with customers. Financial guarantee contracts that are not designated at fair value through profit or loss are presented under "Provisions". C2.1.3. Financial liabilities at amortised cost Classification Financial liabilities that were not classified at fair value through profit or loss, or correspond to financial guarantee contracts, are measured at amortised cost. The category "Financial assets at amortised cost" includes resources from credit institutions and from customers, as well as subordinated and non-subordinated debt securities. Initial recognition and subsequent measurement Financial liabilities at amortised cost are initially recognised at fair value plus transaction costs and are subsequently measured at amortised cost. Interest on financial liabilities at amortised cost are recognised in "Interest expense and similar charges", based on the effective interest rate method. C2.2. Reclassification between categories of financial liabilities Reclassifications of financial liabilities are not allowed. C2.3. Derecognition of financial liabilities The Group derecognises financial liabilities when these are cancelled or extinct. C3. Interest recognition Income and expense related to interest from financial instruments measured at amortised cost are recognised in "Interest and similar income" and "Interest expense and similar charges" (net interest income) through the effective interest rate method. Interest related to financial assets at fair value through other comprehensive income is also recognised in net interest income. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument (or, when appropriate, for a shorter period), to the net carrying amount of the financial asset or financial liability. 2023 REPORT & ACCOUNTS | 209 For calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial instrument (e.g., early payment options) but without considering future impairment losses. The calculation includes all fees paid or received considered as included in the effective interest rate, transaction costs and all other premiums or discounts directly related to the transaction, except for assets and liabilities at fair value through profit and loss. Interest income recognised in income associated with contracts classified in stage 1 or 2 are determined by applying the effective interest rate for each contract on its gross book value. The gross balance of a contract is its amortised cost, before deducting the respective impairment. For financial assets included in stage 3, interest is recognised in the income statement based on its net book value (less impairment). The interest recognition is always made in a prospective way, i.e., for financial assets entering stage 3, interest is recognised at the amortised cost (net of impairment) in subsequent periods. For purchased or originated credit-impaired assets (POCI), the effective interest rate reflects the expected credit losses in determining the expected future cash flows receivable from the financial asset. C4. Hedge accounting As allowed by IFRS 9, the Group opted to continue to apply the hedge accounting requirements in accordance with IAS 39. The Group designates derivatives and other financial instruments to hedge its exposure to interest rate and foreign exchange risk, resulting from financing and investment activities. Derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative hedging instruments are stated at fair value and gains and losses on revaluation are recognised in accordance with the hedge accounting model adopted by the Group. A hedge relationship exists when: – at the inception of the hedge there is formal documentation of the hedge; – the hedge is expected to be highly effective; – the effectiveness of the hedge can be reliably measured; – the hedge is assessed in a continuous basis and highly effective throughout the reporting period; and, – for hedges of a forecasted transaction, the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit or loss. When a derivative financial instrument is used to hedge foreign exchange variations arising from monetary assets or liabilities, no hedge accounting model is applied. Any gain or loss associated to the derivative is recognised through profit and loss, as well as changes in currency risk of the monetary items. C4.1. Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedge instruments are recognised in profit and loss, together with changes in the fair value attributable to the hedged risk of the asset or liability or group of assets and liabilities. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative gains and losses due to variations of hedged risk linked to the hedge item recognised until the discontinuance of the hedge accounting are amortised through profit and loss over the residual term of the hedged item. C4.2. Cash flow hedge In a hedge relationship, the effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity - cash flow hedge reserves in the effective part of the hedge relations. Any gain or loss relating to the ineffective portion of the hedge is immediately recognised in profit and loss when occurred. Amounts accumulated in equity are reclassified to profit and loss in the periods in which the hedged item will affect profit or loss. 2023 REPORT & ACCOUNTS 210 | In case of hedging variability of cash flows, when the hedge instrument expires or is disposed or when the hedging relationship no longer meets the criteria for hedge accounting, or when the hedge relation is revoked, the hedge relationship is discontinued on a prospective basis. Therefore, the fair value changes of the derivative accumulated in equity until the date of the discontinued hedge accounting can be: – deferred over the residual period of the hedged instrument; or, – recognised immediately in results if the hedged instrument is extinguished. In the case of a discontinued hedge of a forecast transaction, the change in fair value of the derivative recognised in equity at that time remains in equity until the forecasted transaction is ultimately recognised in the income statement. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to profit and loss. C4.3. Hedge effectiveness For a hedge relationship to be classified as such according to IAS 39, effectiveness must be demonstrated. As such, the Group performs prospective tests at the beginning date of the initial hedge, if applicable, and retrospective tests in order to demonstrate at each reporting period the effectiveness of the hedging relationships, demonstrating that the variations in fair value of the hedging instrument are hedged by the fair value variations of the hedged item in the portion assigned to the risk covered. Any ineffectiveness is recognised immediately in profit and loss when incurred. C4.4. Hedge of a net investment in a foreign operation Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any exchange gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss relating to the ineffective portion is immediately recognised in profit and loss. Gains and losses accumulated in equity related to the investment in a foreign operation and to the associated hedge operation are recognised in equity and transferred to profit and loss, on the disposal of the foreign operation as part of the gain or loss from the disposal. C5. Embedded Derivatives An embedded derivative is a component of a hybrid agreement, which also includes a non-derived host instrument. If the main instrument included in the hybrid contract is considered a financial asset, the classification and measurement of the entire hybrid contract is carried out in accordance with the criteria described in note C1.1.3. Derivatives embedded in contracts that are not considered financial assets are treated separately whenever the economic risks and benefits of the derivative are not related to those of the main instrument, since the hybrid instrument is not initially recognised at fair value through profit or loss. Embedded derivatives are recorded at fair value with subsequent fair value changes recorded in profit or loss for the period and presented in the trading derivatives portfolio. D. Securitization operations D1. Traditional securitizations As at 31 December 2023, Banco Comercial Português has in Portugal two residential mortgage credit securitization operations, Magellan Mortgages no.3 and no.4, in which the respective portfolios were derecognised from the Bank’s individual balance sheet, as the risks and rewards related to the residual portions of the referred transactions, were transferred to institutional investors. By purchasing a part or all of the most subordinated residual portion, the Group maintained control of the assets and liabilities of Magellan Mortgages no.3, this Special Purpose Entity (SPE) being consolidated in the Group’s financial statements, in accordance with the accounting policy referred to in note 1 B. The two operations are traditional securitizations, where each mortgage loan portfolio was sold to a Portuguese Loan Securitisation Fund, which has financed this purchase through the sale of securitisation units to an Irish-SPE. At the same time, this SPE issued and sold in capital markets the different tranches of bonds. 2023 REPORT & ACCOUNTS | 211 D2. Synthetic securitizations As at 31 December 2023, Banco Comercial Português has in Portugal three synthetic securitization operations, with similar characteristics, with reference to credit portfolios granted by the Bank mainly to Small and Medium Enterprises (SMEs). Caravela SME no.3, which started on 28 June 2013, has a medium and long-term loan portfolio of current accounts and authorized overdrafts. Caravela SME no.4, initiated on 5 June 2014, has a reference portfolio of vehicle, real estate and equipment leasing. Caravela SME no.5, initiated on 20 December 2022, is supported on a credit portfolio of medium and long term loans, leasing contracts and commercial paper programmes. In any of these operations, the Bank contracted a Credit Default Swap (CDS) from a Special Purpose Entity (SPE), buying, this way, protection over the total referenced portfolio. As in all synthetic securitizations, under CDS, the risk of the respective portfolios was divided in 3 tranches: senior, mezzanine and equity. In the case of both Caravela no.3 and no.4, the mezzanine and part of the equity (20%) were placed in the market through the issuance of Credit Linked Notes (CLNs) by the above mentioned SPE which were subscribed by investors, while the Group retained the senior risk and the remaining part of the equity (80%). In the case of Caravela, SME no. 5, only the full amount of the mezzanine was placed in the market, while the Group retained the risk of the full amount of the senior and equity tranches. Note that in all the above-mentioned synthetic transactions, the product of the CLNs issue was invested by the SPE in a deposit, which fully collateralizes the responsibilities in the presence of its creditors including BCP in accordance with the CDS. In December 2023, the Bank Millennium carried out a synthetic securitization transaction of a portfolio of unsecured cash loans with a total value of PLN 7.2 billion (Euros 1.7 billion). This was the largest synthetic securitization transaction concluded by the Bank so far. As part of the transaction, the Bank transferred a significant part of the credit risk of the securitized portfolio to the investor. The securitized loan portfolio remains on the Bank's balance sheet. The risk of the securitized portfolio is transferred via a credit protection instrument in the form of credit risk- related bonds issued in December 2023 ("CLN Bonds") in the amount of PLN 489 million (Euros 112.6 million). Earlier, in July 2023, the Bank's subsidiary, Millennium Leasing, conducted another synthetic securitization transaction. The reference portfolio of leasing transactions was worth PLN 4.0 billion (Euros 0.9 million). As part of the transaction, Millennium Leasing transferred a significant part of the credit risk of the securitized portfolio to the investor. The securitized loan portfolio remains on Millennium Leasing's balance sheet. The risk transfer of the securitized portfolio is carried out through a credit protection instrument in the form of credit risk bonds issued in July 2023 ("CLN Bonds") in the amount of PLN 280 million (Euros 64.5 million). E. Equity instruments A financial instrument is an equity instrument only if: i) the instrument includes no contractual obligation to deliver cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; and, ii) the instrument will or may be settled in the issuer's own equity instruments, it is either a non-derivative that includes no contractual obligation for the issuer to deliver a variable number of its own equity instruments or a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments. 2023 REPORT & ACCOUNTS 212 | An equity instrument, independently from its legal form, evidences a residual interest in the assets of an entity after deducting all its liabilities. Transaction costs directly attributable to an equity instrument issuance are recognised in equity as a deduction to the amount issued. Amounts paid or received related to sales or acquisitions of equity instruments are recognised in equity, net of transaction costs. Preference shares issued by the Group are considered as an equity instrument when redemption of the shares is solely at the discretion of the Group and dividends are paid at the discretion of the Group. Income from equity instruments (dividends) are recognised when the obligation to pay is established and are deducted to equity. F. Securities borrowing and repurchase agreement transactions F1. Securities borrowing Securities lent under securities lending arrangements continue to be recognised in the balance sheet and are measured in accordance with the applicable accounting policy. Cash collateral received in respect of securities lent is recognised as a financial liability. Securities borrowed under securities borrowing agreements are not recognised. Cash collateral placements in respect of securities borrowed are recognised under loans and advances to either banks or customers. Income and expenses arising from the securities borrowing and lending business are recognised on an accrual basis over the period of the transactions and are included in interest income or expense (net interest income). F2. Repurchase agreements The Group performs acquisition/sale of securities under reselling/repurchase agreements of securities substantially equivalent in a future date at a predetermined price ('repos'/'reverse repos'). The securities related to reselling agreements in a future date are not recognised in the balance sheet. The amounts paid are recognised in loans and advances to customers or loans and advances to credit institutions. The receivables are collateralised by the related securities. Securities sold through repurchase agreements continue to be recognised in the balance sheet and are revaluated in accordance with the applicable accounting policy. The amounts received from the proceeds of these securities are considered as deposits from customers and deposits from credit institutions. The difference between the acquisition/sale and reselling/repurchase conditions is recognised on an accrual basis over the period of the transaction and is included in interest income or expenses. G. Non-current assets held for sale and Discontinued or discontinuing operations Non-current assets, groups of non-current assets held for sale (groups of assets together with related liabilities that include at least a non-current asset) and discontinued operations are classified as held for sale when the intention is to sell the referred assets and liabilities and when the referred assets or group of assets are available for immediate sale, subject to the terms of sale usually applicable to these types of assets, and its sale is highly probable, in accordance with IFRS 5. For the sale to be considered highly probable, the Group must be committed to a plan to sell the asset (or disposal group) and must have initiated an active program to locate a buyer and complete the plan. In addition, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. Furthermore, it should be expected that the sale qualifies for recognition as a completed sale within one year from the date of classification, except as permitted by paragraph 9 of IFRS 5, and that the Group remains committed to the asset sales plan and the delay is caused by events or circumstances beyond its control. If the requirements set out in IFRS 5 for these assets are not met, the balance sheet value and respective impairment are reflected in the caption "Other assets". In 2023, a group of properties was reclassified, as described in notes 27 and 32. 2023 REPORT & ACCOUNTS | 213 The Group also classifies as non-current assets held for sale those non-current assets or groups of assets acquired exclusively with a view to its subsequent disposal, which are available for immediate sale and its sale is highly probable. Immediately before classification as held for sale, the measurement of the non-current assets or all assets and liabilities in a disposal group, is performed in accordance with the applicable IFRS. After their reclassification, these assets or disposal groups are measured at the lower of their cost and fair value less costs to sell. Discontinued operations and the subsidiaries acquired exclusively with the purpose to sell in the short-term are consolidated until the moment of their sale. G1. Non-operating real estate (INAE) The Group also classifies as non-current assets held for sale the non-operating real estate (INAE), which include properties acquired by the Group as a result of the resolution of customer credit processes, as well as own properties that are no longer used by the Group's services. Properties held by real estate companies and real estate investment funds, which are part of the Group's consolidation perimeter, whose capital or units acquired by the Group as a result of the recovery loans are treated as INAE. At the time of acquisition, real estate classified as INAE is recognised at the lower of the value of the loans existing on the date on which the recovery occurs, or the judicial decision is formalised, and the fair value of the property, net of estimated costs for sale. Subsequent measurement of INAE is made at the lower of their book value and the corresponding fair value, net of the estimated costs for their sale and are not subject to amortisation. Impairment losses are recorded in the results of the period in which they arise. The fair value is determined based on the market value, which is determined based on the expected sales price obtained through periodic evaluations made by expert external evaluators accredited to the Comissão do Mercado de Valores Mobiliários (CMVM). The principles used to determine the net fair value of selling costs of a property apply, whenever possible, to real estate like INAE held by Real Estate Companies and Real Estate Investment Funds for the purpose of consolidating Group accounts. Whenever the net fair value of the selling costs calculated for an INAE is less than the amount by which the same is recognised in the Group's balance sheet, an impairment loss is recorded in the amount of the decrease in value ascertained. Impairment losses are recorded against income for the year. If the net fair value of the selling costs of an INAE, after recognition of impairment, indicates a gain, the Group may reflect that gain up to the maximum of the impairment that has been recorded on that property. H. Lease transactions (IFRS 16) This standard establishes the requirements regarding the scope, classification/recognition and measurement of leases: – from the lessor's perspective, leases will continue to be classified as finance leases or operating leases; – from the lessee’s perspective, the standard defines a single model of accounting for lease contracts, which results in the recognition of a right-of-use asset and a lease liability for all leases, except for those which the lease term ends within 12 months or for those which the underlying asset is of low-value and, in these cases, the lessee may opt for the exemption from recognition under IFRS 16 and shall recognise the lease payments associated with these leases as an expense. The Group chose not to apply this standard to short-term lease contracts, i.e. contracts with a term shorter than or equal to one year, and to lease contracts in which the underlying asset’s value is below Euros 5,000. Additionally, this standard was not applied to leases of intangible assets. 2023 REPORT & ACCOUNTS 214 | Lease definition The lease definition focuses on the control of the identified asset, establishing that a contract constitutes or contains a lease if it carries the right to control the use of an identified asset, i.e., the right to obtain substantially all the economic benefits of using it, and the right to choose how to use the identified asset over a period in exchange of a payment. Impacts from the lessee’s perspective The Group recognises for all leases, except for those with a term under 12 months or for leases of low-value assets: – a right-of-use asset initially measured at cost must consider the Net Present Value (NPV) of the lease liability plus the value of payments made (fixed and/or variable), deducted from any lease incentives received, penalties for terminating the lease (if reasonably certain), as well as any cost estimates to be supported by the lessee with the dismantling and removal of the underlying asset and/or with the recovery of its location. Subsequently, it will be measured according to the cost model (subject to depreciations/amortisations and impairment tests); – a lease liability initially recorded at the present value of the remaining lease payments (NPV), which includes: – fixed payments deducted from any lease incentives receivable; – variable lease payments that depend on a rate or an index, initially measured considering the rate or index as at the commencement date; – amounts expected to be paid by the lessee under residual values guarantees; – the exercise price of a purchase option, if the lessee is reasonably certain to exercise that option; – payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to end the lease. Since it is not possible to easily determine the implicit interest rate in the lease (paragraph 26 of IFRS 16), lease payments are discounted according to the lessee’s incremental borrowing rate, which embodies the risk-free rate curve (swap curve) plus the Group’s spread of risk, applied over the weighted average term of each lease contract. For term contracts, that date is considered as the end of lease date, while for contracts without term, or with renewable terms, it is assessed using the date in which the contract is enforceable, as well as eventual economic penalties associated with the lease contract. In the evaluation of enforceability, the particular clauses of the contracts are considered, as well as the current law on Urban Leases. Subsequently, lease payments are measured as follows: – by increasing their carrying amount to reflect interest; – by reducing their carrying amount to reflect lease payments; – carrying amount shall be remeasured to reflect any leases’ revaluations or changes, as well as to reflect the review of in -substance fixed payments and the review of the lease term. The Group remeasures the lease liability (and makes a corresponding adjustment to the right-of-use asset) whenever: – the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using the revised discount rate; – the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used; – a lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using the revised discount rate. 2023 REPORT & ACCOUNTS | 215 The Group did not make any adjustment during the periods presented. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If the lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The implementation of this standard implies changes in the Group’s financial statements, namely: – in the consolidated income statement: (i) recording in “Interest Income” the interest expenses related to lease liabilities; (ii) recording in “Other administrative costs” the amounts related to short-term lease contracts and to lease contracts of low-value assets; and, (iii) recording in “Amortisations and depreciations” the depreciation expenses related to right-to-use assets. – in the consolidated balance sheet: (i) recording in “Financial assets at amortised cost – Loans and advances to customers” the recognition of financial assets related to sublease operations measured accordingly to IFRS 9; (ii) recording in “Other tangible assets” the recognition of right-to-use assets; and, (iii) recording in “Other liabilities” the amount of recognised lease liabilities. – in the consolidated statement of cash flows, the balance “Cash flows arising from operating activities – Payments (cash) to suppliers and employees” includes amounts related to short-term lease contracts and to lease contracts of low-value assets, and the balance “Cash flows arising from financing activities - Decrease in other sundry liabilities and non-controlling interests” includes amounts related to payments of lease liabilities’ capital portions, as detailed in the consolidated statement of cash flows. Impact from the lessor’s perspective In accordance with IFRS 16, paragraph 62, lessors shall classify leases as finance or operational leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards inherent to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards inherent to ownership of an underlying asset. Subleases A sublease implies that the lessee establishes a lease contract with a third party, which acts as an intermediary, and the lease contract with the original lessor is kept in force. IFRS 16 – Leases requires that the lessor evaluates subleases regarding right-to-use and not regarding the underlying asset. The sublease’s lessor, simultaneously lessee regarding the original lease, shall recognise an asset in the financial statement – a right-to-use related to the initial lease (if the lease is classified as operating) or a financial asset, measured according to IFRS 9, related to the sublease (if the lease is classified as financing). In case the primary lease is short-term, then the sublease should be classified as an operating lease. 2023 REPORT & ACCOUNTS 216 | I. Recognition of income from services and commissions In accordance with IFRS 15, the Bank recognizes revenue associated with services and commissions when (or as) a performance obligation is satisfied when transferring a service, based on the transaction price associated with this performance obligation. In this context, the Bank takes the following steps to recognize revenue associated with services and commissions: - Recognition (satisfaction of the performance obligation): (i) identification of the contract associated with the service provided and whether it should be covered by IFRS 15; (ii) identification of performance obligations associated with each contract; (iii) definition of the criteria for the fulfilment of performance obligations, also considering the contractual terms established with the counterparty. According to this definition, a service is transferred when the customer obtains the benefits and control associated with the service provided. In this context, the Bank also identifies whether performance obligations are met over time (“over time”) or at an exact moment (“point in time”), with revenue being recognized accordingly. - Measurement (price to be recognized associated with each performance obligation): (i) determine the transaction price associated with the service provided, considering the contractual terms established with the counterparty and its usual commercial practices. The transaction price is the amount of consideration to which the Bank expects to be entitled in exchange for transferring promised services to the customer, excluding amounts collected on behalf of third parties. The Bank includes in the transaction price part or all of the estimated amount of the variable consideration associated with a performance obligation, only to the extent that it is highly probable that a significant reversal in the amount of the accrued revenue recognized will not occur when the uncertainty associated with that variable consideration is subsequently resolved; and (ii) allocate the transaction price to each of the performance obligations identified under the contract established with the customer. It should be noted that when services or commissions are an integral part of the effective interest rate of a financial instrument, income resulting from services and commissions is recorded in net interest income (Note C.3). J. Gains/(losses) on financial operations at fair value through profit or loss, Foreign exchange gains/(losses), Gains/(losses) on hedge accounting and Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss These balances include gains and losses on financial assets and liabilities at fair value through profit and loss, i.e., fair value changes and interest on trading derivatives and embedded derivatives, as well as the corresponding dividends received. This balance also includes the gains and losses on sale of financial assets at fair value through other comprehensive income and financial assets and financial liabilities at amortised cost. The changes in fair value of hedging derivatives and hedged items, when fair value hedge is applicable, are also recognised in this balance, as well as the foreign exchange gains or losses. K. Fiduciary activities Assets held in the scope of fiduciary activities are not recognised in the Group’s consolidated financial statements. Fees and commissions arising from this activity are recognised in the income statement in the period in which they occur. L. Other tangible assets Other tangible assets are stated at acquisition cost less accumulated depreciation and impairment losses. Subsequent costs are recognised as a separate asset only when it is probable that future economic benefits will result for the Group. All other repairs and maintenance expenses are charged to the income statement during the financial period in which they are incurred, under the principle of accrual-based accounting. 2023 REPORT & ACCOUNTS | 217 Depreciation is calculated on a straight-line basis, over the following periods which correspond to their estimated useful life: Number of years Buildings 50 Expenditure on freehold and leasehold buildings 10 Equipment 4 to 12 Other tangible assets 3 Whenever there is an indication that a fixed tangible asset might be impaired, its recoverable amount is estimated and an impairment loss shall be recognised if the net value of the asset exceeds its recoverable amount. The recoverable amount is determined as the highest between the fair value less costs to sell and its value in use calculated based on the present value of future cash flows estimated to be obtained from the continued use of the asset and its sale at the end of the useful life. The impairment losses of the fixed tangible assets are recognised in the income statement of the period. M. Investment properties Real estate properties owned by the Group are recognised as ‘Investment properties’ considering that the main objective of these buildings is their capital appreciation on a long-term basis and not their sale in a short-term period, nor their maintenance for own use. These investments are initially recognised at their acquisition cost, including transaction costs, and subsequently revaluated at their fair value. The fair value of investment properties should reflect the market conditions at the balance sheet date. Changes in fair value are recognised in the income statement, as "Other operating income/ (losses)" (note 6). The experts responsible for the valuation of the assets are properly certified for that purpose, being registered in CMVM. N. Intangible assets N1. Research and development expenditure The Group does not capitalise any research and development costs. All expenses are recognised as costs in the period in which they occur. N2. Software The Group recognises as intangible assets the costs associated to software acquired from external entities and depreciates them on a straight-line basis by an estimated lifetime of 6 years. The Group does not capitalise internal costs arising from software development. O. Cash and cash equivalents For the purposes of the cash flow statement, the item “Cash and cash equivalents” comprises balances with less than three months maturity from the balance sheet date, where the items "Cash and deposits at Central Banks" and "Loans and advances to credit institutions" are included. P. Offsetting Financial assets and liabilities are offset and recognised at their net book value when: i) the Group has a legal right to offset the amounts recognised and transactions can be settled at their net value; and, ii) the Group intends to settle on a net basis or realize the asset and settle the liability simultaneously. Considering the current operations of the Group, no compensation of material amount is made. In case of reclassification of comparative amounts, the provisions of IAS 1.41 are disclosed: i) the nature of the reclassification; ii) the amount of each item (or class of items) reclassified; and, iii) the reason for the reclassification. 2023 REPORT & ACCOUNTS 218 | Q. Foreign currency transactions Transactions in foreign currencies are converted into the respective functional currency of the operation at the foreign exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are converted into the respective functional currency of the operation at the foreign exchange rate on the reporting date. Foreign exchange differences arising from conversion are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are converted into the respective functional currency of the operation at the foreign exchange rate on the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are converted into the respective functional currency of the operation at the foreign exchange rate on the date that the fair value was determined against profit and loss, except for financial assets at fair value through other comprehensive income, for which the difference is recognised against equity. R. Employee benefits R1. Defined benefit plans The Group has the responsibility to pay its employees' retirement pensions, invalidity pensions and survivor’s pensions for their death, in accordance with the terms of the two collective labour agreements approved. These benefits are provided for in the pension plans ‘Plano ACT’ and ‘Plano ACTQ’ of the Banco Comercial Português Group Pension Fund. Following the publication of Decree-Law no. 54/2009, of 2 March, banking entities are obligatorily enrolling new employees in the General Social Security System (RGSS). These employees have the RGSS as their basic retirement scheme, and do not have any benefits under the ACT (base plan). Under the scope of its management and human resources, the Group had already adopted as a rule the inclusion of new employees in the RGSS since July 2005. However, until the transposition into the ACT of the alterations resulting from the referred Decree-Law no. 54/2009, all employees were covered by the provisions of the social security chapter of the ACT, and for employees who were already registered with the RGSS, the ACT benefit worked as a complement to the RGSS. As of 1 July 2009, in accordance with the ACT, all new employees only have the RGSS as their basic social security scheme. Until 2011, in addition to the benefits provided for in the two plans above-mentioned, the Group had assumed the responsibility, if certain conditions of profitability were verified in each year, of assigning retirement supplements to the Group's employees hired up to 21 September 2006 (Complementary Plan). The Group, at the end of 2012, determined the extinction (cut) of the old-age benefit of the Complementary Plan. On 14 December 2012, Instituto de Seguros de Portugal (ISP) formally approved this change to the Group’s benefit plan, effective from 1 January 2012. The plan was cut, and employees were given individual acquired rights. On that date, the Group also proceeded to the settlement of the respective liability. From 1 January 2011, Bank employees were integrated in the General Social Security Scheme which now covers their maternity, paternity, adoption and pension benefits. However, the banks remain liable for benefits that concern illness, disability and life insurance (Decree-Law no. 1-A/2011, of 3 January). The contributory rate is 26.6% divided between 23.6% supported by the employer and 3% supported by the employee, replacing the Banking Social Healthcare System which was extinguished by the decree law referred above. As a consequence of this amendment the capability to receive pensions by the actual employees are covered by the General Social Security Scheme regime, considering the service period between 1 January 2011 and the retirement age. The banks support the remaining difference for the total pension assured in the Collective Labour Agreement (ACT). This integration has led to a decrease in the present value of the total benefits reported to the retirement age to be borne by the Pension Fund, and this effect is to be recorded in accordance with the Projected Unit Credit during the average lifetime of the pension until the normal retirement age is reached. The calculation of the liability for pensions carried out periodically by the actuary considers this effect and is calculated considering the actuarial assumptions in force, ensuring that the liabilities calculated with reference to 31 December 2010, not considering the effect of the integration of bank employees into the General Social Security Scheme are fully covered and deducted from the amount of the effect recognised until the date. The component of this effect for the year is recognised under the heading "Current service costs". 2023 REPORT & ACCOUNTS | 219 Following the approval by the Government of the Decree-Law no. 127/2011, which was published on 31 December, an agreement was established between the Government, the Portuguese Banking Association and the Banking Labour Unions in order to transfer, to the Social Security, the liabilities related to pensions currently being paid to pensioners and retirees, as at 31 December 2011. This agreement established that the responsibilities to be transferred related to the pensions in payment as at 31 December 2011 at fixed amounts (discount rate 0%) in the component established in the IRCT - Instrument of Collective Regulation of Work of the retirees and pensioners. The responsibilities related to the increase in pensions as well as any other complements, namely, contributions to the Health System (SAMS), death benefit and death before retirement benefit continued to be under the responsibility of the Financial Institutions. At the end of December 2016, a revision of the ACT was reached between the BCP Group and four unions from the two union federations of the unions that represent the Group's employees, which introduced changes in the Social Security clause and consequently in the pension plan financed by the BCP Group Pension Fund. The new ACT was published by the Ministry of Labour in the Bulletin of Labour and Employment on 15 February 2017 and the effects were recorded in the financial statements of 31 December 2016, for employees associated with these four unions. The negotiation with Sindicato dos Bancários do Norte (SBN), which was also involved in the negotiations of the new ACT, was concluded in April 2017 with the publication of the Bulletin of Labour and Employment, with the effects of this new ACT recorded in the financial statements as at 31 December 2017, for employees associates of SBN. The most relevant changes in the ACT were the change in the retirement age (presumed disability) from 65 years to 66 years and two months in 2016 and the subsequent update of an additional month in each year, which cannot, in any case, be higher than the one in force at any moment in the General Regime of Social Security, the change in the formula for determining the employer's contribution to SAMS and, lastly, the introduction of a new benefit called the End of Career Premium, which replaces the Seniority Premium. These changes were framed by the Group as a change to the pension plan under the terms of IAS 19, as such had an impact on the present value of the liabilities with services rendered and were recognised in the income statement for the year under "Staff costs". In 2017, after the authorization of the Autoridade de Supervisão de Seguros e Fundos de Pensões (ASF - Portuguese Insurance and Pension Funds Supervision Authority), the BCP Group's pension fund agreement was amended. The main purpose of the process was to incorporate into the pension fund the changes introduced in the Group's ACT in terms of retirement benefits, as well as to transfer to the pension fund the responsibilities that were directly chargeable to the company (extra-fund liabilities). The pension fund has a part exclusively for the financing of these liabilities which, in the scope of the fund, is called Additional Complement. The End of Career Premium also became the responsibility of the pension fund under the basic pension plan. The Group’s net obligation in respect of pension plans (defined benefit pensions plan) is calculated on a half year basis on 31 December and 30 June of each year, and whenever there are significant market fluctuations or significant specific events, such as changes in the plan, curtailments or settlements since the last estimation. The responsibilities with past service are calculated using the Projected Unit Credit method and actuarial assumptions considered adequate. Pension liabilities are calculated by the responsible actuary, who is certified by the ASF. The Group’s net obligation in respect of defined benefit pension plans and other benefits is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. The benefit is discounted to determine its present value, using a discount rate determined by reference to interest rates of high- quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations. The net obligations are determined after the deduction of the fair value of the Pension Plan's assets. 2023 REPORT & ACCOUNTS 220 | The income/cost of interest with the pension plan is calculated by the Group, multiplying the net asset/liability with retirement pension (liabilities less the fair value of the plan's assets) by the discount rate used in the determination of the retirement pension liabilities. On this basis, the income/cost net of interest includes the interest costs associated with retirement pension liabilities and the expected return of the plan's assets, both measured based on the discount rate used to calculate the liabilities. Gains and losses from the re-measurement, namely (i) actuarial gains and losses resulting from differences between actuarial assumptions used and the amounts actually observed (experienced gains and losses) and changes in actuarial assumptions and (ii) gains and losses arising from the difference between the expected return of the plan's assets and the amounts obtained, are recognised against equity under "Other comprehensive income". The Group recognises in its income statement a net total amount that comprises (i) the current service cost, (ii) the income/cost net of interest with the pension plan, (iii) the effect of early retirement, (iv) past service costs and, (v) the effects of any settlement or curtailment occurred during the period. The net income/cost with the pension plan is recognised as interest and similar income or interest expense and similar costs depending on their nature. The costs of early retirements correspond to the increase in liabilities due to the employee's retirement before reaching the age of retirement. Employee benefits, other than pension plans, namely post-retirement health care benefits and benefits for the spouse and descendants for death before retirement are also included in the benefit plan calculation. The contributions to the funds are made annually by each company of the Group, according to a specific contribution plan that ensures the solvency of the fund. In the end of each year, according to Bank of Portugal Notice no. 12/2001, the minimum level required for the responsibilities funding must be 100% regarding pension payments and 95% regarding past services of active employees. R2. Revision of the salary tables for employees in service and pensions in payment In 2023, negotiations continued with all the unions subscribing to the Group's Collective Labour Agreements, for the conclusion of the full review of the respective clauses, negotiations which are still ongoing. At the same time, negotiations took place with all the unions that subscribed the Group's Collective Labour Agreements, for the review of the Salary Tables and remaining pecuniary clauses relating to the year 2023, having been agreed on 9 and 17 October with all the Unions subscribing to the Group's Collective Labour Agreements, the update of the Salary Tables in 2023 with differentiated increases by contractual level between 4.00% and 7.80%. An increase of 4.50% was agreed for the Bank's Contributions to SAMS and other pecuniary clauses, such as study subsidies, diuturnities, among others, and an increase of 21.43% was agreed for the lunch subsidy, whose daily value increased to Euros 12.75. The agreed updates took effect on 1 January 2023, with the exception of remuneration related to subsistence and travel allowances, which were updated after the agreed updates were operationalized. Regarding the unions SNQTB – Sindicato Nacional dos Quadros e Técnicos Bancários e SIB – Sindicato Independente da Banca, an agreement was also reached regarding the revision of the Salary Tables and other pecuniary clauses relating to the year 2022, as already agreed in 2022 with the remaining unions. R3. Defined contribution plan For the defined contribution plans, the responsibilities related to the benefits attributed to the Group's employees are recognised as expenses when incurred. As at 31 December 2023, the Group has two defined contribution plans. One plan covers employees who were hired before 1 July 2009. For this plan, called non-contributory, Group's contributions will be made annually and equal to 1% of the annual remuneration paid to employees in the previous year. Contributions shall only be made if the following requirements are met: (i) the Bank's ROE equals or exceeds the rate of government bonds of 10 years plus 5 percentage points, and (ii) distributable profits or reserves exist in the accounts of Banco Comercial Português. In 2022 the indicated requirements were fulfilled, in 2023 the planned annual contribution was accomplished, the expect value of which was recorded in the costs of 2022. As in the year 2023, the indicated requirements were also fulfilled, a provision for the annual contribution to be made during 2024 was recorded in the 2023 costs. 2023 REPORT & ACCOUNTS | 221 The other plan covers employees who have been hired after 1 July 2009. For this plan, designated contributory, monthly contributions will be made equal to 1.5% of the monthly remuneration received by employees in the current month, either by themselves or by the Group and employees. This contribution has a mandatory character and is defined in the Collective Labour Agreement of the BCP Group and does not have a performance criterion. R4. Variable remuneration paid to employees In the remuneration policy for employees in force it is foreseen an annual variable remuneration system for employees not covered by commercial incentive systems, based on the performance assessment of each employee, in accordance with quantitative and qualitative criteria, that is carried out annually. As a result of this assessment and of the annual fixed remuneration of reference for the role performed, and provided that the Bank's minimum level of performance, as measured by a set of quantitative indicators, is met, the amount of the variable remuneration to be attributed to each employee is determined. The Executive Committee is responsible, under the terms defined in the remuneration policy, for setting the respective allocation criteria for each employee, whenever it is attributed. The variable remuneration attributed to employees is recorded against the income statement in the period to which it relates. R5. Share-based compensation plan As at 31 December 2023, a variable compensation plan with BCP shares is in force for the members of the Executive Committee and for the employees considered Key Function Holders (includes Key Management Members), resulting from the Remuneration Policies for the members of the management and supervisory bodies and for the Employees, both approved for the financial year of 2023 and following years, with the changes that may be approved in each financial year, namely by the General Shareholders’ Meeting regarding the Remuneration Policy for the members of the management and supervisory bodies, and by the Board of Directors regarding the Remuneration Policy for Employees. Key Function Holders include Key Management Members, which are the first line directors who report directly to the Board of Directors and the remaining employees whose professional activities have a significant impact on the Bank's risk profile. As defined in the Remuneration Policy for the members of the management and supervisory bodies, an annual variable remuneration system is foreseen, for which an assessment of the performance of each member of the Executive Committee is carried out on an annual basis based on quantitative and qualitative criteria. According to this assessment and the annual fixed remuneration, and provided that the Bank's minimum level of performance as measured by a set of quantitative indicators is met, the amount of the variable remuneration to be attributed to each member of the Executive Committee is decided by the Remuneration and Welfare Board. The payment of the amount of the variable remuneration attributed is subject to a deferral period of 5 years for 50% of its value, being 50% of its value paid in the year following the financial year in question. The amounts related to the non-deferred and deferred portion are paid 50% in cash and 50% in BCP shares. The number of BCP shares attributed results from their valuation at a price defined in accordance with the approved Remuneration Policy. The Remuneration Policy for Employees foresees an annual variable remuneration system for Employees not covered by Commercial Incentives Systems, based on the performance assessment of each employee, in accordance with quantitative and qualitative criteria, that is carried out annually. As a result of this assessment and the fixed reference remuneration for the function performed, and provided that the Bank's minimum level of performance in a set of quantitative indicators is met, the value of the variable remuneration to be attributed to each Employee is decided by the Executive Committee. For Employees considered as Key Function Holders, the payment of the amount of the variable remuneration to be attributed to each Employee is decided by the Nominations and Remunerations Committee, and its payment subject to a deferral period of 5 years for 40% of its value, with 60% of its value paid in the year following the financial year in question. The amounts related to the non-deferred and deferred portion are paid 50% in cash and 50% in BCP shares. The number of BCP shares attributed and to be attributed results from their valuation at a price defined in accordance with the approved Remuneration Policy. As provided for in the Remuneration Policy for Employees, if the amount of the annual variable remuneration awarded to a Key Function Holder is less than Euros 50,000 and does not represent more than one third of the total annual remuneration of the Key Function Holder the payment of the annual variable remuneration will be 100% in cash and there will be no deferral. 2023 REPORT & ACCOUNTS 222 | Employees considered as Key Function Holders are not covered by Commercial Incentives Systems. For the remaining Employees not covered by Commercial Incentive Systems, the payment of the variable remuneration amount awarded is fully paid in cash in the following year to which it relates. As foreseen in the approved Remuneration Policy and in the applicable legislation, the amounts of variable remuneration attributed to the members of the Executive Committee and to the Employees Key Function Holders are subject to reduction and reversal mechanisms, to be applied in case of verification of extremely significant events, duly identified, in which the people covered have had a direct participation. For the members of the Executive Committee and to the employees considered as Key Function Holders, a long-term variable remuneration system is also foreseen, through which these members may receive variable remuneration fully paid in BCP shares after the end of the assessment period, from 1 January 2022 until 31 December 2025 (from 1 January 2023 until 31 December 2025 to the Employees Key Function Holders), provided that a certain level of performance is achieved in a set of long-term objectives. The amount of the long-term variable remuneration attributed is subject to a deferral period of 5 years for 50% of its value, being 50% of its value paid in the year following the assessment period to which it relates. The number of BCP shares attributed results from their valuation at a price defined in accordance with the approved Remuneration Policy. All the shares attributed to the members of the Executive Committee and to the Key Function Holders, within the scope of the payment of variable remuneration, including long-term, are subject to a retention period of 1 year after their payment. The total variable remuneration to be attributed, each year, to each member of the Executive Committee and to the Key Function Holders, regarding the proportion between its amount and the annual fixed remuneration, is limited to the limits provided in the respective Remuneration Policy. S. Income taxes The Group is subject to income tax in several jurisdictions. The Bank is subject, in individual terms, to the regime established by the Corporate Income Tax Code (CIRC), the Special Regime applicable to Deferred Tax Assets approved by Law no. 61/2014 of 26 August, to which it adhered, and individual legislation. Additionally, deferred taxes relating to tax losses and to temporary differences between the accounting net income and the net income accepted by the Tax Authorities for Income Taxes calculation are accounted for, whenever there is a reasonable probability that these taxes will be paid or recovered in the future. Income tax registered in net income for the year comprises current and deferred tax effects. Income tax is recognised in the income statement, except when related to items recognised directly in equity, which implies its recognition in equity. Deferred taxes arising from the revaluation of financial assets at fair value through other comprehensive income and cash flow hedging derivatives are recognised in shareholders’ equity and are recognised after in the income statement at the moment the profit and loss that originated the deferred taxes are recognised. Current tax is the value that determines the taxable income for the year, using tax rates enacted or substantively enacted by authorities at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred taxes are calculated in accordance with the liability method based on the balance sheet, considering temporary differences, between the carrying amounts of assets and liabilities and the amounts used for taxation purposes using the tax rates approved or substantially approved at balance sheet date and that is expected to be applied when the temporary difference is reversed. Deferred tax liabilities are recognised for all taxable temporary differences except for non-deductible goodwill for tax purposes, differences arising from initial recognition of assets and liabilities that affect neither accounting nor taxable profit and differences relating to investments in subsidiaries to the extent that probably they will not reverse in the foreseeable future. 2023 REPORT & ACCOUNTS | 223 The item “Deferred tax assets” includes amounts associated with credit impairments not accepted for tax purposes whose credits have been written-off, according to the expectation that the use of such impairments will be deductible for the purposes of determining taxable income for the tax periods in which the legal conditions required for their tax deductibility are met. Deferred tax assets are recognised when it is probable that there will be future taxable profits that absorb the deductible temporary differences for tax purposes (including reportable tax losses). The Group, as established in IAS 12, paragraph 74, compensates the deferred tax assets and liabilities if, and only if: (i) it has a legally enforceable right to offset current tax assets and current tax liabilities; and, (ii) the deferred tax assets and the deferred tax liabilities relate to income taxes released by the same Tax Authority on the same taxable entity. The Group complies with the guidelines of IFRIC 23 – Uncertainty over Income Tax Treatments on the determination of taxable profit, tax bases, tax losses to be reported, tax credits to be used and tax rates in scenarios of uncertainty regarding the income tax treatment, not having occurred any material impact on the Bank’s financial statements resulting from its application. In 2016, the Banco Comercial Português adhered to the Special Tax Regime for Groups of Companies (RETGS) for the purposes of corporate income (IRC) taxation, with BCP being the dominant entity. In the financial years of 2023 and 2022, RETGS application was maintained. The group's taxable profit is calculated by the algebraic sum of taxable profits and individual tax losses of the companies that integrate it. T. Segmental reporting The Group adopted IFRS 8 – Operating Segments for the purpose of disclosing financial information by operating and geographic segments. A business segment is a Group's component: (i) which develops business activities that can obtain revenues or expenses; (ii) whose operating results are regularly reviewed by the management with the aim of taking decisions about allocating resources to the segment and assess its performance; and, (iii) for which separate financial information is available. The Group controls its activity through the following major operating segments: Portugal activity: – Retail Banking, also including ActivoBank; – Companies and Corporate; – Private Banking; – Other. The Other segment (Portugal activity) includes activities that are not allocated to remaining segments, namely centralized management of financial investments, corporate activities, and insurance activity. Foreign activity: – Poland; – Mozambique; – Other. The "Other" segment (foreign activity) includes the contribution of the participation in an associate in Angola and the activity arising from the discontinued operations in Cayman Islands (operation liquidated in 2022). It should also be noted that, following the sale of the operation in Switzerland, which took place at the end of 2021, the sale price and the corresponding capital gain generated with the completion of this operation was adjusted pursuant to typical clauses adopted in this type of transactions in 2022 and again in 2023, as final adjustment, records reflected as income arising from discontinued operations, as provided for in IFRS 5. 2023 REPORT & ACCOUNTS 224 | U. Provisions, Contingent liabilities and Contingent assets U1. Provisions Provisions are recognised when (i) the Group has a present obligation (legal or resulting from past practices or published policies that imply the recognition of certain responsibilities); (ii) it is probable that a payment will be required to settle; and, (iii) a reliable estimation can be made of the amount of the obligation. Additionally, when fundamental reorganizations occur that have a material effect on the nature and focus of the company's operations, and the criteria for recognition of provisions referred to above are met, provisions are recognized for restructuring costs. The measurement of provisions considers the principles set in IAS 37 regarding the best estimate of the expected cost, the most likely result of current actions and considering the risks and uncertainties inherent to the process result. On the cases that the discount effect is material, provision corresponds to the actual value of the expected future payments, discounted at a rate that considers the associated risk of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the best estimate, being reverted through profit and loss in the proportion of the payments that are not probable. Provisions are derecognised through their use in the obligations for which they were initially created, or in the case that these obligations cease to exist. U2. Contingent assets Contingent assets are not recognised in the financial statements and are disclosed when a future economic inflow of resources is probable. U3. Contingent liabilities Contingent liabilities are not recognised in the financial statements, being framed under IAS 37 whenever the possibility of an outflow of resources regarding economic benefits is not remote. The Group registers a contingent liability when: i) it is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events that are not wholly within the control of the Group; or, ii) it is a present obligation that arises from past events but is not recognised because: a) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or, b) the amount of the obligation cannot be measured with sufficient reliability. The contingent liabilities identified are subject to disclosure, unless the possibility of an outflow of resources incorporating economic benefits is remote. V. Earnings per share Basic earnings per share are calculated by dividing net income attributable to shareholders of the Group by the weighted average number of ordinary shares outstanding, excluding the average number of ordinary shares purchased by the Group and held as treasury shares. For the diluted earnings per share, the weighted average number of ordinary shares outstanding is adjusted to consider conversion of all dilutive potential ordinary shares. Potential or contingent share issues are treated as dilutive when their conversion to shares would decrease net earnings per share. If the earnings per share are changed because of an issue with premium or discount or other event that changed the potential number of ordinary shares or because of changes in the accounting policies, the earnings per share for all presented periods should be adjusted retrospectively. 2023 REPORT & ACCOUNTS | 225 W. Insurance contracts W1. Classification IFRS 17 is the new accounting standard for insurance contracts, reinsurance contracts and for Investment contracts with discretionary participation features, covering aspects such as recognition and measurement, presentation and disclosure of information, replacing IFRS 4 – Insurance contracts. The Group issues contracts that include insurance risk, financial risk or a combination of both insurance and financial risk. A contract, in which the Group accepts a significant insurance risk from another party, by agreeing to compensate that party on the occurrence of a specified uncertain future event, is classified as an insurance contract. A contract issued by the Group without significant insurance risk, but on which financial risk is transferred with discretionary participating features is classified as an investment contract recognised and measured in accordance with the accounting policies applicable to insurance contracts. A contract issued by the Group that transfers only financial risk, without discretionary participating features, is accounted for as a financial instrument. W2. Recognition and measurement IFRS 17 defines new principles for recognition, measurement, presentation and disclosure of insurance contracts, reinsurance contracts and Investment contracts with discretionary participation features. The references below apply to these three types of contracts. In terms of recognition and measurement, insurance contracts are divided into portfolios, annual cohorts and groups of contracts. In the initial recognition, contracts that have similar risk and can be managed together, must be identified, grouping them into portfolios. For measurement purposes, these portfolios are further subdivided into annual cohorts, according to the issuance year. Each of the cohorts, according to the expected future return, is then divided into the following groups: i) contracts that are onerous at initial recognition; ii) contracts that do not present a significant possibility of subsequently becoming onerous; and iii) remaining contracts in the portfolio. The liability of an insurance contract begins when one of the following conditions is met: i) beginning of the coverage period of the contract, ii) date on which the first payment is made by the insured and this becomes due or iii) in the case of an onerous contract, when it becomes onerous. IFRS 17 defines 3 measurement models of the insurance liabilities: GMM (General Measurement Model) as a general modal, VFA (Variable Fee Approach) to be applied for investment contracts, which does not include a transfer of significant insurance risk and PAA (Premium Allocation Approach), which can be applied for short term contracts (less than 1 year). The measurement of the value of a contract is the sum of (except where contracts are being measured using the premium allocation approach): (i) the present value of future cash flows; (ii) a non-financial risk adjustment; and the amount of future profit that is estimated that this contract will generate the Contractual Service Margin (CSM), unless the contract group is onerous. In this case, the estimated loss is recognized immediately. The liability for future services in contracts measured using the premium allocation approach is based on premiums received, less amounts recognized in profit or loss already incurred in the period. In terms of the discount rate for determining future cash flows, it should: (i) reflect the time value of money; ii) be consistent with similar ones applied in the market for situations with similar characteristics and iii) exclude the effect of factors that do not affect the future cash flows of the insurance contract. In the subsequent valuation, the Statement of Financial Position shall include liabilities for insurance contracts, divided into i) liabilities for future services and ii) liabilities for past services. In terms of the Income Statement, it should include: i) income from insurance contracts, ii) expenses from insurance contracts and iii) losses from the financial component of insurance contracts. 2023 REPORT & ACCOUNTS 226 | W3. Presentation and disclosures In the Statement of Financial Position should appear in disaggregated form i) insurance contract assets, ii) reinsurance ceded contract assets iii) insurance contracts liabilities and iv) reinsurance ceded contract liabilities. In terms of the Income Statement, it should be evidenced i) insurance revenue, ii) insurance service expense and iii) Insurance finance result, as well as iv) the net result arising from reinsurance contracts. Together with the Financial Statements, the standard provides for additional qualitative and quantitative disclosures of i) amounts recognized in the financial statements that fall within the scope of IFRS 17; ii) significant judgments and changes to those judgments made with the application of IFRS 17 and iii) nature and extent of the risks inherent in contracts that fall within the scope of IFRS 17. For risks falling within the scope of IFRS 17, the entity shall analyze: (i) concentration risk, (ii) sensitivity analysis to the most significant risks, (iii) claims development, (iv) credit risk and (v) liquidity risk. W4. Transition IFRS 17 is applied retrospectively with exemptions provided for the transition date, exemptions related to the impracticality and complexity involved, for example in the calculation of liabilities, the Contractual Service Margin (CSM) or the Loss Component, or the Reserve of the Financial Component of Insurance/Reinsurance Contracts (“OCI option”) at the transition date. When impractical the Standard provides for the use of the Modified Retrospective Approach or the Fair Value Approach. The impacts of applying IFRS 17 are detailed in note 59. X. Insurance or reinsurance intermediation services Banco Comercial Português and Banco ActivoBank are entities authorized by the Insurance and Pension Funds Supervisory Authority (ASF - Autoridade de Supervisão de Seguros e Fundos de Pensões) for the practice of the activity of insurance mediation, in the category of tied Insurance Intermediary, in accordance with article 8(a)(i) of Decree-Law no. 144/2006, of 31 July, developing the activity of insurance intermediation in the life and non-life branches. Within the scope of insurance mediation services, these Banks sell insurance contracts. As remuneration for the services provided of insurance mediation, they receive commissions for the mediation of insurance contracts and investment contracts, which are defined in agreements/protocols established with the Insurers. Commissions received by insurance mediation services are recognized in accordance with the accrual principle, so that commissions received at a time other than the period to which it relates are recorded as receivables under "Other assets". Commissions received for insurance mediation services are recognized in accordance with the policy described in note I. Recognition of income from services and commissions. Y. Accounting estimates and judgments in applying accounting policies IFRS set forth a range of accounting treatments that require the Board of Directors, under advice of the Executive Committee, to apply judgments and to make estimations when deciding which treatment is the most appropriate. These estimates were made considering the best information available at the date of preparation of the consolidated financial statements, considering the context of uncertainty that results from the current economic scope and the geopolitical conflict in Eastern Europe. The most significant of these accounting estimates and judgments used when applying accounting principles are discussed in this section to improve understanding of how they affect the Group’s reported results and related disclosure. Considering that in some cases there are several alternatives to the accounting treatment chosen by the Board of Directors, under advice of the Executive Committee, the Group’s reported results would differ if a different treatment was chosen. The Executive Committee believes that the choices made are appropriate and that the financial statements present the Group’s financial position and results fairly in all material relevant aspects. 2023 REPORT & ACCOUNTS | 227 The alternative outcomes discussed below are presented solely to assist the reader in understanding the financial statements and are not intended to suggest that other alternatives or estimations would be more appropriate. Y1. Entities included in the consolidation perimeter For the purposes of determining entities to include in the consolidation perimeter, the Group assesses whether it is exposed to, or has rights to, the variable returns from its involvement with the entity and if it can take possession of these results through the power it holds (de facto control). The decision if an entity needs to be consolidated by the Group requires the use of judgment, estimations and assumptions to determine at what extent the Group is exposed to the variable returns and its ability to use its power to affect these returns. Different estimations and assumptions could lead the Group to a different scope of consolidation perimeter with a direct impact in consolidated income. Y2. Goodwill impairment The recoverable amount of the goodwill recorded in the Group's assets is assessed annually in the preparation of accounts with reference to the end of the year or whenever there are indications of eventual loss of value. For this purpose, the carrying amount of the business units of the Group for which goodwill has been recognised is compared with the respective recoverable amount. A goodwill impairment loss is recognised when the carrying amount of the business unit exceeds the respective recoverable amount. In the absence of an available market value, the recoverable amount is determined using cash flows predictions, applying a discount rate that includes a risk premium appropriated to the business unit being tested. Determining the cash flows to discount and the discount rate, involves judgment. Y3. Income taxes Interpretations and estimations were required to determine the total amount of income taxes in each of the jurisdictions where the Group operates. There are many transactions and calculations for which the tax determination is uncertain during the ordinary course of business. Different interpretations and estimations could result in a different level of income taxes, current and deferred, recognised in the year. This aspect assumes greater relevance for the purposes of the analysis of the recoverability of deferred taxes, in which the Group considers projections of future taxable income based on a set of assumptions, including the estimate of income before tax, adjustments to taxable income, evolution of tax legislation and its interpretation. Thus, the recoverability of deferred tax assets depends on the implementation of the Bank's Board of Directors strategy, namely the ability to generate the estimated taxable income, the evolution of tax law and its interpretation. Regarding the activity in Portugal, the Law No. 98/2019, of 4 September established the tax regime for credit impairments and provisions for guarantees for tax periods beginning on or after 1 January 2019, providing for approximation between the accounting and tax rules for the purposes of deductibility of expenses with the reinforcement of credit impairments. The rules in force until 2018 could continue to be applied until the end of the 2023 financial year, unless the option to apply the new regime was exercised in advance. In 2022, the Banco Comercial Português, S.A. and the Banco ActivoBank, S.A. exercised the option to apply the new regime, under the terms of which the impairment losses for credit risk relating to exposures analysed on an individual or on a collective basis recognized in accordance with the applicable accounting standards and regulations are fully deductible for the purposes of determining taxable profit, with the exceptions provided for in the Corporate Income Tax Code. The exceptions apply to impairment losses relating to credits and other rights over natural or legal persons who hold, directly or indirectly, more than 10 % of the Bank's capital, over members of its corporate bodies, over companies in which the Bank holds, directly or indirectly, more than 10 % of the capital or over entities with which it is in a situation of special relations. The Impairment losses and other value corrections for specific credit risk recorded until 31 December 2021 and still not accepted for tax purposes are only deductible up to the amount that, in each tax period, corresponds to the application of the mandatory minimum limits set out in Notice of Bank of Portugal No. 3/95, as amended before its repeal by Notice of Bank of Portugal No. 5/2015, and, between other conditions, provided that they are not credits covered by real estate rights. 2023 REPORT & ACCOUNTS 228 | Following the amendments provided for in Law No. 24-D/2022, of 30 December, within the scope of the State Budget for 2023, the time limit applicable to the carrying forward of tax losses in Portugal was eliminated. This amendment applies to tax losses calculated in tax periods beginning on or after 1 January 2023, as well as to tax losses calculated in tax periods prior to 1 January 2023 and whose deduction period is still in progress on that date. Thus, tax losses calculated in 2014 and subsequent years may be deducted from future taxable income. The deduction limit for tax losses went from 70% to 65%, being increased by ten percentage points when the difference results from the deduction of tax losses calculated in the 2020 and 2021 tax periods, under the terms of the special regime provided for in Law n. 27-A/2020, of 24 July. In the projections of future taxable income, namely for purposes of the analysis of the recoverability of deferred taxes assets carried out with reference to 31 December 2023, the approximation between the accounting and tax rules provided for in the aforementioned Law n.º 98/2019, of 4 September, taking into account the option for applying the new regime exercised in 2022, as well as the changes in terms of the elimination of the time limit on the use of tax losses provided for in said Law no. 24-D/2022, of 30 December. The taxable profit or tax loss calculated by the Bank or its subsidiaries residing in Portugal can be corrected by the Portuguese tax administration within a period of four years, except in the case of any tax losses deduction has been made or tax credit has been used, in which the expiry period is the exercise of that right. The Bank recorded provisions, current tax liabilities or deferred taxes liabilities in the amount it considers appropriate to cover tax corrections or tax losses incurred, as well as contingencies relating to years not yet reviewed by the tax authorities. Y4. Valuation of real estate recorded in Non-current assets held for sale and in Others assets The valuation of these assets, and consequently the impairment losses, is supported by evaluations carried out by external experts, which incorporate several assumptions, namely the selling price per square meter, discount rate, better use of the real estate and expectations regarding the development of real estate projects, as applicable, and also considers the Bank's historical experience in the commercialization of real estate, its perspectives on the evolution of the real estate market and the intentions of the management body regarding the commercialization of these assets. The assumptions used in the valuations of these assets have an impact on their valuation and consequently on the determination of impairment. Y5. Pension and other employees’ benefits Determining pension liabilities requires the use of assumptions and estimations, including the use of actuarial projections, estimated returns on investment, and other factors, such as discount rate, pensions and salary growth rates, mortality tables, that could impact the cost and liability of the pension plan. The discount rate used to update the Bank's pension fund liabilities, regarding the defined benefit pension plans of its employees and managers, was determined based on an analysis carried out on a set of available information, which includes, among other elements, the market references for this indicator published by internationally recognized specialized entities and which are based, as defined by IAS 19, on market yields of a universe of high quality bond issues (low risk), different maturities, called in Euros and relating to a diverse and representative range of issuers (non- sovereign). Y6. Financial instruments – IFRS 9 Y6.1. Classification and measurement The classification and measurement of financial assets depends on the results of the SPPI test (analysis of the characteristics of the contractual cash flows to determine if they correspond only to payments of principal and interest on the outstanding capital) and the testing of the business model. The Group determines the business model at a level that reflects how financial asset groups are managed together to achieve a specific business objective. This evaluation requires judgment, since the following aspects, among others, must be considered: the way in which the performance of assets is evaluated; the risks that affect the performance of the assets and the way these risks are managed; and how asset managers are rewarded. 2023 REPORT & ACCOUNTS | 229 The Group monitors the financial assets measured at amortised cost and at fair value through other comprehensive income that are derecognised prior to their maturity to understand the underlying reasons for their disposal and to determine whether they are consistent with the purpose of the business model defined for these assets. This monitoring is part of a process of continuous evaluation by the Group of the business model of the financial assets that remain in the portfolio, to determine if it is adequate and, if it is not, if there was a change in the business model and, consequently, a prospective classification change of these financial assets. Y6.2. Impairment losses on financial assets at amortised cost and debt instruments at fair value through other comprehensive income The determination of impairment losses on financial instruments involves judgments and estimations regarding, among others, the following: Significant increase in credit risk: Impairment losses correspond to the expected losses on a 12-month for the assets in Stage 1 and the expected losses considering the probability of a default event occurring at some point up to the maturity date of the instrument financial assets for assets in Stages 2 and 3. An asset is classified in Stage 2 whenever there is a significant increase in its credit risk since its initial recognition. In assessing the existence of a significant increase in credit risk, the Group considers qualitative and quantitative information, reasonable and sustainable. In order to comply with the Supervisors' guidelines, namely regarding to the identification and measurement of credit risk in the context of of uncertainty associated with the current geopolitical crises, the disruption in distribution chains, rising energy costs and inflationary pressures, the Bank proceeded to record additional impairments in relation to the current models of collective impairment calculation (overlays). The exercise carried out was based on an analysis of migrations from customers identified as having the highest risk for Stage 2 and Stage 3, with the greatest impact on the corporate segment. Definition of groups of assets with common credit risk characteristics: When expected credit losses are measured on a collective basis, the financial instruments are grouped based on common risk characteristics. The Group monitors the adequacy of credit risk characteristics on a regular basis to assess whether it maintains its similarity. This procedure is necessary to ensure that, in the event of a change in the credit risk characteristics, the asset segmentation is reviewed. This review may result in the creation of new portfolios or in transferring assets to existing portfolios that better reflect their credit risk characteristics. Definition of the number and relative weight of prospective information for each type of product/market and determination of relevant prospective information: In estimating expected credit losses, the Group uses reasonable and sustainable forecasting information that is based on assumptions about the future evolution of different economic drivers and how each of the drivers impacts the remaining drivers. Probability of default: The probability of default represents a determining factor in the measurement of expected credit losses and corresponds to an estimation of the probability of default in each period, which is calculated based on historical data, assumptions and expectations about future conditions. Loss given default: It corresponds to a loss estimation in a default scenario. It is based on the difference between the contractual cash flows and those that the Bank expects to receive, through the cash flows generated by the customers' business or credit collaterals. The estimation of loss given default is based on, among other aspects, the different recovery scenarios, historical information, the costs involved in the recovery process and the estimation of the valuation of collaterals associated with credit operations. 2023 REPORT & ACCOUNTS 230 | Y6.3. Fair value of derivative financial instruments Fair values are based on listed market prices if available, otherwise fair value is determined either by dealer price quotations (either for that transaction or for similar instruments traded) or by pricing models, based on net present value of estimated future cash flows which considers the market conditions for the underlying instruments, time value, yield curve and volatility factors. These pricing models may require assumptions or judgments in estimating their fair values. Consequently, the use of a different model or of different assumptions or judgments in applying a particular model could result in different results from the ones reported. Due to market stress conditions, the Bank needed to reallocate the risk limits, especially in the sensitivity limit of the trading portfolio and to review the stress-test scenarios and their methodologies. In the context of the uncertainty associated with the current macroeconomic framework, the calculation of fair value adjustments was revised considering liquidity discounts, the costs of closing positions (widening the buy and sell spread), credit risk, spreads of financing and increased volatility. Y7. Provisions for legal risk related to foreign currency-indexed mortgage loans (mostly to Swiss franc) The Group creates provisions for legal contingencies related foreign currency-indexed mortgage loans, mostly to Swiss franc granted by Bank Millennium, S.A. The assumptions used by Bank Millennium are essentially based on historical observations and will have to be updated in subsequent periods, which may have a relevant impact on the provision’s estimation. The methodology developed by Bank Millennium is based on the following parameters: (i) the number of ongoing cases (including class action agreements) and potential future lawsuits that will arise within the specified (three-year) time horizon; (ii) the currently estimated amount of Bank Millennium's potential loss in the event of a specific court judgment; (iii) the probability of obtaining a specific court judgment calculated on the basis of statistics of judgments in cases where Bank Millennium is a party and legal opinions obtained; (iv) Bank Millennium does not include in the methodology for calculating provisions the element related to the potential claim for remuneration for the client in connection with the repayments made by him/her; and (v) estimates involved with amicable settlements with clients, concluded in court or out of court. The evolution of responsibilities with legal contingencies related to mortgage loans indexed to the Swiss franc and the amount of the Bank Millennium’s actual losses depend, namely, on the number of ongoing and potential lawsuits, as well as on the final court decisions about each case and amicable settlement with clients. Z. Subsequent events The Group analyses events occurred after the balance sheet date, i.e., favourable and/or unfavourable events that occur between the balance sheet date and the date the financial statements were authorized for issue. In this context, two types of events can be identified: i) those that provide evidence of conditions that existed at the balance sheet date (events after the balance sheet date that give rise to adjustments); and, ii) those that are indicative of the conditions that arose after the balance sheet date (events after the balance sheet date that do not give rise to adjustments). Events occurred after the date of the financial statements that are not considered as adjustable events, if significant, are disclosed in the notes to the consolidated financial statements. 2023 REPORT & ACCOUNTS | 231 2. Net interest income The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Interest and similar income Interest on deposits at Central Banks and on loans and advances to credit institutions repayable on demand 105,333 55,281 Interest on financial assets at amortised cost Loans and advances to credit institutions 74,377 74,519 Loans and advances to customers 3,243,794 2,150,214 Debt securities 491,969 242,165 Interest on financial assets at fair value through profit or loss Financial assets held for trading 53,684 2,543 Financial assets not held for trading mandatorily at fair value through profit or loss 2,202 6,109 Financial assets designated at fair value through profit or loss 452 — Interest on financial assets at fair value through other comprehensive income 268,650 152,066 Interest on hedging derivatives 114,085 47,212 Interest on other assets 16,743 7,126 4,371,289 2,737,235 Interest expense and similar charges Interest on financial liabilities at amortised cost Resources from credit institutions (50,838) 18,156 Resources from customers (873,330) (421,674) Non subordinated debt securities issued (90,084) (27,703) Subordinated debt (84,234) (68,546) Interest on financial liabilities at fair value through profit or loss Financial liabilities held for trading Derivatives associated to financial instruments at fair value through profit or loss (33,724) (14,130) Financial liabilities at fair value through profit or loss Resources from customers (8,582) — Non subordinated debt securities issued (631) (3,565) Interest on hedging derivatives (392,995) (62,159) Interest on leasing (10,983) (5,633) Interest on other liabilities (164) (2,209) (1,545,565) (587,463) 2,825,724 2,149,772 The balance Interest and similar income - Interest on deposits at Central Banks and on loans and advances to credit institutions repayable on demand has accounted for a positive interest of Euros 11,884,000 (2022: negative interest Euros 6,572,000) associated with demand deposits with the Bank of Portugal (do not include overnight operations). The balance Interest and similar income - Interest on financial assets at amortised cost - Loans and advances to customers includes the amount of Euros 54,823,000 (2022: Euros 55,967,000) related to commissions and other gains accounted for under the effective interest method, as referred in the accounting policy described in note 1 C3. The balance also includes the amount of Euros 92,894,000 (2022: Euros 76,249,000) related to interest income arising from customers classified in stage 3. The balance Interest and similar income includes the following amounts related to hedge breakages: Interest on financial assets at amortized cost - Loans and advances to customers, negative interest of Euros 32,558,000 (2022: positive interests of Euros 58,153,000), Interest on financial assets at amortized cost - Debt securities, positive interests of Euros 64,385,000 (2022: positive interests of Euros 30,752,000), Interest on financial assets at fair value through other comprehensive income, positive interests of Euros 5,360,000 (2022: positive interests of Euros 11,301,000), no hedge breaks were recorded for customer's deposits. 2023 REPORT & ACCOUNTS 232 | The balances Interest expense and similar charges - Interest on non-subordinated debt securities issued and Interest on subordinated debt include the amount of Euros 2,892,000 and Euros 712,000, respectively (2022: Euros 2,553,000 and Euros 970,000, respectively) related to commissions and other costs accounted for under the effective interest method, as referred in the accounting policy described in note 1 C3. In 2022, the balance Interest expense and similar charges - Interest on financial liabilities at amortised cost - Resources from credit institutions had recorded a negative cost of Euros 41,555,000 associated with the TLTRO III operation described in note 33. The balance Interest expense and similar charges - Interest on leasing refers to the interest cost related to the leasing liabilities recognised under IFRS 16, as referred in accounting policy described 1 H. 3. Dividends from equity instruments The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Dividends from financial assets through other comprehensive income 1,783 10,086 1,783 10,086 The balances Dividends from financial assets through other comprehensive income include dividends from shares of Tiicc, Sarl and Octal Group, Ltd. in the amount of Euros 615,000 and Euros 412,000, respectively (2022: Euros 7,950,000 and Euros 1,325,000 of Octal Group, Ltd. and Tiicc, Sarl, respectively). This balance also includes income from investment fund units received during the year. 4. Net fees and commissions income The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Fees and commissions received Banking services provided 489,255 484,454 Management and maintenance of accounts 168,859 170,372 Bancassurance 120,702 121,824 Securities operations 65,917 70,775 From guarantees granted 49,551 46,834 From commitments to third parties 5,243 5,195 Management and intervention commissions 23,381 23,624 Other commissions 21,403 20,696 944,311 943,774 Fees and commissions paid Banking services provided by third parties (131,769) (132,751) Securities operations (7,520) (8,991) From guarantees received (8,357) (7,699) Other commissions (24,992) (22,425) (172,638) (171,866) 771,673 771,908 2023 REPORT & ACCOUNTS | 233 5. Gains / (losses) on financial operations The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Gains/(losses) on financial operations at fair value through profit or loss Gains/(losses) on financial assets held for trading 172,618 (151,915) Gains/(losses) on financial assets not held for trading mandatorily at fair value through profit or loss (3,111) 8,962 Gains/(losses) on financial assets and liabilities designated at fair value through profit or loss (176,057) 170,259 (6,550) 27,306 Foreign exchange gains/(losses) 17,469 19,390 Gains/(losses) on hedge accounting 21,808 (2,233) Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss 112,088 5,497 144,815 49,960 The balances Gains/(losses) on financial operations at fair value through profit or loss is comprised of: (Thousands of euros) 2023 2022 (restated) Gains/(losses) on financial assets held for trading Gains Debt securities portfolio 12,001 7,122 Equity instruments 13,414 202 Derivative financial instruments 335,620 336,772 Other operations 1,374 1,962 362,409 346,058 Losses Debt securities portfolio (7,578) (16,543) Equity instruments (9,613) (8,062) Derivative financial instruments (171,890) (472,534) Other operations (710) (834) (189,791) (497,973) 172,618 (151,915) (continues) 2023 REPORT & ACCOUNTS 234 | (continuation) (Thousands of euros) 2023 2022 (restated) Gains/(losses) on financial assets not held for trading mandatorily at fair value through profit or loss Gains Loans and advances to customers 3,011 10,280 Debt securities portfolio 48,269 38,336 Equity instruments 10,307 22,674 61,587 71,290 Losses Loans and advances to customers (3,222) (7,610) Debt securities portfolio (42,769) (42,847) Equity instruments (18,707) (11,871) (64,698) (62,328) (3,111) 8,962 Gains/(losses) on financial assets and liabilities designated at fair value through profit or loss Gains Debt securities portfolio 207 — Resources from customers 6,243 3,936 Debt securities issued Certificates and structured securities issued 66,658 142,982 Other debt securities issued 188 25,993 73,296 172,911 Losses Resources from customers (11,495) — Debt securities issued Certificates and structured securities issued (224,547) — Other debt securities issued (13,311) (2,652) (249,353) (2,652) (176,057) 170,259 The balances Gains / (losses) on financial assets and liabilities designated at fair value through profit or loss - Gains/ (Losses) - Certificates and structured securities issued record the valuations and devaluations of certificates issued by the Group. These liabilities are covered by futures, which valuation and devaluation are recorded in Gains / (losses) on financial assets held for trading - Gains/(Losses) - Derivative financial instruments. 2023 REPORT & ACCOUNTS | 235 The balances Foreign exchange gains/(losses), Gains/(losses) on hedge accounting and Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss, are presented as follows: (Thousands of euros) 2023 2022 (restated) Foreign exchange gains/(losses) Gains 3,714,151 2,637,014 Losses (3,696,682) (2,617,624) 17,469 19,390 Gains/(losses) on hedge accounting Gains Hedging derivatives 274,230 1,303,985 Hedged items 214,420 199,940 488,650 1,503,925 Losses Hedging derivatives (289,761) (376,843) Hedged items (177,081) (1,129,315) (466,842) (1,506,158) 21,808 (2,233) Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss Gains Credit sales 9,840 13,040 Debt securities portfolio at amortized cost 1,070 10,466 Debt securities portfolio at fair value through other comprehensive income 2,102 40,019 Debt securities issued 1,614 1,224 Others 128,825 933 143,451 65,682 Losses Credit sales (15,082) (4,683) Debt securities portfolio at fair value through other comprehensive income (14,744) (53,405) Debt securities issued (1,027) (630) Others (510) (1,467) (31,363) (60,185) 112,088 5,497 In 2023, the main contributions for the balance Gains/(losses) on hedge accounting were the gains of Euros 12,755,000 and Euros 8,713,000 relating to the deposits portfolio hedge and subordinated issues portfolio hedge, respectively. Regarding the sale of financial assets at fair value through other comprehensive income subject to hedge accounting, the balance Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss - Debt securities portfolio at fair value through other comprehensive income, includes a net gain of Euros 853,000 (2022: net gain Euros 114,278,000), which is offset in the balance Gains/(losses) on hedge accounting. The balance Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss - Gains - Debt securities portfolio at fair value through other comprehensive income includes the amount of Euros 12,000 (2022: Euros 479,000) related to gains resulting from the sale of Portuguese Treasury bonds. 2023 REPORT & ACCOUNTS 236 | As described in note 48, the Bank Millennium's Management Board announced that after obtaining the necessary corporate approvals, on 13 February 2023, the Bank concluded an agreement ("Agreement") for the sale of 80% of shares in Millennium Financial Services sp. z o. o. ("Company") to Towarzystwo Ubezpieczeń na Życie Europa S.A., which acquires 72% of the Company's shares, and Towarzystwo Ubezpieczeń Europa S.A., which acquires 8% of the Company's shares (collectively, the "Buyer"). Bank Millennium also concluded agreements with the Buyers and the Company regarding the exclusive insurance distribution model, including cooperation agreements, distribution agreements and agency agreements. Strategic insurance cooperation provides for long-term (10 years) cooperation in the field of bancassurance in relation to specific insurance related to credit products offered by the Bank Millennium. The essence of the transaction provided for in the Agreement was the direct purchase of Shares by the Buyers from the Bank for a defined initial price, which could be subject to a price adjustment mechanism after the closing of the Transaction. On 29 March 2023, 80% of the shares in the company were transferred to the Buyers, and the final settlement of the transaction, together with the price adjustment, took place in December 2023. Since as part of the transaction, in addition to Agreement, Bank Millennium also concluded other agreements with the Buyers and the Company, the Bank analysed individual agreements and their economic effects in accordance with the requirements of IFRS 10, IFRS 15 and IFRS 9. As a result, Millennium identified contractual obligations and assessed the assignment of contractual remuneration for individual elements of the transaction, determining the appropriate method of recognizing revenues from single contractual obligations. As a result, Bank Millennium recognized in 2023 in the Profit and Loss Account a result of Euros 143.7 million (PLN 652.4 million) (gross), which consisted of: 1. profit realized on sale: payment of the price less the fair value of the shares at the moment of loss of control in the amount of Euros 122 million (PLN 553.9 million) (gross) was included in the item “Gains arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss - Others”; 2. an inflow of Euros 10.1 million (PLN 46 million) (gross) as a valuation of the derivative at the time of final settlement of the transaction in December 2023, resulting from the agreed potential future remuneration payments, was recognized as “Gains on financial assets held for trading”; 3. At the same time, due to the loss of control over the Company, the Bank valued the remaining non-controlling share in the Company at fair value of Euros 11.6 million (PLN 52.5 million) (gross), this amount was included in "Gains/(losses) on disposal of subsidiaries and other assets" (note 16). Starting from the moment of loss of control, the investment in the Company is treated as an involvement in an associated entity (Bank Millennium holds 20% of the shares in the Company) and is valued at the Group level using the equity method, while in the Bank Millennium's financial statements the valuation model is fair value with the valuation effect recorded in the Profit and Loss Account. The Bank Millennium's assessment was made on the basis of IFRS and their interpretations applicable as at the date of these financial statements. 2023 REPORT & ACCOUNTS | 237 6. Other operating income / (losses) The amount of this account is comprised of (Thousands of euros) 2023 2022 (restated) Operating income Gains on leasing operations 3,783 3,266 Income from services provided 30,026 28,614 Rents 2,133 4,053 Sales of cheques and others 8,357 9,730 Other operating income 80,583 50,125 124,882 95,788 Operating costs Donations and contributions (4,151) (4,435) Contribution to the banking sector (44,807) (43,484) Contributions to Resolution Funds (22,716) (36,489) Contribution to the Single Resolution Fund (17,729) (25,847) Contributions to the Deposit Guarantee Fund (665) (8,805) Institutional protection scheme (Poland) — (58,972) Special tax on the polish banking sector — (36,107) Taxes (16,098) (18,137) Losses on financial leasing operations (25) (37) Other operating costs (79,106) (56,587) (185,297) (288,900) (60,415) (193,112) The balance Contribution to the banking sector in Portugal is estimated according to the terms of the Decree-Law no. 55-A/2010. The determination of the amount payable is based on: (i) the annual average liabilities deducted by core capital (Tier 1) and supplementary capital (Tier 2) and deposits covered by the Deposit Guarantee Fund, and (ii) notional amount of derivatives. The balance Contributions to Resolution Funds includes the periodic contributions that must be paid to the Portuguese Fund, as stipulated in Decree-Law No 24/2013. The periodic contributions are determined by a base rate, established by the Bank of Portugal through regulatory instruments, to be applied in each year and which may be adjusted to the credit institution’s risk profile based on the objective incidence of those contributions. The period contributions affect the liabilities of the credit institutions members of the Fund, as per the article 10 of the referred Decree-Law, deducted from the liability elements that are part of the core capital and supplementary and from the deposits covered by the Deposit Guarantee Fund. The balance Contributions to Resolution Funds also includes the mandatory contributions made by Bank Millennium, S.A to the Bank Guarantee Fund in Poland. The current principles of financing the deposit guarantee system and resolution in Poland, as defined in the Act of 10 June 2016 on the Bank Guarantee Fund, deposit guarantee system and forced restructuring, and are effective from 2017. 2023 REPORT & ACCOUNTS 238 | The method of calculating contributions regarding the resolution fund of banks in Poland was defined in the Delegated Regulation of the European Commission No. 2015/63 (amended by regulation 2016/1434), which applies directly to all European Union countries. The contribution for a given year from each entity is calculated by BFG in accordance with this regulation and the entity is notified by 1 May, each year. The balance Contribution to the Single Resolution Fund (‘SRF’) corresponds to the Bank’s annual ex-ante contribution to support the application of resolution measures at EU level. The SRF has been established by Regulation (EU) No 806/2014 (the “SRM Regulation”). The SRF is financed from ex-ante contributions paid annually at individual level by all credit institutions within the Banking Union. Contributions to the SRF consider the annual target level as well as the size and the risk profile of institutions. In calculating the ex-ante contributions, the SRF applies the methodology as set out in the Commission Delegated Regulation (EU) No 2015/63 and European Parliament and of the Council Regulation (EU) No 806/2014. The annual contribution to the Fund is based on the institution's liabilities excluding own funds and covered deposits considering adjustments due to derivatives and intra group liabilities and on a risk factor adjustment that depends on the risk profile of the institution. In accordance with Article 67(4) of SRM Regulation and in accordance with the Intergovernmental Agreement on the transfer and mutualisation of contributions to the SRF, the ex-ante contributions are collected by national resolution authorities and transferred to the SRF by 30 June of each year. In 2023, the total value of the contribution to the Single Resolution Fund attributable to the Group (BCP and ActivoBank) amounted to Euros 22,861,000 (2022: Euros 30,400,000). The Group delivered the amount of Euros 17,729,000 to the Single Resolution Fund (2022: Euros 25,847,000) and chose to constitute an irrevocable commitment in the amount of Euros 5,132,000 (2022: Euros 4,553,000), under the terms set out in Decree-Law no. 24/2013, of 19 February. As a guarantee of the assumption of the irrevocable payment commitment made in the year with the Single Resolution Fund, a deposit was set up for this purpose, in the amount of Euros 5,132,000 (2022: Euros 4,553,000), which is fully secured and accounted for in Other assets - Deposit account applications (note 32). The accumulated irrevocable payment commitments constituted in the amount of Euros 30,638,000 (2022: Euros 25,506,000) are accounted for in off-balance sheet items (note 45), and are fully collateralized by assets registered in Other assets - Deposit account applications (note 32). In 2023, the total value of the contribution to the Deposit Guarantee Fund attributable to the Group (BCP and ActivoBank) amounted to Euros 583,000 (2022: Euros 506,000), with the Group delivering the entire contribution to the Deposit Guarantee Fund. Until 2011, inclusive, under the terms set out in Banco de Portugal Notice No. 11/94, the Bank could choose to deliver part of the contribution to the Deposit Guarantee Fund and the other part to constitute an irrevocable payment commitment. As a guarantee of the assumption of irrevocable payment commitments assumed until 2012 with the Deposit Guarantee Fund, a security pledge has been created for this purpose, in the amount of Euros 99,824,000 (2022: Euros 99,757,000). The accumulated irrevocable payment commitments constituted amount to Euros 95,190,000, and are accounted for in off-balance sheet items (note 45). Regarding the irrevocable commitments of the Single Resolution Fund and the Deposit Guarantee Fund, the Bank considered that they qualify as contingent liabilities under IAS 37, meaning that no liabilities or provisions were recorded for this purpose. In 2022, the balance Institutional protection scheme (Poland) corresponded to the contribution of Bank Millennium to the polish Institutional Protection Scheme. Regarding the item Special tax on the polish banking sector, as a result of the implementation of the Recovery Plan from July 2022, Bank Millennium S.A. benefited from the exemption from the special tax on the polish banking sector starting from that date. 2023 REPORT & ACCOUNTS | 239 7. Staff costs The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Remunerations 517,492 470,285 Mandatory social security charges Post-employment benefits (note 50) Service cost (9,616) (11,727) Net interest cost / (income) in the liability coverage balance (17,062) (5,929) Cost with early retirement programs 7,043 2,223 Amount transferred to the Fund resulting from acquired rights unassigned related to the Complementary Plan (9) (6) (19,644) (15,439) Other mandatory social security charges 113,622 104,784 93,978 89,345 Voluntary social security charges 15,538 12,326 Other staff costs 4,798 8,851 631,806 580,807 The balance Remunerations includes the amount of Euros 9,740,000 (2022: Euros 5,630,000) related to the distribution of profits to Bank's employees. In 2023, the Group paid severance payments in the amount of 3,718,000 (2022: Euros 1,588,000), of which the highest amounted to Euros 565,000 (2022: Euros 217,000). Of the total severance payments, Euros 3,113,000 had already been recorded as staff costs in the 2022 financial year, given that these were agreements concluded in that year, but whose effective departures only occurred in 2023, as described in note 39. The average number of employees by professional category, at service in the Group, is analysed as follows by category: 2023 2022 (restated) Portugal Top Management 880 854 Intermediary Management 1,426 1,416 Specific/Technical functions 2,926 2,867 Other functions 1,032 1,119 6,264 6,256 Abroad 9,318 9,314 15,582 15,570 2023 REPORT & ACCOUNTS 240 | Remunerations In compliance with the provisions of Article 47 of Banco de Portugal Notice no. 3/2020, quantitative information is disclosed regarding the remuneration paid to different categories of members of governing bodies and categories of employees provided for in Article 115 C no. 2 of the RGICS, as well as the information provided for in Article 450 g) to i) of Regulation (EU) 2019/876 of the European Parliament and of the Council. A. BCP Board of Directors The fixed remuneration and social charges paid to members of the Board of Directors of Banco Comercial Português, S.A. are analysed as follows: (Thousands of euros) Board of Directors Executive Committee Non-executive directors 2023 2022 (restated) 2023 2022 (restated) Fixed remuneration 3,177 3,055 2,083 1,856 Variable remuneration Pecuniary 461 370 — — Shares 460 1,322 — — Deferred 534 1,024 — — Supplementary retirement pension 635 611 144 138 Post-employment benefits (14) (42) — — Other mandatory social security charges 763 734 491 443 6,016 7,074 2,718 2,437 Number of beneficiaries 6 6 11 11 Considering that the remuneration of members of the Executive Committee and Directors, with an exclusivity contract, intends to compensate the functions that are performed in the Bank and in all other functions performed in subsidiaries or governing bodies for which they have been designated by indication or in representation of the Bank, in the latter case, the net amount of the remuneration annually received by each member of the Executive Committee will be deducted from the fixed annual remuneration attributed by the Bank, ensuring that the effective payable amount corresponds to the one approved by the Remuneration and Welfare Board. In 2023, the amount of remuneration paid to the Executive Committee includes the amount of Euros 113,000 (2022: Euros 101,000) supported by subsidiaries or companies whose governing bodies represent the Group's interests. Regarding the Non-executive directors, this amount was Euros 27,000 (2022: Euros 26,000). In 2023, it was assigned variable remuneration in accordance with the remuneration policies for the members of the management and supervisory bodies and for employees, approved for 2022, as described in accounting policies 1 R4 and 1 R5. In 2023, the variable remuneration attributed was Euros 923,000 in cash, of which Euros 463,000 are deferred for 5 years, and 4,136,539 shares corresponding to Euros 1,846,000, of which 2,068,268 shares are deferred for 5 years. In 2023, the deferred variable remuneration paid refers to the years 2021, 2020, 2019 and 2018, of which Euros 131,000 in cash and 1,811,526 BCP shares in the amount of Euros 403,000. In 2022, the variable remuneration attributed was Euros 616,000 in cash, of which Euros 246,000 are deferred for 5 years, and 12,416,223 shares corresponding to Euros 2,567,000, of which 1,568,846 shares are deferred for 5 years, and 3,397,643 shares are deferred for 3 years. In 2022 the deferred variable remuneration of 2021, 2020 and 2019 attributed to the Executive Committee is related to 2020, 2019 and 2018 years, and amounts to Euros 590,000 in cash and 2,443,549 BCP shares in the amount of Euros 434,000. In 2023 and 2022, no severance payments were paid to members of the Board of Directors. 2023 REPORT & ACCOUNTS | 241 B. Key Function Holders (KFH) In 2023, the remunerations and social security charges supported with the Group's Key Function Holders are, detailed by segment, as follows: (Thousands of euros) 2023 Retail Corporate Control functions Others Total Fixed remuneration 1,391 2,387 2,838 5,098 11,714 Variable remuneration Pecuniary 287 335 475 1,028 2,125 Shares 98 119 166 369 752 Deferred 42 36 19 125 222 Post-employment benefits (72) (39) (146) (234) (491) Other mandatory social security charges 368 504 708 1,283 2,863 2,114 3,342 4,060 7,669 17,185 Number of beneficiaries 10 13 31 38 92 Arising from the application of the Remuneration Policies for Employees, approved for the financial year 2022, as described in accounting policies 1 R4 and 1 R5, in 2023, the 92 Key Function Holders were awarded with variable remuneration, in the amount of Euros 337,000 in cash and 1,494,050 shares deferred for 5 years, as well as 229 participation units from AF Portfólio Imobiliário Fund deferred for 3 years. In 2023, deferred variable remunerations were paid to KFH deferred from 2022, 2021 and 2020 years, corresponding in cash to Euros 102,000 and shares in the amount of Euros 120,000. In 2023, severance payments were paid to 5 KFH in the amount of Euros 267,000, of which the highest payment was Euros 110.000 and end-of-career bonuses in the amount of Euros 35,000. In 2022, the remunerations and social security charges supported with the Group's Key Function Holders are, detailed by segment, as follows: (Thousands of euros) 2022 (restated) Retail Corporate Control functions Others Total Fixed remuneration 1,317 2,657 2,474 5,494 11,942 Variable remuneration Pecuniary 129 176 224 491 1,020 Shares 80 105 139 280 604 Deferred 48 42 20 129 239 Post-employment benefits (112) (108) (191) (373) (784) Other mandatory social security charges 331 547 649 1,320 2,847 1,793 3,419 3,315 7,341 15,868 Number of beneficiaries 9 15 26 40 90 Arising from the application of the Remuneration Policies for Employees, approved for the financial year 2021, as described in accounting policies 1 R4 and 1 R5, in 2022, the 90 Key Function Holders were awarded with variable remuneration, in the amount of Euros 236,000 in cash and 1,534,941 shares deferred for 5 years, as well as 174 participation units from AF Portfólio Imobiliário Fund deferred for 3 years. In 2022, deferred variable remunerations were paid to KFH deferred from 2021, 2020 and 2019 years, corresponding in cash to Euros 57,000 and shares in the amount of Euros 182,000. In 2022, severance payments were paid to 3 Bank's Key Function Holders in the amount of Euros 255,000 of which the highest amounts to Euros 200,000 and end-of-career bonuses in the amount of Euros 65,000. 2023 REPORT & ACCOUNTS 242 | The remunerations and social security charges supported with the Group's Key Function Holders, discriminated by Key management members and by members whose professional activities have significant impact in the risk profile of the Bank (Other KFH), are as follows: (Thousands of euros) Key Function Holders Key management members Other KFH Total 2023 2022 (restated) 2023 2022 (restated) 2023 2022 (restated) Fixed remuneration 7,785 7,865 3,929 4,077 11,714 11,942 Variable remuneration Pecuniary 1,497 705 628 315 2,125 1,020 Shares 538 417 214 187 752 604 Deferred 217 230 5 9 222 239 Post-employment benefits (265) (453) (226) (331) (491) (784) Other mandatory social security charges 1,944 1,934 919 913 2,863 2,847 11,716 10,698 5,469 5,170 17,185 15,868 Number of beneficiaries 54 53 38 37 92 90 In 2023, referring to the 2022 financial year, the Key management members were awarded with deferred variable remuneration in the amount of Euros 337,000 and 1,494,050 shares deferred for 5 years, as well as 229 participation units from AF Portfólio Imobiliário Fund deferred for 3 years. In 2023 deferred variable remunerations from 2022, 2021 and 2020 years were paid in cash to Key management members, in the amount of Euros 99,000, as well as BCP shares and participation units from AF Portfólio Imobiliário Fund corresponding to Euros 118,000. Regarding the other KFH, were paid Euros 2,000 in cash deferred from 2020, BCP shares and participation units from AF Portfólio Imobiliário Fund, from the years 2020, corresponding to Euros 3,000. During 2022, with reference to the financial year of 2021, the Key management members were awarded with deferred variable remuneration in the amount of Euros 236,000 and 1,534,941 shares deferred for 5 years, as well as 174 participation units from AF Portfólio Imobiliário Fund deferred for 3 years. During 2022, deferred variable remunerations from 2021 and 2020 years were paid Euros 55,000 in cash to Key management members, BCP shares and participation units from AF Portfólio Imobiliário Fund from the years 2021, 2020 and 2019 corresponding to Euros 175,000. Relatedly to the other KFH, were paid Euros 3,000 in cash deferred from 2020 and BCP shares and participation units from AF Portfólio Imobiliário Fund, from the years 2020 and 2019, corresponding to Euros 7,000. In accordance with regulation (EU) 11º 575/2013, Article 450 point 1.i), in the year 2023 the Bank has 1 employee on the Board of Directors with remuneration between Euros 1 and Euros 1.5 million. In 2022, the Bank had no employees earning more than Euros 1 million. 2023 REPORT & ACCOUNTS | 243 8. Other administrative costs The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Water, electricity and fuel 14,846 17,885 Credit cards and mortgage 8,621 8,603 Communications 25,152 24,296 Maintenance and related services 18,407 17,651 Legal expenses 5,011 4,368 Travel, hotel and representation costs 7,279 5,318 Advisory services 44,301 32,103 Training costs 1,453 1,404 Information technology services 25,708 35,277 Consumables 7,601 7,554 Outsourcing and independent labour 111,577 77,424 Advertising 27,705 24,854 Rents and leases 26,769 31,244 Insurance 4,943 4,848 Transportation 11,192 10,185 Other specialised services 28,869 28,970 Other supplies and services 23,812 20,977 393,246 352,961 The balance Rents and leases includes the amount of Euros 1,440,000 (2022: Euros 590,000) related to short-term lease contracts and the amount of Euros 2,612,000 (2022: Euros 2,402,000) related to lease contracts of low-value assets, as described in the accounting policy 1 H. The balance Other specialised services includes fees for services rendered by the Statutory Auditor of the Group, currently in functions, and by companies in its network as part of its statutory audit functions, as well as other services, is analysed as follows: (Thousands of euros) 2023 2022 (restated) Auditing services Legal certification 3,310 3,190 Other assurance services 1,180 1,388 Other services 747 310 5,237 4,888 2023 REPORT & ACCOUNTS 244 | 9. Amortisations and depreciations The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Amortisations of intangible assets (note 30): Software 33,928 36,168 Other intangible assets 5,289 4,166 39,217 40,334 Depreciations of other tangible assets (note 29): Properties 14,324 14,917 Equipment Computers 17,738 16,375 Security equipment 958 862 Installations 3,167 3,007 Machinery 1,649 1,535 Furniture 2,540 2,717 Motor vehicles 5,054 4,636 Other equipment 1,662 1,498 Right-of-use Real estate 51,190 53,365 Vehicles and equipment — 4 98,282 98,916 137,499 139,250 10. Results on modification The Group has accounted for in this balance the negative amount of Euros 19,426,000 (2022: negative amount of Euros 27,052,000) relating to contractual modifications made in accordance with IFRS 9, namely those negotiated with customers holding foreign currency-indexed mortgage loans in Poland, described in note 57, which amounted, in 2023, to Euros 11,505,000 (2022: Euros 21,817,000). During 2022 an Act on crowdfunding for business ventures and assistance to borrowers was approved in Poland, introducing, among others, a possibility of up to 8 months of credit holidays in 2022-2023 for PLN mortgage borrowers. It was calculated an adjustment and recognized in accordance with IFRS 9 the reduction of the gross value of mortgage loans in PLN against Results on modification item. The amount of the adjustment was originally calculated as the difference between the gross value of the loan portfolio as at the calculation date and the current value of estimated cash flows under loan agreements, considering 80% of loan principals that would suspend the repayment instalment. As a result of the analysis of customer behaviour carried out in December 2022, the Bank Millennium's Group adjusted the estimates of the percentage to 68%. As a result of the above and the expected costs, the value of the adjustment recognized in 2022 as Results on modification amounted to Euros 282,813,000 (PLN 1,324,208,000). 2023 REPORT & ACCOUNTS | 245 11. Impairment of financial assets at amortised cost The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Loans and advances to credit institutions (note 21) Charge for the year 92 349 Reversals for the year (762) (673) (670) (324) Loans and advances to customers (note 22) Charge for the year 805,500 830,750 Reversals for the year (511,733) (506,926) Recoveries of loans and interest charged-off (57,731) (20,836) 236,036 302,988 Debt securities (note 23) Associated to credit operations Charge for the year 3,991 8 Reversals for the year — (2,393) 3,991 (2,385) Not associated to credit operations Charge for the year 9,323 3,329 Reversals for the year (688) (2,779) 8,635 550 12,626 (1,835) 247,992 300,829 12. Impairment of financial assets at fair value through other comprehensive income The detail of this balance is comprised of: (Thousands of euros) 2023 2022 (restated) Impairment of financial assets at fair value through other comprehensive income (note 24) Charge for the year 2,641 545 Reversals for the year (1,319) (5,568) 1,322 (5,023) 2023 REPORT & ACCOUNTS 246 | 13. Impairment of other assets The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Impairment of investments in associated companies (note 26) Charge for the year — 1,435 — 1,435 Impairment of non-current assets held for sale (note 27) Charge for the year 12,899 78,318 Reversals for the year (1,656) (1,116) 11,243 77,202 Impairment of goodwill of subsidiaries (note 30) Charge for the year — 102,770 — 102,770 Impairment of other assets (note 32) Charge for the year 17,673 17,699 Reversals for the year (7,150) (7,047) 10,523 10,652 Impairment of real estate and other assets arising from recovered loans (note 32) () Charge for the year 34,706 — Reversals for the year (98) — 34,608 — 56,374 192,059 () The 2023 values regard to impairment associated with real estate and assets arising from recovered loans. 14. Other provisions This balance is comprised of: (Thousands of euros) 2023 2022 (restated) Provision for guarantees and other commitments (note 39) Charge for the year 40,602 27,864 Reversals for the year (28,372) (26,939) 12,230 925 Other provisions for liabilities and charges (note 39) Charge for the year 785,928 569,226 Reversals for the year (4,000) (1,854) 781,928 567,372 794,158 568,297 The balance Other provisions for liabilities and charges - Charge for the year refers essentially to provisions for legal risk accounted for by Bank Millennium, related to foreign currency-indexed mortgage loans, as described in note 57, which, in 2023, amounted to Euros 675,252,000 (2022: Euros 430,843,000). 2023 REPORT & ACCOUNTS | 247 15. Share of profit of associates accounted for using the equity method The main contributions of the investments accounted for using the equity method are analysed as follows: (Thousands of euros) 2023 2022 (restated) Banco Millennium Atlântico, S.A. (note 26) Appropriation relating to the current year 2,977 2,431 Appropriation relating to the previous year — (2,924) Effect of the application of IAS 29: Amortization of the effect calculated until 31 December 2018 (a) (268) (423) 2,709 (916) Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. 40,422 29,700 Unicre - Instituição Financeira de Crédito, S.A. 6,597 11,843 SIBS, S.G.P.S, S.A. 9,851 11,687 Banque BCP, S.A.S. 2,745 4,520 Fidelidade Moçambique - Companhia de Seguros S.A. 1,942 1,841 Other companies — (64) 61,557 59,527 64,266 58,611 (a) Based on the requirements of IAS 29, Angola was considered as a high inflation economy until 31 December 2018, for the purposes of presentation of consolidated financial statements, as described in accounting policy 1 B6. This classification is no longer applied since 1 January 2019. 16. Gains/(losses) on disposal of subsidiaries and other assets This balance is comprised of: (Thousands of euros) 2023 2022 (restated) Gains /(Losses) on disposal of investments 11,539 (283) Gains /(Losses) on disposal of other assets 10,270 10,450 21,809 10,167 As described in notes 5 and 48, due to the sale of 80% of the shares of Millennium Financial Services sp. z o.o. by Bank Millennium in Poland and consequently loss of control over the company, the Group measured its remaining non- controlling stake (20%) at fair value, recording a gain of Euros 11,562,000 recorded as Gains /(Losses) on disposal of investments. The balance Gains /(Losses) on disposal of other assets includes essentially gains on disposal of assets held by the Group and classified as non-current assets held for sale and as other assets, which corresponds to a gain of Euros 5,612,000 (2022: gain of Euros 11,323,000). 2023 REPORT & ACCOUNTS 248 | 17. Net income from discontinued or discontinuing operations The amount of this account is comprised of: (Thousands of euros) 2023 2022 (restated) Banque Privée BCP (Suisse) S.A. Gains on disposal of the investment held (price adjustment) (2,843) 1,765 Fidelidade Moçambique - Companhia de Seguros S.A. Correction of gains on disposal of the investment held — 3,772 Millennium bcp Gestão de Activos - Sociedade Gestora de Fundos de Investimento, S.A. Losses (expenses) (9) — (2,852) 5,537 Under the agreement entered between Banco Comercial Português, S.A. and Union Bancaire Privée, UBP SA regarding the sale of the entire share capital of Banque Privée BCP (Suisse) S.A. and in accordance with the provisions of IFRS 5, this operation was considered as discontinued in June 2021, and the impact on results presented in a separate line of the income statement named "Net income from discontinued or discontinuing operations". The sale price received and the corresponding capital gain on disposal were adjusted in 2022 and in 2023 definitively, based on price adjustments related to the evolution of certain parameters defined contractually, as is usual in this type of transaction, including those that result from the variation of stocks and/or flows of assets under management, in pre-determined dates and specified portfolios. By the end of 2021, the Group, through its subsidiary BIM - Banco Internacional de Moçambique, S.A., sold 70% of the investment held in Seguradora Internacional de Moçambique, S.A. (now designated Fidelidade Moçambique - Companhia de Seguros S.A., according to note 60), becoming to hold a minority stake of 22%. In accordance with the provisions of IFRS 5, this operation was considered as discontinued and the impact on results presented in a separate line of the income statement named "Net income from discontinued or discontinuing operations". The final sales price was adjusted positively in 2022, depending on the price adjustment resulting from adjustments as is usual in this type of transactions, namely the variation of the value and/or flows of assets under management, in pre- determined dates and for specified assets. By the end of 2022, the period during which price adjustments could be made ended. 2023 REPORT & ACCOUNTS | 249 18. Earnings per share The earnings per share are calculated as follows: (Thousands of euros) 2023 2022 (restated) Continuing operations Net income from continuing operations 950,461 114,027 Non-controlling interests (91,559) 77,822 Appropriated net income from continuing operations 858,902 191,849 Interests on perpetual subordinated bonds (Additional Tier 1) (37,000) (37,000) Adjusted net income from continuing operations 821,902 154,849 Discontinued or discontinuing operations (note 17) Net income from discontinued or discontinuing operations (2,852) 5,537 Adjusted net income 819,050 160,386 Average number of shares 15,113,989,952 15,113,989,952 Basic earnings per share (Euros): from continuing operations 0.054 0.010 from discontinued or discontinuing operations 0.000 0.000 0.054 0.010 Diluted earnings per share (Euros): from continuing operations 0.054 0.010 from discontinued or discontinuing operations 0.000 0.000 0.054 0.010 As at 31 December 2023, the Bank's share capital amounts to Euros 3,000,000,000 (2022: Euros 3,000,000,000) and is represented by 15,113,989,952 nominative book-entry shares without nominal value, fully subscribed and paid up. There were not identified another dilution effects of the earnings per share as at 31 December 2023 and 2022, so the diluted result is equivalent to the basic result. 2023 REPORT & ACCOUNTS 250 | 19. Cash and deposits at Central Banks This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Cash 688,501 593,033 Central Banks Bank of Portugal 2,134,395 3,370,139 Central Banks abroad 1,722,630 2,058,829 4,545,526 6,022,001 The balance Central Banks includes deposits at Central Banks of the countries where the Group operates to satisfy the legal requirements to maintain a cash reserve calculated based on the value of deposits and other effective liabilities. According to the European Central Bank System for Euro Zone, the cash reserve requirements establish the maintenance of a deposit with the Central Bank equivalent to 1% of the average value of deposits and other liabilities, during each reserve requirement period. The rate is different for countries outside the Euro Zone. In addition, from the reserve counting period started on 30 October 2019, the ECB introduced the tiering regime, in which the balance with the Central Bank in excess of the minimum cash reserves, up to an estimated maximum of 6 times of the reserves, is remunerated at the central bank's lending rate instead of the deposit rate. 20. Loans and advances to credit institutions repayable on demand This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Credit institutions in Portugal 1,285 2,338 Credit institutions abroad 260,227 112,443 Amounts due for collection 76,175 98,679 337,687 213,460 The balance Amounts due for collection represents, essentially, cheques due for collection on other financial institutions. These balances were settled in the first days of the following month. 2023 REPORT & ACCOUNTS | 251 21. Loans and advances to credit institutions This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Loans and advances to Central Banks Central Banks abroad 184,650 382,038 184,650 382,038 Loans and advances to credit institutions in Portugal Term deposits (23) 973 Loans — 4,250 Term deposits to collateralise CIRS and IRS operations () 330 — Other 10,175 1,068 10,482 6,291 Loans and advances to credit institutions abroad Term deposits 371,647 425,152 Term deposits to collateralise CIRS and IRS operations () 58,446 124,746 Other 283,476 26,069 713,569 575,967 908,701 964,296 Impairment for loans and advances to credit institutions (224) (862) 908,477 963,434 () Under the scope of derivative financial instruments operations (IRS and CIRS) with institutional counterparties, and as defined in the respective contracts ("Cash collateral"), these deposits are held by the counterparties and are given as collateral of the referred operations (IRS and CIRS), whose revaluation is negative for the Group. This balance analysed by the period to maturity, before impairment, is as follows: (Thousands of euros) 2023 2022 (restated) Up to 3 months 703,056 752,913 3 to 6 months 1,041 79,247 6 to 12 months 204,604 132,136 908,701 964,296 The changes occurred in impairment of Loans and advances to credit institutions are analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance on 1 January 862 1,187 Transfers 28 — Charge for the year (note 11) 92 349 Reversals for the year (note 11) (762) (673) Exchange rate differences 4 (1) Balance at the end of the year 224 862 2023 REPORT & ACCOUNTS 252 | 22. Loans and advances to customers The analysis of loans and advances to customers, by type of credit, is as follows: (Thousands of euros) 2023 2022 (restated) Mortgage loans 28,622,845 28,658,104 Loans 16,520,496 17,672,581 Finance leases 4,195,116 4,176,329 Factoring operations 2,909,570 3,022,248 Current account credits 847,455 822,473 Overdrafts 1,019,668 1,046,121 Discounted bills 156,603 201,081 54,271,753 55,598,937 Overdue loans - less than 90 days 110,996 94,063 Overdue loans - Over 90 days 505,060 485,166 54,887,809 56,178,166 Loans impairment (1,582,650) (1,502,373) 53,305,159 54,675,793 The balance Loans and advances to customers, as at 31 December 2023, is analysed as follows: (Thousands of euros) 2023 Outstanding loans Overdue loans Gross amount Impairment Net amount Public sector 538,721 40 538,761 (1,261) 537,500 Asset-backed loans 31,799,089 111,046 31,910,135 (564,616) 31,345,519 Other guaranteed loans 4,716,031 71,101 4,787,132 (183,142) 4,603,990 Unsecured loans 8,039,408 308,262 8,347,670 (612,363) 7,735,307 Foreign loans 2,073,818 13,816 2,087,634 (51,924) 2,035,710 Factoring operations 2,909,570 22,103 2,931,673 (59,231) 2,872,442 Finance leases 4,195,116 89,688 4,284,804 (110,113) 4,174,691 54,271,753 616,056 54,887,809 (1,582,650) 53,305,159 The balances Asset-backed loans and Other guaranteed loans follow the subsequent types of guarantees considered: – Asset-backed loans: Financial collaterals, physical collaterals (movable or immovable) and amounts receivable (income consignment); – Credit with other guarantees: First-demand guarantees issued by banks or other entities and personal guarantees. 2023 REPORT & ACCOUNTS | 253 The balance Loans and advances to customers, as at 31 December 2022, is analysed as follows: (Thousands of euros) 2022 (restated) Outstanding loans Overdue loans Gross amount Impairment Net amount Public sector 583,999 — 583,999 (966) 583,033 Asset-backed loans 32,233,382 123,063 32,356,445 (555,500) 31,800,945 Other guaranteed loans 5,667,532 100,085 5,767,617 (222,449) 5,545,168 Unsecured loans 7,458,312 258,186 7,716,498 (476,885) 7,239,613 Foreign loans 2,457,135 2,451 2,459,586 (34,334) 2,425,252 Factoring operations 3,022,248 16,680 3,038,928 (49,411) 2,989,517 Finance leases 4,176,329 78,764 4,255,093 (162,828) 4,092,265 55,598,937 579,229 56,178,166 (1,502,373) 54,675,793 The balance Loans and advances to customers includes the amount of Euros 10,875,965,000 (31 December 2022: Euros 10,613,589,000) regarding mortgage loans assigned to the cover pool backing the Group’s covered bond programme issuances. As part of the liquidity risk management, the Group holds a pool of eligible assets that can serve as collateral in funding operations with the European Central Bank and other Central Banks in countries where the Group operates, which include loans and advances to customers. As referred in note 51, the Group provides loans and/or guarantees to qualifying shareholders holding individually or together with their affiliates, 5% or more of the share capital identified in the Board of Directors report and in note 41. The Group granted credit to qualifying shareholders and entities controlled by them, in the amount of Euros 112,007,000 (31 December 2022: Euros 98,658,000), as referred in note 51 a). The amount of impairment recognised for these contracts amounts to Euros 1,481,000 (31 December 2022: Euros 914,000). The conclusion of business between the Company and holders of qualifying holdings or individuals or legal entities related to them in accordance with the provisions of article 33.º, n.º 3 of Notice 3/2020 of Bank of Portugal, regardless of the amount, is always subject of consideration and deliberation by the Board of Directors, after obtaining a prior opinion from the Audit Committee, and by proposal of the Executive Committee, which in turn deliberates under proposal from the Credit Committee, after obtaining an analysis and opinion from the Compliance Office, which pronounces regarding the compliance of the proposed operations with internal regulations, legal and regulatory provisions and other conditions that may apply to them, and the Risk Office, which evaluates and issues an opinion on the risks inherent to the operation. As at 31 December 2022, the balance Finance leases included the amount of Euros 348,000 relative to sublease operations, as referred in accounting policy 1 H. The analysis of the outstanding amount of financial lease contracts, by type of client, is presented as follows: (Thousands of euros) 2023 2022 (restated) Individuals Home 36,649 43,402 Consumption 26,702 27,606 Others 71,927 75,666 135,278 146,674 Companies Equipment 1,936,577 1,890,361 Real estate 2,123,261 2,139,294 4,059,838 4,029,655 4,195,116 4,176,329 2023 REPORT & ACCOUNTS 254 | The analysis of loans and advances to customers, as at 31 December 2023, by sector of activity, is as follows: (Thousands of euros) 2023 Outstanding loans Overdue loans Gross amount Impairment Net amount % Gross amount Agriculture and forestry 433,118 5,320 438,438 (12,157) 426,281 0.80% Fisheries 23,941 3,237 27,178 (3,835) 23,343 0.05% Mining 64,315 1,603 65,918 (6,510) 59,408 0.12% Food, beverage and tobacco 721,867 6,374 728,241 (33,043) 695,198 1.33% Textiles 412,927 11,034 423,961 (54,906) 369,055 0.77% Wood and cork 239,794 2,606 242,400 (5,411) 236,989 0.44% Paper, printing and publishing 120,862 703 121,565 (4,018) 117,547 0.22% Chemicals 702,032 15,497 717,529 (30,817) 686,712 1.31% Machinery, equipment and basic metallurgical 1,347,043 27,219 1,374,262 (61,863) 1,312,399 2.50% Electricity and gas 234,740 255 234,995 (7,500) 227,495 0.43% Water 190,356 608 190,964 (8,609) 182,355 0.35% Construction 1,465,696 23,140 1,488,836 (80,773) 1,408,063 2.71% Retail business 1,697,573 18,103 1,715,676 (38,154) 1,677,522 3.13% Wholesale business 2,001,101 24,270 2,025,371 (72,776) 1,952,595 3.69% Restaurants and hotels 1,358,246 16,267 1,374,513 (76,772) 1,297,741 2.50% Transports 1,305,519 13,925 1,319,444 (29,283) 1,290,161 2.40% Post offices 24,654 319 24,973 (571) 24,402 0.05% Telecommunications 355,653 4,045 359,698 (7,521) 352,177 0.66% Services Financial intermediation 1,456,457 476 1,456,933 (40,634) 1,416,299 2.65% Real estate activities 1,987,406 14,870 2,002,276 (53,201) 1,949,075 3.65% Consulting, scientific and technical activities 1,009,028 29,952 1,038,980 (156,822) 882,158 1.89% Administrative and support services activities 490,512 5,048 495,560 (22,072) 473,488 0.90% Public sector 631,184 40 631,224 (2,956) 628,268 1.15% Education 107,963 969 108,932 (2,286) 106,646 0.20% Health and collective service activities 356,644 1,856 358,500 (9,471) 349,029 0.65% Artistic, sports and recreational activities 221,300 901 222,201 (32,350) 189,851 0.41% Other services 258,037 3,808 261,845 (72,074) 189,771 0.48% Consumer loans 6,566,398 256,681 6,823,079 (428,213) 6,394,866 12.43% Mortgage credit 27,868,097 112,639 27,980,736 (202,120) 27,778,616 50.98% Other domestic activities 1,501 197 1,698 (152) 1,546 0.00% Other international activities 617,789 14,094 631,883 (25,780) 606,103 1.15% 54,271,753 616,056 54,887,809 (1,582,650) 53,305,159 100% 2023 REPORT & ACCOUNTS | 255 The analysis of loans and advances to customers, as at 31 December 2022, by sector of activity, is as follows: (Thousands of euros) 2022 (restated) Outstanding loans Overdue loans Gross amount Impairment Net amount % Gross amount Agriculture and forestry 461,680 8,517 470,197 (13,879) 456,318 0.84% Fisheries 25,308 3,226 28,534 (2,563) 25,971 0.05% Mining 70,970 1,676 72,646 (5,249) 67,397 0.13% Food, beverage and tobacco 813,359 11,634 824,993 (26,201) 798,792 1.47% Textiles 497,338 8,989 506,327 (17,109) 489,218 0.90% Wood and cork 260,175 3,730 263,905 (5,364) 258,541 0.47% Paper, printing and publishing 148,937 742 149,679 (3,924) 145,755 0.27% Chemicals 862,826 38,334 901,160 (63,538) 837,622 1.60% Machinery, equipment and basic metallurgical 1,526,778 25,298 1,552,076 (56,649) 1,495,427 2.76% Electricity and gas 229,821 443 230,264 (1,285) 228,979 0.41% Water 204,736 452 205,188 (8,371) 196,817 0.37% Construction 1,497,114 21,639 1,518,753 (141,991) 1,376,762 2.70% Retail business 1,705,882 18,730 1,724,612 (36,848) 1,687,764 3.07% Wholesale business 2,225,903 26,755 2,252,658 (67,081) 2,185,577 4.01% Restaurants and hotels 1,505,963 15,721 1,521,684 (71,192) 1,450,492 2.71% Transports 1,320,236 7,464 1,327,700 (20,751) 1,306,949 2.36% Post offices 19,918 254 20,172 (412) 19,760 0.04% Telecommunications 411,885 1,508 413,393 (9,411) 403,982 0.74% Services Financial intermediation 2,047,265 2,149 2,049,414 (44,691) 2,004,723 3.65% Real estate activities 1,978,182 10,931 1,989,113 (35,469) 1,953,644 3.54% Consulting, scientific and technical activities 969,410 8,232 977,642 (86,718) 890,924 1.74% Administrative and support services activities 532,237 4,296 536,533 (57,220) 479,313 0.96% Public sector 823,904 — 823,904 (2,545) 821,359 1.47% Education 143,930 814 144,744 (14,627) 130,117 0.26% Health and collective service activities 378,423 1,029 379,452 (7,108) 372,344 0.68% Artistic, sports and recreational activities 236,543 2,128 238,671 (37,124) 201,547 0.43% Other services 234,399 2,971 237,370 (101,356) 136,014 0.42% Consumer loans 5,775,239 237,160 6,012,399 (369,220) 5,643,179 10.70% Mortgage credit 28,012,946 110,809 28,123,755 (181,551) 27,942,204 50.06% Other domestic activities 1,377 332 1,709 (38) 1,671 0.00% Other international activities 676,253 3,266 679,519 (12,888) 666,631 1.21% 55,598,937 579,229 56,178,166 (1,502,373) 54,675,793 100% 2023 REPORT & ACCOUNTS 256 | The analysis of loans and advances to customers, by maturity and by sector of activity, as at 31 December 2023, is as follows: (Thousands of euros) 2023 Outstanding loans Due within 1 year 1 year to 5 years Over 5 years Total Outstanding Overdue loans Total Agriculture and forestry 100,868 184,889 147,361 433,118 5,320 438,438 Fisheries 4,945 14,326 4,670 23,941 3,237 27,178 Mining 14,165 39,788 10,362 64,315 1,603 65,918 Food, beverage and tobacco 351,595 288,183 82,089 721,867 6,374 728,241 Textiles 155,018 203,731 54,178 412,927 11,034 423,961 Wood and cork 94,585 110,513 34,696 239,794 2,606 242,400 Paper, printing and publishing 28,129 67,447 25,286 120,862 703 121,565 Chemicals 272,606 335,125 94,301 702,032 15,497 717,529 Machinery, equipment and basic metallurgical 535,951 649,954 161,138 1,347,043 27,219 1,374,262 Electricity and gas 23,025 77,272 134,443 234,740 255 234,995 Water 29,806 72,955 87,595 190,356 608 190,964 Construction 560,700 582,187 322,809 1,465,696 23,140 1,488,836 Retail business 801,913 634,450 261,210 1,697,573 18,103 1,715,676 Wholesale business 940,274 854,941 205,886 2,001,101 24,270 2,025,371 Restaurants and hotels 104,819 395,354 858,073 1,358,246 16,267 1,374,513 Transports 375,001 815,722 114,796 1,305,519 13,925 1,319,444 Post offices 13,066 9,822 1,766 24,654 319 24,973 Telecommunications 75,412 235,896 44,345 355,653 4,045 359,698 Services Financial intermediation 242,262 395,639 818,556 1,456,457 476 1,456,933 Real estate activities 385,845 814,149 787,412 1,987,406 14,870 2,002,276 Consulting, scientific and technical activities 204,844 368,309 435,875 1,009,028 29,952 1,038,980 Administrative and support services activities 161,135 249,466 79,911 490,512 5,048 495,560 Public sector 48,020 330,153 253,011 631,184 40 631,224 Education 26,519 42,676 38,768 107,963 969 108,932 Health and collective service activities 75,506 147,598 133,540 356,644 1,856 358,500 Artistic, sports and recreational activities 11,753 58,855 150,692 221,300 901 222,201 Other services 75,487 120,256 62,294 258,037 3,808 261,845 Consumer loans 2,180,784 3,153,772 1,231,842 6,566,398 256,681 6,823,079 Mortgage credit 455,670 1,751,219 25,661,208 27,868,097 112,639 27,980,736 Other domestic activities 304 543 654 1,501 197 1,698 Other international activities 408,128 57,386 152,275 617,789 14,094 631,883 8,758,135 13,062,576 32,451,042 54,271,753 616,056 54,887,809 2023 REPORT & ACCOUNTS | 257 The analysis of loans and advances to customers, by maturity and by sector of activity, as at 31 December 2022, is as follows: (Thousands of euros) 2022 (restated) Outstanding loans Due within 1 year 1 year to 5 years Over 5 years Total Outstanding Overdue loans Total Agriculture and forestry 104,760 181,701 175,219 461,680 8,517 470,197 Fisheries 3,756 12,465 9,087 25,308 3,226 28,534 Mining 17,107 42,103 11,760 70,970 1,676 72,646 Food, beverage and tobacco 408,663 307,334 97,362 813,359 11,634 824,993 Textiles 154,019 265,451 77,868 497,338 8,989 506,327 Wood and cork 92,259 135,429 32,487 260,175 3,730 263,905 Paper, printing and publishing 42,397 76,818 29,722 148,937 742 149,679 Chemicals 335,828 396,647 130,351 862,826 38,334 901,160 Machinery, equipment and basic metallurgical 559,264 742,898 224,616 1,526,778 25,298 1,552,076 Electricity and gas 55,254 67,104 107,463 229,821 443 230,264 Water 35,418 80,638 88,680 204,736 452 205,188 Construction 524,861 638,536 333,717 1,497,114 21,639 1,518,753 Retail business 668,493 729,772 307,617 1,705,882 18,730 1,724,612 Wholesale business 1,011,781 933,752 280,370 2,225,903 26,755 2,252,658 Restaurants and hotels 81,252 523,536 901,175 1,505,963 15,721 1,521,684 Transports 334,717 840,728 144,791 1,320,236 7,464 1,327,700 Post offices 12,384 6,551 983 19,918 254 20,172 Telecommunications 82,116 274,708 55,061 411,885 1,508 413,393 Services Financial intermediation 194,026 783,252 1,069,987 2,047,265 2,149 2,049,414 Real estate activities 345,774 830,401 802,007 1,978,182 10,931 1,989,113 Consulting, scientific and technical activities 211,357 387,691 370,362 969,410 8,232 977,642 Administrative and support services activities 122,350 278,364 131,523 532,237 4,296 536,533 Public sector 84,965 283,426 455,513 823,904 — 823,904 Education 29,436 47,613 66,881 143,930 814 144,744 Health and collective service activities 70,100 167,080 141,243 378,423 1,029 379,452 Artistic, sports and recreational activities 11,618 64,764 160,161 236,543 2,128 238,671 Other services 70,922 121,649 41,828 234,399 2,971 237,370 Consumer loans 1,901,816 2,744,264 1,129,159 5,775,239 237,160 6,012,399 Mortgage credit 464,882 1,593,206 25,954,858 28,012,946 110,809 28,123,755 Other domestic activities 247 477 653 1,377 332 1,709 Other international activities 432,937 81,442 161,874 676,253 3,266 679,519 8,464,759 13,639,800 33,494,378 55,598,937 579,229 56,178,166 2023 REPORT & ACCOUNTS 258 | The analysis of loans and advances to customers, by type of credit and by maturity, as at 31 December 2023, is as follows: (Thousands of euros) 2023 Outstanding loans Due within 1 year 1 year to 5 years Over 5 years Total Outstanding Overdue loans Total Public sector 9,277 189,817 339,627 538,721 40 538,761 Asset-backed loans 1,654,088 3,658,185 26,486,816 31,799,089 111,046 31,910,135 Other guaranteed loans 843,304 3,182,893 689,834 4,716,031 71,101 4,787,132 Unsecured loans 2,791,442 3,863,145 1,384,821 8,039,408 308,262 8,347,670 Foreign loans 229,016 386,412 1,458,390 2,073,818 13,816 2,087,634 Factoring operations 2,645,855 263,715 — 2,909,570 22,103 2,931,673 Finance leases 585,153 1,518,409 2,091,554 4,195,116 89,688 4,284,804 8,758,135 13,062,576 32,451,042 54,271,753 616,056 54,887,809 The analysis of loans and advances to customers, by type of credit and by maturity, as at 31 December 2022, is as follows: (Thousands of euros) 2022 (restated) Outstanding loans Due within 1 year 1 year to 5 years Over 5 years Total Outstanding Overdue loans Total Public sector 21,138 19,832 543,029 583,999 — 583,999 Asset-backed loans 1,608,240 3,615,091 27,010,051 32,233,382 123,063 32,356,445 Other guaranteed loans 842,171 3,866,580 958,781 5,667,532 100,085 5,767,617 Unsecured loans 2,660,372 3,452,035 1,345,905 7,458,312 258,186 7,716,498 Foreign loans 171,535 785,272 1,500,328 2,457,135 2,451 2,459,586 Factoring operations 2,592,313 426,935 3,000 3,022,248 16,680 3,038,928 Finance leases 568,990 1,474,055 2,133,284 4,176,329 78,764 4,255,093 8,464,759 13,639,800 33,494,378 55,598,937 579,229 56,178,166 The item Loans and advances to customers, split by stage according with IFRS 9, is analysed as follows: (Thousands of euros) 2023 2022 (restated) Stage 1 Gross amount 45,652,779 46,404,751 Impairment (268,948) (214,469) 45,383,831 46,190,282 Stage 2 Gross amount 7,295,904 7,567,944 Impairment (291,928) (284,653) 7,003,976 7,283,291 Stage 3 Gross amount 1,939,126 2,205,471 Impairment (1,021,774) (1,003,251) 917,352 1,202,220 Net amount 53,305,159 54,675,793 The exposure and impairment of the above table also includes the operations classified as POCI as detailed in note 54. 2023 REPORT & ACCOUNTS | 259 The analysis of the exposure covered by collaterals associated with loans and advances to customers' portfolio, by stage according with IFRS 9, considering the collaterals' fair value, is as follows: (Thousands of euros) 2023 2022 (restated) Stage 1 Securities and other financial assets 1,601,275 1,533,809 Residential real estate 25,107,829 24,796,864 Other real estate 3,236,223 3,475,795 Other guarantees 7,147,794 7,654,261 37,093,121 37,460,729 Stage 2 Securities and other financial assets 177,614 192,025 Residential real estate 2,840,231 2,507,458 Other real estate 1,159,093 1,158,362 Other guarantees 1,500,324 1,744,218 5,677,262 5,602,063 Stage 3 Securities and other financial assets 20,313 28,765 Residential real estate 442,566 432,138 Other real estate 346,101 516,903 Other guarantees 214,931 235,900 1,023,911 1,213,706 43,794,294 44,276,498 The balance Other guarantees include first-demand guarantees issued by the Bank and other entities, with an internal risk rating of 7 or better; personal guarantees, when the guarantors are classified with internal risk grade 7 or better. This balance also includes pledges, assets subject to financial leasing operations and personal guarantees, among others. Considering the policy of risk management of the Group (note 54), the amounts presented do not include the fair value of the personal guarantees provided by clients with lower risk rating. When considered, the fair value of the personal guarantees corresponds to the guaranteed amount. The Group is applying physical collaterals and financial guarantees as instruments to mitigate the credit risk. The physical collaterals are mainly mortgages on residential buildings for the mortgage portfolio and other mortgages on other types of buildings related to other types of loans. To reflect the market value, these collaterals are regularly reviewed based on independent and certified valuation entities or through the application of revaluation coefficients that reflect the market trends for each specific type of building and geographical area. The financial guarantees are reviewed based on the market value of the respective assets, when available, with the subsequent application of haircuts that reflect the volatility of their prices. The Group continued to negotiate additional physical and financial collaterals with its customers. 2023 REPORT & ACCOUNTS 260 | The loan to customers' portfolio includes contracts that resulted in a formal restructuring with the customers and which arise to the marking of operations as being restructured due to financial difficulties of customers. The restructuring may include in a reinforce of guarantees, liquidation of part of the credit and imply an extension of maturities or changes in interest rate. The analysis of the restructured loans, by sector of activity, is as follows: (Thousands of euros) 2023 2022 (restated) Restructured loans Impairment () Net amount Restructured loans Impairment () Net amount Agriculture and forestry 21,199 (1,928) 19,271 15,009 (2,216) 12,793 Fisheries 3,381 (2,708) 673 2,772 (1,762) 1,010 Mining 5,919 (3,246) 2,673 1,305 (199) 1,106 Food, beverage and tobacco 18,625 (7,781) 10,844 28,393 (10,112) 18,281 Textiles 7,766 (1,948) 5,818 14,120 (4,981) 9,139 Wood and cork 3,670 (428) 3,242 6,088 (784) 5,304 Paper, printing and publishing 6,563 (1,868) 4,695 8,698 (1,701) 6,997 Chemicals 22,807 (6,719) 16,088 30,146 (11,809) 18,337 Machinery, equipment and basic metallurgical 35,284 (14,955) 20,329 74,637 (22,688) 51,949 Electricity and gas 951 (6) 945 1,133 (255) 878 Water 1,749 (934) 815 1,767 (734) 1,033 Construction 141,642 (27,956) 113,686 151,970 (94,787) 57,183 Retail business 22,524 (4,587) 17,937 38,861 (10,085) 28,776 Wholesale business 25,671 (6,607) 19,064 68,474 (13,627) 54,847 Restaurants and hotels 63,536 (21,319) 42,217 97,002 (16,126) 80,876 Transports 4,666 (1,513) 3,153 9,620 (1,767) 7,853 Post offices 100 (40) 60 125 (33) 92 Telecommunications 1,861 (404) 1,457 25,228 (4,066) 21,162 Services Financial intermediation 24,992 (2,430) 22,562 54,764 (19,879) 34,885 Real estate activities 74,959 (14,492) 60,467 45,785 (9,927) 35,858 Consulting, scientific and technical activities 192,379 (130,306) 62,073 190,444 (63,606) 126,838 Administrative and support services activities 28,633 (10,843) 17,790 67,941 (46,519) 21,422 Public sector 60,886 (464) 60,422 63,016 (427) 62,589 Education 2,089 (234) 1,855 17,310 (11,358) 5,952 Health and collective service activities 9,543 (1,352) 8,191 8,428 (1,206) 7,222 Artistic, sports and recreational activities 38,720 (27,782) 10,938 19,732 (8,865) 10,867 Other services 8,596 (1,801) 6,795 11,855 (1,601) 10,254 Consumer loans 276,092 (115,154) 160,938 274,500 (99,459) 175,041 Mortgage credit 623,740 (71,001) 552,739 535,948 (69,129) 466,819 Other domestic activities 3 — 3 — — — Other international activities 705 (621) 84 977 (594) 383 1,729,251 (481,427) 1,247,824 1,866,048 (530,302) 1,335,746 ()The impairment presented in the table does not include the amounts of impairment calculated using the overlays methodology described in point ii. of the section "Additional measures with impact on the Impairment level" of note 54. 2023 REPORT & ACCOUNTS | 261 The breakdown of the restructured loans as at 31 December 2023, by restructuring measure, is as follows: (Thousands of euros) 2023 Number of operations Outstanding loans Overdue loans Gross amount Impairment () Net amount Extension of the repayment term 41,274 338,147 59,307 397,454 (130,610) 266,844 Introduction of the grace period for capital and / or interest 6,318 358,580 31,700 390,280 (97,525) 292,755 Interest rate reduction 2,130 106,926 2,383 109,309 (9,963) 99,346 Payment plan change 8,891 332,029 9,784 341,813 (133,956) 207,857 Debt relief 86 22,201 1,334 23,535 (21,655) 1,880 Debt-asset swaps 2 — 17 17 (1) 16 Other restructured loans 6,046 401,629 65,214 466,843 (87,717) 379,126 64,747 1,559,512 169,739 1,729,251 (481,427) 1,247,824 The breakdown of the restructured loans as at 31 December 2022, by restructuring measure, is as follows: (Thousands of euros) 2022 (restated) Number of operations Outstanding loans Overdue loans Gross amount Impairment () Net amount Extension of the repayment term 40,796 383,529 64,104 447,633 (130,635) 316,998 Introduction of the grace period for capital and / or interest 7,359 433,555 30,187 463,742 (134,502) 329,240 Interest rate reduction 3,933 147,583 5,694 153,277 (105,411) 47,866 Payment plan change 10,832 233,879 9,338 243,217 (21,762) 221,455 Debt relief 105 935 1,693 2,628 (1,391) 1,237 Debt-asset swaps 4 368 21 389 (31) 358 Other restructured loans 6,877 507,410 47,752 555,162 (136,570) 418,592 69,906 1,707,259 158,789 1,866,048 (530,302) 1,335,746 () The impairment presented in the tables does not include the amounts of impairment calculated using the overlays methodology described in point ii. of the section "Additional measures with impact on the Impairment level" of note 54. The restructured loans are also subject to an impairment analysis resulting from the revaluation of expectation to meet new cash flows inherent to the new contract terms and considering new collaterals. The Group has implemented a process for marking operations restructured due to clients' financial difficulties. This marking is part of the credit analysis process, being in charge of the respective decision-making bodies, according to the corresponding competencies, established in the regulations in force. The information on operations restructured due to financial difficulties is available in the Group's information systems, having a relevant role in the processes of credit analysis, in the marking of customers in default and in the process of determining impairment. In particular: - there are several default triggers related to restructuring due to financial difficulties (restructuring with loss of value, recidivism of restructuring, default on customers with restructured operations); - in the process of individual impairment analysis, in addition to the existence of operations restructured due to financial difficulties, being a reason for customer selection, the loss inherent to the change in the conditions resulting from the restructuring is determined. 2023 REPORT & ACCOUNTS 262 | The demarcation of an operation marked as restructured due to financial difficulties, can only take place at least 2- years periods after the date of marking, provided that a set of conditions exist that allow to conclude by the improvement of the financial condition of the client. In the case of credits marked as Non-Performing Exposure (NPE), this 2-year period will only start on the date of classification of the credit as performing. The definition of Non-Performing Loans for more than 90 days (NPL > 90) incorporates total credit (past due plus outstanding) associated with past due operations for more than 90 days. The amount calculated is Euros 749,569,000 (31 December 2022: Euros 725,300,000). All customers who check at least one of the following conditions are marked in default and therefore as NPE: - Material payment delay of more than 90 days in the amounts of principal, interest or unpaid commissions on the due date that, cumulatively, represent: more than Euros 100 (retail) or more than Euros 500 (non-retail); and more than 1% of the total debt (direct liabilities). - Indications of low probability of payment: a) Credit restructuring due to financial difficulties with loss of value; b) Delay after restructuring due to financial difficulties; c) Recurrence of restructuring due to financial difficulties; d) Credit with signs of impairment (or Stage 3 of IFRS 9); e) Insolvency or equivalent process; f) Litigation; g) Guarantees of operations in default; h) Loss of credit sales; i) Credit fraud; j) Unpaid credit status; k) Breach of covenants in a credit agreement; l) Contagion of default in an economic group; m) Cross default in the BCP Group. The NPE associated with Loans and advances customers at amortized cost amounts to Euros 1,939,126,000 (31 December 2022: Euros 2,205,471,000). The changes occurred in Loans impairment are analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance on 1 January 1,502,373 1,849,284 Charge for the year in net income interest 3,545 32,942 Transfers resulting from changes in the Group's structure 411 — Other transfers (1,054) (53,634) Impairment charge for the year (note 11) 805,500 830,750 Reversals for the year (note 11) (511,733) (506,926) Loans charged-off Write-offs (192,473) (458,405) Credit assignments (62,044) (189,061) Exchange rate differences 38,125 (2,577) Balance at the end of the year 1,582,650 1,502,373 The balance Other transfers included, as at 31 December 2022, the amount of Euros 52,794,000 related to impairment for loans that were reclassified to Financial assets not held for trading mandatorily at fair value through profit or loss - Loans and advances to customers at fair value. According to note 39, regarding the proceedings related to foreign currency-indexed mortgage loans of Bank Millennium the amount of Euros 1,500,209,000 has been written-off from the gross carrying amount of loans portfolio (31 December 2022: Euros 976,782,000). 2023 REPORT & ACCOUNTS | 263 The analysis of Write-offs, by sector of activity, is as follows: (Thousands of euros) 2023 2022 (restated) Agriculture and forestry 1,046 271 Fisheries — 1 Mining — 46 Food, beverage and tobacco 3,799 1,696 Textiles 1,141 1,405 Wood and cork 567 2,083 Paper, printing and publishing 103 141 Chemicals 1,058 1,425 Machinery, equipment and basic metallurgical 6,091 2,613 Electricity and gas 377 615 Water 51 39 Construction 3,100 9,992 Retail business 1,714 10,324 Wholesale business 3,338 13,782 Restaurants and hotels 891 3,482 Transports 475 6,527 Post offices 134 128 Telecommunications 234 72 Services Financial intermediation 20,210 72,244 Real estate activities 208 306 Consulting, scientific and technical activities 5,975 1,119 Administrative and support services activities 35,569 2,839 Education 10 48 Health and collective service activities 173 179 Artistic, sports and recreational activities 222 6,492 Other services 268 240,544 Consumer loans 64,537 69,019 Mortgage credit 1,968 3,581 Other domestic activities 761 838 Other international activities 38,453 6,554 192,473 458,405 According with the accounting policy described in note 1 C1.3, the Group writes off a loan when it does not have reasonable expectations of recovering a financial asset in its entirety or partially. Loans written-off are recognised in off-balance sheet accounts. The analysis of Write-offs, by type of credit, is as follows: (Thousands of euros) 2023 2022 (restated) Asset-backed loans 2,432 3,296 Other guaranteed loans 40,982 313,915 Unsecured loans 142,768 128,131 Finance leases 6,291 13,063 192,473 458,405 2023 REPORT & ACCOUNTS 264 | The analysis of recovered loans and interest occurred during 2023 and 2022, by sector of activity, is as follows: (Thousands of euros) 2023 2022 (restated) Agriculture and forestry 52 6 Food, beverage and tobacco 30 34 Textiles 29 41 Wood and cork 137 43 Chemicals 533 105 Machinery, equipment and basic metallurgical 17 165 Construction 1,065 2,719 Retail business 1,151 757 Wholesale business 1,570 113 Restaurants and hotels 22 67 Transports 301 56 Post offices — 1 Telecommunications — 2 Services Financial intermediation 2,492 619 Real estate activities 192 483 Consulting, scientific and technical activities 1,962 8 Administrative and support services activities 31 29 Education 1 5 Health and collective service activities 1 1 Artistic, sports and recreational activities 20 3 Other services 1,206 8 Consumer loans 10,399 13,967 Mortgage credit 603 130 Other domestic activities 17 29 Other international activities 35,900 1,445 57,731 20,836 The analysis of recovered loans and interest occurred during 2023 and 2022, by type of credit, is as follows: (Thousands of euros) 2023 2022 (restated) Asset-backed loans 1,318 130 Other guaranteed loans 37,409 4,237 Unsecured loans 16,625 16,300 Foreign loans 1,511 80 Finance leases 868 89 57,731 20,836 2023 REPORT & ACCOUNTS | 265 The balance Loans and advances to customers includes the effect of traditional securitization transactions made through Special Purpose Entities (SPE) consolidated following the application of IFRS 10, in accordance with accounting policy 1 B and synthetic securitization. The characterization of these operations is described in note 1 D. Traditional securitizations The traditional securitization transaction engaged by the BCP and still ongoing, refers to mortgage loans portfolios and are set through securitization funds and special purpose entities (SPEs). As referred in accounting policy 1 B, when the substance of the relationships with the referred SPEs indicates that the Group holds control of its activities, those are consolidated by the full method. Magellan Mortgages No. 3 On 24 June 2005, the Bank transferred, through securitization funds, an owned mortgage loans portfolio to the SPE “Magellan Mortgages No. 3 PLC”. Considering that, by having acquired part of the subordinated tranche of the bonds issued by that SPE, the Bank holds the control of the referred assets, the SPE is consolidated in the Group’s Financial Statements, as established in the accounting policy 1.B. As at 31 December 2023, the SPE's credit portfolio associated with this operation amounts to Euros 160,845,000 (31 December 2022: Euros 188,214,000) and bonds issued with different subordination levels amount to Euros 121,882,000 (this amount excludes bonds hold by the Group in the amount of Euros 54,929,000) and the most subordinated tranche amounts to Euros 44,000 (this amount excludes bonds already acquired by the Group in the amount Euros 206,000). Synthetic securitizations BCP has three operations in progress which form structures of synthetic securitization with similar characteristics, with reference to credit portfolios granted by the Bank mainly to Small and Medium Enterprises (SMEs). Caravela SME No. 3 Caravela SME No.3, supports an operation started on 28 June 2013, based on a medium and long term loans portfolio of current accounts and authorized overdrafts. The legal maturity date of the operation is 25 March of 2036 and the operation amounts to Euros 177,327,000 as at 31 December 2023 (31 December 2022: Euros 276,209,000). The fair value of the relative Credit Default Swap (CDS) is recorded as a positive amount of Euros 172,994,000 (31 December 2022: Euros 179,713,000)and the respective gain registered in 2023 amounts to Euros 959,000 (31 December 2022: loss of Euros 4,824,000). Caravela SME No. 4 Caravela SME No.4 is a similar operation, initiated on 5 June 2014, which portfolio contains car, real estate and equipment leasing. The legal maturity date is 21 September of 2043 and, as at 31 December 2023, the operation amounts to Euros 393,247,000 (31 December 2022: Euros 506,117,000). The fair value of the relative CDS is recorded as a positive amount of Euros 60,386,000 (31 December 2022: Euros 61,551,000) and the respective gain registered in 2023 amounts to Euros 648,000 (31 December 2022: loss of Euros 2,026,000). 2023 REPORT & ACCOUNTS 266 | Caravela SME No.5 Caravela SME No.5, initiated on 20 December 2022, is supported by a portfolio of medium and long term loans, leasing contract and commercial paper programmes. The legal maturity date is 26 September of 2035 and, as at 31 December 2023, the operation amounts to Euros 1,697,747,000 (31 December 2022: Euros 1,918,408,000). The fair value of the relative CDS is recorded as a negative amount of Euros 46,362,000 (31 December 2022: positive amount 76,000) and the respective cost registered in 2023 amounts to Euros 18,010,000 (31 December 2022: Euros 1,424,000). In any of these transactions, the Bank contracted a Credit Default Swap (CDS) with a Special Purpose Entity (SPE), purchasing from it form, credit risk protection on the referenced portfolio. In the case of synthetic structures, in the of this same CDS the risk of the respective portfolios was subdivided into 3 tranches: senior, mezzanine and equity. In this case of Caravela SME no.3 and no.4 operations, the mezzanine tranche and part of equity (20%) were placed on the market through the issuance, by the SPE, of Credit Linked Notes (CLN's) subscribed by investors, while in Caravela SME no.5 has been placed on the market for the entire mezzanine tranche. In turn, the Bank retained the risk of the tranche senior and the remaining part of the equity tranche (80%) in the case of Caravela operations no. 3 and no. 4, and the whole of the equity tranche in the case of Caravela SME no.5. The proceeds of the issuance of the CLNs were applied by the SPE in the constitution of a deposit which fully collateralises its liabilities to its creditors in connection with the transaction, including BCP. These operations allowed the Bank to reduce the risk-weighted assets associated with the credit portfolios supporting the operations, but the Bank did not transfer to third parties most of the rights and obligations arising from the credits included in the respective portfolios, thus not meeting the derecognition criteria in the accounting policy presented in note 1 C1.3. Securitization operations carried out by Bank Millennium Group In December 2023, the Bank Millennium carried out a synthetic securitization transaction of a portfolio of unsecured cash loans with a total value of PLN 7.2 billion (Euros 1.7 billion). This was the largest synthetic securitization transaction concluded by the Bank so far. As part of the transaction, the Bank transferred a significant part of the credit risk of the securitized portfolio to the investor. The securitized loan portfolio remains on the Bank's balance sheet. The risk of the securitized portfolio is transferred via a credit protection instrument in the form of credit risk- related bonds issued in December 2023 ("CLN Bonds") in the amount of PLN 489 million (Euros 112.6 million). Earlier, in July 2023, the Bank's subsidiary, Millennium Leasing, conducted another synthetic securitization transaction. The reference portfolio of leasing transactions was worth PLN 4.0 billion (Euros 0.9 million). As part of the transaction, Millennium Leasing transferred a significant part of the credit risk of the securitized portfolio to the investor. The securitized loan portfolio remains on Millennium Leasing's balance sheet. The risk transfer of the securitized portfolio is carried out through a credit protection instrument in the form of credit risk bonds issued in July 2023 ("CLN Bonds") in the amount of PLN 280 million (Euros 64.5 million). 2023 REPORT & ACCOUNTS | 267 23. Debt securities The balance Debt securities is analysed as follows: (Thousands of euros) 2023 2022 (restated) Debt securities held associated with credit operations Portuguese issuers Bonds 115,629 183,260 Commercial paper 1,762,453 1,256,557 Foreign issuers Commercial paper 38,900 65,781 1,916,982 1,505,598 Overdue securities - over 90 days 40 40 1,917,022 1,505,638 Impairment (8,668) (4,676) 1,908,354 1,500,962 Debt securities held not associated with credit operations Bonds issued by public entities () Portuguese issuers 3,552,807 3,517,560 Foreign issuers 11,237,924 7,317,443 Bonds issued by public companies and other entities Portuguese issuers 459,392 248,399 Foreign issuers 395,102 124,438 Treasury bills (Public Issuers and Central Banks) Foreign issuers 42,277 336,343 15,687,502 11,544,183 Impairment (16,720) (9,563) 15,670,782 11,534,620 17,579,136 13,035,582 () Includes the negative amount of Euros 356,628,000 (31 December 2022: negative amount of Euros 417,311,000) related to adjustments resulting from the application of fair value hedge accounting. Under the terms of IFRS 9, the balance Debt securities held not associated with credit operations - Bonds issued by public issuers, includes essentially a portfolio of securities to support Bank's ALM (Asset and Liability Management), whose business model seeks to receive the respective income until maturity, that is, of a portfolio Held to Collect, whose value as at 31 December 2023 amounts to Euros 9,905,849,000 (31 December 2022: Euros 9,248,707,000). 2023 REPORT & ACCOUNTS 268 | The analysis of the balance Debt securities before impairment, by maturity, as at 31 December 2023 is as follows: (Thousands of euros) 2023 Up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue Total Debt securities held associated with credit operations Portuguese issuers Bonds — — 10,128 105,501 — 115,629 Commercial paper 1,382,628 379,825 — — 40 1,762,493 Foreign issuers Commercial paper 19,407 19,493 — — — 38,900 1,402,035 399,318 10,128 105,501 40 1,917,022 Debt securities held not associated with credit operations Public entities Portuguese issuers — — 2,876,835 675,972 — 3,552,807 Foreign issuers 625,851 675,486 4,811,329 5,125,258 — 11,237,924 Public companies and other entities Portuguese issuers — 50,030 133,699 275,663 — 459,392 Foreign issuers — — 395,102 — — 395,102 Treasury bills (Public Issuers and Central Banks) Foreign issuers 42,277 — — — 42,277 668,128 725,516 8,216,965 6,076,893 — 15,687,502 2,070,163 1,124,834 8,227,093 6,182,394 40 17,604,524 2023 REPORT & ACCOUNTS | 269 The analysis of the balance Debt securities before impairment, by maturity, as at 31 December 2022 is as follows: (Thousands of euros) 2022 (restated) Up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue Total Debt securities held associated with credit operations Portuguese issuers Bonds — — 13,480 169,780 — 183,260 Commercial paper 860,395 396,162 — — 40 1,256,597 Foreign issuers Commercial paper 31,361 34,420 — — — 65,781 891,756 430,582 13,480 169,780 40 1,505,638 Debt securities held not associated with credit operations Public entities Portuguese issuers — — 1,865,689 1,651,871 — 3,517,560 Foreign issuers 50,410 212,482 970,601 6,083,950 — 7,317,443 Public companies and other entities Portuguese issuers — — 153,548 94,851 — 248,399 Foreign issuers — 97,962 — 26,476 — 124,438 Treasury bills (Public Issuers and Central Banks) Foreign issuers 237,209 99,134 — — 336,343 287,619 409,578 2,989,838 7,857,148 — 11,544,183 1,179,375 840,160 3,003,318 8,026,928 40 13,049,821 2023 REPORT & ACCOUNTS 270 | The analysis of debt securities portfolio, net of impairment, by sector of activity, is analysed as follows: (Thousands of euros) 2023 2022 (restated) Debt securities held associated with credit operations Agriculture and forestry 2,479 2,496 Mining 85,939 46,403 Food, beverage and tobacco 102,720 79,448 Textiles 45,203 58,555 Wood and cork 23,720 19,630 Paper, printing and publishing 9,206 8,104 Chemicals 215,972 179,516 Machinery, equipment and basic metallurgical 42,787 65,973 Electricity and gas 211,183 165,676 Water 31,955 5,475 Construction 10,633 13,397 Retail business 28,973 20,507 Wholesale business 64,044 56,698 Restaurants and hotels 8,857 8,789 Transports 33,392 36,591 Telecommunications 4,018 9,706 Services Financial intermediation 114,283 107,372 Real estate activities 55,566 50,845 Consulting, scientific and technical activities 751,610 473,231 Administrative and support services activities 11,217 12,269 Health and collective service activities 4,974 — Artistic, sports and recreational activities 7,058 10,406 Other services 3,665 4,095 Other international activities 38,900 65,780 1,908,354 1,500,962 Debt securities held not associated with credit operations Machinery, equipment and basic metallurgical 11,977 — Electricity and gas 99,846 88,873 Water — 39,704 Services Financial intermediation 437,378 460,781 Consulting, scientific and technical activities 346,117 119,297 895,318 708,655 Government and Public securities 14,775,464 10,825,965 15,670,782 11,534,620 17,579,136 13,035,582 2023 REPORT & ACCOUNTS | 271 The analysis of restructured debt securities portfolio, by sector of activity, is analysed as follows: (Thousands of euros) 2023 2022 Restructured loans Impairment Net amount Restructured loans Impairment Net amount Debt securities held associated with credit operations Food, beverage and tobacco 7,711 (126) 7,585 — — — Chemicals — — — 5,062 (101) 4,961 Services Administrative and support services activities 10,311 (90) 10,221 10,604 (132) 10,472 18,022 (216) 17,806 15,666 (233) 15,433 The changes occurred in impairment of debt securities are analysed as follows: (Thousands of euros) 2023 2022 (restated) Debt securities held associated with credit operations Balance on 1 January 4,676 7,059 Charge for the year in net income interest 2 — Charge for the year (note 11) 3,991 8 Reversals for the year (note 11) — (2,393) Exchange rate differences (1) 2 Balance at the end of the year 8,668 4,676 Debt securities held not associated with credit operations Balance on 1 January 9,563 8,743 Charge for the year (note 11) 9,323 3,329 Reversals for the year (note 11) (688) (2,779) Amounts charged-off (1,282) — Exchange rate differences (196) 270 Balance at the end of the year 16,720 9,563 2023 REPORT & ACCOUNTS 272 | 24. Financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income The balances Financial assets at fair value through profit or loss and Financial assets at fair value through other comprehensive income are analysed as follows: (Thousands of euros) 2023 2022 (restated) Financial assets at fair value through profit or loss Financial assets held for trading Debt instruments 355,526 338,813 Equity instruments 53,432 51,540 Trading derivatives 413,946 376,244 822,904 766,597 Financial assets not held for trading mandatorily at fair value through profit or loss Loans and advances to customers at fair value 4,454 20,929 Debt instruments 280,558 311,404 Equity instruments 182,242 220,346 467,254 552,679 Financial assets designated at fair value through profit or loss Debt instruments 32,004 — 32,004 — Financial assets at fair value through other comprehensive income Debt instruments 10,809,872 7,434,152 Equity instruments 24,419 27,401 10,834,291 7,461,553 12,156,453 8,780,829 2023 REPORT & ACCOUNTS | 273 The portfolio of Financial assets at fair value through profit or loss (excluding Loans and advances to customers at fair value) and Financial assets at fair value through other comprehensive income, net of impairment, by type of asset, as at 31 December 2023, is analysed as follows: (Thousands of euros) 2023 At fair value through profit or loss Held for trading Not held for trading mandatorily at fair value through profit or loss Designated at fair value through profit or loss At fair value through other comprehensive income Total Debt instruments Bonds issued by public entities Portuguese issuers 20,312 — 32,004 1,950,559 2,002,875 Foreign issuers 25,452 — — 3,435,176 3,460,628 Bonds issued by public companies and other entities Portuguese issuers — 50 — 403,971 404,021 Foreign issuers 10,395 — — 1,120,454 1,130,849 Treasury bills (Public Issuers and Central Banks) Portuguese issuers 103,661 — — — 103,661 Foreign issuers 192,741 — — 3,899,712 4,092,453 Shares of foreign companies (a) — 23,498 — — 23,498 Investment fund units (b) — 257,010 — — 257,010 Commercial paper 2,965 — — — 2,965 355,526 280,558 32,004 10,809,872 11,477,960 Equity instruments Shares Portuguese companies 142 — — 16,352 16,494 Foreign companies 28 15,335 — 8,067 23,430 Investment fund units (c) — 166,907 — — 166,907 Other securities (d) 53,262 — — — 53,262 53,432 182,242 — 24,419 260,093 Trading derivatives 413,946 — — — 413,946 822,904 462,800 32,004 10,834,291 12,151,999 Level 1 405,585 — 32,004 8,301,377 8,738,966 Level 2 84,614 — — 2,431,483 2,516,097 Level 3 332,705 462,800 — 101,431 896,936 (a) These shares are considered as debt instruments because they do not fall within the definition of equity instruments provided by IAS 32. (b) These investment fund units are considered as debt instruments because they do not fall within the definition of equity instruments provided by IAS 32. (c) These investment fund units were considered as equity instruments in accordance with the terms provided in IAS 32. (d) Includes the amount of Euros 52,854,000 in Exchange Traded Funds (ETFs). The portfolios are recorded at fair value in accordance with the accounting policy described in note 1 C. As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 49. The balance Financial assets held for trading include bonds issued with different levels of subordination associated with the traditional securitization transactions Magellan Mortgages No. 4, referred in note 1 D, in the amount of Euros 66,000 (31 December 2022: Euros 74,000). 2023 REPORT & ACCOUNTS 274 | In accordance with the accounting policy C1.1.3 regarding the classification of financial assets, the securities accounted for in Financial assets designated at fair value through profit or loss are covered by the "Treasury Bond Certificates October 2025" issued by Banco Comercial Português, S.A. which are recorded in Financial liabilities designated at fair value through profit or loss (note 38). The portfolio of Financial assets at fair value through profit or loss (excluding Loans and advances to customers at fair value) and Financial assets at fair value through other comprehensive income, net of impairment, by type of asset, as at 31 December 2022, is analysed as follows: (Thousands of euros) 2022 (restated) At fair value through profit or loss Held for trading Not held for trading mandatorily at fair value through profit or loss At fair value through other comprehensive income Total Debt instruments Bonds issued by public entities Portuguese issuers 21,450 — 2,448,636 2,470,086 Foreign issuers 8,353 — 2,916,098 2,924,451 Bonds issued by public companies and other entities Portuguese issuers — 51 542,765 542,816 Foreign issuers 74 — 897,146 897,220 Treasury bills (Public Issuers and Central Banks) Portuguese issuers 308,936 — 993 309,929 Foreign issuers — — 628,514 628,514 Shares of foreign companies (a) — 19,387 — 19,387 Investment fund units (b) — 291,966 — 291,966 338,813 311,404 7,434,152 8,084,369 Equity instruments Shares Portuguese companies — — 18,811 18,811 Foreign companies 24 27,550 8,590 36,164 Investment fund units (c) — 192,796 — 192,796 Other securities (d) 51,516 — — 51,516 51,540 220,346 27,401 299,287 Trading derivatives 376,244 — — 376,244 766,597 531,750 7,461,553 8,759,900 Level 1 389,954 — 6,489,282 6,879,236 Level 2 81,347 — 862,566 943,913 Level 3 295,296 531,750 109,705 936,751 (a) These shares are considered as debt instruments because they do not fall within the definition of equity instruments provided by IAS 32. (b) These investment fund units are considered debt instruments because they do not fall within the definition of equity instruments provided by IAS 32. (c) These investment fund units were considered as equity instruments in accordance with the terms provided in IAS 32. (d) Includes the amount of Euros 51,191,000 in Exchange Traded Funds (ETFs). 2023 REPORT & ACCOUNTS | 275 The changes occurred in impairment of financial assets at fair value through other comprehensive income, are analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance on 1 January 1,067 1,092 Transfers to fair value changes (note 43) (1,322) 5,024 Impairment through profit and loss (note 12) 2,641 545 Reversals through profit and loss (note 12) (1,319) (5,569) Exchange rate differences 83 (25) Balance at the end of the year 1,150 1,067 The accumulated impairment related to credit risk associated with the financial assets at fair value through other comprehensive income amounts to Euros 6,272,000 and is recognised against Fair value reserves (31 December 2022: Euros 5,270,000). The portfolio of financial assets at fair value through other comprehensive income, as at 31 December 2023, is analysed as follows: (Thousands of euros) 2023 Amortised cost (a) Fair value hedge adjustments (note 43) Fair value adjustments (note 43) Total Debt instruments Bonds issued by public entities Portuguese issuers 2,071,760 (78,556) (42,645) 1,950,559 Foreign issuers 3,452,443 6,501 (23,768) 3,435,176 Bonds issued by public companies and other entities Portuguese issuers 412,309 (9,040) 702 403,971 Foreign issuers 1,182,733 (49,114) (13,165) 1,120,454 Treasury bills (Public Issuers and Central Banks) Foreign issuers 3,896,162 — 3,550 3,899,712 11,015,407 (130,209) (75,326) 10,809,872 Equity instruments Shares Portuguese companies 23,253 — (6,901) 16,352 Foreign companies 4,913 — 3,154 8,067 28,166 — (3,747) 24,419 11,043,573 (130,209) (79,073) 10,834,291 (a) Include interest accrued and accumulated impairment for debt securities classified as financial assets at fair value through other comprehensive income, as provided by IFRS 9, and according to the requirements defined in the accounting policy 1 C1.5.1.2. 2023 REPORT & ACCOUNTS 276 | The portfolio of financial assets at fair value through other comprehensive income, as at 31 December 2022, is analysed as follows: (Thousands of euros) 2022 (restated) Amortised cost (a) Fair value hedge adjustments (note 43) Fair value adjustments (note 43) Total Debt instruments Bonds issued by public entities Portuguese issuers 2,721,263 (182,643) (89,984) 2,448,636 Foreign issuers 3,007,189 — (91,091) 2,916,098 Bonds issued by public companies and other entities Portuguese issuers 566,480 (19,099) (4,616) 542,765 Foreign issuers 1,023,516 (83,632) (42,738) 897,146 Treasury bills (Public Issuers and Central Banks) Portuguese issuers 994 — (1) 993 Foreign issuers 628,509 — 5 628,514 7,947,951 (285,374) (228,425) 7,434,152 Equity instruments Shares Portuguese companies 33,448 — (14,637) 18,811 Foreign companies 19,799 — (11,209) 8,590 53,247 — (25,846) 27,401 8,001,198 (285,374) (254,271) 7,461,553 (a) Include interest accrued and accumulated impairment for debt securities classified as financial assets at fair value through other comprehensive income, as provided by IFRS 9, and according to the requirements defined in the accounting policy 1 C1.5.1.2. The portfolio of Financial assets at fair value through profit or loss (excluding Loans and advances to customers at fair value) and Financial assets at fair value through other comprehensive, net of impairment, as at 31 December 2023, by valuation levels, is analysed as follows: (Thousands of euros) 2023 Level 1 Level 2 Level 3 Total Debt instruments Bonds issued by public entities Portuguese issuers 1,973,284 29,591 — 2,002,875 Foreign issuers 3,448,941 — 11,687 3,460,628 Bonds issued by public companies and other entities Portuguese issuers 279,580 59,064 65,377 404,021 Foreign issuers 1,130,849 — — 1,130,849 Treasury bills (Public Issuers and Central Banks) Portuguese issuers 103,661 — — 103,661 Foreign issuers 1,749,627 2,342,826 — 4,092,453 Shares of Foreign companies — — 23,498 23,498 Investment fund units — — 257,010 257,010 Commercial paper — — 2,965 2,965 8,685,942 2,431,481 360,537 11,477,960 Equity instruments Shares Portuguese companies 142 — 16,352 16,494 Foreign companies 28 — 23,402 23,430 Investment fund units — — 166,907 166,907 Other securities 52,854 — 408 53,262 53,024 — 207,069 260,093 Trading derivatives — 84,616 329,330 413,946 8,738,966 2,516,097 896,936 12,151,999 2023 REPORT & ACCOUNTS | 277 The portfolio of Financial assets at fair value through profit or loss (excluding Loans and advances to customers at fair value) and Financial assets at fair value through other comprehensive, net of impairment, as at 31 December 2022, by valuation levels, is analysed as follows: (Thousands of euros) 2022 (restated) Level 1 Level 2 Level 3 Total Debt instruments Bonds issued by public entities Portuguese issuers 2,336,787 133,299 — 2,470,086 Foreign issuers 2,908,924 — 15,527 2,924,451 Bonds issued by public companies and other entities Portuguese issuers 416,374 57,212 69,230 542,816 Foreign issuers 853,605 43,615 — 897,220 Treasury bills (Public Issuers and Central Banks) Portuguese issuers 309,929 — — 309,929 Foreign issuers — 628,514 — 628,514 Shares of Foreign companies — — 19,387 19,387 Investment fund units — — 291,966 291,966 6,825,619 862,640 396,110 8,084,369 Equity instruments Shares Portuguese companies 2,402 — 16,409 18,811 Foreign companies 24 — 36,140 36,164 Investment fund units — — 192,796 192,796 Other securities 51,191 — 325 51,516 53,617 — 245,670 299,287 Trading derivatives — 81,273 294,971 376,244 6,879,236 943,913 936,751 8,759,900 As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 49. The balance Debt instruments - Investment fund units classified as level 3, includes units in restructuring funds (note 47) which book value resulted from the last disclosure of the Net Asset Value (NAV) determined by the Management Company, which corresponds to the NAV with reference to that date, after considering the effects of the last audited accounts for the respective funds. These funds have a diverse set of assets and liabilities, valued in their respective accounts at fair value through internal methodologies used by the management company. The instruments classified as level 3 have associated net losses not performed in the amount of Euros 856,000 (31 December 2022: losses Euros 15,429,000) recorded in Other comprehensive income. The amount of impairment created for these securities amounts to Euros 1,150,000 (31 December 2022: Euros 1,067,000). 2023 REPORT & ACCOUNTS 278 | The analysis of Financial assets at fair value through profit or loss (excluding loans and advances at fair value and trading derivatives) and Financial assets at fair value through other comprehensive, by residual maturity, as at 31 December 2023, is as follows: (Thousands of euros) 2023 Up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Undetermined Total Debt instruments Bonds issued by public entities Portuguese issuers 324 30,653 1,600,329 371,569 — 2,002,875 Foreign issuers 65,904 501,611 2,638,954 254,159 — 3,460,628 Bonds issued by public companies and other entities Portuguese issuers — 56,316 319,417 28,288 — 404,021 Foreign issuers 31,846 140,832 644,363 313,808 — 1,130,849 Treasury bills (Public Issuers and Central Banks) Portuguese issuers 49,648 54,013 — — — 103,661 Foreign issuers 2,416,524 1,675,929 — — — 4,092,453 Shares of Foreign companies — — — — 23,498 23,498 Investment fund units 6,404 3,067 205,191 37,142 5,206 257,010 Commercial paper 2,965 — — — — 2,965 2,573,615 2,462,421 5,408,254 1,004,966 28,704 11,477,960 Equity instruments Shares Portuguese companies 16,494 16,494 Foreign companies 23,430 23,430 Investment fund units 166,907 166,907 Other securities 53,262 53,262 260,093 260,093 2,573,615 2,462,421 5,408,254 1,004,966 288,797 11,738,053 2023 REPORT & ACCOUNTS | 279 The analysis of Financial assets at fair value through profit or loss (excluding loans and advances at fair value and trading derivatives) and Financial assets at fair value through other comprehensive, by residual maturity, as at 31 December 2022, is as follows: (Thousands of euros) 2022 (restated) Up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Undetermined Total Debt instruments Bonds issued by public entities Portuguese issuers — 8,267 2,172,623 289,196 — 2,470,086 Foreign issuers 416,699 493,389 1,863,833 150,530 — 2,924,451 Bonds issued by public companies and other entities Portuguese issuers 163,229 58,247 300,962 20,378 — 542,816 Foreign issuers 4,414 13,732 457,154 421,920 — 897,220 Treasury bills (Public Issuers and Central Banks) Portuguese issuers 128,349 181,580 — — — 309,929 Foreign issuers 56,638 571,876 — — — 628,514 Shares of Foreign companies — — — — 19,387 19,387 Investment fund units 5,942 38,534 202,152 39,863 5,475 291,966 775,271 1,365,625 4,996,724 921,887 24,862 8,084,369 Equity instruments Shares Portuguese companies 18,811 18,811 Foreign companies 36,164 36,164 Investment fund units 192,796 192,796 Other securities 51,516 51,516 299,287 299,287 775,271 1,365,625 4,996,724 921,887 324,149 8,383,656 The balance Financial assets not held for trading mandatorily at fair value through profit or loss - Loans to customers at fair value is analysed as follows: (Thousands of euros) 2023 2022 (restated) Unsecured loans 2,688 17,217 Overdue loans - less than 90 days 106 554 Overdue loans - Over 90 days 1,660 3,158 4,454 20,929 2023 REPORT & ACCOUNTS 280 | The balance Loans to customers at fair value correspond essentially to consumer loans. This balance is analysed, by remaining period, as follows: (Thousands of euros) 2023 2022 (restated) Up to 3 months 318 1,733 3 months to 1 year 1,452 6,220 1 to 5 years 918 9,264 Undetermined 1,766 3,712 4,454 20,929 The analysis of Financial assets at fair value through profit or loss (excluding loans and advances to customers at fair value and trading derivatives) and Financial assets at fair value through other comprehensive income, by sector of activity, as at 31 December 2023, is as follows: (Thousands of euros) 2023 Bonds and Treasury bills Shares Other Financial Assets Total Mining — 6 — 6 Paper, printing and publishing 47,416 — — 47,416 Chemicals 7,952 2 — 7,954 Machinery, equipment and basic metallurgical 2,477 8 — 2,485 Electricity and gas 70,806 — — 70,806 Water 5,025 — — 5,025 Construction — 145 — 145 Wholesale business 7,067 238 — 7,305 Transports 43,767 — — 43,767 Telecommunications 39,126 4,553 — 43,679 Services Financial intermediation 3,510,636 52,163 476,771 4,039,570 Consulting, scientific and technical activities 111,525 131 — 111,656 Administrative and support services activities 24,216 6,149 — 30,365 Public sector 10,645 — 408 11,053 Other services — 26 — 26 Other international activities — 1 — 1 3,880,658 63,422 477,179 4,421,259 Government and Public securities 7,316,794 — — 7,316,794 11,197,452 63,422 477,179 11,738,053 2023 REPORT & ACCOUNTS | 281 The analysis of Financial assets at fair value through profit or loss (excluding loans and advances to customers at fair value and trading derivatives) and Financial assets at fair value through other comprehensive income, by sector of activity, as at 31 December 2022, is as follows: (Thousands of euros) 2022 (restated) Bonds and Treasury bills Shares Other Financial Assets Total Mining — 5 — 5 Paper, printing and publishing 45,562 2 — 45,564 Chemicals — 2 — 2 Machinery, equipment and basic metallurgical 2,302 6 — 2,308 Electricity and gas 44,627 — — 44,627 Water 9,460 — — 9,460 Construction 4,934 2 — 4,936 Retail business 20,503 2 — 20,505 Wholesale business 6,456 260 — 6,716 Restaurants and hotels — 1,401 — 1,401 Transports 29,491 — — 29,491 Telecommunications 38,869 4,401 — 43,270 Services Financial intermediation 1,533,154 54,477 532,567 2,120,198 Consulting, scientific and technical activities 303,036 103 — 303,139 Administrative and support services activities 26,691 8,629 — 35,320 Public sector — — 325 325 Other services 3,465 5,054 3,386 11,905 Other international activities — 18 — 18 2,068,550 74,362 536,278 2,679,190 Government and Public securities 5,704,466 — — 5,704,466 7,773,016 74,362 536,278 8,383,656 2023 REPORT & ACCOUNTS 282 | The analysis of trading derivatives, by maturity, as at 31 December 2023, is as follows: (Thousands of euros) 2023 Notional (remaining term) Fair value Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities (note 37) Interest rate derivatives: OTC Market: Interest rate swaps 885,425 602,395 4,038,102 5,525,922 56,115 49,956 Interest rate options (purchase) 13,750 32,876 295,120 341,746 2,824 — Interest rate options (sale) 13,750 32,876 295,121 341,747 — 2,779 912,925 668,147 4,628,343 6,209,415 58,939 52,735 Stock Exchange transactions: Interest rate futures — — 28,351 28,351 — — — — 28,351 28,351 — — Currency derivatives: OTC Market: Forward exchange contract 246,896 109,064 6,591 362,551 3,855 9,235 Currency swaps 1,386,897 437,757 7,327 1,831,981 16,822 26,780 Other currency contracts 107,251 — — 107,251 — — 1,741,044 546,821 13,918 2,301,783 20,677 36,015 Shares/indexes: OTC Market: Shares/indexes swaps 815,184 1,572,063 228,377 2,615,624 5,004 19,865 Shares/indexes options (purchase) 117,574 482,355 199,637 799,566 95,945 — Shares/indexes options (sale) 779,957 17,699 1,910 799,566 — 97,923 1,712,715 2,072,117 429,924 4,214,756 100,949 117,788 Stock exchange transactions: Shares futures — — 891,352 891,352 — — — — 891,352 891,352 — — Commodity derivatives: Stock Exchange transactions: Commodities futures — — 1 1 — — — — 1 1 — — Credit derivatives: OTC Market: Credit default swaps (CDS) — — 358,107 358,107 233,381 223 — — 358,107 358,107 233,381 223 Total derivatives traded in: OTC Market 4,366,684 3,287,085 5,430,292 13,084,061 413,946 206,761 of which: Embedded derivatives — — 771,103 771,103 — 95,357 Stock Exchange — — 919,704 919,704 — — 4,366,684 3,287,085 6,349,996 14,003,765 413,946 206,761 2023 REPORT & ACCOUNTS | 283 The analysis of trading derivatives, by maturity, as at 31 December 2022, is as follows: (Thousands of euros) 2022 (restated) Notional (remaining term) Fair value Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities (note 37) Interest rate derivatives: OTC Market: Interest rate swaps 79,053 233,349 3,425,079 3,737,481 53,994 119,637 Interest rate options (purchase) — 133,738 88,199 221,937 6,668 — Interest rate options (sale) — 133,738 88,200 221,938 — 6,555 79,053 500,825 3,601,478 4,181,356 60,662 126,192 Stock Exchange transactions: Interest rate futures — — 66,888 66,888 — — — — 66,888 66,888 — — Currency derivatives: OTC Market: Forward exchange contract 222,128 253,830 9,349 485,307 6,013 9,418 Currency swaps 1,580,200 198,362 8,256 1,786,818 14,081 23,245 1,802,328 452,192 17,605 2,272,125 20,094 32,663 Currency and interest rate swaps: OTC Market: Currency and interest rate swaps: 100,177 — — 100,177 432 90 100,177 — — 100,177 432 90 Shares/indexes: OTC Market: Shares/indexes swaps — 523,118 459,431 982,549 — 27,193 Shares/indexes options (sale) — — 597,213 597,213 — 53,487 — 523,118 1,056,644 1,579,762 — 80,680 Stock exchange transactions: Shares futures — — 835,835 835,835 — — Shares/indexes options (purchase) — 59,735 533,092 592,827 53,707 — Shares/indexes options (sale) — 4,636 11,945 16,581 — 859 — 64,371 1,380,872 1,445,243 53,707 859 Credit derivatives: OTC Market: Credit default swaps (CDS) 2,000 — 395,831 397,831 241,349 — Other credit derivatives (sale) — — 4,351 4,351 — — 2,000 — 400,182 402,182 241,349 — Total derivatives traded in: OTC Market 1,983,558 1,476,135 5,075,909 8,535,602 322,537 239,625 of which: Embedded derivatives 2,000 — 576,242 — — 53,495 Stock Exchange — 64,371 1,447,760 1,512,131 53,707 859 1,983,558 1,540,506 6,523,669 10,047,733 376,244 240,484 2023 REPORT & ACCOUNTS 284 | 25. Hedging derivatives This balance is analysed, by hedging instruments, as follows: (Thousands of euros) 2023 2022 (restated) Assets Liabilities Assets Liabilities Swaps 40,628 67,825 59,703 178,000 Hedging derivatives are measured in accordance with internal valuation techniques considering observable market inputs and, when not available, on information prepared by the Group by extrapolation of market data. In accordance with the hierarchy of the valuation sources, as referred in IFRS 13, these derivatives are classified in level 2. The Group resources to derivatives to hedge interest and exchange rate exposure risks. The accounting method depends on the nature of the hedged risk, namely if the Group is exposed to fair value changes, variability in cash flows or highly probable forecast transactions. As allowed by IFRS 9, the Group opted to continue to apply the hedge accounting requirements in accordance with IAS 39, using mainly interest rate and exchange rate derivatives. The fair value hedge model is adopted for debt securities, loans granted at fixed rate and money market loans and deposits, securities and combined hedge of variable rate financial assets and fixed rate financial liabilities. The cash flows hedge model is adopted for future transactions in foreign currency to cover dynamic changes in cash flows from loans granted and variable rate deposits in foreign currency and foreign currency mortgage loans. The relationships that follow the fair value hedge model recorded ineffectiveness of a negative amount of Euros 5,590,000 (31 December 2022: negative amount of Euros 17,355,000) and the hedging relationships that follow the cash flows model recorded ineffectiveness of a positive amount of Euros 517,000 (31 December 2022: negative amount of Euros 1,571,000). Reclassifications of amounts recorded in results for fair reserves were carried out related to cash flow hedge relationships, in a negative amount of Euros 45,947,000 (31 December 2022: positive amount of Euros 54,861,000). The accumulated adjustment on financial risks covered performed on the assets and liabilities which includes hedged items is detailed in note 54. The analysis of hedging derivatives portfolio, by maturity, as at 31 December 2023, is as follows: (Thousands of euros) 2023 Notional (remaining period) Fair value Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities Fair value hedging derivatives related to interest rate risk changes OTC Market Interest rate swaps 7,750 508,735 10,965,729 11,482,214 34,716 8,441 Fair value hedging derivatives related to currency risk changes OTC Market Currency and interest rate swap (CIRS) 140,291 208,173 — 348,464 2,279 6,272 Cash flow hedging derivatives related to interest rate risk changes OTC Market Interest rate swaps 499,574 1,600,000 8,159,354 10,258,928 164 14,965 Cash flow hedging derivatives related to currency risk changes OTC Market Currency and interest rate swap (CIRS) 354,009 19,885 80,374 454,268 3,469 38,147 Total derivatives traded by OTC Market 1,001,624 2,336,793 19,205,457 22,543,874 40,628 67,825 2023 REPORT & ACCOUNTS | 285 The analysis of hedging derivatives portfolio, by maturity, as at 31 December 2022, is as follows: (Thousands of euros) 2022 (restated) Notional (remaining period) Fair value Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities Fair value hedging derivatives related to interest rate risk changes OTC Market Interest rate swaps 293,467 377,114 11,291,464 11,962,045 27,696 7,031 Fair value hedging derivatives related to currency risk changes OTC Market Currency and interest rate swap (CIRS) 98,439 332,818 — 431,257 2,999 18,432 Cash flow hedging derivatives related to interest rate risk changes OTC Market Interest rate swaps 240,409 278,751 14,039,978 14,559,138 — 110,562 Cash flow hedging derivatives related to currency risk changes OTC Market Currency and interest rate swap (CIRS) 153,720 685,365 434,578 1,273,663 29,008 41,975 Total derivatives traded by OTC Market 786,035 1,674,048 25,766,020 28,226,103 59,703 178,000 26. Investments in associated companies This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Portuguese credit institutions 51,793 49,228 Foreign credit institutions 128,467 170,045 Other Portuguese companies 179,312 131,477 Other foreign companies 43,042 30,432 402,614 381,182 Impairment (46,355) (66,263) 356,259 314,919 2023 REPORT & ACCOUNTS 286 | The balance Investments in associated companies, as at 31 December 2023, is analysed as follows: (Thousands of euros) 2023 Global value of participation Impairment of investments in associated companies Book value of participation Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. 114,767 — 114,767 Banco Millennium Atlântico, S.A. 75,430 (28,344) 47,086 Banque BCP, S.A.S. 53,037 — 53,037 SIBS, S.G.P.S, S.A. 64,545 — 64,545 Fidelidade Moçambique - Companhia de Seguros S.A. 12,942 — 12,942 Unicre - Instituição Financeira de Crédito, S.A. 51,793 — 51,793 Webspectator Corporation 18,011 (18,011) — Millennium Financial Services Sp. z o.o. 12,089 — 12,089 402,614 (46,355) 356,259 These investments correspond to unquoted companies. According to the accounting policy described in note 1 B, these investments are measured at the equity method. The balance Investments in associated companies, as at 31 December 2022, is analysed as follows: (Thousands of euros) 2022 (restated) Global value of participation Impairment of investments in associated companies Book value of participation Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. 75,968 — 75,968 Banco Millennium Atlântico, S.A. 119,180 (48,252) 70,928 Banque BCP, S.A.S. 50,865 — 50,865 SIBS, S.G.P.S, S.A. 55,509 — 55,509 Fidelidade Moçambique - Companhia de Seguros S.A. 12,421 — 12,421 Unicre - Instituição Financeira de Crédito, S.A. 49,228 — 49,228 Webspectator Corporation 18,011 (18,011) — 381,182 (66,263) 314,919 The Group's companies included in the consolidation perimeter are presented in note 60, as well as the main indicators of the most relevant ones. The movements occurred in Impairment of investments in associated companies are analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance on 1 January 66,263 78,268 Transfers from Other provisions (Banco Millennium Atlântico, S.A.) (note 39) — 5,000 Impairment charge for the year (note 13) — 1,435 Impairment write-off (Banco Millennium Atlântico, S.A.) — (16,787) Exchange rate differences (19,908) (1,653) Balance at the end of the year 46,355 66,263 2023 REPORT & ACCOUNTS | 287 In accordance with the requirements of IFRS 12 and considering their relevance, the movements occurred in the investment held in Banco Millennium Atlântico, S.A., is analysed as follows: (Thousands of euros) 2023 2022 (restated) Ownership held by BCP on equity of the associated company as at 1 January 70,928 60,203 Application of IAS 29 for the year: Net non-monetary assets of the BMA Effect of exchange rate variations (note 43) (3,417) 1,282 Amortization of the effect of IAS 29 application calculated as at 31 December 2018 (note 15) (268) (423) Goodwill of the merger operation of the BMA Effect of exchange rate variations (note 43) (8,223) 2,810 Transfers from Other provisions (note 39) — (5,000) Impairment of investments in associated companies — (1,436) Appropriation of the net income of the associated companies (note 15) 2,977 2,431 Appropriation of the net income of previous years (note 15) — (2,924) Other comprehensive income attributable to BCP 3,182 99 Exchange differences Effect on BMA's equity (27,994) 8,814 Goodwill associated with investment in BMA (10,007) 3,419 Impairment of investments in associated companies (note 43) 19,908 1,653 Investment held at the end of the year 47,086 70,928 The following table presents the financial statements of Banco Millennium Atlântico, S.A, prepared in accordance with IFRS, modified by the consolidation adjustments: (Thousands of euros) 2023 2022 (restated) Net profit for the year 13,097 10,693 Comprehensive income 13,996 435 Total comprehensive income attributable to Shareholders of the associated company 27,093 11,128 Application of IAS 29 () (1,180) (1,861) Attributable to Shareholders of the associated companies adjusted to BCP GAAP 25,913 9,267 Attributable to the BCP Group 5,891 2,107 Balance sheet Financial assets 1,979,566 2,562,438 Non-financial assets 245,431 347,632 Financial liabilities (2,000,669) (2,579,341) Non-financial liabilities (27,475) (37,836) Attributable to Shareholders of the associated companies 196,853 292,893 Application of IAS 29 () 20,764 36,974 Attributable to Shareholders of the associated companies adjusted to BCP GAAP 217,617 329,867 Attributable to the BCP Group 49,474 74,994 Goodwill of the merge 25,956 44,186 Impairment of investments in associated companies (28,344) (48,252) Attributable to the BCP Group adjusted of consolidation items 47,086 70,928 () The impact of the IAS 29 adoption was calculated from the date of the merger (April 2016). 2023 REPORT & ACCOUNTS 288 | The amounts presented do not include adjustments arising from the application of IAS 29. Based on the requirements of IAS 29, Angola was considered a hyperinflationary economy until 31 December 2018, for the purpose of presenting the consolidated financial statements, as described in accounting policy 1 B6. This classification ceased to be applied on 1 January 2019. In accordance with the requirements of IFRS 12 and considering their relevance, the movements occurred in the investment held in Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A., is analysed as follows: (Thousands of euros) 2023 2022 (restated) Appropriation of equity of the associate on 1 January (before restatement) 59,766 261,446 Transition to IFRS 9 and IFRS 17 (note 59): 1 January 2022 (89,858) (89,858) Other comprehensive income for the year 2022 116,152 — Other reserves for the year 2022 19 — Net income for the year 2022 (10,111) — Appropriation of equity of the associate on 1 January (restated) 75,968 171,588 Appropriation of net income for the year of associate: Before the restatement — 39,811 Transition to IFRS 9 and IFRS 17 (note 59) — (10,111) Appropriation of net income for the year of associates (note 15) 40,422 29,700 Other comprehensive income attributable to BCP: Before the restatement — (109,240) Transition to IFRS 9 and IFRS 17 (note 59) — 116,152 Other comprehensive income attributable to BCP (1,565) 6,912 Dividends received — (132,251) Other changes (Transition to IFRS 9 and IFRS 17) (note 59) — 19 Other changes (58) — Investment held at the end of the year 114,767 75,968 2023 REPORT & ACCOUNTS | 289 The following table presents the financial statements of Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A., prepared in accordance with IFRS, modified by the consolidation adjustments: (Thousands of euros) 2023 2022 (restated) Net profit for the year 82,494 60,612 Comprehensive income (3,194) 14,106 Total comprehensive income attributable to Shareholders of the associated company 79,300 74,718 Attributable to the BCP Group (49%) 38,857 36,612 Balance sheet Financial assets 7,813,872 8,176,426 Non-financial assets 482,087 673,510 Financial liabilities (3,632,700) (8,362,729) Non-financial liabilities (4,165,573) (68,754) Total equity 497,686 418,453 Attributable to non-controlling interests 10,980 10,929 Attributable to Shareholders of the associated companies 486,706 407,524 Adjustments of intra-group transactions () 378,415 378,415 Attributable to Shareholders of the associated company adjusted to BCP GAAP 865,121 785,939 Attributable to the BCP Group 423,909 385,110 Reverse of the initial gain in 2004 allocated to the BCP Group (309,142) (309,142) Attributable to the BCP Group adjusted of consolidation items 114,767 75,968 () Adjustment related to the cancellation in the BCP Group consolidated accounts of the VOBA recorded by Millenniumbcp Ageas Grupo Segurador, S.G.P.S, S.A., at the time of the initial registration of this investment. VOBA corresponds to the estimated current value of the future cash flows of the contracts in force at the date of acquisition under IFRS 4. With the implementation of IFRS 17, this concept was cancelled in the consolidated accounts of Millenniumbcp Ageas having no impact on the Group 's consolidated accounts as it is not recognised in the investment. The Group owns 49% of Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A., being accounted for under the equity method, as Investments in associated companies. Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. is dedicated to the management of life insurance and pension funds. On 1 January 2023 Millenniumbcp Ageas made the simultaneous adoption of IFRS 9 - Financial Instruments and IFRS 17 - Insurance Contracts. It opted for the possibility given to Insurance Companies to defer the application of IFRS 9, since the combined implementation with IFRS 17 would minimize the distortion of results. IFRS 17 replaces IFRS 4 - "Insurance Contracts" and is applicable to all entities that issue insurance contracts, reinsurance contracts and investment contracts with discretionary participation features if they are also issuers of insurance contracts. The initial application of IFRS 17 and IFRS 9 requires comparative information. Therefore, Millenniumbcp Ageas Grupo Segurador made the transition exercise on 1 January 2022 and the impacts resulting from its implementation are detailed in note 59. Application of IFRS 17 – Insurance Contracts and IFRS 9 - Financial Instruments by Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. 2023 REPORT & ACCOUNTS 290 | 27. Non-current assets held for sale This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Gross value Impairment Net value Gross value Impairment Net value Real estate Assets arising from recovered loans 87,735 (39,327) 48,408 326,577 (90,699) 235,878 Assets belong to investments funds and real estate companies 19,854 (6,149) 13,705 266,544 (46,497) 220,047 Assets for own use (closed branches) 3,472 (1,671) 1,801 20,556 (6,626) 13,930 Equipment and other 5,006 (696) 4,310 22,117 (5,743) 16,374 Other assets () 16,446 (4,353) 12,093 12,806 — 12,806 132,513 (52,196) 80,317 648,600 (149,565) 499,035 () includes Shares, Price Deposit and Property Adjudication Proposals In 2023, a set of assets with a balance sheet value of Euros 264.127.000 (of which Euros 237,816,000 in Assets arising from recovered loans) and respective impairment of Euros 51,802,000 (of which Euros 50,856,000 in Assets arising from recovered loans), were transferred to "Other assets” (note 32) following the analysis of the requirements provided in IFRS 5. The assets included in this balance are accounted for in accordance with the accounting policy described in note 1 G. The balance Real estate - Assets arising from recovered loans includes, essentially, real estate resulted from process of recovered loans or judicial auction being accounted for at the time the Group assumes control of the asset, which is usually associated with the transfer of their legal ownership. Additional information on these assets is presented in note 54. The Group has a strategy for sale these assets, consistent with the characteristic of each asset as well as with the breakdown of underlying valuations. However, considering the formal constraints, it was not possible in all instances to conclude the sales in the expected time. The sale strategy is based in an active search of buyers, with the Group having a website where advertises these properties and through partnerships with the mediation of companies having more ability for the product that each time the Group has for sale. Prices are periodically reviewed and adjusted for continuous adaptation to the market. The Group requests, regularly, to the European Central Bank, the extension of the period of holding these properties. As at 31 December 2023, this balance includes properties for which the Group has already entered sales contracts in the gross amount of Euros 54,014,000 (31 December 2022: Euros 97,975,000). The impairment associated with these contracts amounts to Euros 24,127,000 (31 December 2022: Euros 11,296,000), and it was calculated considering the value of the respective contracts. With reference to 31 December 2022, from the total of the entered sales contracts Euros 70,169,000 were related to properties held by investment funds and for which was recorded impairment in the amount of Euros 6,059,000. The changes occurred in Impairment of non-current assets held for sale are analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance on 1 January 149,565 190,714 Transfer to other assets (51,802) — Other transfers (21,143) — Charge for the year (note 13) 12,899 78,318 Reversals for the year (note 13) (1,656) (1,116) Amounts charged-off (35,249) (119,073) Exchange rate differences (418) 722 Balance at the end of the year 52,196 149,565 2023 REPORT & ACCOUNTS | 291 28. Investment property The balance Investment property corresponds to real estate evaluated in accordance with the accounting policy presented in note 1 N, based on independent assessments and compliance with legal requirements. The rents received related to these assets amounted to Euros 851,000 (31 December 2022: Euros 681,000). The changes occurred in this balance are analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance on 1 January 15,217 2,870 Transfers from / (to) non-current assets held for sale — 12,532 Revaluations 94 (185) Disposals 23,789 — Balance at the end of the year 39,100 15,217 29. Other tangible assets This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Real estate 669,847 670,000 Equipment Computer equipment 346,220 334,864 Security equipment 67,587 67,687 Interior installations 151,649 149,986 Machinery 49,712 47,283 Furniture 84,154 84,516 Motor vehicles 35,839 32,529 Other equipment 31,842 28,224 Right of use Real estate 390,625 366,363 Vehicles and equipment — 431 Work in progress 20,563 21,279 Other tangible assets 36 39 1,848,074 1,803,201 Accumulated depreciation Relative to the current year (note 9) (98,282) (98,916) Relative to the previous years (1,143,345) (1,129,588) (1,241,627) (1,228,504) 606,447 574,697 The balance Real Estate includes the amount of Euros 107,833,000 (31 December 2022: Euros 108,616,000) related to real estate held by the Group's real estate investment funds. The balance Right-of-use essentially corresponds to real estate (branches and central buildings) and to a residual number of vehicles, which are amortized according to the lease term of each contract, as described in the accounting policy 1 H. 2023 REPORT & ACCOUNTS 292 | The changes occurred in Other tangible assets during 2023 are analysed as follows: (Thousands of euros) 2023 Balance on 1 January Acquisitions / Charge Disposals / Charged-off Transfers Exchange differences Balance on 31 December Real estate 670,000 3,552 (13,520) 6,778 3,037 669,847 Equipment: Computer equipment 334,864 13,297 (10,799) 7,318 1,540 346,220 Security equipment 67,687 459 (548) 183 (194) 67,587 Interior installations 149,986 916 (1,691) 2,944 (506) 151,649 Machinery 47,283 115 (605) 1,388 1,531 49,712 Furniture 84,516 494 (1,467) 803 (192) 84,154 Motor vehicles 32,529 7,649 (5,407) 561 507 35,839 Other equipment 28,224 22 (859) 2,436 2,019 31,842 Right of use Real estate 366,363 138,697 (122,744) — 8,309 390,625 Vehicles and equipment 431 — (444) — 13 — Work in progress 21,279 23,188 (571) (24,351) 1,018 20,563 Other tangible assets 39 — — — (3) 36 1,803,201 188,389 (158,655) (1,940) 17,079 1,848,074 Accumulated depreciation Real estate (406,065) (14,324) 12,459 779 (3,304) (410,455) Equipment: Computer equipment (286,978) (17,738) 10,729 141 (625) (294,471) Security equipment (63,350) (958) 537 27 145 (63,599) Interior installations (133,154) (3,167) 1,582 37 322 (134,380) Machinery (39,524) (1,649) 517 (199) (1,160) (42,015) Furniture (79,007) (2,540) 1,428 148 149 (79,822) Motor vehicles (18,457) (5,054) 4,594 (37) (234) (19,188) Other equipment (22,660) (1,662) 806 (21) (1,564) (25,101) Right of use Real estate (178,839) (51,190) 61,845 (1) (4,375) (172,560) Vehicles and equipment (431) — 444 — (13) — Other tangible assets (39) — — — 3 (36) (1,228,504) (98,282) 94,941 874 (10,656) (1,241,627) 574,697 90,107 (63,714) (1,066) 6,423 606,447 2023 REPORT & ACCOUNTS | 293 The changes occurred in Other tangible assets during 2022 are analysed as follows: (Thousands of euros) 2022 (restated) Balance on 1 January Acquisitions / Charge Disposals / Charged-off Transfers Exchange differences Balance on 31 December Real estate 708,803 2,442 (37,606) (6,690) 3,051 670,000 Equipment: Computer equipment 337,457 15,238 (31,600) 12,186 1,583 334,864 Security equipment 67,542 844 (1,372) 382 291 67,687 Interior installations 148,532 1,339 (1,880) 1,198 797 149,986 Machinery 49,455 611 (2,068) (380) (335) 47,283 Furniture 84,923 440 (3,583) 2,371 365 84,516 Motor vehicles 29,703 7,033 (4,869) 306 356 32,529 Other equipment 30,711 180 (2,223) 107 (551) 28,224 Right of use Real estate 352,346 35,010 (20,114) (8) (871) 366,363 Vehicles and equipment 505 — (65) — (9) 431 Work in progress 20,656 24,408 (1,133) (22,808) 156 21,279 Other tangible assets 38 — — — 1 39 1,830,671 87,545 (106,513) (13,336) 4,834 1,803,201 Accumulated depreciation Real estate (428,656) (14,917) 31,982 5,702 (176) (406,065) Equipment: Computer equipment (300,560) (16,375) 31,432 (116) (1,359) (286,978) Security equipment (63,723) (862) 1,337 152 (254) (63,350) Interior installations (131,897) (3,007) 1,828 446 (524) (133,154) Machinery (41,681) (1,535) 1,997 1,427 268 (39,524) Furniture (78,344) (2,717) 3,543 (1,232) (257) (79,007) Motor vehicles (17,743) (4,636) 4,189 (53) (214) (18,457) Other equipment (23,811) (1,498) 2,222 12 415 (22,660) Right of use Real estate (142,996) (53,365) 17,094 1 427 (178,839) Vehicles and equipment (501) (4) 65 — 9 (431) Other tangible assets (38) — — — (1) (39) (1,229,950) (98,916) 95,689 6,339 (1,666) (1,228,504) 600,721 (11,371) (10,824) (6,997) 3,168 574,697 2023 REPORT & ACCOUNTS 294 | 30. Goodwill and intangible assets This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Goodwill - Differences arising on consolidation Bank Millennium, S.A. (Poland) 110,640 102,655 Euro Bank, S.A. (Poland) 44,231 41,038 Others 10,172 10,182 165,043 153,875 Impairment Bank Millennium, S.A. (Poland) (110,640) (102,655) Others (9,880) (9,880) (120,520) (112,535) 44,523 41,340 Intangible assets Software 309,776 277,205 Other intangible assets 80,598 73,607 390,374 350,812 Accumulated amortisation Charge for the year (note 9) (39,217) (40,334) Charge for the previous years (172,575) (169,131) (211,792) (209,465) 178,582 141,347 223,105 182,687 According to the accounting policy described in note 1 B, the recoverable amount of the Goodwill is annually assessed in the second half of each year or whenever there are indications of eventual loss of value. In accordance with IAS 36 the recoverable amount of goodwill resulting from the consolidation of the subsidiaries, should be the greater between its value in use (the present value of the future cash flows expected from its use) and its fair value less costs to sell. Based on these criteria, the Group made in 2022, valuations of their investments for which there is goodwill recognised considering among other factors: (i) an estimate of future cash flows generated by each cash generating unit; (ii) an expectation of potential changes in the amounts and timing of cash flows; (iii) the time value of money; (iv) a risk premium associated with the uncertainty by holding the asset; and (v) other factors associated with the current situation of financial markets. The valuations are based on reasonable and sustainable assumptions representing the best estimate of the Executive Committee on the economic conditions that affect each subsidiary, the budgets and the latest projections approved for those subsidiaries and their extrapolation to future periods. The assumptions made for these valuations might vary with the change in economic conditions and in the market. In 2023, there were no factors pointing to the deterioration of the value of those financial participations that could lead to impairment charges in respect of goodwill. In the case of Bank Millennium S.A. (Poland), in which case factors were identified during 2022 that showed a deterioration in the value of this financial participation, which led to a total impairment of the goodwill then associated with the acquisition by the BCP Group of the percentage of control over Bank Millennium S.A. (Poland) in the amount of Euros 102.3 million in the first half of 2022. 2023 REPORT & ACCOUNTS | 295 The changes occurred in Goodwill and intangible assets, during 2023, are analysed as follows: (Thousands of euros) 2023 Balance on 1 January Acquisitions / Charge Disposals / Charged-off Transfers Exchange differences Balance on 31 December Goodwill - Differences arising on consolidation 153,875 — — — 11,168 165,043 Impairment for goodwill (112,535) — — — (7,985) (120,520) 41,340 — — — 3,183 44,523 Intangible assets Software 277,205 75,177 (47,120) (2,396) 6,910 309,776 Other intangible assets 73,607 14 (1,154) 2,403 5,728 80,598 350,812 75,191 (48,274) 7 12,638 390,374 Accumulated depreciation Software (146,799) (33,928) 45,427 217 (3,425) (138,508) Other intangible assets (62,666) (5,289) — (216) (5,113) (73,284) (209,465) (39,217) 45,427 1 (8,538) (211,792) 141,347 35,974 (2,847) 8 4,100 178,582 182,687 35,974 (2,847) 8 7,283 223,105 The changes occurred in Goodwill and intangible assets during 2022 are analysed as follows: (Thousands of euros) 2022 (restated) Balance on 1 January Acquisitions / Charge Disposals / Charged-off Transfers Exchange differences Balance on 31 December Goodwill - Differences arising on consolidation 159,431 — (2,512) — (3,044) 153,875 Impairment for goodwill (11,931) (102,770) 2,512 — (346) (112,535) 147,500 (102,770) — — (3,390) 41,340 Intangible assets Software 234,192 72,441 (25,315) (3,664) (449) 277,205 Other intangible assets 70,823 1,213 (1,037) 4,073 (1,465) 73,607 305,015 73,654 (26,352) 409 (1,914) 350,812 Accumulated depreciation Software (136,360) (36,168) 24,859 419 451 (146,799) Other intangible assets (59,942) (4,166) 1,027 (828) 1,243 (62,666) (196,302) (40,334) 25,886 (409) 1,694 (209,465) 108,713 33,320 (466) — (220) 141,347 256,213 (69,450) (466) — (3,610) 182,687 2023 REPORT & ACCOUNTS 296 | 31. Income tax Income tax assets and liabilities are analysed as follows: (Thousands of euros) 2023 2022 (restated) Assets Liabilities Net Assets Liabilities Net Deferred taxes not depending on the future profits (a) Impairment losses (b) 862,261 — 862,261 982,465 — 982,465 Employee benefits 732,273 — 732,273 835,619 — 835,619 1,594,534 — 1,594,534 1,818,084 — 1,818,084 Deferred taxes depending on the future profits Impairment losses (b) 419,544 — 419,544 438,430 (50,303) 388,127 Tax losses carried forward 167,995 — 167,995 188,693 — 188,693 Employee benefits 103,938 (141,506) (37,568) 50,770 (136,019) (85,249) Financial assets at fair value through other comprehensive income 500,202 (82,879) 417,323 729,416 (134,154) 595,262 Derivatives — (7,750) (7,750) — (5,482) (5,482) Intangible assets 968 — 968 1,143 — 1,143 Other tangible assets 9,401 (3,268) 6,133 8,693 (3,380) 5,313 Others 92,615 (108,258) (15,643) 111,336 (89,949) 21,387 1,294,663 (343,661) 951,002 1,528,481 (419,287) 1,109,194 Total deferred taxes 2,889,197 (343,661) 2,545,536 3,346,565 (419,287) 2,927,278 Offset between deferred tax assets and deferred tax liabilities (334,866) 334,866 — (407,579) 407,579 — Net deferred taxes 2,554,331 (8,795) 2,545,536 2,938,986 (11,708) 2,927,278 Current taxes (c) 20,469 (197,085) — 17,945 (23,680) — (a) Special Regime applicable to deferred tax assets. (b) The amounts as at 31 December 2023 and 2022 include deferred tax assets related with credit impairments non-accepted fiscally of which credits were written-off, according to the expectation that the use of such impairments will be deductible for the purposes of determining taxable income for the tax periods in which the legal conditions required for their tax deductibility are met. (c) The amounts of current taxes assets and liabilities refer exclusively to income taxes levied on the various BCP Group companies. As at 31 December 2023, the balance deferred tax assets amounts to Euros 2,554,331,000, of which Euros 2,439,081,000 are related to the Bank's activity. The deferred taxes assets relating to the individual activity include a net amount of Euros 397,020,000 resulting from losses on cash flow hedging derivatives operations of interest rate risk recognized in other comprehensive income, whose average maturity of operations is 2.5 years and Euros 447,528,000 which depends on the existence of future profitable profits (deferred tax assets not eligible under the special regime applicable to deferred tax assets, approved by Law No. 61/2014, of 26 August), including: - Euros 260,047,000 (net value) related to impairment losses; and - Euros 157,450,000 resulting from tax losses carried forward from 2016 and 2020. 2023 REPORT & ACCOUNTS | 297 Special regime applicable to deferred tax assets The Extraordinary General Meetings of Banco Comercial Português and Activobank which took place on 15 October 2014 and 5 November 2014 approved the accession of these banks to the Special Regime approved by Law No. 61/2014, of 26 August, applicable to deferred tax assets that resulted from not deduction of expenses and negative equity variations with impairment losses on credits and post-employment or long-term employee benefits. The special regime is applicable to those expenses and negative equity variations recorded in tax periods beginning on or after 1 January 2015, as well as to deferred tax assets recorded in the annual accounts for the last tax period prior to that date and to part of expenses and negative equity variations associated with them. Pursuant to Law No. 23/2016, of 19 August, this special regime is not applicable to expenses and negative equity variations with impairment losses on credits and with post-employment or long-term employee benefits recorded in the period's taxation commencing on or after 1 January 2016, nor to deferred tax assets to these associates. The special regime applicable to deferred tax assets provides for an optional framework and with the possibility of subsequent waiver, under which: - Expenses and negative equity variations with impairment losses on credits and with post-employment or long-term employee benefits covered by it are deducted, under the terms and conditions set out in the Corporate income tax Code and in relevant separate tax legislation, up to the limit of the taxable profit for the tax period determined before these deductions. Expenses and negative equity variations not deducted because of applying this limit are deducted in subsequent tax periods, with the same limit. In the BCP Group, deferred tax assets associated with expenses and negative equity variations under these conditions amount to Euros 1,387,878,000 (31 December 2022: Euros 1,599,199,000), of which Euros 848,120,000 relate to impairment losses on credits (31 December 2022: Euros 967,679,000) and Euros 539,758,000 relate to post-employment or long-term employee benefits (31 December 2022: Euros 631,520,000). - In certain situations (those with negative net results in annual individual accounts or liquidation by voluntary dissolution, insolvency decreed by court or revocation of the respective authorization), deferred tax assets covered by the Special Regime are converted into tax credits, in part or in wholeness. In case of negative net income, the conversion is made according to the proportion between the amount of the negative net income for the period and the total of equity, and a special reserve corresponding to 110% of the tax credit must also be constituted and, simultaneously, constituting conversion rights attributable to the State of equivalent value, rights that can be acquired by the shareholders upon payment to the State of the same value. Tax credits may be offset against tax debts of the beneficiaries (or an entity based in Portugal within the same prudential consolidation perimeter or included in the same group of entities for which are applied the Special Tax Regime for Groups of Companies) or reimbursed by the State. As neither Banco Comercial Português nor Banco ActivoBank recorded negative net results in the years 2015 to 2022, there was no conversion of deferred taxes assets into tax credits, under the terms provided for in the Special Regime. Pursuant to the regime described, the recovery of deferred tax assets covered by the optional regime approved by Law No. 61/2014, of 26 August, is not dependent on future profits. The above-mentioned legal framework was densified by Ordinance no. 259/2016, of 4 October, about the control and use of tax credits, and by the Ordinance No. 293-A/2016, of 18 November, which establishes the conditions and procedures for the acquisition by the shareholders of the referred rights of the State. Law No. 98/2019, of 4 September, establishes a deadline for the acquisition of the referred rights of the State by the shareholders, after which the Management Board of the issuing bank is obliged to promote the record of the capital increase by the amount resulting from the exercise of the conversion rights. According to this legislation, among other aspects, these rights are subject to a right of acquisition by the shareholders on the date of creation of the rights of the State, exercisable in periods that will be established by the Board of Directors until 3 years after the confirmation date of the conversion of the deferred tax asset into tax credit by the Portuguese Tax and Customs Authority. The issuing entity shall deposit in favour of the State the amount of the price corresponding to all the rights issued, within 3 months beginning from the confirmation date of the conversion of the deferred tax asset into tax credit. Such deposit shall be redeemed when and to the extent that the rights of the State are acquired by the shareholders or exercised by the State. 2023 REPORT & ACCOUNTS 298 | Deferred taxes are calculated based on the tax rates expected to be in force when the temporary differences are reversed, which correspond to the approved rates or substantially approved at the balance sheet date. The deferred tax assets and liabilities are presented on a net basis whenever, in accordance with applicable law, current tax assets and current tax liabilities can be offset with each other, and the deferred tax assets and liabilities related to income taxes levied by the same fiscal authority over the same taxable entity. The current tax rate for Banco Comercial Português, S.A. is analysed as follows: 2023 2022 (restated) Income tax 21% 21% Municipal surtax rate (on taxable net income) 1.5% 1.5% State tax rate (on taxable net income) More than 1,500,000 to 7,500,000 3% 3% From more than 7,500,000 to 35,000,000 5% 5% More than 35,000,000 9% 9% The deferred tax rate related to the Bank’s tax losses is 21%, in 2023 and 2022. The average deferred tax rate associated with temporary differences of Banco Comercial Português, S.A. is 31.3%. The income tax rate in the other main countries where the Group operates is 19% in Poland, 32% in Mozambique and 0% (exemption) in the Cayman Islands. Following the amendments provided for in Law No. 24-D/2022, of 30 December, within the scope of the State Budget for 2023, the time limit applicable to the carrying forward of tax losses in Portugal was eliminated. This amendment applies to tax losses calculated in tax periods beginning on or after 1 January 2023, as well as to tax losses calculated in tax periods prior to 1 January 2023 and whose deduction period is still in progress on that date. Thus, tax losses calculated in 2014 and subsequent years may be deducted from future taxable income. The deduction limit for tax losses increased from 70% to 65%, being increased by ten percentage points when the difference results from the deduction of tax losses calculated in the 2020 and 2021 tax periods, under the terms of the special regime provided for in Law n. 27-A/2020, of 24 July. The reporting period for tax losses carried forward in Poland and in Mozambique it is 5 years. Banco Comercial Português, S.A. applies the Special Tax Regime for Groups of Companies (RETGS) since 2016 for taxation purposes under corporate income tax (IRC), in which it’s the dominant company. The remaining companies covered by the RETGS are Banco ActivoBank, S.A., Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A., BCP África, S.G.P.S. Lda., Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal Lda. and Millennium bcp Teleserviços – Serviços de Comércio Electrónico, S.A. In 2023 and 2022, the application of RETGS was maintained. The balance deferred tax assets not depending on the future profits (covered by the regime approved by Law no. 61/2014, of 26 August) includes the amounts of Euros 210,686,000 and Euros 4,020,000 recorded in 2015 and 2016, respectively, related to expenses and negative equity variations with post-employment or long-term employee benefits and to impairment losses of loans accounted for until 31 December 2014. Regarding the activity in Portugal, the Law No. 98/2019, of 4 September, established the tax regime for credit impairments and provisions for guarantees for tax periods beginning on or after 1 January 2019, providing for approximation between the accounting and tax rules for the purposes of deductibility of expenses with the reinforcement of credit impairments. The rules in force until 2018 could continue to be applied until the end of the 2023 financial year, unless the option to apply the new regime was exercised in advance. In 2022, the Banco Comercial Português, S.A. and the Banco ActivoBank, S.A. exercised the option to apply the new regime, under the terms of which the impairment losses for credit risk relating to exposures analysed on an individual or on a collective basis recognized in accordance with the applicable accounting standards and regulations are fully deductible for the purposes of determining taxable profit, with the exceptions provided for in the Corporate Income Tax Code. The exceptions apply to impairment losses relating to credits and other rights over natural or legal persons who hold, directly or indirectly, more than 10 % of the Bank's capital, over members of its corporate bodies, over companies in which the Bank holds, directly or indirectly, more than 10 % of the capital or over entities with which it is in a situation of special relations. 2023 REPORT & ACCOUNTS | 299 The Impairment losses and other value corrections for specific credit risk recorded until 31 December 2021 and still not accepted for tax purposes are only deductible up to the amount that, in each tax period, corresponds to the application of the mandatory minimum limits set out in Notice of Bank of Portugal No. 3/95, as amended before its repeal by Notice of Bank of Portugal No. 5/2015 and, between other conditions, provided that they are not claims covered by real estate rights. The Group complies with the guidelines of IFRIC 23 - Uncertainty over Income Tax Treatments on the determination of taxable profit, tax bases, tax losses to be reported, tax credits to be used and tax rates in scenarios of uncertainty regarding the income tax treatment. Analysis of the recoverability of deferred tax assets In accordance with the accounting policy 1 Y3 and with the requirements of IAS 12, the deferred tax assets were recognised based on the Group's expectation of their recoverability. The recoverability of deferred taxes depends on the implementation of the strategy of the Bank's Board of Directors, namely the generation of estimated taxable income and its interpretation of tax legislation. Any changes in the assumptions used in estimating future profits or tax legislation may have material impacts on deferred tax assets. The assessment of the recoverability of deferred tax assets is based on the projected results for the period from 2024 to 2030, as longer projection periods have higher underlying factors of uncertainty. The projected pre-tax results for the years 2024, 2025 and 2026 are consistent with the budget approved by the Bank's Board of Directors in November 2023, which incorporates the priorities stemming from the 2021-2024 Strategic Plan, in a framework where the financial targets set therein for 2024 have been achieved or exceeded in 2023, adjusted for the impact of a new issue of additional Tier 1 securities in the amount of Euros 400 million, with an option for early repayment from the end of the 5th year and with an annual interest rate of 8.125%. In the earnings projection for the years 2027, 2028, 2029 and 2030, a standard nominal growth rate of 2% was considered. The projections incorporate the impact of the stabilization of interest rates at a lower level than the current one, preserving profitability levels in line with those targets and reflecting the commercial positioning and the desired capture of efficiency gains, enshrined in the 2021-2024 Strategic Plan approved by the governing bodies, highlighting: - after reflecting the impacts of the normalization of interest rates, the net interest income benefits from the recovery of volumes in deposits and loans to customers, where the Bank continues to privilege priority segments associated with the relationship and knowledge of its customers and transactionality; - increase in commission income based on an efficient and judicious management of commissions and price lists; - cost of risk still showing improvement, although gradually less significant, as this indicator converges to levels in line with the Bank's current activity, with a lower impact on the historical portfolios of NPEs, foreclosed assets and FRE (Corporate Restructuring Funds), after the reduction of these exposures achieved over the last years; - Preservation of high levels of efficiency based on continued cost discipline and increased use of technology. To estimate taxable net income for the periods of 2024 to 2030, the following main assumptions were considered: - The rules of the new tax regime of credit impairment were applied. In the application of these rules, the following assumptions were considered, in general terms: a) the impairment losses for credit risk related to exposures analysed on an individual or collective basis, recognised in accordance with the applicable accounting and regulatory standards, were considered deductible for tax purposes; b) impairment reversals created up to 31 December 2021 not accepted for tax purposes were estimated based on the Non-Performing Assets Reduction Plan 2024-2025 submitted to the supervisory authority in March 2023, and also on the basis of the average percentage of reversal observed in the last years from 2016 to 2023; c) the referred average percentages were calculated separately, depending on whether or not there was a mortgage guarantee, the eligibility for purposes of the special regime applicable to deferred tax assets and according to the customers’ classification as Non-Performing Exposures (NPE). 2023 REPORT & ACCOUNTS 300 | - The deductions related to impairment of financial assets were projected based on the destination (sale or settlement) and the estimated date of the respective operations; - Impairment reversals of non-financial assets not accepted for tax purposes were projected considering the expected periods of disinvestment in certain real estate assets. For the remaining assets without a forecasted term for disinvestment, the reversals were estimated based on the average percentage of reversal observed in the years from 2016 to 2023. Non-deductible expenses related to the reinforcement of impairment of non-financial assets were estimated on the based on the average percentage of amounts not deducted for tax purposes in the years from 2016 to 2023, compared to the amounts of reinforcements net of impairment recorded in those years; - The deductions related to employee benefits were projected based on their estimated payments or deduction plans, in accordance with information provided by the pension fund actuary; - The realization of changes in the fair value of real estate investment funds was projected based on the information available in the regulations of the funds in question in relation to the period foreseen for the respective liquidation. According to the estimate of future taxable income, the deferred taxes assets recorded as at 31 December 2023 and 31 December 2022 are adequate under the IAS 12 requirements. In accordance with these assessments, the amount of unrecognised deferred tax related to temporary differences and to tax losses is as follows: (Thousands of euros) 2023 2022 (restated) Temporary differences 40,976 54,015 Tax losses carried forward 2014 161,906 161,895 2015 2 2 2016 282,498 286,419 2017 2,773 3,530 2018 118,295 118,295 2019 () 24,192 24,265 2020 () 15,213 5,704 2021 193,878 193,829 2022 19,469 16,707 2023 2,402 — Total 820,628 810,646 () Following the publication of the Circular n. 3/2024 issued by the Portuguese Tax Authorities on the Corporate Income tax treatment of leased assets under IFRS 16, the DTA related to 2019 and 2020 tax losses should increase by Euros 4,886 thousands and Euros 4,616 thousands, respectively. The amount of unrecognized deferred taxes relating to tax losses per expiry year is analysed as follows: (Thousands of euros) 2023 2022 (restated) 2024 206 278 2025 13,623 77 2026 129 2,447 2027 12,051 12,797 2028 2,293 — No expiry date 792,326 795,047 Total 820,628 810,646 2023 REPORT & ACCOUNTS | 301 The impact of income taxes in Net income and in other balances of Group's equity, as at 31 December 2023, is analysed as follows: (Thousands of euros) 2023 Net income for the year Reserves Exchange differences Deferred taxes not depending on the future profits Impairment losses (120,204) — — Employee benefits (89,567) (13,779) — (209,771) (13,779) — Deferred taxes depending on the future profits Impairment losses (27,671) (1,978) 10,763 Tax losses carried forward (a) (21,822) 500 624 Employee benefits (56,994) 103,856 819 Financial assets at fair value through other comprehensive income — (195,343) 17,404 Derivatives — — (2,268) Intangible assets (253) — 78 Other tangible assets 851 — (31) Others (41,854) (164) (17,576) (147,743) (93,129) 9,813 (357,514) (106,908) 9,813 Current taxes Current year (179,519) 387 — Correction of previous years (338) — — (179,857) 387 — (537,371) (106,521) 9,813 The impact of income taxes in Net income and in other balances of Group's equity, as at 31 December 2022, is analysed as follows: (Thousands of euros) 2022 (restated) Net income for the year Reserves Exchange differences Deferred taxes not depending on the future profits Impairment losses (712) — — (712) — — Deferred taxes depending on the future profits Impairment losses (160,953) — (2,542) Tax losses carried forward (a) 2,785 (2,236) 669 Employee benefits (6,199) (126,957) (449) Financial assets at fair value through other comprehensive income — 575,491 (1,271) Derivatives — — (559) Intangible assets (463) — (33) Other tangible assets 503 — 12 Others (29,649) 6,803 1,755 (193,976) 453,101 (2,418) (194,688) 453,101 (2,418) Current taxes Current year (110,551) (18) — Correction of previous years 919 — — (109,632) (18) — (304,320) 453,083 (2,418) (a) The amount recorded in reserves refers to the deferred tax on the part of tax loss arising from the deduction of negative equity changes recorded in reserves that contribute to the calculation of taxable income. 2023 REPORT & ACCOUNTS 302 | The reconciliation between the nominal tax rate and the effective tax rate is analysed as follows: (Thousands of euros) 2023 2022 (restated) Net income before income taxes 1,487,832 418,347 Current tax rate (%) 31.5% 31.5% Expected tax (468,667) (131,779) Non-deductible impairment and provisions (a) (139,548) (145,811) Mandatory contributions to the banking sector (b) (16,760) (25,502) Results of companies accounted by the equity method 20,253 18,472 Interests on other equity instruments (c) 11,655 11,655 Effect of the tax rate difference (d) 54,764 (8,508) Effect of recognition/derecognition net of deferred taxes (e) 7,071 (24,252) Non-deductible costs and other corrections (6,731) 2,013 Correction of previous years 1,353 660 Autonomous tax (761) (1,268) Total (537,371) (304,320) Effective rate (%) 36.1% 72.7% (a) In 2023 includes the negative amount of Euros 113,706,000 (2022: negative Euros 85,896,000) related to the impact of the non-deductibility for tax purposes of the provisions related to legal risks associated with the mortgage loans portfolio granted in foreign currency by Bank Millennium, such as the negative amount of Euros 27,858,000 (2022: negative Euros 23,695,000) relating on the impact of the non-deductibility for tax purposes of the net reinforcement of provisions for risks and charges registered with Banco Comercial Português, S.A. In 2022 includes the negative amount of Euros 32,227,000 regarding the goodwill impairment associated to this subsidiary. On 6 December 2023, the Supreme Administrative Court issued a judgment on the Bank Millennium’s complaint against the tax ruling of the Director of the National Tax Information Service on the rules for recognizing the effects in CIT of cancellations of mortgage loans indexed to foreign currencies and foreign currency loans (in particular in CHF) adjudicated by common courts. According to the ruling, Bank Millennium should recognise the tax consequences not by recognising the resulting losses as tax-deductible costs, but by adjusting the revenues from the above-mentioned loans and advances (FX gains, interest, commissions and fees) previously taxed with CIT, taking into account the rules of limitation of tax liabilities. Until the above judgment was issued, Bank Millennium prudently did not recognize losses due to cancellations for CIT and deferred tax purposes and is currently in the process of analysing and preparing a methodology and process both in order to make appropriate adjustments to CIT liabilities due to cancellations in previous years, as well as to recognize the relevant asset in deferred tax relating in a fair manner to the probable cancellations of the above-mentioned loans and advances in the future. Indeed, there are doubts as to the detailed rules for the adjustment of revenues, which may change the final amounts of the adjustments. (b) Refers to mandatory contributions to the banking sector in Portugal (contribution to the banking sector and additional solidarity on the banking sector) and in Poland. (c) Relates to the impact of the deduction for taxable income purposes of interest paid in respect of perpetual bonds representing subordinated debt issued in 2019. (d) In 2023 this balance includes the amount of Euros 18,947,000 (2022: Euros 21,668,000) related with the effect of the taxation of 20% tax on interests of Mozambique's public debt securities and the amount of Euros 36,140,000 (2022: negative Euros 19,507,000) related to the effect of the difference in the tax rate on profits in Poland, which is 19%, on a net income before income tax. (e) In 2023 includes the amount of Euros 29,469,000 related to the recognition of deferred tax assets related to temporary differences associated with potential losses in specialised credit recovery funds and the negative amount of Euros 14,788,000 (2022: negative Euros 20,981,000) related to the non-recognition/derecognition of deferred tax assets of tax losses. Directive (EU) 2022/2523 of the Council, of 15 December 2022 – Minimum level of taxation of 15% per jurisdiction Under Pillar 2 of the Base Erosion and Profit Shifting 2.0 ("BEPS 2.0") project of the Organisation for Economic Co- operation and Development ("OECD"), enshrined in Council Directive (EU) 2022/2523 of 15 December 2022, multinationals enterprises and large national groups with consolidated annual revenues of more than EUR 750 million in at least two of the last four financial years, will become subject, as of the 2024 financial year, to a minimum level of taxation of 15% in each of the jurisdiction they operate. Neither Portugal nor Poland ensured the transposition of this new regime into their respective domestic legislation by 31 December 2023, under the terms determined by the Directive mentioned above, and it is expected that the Pillar 2 legislation will be enacted in the course of 2024. The regime in question may determine the payment of a top-up tax when a minimum level of taxation of 15% is not observed, on a jurisdictional basis. Considering the consolidated annual income earned in recent years, the Group should meet the eligibility criterion for the application of the Pillar 2 legislation. According to the analysis carried out on the potential future impacts of this regime, the Group estimates that it will meet, in the jurisdictions in which it operates, namely in Portugal, Poland and Mozambique, the necessary requirements for the application of "transitional safe harbours", thus being excluded, between 2024-2026, from the obligation to calculate any tup-up tax. 2023 REPORT & ACCOUNTS | 303 32. Other assets This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Deposit account applications 57,866 51,371 Capital supplies 173,175 178,725 Obligations with post-employment benefits 390,258 593,494 Debtors for futures and options transactions 118,472 191,290 Real estate and other assets arising from recovered loans (a) 338,486 — Debtors Residents Receivables from real estate, transfers of assets and other securities 87,816 111,693 Prosecution cases / agreements with the Bank 11,163 12,163 SIBS 3,579 3,521 Others 21,779 66,744 Non-residents 50,992 30,584 Amounts due for collection 81,614 80,024 Interest and other amounts receivable 80,094 69,613 Amounts receivable on trading activity 10,736 3,234 Amounts due from customers 76,047 51,229 Artistic patrimony 28,796 28,796 Prepaid expenses 25,505 23,654 Subsidies receivables 8,347 10,764 Other recoverable tax 8,112 9,082 Gold and other precious metals 3,562 3,640 Capital supplementary contributions 165 165 Associated companies 116 145 Sundry assets 371,836 254,276 1,948,516 1,774,207 Impairment for other assets (321,832) (191,752) 1,626,684 1,582,455 (a) assets transferred from Non-current assets held for sale As at 31 December 2023, the balance Deposit account applications includes the amount of Euros 30,638,000 (31 December 2022: Euros 25,506,000) relating to the collateral constituted in compliance with the assumption of irrevocable payment commitments to Single Resolution Fund, as referred in note 6. As referred in note 47, as at 31 December 2023, the balance Capital supplies includes the amount of Euros 165,837,000 (31 December 2022: Euros 171,397,000) arising from the transfers of assets to Specialized recovery funds which have impairment in the same amount. The balance Amounts receivable on trading activity includes amounts receivable within 3 business days of stock exchange operations. Considering the nature of these transactions and the age of the amounts of these items, the Group's procedure is to periodically assess the collectability of these amounts and whenever impairment is identified, an impairment loss is registered in the income statement. 2023 REPORT & ACCOUNTS 304 | The detail of the item Real estate and other assets arising from recovered loans is analysed as follows: (Thousands of euros) 2023 Gross value Impairment Net value Real estate Assets arising from recovered loans 138,165 (45,829) 92,336 Assets belong to investments funds and real estate companies 173,443 (84,904) 88,539 Assets for own use (closed branches) 13,537 (5,432) 8,105 Equipment 92 (81) 11 Other assets () 13,249 (594) 12,655 338,486 (136,840) 201,646 () includes Shares, Price Deposit and Property Adjudication Proposals The changes occurred in Impairment of other assets, with the exception of impairment for Real estate and other assets arising from recovered loans are analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance on 1 January 191,752 260,199 Transfers resulting from changes in the Group's structure — (1,038) Other transfers (513) 908 Charge for the year (note 13) 17,673 17,699 Reversals for the year (note 13) (7,150) (7,047) Amounts charged-off (17,232) (78,835) Exchange rate differences 462 (134) Balance at the end of the year 184,992 191,752 The changes occurred in impairment for Real Estate and other assets arising from recovered loans, are analysed as follow: (Thousands of euros) 2023 2022 (restated) Balance on 1 January — — Transfer of Non-current assets held for sale (note 27) 51,802 — Other transfers 52,488 — Charge for the year (note 13) 34,706 — Reversals for the year (note 13) (98) — Amounts charged-off (1,953) — Exchange rate differences (105) — Balance at the end of the year 136,840 — 2023 REPORT & ACCOUNTS | 305 33. Resources from credit institutions This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Non-interest bearing Interest bearing Total Non-interest bearing Interest bearing Total Resources and other financing from Central Banks Bank of Portugal — — — — 592,740 592,740 Central Banks abroad — 110,776 110,776 — 14,736 14,736 — 110,776 110,776 — 607,476 607,476 Resources from credit institutions in Portugal Sight deposits 63,128 — 63,128 92,493 — 92,493 Term Deposits — 79,198 79,198 — 151,244 151,244 63,128 79,198 142,326 92,493 151,244 243,737 Resources from credit institutions abroad Repayable on demand 88,864 — 88,864 74,890 — 74,890 Term deposits — 127,224 127,224 — 152,385 152,385 Loans obtained — 264,635 264,635 — 293,387 293,387 CIRS and IRS operations collateralised by deposits () 88,633 — 88,633 92,299 — 92,299 Other resources — 6,668 6,668 — 4,186 4,186 177,497 398,527 576,024 167,189 449,958 617,147 240,625 588,501 829,126 259,682 1,208,678 1,468,360 () Under the scope of transactions involving derivative financial instruments (IRS and CIRS) with institutional counterparties, and in accordance with the terms of their respective agreements ("Cash collateral"). These deposits are held by the Group and are reported as collateral for the referred operations (IRS and CIRS), whose revaluation is positive. As at 31 December 2022, the item Resources and others financing from Central Banks – Bank of Portugal included a total amount associated with the TLTRO III program of Euros 600,000,000, having been repaid early in January 2023. Considering the financing characteristics and the nature of the respective lender, the Bank accounted for the TLTRO III operation under IFRS 9. The Bank considered that the operation constitutes a variable rate financing, indexed to the Deposit Facility Rate of the European Central Bank (ECB), having fulfilled the necessary criteria for it. Specifically for the period between 24 June 2020 and 23 June 2022, the Bank complied with the conditions required for the application, to each of the two tranches of the financing, of a maximum interest rate of -1%. Consequently, it recognised in the financial statements, for the referred interest counting period, the rate of -1%. For the period between 24 June and 31 December 2022, the rate resulting from the provisions of the regulation applied for the calculation in the different subperiods. This balance is analysed, by remaining period, as follows: (Thousands of euros) 2023 2022 (restated) Up to 3 months 516,776 499,654 3 to 6 months 18,467 53,095 6 to 12 months 293,883 34,278 1 to 5 periods — 881,333 829,126 1,468,360 2023 REPORT & ACCOUNTS 306 | 34. Resources from customers and other loans This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Non-interest bearing Interest bearing Total Non-interest bearing Interest bearing Total Deposits from customers Repayable on demand 44,526,917 522,014 45,048,931 48,490,531 182,647 48,673,178 Term deposits — 25,106,121 25,106,121 — 19,742,066 19,742,066 Saving accounts — 4,487,509 4,487,509 — 6,315,477 6,315,477 Cheques and orders to pay 630,497 — 630,497 564,369 — 564,369 Other — 60,000 60,000 — 60,005 60,005 45,157,414 30,175,644 75,333,058 49,054,900 26,300,195 75,355,095 Corrections to the liabilities value subject to hedging operations 103,654 (1,846) Deferred costs/ (income) (621) (716) Interests to pay 170,722 77,610 75,606,813 75,430,143 In the terms of the Law, the Deposit Guarantee Fund was established to guarantee the reimbursement of funds deposited in Credit Institutions. The criteria to calculate the annual contributions to the Portuguese fund are defined in the Regulation no. 11/94 of the Bank of Portugal. This balance is analysed, by remaining period until the next operation renewal date, as follows: (Thousands of euros) 2023 2022 (restated) Deposits repayable on demand 45,049,544 48,673,569 Term deposits and saving accounts Up to 3 months 15,054,319 14,069,453 3 to 6 months 8,776,363 7,034,909 6 to 12 months 5,341,384 3,921,351 1 to 5 years 693,602 1,106,125 29,865,668 26,131,838 Cheques and orders to pay Up to 3 months 630,497 564,369 630,497 564,369 Other Up to 3 months 1,104 367 Over 5 years 60,000 60,000 61,104 60,367 75,606,813 75,430,143 2023 REPORT & ACCOUNTS | 307 35. Non subordinated debt securities issued This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Bonds 232,866 53,799 Medium term notes (MTN) 2,347,610 1,347,967 Securitisations 121,933 142,062 2,702,409 1,543,828 Corrections to the liabilities value subject to hedging operations (22,873) (66,860) Deferred cost s/ (gains) (11,142) (12,523) Interests to pay 44,288 17,641 2,712,682 1,482,086 The characteristics of the bonds issued by the Group, as at 31 December 2023 are analysed as follows: (Thousands of euros) Issue Issue date Maturity date Interest rate Nominal value Book value Banco Comercial Português: Bcp 6NC5 Senior Preferred EUR 500MN NG - MTN 856 February, 2021 February, 2027 Fixed rate 1.125% year until Feb-26 /after Euribor 3M + Variable rate 1.55% 500,000 509,986 Bcp 1.75% Eur 500M 6.5Nc5.5 Social Senior Preferred Notes - Mtn 857 October, 2021 April, 2028 Fixed rate 1.75% year until Apr-27/after + Euribor 3M + 2% 500,000 466,298 BCP2022 MTN 859 BCP Senior Preferred Notes OCT 2025 October, 2022 October, 2025 Fixed rate 8.5% until October 2024; after 5.547% + Euribor 3M 350,000 353,061 BCP2023 MTN 861 BCP Senior Preferred Notes OCT 2026 October, 2023 October, 2026 Fixed rate 5.625% until October 2025; after 1.90% + Euribor 3M 500,000 505,554 BCP Fin.Bank - EUR 10 M () March, 2004 March, 2024 Fixed rate 5.01% 300 311 Magellan Mortgages n.º 3: Mbs Magellan Mortgages S 3 Cl.A June, 2005 May, 2058 Euribor 3M + 0.26% 120,348 112,165 Mbs Magellan Mortgages S.3 Cl.B June, 2005 May, 2058 Euribor 3M + 0.38% 621 579 Mbs Magellan Mortgages S. 3 Cl.C June, 2005 May, 2058 Euribor 3M + 0.58% 964 900 Bank Millennium: Bank Millennium - BMCN_012040 December, 2022 January, 2040 Wibor 3m 7.05%+1.39% = 19.57% 55,828 57,863 Millennium Leasing CLN 23-38 July, 2023 October, 2038 Wibor 3m 6.85%+11.75% = 18.6% 64,461 66,739 Bank Millennium - MILP-2027/09 September, 2023 September, 2027 Fixed rate 9.875% 499,945 525,473 Bank Millennium - BMCN_082036 December, 2023 August, 2036 Wibor 3m 5,85%+12,30% = 18,15% 112,577 113,753 2,712,682 () In the last quarter of 2023, the issuer was replaced by Banco Comercial Português 2023 REPORT & ACCOUNTS 308 | This balance as at 31 December 2023 is analysed by the remaining period, as follows: (Thousands of euros) 2023 Up to 3 months 3 months to 6 months 6 months to 1 year 1 year to 5 years Over 5 years Total Bonds — — — — 238,355 238,355 Medium term notes (MTNs) — 311 — 2,360,372 — 2,360,683 Securitisations — — — — 113,644 113,644 — 311 — 2,360,372 351,999 2,712,682 This balance as at 31 December 2022 is analysed by the remaining period, as follows: (Thousands of euros) 2022 (restated) Up to 3 months 3 months to 6 months 6 months to 1 year 1 year to 5 years Over 5 years Total Bonds 2,008 — — — 52,066 54,074 Medium term notes (MTNs) — — — 852,706 443,148 1,295,854 Securitisations — — — — 132,158 132,158 2,008 — — 852,706 627,372 1,482,086 36. Subordinated debt This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Bonds Non-Perpetual 1,402,278 1,376,856 Corrections to the liabilities value subject to hedging operations (note 54) (41,831) (72,040) Deferred costs / (income) (1,956) (2,436) Interests to pay 38,934 30,676 1,397,425 1,333,056 2023 REPORT & ACCOUNTS | 309 As at 31 December 2023, the subordinated debt issues are analysed as follows: (Thousands of euros) 2023 Issue Issue date Maturity date Interest rate Nominal value Book value Own funds value () Banco Comercial Português Bcp Fix Rate Reset Sub Notes-Emtn 854 December, 2017 December, 2027 See reference (i) 166,300 166,666 130,915 Bcp Subord Fix Rate Note Projeto Tagus Mtn 855 September, 2019 March, 2030 See reference (ii) 450,000 443,394 450,000 BCP Tier 2 Subord Callable Notes Due May 2032 - MTN 858 November, 2021 May, 2032 See reference (iii) 300,000 285,050 300,000 BCP2022 Tier 2 Sub Callable Notes Due 2 June 2033 MTN 860 December, 2022 March, 2033 See reference (iv) 133,700 141,969 133,700 Bank Millennium Group Bank Millennium - BKMO_071227R December, 2017 December, 2027 8.12% 161,153 162,013 51,556 Bank Millennium - BKMO_300129W January, 2019 January, 2029 8.94% 191,081 198,289 61,131 Magellan No. 3 Magellan No. 3 Series 3 Class F June, 2005 May, 2058 - 44 44 — 1,397,425 1,127,302 () Amount of subordinated loans, eligible as Level 2 own funds, in accordance with Articles 62 a), 63 to 65, 66 a) and 67 of the CRR. References - Interest rate: (i) up to the 5th year fixed rate 4.5%; 6th year and following: mid-swap rate in force at the beginning of this period + 4.267%; (ii) Annual interest rate of 3.871% during the first 5.5 years (corresponding to a spread of 4.231% over the 5.5-year mid-swap rate, for the remaining 5 years will be applied over the mid-swap rate in force at the beginning of that period). (iii) Interest rate of 4%, per annum, during the first 5 years and 6 months (corresponding to a spread of 4.065% over the average of the mid- swap rates of 5 and 6 years). At the end of the first 5 years and 6 months the interest rate will be reset to maturity based on the 5-year mid swaps rate prevailing at that time plus the Spread. (iv) Fixed annual interest rate of 8.75% during the first 5.25 years. The annual interest rate from year 5.25 onwards was set at the 5-year mid- swap rate plus a 6.051%. 2023 REPORT & ACCOUNTS 310 | As at 31 December 2022, the subordinated debt issues are analysed as follows: (Thousands of euros) 2022 (restated) Issue Issue date Maturity date Interest rate Nominal value Book value Own funds value () Banco Comercial Português Bcp Fix Rate Reset Sub Notes-Emtn 854 December, 2017 December, 2027 See reference (i) 166,300 164,044 164,175 Bcp Subord Fix Rate Note Projeto Tagus Mtn 855 September, 2019 March, 2030 See reference (ii) 450,000 428,740 450,000 BCP Tier 2 Subord Callable Notes Due May 2032 - MTN 858 November, 2021 May, 2032 See reference (iii) 300,000 274,350 300,000 BCP2022 Tier 2 Sub Callable Notes Due 2 June 2033 MTN 860 December, 2022 March, 2033 See reference (iv) 133,700 130,932 133,700 Bank Millennium Group Bank Millennium - BKMO_071227R December, 2017 December, 2027 9.7% 149,521 150,475 98,956 Bank Millennium - BKMO_300129W January, 2019 January, 2029 9.6% 177,290 184,471 117,334 Magellan No. 3 Magellan No. 3 Series 3 Class F June, 2005 May, 2058 - 44 44 — 1,333,056 1,264,165 () Amount of subordinated loans, eligible as Level 2 own funds, in accordance with Articles 62 a), 63 to 65, 66 a) and 67 of the CRR. References - Interest rate: (i) up to the 5th year fixed rate 4.5%; 6th year and following: mid-swap rate in force at the beginning of this period + 4.267%; (ii) Annual interest rate of 3.871% during the first 5.5 years (corresponding to a spread of 4.231% over the 5.5-year mid-swap rate, for the remaining 5 years will be applied over the mid-swap rate in force at the beginning of that period). (iii) Interest rate of 4%, per annum, during the first 5 years and 6 months (corresponding to a spread of 4.065% over the average of the mid- swap rates of 5 and 6 years). At the end of the first 5 years and 6 months the interest rate will be reset to maturity based on the 5-year mid swaps rate prevailing at that time plus the Spread. (iv) Fixed annual interest rate of 8.75% during the first 5.25 years. The annual interest rate from year 5.25 onwards was set at the 5-year mid- swap rate plus a 6.051%. The analysis of the subordinated debt by remaining period, is as follows: (Thousands of euros) 2023 2022 (restated) 1 to 5 years 328,679 314,519 Over 5 years 1,068,746 1,018,537 1,397,425 1,333,056 2023 REPORT & ACCOUNTS | 311 37. Financial liabilities held for trading This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Short selling securities 626 1,022 Trading derivatives (note 24) Swaps 96,824 170,165 of which: Embedded derivatives — 8 Options 100,702 60,901 of which: Embedded derivatives 95,357 53,487 Forwards 9,235 9,418 206,761 240,484 207,387 241,506 Level 2 108,767 186,130 Level 3 98,620 55,376 As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 49. The balance Financial liabilities held for trading includes, as at 31 December 2023, the embedded derivatives valuation separated from the host contracts in accordance with the accounting policy presented in note 1 C5. in the amount of Euros 95,357,000 (31 December 2022: Euros 53,495,000). This note should be analysed together with note 24. 38. Financial liabilities designated at fair value through profit or loss This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Deposits from customers () 2,321,000 476,671 Certificates 989,703 850,681 Debt securities at fair value through profit and loss Medium term notes (MTN) 297,784 490,326 3,608,487 1,817,678 () Deposits from customers whose remuneration is indexed to a set of shares and/or indices. 2023 REPORT & ACCOUNTS 312 | As at 31 December 2023, the analysis of Debt securities at fair value through profit and loss, is as follows: (Thousands of euros) Issue Issue date Maturity date Interest rate Nominal value Book value Banco Comercial Português: Bcp Cabaz 3 Ações Fevereiro 2024 - Smtn Sr 31 February, 2019 February, 2024 Indexed to portfolio of 3 shares 71,904 71,170 Bcp Tit Div Mill Cabaz 3 Ações 8Abr24 Smtn Sr 35 April, 2019 April, 2024 Indexed to portfolio of 3 shares 64,634 63,405 Bcp Tit Div Millennium Cabaz 5 Ac 26Julho2024 Smtn 42 July, 2019 July, 2024 Indexed to portfolio of 5 shares 75,600 73,026 Bcp Tit Divida Millennium Cabaz 5 Acoes 6Dez24 Smtn 44 December, 2019 December, 2024 Indexed to portfolio of 5 shares 94,602 90,183 297,784 As at 31 December 2023, the analysis of Debt securities at fair value through profit and loss, is as follows: (Thousands of euros) 2023 Up to 3 months 3 months to 6 months 6 months to 1 year 1 year to 5 years Over 5 years Total Deposits from customers 749,199 277,406 1,059,861 234,534 — 2,321,000 Certificates — — — 32,088 957,615 989,703 Debt securities at fair value through profit and loss MTN 71,170 63,405 163,209 — — 297,784 820,369 340,811 1,223,070 266,622 957,615 3,608,487 As at 31 December 2022, the analysis of this balance, by remaining period, is as follows: (Thousands of euros) 2022 (restated) Up to 3 months 3 months to 6 months 6 months to 1 year 1 year to 5 years Over 5 years Total Deposits from customers 315,692 160,979 476,671 Certificates — — — — 850,681 850,681 Debt securities at fair value through profit and loss MTN — 80,858 116,899 292,569 — 490,326 — 80,858 432,591 453,548 850,681 1,817,678 2023 REPORT & ACCOUNTS | 313 39. Provisions This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Provision for guarantees and other commitments 121,574 110,754 Other provisions for liabilities and charges 631,529 451,032 753,103 561,786 Changes in Provisions for guarantees and other commitments are analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance on 1 January 110,754 110,649 Transfers (1,990) (708) Charge for the year (note 14) 40,602 27,864 Reversals for the year (note 14) (28,372) (26,939) Exchange rate differences 580 (112) Balance at the end of the year 121,574 110,754 Changes in Other provisions for liabilities and charges are analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance on 1 January 451,032 348,095 Transfers (24,858) (5,504) Charge of the year for restructuring costs — 4,414 Charge for the year (note 14) 785,928 569,226 Reversals for the year (note 14) (4,000) (1,854) Amounts charged-off (42,138) (116,874) Allocation to loan's portfolio (note 22) (583,027) (344,052) Exchange rate differences 48,592 (2,419) Balance at the end of the year 631,529 451,032 The balance Other provisions for liabilities and charges - Charge for the year refers essentially to provisions for legal risk accounted for by Bank Millennium, related to foreign currency-indexed mortgage loans, as described in note 57, which, in 2023, amounted to Euros 675,252,000 (2022: Euros 430,843,000). 2023 REPORT & ACCOUNTS 314 | The Other provisions for liabilities and charges were based on the probability of occurrence of certain contingencies related to risks inherent to the Group's activity, being reviewed at each reporting date in order to reflect the best estimate of the amount and respective probability of payment. This balance includes provisions for lawsuits, frauds and tax contingencies. As at 31 December 2023, the provisions constituted to cover tax contingencies totalled Euros 54,384,000 (31 December 2022: Euros 38,311,000). At the end of December 2022, the balance of Other provisions for liabilities and charges was reinforced in the amount of Euros 4,414,000, referring to agreements already concluded with some employees whose effective departures will occur during the first half of 2023. By 31 December 2023, the Bank has written-off the amount of Euros 3,113,000, relating to compensations for termination of functions (note 7). Additionally, there are provisions for liabilities and charges recorded for corporate restructuring funds and carved-out assets of the Project Crow, completed in December 2022. Provisions for legal risk related to foreign currency-indexed mortgage loans in Bank Millennium (Poland) In 2021, Bank Millennium changed the accounting policy regarding the recognition of provisions for future claims related to active CHF mortgage loans in the balance sheet. As a result of changes in market conditions, such as the growing number of unfavourable court judgments declaring the entire agreement or certain provisions of these credits to be invalid, the Bank does not expect that all contractual cash flows related to these loans will be recovered. As a result, Bank Millennium allocates provisions for future claims and recognizes them as a reduction of the gross carrying amount of loans for which a decrease in future cash flows is expected, in accordance with paragraph B5.4.6 of IFRS 9 "Financial Instruments" (previously provisions for future claims used to be recognized in accordance with IAS 37 "Provisions, Contingent Liabilities and Contingent Assets"). As a result of the above change, the approach applied in accordance with IAS 37 will be continued only regarding claims relating to already repaid (or almost fully repaid) receivables not recognised in Bank Millennium's balance sheet. As at 31 December 2023, the Loans and advances to customers portfolio in CHF has a gross amount of Euros 2,218,947,000 (31 December 2022: Euros 2,477,851,000). As at 31 December 2023, the provisions estimated by Bank Millennium to address the legal risk related to foreign currency-indexed mortgage loans amount to Euros 1,812,231,000 (PLN 7,871,789,000), of which Euros 1,500,209,000 (PLN 6,516,460,000) are presented under assets, as a deduction from the gross amount of the loan portfolio in CHF (note 22) and Euros 312,022,000 (PLN 1,355,329,000) are presented under Provisions. With reference to 31 December 2022, the provisions estimated by Bank Millennium to address the legal risk related to foreign currency-indexed mortgage loans amount to Euros 1,152,457,000 (PLN 5,395,344,000), of which Euros 976,782,000 (PLN 4,572,901,000) are presented under assets, as a deduction from the gross amount of the loan portfolio in CHF (note 22) and Euros 175,676,000 (PLN 822,443,000) are presented under Provisions. The variation in the level of provisions or concrete losses will depend on the final court decisions about each case and on the number of court cases. 2023 REPORT & ACCOUNTS | 315 40. Other liabilities This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Interests and other amounts payable 169,842 163,843 Operations to be settled - foreign, transfers and deposits 249,509 212,208 Credit insurance received and to accrued 49,181 62,740 Holidays, subsidies and other remuneration payable 58,018 55,132 Transactions on securities to be settled 3,855 4,514 Public sector 51,675 43,628 Creditors Rents to pay 215,714 185,163 Deposit account and other applications 157,102 89,386 Suppliers 57,652 35,649 From factoring operations 47,987 41,618 For futures and options transactions 11,121 73,394 Liabilities not covered by the Group Pension Fund - amounts payable by the Group 10,561 10,819 Associated companies 26 21 Other creditors Residents 35,660 66,158 Non-residents 96,525 70,590 Deferred income 10,424 10,155 Other administrative costs payable 7,809 4,763 Other liabilities 458,891 262,192 1,691,552 1,391,973 The balance Liabilities not covered by the Group Pension Fund - amounts payable by the Group includes the amount of Euros 6,620,000 (31 December 2022: Euros 6,777,000) related to the actual value of benefits attributed associated with mortgage loans to employees, retirees and former employees. The balance Amounts payable on trading activity includes amounts payable within 3 business days of stock exchange operations. The Group has several operating leases for properties, being registered in the item Rents to pay the amount of lease liabilities recognised under IFRS 16, as described in the accounting policy 1 H. The analysis of this balance, by maturity, is as follows: (Thousands of euros) 2023 2022 (restated) Until 1 year 20,728 20,402 1 to 5 years 84,482 137,949 Over 5 years 146,725 33,485 251,935 191,836 Accrued costs recognised in Net interest income (36,221) (6,673) 215,714 185,163 2023 REPORT & ACCOUNTS 316 | 41. Share capital, Share premium and Other equity instruments As at 31 December 2023, the Bank's share capital amounts to Euros 3,000,000,000 and is represented by 15,113,989,952 nominative book-entry shares without nominal value, fully subscribed and paid up. As at 31 December 2023, the Share premium amounts to Euros 16,470,667.11, corresponding to the difference between the issue price (Euros 0.0834 per share) and the issue value (Euros 0.08 per share) determined under the scope of the Exchange Offer occurred in June 2015. As at 31 December 2023, the Other equity instruments in the amount of Euros 400,000,000 corresponds to 2,000 subordinated perpetual bonds (Additional Tier 1), issued on 31 January 2019, with a nominal value of Euros 200,000 each. This issue was classified as an equity instrument in accordance with the specific rules of IAS 32 and accounting policy 1 E. This operation without fixed term has the option of early repayment by the Bank as from the end of the 5th year, and an annual interest rate of 9.25% during the first 5 years. As an instrument classified as AT1, the corresponding interest payment is decided by the Bank at its discretion and is still subject to compliance with a set of conditions, including compliance with the combined requirement of capital reserve and the existence of Distributable Funds in sufficient amount. The payment of interest may also be cancelled by imposition of the competent authorities. As at 31 December 2023, the shareholders who hold, individually or jointly, 5% or more of the Bank's capital, are the following: Shareholder number of shares % share capital % voting rights Chiado (Luxembourg) S.à.r.l. (Fosun Group) 3,927,436,381 25.99% 25.99% Sonangol - Sociedade Nacional de Combustíveis de Angola, EP 2,946,353,914 19.49% 19.49% Total Qualified Shareholdings 6,873,790,295 45.48% 45.48% Chiado (Luxembourg) S.à.r.l. announced on 23 January 2024, that it held on to that date, 3,027,936,381 BCP shares, corresponding to 20.03% of the respective share capital and voting rights. 42. Legal and statutory reserves Under the Portuguese legislation, the Bank is required to annually set-up a legal reserve equal to a minimum of 10% of annual profits until the reserve equals the share capital, or until the sum of the free reserves constituted and the retained earnings, if higher. In accordance with the proposal for the appropriation of net income for the 2022 financial year approved at the General Shareholders' Meeting held on 24 May 2023, the Bank increased its legal reserves in the amount of Euros 47,841,000, thus, as at 31 December 2023 the Legal Reserves amount to Euros 316,375,000 (31 December 2022: Euros 268,534,000). In accordance with the current Portuguese legislation, the Group companies must set-up annually a reserve with a minimum percentage between 5 and 20% of their net annual profits depending on the nature of their economic activity and are recognised in Other reserves and retained earnings in the Bank's consolidated financial statements (note 43). 2023 REPORT & ACCOUNTS | 317 43. Reserves and retained earnings This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Fair value changes - Gross amount Financial assets at fair value through other comprehensive income (note 24) Debt instruments () (75,326) (228,425) Equity instruments (3,747) (25,846) Of associated companies and other changes 1,931 7,838 Cash-flow hedge (1,274,684) (1,744,727) From financial liabilities designated at fair value through profit or loss related to changes in own credit risk (2,596) 182 (1,354,422) (1,990,978) Fair value changes - Tax Financial assets at fair value through other comprehensive income Debt instruments 20,266 58,780 Equity instruments 1,403 1,550 Cash-flow hedge 398,207 540,755 From financial liabilities designated at fair value through profit or loss related to changes in own credit risk 814 (57) 420,690 601,028 (933,732) (1,389,950) Exchange differences arising on consolidation Bank Millennium, S.A. (35,347) (92,629) BIM - Banco Internacional de Moçambique, S.A. (152,108) (139,373) Banco Millennium Atlântico, S.A. (180,187) (143,989) Others 2,031 2,073 (365,611) (373,918) Application of IAS 29 Effect on equity of Banco Millennium Atlântico, S.A. 50,584 42,316 Others (3,965) (3,965) 46,619 38,351 Other reserves and retained earnings 2,975,899 2,997,779 1,723,175 1,272,262 () Includes the effects arising from the application of hedge accounting. The fair value changes correspond to the accumulated changes of the Financial assets at fair value through other comprehensive income and Cash flow hedge, in accordance with the accounting policy presented in note 1 C. The variation in the fair value of cash flow hedges reflects the economic impact on these hedges of the pronounced increase in market interest rates, an effect that is more than offset by the economic impact on the fair value of liabilities that are more sensitive to such an increase and that are accounted for at amortized cost. 2023 REPORT & ACCOUNTS 318 | During 2023, the changes occurred in Fair value changes - Gross amount, excluding the effect of hedge accounting and changes in own credit risk associated with financial liabilities at fair value through profit or loss, are analysed as follows: (Thousands of euros) 2023 Balance as at 1 January Fair value changes Fair value hedge adjustment Impairment in profit or loss Disposals Balance as at 31 December Financial assets at fair value through other comprehensive income (note 24) Debt instruments Debt securities - Portuguese public issuers (89,985) 140,683 (104,087) 306 10,438 (42,645) Others (138,440) 154,972 (51,078) 1,016 849 (32,681) (228,425) 295,655 (155,165) 1,322 11,287 (75,326) Equity instruments (25,846) 12,505 — — 9,594 (3,747) Associated companies and other changes Millenniumbcp Ageas (3,725) (1,533) — — (1,350) (6,608) Other associates and other changes 11,563 2,699 — — (5,723) 8,539 7,838 1,166 — — (7,073) 1,931 (246,433) 309,326 (155,165) 1,322 13,808 (77,142) During 2022 the changes occurred in Fair value changes - Gross amount, excluding the effect of hedge accounting and changes in own credit risk associated with financial liabilities at fair value through profit or loss, are analysed as follows: (Thousands of euros) 2022 (restated) Balance as at 1 January Fair value changes Fair value hedge adjustment Impairment in profit or loss Disposals Balance as at 31 December Financial assets at fair value through other comprehensive income (note 24) Debt instruments Debt securities - Portuguese public issuers 41,380 (293,433) 146,264 (2,406) 18,210 (89,985) Others (32,684) (183,482) 85,052 (2,617) (4,709) (138,440) 8,696 (476,915) 231,316 (5,023) 13,501 (228,425) Equity instruments (30,242) (3,183) — — 7,579 (25,846) Associated companies and other changes Millenniumbcp Ageas (24,485) 6,522 — — 14,238 (3,725) Other associates and other changes 9,640 1,923 — — — 11,563 (14,845) 8,445 — — 14,238 7,838 (36,391) (471,653) 231,316 (5,023) 35,318 (246,433) The item Disposals refers to the derecognition of debt securities and equity instruments at fair value through other comprehensive income. 2023 REPORT & ACCOUNTS | 319 44. Non-controlling interests This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Fair value changes Debt instruments (27,718) (98,139) Equity instruments 2,924 2,380 Cash-flow hedge (6,226) (43,281) Other 4 7 (31,016) (139,033) Deferred taxes Debt instruments 5,362 18,531 Equity instruments (600) (467) Cash-flow hedge 1,183 8,223 5,945 26,287 (25,071) (112,746) Exchange differences arising on consolidation (136,624) (187,306) Actuarial losses (net of taxes) 897 1,742 Other reserves and retained earnings 1,148,225 1,080,424 987,427 782,114 The balance Non-controlling interests is analysed as follows: (Thousands of euros) Balance Sheet Income Statement 2023 2022 (restated) 2023 2022 (restated) Bank Millennium Group 792,061 585,618 63,284 (108,125) BIM - Banco Internacional de Moçambique Group 178,500 174,041 33,865 35,323 Other subsidiaries 16,866 22,455 (5,590) (5,020) 987,427 782,114 91,559 (77,822) 2023 REPORT & ACCOUNTS 320 | The following table presents a summary of financial information for the main subsidiaries included in this balance, prepared in accordance with IFRS. The information is presented before inter-company eliminations: (Thousands of euros) Bank Millennium Group BIM - Banco International de Moçambique Group 2023 2022 (restated) 2023 2022 (restated) Net income for the year 126,821 (216,683) 105,099 106,030 Correction of net income from previous years — — (3,447) — Adjusted net income 126,821 (216,683) 101,652 106,030 Net income for the year attributable to the shareholders 63,537 (108,558) 67,787 70,707 Net income for the year attributable to non-controlling interests 63,284 (108,125) 33,865 35,323 Other comprehensive income attributable to the shareholders 143,760 (34,929) (11,355) 23,390 Other comprehensive income attributable to non-controlling interests 143,186 (34,790) (5,673) 11,685 Total comprehensive income 413,767 (286,402) 84,624 141,105 Balance sheet Financial assets 28,184,289 23,055,876 2,495,727 2,606,994 Non-financial assets 752,625 641,571 215,447 217,416 Financial liabilities (26,121,981) (21,684,366) (2,096,244) (2,235,210) Non-financial liabilities (1,227,601) (839,464) (80,310) (68,008) Equity 1,587,332 1,173,617 534,620 521,192 Equity attributed to the shareholders 795,271 587,999 356,514 347,559 Equity attributed to the non-controlling interests 792,061 585,618 178,106 173,633 Cash flows arising from: operating activities 3,337,195 2,134,937 101,745 104,089 investing activities (2,828,892) 260,370 (18,862) (12,141) financing activities 474,329 (75,834) (71,516) (191,515) Increase / (decrease) in cash and equivalents 982,632 2,319,473 11,367 (99,567) Dividends paid during the year: attributed to the shareholders — — 47,478 119,244 attributed to the non-controlling interests — — 23,719 59,572 — — 71,197 178,816 2023 REPORT & ACCOUNTS | 321 45. Guarantees and other commitments This balance is analysed as follows: (Thousands of euros) 2023 2022 (restated) Guarantees granted Guarantees 3,893,124 4,144,220 Stand-by letter of credit 75,018 57,084 Open documentary credits 238,962 258,591 Bails and indemnities 135,256 135,718 4,342,360 4,595,613 Commitments to third parties Irrevocable commitments Term deposits contracts 2,051 1,621 Irrevocable credit lines 5,279,307 4,880,858 Securities subscription 22,145 41,285 Other irrevocable commitments 157,711 153,982 Revocable commitments Revocable credit lines 6,013,393 5,834,056 Bank overdraft facilities 890,579 998,886 Other revocable commitments 181,380 128,025 12,546,566 12,038,713 Guarantees received 28,126,885 29,552,693 Commitments from third parties 12,352,650 13,453,876 Securities and other items held for safekeeping 85,357,406 75,348,414 Securities and other items held under custody by the Securities Depository Authority 87,167,519 82,314,713 Other off balance sheet accounts 146,614,201 131,084,605 The guarantees granted by the Group may be related to loans transactions, where the Group grants a guarantee in connection with a loan granted to a client by a third entity. According to its specific characteristics it is expected that some of these guarantees expire without being executed and therefore these transactions do not necessarily represent a cash-outflow. The estimated liabilities are recorded under provisions (note 39). Stand-by letters and open documentary credits aim to ensure the payment to third parties from commercial deals with foreign entities and therefore financing the shipment of the goods. Therefore, the credit risk of these transactions is limited since they are collateralised by the shipped goods and are generally short-term operations. Irrevocable commitments are non-used parts of credit facilities granted to corporate or retail customers. Many of these transactions have a fixed term and a variable interest rate and therefore the credit and interest rate risk are limited. The balance Irrevocable commitments - Other irrevocable commitments includes the amount of Euros 30,638,000 (31 December 2022: Euros 25,506,000) relating to the collateral constituted in compliance with the assumption of irrevocable payment commitments to Single Resolution Fund, as referred in note 6. This balance also includes the amount of Euros 95.190.000 (31 December 2022: Euros 95.190.000) corresponding to irrevocable commitments for cumulative payments assumed with the Deposit Guarantee Fund, as referred in note 6. The financial instruments accounted as Guarantees and other commitments are subject to the same approval and control procedures applied to the credit portfolio, namely regarding the analysis of objective evidence of impairment, as described in the accounting policy in note 1.C. The maximum credit exposure is represented by the nominal value that could be lost related to guarantees and commitments undertaken by the Group in the event of default by the respective counterparties, without considering potential recoveries or collaterals. 2023 REPORT & ACCOUNTS 322 | The balance of Guarantees granted, Irrevocable credit lines and revocable commitments portfolio detailed by stage according with IFRS 9, is analysed as follows: (Thousands of euros) 2023 2022 (restated) Stage 1 Gross amount 14,934,354 14,303,231 Impairment (12,880) (11,307) 14,921,474 14,291,924 Stage 2 Gross amount 1,433,605 1,768,595 Impairment (14,686) (14,893) 1,418,919 1,753,702 Stage 3 Gross amount 339,060 365,612 Impairment (94,008) (84,554) 245,052 281,058 16,585,445 16,326,684 46. Assets under management and custody Asset management activity is governed by the framework established in Decree-Law No. 27/2023, of April 28, and by the Portuguese Securities Code as well. The aforementioned framework determines, namely, the obligations to which fund management companies and depositaries are subject to. The total value of funds managed by the Group companies is analysed as follows: (Thousands of euros) 2023 2022 (restated) Banco Comercial Português, S.A. () 3,738,751 3,618,326 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. 611,913 689,142 Millennium TFI S.A. 1,210,447 806,162 5,561,111 5,113,630 The Group provides custody, trustee, corporate administration, investment management and advisory services to third parties, which involve the Group making allocation and purchase and sale decisions in relation to a wide range of financial instruments. For certain services are set objectives and levels of return for assets under management and custody. There is no capital or profitability guaranteed by the Bank in these assets. Those assets held in a fiduciary capacity are not included in the financial statements. The assets under management and custody are analysed as follows: (Thousands of euros) 2023 2022 (restated) Assets under deposit 78,388,104 70,104,626 Wealth management () 3,738,751 3,618,326 Investment funds 1,822,360 1,495,304 83,949,215 75,218,256 () Corresponds to the assets portfolio that are currently monitored and controlled by the business area as being managed by the Bank. 2023 REPORT & ACCOUNTS | 323 47. Transfers of assets The Group performed a set of transactions of sale of financial assets (namely loans and advances to customers) for Funds specialized in the recovery of loans. These funds take the responsibility for management of the borrower companies or assets received as collateral with the objective of ensuring a pro-active management through the implementation of plans to explore/increase the value of the companies/assets. The specialized funds in credit recovery that acquired the financial assets are closed funds, in which the holders of the participation units have no possibility to request the reimbursement of its participation units throughout the useful life of the fund. These participation units are held by several banks, which are the sellers of the loans, in percentages that vary through the useful life of the Funds, ensuring however that, separately, none of the banks hold more than 50% of the capital of the Fund. The Funds have a specific management structure (General Partner), fully independent from the assignor banks and that is selected on the date of establishment of the Fund. The management structure of the Fund has as main responsibilities to: (i) determine the objective of the Fund and (ii) administrate and manage exclusively the Fund, determining the objectives and investment policy and the conduct in management and business of the Fund. The management structure is remunerated through management commissions charged to the Funds. These funds (in which the Group holds minority positions) establish companies in order to acquire the loans to the banks, which are financed through the issuance of senior and junior securities. The value of the senior securities fully subscribed by the Funds that hold the share capital match the fair value of the asset sold, determined in accordance with a negotiation based on valuations performed by both parties. The value of the junior securities is equivalent to the difference between the fair value that was based on the valuation of the senior security and the value of the transferred receivables. These junior securities, being subscribed by the Group, will entitle the Group to a contingent positive value if the value of the assets transferred exceeds the amount of the senior tranches plus the remuneration on them. Thus, considering these junior assets reflect a difference between the valuations of the assets sold based on the appraisals performed by independent entities and the negotiation between the parties, the Group performs the constitution of impairment losses for all of them. Therefore, as a result of the transfer of assets occurred operations, the Group subscribed: - Senior securities (participation units) of the funds, for which the cash-flows arise mainly from a set of assets transferred from the participant banks. These securities are booked in Financial assets not held for trading mandatorily at fair value through profit or loss portfolio and are accounted for at fair value based on the last available Net assets value (NAV), as disclosed by the Management companies and audited at year end, still being analysed by the Bank; - Junior securities (with higher subordination degree) issued by the Portuguese law companies held by the funds and which are fully provided to reflect the best estimate of impairment of the financial assets transferred. Within this context, not withholding control but maintaining an exposure to certain risks and rewards, the Group, in accordance with IFRS 9 3.2 performed an analysis of the exposure to the variability of risks and rewards in the assets transferred, before and after the transaction, having concluded that it does not hold substantially all the risks and rewards. Considering that it does not hold control and does not exercise significant influence on the funds or companies' management, the Group performed, under the scope of IAS IFRS 9 3.2, the derecognition of the assets transferred and the recognition of the assets received. The results are calculated on the date of transfer of the assets. During 2023 and 2022, no credits were sold to corporate restructuring funds. 2023 REPORT & ACCOUNTS 324 | The amounts accumulated as at 31 December 2023, related to these operations, are analysed as follows: (Thousands of euros) Assets transferred Net assets transferred Received value Net gains / (losses) Fundo Recuperação FCR (a) 343,266 243,062 232,267 (10,795) Fundo Aquarius FCR (b) 132,635 124,723 132,635 7,912 Discovery Real Estate Fund (b) 211,388 152,155 138,187 (13,968) Fundo Vega FCR (c) 113,665 113,653 109,599 (4,054) 800,954 633,593 612,688 (20,905) The activity segments are as follows: a) Diversified; b) Real estate and tourism; and c) Real estate. The amounts accumulated as at 31 December 2022, related to these operations, are analysed as follows: (Thousands of euros) Assets transferred Net assets transferred Received value Net gains / (losses) Fundo Reestruturação Empresarial FCR (a) 84,112 82,566 83,212 646 Fundo Recuperação FCR (a) 343,266 243,062 232,267 (10,795) Fundo Aquarius FCR (b) 132,635 124,723 132,635 7,912 Discovery Real Estate Fund (b) 211,388 152,155 138,187 (13,968) Fundo Vega FCR (c) 113,665 113,653 109,599 (4,054) 885,066 716,159 695,900 (20,259) The activity segments are as follows: a) Diversified; b) Real estate and tourism; and c) Real estate. On 29 June 2023, all of the participation units held by BCP in the Fundo Reestruturação Empresarial FCR were sold, as a result the Group no longer held a position in that Fund. 2023 REPORT & ACCOUNTS | 325 As at 31 December 2023, the assets received under the scope of these operations are comprised of: (Thousands of euros) 2023 Senior securities Junior securities Investment fund units (note 24) Capital supplies (note 32) Total Fundo Recuperação FCR Gross value 166,637 74,631 241,268 Impairment and other fair value adjustments (138,607) (74,631) (213,238) 28,030 — 28,030 Fundo Aquarius FCR Gross value 105,498 — 105,498 Impairment and other fair value adjustments (7,379) — (7,379) 98,119 — 98,119 Discovery Real Estate Fund Gross value 157,716 — 157,716 Impairment and other fair value adjustments 4,568 — 4,568 162,284 — 162,284 Fundo Vega FCR Gross value 46,233 91,206 137,439 Impairment and other fair value adjustments (10,091) (91,206) (101,297) 36,142 — 36,142 Total Gross value 476,084 165,837 641,921 Total impairment and other fair value adjustments (151,509) (165,837) (317,346) 324,575 — 324,575 As at 31 December 2023, the book value of these assets is accounted for in item Financial assets not held for trading mandatorily at fair value through profit or loss and considers the Fund's Global Net Asset Value (NAV) communicated by the Management Companies. The following aspects should also be mentioned: (i) these are Funds whose latest Limited Audit Reports available with reference to 30 June 2023, and Audit Reports available with reference to 31 December 2022, do not include reserves; (ii) the funds are subject to supervision by the competent authorities. 2023 REPORT & ACCOUNTS 326 | As at 31 31 December 2022, the assets received under the scope of these operations are comprised of: (Thousands of euros) 2022 (restated) Senior securities Junior securities Investment fund units (note 24) Capital supplies (note 32) Total Fundo Reestruturação Empresarial FCR Gross value 60,963 — 60,963 Impairment and other fair value adjustments (37,966) — (37,966) 22,997 — 22,997 Fundo Recuperação FCR Gross value 169,033 85,018 254,051 Impairment and other fair value adjustments (134,767) (85,018) (219,785) 34,266 — 34,266 Fundo Aquarius FCR Gross value 119,631 — 119,631 Impairment and other fair value adjustments (11,527) — (11,527) 108,104 — 108,104 Discovery Real Estate Fund Gross value 157,716 — 157,716 Impairment and other fair value adjustments (1,801) — (1,801) 155,915 — 155,915 Fundo Vega FCR Gross value 48,762 86,379 135,141 Impairment and other fair value adjustments (9,899) (86,379) (96,278) 38,863 — 38,863 Total Gross value 556,105 171,397 727,502 Total impairment and other fair value adjustments (195,960) (171,397) (367,357) 360,145 — 360,145 As at 31 December 2022, the book value of these assets is accounted for in item Financial assets not held for trading mandatorily at fair value through profit or loss and considers the Fund's Global Net Asset Value (NAV) communicated by the Management Companies. The following aspects should also be mentioned: (i) these are Funds whose latest Limited Audit Reports available with reference to 30 June 2022 and Audit Reports available with reference to 31 December 2022 and 2021, do not include reserves; (ii) the funds are subject to supervision by the competent authorities. The detail of the commitments of subscribed and unpaid capital for each of the corporate restructuring funds is analysed as follows: (Thousands of euros) 2023 2022 (restated) Corporate restructuring funds Subscribed capital Capital realized Subscribed and unpaid capital Subscribed capital Capital realized Subscribed and unpaid capital Fundo Reestruturação Empresarial FCR — — — 51,212 46,486 4,726 Fundo Recuperação FCR 171,846 166,637 5,209 186,602 169,033 17,569 Fundo Aquarius FCR 118,350 105,497 12,853 134,205 119,631 14,574 Discovery Real Estate Fund 158,991 158,991 — 158,991 158,991 — Fundo Vega FCR 45,439 43,492 1,947 48,150 45,870 2,280 494,626 474,617 20,009 579,160 540,011 39,149 In 31 December 2023 and 2022, there are additional subscription commitments for the fund Discovery, in the amount of Euros 1,107,000. 2023 REPORT & ACCOUNTS | 327 Additionally, are booked in Loans and advances to customer’s portfolio and in balances Guarantees granted and Irrevocable credit lines, the following exposures and respective impairment, in relation to entities controlled by these funds: (Thousands of euros) Items 2023 2022 (restated) Loans and advances to customers 35,978 248,439 Guarantees granted and irrevocable credit lines 24,018 74,834 Gross exposure 59,996 323,273 Impairment (6,176) (15,183) Net exposure 53,820 308,090 Project Crow At the end of December 2022, the designated sale process for the Crow Project was completed, which included the sale to a related company of Davidson Kempner Capital Management LP (Purchaser) of 3 hotel assets belonging to the Fundo Recuperação and the sale of all shares/units of participation of the FLITPTREL and Fundo Recuperação Turismo funds, together with the assets directly and indirectly held by these two funds, with the exception of a set of assets that were transferred to the sellers and which, in the case of Banco Comercial Português, S.A. include the investment held in a Venture capital fund, in 2 real estate funds and in a company, as detailed in the table below: (Thousands of euros) 2023 2022 (restated) Financial assets not held for trading mandatorily at fair value through profit or loss (note 24) Fundo Turismo Algarve, FCR 40,758 50,426 Lusofundo - Fundo de Investimento Imobiliário Fechado 18,780 26,429 Fundo Especial de Investimento Imobiliário Fechado Eurofundo 8,467 12,091 68,005 88,946 Non-current assets held for sale (note 27) Imoserit, S.A. — 17,919 Other assets (note 32) Imoserit, S.A. 14,805 — 82,810 106,865 * previous FLITPTREL Tires, S.A. As referred in note 39, there are provisions for liabilities and charges recorded for corporate restructuring funds and carved-out assets of the Project Crow, completed in December 2022. 2023 REPORT & ACCOUNTS 328 | 48. Relevant events occurred during 2023 Banco Comercial Português, S.A. informed about the upgrade of senior unsecured debt and deposits ratings by DBRS Morningstar Banco Comercial Português, S.A. (“BCP” or “Bank”) informed that DBRS Morningstar rating agency on 18 December 2023, upgraded the Bank's senior unsecured debt ratings from BBB (low) to BBB and deposits ratings from BBB to BBB (high), one notch above the Intrinsic Assessment, reflecting the legal framework in place in Portugal which has full depositor preference in bank insolvency and resolution proceedings. This upgrade of BCP's ratings by DBRS Morningstar reflects the improvement in profitability and the strengthening in capitalization levels while maintaining adequate asset quality. The stable trend reflects DBRS Morningstar expectations that the Bank will maintain adequate profitability levels and solid capital buffers. The stable trend also takes into consideration the Bank’s adequate funding structure coupled with solid liquidity buffers. Banco Comercial Português, S.A. informed about conversion of its existing covered bonds programme into a covered bonds programme compliant with the Legal Regime of Covered Bonds As at 5 December 2023, Banco Comercial Português, S.A. announced that, following the entry into force of Decree-Law no. 31/2022, of 6 May, approving the new legal regime of covered bonds and transposing Directive (EU) 2019/2162 (“Legal Regime of Covered Bonds”), the conversion of its existing covered bonds programme into a covered bonds programme compliant with the Legal Regime of Covered Bonds, in the total amount of Euros 12,500,000,000 (the “Programme”), was approved on the present date by the Portuguese Securities Commission (Comissão do Mercado de Valores Mobiliários) (“CMVM”). Accordingly, Banco Comercial Português, S.A. hereby informed that the covered bonds issues with the ISINs indicated below shall, as from the present date, be governed by the Legal Regime of Covered Bonds and by the terms of the adjusted programme. ISINs: (i) Euros 2.200.000.000 Floating Rate Covered Bonds due 2024 Series 5 (ISIN PTBIPGOE0061); (ii) Euros 2.000.000.000 Floating Rate Covered Bonds due 2025 Series 6 (ISIN PTBCSFOE0024); (iii) Euros 1.000.000.000 Floating Rate Covered Bonds due 2027 Series 7 (ISIN PTBCS3OE0028); and (iv) Euros 4.000.000.000 Floating Rate Covered Bonds due 2026 Series 8 (ISIN PTBCQLOE0036). Minimum prudential requirements As at 4 December 2023, Banco Comercial Português, S.A. (BCP, Bank) informed that, under the context of the Supervisory Review and Evaluation Process (SREP), it has been notified of the decision of the European Central Bank (ECB) regarding minimum prudential requirements to be fulfilled on a consolidated basis from 1 January 2024. The minimum prudential requirements to be in force from January 2024 remained unchanged compared to the requirements in force in 2023. BCP, in the current announcement, also informed the decision from Banco de Portugal on its capital buffer requirement as “other systemically important institution” (O-SII). The ECB’s decision prescribes the following minimum ratios as a percentage of total risk weighted assets (RWA) from 1 January, 2024: Minimum Capital Requirements BCP Consolidated Capital requirements of which: Pilar 1 Pilar 2 Buffers CET1 9.41% 4.50% 1.41% 3.50% T1 11.38% 6.00% 1.88% 3.50% Total 14.00% 8.00% 2.50% 3.50% Buffers include the conservation buffer (2.5%), the countercyclical buffer (0%) and the buffer for other systemically important institutions (O-SII: 1.0%). 2023 REPORT & ACCOUNTS | 329 Banco Comercial Português, S.A. informed about the upgrade of deposits and senior unsecured debt ratings by Moody’s Banco Comercial Português, S.A. (“BCP” or “Bank”) informed that Moody’s rating agency on 22 November 2023, upgraded the Bank's senior unsecured debt ratings from Baa3 to Baa2 and deposits ratings from Baa2 to A3, positioning the rating assigned to deposits at the same risk level to that assigned to the Portuguese Republic. This upgrade of BCP's ratings by Moody’s reflects the reduction in the stock of non-performing assets (NPA), the improvement in capitalization levels as well as the improvement in domestic recurrent profitability. The rating action on BCP also reflects the recent upward revision of the Portuguese Republic's debt rating, from Baa2 to A3. In the scope of the review carried out by Moody’s, it was simultaneously communicated, the upgrade of the Baseline Credit Assessment (BCA) and Adjusted BCA from Ba2 to Ba1, the junior senior debt rating to (P)Ba1, the dated subordinated debt to (P)Ba2 and the preference shares rating to B1(hyb). Additionally, Moody’s informed, on the same date that the rating of BCP's covered bonds program was upgraded from Aa2 to Aaa. The Outlook on the long-term deposit and senior unsecured debt ratings is currently stable, reflecting Moody's view of the expected performance of the Bank over the next 12 to 18 months. Banco Comercial Português, S.A. informed about notification from Banco de Portugal on the implementation of a reserve in own funds for sectoral systemic risk As at 17 November 2023, Banco Comercial Português, S.A. (“Bank”) informed that it was notified by the Banco de Portugal on the decision to implement a reserve for sectoral systemic risk, which aims to reinforce the resilience of the banking sector of a potential deterioration in economic conditions and/or unexpected significant correction in residential property prices. The reserve for sectoral systemic risk complements the current prudential recommendation and consists of a preventive measure to address the possible materialization of potential risks. The Banco de Portugal's decision translates into the requirement to comply with a reserve for sectoral systemic risk of 4% on the amount of risk exposures on the retail portfolio of loans to individuals collateralized by residential properties located in Portugal, calculated in pursuant to paragraph 3 of article 92 of Regulation (EU) 575/2013, from 1 October 2024, onwards, at the highest level of consolidation in Portugal, considering the applicable legal framework. Banco Comercial Português, S.A. informed that the decision to impose this measure, that aims to create a reserve for sectoral systemic risk, would translate on a pro forma basis into an estimated increase in own funds requirements of 26 basis points. BCP S.A. informed about the ECB's authorization to exercise the early redemption option of the currently outstanding Additional Tier 1 (“AT1”) instrument with an outstanding amount of Euros 400 million As at 13 November 2023, Banco Comercial Português, S.A. (“Bank”) informed that it has received permission from the ECB to reduce its Own Funds, through the exercise of the early redemption option of the currently outstanding Additional Tier 1 (“AT1”) instrument, considering that following the said reduction, BCP´s own funds and eligible liabilities, on a consolidated basis, are expected to exceed the requirements laid down in Regulation (EU) No 575/2013, Directive 2013/36/ EU of the European Parliament and of the Council and Directive2014/59/EU of the European Parliament and of the Council by a margin that the ECB considers necessary. Notice is further given that the decision on whether to exercise such option of early redemption of the AT1 issue (ISIN: PTBCPFOM0043) is still under evaluation by the Bank. Such decision will be communicated in due course under the terms set out in the instrument´s final terms and conditions. 2023 REPORT & ACCOUNTS 330 | Banco Comercial Português, S.A. informed about issue of senior preferred debt securities eligible for MREL As at 25 September 2023, Banco Comercial Português, S.A. (“Bank”) informed that it has fixed the terms for a new issue of senior preferred debt securities eligible for MREL (Minimum Requirement for own funds and Eligible Liabilities), under its Euro Note Programme. The issue, in the amount of Euros 500 million, will have a tenor of 3 years, with the option of early redemption by the Bank at the end of year 2, an issue price of 99.825% and an annual interest rate of 5.625% during the first 2 years (corresponding to a spread of 1.90% over the 2-year mid-swap rate). The interest rate for the 3rd year was set at 3- month Euribor plus a 1.90% spread. Banco Comercial Português, S.A. informed about the upgrade to Investment Grade of senior debt ratings by Fitch Ratings As at 21 September 2023, Banco Comercial Português, S.A. (“BCP” or “Bank”) informed that Fitch Ratings upgraded BCP's long-term senior unsecured debt ratings to Investment Grade, from BB+ to BBB-, following the upgrade of the long-term Issuer Default Rating (IDR) from BB+ to BBB- and the Viability Rating (VR) from bb+ to bbb-. This upgrade reflects the Fitch Ratings’ view that BCP’ capital ratios have increased to levels considered adequate. This improvement has been supported by materially stronger profitability given higher interest rates, strong cost efficiency and a balance sheet with reduced credit risk. The upgrade also reflects reduced risks surrounding litigations costs coming from its Polish subsidiary in relation to legacy Swiss franc-denominated mortgage loans. The Outlook on the Long-Term IDR is Stable. Fitch Ratings also raised the ratings on BCP's Additional Tier 1 and Tier 2 instruments by one notch. Banco Comercial Português, S.A. informed about the upgrade to Investment Grade of senior debt ratings by S&P Global As at 12 September 2023, Banco Comercial Português, S.A. (“BCP” or “Bank”) informed that S&P Global Ratings upgraded BCP's senior unsecured debt ratings to Investment Grade, from BB+/B to BBB-/A-3. This upgrade reflects the view that BCP creditworthiness has gradually improved in absolute terms and relative to peers due to a combination of extraordinary measures and solid internal capital generation driven by improving profitability, based on better-than- peer efficiency levels and the expectation that a possible asset quality deterioration will be manageable. The rating on BCP also incorporates potential downside risks arising from the group’s Polish operations and its impact on earnings in 2023 and 2024. Bank Millennium S.A. (Poland) informed about the conclusion of subscription of non-preferred senior notes issued under the EMTN Programme The Bank Millennium S.A. Management Board informed that on 11 September 2023 it concluded the subscription for 4- year non-preferred senior notes of the total nominal value of Euros 400 million, exceeding 10% of the Bank Millennium Group's equity capitals. On 18 September 2023 these notes were admitted to trading on a regulated market, on the Luxembourg Stock Exchange. On 20 September 2023 Bank Millennium S.A. concluded the subscription for 4-year non-preferred senior notes of the total nominal value of Euros 100 million, which were admitted to trading on a regulated market, on the Luxembourg Stock Exchange on 27 September 2023. All issued notes mature on 18 September 2027 (with the possibility of early redemption on 18 September 2026). These notes issue have been organised under the EMTN Programme on the basis of main Prospectus approved on 25 August 2023 by the Commission de Surveillance du Secteur Financier. The notes will be consolidated and will form a single series with a total nominal value of Euros 500 million. 2023 REPORT & ACCOUNTS | 331 The stable Outlook reflects the expectation that the Bank can defend its solid domestic retail franchise and financial profile over the next 18-24 months and the fact that possible further unpredictable government interventions in the Polish market would have a manageable effect on the bank's capitalization, which will remain adequate. S&P Global Ratings also raised the ratings on BCP's Additional Tier 1 and Tier 2 instruments by two notches. Banco Comercial Português, S.A. informed about 2023 EU-Wide Stress Test Results As at 28 July, Banco Comercial Português, S.A. was subject to the 2023 EU-wide stress test conducted by the European Banking Authority (EBA), in cooperation with the Banco de Portugal (BdP), the European Central Bank (ECB), and the European Systemic Risk Board (ESRB). The adverse stress test scenario was set by the ECB/ESRB and covers a three-year time horizon (2023-2025). The stress test has been carried out applying a static balance sheet assumption as of December 2022, and therefore does not take into account future business strategies and management actions. It is not a forecast of Banco Comercial Português, S.A. profits. Considering the results of Banco Comercial Português, S.A, in the stress test, it should be highlighted the following: • the application of the adverse scenario resulted in a reduction of 448 b.p. in the fully loaded CET1 capital ratio at the end of 2025 compared to December 2022, which compares with an average reduction of 459 b.p. in the universe of the 70 banks submitted to this exercise. • the application of the baseline scenario resulted in an increase of 256 b.p. in the fully loaded CET1 capital ratio at the end of 2025 compared to December 2022, which compares with an average increase of 136 b.p. MREL requirements of Banco Comercial Português, S.A. As at 12 July 2023, Banco Comercial Português, S.A. ("BCP" or the "Bank") informed that it has been notified by Banco de Portugal, as the national resolution authority, about the update of its minimum requirement for own funds and eligible liabilities ("MREL" or "Minimum Requirement for own funds and Eligible Liabilities") as decided by the Single Resolution Board. The resolution strategy applied continues to be that of a multiple point of entry ("MPE"). The MREL requirements to be met by BCP Group of Resolution (consisting of BCP, S.A., Banco ActivoBank, S.A. and all the subsidiary companies of BCP apart from Bank Millennium S.A. and Banco Internacional de Moçambique and their respective subsidiaries), from 1 January 2024 is of: • 24.65% of the total risk exposure amount ("TREA") (to which adds further a combined buffer requirement ("CBR") of 3.5%, thus corresponding to total requirements of 28.15%); and • 6.71% of the leverage ratio exposure measure ("LRE"). The Bank is not subject to any subordination requirements. In accordance with the regulations in force, MREL requirements could be annually updated by the competent authorities, and therefore these targets replace those previously set. BCP complies to the currently applicable MREL requirement, both as a percentage of the TREA (also including the applicable CBR) and as a percentage of the LRE. The MREL requirements, now communicated to the BCP resolution group described above, are in line with the 2021-24 Strategic Plan and are accommodated by the ongoing funding plan. 2023 REPORT & ACCOUNTS 332 | Bank Millennium Minimum requirements for own funds and eligible liabilities (MREL) Bank Millennium manages MREL requirements ratios in a manner analogous to capital adequacy ratios. Bank Millennium received a joint decision from the resolution authorities in June 2023, obliging it to comply with MREL requirements. The decision sets updated minimum requirements that must be met by 31 December 2023 - at the levels of 18.89% (consolidated MREL-TREA) and 5.91% (consolidated MREL-TEM). Additionally, in relation to the above decisions, Bank Millennium should also meet the MREL requirement considering the Combined Buffer Requirement (currently 2.75%). Taking into account the above, in September 2023, Bank Millennium successfully completed the subscription of senior non-preferred bonds with a total value of Euros 500 million under the Euro Medium Term Notes Issuance Program with a total nominal value of no more than Euros 3 billion. MREL 31.12.2023 30.09.2023 30.06.2023 31.12.2022 MREL-TREA ratio (consolidated) 23.77% 22.05% 14.93% 14.77% Minimum required level MREL-TREA 18.89% 14.42% 14.42% 15.60% Surplus(+) / Deficit(-) of MREL-TREA (p.p.) 4.88% 7.63% 0.51% -0.83% Minimum required level including Combined Buffer Requirement (CBR) 21.64% 17.17% 17.17% 18.35% Surplus(+) / Deficit(-) of MREL-TREA+CBR (p.p.) 2.13% 4.88% -2.24% -3.58% MREL-TEM (consolidated) 7.50% 7.72% 5.87% 6.04% Minimum required level of MREL-TEM 5.91% 4.46% 4.46% 3.00% Surplus(+) / Deficit(-) of MREL-TEM (p.p.) 1.59% 3.26% 1.41% 3.04% In terms of the MREL-TREA and MREL-TEM requirements, the Bank Millennium's Group presents a surplus compared to the minimum required levels as of 31 December 2023, and also meets the MREL-TREA Requirement after the inclusion of the Combined Buffer Requirement. In addition, in December 2023, Bank Millennium received a letter from the Bank Guarantee Fund informing that due to the update of the P2R buffer by the PFSA, the target updated minimum required MREL-TREA ratio would be 18.03% MREL-TREA with a minimum subordination requirement, while the target MREL-TEM would be 5.91%, with a subordination requirement. The Fund will propose the above MREL-TEM levels as part of the joint decision process in the 2023/2024 planning cycle. 2023 REPORT & ACCOUNTS | 333 Resolutions of the Annual General Meeting of Banco Comercial Português, S.A. Banco Comercial Português, S.A. concluded on 24 May 2023, through electronic means and, simultaneously, at the Bank's facilities, with 64.29% of the share capital represented, the Annual General Meeting of Shareholders, with the following resolutions: Item One – Approval of the individual and consolidated Annual Report, balance sheet and financial statements of 2022, and the Corporate Governance Report, that includes a chapter on the remuneration of the management and supervisory bodies and the Sustainability Report; Item Two – Approval of the proposal for the appropriation of profit concerning the 2022 financial year; Item Three – Approval of a vote of trust and praise addressed to the Board of Directors, including to the Executive Committee and to the Audit Committee and each one of their members, as well as to the Chartered Accountant and its representative; Item Four – Approval of the updating of the policy for the remuneration of Members of the Management and Supervisory Bodies and the repeal of the regulation of reform of the Executive Directors; Item Five – Approval of the update of the policy for selection and appointment of the Statutory Auditor or audit firm and the hiring of non-prohibited non-audit services, under the terms of the legislation in force; Item Six – Approval of the acquisition and sale of own shares and bonds. Approval of the application of article 352 (2) of the CRR On 24 March 2023, BCP was notified of the favourable decision of the supervisory authority on the request for the application of article 352 (2) of the CRR for the exclusion of the calculation of weighted assets for market risk of certain structural exchange positions for hedging of regulatory ratios against changes in exchange rates. The change has an estimated impact on the fully implemented CET1 ratio of around 50 basis points and of around 70 basis points in the total capital ratio. Signing of conditional agreement concerning the sale of Millennium Financial Services sp.zo.o. and strategic insurance cooperation The Management Board of Bank Millennium S.A. informed that following necessary corporate approvals, on 13 February 2023, Bank Millennium executed the agreement (the "Agreement") for the sale of 80% of the shares (the “Shares”) in Millennium Financial Services sp. z o.o. (the “Company”) to Towarzystwo Ubezpieczeń na Życie Europa S.A. which acquires 72% of the Company’s shares and Towarzystwo Ubezpieczeń Europa S.A. which acquires 8% of the Company’s shares (collectively the "Buyers"). Bank Millennium concluded also with the Buyers and the Company certain agreements concerning exclusive insurance distribution model, including a cooperation agreement, distribution agreements and agency agreements (the "Strategic Insurance Cooperation"). The Strategic Insurance Cooperation provides for long term (10 years) bancassurance liaison in relation specified insurance products linked to loans offered by Bank Millennium. On 29 March 2023, 80% of the shares (the "Shares") of Millennium Financial Services sp. z o.o. (the "Company") from the Bank to Towarzystwo Ubezpieczeń in Życie Europa S.A. which acquired 72% of the Company's shares and to Towarzystwo Ubezpieczeń Europa S.A. which acquired 8% of the Company's shares, as well as the payment of the price for the Shares to Bank Millennium S.A. The impacts of the Transaction are reflected in note 5 - Gains / (losses) on financial operations and note 16 - Gains/(losses) on disposal of subsidiaries and other assets. The sale of the Shares by Bank Millennium S.A. to the Buyers constitutes the conclusion of the Transaction, resulting in the recognition of the corresponding positive financial result and triggers the commencement of the Strategic Insurance Cooperation between the Bank and the Buyers, as described above. 2023 REPORT & ACCOUNTS 334 | 49. Fair value Fair value is based on market prices, whenever these are available. If market prices are not available, as occurs regarding many products sold to clients, fair value is estimated through internal models based on cash-flow discounting techniques. Cash-flows for the different instruments sold are calculated according to its financial characteristics and the discount rates used include both the market interest rate curve and the current conditions of the Group's pricing policy. Thus, the fair value obtained is influenced by the parameters used in the evaluation model that have some degree of judgment and reflects exclusively the value attributed to different financial instruments. However, it does not consider prospective factors, as the future business evolution. Therefore, the values presented cannot be understood as an estimate of the economic value of the Group. The main methods and assumptions used in estimating the fair value for the financial assets and financial liabilities are presented as follows: Cash and deposits at Central Banks and Loans and advances to credit institutions repayable on demand Considering the short term of these financial instruments, the amount in the balance sheet is a reasonable estimate of its fair value. Loans and advances to credit institutions, Deposits from credit institutions and Assets with repurchase agreements The fair value of these financial instruments is calculated discounting the expected principal and interest future cash flows for these instruments, considering that the payments of the instalments occur in the contractually defined dates. This update is made based on the prevailing market rate for the term of each cash flow plus the average spread of the production of the most recent 3 months of the same. For the elements with signs of impairment, the net impairment of these operations is considered as a reasonable estimate of their fair value, considering the economic valuation that is realized in the determination of this impairment. For resources from Central Banks, it was considered that the book value is a reasonable estimate of its fair value, given the nature of operations and the associated short-term. For the remaining loans and advances and deposits, the discount rate used reflects the current conditions applied by the Group on identical instruments for each of the different residual maturities (rates from the monetary market or from the interest rate swap market). Loans and advances to customers without defined maturity date Considering the short maturity of these financial instruments, the conditions of the portfolio are similar to conditions used at the date of the report. Therefore, the amount in the balance sheet is a reasonable estimate of its fair value (this class incorporates among other, factoring operations, current account credit, credit cards and overdrafts in demand deposits). Loans and advances to customers with defined maturity date The fair value of these instruments is calculated by discounting the expected principal and interest future cash flows for these instruments, considering that the payments of the instalments occur in the contractually defined dates. For loans with signs of impairment (Stage 3 loans), the net impairment of these operations is considered as a reasonable estimate of their fair value, considering the economic valuation that is realized in the determination of this impairment. 2023 REPORT & ACCOUNTS | 335 The discount rate used is the one that reflects the current rates of the Group for each of the homogeneous classes of this type of instruments and with similar residual maturity. The discount rate includes the market rates for the residual maturity date (rates from the monetary market or from the interest rate swap market) and the spread used at the date of the report, which was calculated from the average production of the three most recent months compared to the reporting date. Resources from customers and other loans The fair value of these financial instruments is calculated by discounting the expected principal and interest future cash flows for the referred instruments, considering that payments occur in the contractually defined dates. The discount rate used reflects the current conditions applied by the Group in similar instruments with a similar maturity. The discount rate includes the market rates of the residual maturity date (rates of monetary market or the interest rate swap market, at the end of the period) and the actual spread of the Group. This was calculated from the average production of the three most recent months compared to the reporting date. As in the case of credits without defined maturity, also for the resources from customers without defined maturity (demand deposits) it is considered that given the potential short term of the same, possibility of their liquidation at any time, the book value of these liabilities is a reasonable estimate of their fair value. The average discount rates for Loans and advances to credit institutions, Loans and advances to customers, Resources from credit institutions and Resources from customers are analysed as follows: Loans and advances to credit institutions Loans and advances to customers Resources from credit institutions Resources from customers 2023 2022 (restated) 2023 2022 (restated) 2023 2022 (restated) 2023 2022 (restated) EUR 4.31% 2.44% 4.76% 5.15% 4.28% 3.38% 4.32% 2.77% AOA n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. AUD n.a. n.a. n.a. n.a. n.a. n.a. 4.86% 3.76% CAD n.a. n.a. n.a. n.a. n.a. n.a. 5.43% 5.11% CHF n.a. n.a. 3.57% 4.48% n.a. n.a. 2.10% 1.58% CNY n.a. n.a. 2.95% n.a. n.a. n.a. 2.66% 1.64% DKK n.a. n.a. n.a. n.a. n.a. n.a. 3.93% 2.77% GBP n.a. n.a. n.a. n.a. 5.69% 4.07% 5.50% 4.18% HKD n.a. n.a. 4.24% 4.73% n.a. n.a. 5.30% 3.89% JPY n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. MOP n.a. n.a. 3.66% 4.17% n.a. n.a. 5.11% 4.89% MZN 19.51% 19.51% 23.62% 22.59% n.a. n.a. 16.41% 15.99% NOK n.a. n.a. n.a. 6.19% n.a. n.a. 5.09% 3.64% PLN 5.27% 7.27% 8.28% 10.01% 5.28% 7.39% 5.48% 7.00% SEK n.a. n.a. n.a. n.a. n.a. n.a. 4.37% 3.53% TRY n.a. n.a. n.a. n.a. n.a. n.a. 44.94% n.a. USD 5.78% 5.41% 6.34% 5.74% 5.85% 5.52% 5.03% 4.51% ZAR 8.69% 8.61% 13.08% 13.05% n.a. n.a. 5.87% 5.45% 2023 REPORT & ACCOUNTS 336 | Financial assets and liabilities measured at fair value through profit or loss (except derivatives), financial assets at fair value through other comprehensive income These financial instruments are accounted for at fair value. Fair value is based on market prices ("Bid-price"), whenever these are available. If market prices are not available, fair value is estimated through numerical models based on cash- flow discounting techniques, using the market interest rate curve adjusted for factors associated, predominantly credit risk and liquidity risk, determined in accordance with the market conditions and time frame. In this class of assets, the fair value corresponds to their book value. Market interest rates are determined based on information released by the suppliers of financial content - Reuters and Bloomberg - more specifically because of prices of interest rate swaps. The values for the very short-term rates are obtained from similar sources but regarding interbank money market. The interest rate curve obtained is calibrated with the values of interest rate short-term futures. Interest rates for specific periods of the cash flows are determined by appropriate interpolation methods. The same interest rate curves are used in the projection of the non- deterministic cash flows such as indexes. When optionality is involved, the standard templates (Black-Scholes, Black, Ho and others) are used considering the volatility areas applicable. Whenever there are no references in the market of sufficient quality or that the available models do not fully apply to meet the characteristics of the financial instrument, specific quotations supplied by an external entity are applied, typically a counterparty of the business. Financial assets measured at amortised cost - Debt securities These financial instruments are accounted at amortised cost net of impairment, as referred in the accounting policy described in note 1 C1.1.1. The fair value of this class of assets, is based on market prices, whenever these are available. If market prices are not available, fair value is estimated through numerical models based on cash-flow discounting techniques, using the market interest rate curve adjusted for factors associated, predominantly credit risk and liquidity risk, determined in accordance with the market conditions and time frame. Hedging and trading derivatives All derivatives are recorded at fair value. In case of derivative contracts that are quoted in organised markets their market prices are used. As for derivatives traded "Over-the-counter", it is applied methods based on numerical cash- flow discounting techniques and models for assessment of options considering variables of the market, particularly the interest rates on the instruments in question, and where necessary, their volatilities. Market interest rates are determined based on information released by the suppliers of financial content - Reuters and Bloomberg - more specifically because of prices of interest rate swaps. The values for the very short-term rates are obtained from similar sources but regarding interbank money market. The interest rate curve obtained is calibrated with the values of interest rate short-term futures. Interest rates for specific periods of the cash flows are determined by appropriate interpolation methods. The same interest rate curves are used in the projection of the non- deterministic cash flows such as indexes. 2023 REPORT & ACCOUNTS | 337 Debt securities non subordinated issued and subordinated debt For these financial instruments the fair value was calculated for components for which fair value is not yet reflected in the balance sheet. Fixed rate remunerated instruments for which the Group adopts "hedge-accounting", the fair value related to the interest rate risk is already recognised. For the fair value calculation, other components of risk were considered, in addition to the interest rate risk already recorded, when applicable. The fair value is based on market prices, whenever these are available. If market prices are not available, fair value is estimated through numerical models based on cash-flow discounting techniques, using the market interest rate curve adjusted by associated factors, predominantly credit risk and trading margin, the latter only in the case of issues placed on non-institutional customers of the Group. As original reference, the Group applies the curves resulting from the market interest rate swaps for each specific currency. The credit risk (credit spread) is represented by an excess from the curve of interest rate swaps established specifically for each term and class of instruments based on the market prices on equivalent instruments. For own issued debts placed among non-institutional customers of the Group, one more differential was added (commercial spread), which represents the margin between the financing cost in the institutional market and the cost obtained by distributing the respective instrument in the owned commercial network. The average of the reference rates of the yield curve obtained from the market prices of the different currencies used in the determination of the fair value of the issues is analysed as follows: 2023 2022 (restated) EUR PLN EUR PLN Placed in the institutional market Subordinated 4.98% 0.00% 9.33% 0.00% Senior 0.04% 0.00% 0.19% 0.00% Placed in retail Senior and collateralised 2.36% 0.04% 3.37% 6.19% For non subordinated debt securities issued, the fair value calculation focused on all the components of these instruments, as a result the difference determined is a positive amount of Euros 118,547,000 (31 December 2022: a positive amount of Euros 72,745,000) and includes a payable amount of Euros 95,357,000 (31 December 2022: a payable amount of Euros 53,495,000) which reflects the fair value of embedded derivatives and are recorded in financial assets and liabilities held for trading (note 24 and 37). The following table presents the interest rates used in the definition of the interest rate curves of main currencies, namely EUR, USD, GBP and PLN used to determine the fair value of the financial assets and liabilities of the Group: 2023 2022 (restated) EUR USD GBP PLN EUR USD GBP PLN 1 day 3.93% 5.28% 5.20% 5.74% 2.00% 4.45% 3.55% 6.76% 7 days 3.93% 5.29% 5.22% 5.74% 2.00% 4.47% 3.58% 6.76% 1 month 3.96% 5.37% 5.25% 5.70% 2.04% 4.57% 3.67% 6.83% 2 months 3.98% 5.41% 5.29% 5.74% 2.13% 4.66% 3.80% 6.87% 3 months 3.97% 5.44% 5.32% 5.78% 2.25% 4.77% 3.91% 6.92% 6 months 3.86% 5.37% 5.34% 5.72% 2.73% 5.07% 4.32% 7.04% 9 months 3.75% 5.33% 5.29% 5.71% 3.11% 5.28% 4.65% 7.09% 1 year 3.45% 5.05% 5.25% 5.50% 3.26% 5.11% 4.87% 7.35% 2 years 2.81% 4.37% 4.28% 4.94% 3.39% 4.69% 4.69% 6.97% 3 years 2.56% 4.04% 3.94% 4.62% 3.31% 4.33% 4.56% 6.53% 5 years 2.43% 3.81% 3.63% 4.41% 3.23% 4.02% 4.33% 6.20% 7 years 2.44% 3.75% 3.53% 4.41% 3.19% 3.89% 4.14% 6.13% 10 years 2.50% 3.74% 3.54% 4.49% 3.21% 3.82% 3.99% 6.20% 15 years 2.56% 3.76% 3.63% 4.66% 3.14% 3.79% 3.91% 6.45% 20 years 2.51% 3.74% 3.66% 4.75% 2.93% 3.72% 3.84% 6.49% 30 years 2.33% 3.57% 3.61% 4.75% 2.54% 3.48% 3.70% 6.49% 2023 REPORT & ACCOUNTS 338 | The following table shows the fair value of financial assets and liabilities of the Group, as at 31 December 2023: (Thousands of euros) 2023 Fair value through profit or loss Fair value through other comprehensive income Amortised cost Book value Fair value Assets Cash and deposits at Central Banks — — 4,545,526 4,545,526 4,545,526 Loans and advances to credit institutions repayable on demand — — 337,687 337,687 337,687 Financial assets at amortised cost Loans and advances to credit institutions — — 908,477 908,477 904,728 Loans and advances to customers (i) — — 53,305,159 53,305,159 52,389,825 Debt securities — — 17,579,136 17,579,136 17,260,082 Financial assets at fair value through profit or loss Financial assets held for trading 822,904 — — 822,904 822,904 Financial assets not held for trading mandatorily at fair value through profit or loss 467,254 — — 467,254 467,254 Financial assets designated at fair value through profit or loss 32,004 — — 32,004 32,004 Financial assets at fair value through other comprehensive income — 10,834,291 — 10,834,291 10,834,291 Hedging derivatives (ii) 40,628 — — 40,628 40,628 1,362,790 10,834,291 76,675,985 88,873,066 87,634,929 Liabilities Financial liabilities at amortised cost Resources from credit institutions — — 829,126 829,126 820,805 Resources from customers (i) — — 75,606,813 75,606,813 75,460,202 Non subordinated debt securities issued (i) — — 2,712,682 2,712,682 2,831,229 Subordinated debt (i) — — 1,397,425 1,397,425 1,456,002 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 207,387 — — 207,387 207,387 Financial liabilities designated at fair value through profit or loss 3,608,487 — — 3,608,487 3,608,487 Hedging derivatives (ii) 67,825 — — 67,825 67,825 3,883,699 — 80,546,046 84,429,745 84,451,937 (i) - The book value includes the effect of the adjustments resulting from the application of hedge accounting; (ii) - Includes a portion that is recognised in reserves in the application of accounting cash flow hedge. The Bank includes in the Book value column of the heading Financial assets at amortized cost - Debt securities the variation in the fair value of the hedged element attributable to the hedged risk (risk of interest rate) for securities to which the Bank is applying fair value hedge accounting. Until 31 December 2022, the Fair value column of the heading Financial assets at cost amortized - Debt securities corresponded to the fair value plus the variation in the fair value of the hedged element attributable to the hedged risk (interest rate risk) for the securities in which the Bank was applying fair value hedge accounting. Since 31 December 2022, the difference between the two columns presented (Book value and Fair value) corresponded to potential gains on debt securities recorded in accounting at amortized cost, not considering the effects of applying hedge accounting (alternatively compared to the initial acquisition cost). As of 30 June 2023, for these instruments, the Bank began to apply a strict definition of Fair value, no longer adding at fair value the change in the fair value of the hedged item attributable to the hedged risk. This way, as of that date, the differential between the two columns referred to above (Book value and Fair value) corresponds to potential gains on debt securities recorded in the accounting at amortized cost after considering the effects of applying hedge accounting. In order to ensure the consistency and comparability of the information disclosed, the information relating to 31 December 2022 was presented consistently with the applied with reference to 31 December 2023. 2023 REPORT & ACCOUNTS | 339 The following table shows the fair value of financial assets and liabilities of the Group, as at 31 December 2022: (Thousands of euros) 2022 (restated) Fair value through profit or loss Fair value through other comprehensive income Amortised cost Book value Fair value Assets Cash and deposits at Central Banks — — 6,022,001 6,022,001 6,022,001 Loans and advances to credit institutions repayable on demand — — 213,460 213,460 213,460 Financial assets at amortised cost Loans and advances to credit institutions — — 963,434 963,434 953,643 Loans and advances to customers (i) — — 54,675,793 54,675,793 53,436,993 Debt securities — — 13,035,582 13,035,582 12,248,074 Financial assets at fair value through profit or loss Financial assets held for trading 766,597 — — 766,597 766,597 Financial assets not held for trading mandatorily at fair value through profit or loss 552,679 — — 552,679 552,679 Financial assets at fair value through other comprehensive income — 7,461,553 — 7,461,553 7,461,553 Hedging derivatives (ii) 59,703 — — 59,703 59,703 1,378,979 7,461,553 74,910,270 83,750,802 81,714,703 Liabilities Financial liabilities at amortised cost Resources from credit institutions — — 1,468,360 1,468,360 1,453,270 Resources from customers (i) — — 75,430,143 75,430,143 75,129,795 Non subordinated debt securities issued (i) — — 1,482,086 1,482,086 1,554,561 Subordinated debt (i) — — 1,333,056 1,333,056 1,305,013 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 241,506 — — 241,506 241,506 Financial liabilities designated at fair value through profit or loss 1,817,678 — — 1,817,678 1,817,678 Hedging derivatives (ii) 178,000 — — 178,000 178,000 2,237,184 — 79,713,645 81,950,829 81,679,823 (i) - The book value includes the effect of the adjustments resulting from the application of hedge accounting; (ii) - Includes a portion that is recognised in reserves in the application of accounting cash flow hedge. The Group classified the financial instruments recorded in the balance sheet at fair value in accordance with the hierarchy established in IFRS 13. The fair value of financial instruments is determined using quotations recorded in active and liquid markets, considering that a market is active and liquid whenever its stakeholders conduct transactions on a regular basis giving liquidity to the instruments traded. When it is verified that there are no transactions that regularly provide liquidity to the traded instruments, valuation methods and techniques are used to determine the fair value of the financial instruments. 2023 REPORT & ACCOUNTS 340 | Level 1 - With quotation in active market In this category are included, in addition to financial instruments traded on a regulated market, bonds and units of investment funds valued based on the prices disclosed through trading systems. The classification of the fair value of level 1 is used when: i. there is a firm daily enforceable quotation for the financial instruments concerned, or; ii. there is a quotation available in market information systems that aggregate multiple prices of various stakeholders. Level 2 - Valuation methods and techniques based on market data Financial instruments, when there are no regular transactions in the active and liquid markets (level 1), are classified in level 2, according to the following rules: i. failure to comply with the rules defined for level 1, or; ii. they are valued based on valuation methods and techniques that use mostly observable market data (interest rate or exchange rate curves, credit curves, etc.). Level 2 includes over-the-counter derivative financial instruments contracted with counterparties with which the Bank maintains collateral agreements (ISDAs with Credit Support Annex (CSA)). In addition, derivative financial instruments traded in the over-the-counter market, which, despite not having CSA agreements, the non-observable market data component (i.e., internal ratings, default probabilities determined by internal models, etc.) incorporated in the estimation of CVA/DVA is not significant in the overall value of the derivative. In order to assess the significance of this component, the Bank defined a quantitative relevance criterion and performed a qualitative sensitivity analysis on the valuation component that includes unobservable market data. Level 3 - Valuation methods and techniques based on data not observable in the market If the level 1 or level 2 criteria are not met, financial instruments should be classified in level 3, as well as in situations where the fair value of financial instruments results from the use of information not observable in the market, such as: - financial instruments which are not classified as level 1 and which are valued using evaluation methods and techniques without being known or where there is consensus on the criteria to be used, namely: i. - those measured using comparative price analysis of financial instruments with risk and return profile, typology, seniority or other similar factors, observable in the active and liquid markets; ii. - those measured based on performance of impairment tests, using performance indicators of the underlying transactions (e.g. default probability rates of the underlying assets, delinquency rates, evolution of the ratings, etc.); iii. - those measured taking as reference the NAV (Net Asset Value) disclosed by the management entities of securities/ real estate/other investment funds not listed on a regulated market. Level 3 includes over-the-counter derivative financial instruments that have been contracted with counterparties with which the Bank does not maintain collateral exchange agreements, and whose unobservable market data component incorporated in the estimation of the value adjustment. 2023 REPORT & ACCOUNTS | 341 The following table shows, by valuation levels, the fair value of financial assets and liabilities of the Group as at 31 December 2023: (Thousands of euros) 2023 Level 1 Level 2 Level 3 Total Assets Cash and deposits at Central Banks 4,545,526 — — 4,545,526 Loans and advances to credit institutions repayable on demand 337,687 — — 337,687 Financial assets at amortised cost Loans and advances to credit institutions — — 904,728 904,728 Loans and advances to customers — — 52,389,825 52,389,825 Debt securities 13,626,971 935,239 2,697,872 17,260,082 Financial assets at fair value through profit or loss Financial assets held for trading 405,585 84,614 332,705 822,904 Financial assets not held for trading mandatorily at fair value through profit or loss — — 467,254 467,254 Financial assets designated at fair value through profit or loss 32,004 — — 32,004 Financial assets at fair value through other comprehensive income 8,301,377 2,431,483 101,431 10,834,291 Hedging derivatives — 40,628 — 40,628 27,249,150 3,491,964 56,893,815 87,634,929 Liabilities Financial liabilities at amortised cost Resources from credit institutions — — 820,805 820,805 Resources from customers — — 75,460,202 75,460,202 Non subordinated debt securities issued — — 2,831,229 2,831,229 Subordinated debt — — 1,456,002 1,456,002 Financial liabilities at fair value through profit or loss Financial liabilities held for trading — 108,767 98,620 207,387 Financial liabilities designated at fair value through profit or loss 989,703 — 2,618,784 3,608,487 Hedging derivatives — 67,825 — 67,825 989,703 176,592 83,285,642 84,451,937 2023 REPORT & ACCOUNTS 342 | The following table shows, by valuation levels, the fair value of financial assets and liabilities of the Group as at 31 December 2022: (Thousands of euros) 2022 (restated) Level 1 Level 2 Level 3 Total Assets Cash and deposits at Central Banks 6,022,001 — — 6,022,001 Loans and advances to credit institutions repayable on demand 213,460 — — 213,460 Financial assets at amortised cost Loans and advances to credit institutions — — 953,643 953,643 Loans and advances to customers — — 53,436,993 53,436,993 Debt securities 9,462,042 694,560 2,091,472 12,248,074 Financial assets at fair value through profit or loss Financial assets held for trading 389,954 81,347 295,296 766,597 Financial assets not held for trading mandatorily at fair value through profit or loss — — 552,679 552,679 Financial assets at fair value through other comprehensive income 6,489,282 862,566 109,705 7,461,553 Hedging derivatives — 59,703 — 59,703 22,576,739 1,698,176 57,439,788 81,714,703 Liabilities Financial liabilities at amortised cost Resources from credit institutions — — 1,453,270 1,453,270 Resources from customers — — 75,129,795 75,129,795 Non subordinated debt securities issued — — 1,554,561 1,554,561 Subordinated debt — — 1,305,013 1,305,013 Financial liabilities at fair value through profit or loss Financial liabilities held for trading — 186,130 55,376 241,506 Financial liabilities designated at fair value through profit or loss 850,681 — 966,997 1,817,678 Hedging derivatives — 178,000 — 178,000 850,681 364,130 80,465,012 81,679,823 2023 REPORT & ACCOUNTS | 343 For financial assets classified at level 3 recorded in the balance sheet at fair value, the changes occurred during 2023 is presented as follows: (Thousands of euros) 2023 Financial assets Held for trading Not held for trading mandatorily at fair value through profit or loss At fair value through other comprehensive income Financial liabilities held for trading () Balance as at 1 January 295,296 552,679 109,705 54,354 Gains / (losses) recognised in profit or loss Results on financial operations 11,032 (5,722) — 203 Net interest income (31) 2,202 — — Purchases / (Sales, repayments or amortisations) 26,408 (86,915) (14,487) 43,437 Gains / (losses) recognised in reserves — — 6,124 — Exchange differences — 5,010 (626) — Accruals of interest — — 715 — Balance as at 31 December 332,705 467,254 101,431 97,994 () Do not include short sales in the amount of Euros 626,000 (note 37). For financial assets classified at level 3 recorded in the balance sheet at fair value, the changes occurred during 2022 is presented as follows: (Thousands of euros) 2022 (restated) Financial assets Held for trading Not held for trading mandatorily at fair value through profit or loss At fair value through other comprehensive income Financial liabilities held for trading () Balance as at 1 January 263,157 990,938 123,944 6,576 Gains / (losses) recognised in profit or loss Results on financial operations (10,027) (90,286) — 47,221 Net interest income — 6,109 — — Transfers between levels (1,860) — — (145) Purchases / (Sales, repayments or amortisations) 44,028 (351,744) (11,130) 702 Gains / (losses) recognised in reserves — — (4,138) — Exchange differences — (2,338) 1,061 — Accruals of interest (2) — (32) — Balance as at 31 December 295,296 552,679 109,705 54,354 () Do not include short sales in the amount of Euros 1,022,000 (note 37). 2023 REPORT & ACCOUNTS 344 | 50. Post-employment benefits and other long-term benefits The Group assumed the liability to pay to their employees' pensions on retirement or disability and other obligations, in accordance with the accounting policy described in note 1 R. The number of participants in the Pension Fund of Banco Comercial Português covered by this pension plan and other benefits is analysed as follows: Number of participants 2023 2022 (restated) Pensioners 17,121 17,111 Former Attendees Acquired Rights 3,452 3,495 Employees 6,345 6,370 26,918 26,976 In accordance with the accounting policy described in note 1 R, the Group's retirement pension liabilities and other benefits and the respective coverage, based on the Projected Unit Credit method are analysed as follows: (Thousands of euros) 2023 2022 (restated) Actual amount of the past services Pensioners 2,318,761 2,126,809 Former attendees acquired rights 183,252 161,387 Employees 577,562 502,428 3,079,575 2,790,624 Pension fund value (3,469,833) (3,384,118) Net (assets) / liabilities in balance sheet (note 32) (390,258) (593,494) Accumulated actuarial deviations and changing assumptions effect recognised in Other comprehensive income 3,375,415 3,152,535 In 2017, following the authorization of the Insurance and Pension Funds Supervisory Authority, the BCP group's pension fund agreement was amended. The main purpose of this process was to incorporate into the pension fund the changes made to the Group's Collective Labour Agreement (CLA) in terms of retirement benefits and to pass on to the pension fund the responsibilities that were directly in charge by the companies (extra-fund liabilities). The pension fund has a share exclusively related to the financing of these liabilities, which under the scope of the fund is called an Additional Complement, which as at 31 December 2023 amounts to Euros 195,420,000 (31 December 2022: Euros 197,486,000). The End of Career Premium also came to be borne by the pension fund under the basic pension plan. In 2023, negotiations continued with all the unions subscribing to the Group's Collective Labour Agreements, for the conclusion of the full review of the respective clauses, negotiations which are still ongoing. At the same time, negotiations took place with all the unions that subscribed the Group's Collective Labour Agreements, for the review of the Salary Tables and remaining pecuniary clauses relating to the year 2023, having been agreed on 9 and 17 October with all the Unions subscribing to the Group's Collective Labour Agreements, the update of the Salary Tables in 2023 with differentiated increases by contractual level between 4.00% and 7.80%. An increase of 4.50% was agreed for the Bank's Contributions to SAMS and other pecuniary clauses, such as study subsidies, diuturnities, among others, and an increase of 21.43% was agreed for the lunch subsidy, whose daily value increased to Euros 12.75. The agreed updates took effect on 1 January 2023, with the exception of remuneration related to subsistence and travel allowances, which were updated after the agreed updates were operationalized. Regarding the unions SNQTB – Sindicato Nacional dos Quadros e Técnicos Bancários e SIB – Sindicato Independente da Banca, an agreement was also reached regarding the revision of the Salary Tables and other pecuniary clauses relating to the year 2022, as already agreed in 2022 with the remaining unions. 2023 REPORT & ACCOUNTS | 345 The change in the projected benefit obligations is analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance as at 1 January 2,790,624 3,497,622 Service cost (9,616) (11,727) Interest cost / (income) 111,658 67,059 Actuarial losses / (gains) Not related to changes in actuarial assumptions 42,609 58,590 Related to changes in assumptions 279,783 (693,673) Payments (149,634) (136,338) Early retirement programmes and terminations by mutual agreement 7,043 2,223 Contributions of employees 7,108 6,868 Balance at the end of the year 3,079,575 2,790,624 The pensions paid by the Fund, including the Additional Complement, amounts to Euros 149,634,000 (31 December 2022: Euros 136,338,000). The liabilities with health benefits are fully covered by the Pension Fund and correspond to Euros 258,840,000 (31 December 2022: Euros 241,345,000). Additionally, regarding the coverage of some benefit obligations related to pensions, the Bank contracted with Ocidental Vida the acquisition of perpetual annuities for which the total liability amounts to Euros 33,765,000 (31 December 2022: Euros 39,093,000), in order to pay: i) pensions of former Group's Board Members in accordance with the Bank's Board Members Retirement Regulation; ii) pensions and complementary pensions to pensioners in accordance with the Pension Fund of the BCP Group employees established in 28 December 1987, as also to pensioners, in accordance with other Pension Funds, that were incorporated after on the BCP Group Pension Fund and which were planed that the retirement benefits should be paid through the acquisition of insurance policies, in accordance with the Decree - Law no. 12/2006. Ocidental Vida is 100% owned by Ageas Group and Ageas Group is 49% owned by the BCP Group. 2023 REPORT & ACCOUNTS 346 | During 2023 and 2022, the changes occurred in the plan's assets value is analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance as at 1 January 3,384,118 3,699,988 Employees' contributions 7,108 6,868 Actuarial gains / (losses) 99,512 (259,394) Payments (149,634) (136,338) Expected return on plan assets 128,720 72,988 Amount transferred to the Fund resulting from acquired rights unassigned related to the Complementary Plan 9 6 Balance at the end of the year 3,469,833 3,384,118 The elements of the Pension Fund's assets are analysed as follows: (Thousands of euros) 2023 2022 (restated) Asset class Assets with market price in active market Remaining Total Portfolio Assets with market price in active market Remaining Total Portfolio Shares 330,370 1,262 331,632 96,817 1,183 98,000 Bonds and other fixed income securities 1,995,531 — 1,995,531 1,120,132 — 1,120,132 Participations units in investment funds — 497,830 497,830 — 969,232 969,232 Participation units in real estate funds — 298,969 298,969 — 308,404 308,404 Properties — 264,968 264,968 — 275,493 275,493 Loans and advances to credit institutions and others — 80,903 80,903 — 612,857 612,857 2,325,901 1,143,932 3,469,833 1,216,949 2,167,169 3,384,118 The balance Properties includes buildings booked in the Fund's financial statements and used by the Group's companies which amounts to Euros 227,346,000 (31 December 2022: Euros 238,202,000). The securities issued by Group's companies accounted in the portfolio of the Fund are analysed as follows: (Thousands of euros) 2023 2022 (restated) Shares — 4,301 Bonds and other fixed income securities 1,812 2,805 Loans and advances to credit institutions and others 48,438 128,476 50,250 135,582 2023 REPORT & ACCOUNTS | 347 The evolution of net (assets) / liabilities in the balance sheet is analysed as follows: (Thousands of euros) 2023 2022 (restated) Balance as at 1 January (593,494) (202,366) Recognised in the income statement: Service cost (9,616) (11,727) Interest cost / (income) net of the balance liabilities coverage (17,062) (5,929) Cost with early retirement programs 7,043 2,223 Amount transferred to the Fund resulting from acquired rights unassigned related to the Complementary Plan (9) (6) (19,644) (15,439) Recognised in the statement of comprehensive income: Actuarial (gains) / losses Not related to changes in actuarial assumptions Difference between the estimated and the actual income of the fund (99,512) 259,394 Difference between expected and effective obligations 42,609 58,590 Arising from changes in actuarial assumptions 279,783 (693,673) 222,880 (375,689) Balance at the end of the year (390,258) (593,494) The estimate of contributions to be made in 2024, by the employees, for the Defined Benefit Plan amount to Euros 7,130,000. In accordance with IAS 19, the Group accounted for (income)/costs with post-employment benefits, which is analysed as follows: (Thousands of euros) 2023 2022 (restated) Current service cost (9,616) (11,727) Net interest cost /(income) in the liability coverage balance (17,062) (5,929) Cost with early retirement programs 7,043 2,223 Amount transferred to the Fund resulting from acquired rights unassigned related to the Complementary Plan (9) (6) (Income) / Cost of the year (19,644) (15,439) Within the framework of the three-party agreement between the Government, the Banking and the Trade Unions, the bank's employees in activity as at 31 December 2010 under the CAFEB / CLA regime were integrated into the General Social Security System (RGSS) with effect from 1 January 2011. The integration led to an effective decrease in the present value of the total benefits reported at the retirement age to be borne by the Pension Fund, and this effect is recorded on a straight-line basis over the average period of active life until the normal retirement age is reached. The calculation of the liability for pensions carried out periodically by the actuary considers this effect and is calculated considering the actuarial assumptions in force, ensuring that the liabilities calculated with reference to 31 December 2010, not considering the effect of the integration of bank employees into the General Social Security Scheme are fully covered and deducted from the amount of the effect recognised until the date. The component of this effect for the year is recognised under the heading "Current service costs". 2023 REPORT & ACCOUNTS 348 | Board of Directors Plan As the Board of Directors Retirement Regulation establish that the pensions are subjected to an annual update, and as it is not common in the insurance market the acquisition of perpetual annuities including variable updates in pensions, the Bank determined, the liability to be recognised on the financial statements related to that update, taking into consideration current actuarial assumptions. In accordance with the remuneration policy of the Board Members, the Group has the responsibility of supporting the cost with: i) the retirement pensions of former Group's Executive Board Members; and ii) the Complementary Plan for these members in accordance with the applicable rules funded through the Pension Fund, Extra-fund and perpetual annuities. In order to cover liabilities with pensions to former members of the Executive Board of Directors, under the Bank's Board of Directors Retirement Regulation the Bank contracted with Ocidental Vida to purchase immediate life annuity insurance policies. Assumptions used in the liability's assessment Considering the market indicators, particularly the inflation rate estimates and the long-term interest rate for Euro Zone, as well as the demographic characteristics of its employees, the Group considered the following actuarial assumptions for calculating the liabilities with pension obligations: 2023 2022 (restated) Salary growth rate (c) 2,65% in 2024; 1,9% in 2025 and 1,15% in the following years 3,75% in 2023; 2,25% in 2024 and 1% in the following years Pension's growth rate (c) 2,25% in 2024; 1,5% in 2025 and 0,75% in the following years 3,0% in 2023; 2,0% in 2024 and 0.75% in the following years Discount rate / Projected Fund's rate of return 3.53% 4.17% Mortality tables Men TV 88/90 less a year TV 88/90 less a year Women (a) TV 99/01 less 2 years TV 99/01 less 2 years Disability rate Non applicable Non applicable Turnover rate Non applicable Non applicable Normal retirement age (b) 66 years and 4 months 66 years and 7 months Total salary growth rate for Social Security purposes 1.75% 1.75% Revaluation rate of wages / pensions of Social Security 1% 1% a) The mortality table considered for women corresponds to TV 99/01 adjusted in less than 2 years (which implies an increase in hope life expectancy compared to that which would be considered in relation to their effective age). b) Retirement age is variable. The normal retirement age increases one month for each civil year and cannot be higher than the normal retirement age in force in the General Social Security Regime (RGSS). The normal retirement age in the RGSS is variable and depends on the evolution of the average life expectancy at 65 years of age. In 2022 the retirement age was 66 years and 7 months. For 2023 and 2024, the normal retirement age in the RGSS is 66 years and 4 months. The reduction in the retirement age was due to the evolution of the average life expectancy at 65 years in Portugal. For the projection of life expectancy’s increment, it was considered an increase of one year in every 10 years, with the maximum retirement age being set at 67 years and 2 months. c) This rate refers to the growth for the years following the reporting year. The assumptions used on the calculation of the actuarial value of the liabilities are in accordance with the requirements of IAS 19, and are determined based on the references of the entities under common control. No disability decreases are considered in the calculation of the liabilities. The discount rate used to update the Bank's pension fund liabilities, regarding the defined benefit pension plans of its employees and managers, was determined based on an analysis carried out on a set of available information, which includes, among other elements, the market references for this indicator published by internationally recognized specialized entities and which are based, as defined by IAS 19, on market yields of a universe of high quality bond issues (low risk), different maturities, called in Euros and relating to a diverse and representative range of issuers (non- sovereign). With reference to 31 December 2023, the Group used a discount rate of 3.53% (31 December 2022: 4.17%). 2023 REPORT & ACCOUNTS | 349 The Actuarial gains are related to the difference between the actuarial assumptions used for the estimation of the liabilities and the values verified and the change in actuarial assumptions, are analysed as follows: (Thousands of euros) Actuarial (gains) / losses 2023 2022 (restated) Values effectively verified in % Amount of deviations Values effectively verified in % Amount of deviations Deviation between expected and actual liabilities 42,609 58,590 Changes on the assumptions: Discount rate 225,566 (1,108,506) Salary and pensions growth rate 54,217 279,108 Mortality tables — 63,571 Other changes — 72,154 Deviation between expected income and income from funds 7.07% (99,512) (5.07)% 259,394 222,880 (375,689) In accordance with IAS 19, the sensitivity analysis to changes in assumptions, is as follows: (Thousands of euros) Impact resulting from changes in financial assumptions 2023 2022 (restated) -0.25% 0.25% -0.25% 0.25% Discount rate 99,220 (92,532) 87,938 (82,095) Pension's increase rate (104,068) 108,563 (98,276) 102,703 Salary growth rate (25,075) 29,118 (20,620) 23,675 (Thousands of euros) Impact resulting from changes in demographic assumptions 2023 2022 (restated) - 1 year + 1 year - 1 year + 1 year Changes in mortality table () 100,138 (100,538) 83,017 (83,816) () The impact of 1 year reduction in the mortality table implies an increase in the average life expectancy Defined contribution plan According to what is described in accounting policy 1 R3, in the scope of the Defined Contribution Plan provided for the BCP Pension Fund of the BCP Group for employees who have been admitted until 1 July 2009, it was accounted for a cost in 2023 of Euros 2,061,000 (2022: cost of 2,026,000) as an estimated contribution given that the Group estimates that the following requirements will be met, cumulatively: (i) the previous year BCP's ROE equals or exceeds the rate of government bonds of 10 years plus 5 percentage points, and (ii) distributable profits or reserves exist in the accounts of Banco Comercial Português. For employees who have been admitted after 1 July 2009, are made monthly contributions equal to 1.5% of the monthly remuneration received by employees in the current month, either by themselves or by the Group and employees. This contribution has a mandatory character and is defined in the Collective Labour Agreement of the BCP Group and does not have a performance criterion. The Group accounted for staff costs in 2023 the amount of Euros 384,000 (2022: Euros 307,000) related to this contribution. 2023 REPORT & ACCOUNTS 350 | 51. Related parties As defined by IAS 24, are considered related parties of the Group, the companies detailed in note 60 - List of subsidiary and associated companies of Banco Comercial Português Group, the Pension Fund, the members of the Board of Directors and key management members. The key management members are the first line Directors. Beyond the members of the Board of Directors and key management members, are also considered related parties, people who are close to them (family relationships) and entities controlled by them or in whose management they have significant influence. As the transactions with subsidiaries are eliminated in consolidation, these are not included in the notes to the Group's consolidated financial statements. According to Portuguese law, namely under Article no. 109 of the General Law for Credit Institutions and Financial Companies and also in accordance with Article no. 33 of Notice 3/2020 of the Bank of Portugal, are considered related parties as well, the qualified shareholders of Banco Comercial Português, S.A. and the entities controlled by them or with which they are in a group relationship. The list of the qualified shareholders is detailed in note 41. A) Balances and transactions with qualified shareholders The balances reflected in assets of consolidated balance sheet with qualified shareholders, are analysed as follows: (Thousands of euros) 2023 2022 (restated) Assets Financial assets at amortised cost Loans and advances to customers 110,527 97,744 Debt securities 52,548 79,787 163,075 177,531 Liabilities Resources from customers 48,099 96,159 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 2,138 4,287 50,237 100,446 The values of Financial assets at amortized cost are net of impairment in the amount of Euros 1,481,000 (31 December 2022: Euros 914,000) for Loans and advances to customers and for Debt securities the amount of Euros 237,000 (31 December 2022: Euros 257,000). 2023 REPORT & ACCOUNTS | 351 The transactions with qualified shareholders, reflected in the consolidated income statement items, are as follows: (Thousands of euros) 2023 2022 (restated) Income Interest and similar income 13,280 5,989 Commissions 476 752 13,756 6,741 Costs Interest and similar expenses 179 — Commissions 76 82 255 82 The balances with qualified shareholders, reflected in the guarantees granted and revocable and irrevocable credit lines, are as follows: (Thousands of euros) 2023 2022 (restated) Guarantees granted 3,536 2,273 Revocable credit lines 5,622 18,171 9,158 20,444 The Group has accounted for provisions for guarantees granted the amount of Euros 8,000 (31 December 2022: Euros 3,000) and provisions for revocable credit lines the amount of Euros 141,000 (31 December 2022: Euros 229,000). B) Balances and transactions with members of the Board of Directors and key management members The balances with related parties discriminated in the following table, included on the consolidated balance sheet, are analysed as follows: (Thousands of euros) Loans and advances to customers Resources from customers 2023 2022 (restated) 2023 2022 (restated) Board of Directors Non-executive directors 8 10 8,900 8,180 Executive Committee () 27 46 2,918 2,716 Closely related people 19 14 2,651 2,629 Controlled entities — — 24 24 Key management members Key management members 5,416 6,575 10,934 10,180 Closely related people 1,948 2,475 4,433 4,497 Controlled entities 705 928 3,276 2,613 8,123 10,048 33,136 30,839 () The item Loans to Customers corresponds to mortgage loans granted prior to the respective election and to the amount used from private credit cards which must be settled on the maturity date. In accordance with Article 85, no. 9 of RGICSF, no credits were granted during 2023 and 2022. 2023 REPORT & ACCOUNTS 352 | The transactions with related parties discriminated in the following table, included in income items of the consolidated income statement, are as follows: (Thousands of euros) Interest and similar income Commissions income 2023 2022 (restated) 2023 2022 (restated) Board of Directors Non-executive directors — — 27 29 Executive Committee 1 — 23 10 Closely related people — — 9 9 Key management members Key management members 174 41 62 62 Closely related people 88 22 39 43 Controlled entities 63 17 31 19 326 80 191 172 The transactions with related parties discriminated in the following table, included in cost items of the consolidated income statement, are as follows: (Thousands of euros) Interest and similar expense Commissions' expense 2023 2022 (restated) 2023 2022 (restated) Board of Directors Non-executive directors 128 19 — — Executive Committee () 26 — — 1 Closely related people 33 9 — — Key management members Key management members 101 6 1 4 Closely related people 20 2 1 2 Controlled entities 21 — 2 2 329 36 4 9 The revocable credit lines granted by the Group to the following related parties are as follows: Guarantees granted Revocable credit lines 2023 2022 (restated) 2023 2022 (restated) Board of Directors Non-executive directors — — 143 113 Executive Committee () — — 160 140 Closely related people — — 63 43 Key management members Key management members 5 5 844 825 Closely related people — — 180 164 Controlled entities — — 622 525 5 5 2,012 1,810 () Corresponds to the maximum authorized and unused limit of private credit cards and overdraft authorization in a salary account under the same regime as all the Bank's other employees. 2023 REPORT & ACCOUNTS | 353 The shareholder and bondholder position of members of the Board of Directors, Key management members and people closely related to the previous categories, as well as the movements occurred during 2023, are as follows: Number of securities Unit price Euros Shareholders/Bondholders Security 2023 2022 (restated) Acquisitions Disposals Date MEMBERS OF BOARD OF DIRECTORS Altina de Fátima Sebastián González Villamarin BCP Shares 0 0 Ana Paula Alcobia Gray BCP Shares 0 0 Cidália Maria da Mota Lopes BCP Shares 2,184 2,184 Fernando da Costa Lima BCP Shares 18,986 18,986 João Nuno Oliveira Jorge Palma BCP Shares 1,723,818 1,364,642 636,836 (a) 277,660 (b) 23/6/2023 0.2200 Jorge Manuel Baptista Magalhães Correia BCP Shares 388,500 388,298 202 20/1/2023 0.1900 Bonds (i) 1 1 Bonds (ii) 1 1 Bonds (iv) 1 0 1 25/9/2023 100,000 José Miguel Bensliman Schorcht da Silva Pessanha BCP Shares 1,504,495 1,177,152 582,460 (a) 255,117 (b) 23/6/2023 0.2200 José Pedro Rivera Ferreira Malaquias BCP Shares 9,808 9,808 Júlia Gu (Xiao Xu Gu) BCP Shares 0 0 Lingjiang Xu BCP Shares 0 0 Lingzi Yuan (Smilla Yuan) BCP Shares 0 0 Maria José Henriques Barreto de Matos de Campos BCP Shares 2,014,344 1,554,512 574,790 (a) 114,958 (b) 23/6/2023 0.2200 Miguel de Campos Pereira de Bragança BCP Shares 2,111,178 1,725,908 674,727 (a) 289,457 (b) 23/6/2023 0.2200 Miguel Maya Dias Pinheiro BCP Shares 2,501,557 2,018,854 839,483 (a) 356,780 (b) 23/6/2023 0.2200 Nuno Manuel da Silva Amado BCP Shares 2,525,388 1,525,388 1,000,000 3/1/2023 0.1567 Bonds (i) 2 2 Bonds (ii) 2 2 Bonds (iii) 3 1 2 8/8/2023 100,000 Bonds (iv) 1 0 1 27/9/2023 100,000 Rui Manuel da Silva Teixeira BCP Shares 1,207,858 571,501 (a) 250,317 (b) 23/6/2023 0.2200 1,152,359 376,663 1/8/2023 0.2500 Valter Rui Dias de Barros BCP Shares 0 0 KEY MANAGEMENT MEMBERS Albino António Carneiro de Andrade BCP Shares 133,881 128,684 5,197 (a) 23/6/2023 0.2200 Alexandre Manuel Casimiro de Almeida BCP Shares 169,519 111,400 58,119 (a) 23/6/2023 0.2200 Américo João Pinto Carola BCP Shares 140,747 104,945 63,588 (a) 27,786 (b) 23/6/2023 0.2200 Ana Maria Jordão F. Torres Marques Tavares BCP Shares 255,931 215,340 63,819 (a) 23,228 (b) 23/6/2023 0.2200 Ana Patrícia Moniz Macedo BCP Shares 35,864 0 63,588 (a) 27,724 (b) 23/6/2023 0.2200 António Augusto Amaral de Medeiros BCP Shares 178,245 143,063 62,599 (a) 27,417 (b) 23/6/2023 0.2200 António Ferreira Pinto Júnior BCP Shares 11,842 11,842 António José Lindeiro Cordeiro BCP Shares 93,898 64,134 49,854 (a) 20,090 (b) 23/6/2023 0.2200 António Luís Duarte Bandeira BCP Shares 321,903 285,425 64,906 (a) 28,428 (b) 23/6/2023 0.2200 António Ricardo Fery Salgueiro Antunes BCP Shares 120,117 61,361 58,756 (a) 23/6/2023 0.2200 António Vítor Martins Monteiro BCP Shares 3,872 3,872 (i) - Fixed Rate Reset Perpetual Temporary Write Down Additional Tier 1 Capital Notes (ii) - BCP Tier 2 Subordinated Callable Notes (iii) - BCP 1.75% EUR 500M 6.5NC5.5 Social Senior Preferred Notes (iv) - BCP/2023 - BCP Senior Preferred Fiexed FLT OCT 2026 (a) - identifies the increment in shares during 2023 corresponding to the annual deferred variable compensation of previous years. (b) - identifies the shares used in sell-cover in 2023 related to the increment of shares of variable compensation. 2023 REPORT & ACCOUNTS 354 | Number of securities Unit price Euros Shareholders/Bondholders Security 2023 2022 (restated) Acquisitions Disposals Date Artur Frederico Silva Luna Pais BCP Shares 517,197 459,405 57,792 (a) 23/6/2023 0.2200 Belmira Abreu Cabral BCP Shares 129,190 96,604 57,978 (a) 25,392 (b) 23/6/2023 0.2200 Bernardo Roquette de Aragão de Portugal Collaço BCP Shares 89,825 54,362 62,103 (a) 26,640 (b) 23/6/2023 0.2200 Carlos Manuel da Silva Teixeira BCP Shares 0 0 Chi Wai Leung (Timothy) BCP Shares 43,768 26,582 17,186 (a) 23/6/2023 0.2200 Constantino Alves Mousinho BCP Shares 108,170 72,352 35,818 (a) 23/6/2023 0.2200 Fernando Maria Cardoso Rodrigues Bicho BCP Shares 237 237 Filipe Maria de Sousa Ferreira Abecasis BCP Shares 174,218 135,398 68,947 (a) 30,127 (b) 23/6/2023 0.2200 Francisco António Caspa Monteiro BCP Shares 225,015 186,219 69,030 (a) 30,234 (b) 23/6/2023 0.2200 Gonçalo Nuno Belo de Almeida Pascoal BCP Shares 153,373 119,771 58,846 (a) 25,244 (b) 23/6/2023 0.2200 Hugo Miguel Martins Resende BCP Shares 178,524 139,589 69,030 (a) 30,095 (b) 23/6/2023 0.2200 João Adriano Azevedo Seixas Vale BCP Shares 43,222 43,222 João Brás Jorge BCP Shares 91,709 91,709 João Manuel Taveira Pinto Santos Paiva BCP Shares 259,116 190,677 68,439 (a) 23/6/2023 0.2200 Jorge Filipe Nogueira Freire Cortes Martins BCP Shares 107,720 48,257 59,463 (a) 23/6/2023 0.2200 Jorge Manuel Machado de Sousa Góis BCP Shares 190,352 134,204 56,148 (a) 23/6/2023 0.2200 Jorge Manuel Magalhães Oliveira Pereira BCP Shares 57,488 25,460 56,785 (a) 24,757 (b) 23/6/2023 0.2200 Jorge Manuel Nobre Carreteiro BCP Shares 55,988 55,776 (a) 23/6/2023 0.2200 41,000 5/9/2023 0.2630 80,764 10,000 4/12/2023 0.3270 Jorge Octávio Neto dos Santos BCP Shares 471,191 471,191 José Artur Gouveia Coelho Caetano BCP Shares 0 0 José Carlos Benito Garcia de Oliveira BCP Shares 37,941 37,941 José Gonçalo Prior Regalado BCP Shares 147,115 79,184 67,931 (a) 23/6/2023 0.2200 José Guilherme Potier Raposo Pulido Valente BCP Shares 315,008 280,081 62,144 (a) 27,217 (b) 23/6/2023 0.2200 José Maria Gonçalves Pereira Brandão de Brito BCP Shares 87,138 55,225 52,660 (a) 20,747 (b) 23/6/2023 0.2200 Liliana Marisa Catoja Costa Lemos BCP Shares 400 400 Luis Miguel Manso Correia dos Santos BCP Shares 285,820 216,790 69,030 (a) 23/6/2023 0.2200 Maria Constança C. Brandão Amado Fonseca G. Santos BCP Shares 800 800 Maria de Fátima Coelho Dias BCP Shares 0 0 Maria de Los Angeles Sanchez Sanchez BCP Shares 61,375 41,011 36,232 (a) 15,868 (b) 23/6/2023 0.2200 Maria Helena Soledade Nunes Henriques BCP Shares 268,800 232,863 63,943 (a) 28,006 (b) 23/6/2023 0.2200 Maria Manuela de Araújo Mesquita Reis BCP Shares 228,036 190,663 62,599 (a) 25,226 (b) 23/6/2023 0.2200 Mário António Pinho Gaspar Neves BCP Shares 142,301 108,172 60,616 (a) 26,487 (b) 23/6/2023 0.2200 Mário Madeira Robalo Fernandes BCP Shares 220,539 156,951 63,588 (a) 23/6/2023 0.2200 Nelson Luís Vieira Teixeira BCP Shares 108,936 7,200 16/2/2023 0.2100 22,200 24/2/2023 0.2250 118,570 68,356 (a) 29,322 (b) 23/6/2023 0.2200 Nuno Alexandre Ferreira Pereira Alves BCP Shares 251,695 183,959 67,736 (a) 23/6/2023 0.2200 Nuno Miguel Nobre Botelho BCP Shares 144,294 85,625 58,669 (a) 23/6/2023 0.2200 Pedro José Mora de Paiva Beija BCP Shares 138,202 50,673 17/1/2023 0.1934 69,030 (a) 23/6/2023 0.2200 173,559 17,000 21/12/2023 0.2710 Pedro Manuel Francisco da Silva Dias BCP Shares 152,178 111,149 68,493 (a) 27,464 (b) 23/6/2023 0.2200 Pedro Manuel Macedo Vilas Boas BCP Shares 146,870 66,368 (a) 23/6/2023 0.2200 70,000 143,238 5/12/2023 0.3310 Pedro Manuel Rendas Duarte Turras BCP Shares 146,367 105,371 68,439 (a) 27,443 (b) 23/6/2023 0.2200 (a) - identifies the increment in shares during 2023 corresponding to the annual deferred variable compensation of previous years. (b) - identifies the shares used in sell-cover in 2023 related to the increment of shares of variable compensation. 2023 REPORT & ACCOUNTS | 355 Number of securities Unit price Euros Shareholders/Bondholders Security 2023 2022 (restated) Acquisitions Disposals Date Ricardo Potes Valadares BCP Shares 100,121 68,014 55,354 (a) 23,247 (b) 23/6/2023 0.2200 Rosa Maria Ferreira Vaz Santa Bárbara BCP Shares 117,023 68,163 5/1/2023 0.1712 87,324 68,439 (a) 29,975 (b) 23/6/2023 0.2200 Bonds (i) 1 1 Rui Artur dos Santos Baptista BCP Shares 2,500 2,500 8/8/2023 0.2500 Rui Emanuel Agapito Silva BCP Shares 145,528 109,252 64,315 (a) 28,039 (b) 23/6/2023 0.2200 Rui Fernando da Silva Teixeira BCP Shares 221,892 186,154 63,588 (a) 27,850 (b) 23/6/2023 0.2200 Rui Manuel Pereira Pedro BCP Shares 408,353 339,819 68,534 (a) 23/6/2023 0.2200 Rui Miguel Alves Costa BCP Shares 348,163 279,133 69,030 (a) 23/6/2023 0.2200 Rui Nelson Moreira de Carvalho Maximino BCP Shares 146,835 110,273 64,823 (a) 28,261 (b) 23/6/2023 0.2200 Rui Pedro da Conceição Coimbra Fernandes BCP Shares 143,793 102,700 21/6/2023 0.2200 79,629 63,588 (a) 25,052 (b) 23/6/2023 0.2200 Tiago Alexandre Machado Ferreira Mateus BCP Shares 52,540 2,128 50,412 (a) 23/6/2023 0.2200 Vânia Alexandra Machado Marques Correia BCP Shares 160,146 115,226 56,148 (a) 11,228 (b) 23/6/2023 0.2200 PEOPLE CLOSELY RELATED TO THE PREVIOUS of: Cidália Maria da Mota Lopes Alexandre Miguel Martins Ventura BCP Shares 2,184 2,184 of: José Miguel Bensliman Schorcht da Silva Pessanha Herança de Anne Marie Bensliman Silva Pessanha BCP Shares 139 139 of: Maria José Henriques Barreto de Matos de Campos Ricardo Gil Monteiro Lopes de Campos BCP Shares (c) (c) of: Rui Manuel da Silva Teixeira Maria Helena Espassandim Catão BCP Shares 576 576 of: Américo João Pinto Carola Ana Isabel Salgueiro Antunes BCP Shares 29 29 of: Ana Maria Jordão F. Torres Marques Tavares Álvaro Manuel Coreia Marques Tavares BCP Shares 25,118 25,118 Francisco Jordão Torres Marques Tavares BCP Shares 1,016 1,016 of: António Luís Duarte Bandeira António da Silva Bandeira BCP Shares 0 20,000 20,000 20/2/2023 0.2110 Ana Margarida Rebelo A. M. Soares Bandeira BCP Shares 2,976 2,976 of: António Ferreira Pinto Júnior Paula Alexandre Cardoso de Miguel Pinto BCP Shares 33,187 33,187 of: António Vítor Martins Monteiro Isabel Maria Vaz Leite Pinto Martins Monteiro BCP Shares 3,104 3,104 of: Francisco António Caspa Monteiro Ricardo Miranda Monteiro BCP Shares 1,639 1,639 Rita Miranda Monteiro BCP Shares 1,639 1,639 of: Maria Helena Soledade Nunes Henriques João Paulo Rodrigues Taborda Gonçalves BCP Shares 130 130 of: Maria Manuela de Araújo Mesquita Reis Luís Filipe da Silva Reis BCP Shares 280,000 280,000 of: José Pedro Rivera Ferreira Malaquias Maria Joana de Oliveira Monteiro Ferreira Malaquias BCP Shares (d) (d) (i) - Fixed Rate Reset Perpetual Temporary Write Down Additional Tier 1 Capital Notes (a) - identifies the increment in shares during 2023 corresponding to the annual deferred variable compensation of previous years. (b) - identifies the shares used in sell-cover in 2023 related to the increment of shares of variable compensation. (c) - solidary ownership in both securities accounts, and Dr. Ricardo Campos is the first holder and Eng.ª Maria José Campos is the 2nd holder of the securities account. (d) - solidary ownership in both securities accounts, and Dr. José Pedro Ferreira Malaquias is the first holder and Maria Joana Ferreira Malaquias is the 2nd holder of the securities account. 2023 REPORT & ACCOUNTS 356 | C) Balances and transactions with associated companies The balances with associated companies included in the consolidated balance sheet items, except for the item investments in associated companies, are as follows: (Thousands of euros) 2023 2022 (restated) Assets Loans and advances to credit institutions repayable on demand 12,220 8,834 Financial assets at amortised cost Loans and advances to credit institutions 212,037 206,078 Loans and advances to customers 2,517 59,487 Financial assets at fair value through profit or loss Financial assets held for trading 3,465 — Other assets 11,778 11,497 242,017 285,896 Liabilities Financial liabilities at amortised cost Resources from credit institutions 22,365 62,845 Resources from customers 198,627 211,193 Non subordinated debt securities issued 6,896 2,002 Financial liabilities held for trading 5,136 3,894 Other liabilities 356 8 233,380 279,942 The transactions with associated companies included in the consolidated income statement items are as follows: (Thousands of euros) 2023 2022 (restated) Income Interest and similar income 10,343 4,198 Commissions 53,594 60,230 Gains on financial operations 2,513 1,020 Other operating income 2,786 1,957 69,236 67,405 Costs Interest and similar expenses 4,785 1,104 Commissions 11 113 Other administrative costs 2,365 4,136 Losses on financial operations 2,796 — Other operating losses 1 51 9,958 5,404 2023 REPORT & ACCOUNTS | 357 The guarantees granted and revocable and irrevocable credit lines by the Group over associated companies are as follows: (Thousands of euros) 2023 2022 (restated) Guarantees granted 4,824 7,539 Revocable credit lines 9,328 9,527 Other revocable commitments 16,284 — 30,436 17,066 Under the scope of the Group's insurance mediation activities, the remuneration from services provided is analysed as follows: (Thousands of euros) 2023 2022 (restated) Life insurance Saving products 24,166 27,966 Mortgage and consumer loans 20,424 20,699 Others 1 — 44,591 48,665 Non-Life insurance Accidents and health 24,007 21,612 Motor 4,066 3,956 Multi-Risk Housing 8,516 7,753 Others 1,843 1,660 38,432 34,981 83,023 83,646 Remuneration from insurance intermediation services was received through bank transfers and resulted from insurance intermediation with Ocidental - Companhia Portuguesa de Seguros de Vida, S.A. and Ageas Portugal - Companhia de Seguros, S.A. (Millenniumbcp Ageas Group). The Group does not collect insurance premiums on behalf of Insurance Companies nor performs any movement of funds related to insurance contracts. Thus, there is no other asset, liability, income or expense to be reported related to the activity of insurance mediation exercised by the Group, other than those already disclosed. The receivable balances from insurance intermediation activities, by nature, are analysed as follows: (Thousands of euros) 2023 2022 (restated) Funds receivable for payment of life insurance commissions 10,546 11,467 Funds receivable for payment of non-life insurance commissions 9,713 8,835 20,259 20,302 The commissions received result from insurance mediation contracts and investment contracts, under the terms established in the contracts in force. The mediation commissions are calculated according to the nature of the contracts subject to mediation, as follows: - insurance contracts – use of fixed rates on gross premiums issued; - investment contracts – use of fixed rates on the responsibilities assumed by the insurance company under the commercialisation of these products. 2023 REPORT & ACCOUNTS 358 | D) Transactions with the Pension Fund The balances with the Pension Fund included in items of the consolidated balance sheet are as follows: (Thousands of euros) 2023 2022 (restated) Assets Financial assets held for trading — 209 — 209 Liabilities Resources from customers 54,850 145,303 Non subordinated debt securities issued 9,075 13,199 Financial liabilities held for trading — 3,475 Other liabilities 231 — 64,156 161,977 In 2023 and 2022, there were no transactions related to other financial instruments between the Group and the Pension Fund. Income and expenses with the Pension Fund included in the items of the consolidated income statement are as follows: (Thousands of euros) 2023 2022 (restated) Income Commissions 1,073 2,167 Expenses Interest expense and similar charges 102 — Other administrative costs 15,118 14,227 15,220 14,227 The balance Other administrative costs corresponds to rents incurred under the scope of the Pension Fund's properties in which the tenant is the Group. As at 31 December 2023 and 2022, the guarantees granted by the Group to the Pension Fund amount to Euros 5,000. 2023 REPORT & ACCOUNTS | 359 52. Consolidated Balance sheet and Income statement by geographic and operational segments The segments presented are in accordance with IFRS 8. In accordance with the Group's management model, the segments presented correspond to the segments used for management purposes by the Executive Committee. The Group offers a wide range of banking activities and financial services in Portugal and abroad, with a special focus on Commercial Banking, Companies Banking and Private Banking. Segments description A. Geographical Segments The Group operates in the Portuguese market, and also in a few affinity markets with recognised growth potential. Considering this, the geographical segments are structured in Portugal and Foreign Business (Poland, Mozambique and Other). Portugal segment reflects, essentially, the activities carried out by Banco Comercial Português in Portugal and ActivoBank. Portugal activity includes the following segments: i) Retail Banking; ii) Companies and Corporate; iii) Private Banking and iv) Other. Retail Banking includes the following business areas: - Retail network, which ensures the monitoring of individual customers, entrepreneurs, merchants and small and medium enterprises with a turnover less than Euros 2.5 million. The Retail network strategic approach is to target “Mass Market” customers, who appreciate a value proposal based on innovation and speed, as well as Prestige and Small Business customers, whose specific characteristics, financial assets or income imply a value proposal based on innovation and personalisation, requiring a dedicated Account Manager; - Retail Recovery Division that accompanies and manages the responsibilities of customers or economic groups in effective default, as well as customers with bankruptcy requirement or other similar mechanisms, looking through the conclusion of agreements or payment restructuring processes that minimizes the economic loss to the Bank; and - ActivoBank, a bank focused on clients who are young, intensive users of new communication technologies and who prefer a banking relationship based on simplicity, offering modern products and services. Companies and Corporate segment includes: - Companies and Corporate network, which monitors clients included in the corporate segment, economic groups and institutional entities, with a turnover higher than Euros 2.5 million, offering a wide range of traditional banking products complemented by specialised financing; - Large Corporate network that assures the relationship and the monitoring of a set of Groups / Clients, which in addition to Portugal, develop their activity in several geographies (Poland, Angola, Mozambique and East), providing a complete range of value-added products and services; - Specialised Monitoring Division which carries out the monitorisation of business groups that have high and complex credit exposures or that show relevant signs of impairment, in order to defend the value and managing credit risk, in a sustainable medium and long term perspective; – Specialised Recovery Division which ensures efficient tracking of customers with predictable or effective high risk of credit, from Companies, Corporate, Large Corporate and retail networks (exposure exceeding Euros 1 million); - Investment Banking unit, that ensures the offer of products and specific services, in particular financial advice, including corporate finance services, capital market transactions and analysis and financing structuring in the medium to long term; - Interfundos with the activity of management of real estate investment funds; - Specialized Credit and Real Estate Department, with the mission of managing the Group's foreclosed assets portfolio, referred as non-performing assets, in order to place them back to the market. - Treasury, Markets and International Department, which coordinates business with banks and financial institutions in order to better serve the Bank's commercial networks and operations abroad. This unit has a dynamic emphasis that promotes international business within commercial networks, aiming to be a partner for clients for internationalization. It also provides securities custody services to resident and non-resident clients, and grants the Bank's intervention in the financial markets, providing commercial services for treasury and markets products and managing the financial risks inherent to the Bank's activity. 2023 REPORT & ACCOUNTS 360 | The Private Banking segment, for the purposes of geographical segments, comprises: - Private Banking Division in Portugal, which ensures the monitoring of clients with high net worth, based on a commitment to excellence and a personalized relationship with clients; - Wealth Management Division, which provides advisory customer services and portfolio management for clients in the Private Banking network and the affluent segment. For the purposes of business segments, the Private Banking segment also includes Millennium bcp Bank & Trust in Cayman Islands (entity liquidated in 2022) that is considered Foreign Business on geographical segmentation. All other businesses not previously discriminated are allocated to the Other segment (Portugal) and include centralized management of financial investments, corporate activities and operations not integrated in the remaining business segments and other amounts not allocated to segments. Foreign Business includes the following segments: - Poland, where the Group is represented by Bank Millennium, a universal bank offering a wide range of financial products and services to individuals and companies nationwide; - Mozambique, where the Group is represented by BIM – Banco Internacional de Moçambique, a universal bank targeting companies and individual customers; and - Other, which includes the contribution of the associate in Angola and the contribution of the discontinued operation in Cayman Islands. B. Business Segments For the purposes of business segments reporting, Foreign Business segment comprises the Group’s operations developed in other countries already mentioned excluding the activity of Millennium bcp Bank & Trust in the Cayman Islands (entity liquidated) which, in this context, is considered in Private Banking segment. Business segments activity The figures reported for each segment resulted from aggregating the subsidiaries and business units integrated in each segment. For the business units in Portugal, the aggregation process reflects the impact from capital allocation and balancing process in the balance sheet and income statement, based on average figures. The balance sheet headings for each business unit in Portugal were calculated considering the allocation process, based on the regulatory solvency criteria. Considering that the process of capital allocation complies with the regulatory criteria of solvency in force, as at 31 December 2023 and 31 December 2022 the risk weighted assets, and consequently the capital allocated to the business segments, are determined in accordance with the Basel III framework, pursuant to the CRD IV/CRR. The capital allocated to each segment resulted from the application of a target capital ratio to the risks managed by each segment, reflecting the application of the Basel III methodology previously referred. Each operation is balanced through internal transfers of funds, with impact on the net interest income and income taxes of each segment, hence with no impact on consolidated accounts. Commissions and other net income, as well as operating costs calculated for each business area, are based on the amounts accounted for directly in the respective cost centres, on the one hand, and the amounts resulting from internal processes for allocating revenues and costs, for another. In this case, the allocation is based on the application of pre-defined criteria related to the level of activity of each business area. The following information has been prepared based on the individual and consolidated financial statements of the Group prepared in accordance with international financial reporting standards (IFRS), as adopted by the European Union (EU), at the reference date and with the Organization of the Group's business areas in force on 31 December 2023. Information relating to prior periods is restated whenever changes in the internal organization of the entity are likely to change the composition of the reportable segments (business and geographical) or relevant changes in the dynamics of allocation of indirect revenues and costs, as described in the previous paragraph, ensuring the comparability of the information provided in the reported periods. The information in the financial statements of reportable segments is reconciled, at the level of the total revenue of those same segments, with the revenue from the demonstration of the consolidated financial position of the reportable entity for each date on which is lodged a statement of financial position. 2023 REPORT & ACCOUNTS | 361 As at 31 December 2023, the net contribution of the major business segments, for the income statement, is analysed as follows: (Thousands of euros) 2023 Commercial banking Companies and Corporate in Portugal Retail in Portugal Foreign business (1) Total Private banking Other Consolidated INCOME STATEMENT Net interest income 881,859 1,359,093 2,240,952 206,539 34,834 343,399 2,825,724 Net fees and commissions income 435,629 211,395 647,024 141,435 32,370 (49,156) 771,673 Other net income 12,535 26,414 38,949 10,609 49 (88,213) (38,606) Net gains arising from trading activity (2) 1,513 131,939 133,452 106 67 11,190 144,815 Dividends from equity instruments — 756 756 — — 1,027 1,783 Share of profit of associates under the equity method — 4,651 4,651 — — 59,615 64,266 Net operating revenue 1,331,536 1,734,248 3,065,784 358,689 67,320 277,862 3,769,655 Operating expenses 356,321 545,894 902,215 61,930 14,960 183,446 1,162,551 Results on modification (3) — (19,426) (19,426) — — — (19,426) Impairment for credit and financial assets (4) (44,223) (36,782) (81,005) (154,511) (178) (14,290) (249,984) Other impairments and provisions (5) (98) (694,696) (694,794) — — (155,068) (849,862) Net income before income tax 930,894 437,450 1,368,344 142,248 52,182 (74,942) 1,487,832 Income tax (291,370) (206,268) (497,638) (44,524) (16,333) 21,124 (537,371) Net income after income tax from continuing operations 639,524 231,182 870,706 97,724 35,849 (53,818) 950,461 Income arising from discontinued operations — — — — (2,843) (9) (2,852) Net income for the year 639,524 231,182 870,706 97,724 33,006 (53,827) 947,609 Non-controlling interests — (97,148) (97,148) — — 5,589 (91,559) Net income for the year attributable to Bank's Shareholders 639,524 134,034 773,558 97,724 33,006 (48,238) 856,050 (1) Includes the contribution associated with the investments held in Angola, in Banco Millennium Atlântico. (2) Includes results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations and results arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss. (3) Includes the results of contractual amendments, namely, costs arising from negotiations with customers holding mortgage loans in foreign currency. (4) Includes impairment of financial assets at amortised cost, for loans to customers (net of recoveries - principal and accrual) and for debt instruments related to credit operations. It also includes impairment of financial assets (at fair value through other comprehensive income and at amortised cost not associated with credit operations). (5) Includes impairment of non-current assets held for sale, investments in associated companies, goodwill, other assets and provisions, highlighting the provisions for legal proceedings related to mortgage loans granted in Swiss francs, booked by the Polish subsidiary. 2023 REPORT & ACCOUNTS 362 | As at 31 December 2023, the net contribution of the major operational Segments, for the balance sheet, is analysed as follows: (Thousands of euros) 2023 Commercial banking Companies and Corporate in Portugal Retail in Portugal Foreign business Total Private banking Other Consolidated BALANCE SHEET Cash and Loans and advances to credit institutions 14,390,981 2,803,205 17,194,186 1,255,995 2,371,683 (15,030,174) 5,791,690 Loans and advances to customers (1) 26,002,815 17,581,929 43,584,744 11,097,187 333,393 202,643 55,217,967 Financial assets (2) — 10,269,402 10,269,402 — — 17,594,007 27,863,409 Other assets — 1,000,590 1,000,590 — — 4,506,122 5,506,712 Total Assets 40,393,796 31,655,126 72,048,922 12,353,182 2,705,076 7,272,598 94,379,778 Resources from credit institutions (3) 259,026 151,175 410,201 1,618,782 — (1,199,857) 829,126 Resources from customers (4) 37,934,752 26,764,909 64,699,661 9,463,888 2,545,353 1,218,911 77,927,813 Debt securities issued (5) 1,144,133 763,831 1,907,964 1,408 133,442 1,957,355 4,000,169 Other financial liabilities (6) — 538,311 538,311 — — 1,134,326 1,672,637 Other liabilities (7) — 1,268,020 1,268,020 — — 1,382,515 2,650,535 Total Liabilities 39,337,911 29,486,246 68,824,157 11,084,078 2,678,795 4,493,250 87,080,280 Total Equity 1,055,885 2,168,880 3,224,765 1,269,104 26,281 2,779,348 7,299,498 Total Liabilities and Equity 40,393,796 31,655,126 72,048,922 12,353,182 2,705,076 7,272,598 94,379,778 Number of employees 3,599 9,446 13,045 440 106 2,097 15,688 (1) Includes loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations net of impairment and balance sheet amount of loans to customers at fair value through profit or loss. (2) Includes debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to customers), financial assets at fair value through other comprehensive income and hedging derivatives. (3) Includes resources and other financing from central banks and resources from other credit institutions. (4) Corresponds to deposits and other resources from customers (including resources from customers at amortised cost and customer deposits at fair value through profit or loss). (5) Includes non-subordinated debt securities at amortized cost and financial liabilities at fair value through profit or loss (debt securities and certificates). (6) Includes financial liabilities held for trading, subordinated debt and hedging derivatives. (7) Includes provisions, current and deferred tax liabilities and other liabilities. 2023 REPORT & ACCOUNTS | 363 As at 31 December 2022, the net contribution of the major business segments, for the income statement, is analysed as follows: (Thousands of euros) 2022 (restated) Commercial banking Companies and Corporate in Portugal Private banking Other Consolidated Retail in Portugal Foreign business (1) Total INCOME STATEMENT Net interest income 621,413 1,197,822 1,819,235 202,754 21,116 106,667 2,149,772 Net fees and commissions income 421,398 211,325 632,723 149,029 32,368 (42,212) 771,908 Other net income 21,634 (106,637) (85,003) 40,768 (10) (138,700) (182,945) Net gains arising from trading activity (2) 2,680 (19,299) (16,619) 69 182 66,328 49,960 Dividends from equity instruments — 811 811 — — 9,275 10,086 Share of profit of associates under the equity method — 925 925 — — 57,686 58,611 Net operating revenue 1,067,125 1,284,947 2,352,072 392,620 53,656 59,044 2,857,392 Operating expenses 328,887 470,347 799,234 57,615 15,299 200,870 1,073,018 Results on modification (3) — (309,865) (309,865) — — — (309,865) Impairment for credit and financial assets (4) (66,953) (82,394) (149,347) (149,529) 591 2,156 (296,129) Other impairments and provisions (5) (394) (550,085) (550,479) — — (209,554) (760,033) Net income before income tax 670,891 (127,744) 543,147 185,476 38,948 (349,224) 418,347 Income tax (209,989) (96,742) (306,731) (58,054) (12,172) 72,637 (304,320) Net income after income tax from continuing operations 460,902 (224,486) 236,416 127,422 26,776 (276,587) 114,027 Income arising from discontinued operations — 3,772 3,772 — 1,765 — 5,537 Net income for the year 460,902 (220,714) 240,188 127,422 28,541 (276,587) 119,564 Non-controlling interests — 72,802 72,802 — — 5,020 77,822 Net income for the year attributable to Bank's Shareholders 460,902 (147,912) 312,990 127,422 28,541 (271,567) 197,386 (1) Includes the contribution associated with the investments held in Angola, in Banco Millennium Atlântico. (2) Includes results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations and results arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss. (3) Results mainly from the amount associated to potential costs arising from the moratorium program in Poland (credit holidays). It's also included the results of contractual amendments, namely, costs arising from negotiations with customers holding mortgage loans in foreign currency. (4) Includes impairment of financial assets at amortised cost, for loans to customers (net of recoveries - principal and accrual) and for debt instruments related to credit operations. It also includes impairment of financial assets (at fair value through other comprehensive income and at amortised cost not associated with credit operations). (5) Includes impairment of non-current assets held for sale, investments in associated companies, goodwill, other assets and provisions, highlighting the provisions for legal proceedings related to mortgage loans granted in Swiss francs, booked by the Polish subsidiary. 2023 REPORT & ACCOUNTS 364 | As at 31 December 2022, the net contribution of the major operational Segments, for the balance sheet, is analysed as follows: (Thousands of euros) 2022 (restated) Commercial banking Companies and Corporate in Portugal Retail in Portugal Foreign business Total Private banking Other Consolidated BALANCE SHEET Cash and Loans and advances to credit institutions 14,496,145 3,208,230 17,704,375 2,405,941 2,427,179 (15,338,600) 7,198,895 Loans and advances to customers (1) 26,360,608 16,983,242 43,343,850 11,751,456 345,264 757,114 56,197,684 Financial assets (2) — 5,458,513 5,458,513 — — 14,895,710 20,354,223 Other assets — 942,640 942,640 — — 5,183,301 6,125,941 Total Assets 40,856,753 26,592,625 67,449,378 14,157,397 2,772,443 5,497,525 89,876,743 Resources from credit institutions (3) 229,245 158,808 388,053 1,140,782 — (60,475) 1,468,360 Resources from customers (4) 38,537,857 23,173,054 61,710,911 11,539,455 2,605,487 50,961 75,906,814 Debt securities issued (5) 1,201,403 52,066 1,253,469 — 141,613 1,428,011 2,823,093 Other financial liabilities (6) — 535,648 535,648 — — 1,216,914 1,752,562 Other liabilities (7) — 907,471 907,471 — — 1,081,676 1,989,147 Total Liabilities 39,968,505 24,827,047 64,795,552 12,680,237 2,747,100 3,717,087 83,939,976 Total Equity 888,248 1,765,578 2,653,826 1,477,160 25,343 1,780,438 5,936,767 Total Liabilities and Equity 40,856,753 26,592,625 67,449,378 14,157,397 2,772,443 5,497,525 89,876,743 Number of employees 3,519 9,491 13,010 444 140 2,149 15,743 (1) Includes loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations net of impairment and balance sheet amount of loans to customers at fair value through profit or loss. (2) Includes debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to customers), financial assets at fair value through other comprehensive income and hedging derivatives. (3) Includes resources and other financing from central banks and resources from other credit institutions. (4) Corresponds to deposits and other resources from customers (including resources from customers at amortised cost and customer deposits at fair value through profit or loss). (5) Includes non-subordinated debt securities at amortized cost and financial liabilities at fair value through profit or loss (debt securities and certificates). (6) Includes financial liabilities held for trading, subordinated debt and hedging derivatives. (7) Includes provisions, current and deferred tax liabilities and other liabilities. 2023 REPORT & ACCOUNTS | 365 As at 31 December 2023, the net contribution of the major geographic segments, for the income statement, is analysed as follows: (Thousands of euros) 2023 Portugal Retail banking Companies and Corporate Private banking Other Total Poland Mozambique Other (1) Consolidated INCOME STATEMENT Net interest income 881,859 206,539 34,834 343,399 1,466,631 1,157,256 201,837 — 2,825,724 Net fees and commissions income 435,629 141,435 32,370 (49,156) 560,278 172,346 39,049 — 771,673 Other net income 12,535 10,609 49 (88,213) (65,020) 21,822 4,592 — (38,606) Net gains arising from trading activity (2) 1,513 106 67 11,190 12,876 115,625 16,314 — 144,815 Dividends from equity instruments — — — 1,027 1,027 756 — — 1,783 Share of profit of associates under the equity method — — — 59,615 59,615 — 1,942 2,709 64,266 Net operating revenue 1,331,536 358,689 67,320 277,862 2,035,407 1,467,805 263,734 2,709 3,769,655 Operating expenses 356,321 61,930 14,960 183,446 616,657 420,211 125,683 — 1,162,551 Results on modification (3) — — — — — (19,426) — — (19,426) Impairment for credit and financial assets (4) (44,223) (154,511) (178) (14,290) (213,202) (57,192) 20,410 — (249,984) Other impairments and provisions (5) (98) — — (155,068) (155,166) (681,857) (12,839) — (849,862) Net income before income tax 930,894 142,248 52,182 (74,942) 1,050,382 289,119 145,622 2,709 1,487,832 Income tax (291,370) (44,524) (16,333) 21,124 (331,103) (162,298) (43,970) — (537,371) Net income after income tax from continuing operations 639,524 97,724 35,849 (53,818) 719,279 126,821 101,652 2,709 950,461 Income arising from discontinued operations — — — (9) (9) — — (2,843) (2,852) Net income for the year 639,524 97,724 35,849 (53,827) 719,270 126,821 101,652 (134) 947,609 Non-controlling interests — — — 5,589 5,589 (63,283) (33,865) — (91,559) Net income for the year attributable to Bank's Shareholders 639,524 97,724 35,849 (48,238) 724,859 63,538 67,787 (134) 856,050 (1) Includes the contribution associated with the investments held in Angola, in Banco Millennium Atlântico. (2) Includes results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations and results arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss. (3) Includes the results of contractual amendments, namely, costs arising from negotiations with customers holding mortgage loans in foreign currency. (4) Includes impairment of financial assets at amortised cost for loans to customers (net of recoveries - principal and accrual) and for debt instruments related to credit operations. It also includes impairment of financial assets at amortised cost not associated with credit operations. (5) Includes impairment of non-current assets held for sale, investments in associated companies, goodwill, other assets and provisions, highlighting the provisions for legal proceedings related to mortgage loans granted in Swiss francs, booked by the Polish subsidiary. 2023 REPORT & ACCOUNTS 366 | As at 31 December 2023, the net contribution of the major geographic segments, for the balance sheet is analysed as follows: (Thousands of euros) 2023 Portugal Retail banking Companies and Corporate Private banking Other Total Poland Mozambique Other (1) Consolidated BALANCE SHEET Cash and Loans and advances to credit institutions 14,390,981 1,255,995 2,371,683 (15,030,174) 2,988,485 1,621,924 1,181,281 — 5,791,690 Loans and advances to customers (1) 26,002,815 11,097,187 333,393 202,643 37,636,038 16,955,492 626,437 — 55,217,967 Financial assets (2) — — — 17,594,007 17,594,007 9,594,785 674,653 (36) 27,863,409 Other assets — — — 4,506,122 4,506,122 724,823 228,803 46,964 5,506,712 Total Assets 40,393,796 12,353,182 2,705,076 7,272,598 62,724,652 28,897,024 2,711,174 46,928 94,379,778 Resources from other credit institutions (3) 259,026 1,618,782 — (1,199,857) 677,951 130,131 21,044 — 829,126 Resources from customers (4) 37,934,752 9,463,888 2,545,353 1,218,911 51,162,904 24,689,709 2,075,200 — 77,927,813 Debt securities issued (5) 1,144,133 1,408 133,442 1,957,355 3,236,338 763,831 — — 4,000,169 Other financial liabilities (6) — — — 1,134,326 1,134,326 538,311 — — 1,672,637 Other liabilities (7) — — — 1,382,515 1,382,515 1,187,710 80,310 — 2,650,535 Total Liabilities 39,337,911 11,084,078 2,678,795 4,493,250 57,594,034 27,309,692 2,176,554 — 87,080,280 Total Equity 1,055,885 1,269,104 26,281 2,779,348 5,130,618 1,587,332 534,620 46,928 7,299,498 Total Liabilities and Equity 40,393,796 12,353,182 2,705,076 7,272,598 62,724,652 28,897,024 2,711,174 46,928 94,379,778 Number of employees 3,599 440 106 2,097 6,242 6,872 2,574 0 15,688 1) Includes loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations net of impairment and balance sheet amount of loans to customers at fair value through profit or loss. 2) Includes debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to customers), financial assets at fair value through other comprehensive income and hedging derivatives. 3) Includes resources and other financing from central banks and resources from other credit institutions. 4) Corresponds to deposits and other resources from customers (including resources from customers at amortised cost and customer deposits at fair value through profit or loss). 5) Includes non-subordinated debt securities at amortized cost and financial liabilities at fair value through profit or loss (debt securities and certificates). 6) Includes financial liabilities held for trading, subordinated debt and hedging derivatives. 7) Includes provisions, current and deferred tax liabilities and other liabilities. 2023 REPORT & ACCOUNTS | 367 As at 31 December 2022, the net contribution of the major geographic segments, for the income statement, is analysed as follows: (Thousands of euros) 2022 (restated) Portugal Retail banking Companies and Corporate Private banking Other Total Poland Mozambique Other (1) Consolidated INCOME STATEMENT Net interest income 621,413 202,754 20,144 106,667 950,978 995,565 202,257 972 2,149,772 Net fees and commissions income 421,398 149,029 32,343 (42,212) 560,558 172,631 38,694 25 771,908 Other net income 21,634 40,768 24 (138,700) (76,274) (109,088) 2,451 (34) (182,945) Net gains arising from trading activity (2) 2,680 69 162 66,328 69,239 (40,130) 20,830 21 49,960 Dividends from equity instruments — — — 9,275 9,275 811 — — 10,086 Share of profit of associates under the equity method — — — 57,686 57,686 — 1,841 (916) 58,611 Net operating revenue 1,067,125 392,620 52,673 59,044 1,571,462 1,019,789 266,073 68 2,857,392 Operating expenses 328,887 57,615 14,376 200,870 601,748 357,092 113,255 923 1,073,018 Results on modification (3) — — — — — (309,865) — — (309,865) Impairment for credit and financial assets (4) (66,953) (149,529) 591 2,156 (213,735) (74,067) (8,327) — (296,129) Other impairments and provisions (5) (394) — — (209,554) (209,948) (537,143) (6,506) (6,436) (760,033) Net income before income tax 670,891 185,476 38,888 (349,224) 546,031 (258,378) 137,985 (7,291) 418,347 Income tax (209,989) (58,054) (12,172) 72,637 (207,578) (60,614) (36,128) — (304,320) Net income after income tax from continuing operations 460,902 127,422 26,716 (276,587) 338,453 (318,992) 101,857 (7,291) 114,027 Income arising from discontinued operations — — — — — — 3,772 1,765 5,537 Net income for the period 460,902 127,422 26,716 (276,587) 338,453 (318,992) 105,629 (5,526) 119,564 Non-controlling interests — — — 5,020 5,020 108,125 (35,323) — 77,822 Net income for the period attributable to Bank's Shareholders 460,902 127,422 26,716 (271,567) 343,473 (210,867) 70,306 (5,526) 197,386 (1) Includes the contribution associated with the investments held in Angola, in Banco Millennium Atlântico. (2) Includes results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations and results arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss. (3) ) Results mainly from the amount associated to potential costs arising from the moratorium program in Poland (credit holidays). It's also included the results of contractual amendments, namely, costs arising from negotiations with customers holding mortgage loans in foreign currency. (4) Includes impairment of financial assets at amortised cost for loans to customers (net of recoveries - principal and accrual) and for debt instruments related to credit operations. It also includes impairment of financial assets at amortised cost not associated with credit operations. (5) Includes impairment of non-current assets held for sale, investments in associated companies, goodwill, other assets and provisions, highlighting the provisions for legal proceedings related to mortgage loans granted in Swiss francs, booked by the Polish subsidiary. 2023 REPORT & ACCOUNTS 368 | As at 31 December 2022, the net contribution of the major geographic segments, for the balance sheet is analysed as follows: (Thousands of euros) 2022 (restated) Portugal Retail banking Companies and Corporate Private banking Other Total Poland Mozambique Other (1) Consolidated BALANCE SHEET Cash and Loans and advances to credit institutions 14,496,145 2,405,941 2,427,179 (15,338,600) 3,990,665 2,193,520 1,014,710 — 7,198,895 Loans and advances to customers (1) 26,360,608 11,751,456 345,264 757,114 39,214,442 16,355,525 627,717 — 56,197,684 Financial assets (2) — — — 14,895,710 14,895,710 4,506,830 951,716 (33) 20,354,223 Other assets — — — 5,183,301 5,183,301 641,572 230,266 70,802 6,125,941 Total Assets 40,856,753 14,157,397 2,772,443 5,497,525 63,284,118 23,697,447 2,824,409 70,769 89,876,743 Resources from other credit institutions (3) 229,245 1,140,782 — (60,475) 1,309,552 155,411 3,397 — 1,468,360 Resources from customers (4) 38,537,857 11,539,455 2,605,487 50,961 52,733,760 20,941,241 2,231,813 — 75,906,814 Debt securities issued (5) 1,201,403 — 141,613 1,428,011 2,771,027 52,066 — — 2,823,093 Other financial liabilities (6) — — — 1,216,914 1,216,914 535,648 — — 1,752,562 Other liabilities (7) — — — 1,081,676 1,081,676 839,464 68,007 — 1,989,147 Total Liabilities 39,968,505 12,680,237 2,747,100 3,717,087 59,112,929 22,523,830 2,303,217 — 83,939,976 Total Equity 888,248 1,477,160 25,343 1,780,438 4,171,189 1,173,617 521,192 70,769 5,936,767 Total Liabilities and Equity 40,856,753 14,157,397 2,772,443 5,497,525 63,284,118 23,697,447 2,824,409 70,769 89,876,743 Number of employees 3,519 444 140 2,149 6,252 6,987 2,504 0 15,743 1) Includes loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations net of impairment and balance sheet amount of loans to customers at fair value through profit or loss. 2) Includes debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to customers), financial assets at fair value through other comprehensive income and hedging derivatives. 3) Includes resources and other financing from central banks and resources from other credit institutions. 4) Corresponds to deposits and other resources from customers (including resources from customers at amortised cost and customer deposits at fair value through profit or loss). 5) Includes non-subordinated debt securities at amortized cost and financial liabilities at fair value through profit or loss (debt securities and certificates). 6) Includes financial liabilities held for trading, subordinated debt and hedging derivatives. 7) Includes provisions, current and deferred tax liabilities and other liabilities. 2023 REPORT & ACCOUNTS | 369 Reconciliation of net income of reportable segments with the net income attributable to shareholders (Thousands of euros) 2023 2022 (restated) Net contribution Retail banking in Portugal 639,524 460,902 Companies and Corporate 97,724 127,422 Private Banking 35,849 26,716 Foreign business (continuing operations) 231,182 (224,426) Non-controlling interests (1) (97,148) 72,802 907,131 463,416 Income arising from discontinued or discontinuing operations (2,843) 5,537 904,288 468,953 Amounts not allocated to segments Net interest income - bonds portfolio 325,921 105,777 Net interest income - others (2) 17,478 890 Foreign exchange activity 17,005 39,603 Gains / (losses) arising from sales of subsidiaries and other assets 3,098 (26,440) Equity accounted earnings 59,614 57,686 Impairment and other provisions (3) (169,358) (207,397) Operational costs (183,446) (200,870) Gains on sale of Portuguese public debt (8,181) (24,336) Gains on sale of foreign public debt 31 15,404 Mandatory contributions (72,583) (88,528) Loans sale (5,242) 8,357 Income from other financial assets not held for trading mandatorily at fair value through profit or loss (4) (5,834) 3,473 Taxes (5) 21,124 72,637 Income from discontinued operations (9) — Non-controlling interests 5,589 5,020 Others (6) (53,445) (32,843) Total not allocated to segments (48,238) (271,567) Consolidated net income 856,050 197,386 (1) Corresponds mainly to the income attributable to third parties related to the subsidiaries in Poland and in Mozambique. (2) Includes net interest income arising from internal transfer of liquidity, interest rate risk, cost of wholesale funding and others. (3) Includes impairments for non-current assets held for sale, impairments for other assets, provisions for administrative infractions, various contingencies and other impairments and/or provisions not allocated to business segments. (4) Includes gains/(losses) from corporate restructuring funds. (5) Includes deferred tax revenue, net of current non-segment tax expense, namely the tax effect associated with the impacts of the previous items. (6) It includes other operations not allocated previously namely funding for non-interest bearing assets and strategic financial investments. 2023 REPORT & ACCOUNTS 370 | 53. Solvency The Group’s own funds are determined according to the established regulation, in particular, according to Directive 2013/36/EU and Regulation (EU) 575/2013, approved by the European Parliament and the Council (CRD IV/CRR). Total capital includes tier 1 and tier 2. Tier 1 comprises common equity tier 1 (CET1) and additional tier 1. Common equity tier 1 includes: (i) paid-up capital, share premium, reserves and retained earnings deducted anticipated dividends and non-controlling interests; ii) and deductions related to own shares and loans to finance the acquisition of shares of the Bank, the shortfall of value adjustments and provisions to expected losses concerning risk‐ weighted exposure amounts calculated according to the IRB approach, goodwill and other intangible assets and the additional value adjustments necessary for the prudent valuation requirements applied to all assets at fair value, adjustments related to minimum commitment with collective investments undertakings, insufficient coverage for non- performing exposures and with the amount of securitisation positions, eligible for deduction as an alternative to a 1 250 % risk weight. Reserves and retained earnings are adjusted by the reversal of unrealised gains and losses on cash-flow hedge transactions and on financial liabilities valued at fair value through profits and losses, to the extent related to own credit risk. The non-controlling interests are only eligible up to the amount of the Group’s capital requirements attributable to the minorities. In addition, the deferred tax assets arising from unused tax losses carried forward are deducted, as well as the deferred tax assets arising from temporary differences relying on the future profitability and the interests held in financial institutions and insurers of at least 10%, in this case only in the amount that exceeds the thresholds of 10% and 15% of the common equity tier 1, when analysed on an individual and aggregated basis, respectively. The irrevocable payment commitments for the Single Resolution Fund, the fair value of the collateral for irrevocable commitments from the Deposits Guarantee Fund and the additional coverage for non-performing exposures, are also deducted, due to a SREP (Supervisory Review and Evaluation Process) recommendation. Additional tier 1 comprises preference shares, hybrid instruments and perpetual bonds representing subordinated debt that are compliant with the issue conditions established in the Regulation and non-controlling interests related to minimum level 1 additional capital requirements of institutions that are not totally owned by the Group. Tier 2 includes the subordinated debt that is compliant with the Regulation and the non-controlling interests related to minimum total capital requirements of institutions that are not totally owned by the Group. Additionally, Tier 2 instruments held in financial institutions and insurers of at least 10% are deducted. The legislation in force stipulates a transitional period between the own funds calculated under national law until 31 December 2013, and own funds estimated according to EU law, in order to exclude some elements previously considered (phase-out) and include new elements (phase-in). The transitional period was extended to the end of 2017 for most of the elements, except for the deferred tax assets already recorded on the balance sheet of 1 January 2014, according to the new regulation, which period ends in 2023. With the IFRS9 introduction the Group has decided to gradually recognise the impacts, according to artº 473º-A of CRR. CRD IV/CRR establishes Pilar 1 capital requirements for CET1, Tier 1 and Total Capital. However, under the scope of SREP , European Central Bank notified BCP about the need to comply with phased-in capital ratios, including additional Pilar 2 requirements, O-SII and capital conservation buffer, as following: 2023 Minimum Capital Requirements BCP Consolidated Phased-in of which: Fully implemented of which: Pilar 1 Pilar 2 Buffers Pilar 1 Pilar 2 Buffers CET1 9.41% 4.50% 1.41% 3.50% 9.41% 4.50% 1.41% 3.50% T1 11.38% 6.00% 1.88% 3.50% 11.38% 6.00% 1.88% 3.50% Total 14.00% 8.00% 2.50% 3.50% 14.00% 8.00% 2.50% 3.50% The Bank meets all the requirements and other recommendations issued by the supervisor on this matter. 2023 REPORT & ACCOUNTS | 371 The Group has adopted the methodologies based on internal rating models (IRB) for the calculation of capital requirements for credit and counterparty risk, covering a substantial part of both its retail portfolio in Portugal and Poland and its corporate portfolio in Portugal. The Group has adopted the advanced approach (internal model) for the coverage of trading portfolio’s general market risk and for exchange rate risks generated in exposures in the perimeter centrally managed from Portugal, and the standard method was used for the purposes of operational risk coverage. The capital requirements of the other portfolios/geographies were calculated using the standardised approach. The own funds and the capital requirements determined according to the CRD IV/CRR (phased-in) methodologies previously referred, are the following: (Thousands of euros) 2023 2022 (restated) Common equity tier 1 (CET1) Share capital 3,000,000 3,000,000 Share Premium 16,471 16,471 Reserves and retained earnings 2,632,602 1,715,797 Non-controlling interests eligible to CET1 475,923 433,767 Regulatory adjustments to CET1 32,342 276,422 6,157,338 5,442,457 Tier 1 Capital Instruments 400,000 400,000 Non-controlling interests eligible to AT1 84,267 96,341 6,641,605 5,938,798 Tier 2 Subordinated debt 1,014,615 1,047,875 Non-controlling interests eligible to Tier 2 225,063 271,800 Other 24,303 20,240 1,263,981 1,339,915 Total own funds 7,905,586 7,278,713 RWA - Risk weighted assets Credit risk 34,304,305 36,265,788 Market risk 547,022 2,611,404 Operational risk 4,854,039 4,178,551 CVA 45,646 47,016 39,751,012 43,102,759 Capital ratios CET1 15.5% 12.6% Tier 1 16.7% 13.8% Tier 2 3.2% 3.1% Total own funds 19.9% 16.9% The presented amounts include the accumulated net income. 2023 REPORT & ACCOUNTS 372 | 54. Risk Management The Group is subject to several risks during the course of its business. The risks from different companies of the Group are managed centrally, in coordination with the local departments and considering the specific risks of each business. The Group's risk-management policy is designed to permanently ensure an adequate relationship between its own funds and the business it develops, as well as the corresponding evaluation of the risk/return profile by business line. Under this scope, the monitoring and control of the main types of financial risks (e.g., credit, market, operational) or non- financial risks (e.g., legal and compliance, reputational) to which the Group’s business is subject to, including the impact of the ESG risk drivers (environmental, social and governance). The Bank implemented a regular process for identifying and assessing the risks to which its activity is exposed, which conclusions are presented to the management bodies and influence the update of the Group’s risk appetite and risk strategy. Internal organisation The Board of Directors of Banco Comercial Português is responsible for the definition of the risk strategy and policies, including the approval of the principles and rules of the highest level to be followed in risk management of the Group, as well as the guidelines dictating the allocation of capital to the business lines. The Board of Directors, through the Audit Committee and Committee for Risk Assessment, ensures the existence of adequate risk control and of risk-management systems at Group level and for each entity. The Board of Directors also approves the risk-tolerance level acceptable to the Group, proposed by its Executive Committee, hearing the Risk Assessment Committee. The Risk Committee is responsible for monitoring the overall levels of risk incurred, ensuring that these are compatible with the goals and strategies approved for the business. Other commissions regularly monitor specific risks, namely the Compliance and Operational Risks Commission, the Credit and Non-performing Assets Monitoring Commission, the Pension Funds Risk Monitoring Commission, the Operational Resilience Commission (with a focus on information technologies and cybernetics), the Sustainability Commission and the Corporate Risk Monitoring Commission. The Chief Risk Officer is responsible for the control of risks in all Group entities, for the identification of all risks to which the Group activity is exposed and for the proposal of measures to improve risks control. The Chief Risk Officer also ensures that risks are monitored on an overall basis and that there is alignment of concepts, practices and goals in risk management. The activity of every entity included within the Banco Comercial Português consolidation perimeter is governed by the principles and decisions established centrally by the Board of Directors and the main subsidiaries are provided with Risk Office structures which are established in accordance with the risks inherent to their particular business. A Risk Control Commission has been set up at each relevant subsidiary, responsible for the control of risks at local level, in which the Chief Risk Officer takes part. As Head of the Compliance Office, the Compliance Officer is responsible to ensure that regulatory requirements are complied with, as well as the ethical values of the organization, fulfilling all the attributions that are legally conferred to it, ensuring the existence of an internal control culture, thus contributing to the mitigation of the risk of attributing sanctions or significant asset or reputational damages to the Group Entities, including the compliance with the regulatory framework on the prevention and combating money laundering and terrorism financing. 2023 REPORT & ACCOUNTS | 373 Risk assessment Credit Risk Credit granting is based on a prior classification of the customers’ risk and on a thorough assessment of the level of protection provided by the underlying collateral. In order to do so, a single risk-notation system has been introduced, the Rating Master Scale, based on the expected probability of default, allowing greater discrimination in the assessment of the customers and better establishment of the hierarchies of the associated risk. The Rating Master Scale also identifies those customers that show a worsening credit capacity and, in particular, those classified as being in default. All rating and scoring models used by the Group have been duly calibrated for the Rating Master Scale. The protection-level concept has been introduced as a crucial element of evaluation of the effectiveness of the collateral in credit-risk mitigation, leading to a more active collateralization of loans and to a better adequacy of pricing regarding the risk incurred. The gross Group’s exposure to credit risk (original exposure) is presented in the following table: (Thousands of euros) Risk items 2023 2022 (restated) Central Governments or Central Banks 26,982,937 22,898,387 Regional Governments or Local Authorities 1,210,789 1,012,723 Administrative and non-profit Organisations 1,098,748 412,223 Multilateral Development Banks 227,711 114,633 Other Credit Institutions 3,283,571 3,279,977 Retail and Corporate customers 67,789,725 69,798,319 Other items () 11,597,622 10,153,154 112,191,103 107,669,416 Note: gross exposures of impairment and amortization, in accordance with the prudential consolidation perimeter. Includes securitization positions. () In addition to positions in equity, collective investment and securitization, the Other items contain other assets subject to credit risk in accordance with Article 156 of the CRR. The evaluation of the risk associated to the loan portfolio and quantification of the respective losses expected considers the following methodological notes. a) Collaterals and Guarantees On the risk evaluation of an operation or of a group of operations, the mitigation elements of credit risk associated to those operations are considered in accordance with the rules and internal procedures that fulfil the requirements defined by the regulations in force, also reflecting the experience of the loan's recovery areas and the Legal Department opinions with respect to the entailment of the various mitigation instruments. The collaterals and the relevant guarantees can be aggregated in the following categories: - financial collaterals, real estate collaterals or other collaterals; - receivables; - first demand guarantees, issued by banks or other entities with Risk Grade 7 or better on the Rating Master Scale; - personal guarantees when the persons are classified with Risk Grade 7 or better; - credit derivatives. 2023 REPORT & ACCOUNTS 374 | The financial collaterals accepted are those that are traded in a recognised stock exchange, i.e., on an organized secondary market, liquid and transparent, with public bid-ask prices, located in countries of the European Union, United Kingdom, United States, Japan, Canada, Hong Kong or Switzerland. In this context, it is important to refer that the Bank’s shares are not accepted as financial collaterals of new credit operations and are only accepted for the reinforcement of guarantees of existing credit operations, or in restructuring process associated to credit recoveries. Regarding guarantees and credit derivatives, it can be applied the substitution principle by replacing the Risk Grade of the client by the Risk Grade of the guarantor, (if the Risk of Grade Degree of the guarantor is better than the client’s), when the protection is formalized through: - State, Financial Institutions or Mutual Guarantee Societies guarantees exist; - personal guarantees (or, in the case of Leasing, there is a recovery agreement of the provider); - Credit derivatives; - Formalization of the clause of the contracting party in leasing contracts in which it is an entity that is in a relationship of dominion or group with the lessee. An internal level of protection is attributed to all credit operations at the moment of the credit granting decision, considering the credit amount as well as the value and type of the collaterals involved. The protection level corresponds to the loss reduction in case of default that is linked to the various collateral types, considering their market value and the amount of the associated exposure. In the case of financial collaterals, adjustments are made to the protection value by the use of a set of haircuts, in order to reflect the price volatility of the financial instruments. In the case of real estate mortgages, the initial appraisal of the real estate value is done during the credit analysis and before decision process. Either the initial evaluations or the subsequent reviews carried out are performed by external expert valuers and the ratification process is centralized in the Appraisals Unit, which is independent of the clients’ areas. In any case, they are the subject to a written report, in a standardized digital format, based on a group of predefined methods that are aligned with the sector practices – income, replacement cost and/or market comparative - mentioning the obtained value, for both the market value and for purposes of the mortgage guarantee, depending on the type of the real estate. The evaluations have a declaration/certification of an expert valuer since 2008, as requested by Regulation (EU) 575/2013 and Law 153/2015 of 14 September and are ratified by the Appraisals Unit. Regarding residential real estate, after the initial valuation and in accordance with Notice n. 5/2006 of Bank of Portugal and e CRR 575/2013, the Bank monitors the respective values through market indexes. If the index is lower than 0.9, the Bank revaluates choosing one of the following two methods: i) - depreciation of the property by direct application of the index, if the amount owed does not exceed Euros 300,000; ii) - review of the property value by external valuators, depending on the value of the credit operation, and in accordance with the established standards from ECB and Bank of Portugal. For all non-residential real estate, the Bank also monitors its values through market indexes and to the regular valuation reviews with the minimum periodicities in accordance with the Regulation (EU) 575/2013, in the case of offices, commercial spaces, warehouses and industrial premises. For all real estate (residential or non-residential) for which the monitoring result in significant devaluation of the real estate value (more than 10%), a valuation review is subsequently carried out by an expert valuer, preserving the referred i) above. For the remaining real estate (land or countryside buildings for example) there are no market indexes available for the monitoring of appraisal values, after the initial valuations. Therefore, for these cases and in accordance with the minimum periodicity established for the monitoring and reviewing of this type of real estate, valuation reviews are carried out by expert valuers. 2023 REPORT & ACCOUNTS | 375 The indexes currently used are supplied to the Bank by an external specialized entity that, for more than a decade, has been collecting and processing the data upon which the indexes are built. In the case of financial collaterals, their market value is daily and automatically updated, through the IT connection between the collaterals management system and the relevant financial markets data. b) Risk grades Credit granting is based on the previous risk assessment of clients and also on a rigorous assessment of the protection level provided by the underlying collaterals. For this purpose, a single risk grading system is used - the Rating Master Scale - based on Probability of Default (PD), allowing for a greater discriminating power in clients' assessment and for a better hierarchy of the associated risk. The Rating Master Scale also allows to identify clients that show signs of degradation in their credit capacity and, in particular, those that are classified in a default situation. All rating systems and models used by the Group were calibrated for the Rating Master Scale. Aiming at an adequate assessment of credit risk, the Group defined a set of macro segments and segments which are treated through different rating systems and models that relate the internal risk grades and the clients’ PD, ensuring a risk assessment that considers the clients’ specific features in terms of their respectively risk profiles. The assessment made by these rating systems and models result in the risk grades of the Master Scale, that has fifteen grades, where the last three correspond to relevant downgrades of the clients’ credit quality and are referred to by “procedural risk grades”: 13, 14 and 15, that correspond, in this order, to situations of increased severity in terms default, as risk grade 15 is a Default situation. The non-procedural risk grades are attributed by the rating systems through automatic decision models or by the Rating Division – a unit which is independent from the credit analysis and decision areas and bodies- and are reviewed/updated periodically or whenever this is justified by events. The models within the various rating systems are regularly subject to validation, made by the Models Validation and Monitoring Office, which is independent from the units that are responsible for the development and maintenance of the rating models. The conclusions of the validations by the Models Validation and Monitoring Office, as well the respective recommendations and proposal for changes and/or improvements, are analysed and ratified by a specific Validation Committee, composed in accordance to the type of model analysed. The proposals for models’ changes originated by the Validation Committee are submitted to the approval of the Risk Committee. The following table lists the equivalence between the internal rating levels (Rating Master Scale) and the external ratings of the international rating agencies: Internal risk grade External ratings Fitch S&P Moody's DBRS 1 AAA AAA Aaa AAA 1 AA+ AA+ Aa1 AA (high) 2 AA AA Aa2 AA 2 AA- AA- Aa3 AA (low) 3 A+ A+ A1 A (high) 3 A A A2 A 4 A- A- A3 A (low) 4 BBB+ BBB+ Baa1 BBB (high) 5 BBB BBB Baa2 BBB 6 BBB- BBB- Baa3 BBB (low) 7 BB+ BB+ Ba1 BB (high) 8 BB BB Ba2 BB 9 BB- BB- Ba3 BB (low) 10 B+ B+ B1 B (high) 11 B B B2 B 12 ≤ B- ≤ B- ≤ B3 ≤ B- 2023 REPORT & ACCOUNTS 376 | c) Impairment and Write-offs The credit impairment calculation as at 31 December 2023 and 2022 integrates the general principles defined in International Financial Reporting Standards (IFRS 9) and the guidelines issued by the Bank of Portugal through Circular Letter CC/2018/00000062, in order to align the calculation process used in the Group with the best international practices in this area. As at 31 December 2023, the financial instruments subject to impairment requirements under IFRS 9, (do not include equity instruments as accounting policy 1.C1.1.2), analysed by stage, are detailed in the following tables: (Thousands of euros) Category 2023 Gross exposure Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 21) 908,701 — — — 908,701 Loans and advances to customers (note 22) 45,651,670 7,290,622 1,914,768 30,749 54,887,809 Debt instruments (note 23) 17,536,547 62,872 5,105 — 17,604,524 Debt instruments at fair value through other comprehensive income (note 24) () 10,809,872 — 1,150 — 10,811,022 Guarantees and other commitments (note 45) () 14,934,354 1,433,594 336,497 2,574 16,707,019 Total 89,841,144 8,787,088 2,257,520 33,323 100,919,075 (*) For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1.C1.5.1.2. () Includes the balances of guarantees granted, irrevocable credit lines and revocable commitments (Thousands of euros) Category 2023 Impairment losses Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 21) 224 — — — 224 Loans and advances to customers (note 22) 268,948 291,752 1,007,481 14,469 1,582,650 Debt instruments (note 23) 23,066 797 1,525 — 25,388 Debt instruments at fair value through other comprehensive income (note 24) () — — 1,150 — 1,150 Guarantees and other commitments (note 39) 12,880 14,686 94,008 — 121,574 Total 305,118 307,235 1,104,164 14,469 1,730,986 (Thousands of euros) Category 2023 Net exposure Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 21) 908,477 — — — 908,477 Loans and advances to customers (note 22) 45,382,722 6,998,870 907,287 16,280 53,305,159 Debt instruments (note 23) 17,513,481 62,075 3,580 — 17,579,136 Debt instruments at fair value through other comprehensive income (note 24) () 10,809,872 — — — 10,809,872 Guarantees and other commitments (note 45) () 14,921,474 1,418,908 242,489 2,574 16,585,445 Total 89,536,026 8,479,853 1,153,356 18,854 99,188,089 (*) For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1.C1.5.1.2. () Includes the balances of guarantees granted, irrevocable credit lines and revocable commitments. 2023 REPORT & ACCOUNTS | 377 As at 31 December 2022, the financial instruments subject to impairment requirements under IFRS 9 (do not include equity instruments as accounting policy 1.C1.1.2), analysed by stage, are detailed in the following tables: (Thousands of euros) Category 2022 (restated) Gross exposure Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 21) 964,296 — — — 964,296 Loans and advances to customers (note 22) 46,395,996 7,564,235 2,170,979 46,956 56,178,166 Debt instruments (note 23) 12,990,232 55,787 3,802 — 13,049,821 Debt instruments at fair value through other comprehensive income (note 24) () 7,434,152 — 1,067 — 7,435,219 Guarantees and other commitments (note 45) () 14,303,231 1,768,595 364,691 921 16,437,438 Total 82,087,907 9,388,617 2,540,539 47,877 94,064,940 () For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1.C1.5.1.2. () Includes the balances of guarantees granted, irrevocable credit lines and revocable commitments. (Thousands of euros) Category 2022 (restated) Impairment losses Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 21) 862 — — — 862 Loans and advances to customers (note 22) 214,470 284,448 985,557 17,898 1,502,373 Debt instruments (note 23) 13,409 720 110 — 14,239 Debt instruments at fair value through other comprehensive income (note 24) () — — 1,067 — 1,067 Guarantees and other commitments (note 39) 11,307 14,893 84,435 119 110,754 Total 240,048 300,061 1,071,169 18,017 1,629,295 (Thousands of euros) Category 2022 (restated) Net exposure Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 21) 963,434 — — — 963,434 Loans and advances to customers (note 22) 46,181,526 7,279,787 1,185,422 29,058 54,675,793 Debt instruments (note 23) 12,976,823 55,067 3,692 — 13,035,582 Debt instruments at fair value through other comprehensive income (note 24) () 7,434,152 — — — 7,434,152 Guarantees and other commitments (note 45) () 14,291,924 1,753,702 280,256 802 16,326,684 Total 81,847,859 9,088,556 1,469,370 29,860 92,435,645 () For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1 C1.5.1.2. () Includes the balances of guarantees granted, irrevocable credit lines and revocable commitments 2023 REPORT & ACCOUNTS 378 | The maximum exposure to credit risk of financial assets not subject to impairment requirements is analysed as follows: (Thousands of euros) 2023 2022 (restated) Financial assets held for trading (note 24) Debt instruments 355,526 338,813 Derivatives 437,155 394,183 Financial assets designated at fair value through profit or loss - Debt instruments (note 24) 32,004 — Financial assets not held for trading mandatorily at fair value through profit or loss Debt instruments (note 24) 280,558 311,404 Hedging derivatives (note 25) 40,628 59,703 Total 1,145,871 1,104,103 - In the case of financial assets, excluding derivatives, it is considered that its credit risk exposure is equal to its book value; - In the case of derivatives, the maximum exposure to credit risk is its market value, plus its potential risk ("add-on"). During 2023, the changes occurred in Loans and advances to customers - gross amount are as follows: (Thousands of euros) 2023 Financial assets at amortised cost - Loans and advances to customers - Gross amount Stage 1 Stage 2 Stage 3 POCI Total Gross amount as at 1 January 46,395,996 7,564,235 2,170,979 46,956 56,178,166 Changes in gross book value: Transfers from stage 1 to stage 2 (2,100,816) 2,100,816 — — — Transfers from stage 1 to stage 3 (285,020) — 285,020 — — Transfers from stage 2 to stage 1 1,889,217 (1,889,217) — — — Transfers from stage 2 to stage 3 — (415,277) 415,277 — — Transfers from stage 3 to stage 1 36,667 — (36,667) — — Transfers from stage 3 to stage 2 — 291,025 (291,025) — — Write-offs (811) (2,261) (186,529) (2,872) (192,473) Net balance of new financial assets and derecognised financial assets and other variations (283,563) (358,699) (442,287) (13,335) (1,097,884) Gross amount at the end of the year 45,651,670 7,290,622 1,914,768 30,749 54,887,809 2023 REPORT & ACCOUNTS | 379 During 2023, the changes occurred in Loans and advances to customers - impairment are as follows: (Thousands of euros) 2023 Financial assets at amortised cost - Loans and advances to customers impairment Stage 1 Stage 2 Stage 3 POCI Total Impairment losses as at 1 January 214,470 284,448 985,557 17,898 1,502,373 Change in impairment losses: Transfer to Stage 1 64,091 (55,424) (8,587) (80) — Transfer to Stage 2 (12,326) 129,062 (116,736) — — Transfer to Stage 3 (4,882) (36,867) 42,105 (356) — Changes occurred due to changes in credit risk (26,368) (45,099) 376,483 2,155 307,171 Write-offs (811) (2,261) (186,529) (2,872) (192,473) Changes due to new financial assets and derecognised financial assets and other variations 34,774 17,893 (84,812) (2,276) (34,421) Impairment losses at the end of the year 268,948 291,752 1,007,481 14,469 1,582,650 During 2022, the changes occurred in Loans and advances to customers - gross amount are as follows: (Thousands of euros) 2022 (restated) Financial assets at amortised cost - Loans and advances to customers - Gross amount Stage 1 Stage 2 Stage 3 POCI Total Gross amount as at 1 January 46,113,653 7,964,052 2,686,267 57,713 56,821,685 Changes in gross book value: Transfers from stage 1 to stage 2 (2,111,726) 2,111,726 — — — Transfers from stage 1 to stage 3 (258,614) — 258,614 — — Transfers from stage 2 to stage 1 1,946,027 (1,946,027) — — — Transfers from stage 2 to stage 3 — (631,859) 631,859 — — Transfers from stage 3 to stage 1 26,176 — (26,176) — — Transfers from stage 3 to stage 2 — 174,249 (174,249) — — Write-offs (922) (2,996) (440,667) (13,820) (458,405) Net balance of new financial assets and derecognised financial assets and other variations 681,402 (104,910) (764,669) 3,063 (185,114) Gross amount at the end of the year 46,395,996 7,564,235 2,170,979 46,956 56,178,166 2023 REPORT & ACCOUNTS 380 | During 2022, the changes occurred in Loans and advances to customers - impairment are as follows: (Thousands of euros) 2022 (restated) Financial assets at amortised cost - Loans and advances to customers impairment Stage 1 Stage 2 Stage 3 POCI Total Impairment losses as at 1 January 207,328 288,642 1,336,612 16,702 1,849,284 Change in impairment losses: Transfer to Stage 1 50,530 (50,139) (4,778) 4,387 — Transfer to Stage 2 (14,016) 47,552 (33,614) 78 — Transfer to Stage 3 (4,314) (55,508) 58,004 1,818 — Changes occurred due to changes in credit risk (51,425) 25,711 196,355 4,816 175,457 Write-offs (922) (2,996) (440,667) (13,820) (458,405) Changes due to new financial assets and derecognised financial assets and other variations 27,289 31,186 (126,355) 3,917 (63,963) Impairment losses at the end of the year 214,470 284,448 985,557 17,898 1,502,373 Financial assets modified during the period that have not resulted in derecognition (with impairment losses based on expected lifetime losses) are analysed as follows: (Thousands of euros) Financial assets modified 2023 2022 (restated) Amortised cost before changes 457,237 396,049 Impairment losses before changes (61,984) (47,337) Net amortised cost before changes 395,253 348,712 Net gain/loss arising on changes (9,926) (32,993) Net amortised cost after changes 385,327 315,719 The financial assets changed since the initial recognition at a time when the impairment loss was measured based on the expected credit losses lifetime, are analysed as follows: (Thousands of euros) Financial assets changed 2023 2022 (restated) Amortised cost of financial assets for which credit losses expected to go from "lifetime" to 12 months 106,778 65,942 2023 REPORT & ACCOUNTS | 381 As at 31 December 2023, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by segment and stage, are as follows: (Thousands of euros) 2023 Stage 2 Stage 3 Segment Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Individuals-Mortgage 24,913,323 2,317,570 217,742 106,027 2,641,339 269,211 149,473 418,684 11,247 27,984,593 Individuals-Other 8,455,374 996,879 138,926 50,292 1,186,097 256,328 320,458 576,786 14,263 10,232,520 Financial Companies 3,275,624 53,152 42 1 53,195 46,841 10 46,851 — 3,375,670 Non-financial companies - Corporate 10,825,177 716,737 13,734 1,961 732,432 198,010 29,407 227,417 2,209 11,787,235 Non-financial companies - SME- Corporate 8,777,780 2,327,698 13,722 3,902 2,345,322 582,545 102,199 684,744 2,959 11,810,805 Non-financial companies -SME- Retail 6,672,112 1,429,586 45,468 19,621 1,494,675 161,067 138,539 299,606 2,645 8,469,038 Non-financial companies - Other 515,637 22,791 4 16 22,811 269 2,010 2,279 — 540,727 Other loans 15,596,245 308,938 2,266 13 311,217 1 2 3 — 15,907,465 Total 79,031,272 8,173,351 431,904 181,833 8,787,088 1,514,272 742,098 2,256,370 33,323 90,108,053 Impairment Individuals-Mortgage 30,606 21,789 4,435 5,736 31,960 59,673 54,599 114,272 5,376 182,214 Individuals-Other 65,165 42,205 23,950 13,973 80,128 104,578 211,238 315,816 9,093 470,202 Financial Companies 23,475 1,381 3 — 1,384 34,559 6 34,565 — 59,424 Non-financial companies - Corporate 36,533 25,712 247 312 26,271 91,151 20,578 111,729 — 174,533 Non-financial companies - SME- Corporate 49,075 78,177 1,490 760 80,427 313,575 59,279 372,854 — 502,356 Non-financial companies -SME- Retail 83,013 75,676 4,281 4,152 84,109 92,830 59,457 152,287 — 319,409 Non-financial companies - Other 370 74 — 2 76 8 1,482 1,490 — 1,936 Other loans 16,881 2,763 116 1 2,880 — 1 1 — 19,762 Total 305,118 247,777 34,522 24,936 307,235 696,374 406,640 1,103,014 14,469 1,729,836 Net exposure Individuals-Mortgage 24,882,717 2,295,781 213,307 100,291 2,609,379 209,538 94,874 304,412 5,871 27,802,379 Individuals-Other 8,390,209 954,674 114,976 36,319 1,105,969 151,750 109,220 260,970 5,170 9,762,318 Financial Companies 3,252,149 51,771 39 1 51,811 12,282 4 12,286 — 3,316,246 Non-financial companies - Corporate 10,788,644 691,025 13,487 1,649 706,161 106,859 8,829 115,688 2,209 11,612,702 Non-financial companies - SME- Corporate 8,728,705 2,249,521 12,232 3,142 2,264,895 268,970 42,920 311,890 2,959 11,308,449 Non-financial companies -SME- Retail 6,589,099 1,353,910 41,187 15,469 1,410,566 68,237 79,082 147,319 2,645 8,149,629 Non-financial companies - Other 515,267 22,717 4 14 22,735 261 528 789 — 538,791 Other loans 15,579,364 306,175 2,150 12 308,337 1 1 2 — 15,887,703 Total 78,726,154 7,925,574 397,382 156,897 8,479,853 817,898 335,458 1,153,356 18,854 88,378,217 % of impairment coverage Individuals-Mortgage 0.12% 0.94% 2.04% 5.41% 1.21% 22.17% 36.53% 27.29% 47.80% 0.65% Individuals-Other 0.77% 4.23% 17.24% 27.78% 6.76% 40.80% 65.92% 54.75% 63.75% 4.60% Financial Companies 0.72% 2.60% 7.14% 0.00% 2.60% 73.78% 60.00% 73.78% 0.00% 1.76% Non-financial companies - Corporate 0.34% 3.59% 1.80% 15.91% 3.59% 46.03% 69.98% 49.13% 0.00% 1.48% Non-financial companies - SME- Corporate 0.56% 3.36% 10.86% 19.48% 3.43% 53.83% 58.00% 54.45% 0.00% 4.25% Non-financial companies -SME- Retail 1.24% 5.29% 9.42% 21.16% 5.63% 57.63% 42.92% 50.83% 0.00% 3.77% Non-financial companies - Other 0.07% 0.32% 0.00% 12.50% 0.33% 2.97% 73.73% 65.38% 0.00% 0.36% Other loans 0.11% 0.89% 5.12% 7.69% 0.93% 0.00% 50.00% 33.33% 0.00% 0.12% Total 0.39% 3.03% 7.99% 13.71% 3.50% 45.99% 54.80% 48.88% 43.42% 1.92% 2023 REPORT & ACCOUNTS 382 | As at 31 December 2022, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by segment and stage, are as follows: (Thousands of euros) 2022 (restated) Stage 2 Stage 3 Segment Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Individuals-Mortgage 25,213,881 2,320,624 151,906 89,857 2,562,387 284,276 142,817 427,093 10,525 28,213,886 Individuals-Other 7,614,004 958,714 118,276 42,895 1,119,885 252,456 284,486 536,942 19,621 9,290,452 Financial Companies 3,569,566 80,945 61 — 81,006 72,980 1,494 74,474 7,545 3,732,591 Non-financial companies - Corporate 9,621,830 700,538 660 13 701,211 204,523 91,575 296,098 — 10,619,139 Non-financial companies - SME- Corporate 10,238,522 2,798,567 5,339 2,559 2,806,465 761,101 95,135 856,236 6,733 13,907,956 Non-financial companies -SME- Retail 6,024,603 1,683,407 30,867 14,532 1,728,806 231,377 117,109 348,486 3,453 8,105,348 Non-financial companies - Other 558,812 46,613 2 — 46,615 113 — 113 — 605,540 Other loans 11,812,537 342,203 39 — 342,242 — 30 30 — 12,154,809 Total 74,653,755 8,931,611 307,150 149,856 9,388,617 1,806,826 732,646 2,539,472 47,877 86,629,721 Impairment Individuals-Mortgage 15,380 23,667 4,083 5,262 33,012 56,519 56,440 112,959 5,452 166,803 Individuals-Other 52,559 31,277 18,676 11,224 61,177 104,108 180,916 285,024 12,436 411,196 Financial Companies 8,491 1,701 4 — 1,705 36,543 1,245 37,788 — 47,984 Non-financial companies - Corporate 27,484 18,218 22 — 18,240 87,043 43,500 130,543 — 176,267 Non-financial companies - SME- Corporate 46,296 81,667 506 660 82,833 298,455 46,890 345,345 129 474,603 Non-financial companies -SME- Retail 78,239 92,784 4,090 3,226 100,100 106,533 51,896 158,429 — 336,768 Non-financial companies - Other 512 129 — — 129 5 — 5 — 646 Other loans 11,087 2,860 5 — 2,865 — 9 9 — 13,961 Total 240,048 252,303 27,386 20,372 300,061 689,206 380,896 1,070,102 18,017 1,628,228 Net exposure Individuals-Mortgage 25,198,501 2,296,957 147,823 84,595 2,529,375 227,757 86,377 314,134 5,073 28,047,083 Individuals-Other 7,561,445 927,437 99,600 31,671 1,058,708 148,348 103,570 251,918 7,185 8,879,256 Financial Companies 3,561,075 79,244 57 — 79,301 36,437 249 36,686 7,545 3,684,607 Non-financial companies - Corporate 9,594,346 682,320 638 13 682,971 117,480 48,075 165,555 — 10,442,872 Non-financial companies - SME- Corporate 10,192,226 2,716,900 4,833 1,899 2,723,632 462,646 48,245 510,891 6,604 13,433,353 Non-financial companies -SME- Retail 5,946,364 1,590,623 26,777 11,306 1,628,706 124,844 65,213 190,057 3,453 7,768,580 Non-financial companies - Other 558,300 46,484 2 — 46,486 108 — 108 — 604,894 Other loans 11,801,450 339,343 34 — 339,377 — 21 21 — 12,140,848 Total 74,413,707 8,679,308 279,764 129,484 9,088,556 1,117,620 351,750 1,469,370 29,860 85,001,493 % of impairment coverage Individuals-Mortgage 0.06% 1.02% 2.69% 5.86% 1.29% 19.88% 39.52% 26.45% 51.80% 0.59% Individuals-Other 0.69% 3.26% 15.79% 26.17% 5.46% 41.24% 63.59% 53.08% 63.38% 4.43% Financial Companies 0.24% 2.10% 6.56% 0.00% 2.10% 50.07% 83.33% 50.74% 0.00% 1.29% Non-financial companies - Corporate 0.29% 2.60% 3.33% 0.00% 2.60% 42.56% 47.50% 44.09% 0.00% 1.66% Non-financial companies - SME- Corporate 0.45% 2.92% 9.48% 25.79% 2.95% 39.21% 49.29% 40.33% 1.92% 3.41% Non-financial companies -SME- Retail 1.30% 5.51% 13.25% 22.20% 5.79% 46.04% 44.31% 45.46% 0.00% 4.15% Non-financial companies - Other 0.09% 0.28% 0.00% 0.00% 0.28% 4.42% 0.00% 4.42% 0.00% 0.11% Other loans 0.09% 0.84% 12.82% 0.00% 0.84% 0.00% 30.00% 30.00% 0.00% 0.11% Total 0.32% 2.82% 8.92% 13.59% 3.20% 38.14% 51.99% 42.14% 37.63% 1.88% 2023 REPORT & ACCOUNTS | 383 As at 31 December 2023, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by sector of activity and stage, are as follows: (Thousands of euros) 2023 Stage 2 Stage 3 Sector of activity Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Loans to individuals 33,368,697 3,314,449 356,668 156,319 3,827,436 525,539 469,931 995,470 25,510 38,217,113 Non-financial companies - Trade 5,299,609 735,392 16,114 3,998 755,504 91,961 44,149 136,110 604 6,191,827 Non-financial companies - Construction 2,346,987 583,617 7,508 2,523 593,648 272,067 30,830 302,897 4,141 3,247,673 Non-financial companies - Manufacturing industries 5,596,512 934,013 14,368 7,458 955,839 137,257 71,289 208,546 560 6,761,457 Non-financial companies - Other activities 2,265,462 372,268 12,087 954 385,309 56,211 15,197 71,408 50 2,722,229 Non-financial companies - Other services 11,282,136 1,871,522 22,851 10,567 1,904,940 384,395 110,690 495,085 2,458 13,684,619 Other Services /Other activities 18,871,869 362,090 2,308 14 364,412 46,842 12 46,854 — 19,283,135 Total 79,031,272 8,173,351 431,904 181,833 8,787,088 1,514,272 742,098 2,256,370 33,323 90,108,053 Impairment Loans to individuals 95,771 63,994 28,385 19,709 112,088 164,251 265,837 430,088 14,469 652,416 Non-financial companies - Trade 28,456 25,648 863 1,084 27,595 40,537 19,292 59,829 — 115,880 Non-financial companies - Construction 15,896 13,624 978 645 15,247 91,537 17,927 109,464 — 140,607 Non-financial companies - Manufacturing industries 54,770 57,777 1,909 1,842 61,528 53,536 35,826 89,362 — 205,660 Non-financial companies - Other activities 10,608 18,371 771 170 19,312 38,378 8,562 46,940 — 76,860 Non-financial companies - Other services 59,261 64,219 1,497 1,485 67,201 273,576 59,189 332,765 — 459,227 Other Services /Other activities 40,356 4,144 119 1 4,264 34,559 7 34,566 — 79,186 Total 305,118 247,777 34,522 24,936 307,235 696,374 406,640 1,103,014 14,469 1,729,836 Net exposure Loans to individuals 33,272,926 3,250,455 328,283 136,610 3,715,348 361,288 204,094 565,382 11,041 37,564,697 Non-financial companies - Trade 5,271,153 709,744 15,251 2,914 727,909 51,424 24,857 76,281 604 6,075,947 Non-financial companies - Construction 2,331,091 569,993 6,530 1,878 578,401 180,530 12,903 193,433 4,141 3,107,066 Non-financial companies - Manufacturing industries 5,541,742 876,236 12,459 5,616 894,311 83,721 35,463 119,184 560 6,555,797 Non-financial companies - Other activities 2,254,854 353,897 11,316 784 365,997 17,833 6,635 24,468 50 2,645,369 Non-financial companies - Other services 11,222,875 1,807,303 21,354 9,082 1,837,739 110,819 51,501 162,320 2,458 13,225,392 Other Services /Other activities 18,831,513 357,946 2,189 13 360,148 12,283 5 12,288 — 19,203,949 Total 78,726,154 7,925,574 397,382 156,897 8,479,853 817,898 335,458 1,153,356 18,854 88,378,217 % of impairment coverage Loans to individuals 0.29% 1.93% 7.96% 12.61% 2.93% 31.25% 56.57% 43.20% 56.72% 1.71% Non-financial companies - Trade 0.54% 3.49% 5.36% 27.11% 3.65% 44.08% 43.70% 43.96% 0.00% 1.87% Non-financial companies - Construction 0.68% 2.33% 13.03% 25.56% 2.57% 33.65% 58.15% 36.14% 0.00% 4.33% Non-financial companies - Manufacturing industries 0.98% 6.19% 13.29% 24.70% 6.44% 39.00% 50.25% 42.85% 0.00% 3.04% Non-financial companies - Other activities 0.47% 4.93% 6.38% 17.82% 5.01% 68.27% 56.34% 65.73% 0.00% 2.82% Non-financial companies - Other services 0.53% 3.43% 6.55% 14.05% 3.53% 71.17% 53.47% 67.21% 0.00% 3.36% Other Services /Other activities 0.21% 1.14% 5.16% 7.14% 1.17% 73.78% 58.33% 73.77% 0.00% 0.41% Total 0.39% 3.03% 7.99% 13.71% 3.50% 45.99% 54.80% 48.88% 43.42% 1.92% 2023 REPORT & ACCOUNTS 384 | As at 31 December 2022, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by sector of activity and stage, are as follows: (Thousands of euros) 2022 (restated) Stage 2 Stage 3 Sector of activity Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Loans to individuals 32,827,885 3,279,338 270,182 132,752 3,682,272 536,732 427,303 964,035 30,146 37,504,338 Non-financial companies - Trade 5,312,463 827,990 9,921 4,283 842,194 91,204 45,688 136,892 4,715 6,296,264 Non-financial companies - Construction 2,010,021 771,490 3,040 1,033 775,563 363,418 32,791 396,209 1,851 3,183,644 Non-financial companies - Manufacturing industries 5,836,145 1,013,888 9,380 4,983 1,028,251 162,228 117,804 280,032 928 7,145,356 Non-financial companies - Other activities 2,107,745 395,981 3,587 1,007 400,575 101,252 17,354 118,606 44 2,626,970 Non-financial companies - Other services 11,177,393 2,219,776 10,940 5,798 2,236,514 479,012 90,182 569,194 2,648 13,985,749 Other Services /Other activities 15,382,103 423,148 100 — 423,248 72,980 1,524 74,504 7,545 15,887,400 Total 74,653,755 8,931,611 307,150 149,856 9,388,617 1,806,826 732,646 2,539,472 47,877 86,629,721 Impairment Loans to individuals 67,939 54,944 22,759 16,486 94,189 160,627 237,356 397,983 17,888 577,999 Non-financial companies - Trade 22,306 26,555 1,168 1,110 28,833 35,530 20,294 55,824 129 107,092 Non-financial companies - Construction 11,517 16,055 551 288 16,894 154,391 18,769 173,160 — 201,571 Non-financial companies - Manufacturing industries 54,925 54,821 1,293 1,258 57,372 65,474 58,761 124,235 — 236,532 Non-financial companies - Other activities 7,701 15,667 529 154 16,350 44,356 8,459 52,815 — 76,866 Non-financial companies - Other services 56,082 79,700 1,077 1,076 81,853 192,285 36,003 228,288 — 366,223 Other Services /Other activities 19,578 4,561 9 — 4,570 36,543 1,254 37,797 — 61,945 Total 240,048 252,303 27,386 20,372 300,061 689,206 380,896 1,070,102 18,017 1,628,228 Net exposure Loans to individuals 32,759,946 3,224,394 247,423 116,266 3,588,083 376,105 189,947 566,052 12,258 36,926,339 Non-financial companies - Trade 5,290,157 801,435 8,753 3,173 813,361 55,674 25,394 81,068 4,586 6,189,172 Non-financial companies - Construction 1,998,504 755,435 2,489 745 758,669 209,027 14,022 223,049 1,851 2,982,073 Non-financial companies - Manufacturing industries 5,781,220 959,067 8,087 3,725 970,879 96,754 59,043 155,797 928 6,908,824 Non-financial companies - Other activities 2,100,044 380,314 3,058 853 384,225 56,896 8,895 65,791 44 2,550,104 Non-financial companies - Other services 11,121,311 2,140,076 9,863 4,722 2,154,661 286,727 54,179 340,906 2,648 13,619,526 Other Services /Other activities 15,362,525 418,587 91 — 418,678 36,437 270 36,707 7,545 15,825,455 Total 74,413,707 8,679,308 279,764 129,484 9,088,556 1,117,620 351,750 1,469,370 29,860 85,001,493 % of impairment coverage Loans to individuals 0.21% 1.68% 8.42% 12.42% 2.56% 29.93% 55.55% 41.28% 59.34% 1.54% Non-financial companies - Trade 0.42% 3.21% 11.77% 25.92% 3.42% 38.96% 44.42% 40.78% 2.74% 1.70% Non-financial companies - Construction 0.57% 2.08% 18.13% 27.88% 2.18% 42.48% 57.24% 43.70% 0.00% 6.33% Non-financial companies - Manufacturing industries 0.94% 5.41% 13.78% 25.25% 5.58% 40.36% 49.88% 44.36% 0.00% 3.31% Non-financial companies - Other activities 0.37% 3.96% 14.75% 15.29% 4.08% 43.81% 48.74% 44.53% 0.00% 2.93% Non-financial companies - Other services 0.50% 3.59% 9.84% 18.56% 3.66% 40.14% 39.92% 40.11% 0.00% 2.62% Other Services /Other activities 0.13% 1.08% 9.00% 0.00% 1.08% 50.07% 82.28% 50.73% 0.00% 0.39% Total 0.32% 2.82% 8.92% 13.59% 3.20% 38.14% 51.99% 42.14% 37.63% 1.88% 2023 REPORT & ACCOUNTS | 385 As at 31 December 2023, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by geography and stage, are as follows: (Thousands of euros) 2023 Stage 2 Stage 3 Geography Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Portugal 54,817,070 6,507,490 243,837 97,956 6,849,283 1,101,355 321,902 1,423,257 14,814 63,104,424 Poland 22,932,079 1,254,639 168,557 76,684 1,499,880 404,395 394,011 798,406 18,509 25,248,874 Mozambique 1,282,123 411,222 19,510 7,193 437,925 8,522 26,185 34,707 — 1,754,755 Total 79,031,272 8,173,351 431,904 181,833 8,787,088 1,514,272 742,098 2,256,370 33,323 90,108,053 Impairment Portugal 190,234 201,637 10,867 9,419 221,923 551,673 145,912 697,585 — 1,109,742 Poland 103,505 40,435 22,551 14,419 77,405 143,301 245,864 389,165 14,469 584,544 Mozambique 11,379 5,705 1,104 1,098 7,907 1,400 14,864 16,264 — 35,550 Total 305,118 247,777 34,522 24,936 307,235 696,374 406,640 1,103,014 14,469 1,729,836 Net exposure Portugal 54,626,836 6,305,853 232,970 88,537 6,627,360 549,682 175,990 725,672 14,814 61,994,682 Poland 22,828,574 1,214,204 146,006 62,265 1,422,475 261,094 148,147 409,241 4,040 24,664,330 Mozambique 1,270,744 405,517 18,406 6,095 430,018 7,122 11,321 18,443 — 1,719,205 Total 78,726,154 7,925,574 397,382 156,897 8,479,853 817,898 335,458 1,153,356 18,854 88,378,217 % of impairment coverage Portugal 0.35% 3.10% 4.46% 9.62% 3.24% 50.09% 45.33% 49.01% 0.00% 1.76% Poland 0.45% 3.22% 13.38% 18.80% 5.16% 35.44% 62.40% 48.74% 78.17% 2.32% Mozambique 0.89% 1.39% 5.66% 15.26% 1.81% 16.43% 56.77% 46.86% 0.00% 2.03% Total 0.39% 3.03% 7.99% 13.71% 3.50% 45.99% 54.80% 48.88% 43.42% 1.92% As at 31 December 2022, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by geography and stage, are as follows: (Thousands of euros) 2022 (restated) Stage 2 Stage 3 Geography Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Portugal 54,604,642 7,155,127 159,209 66,646 7,380,982 1,410,285 306,213 1,716,498 19,011 63,721,133 Poland 18,184,099 1,377,667 142,519 81,498 1,601,684 386,990 343,753 730,743 28,866 20,545,392 Mozambique 1,865,014 398,817 5,422 1,712 405,951 9,551 82,680 92,231 — 2,363,196 Total 74,653,755 8,931,611 307,150 149,856 9,388,617 1,806,826 732,646 2,539,472 47,877 86,629,721 Impairment Portugal 150,039 205,954 7,124 5,447 218,525 550,372 124,012 674,384 — 1,042,948 Poland 83,818 42,151 19,641 14,566 76,358 136,847 210,573 347,420 18,017 525,613 Mozambique 6,191 4,198 621 359 5,178 1,987 46,311 48,298 — 59,667 Total 240,048 252,303 27,386 20,372 300,061 689,206 380,896 1,070,102 18,017 1,628,228 Net exposure Portugal 54,454,603 6,949,173 152,085 61,199 7,162,457 859,913 182,201 1,042,114 19,011 62,678,185 Poland 18,100,281 1,335,516 122,878 66,932 1,525,326 250,143 133,180 383,323 10,849 20,019,779 Mozambique 1,858,823 394,619 4,801 1,353 400,773 7,564 36,369 43,933 — 2,303,529 Total 74,413,707 8,679,308 279,764 129,484 9,088,556 1,117,620 351,750 1,469,370 29,860 85,001,493 % of impairment coverage Portugal 0.27% 2.88% 4.47% 8.17% 2.96% 39.03% 40.50% 39.29% 0.00% 1.64% Poland 0.46% 3.06% 13.78% 17.87% 4.77% 35.36% 61.26% 47.54% 62.42% 2.56% Mozambique 0.33% 1.05% 11.45% 20.97% 1.28% 20.80% 56.01% 52.37% 0.00% 2.52% Total 0.32% 2.82% 8.92% 13.59% 3.20% 38.14% 51.99% 42.14% 37.63% 1.88% 2023 REPORT & ACCOUNTS 386 | As at 31 December 2023, the gross exposure, by type of financial instrument, internal rating and stage, is analysed as follows: (Thousands of euros) 2023 Gross Exposure Higher quality (GR 1-6) Average quality (GR 7-9) Lower quality (GR 10-12) Procedural (GR 13/14/15) Not classified (without risk grade) Total Impairment losses Net exposure Financial assets at amortised cost stage 1 48,884,930 9,891,705 4,050,015 800 1,269,469 64,096,919 292,238 63,804,681 stage 2 1,338,150 1,942,276 3,215,313 379,810 477,945 7,353,494 292,549 7,060,945 stage 3 — — — 1,896,329 23,543 1,919,872 1,009,006 910,866 POCI 2,152 2,448 1,202 24,831 115 30,748 14,469 16,279 50,225,232 11,836,429 7,266,530 2,301,770 1,771,072 73,401,033 1,608,262 71,792,771 Debt instruments at fair value through other comprehensive income () stage 1 10,490,205 153,637 11,687 50 154,294 10,809,873 — 10,809,873 stage 3 — — — — 1,150 1,150 1,150 — 10,490,205 153,637 11,687 50 155,444 10,811,023 1,150 10,809,873 Guarantees and other commitments () stage 1 9,603,432 3,927,153 1,224,614 3,511 175,643 14,934,353 12,880 14,921,473 stage 2 169,847 400,684 670,786 13,250 179,027 1,433,594 14,686 1,418,908 stage 3 — — — 336,351 147 336,498 94,008 242,490 POCI 6 5 1 2,563 — 2,575 — 2,575 9,773,285 4,327,842 1,895,401 355,675 354,817 16,707,020 121,574 16,585,446 Total 70,488,722 16,317,908 9,173,618 2,657,495 2,281,333 100,919,076 1,730,986 99,188,090 (*) For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1 C1.5.1.2. () The gross exposure includes the guarantees granted, irrevocable credit lines and revocable commitments (note 45). As at 31 December 2022, the gross exposure, by type of financial instrument, internal rating and stage, is analysed as follows: (Thousands of euros) 2022 (restated) Gross Exposure Higher quality (GR 1-6) Average quality (GR 7-9) Lower quality (GR 10-12) Procedural (GR 13/14/15) Not classified (without risk grade) Total Impairment losses Net exposure Financial assets at amortised cost stage 1 44,625,339 10,468,892 3,984,622 2,862 1,268,808 60,350,523 228,741 60,121,782 stage 2 1,456,028 1,911,502 3,321,694 373,651 557,148 7,620,023 285,168 7,334,855 stage 3 — — — 2,165,309 9,472 2,174,781 985,667 1,189,114 POCI 1,928 9,048 1,122 34,782 77 46,957 17,898 29,059 46,083,295 12,389,442 7,307,438 2,576,604 1,835,505 70,192,284 1,517,474 68,674,810 Debt instruments at fair value through other comprehensive income () stage 1 6,600,955 169,240 34,790 — 629,167 7,434,152 — 7,434,152 stage 3 — — — — 1,067 1,067 1,067 — 6,600,955 169,240 34,790 — 630,234 7,435,219 1,067 7,434,152 Guarantees and other commitments () stage 1 9,105,641 3,673,579 1,312,038 57 211,917 14,303,232 11,307 14,291,925 stage 2 219,327 390,858 832,431 34,840 291,138 1,768,594 14,893 1,753,701 stage 3 — — — 364,627 64 364,691 84,435 280,256 POCI — — — 921 — 921 119 802 9,324,968 4,064,437 2,144,469 400,445 503,119 16,437,438 110,754 16,326,684 Total 62,009,218 16,623,119 9,486,697 2,977,049 2,968,858 94,064,941 1,629,295 92,435,646 () For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1 C1.5.1.2. () The gross exposure includes the guarantees granted, irrevocable credit lines and revocable commitments (note 45). 2023 REPORT & ACCOUNTS | 387 As at 31 December 2023, the financial assets at amortised cost, guarantees and other commitments subject to individual and collective impairment, by segment, are presented in the following table: (Thousands of euros) 2023 Gross Exposure Impairment losses Segment Individual Collective Total Individual Collective Total Individuals - Mortgage 27,960 27,956,633 27,984,593 9,347 172,867 182,214 Individuals - Other 8,531 10,223,989 10,232,520 4,709 465,493 470,202 Financial Companies 48,444 3,327,226 3,375,670 34,439 24,985 59,424 Non-financial companies-Corporate 204,869 11,582,366 11,787,235 105,559 68,974 174,533 Non-financial companies-SME-Corporate 517,062 11,293,743 11,810,805 326,269 176,087 502,356 Non-financial companies-SME-Retail 84,903 8,384,136 8,469,039 77,852 241,557 319,409 Non-financial companies-Other 702 540,025 540,727 567 1,369 1,936 Other loans — 15,907,464 15,907,464 — 19,762 19,762 Total 892,471 89,215,582 90,108,053 558,742 1,171,094 1,729,836 As at 31 December 2022, the financial assets at amortised cost, guarantees and other commitments subject to individual and collective impairment, by segment, are presented in the following table: (Thousands of euros) 2022 (restated) Gross Exposure Impairment losses Segment Individual Collective Total Individual Collective Total Individuals - Mortgage 30,700 28,183,186 28,213,886 9,386 157,417 166,803 Individuals - Other 26,953 9,263,499 9,290,452 18,543 392,653 411,196 Financial Companies 81,059 3,651,532 3,732,591 37,622 10,362 47,984 Non-financial companies-Corporate 276,046 10,343,093 10,619,139 126,378 49,889 176,267 Non-financial companies-SME-Corporate 654,073 13,253,883 13,907,956 301,952 172,651 474,603 Non-financial companies -SME - Retail 158,552 7,946,796 8,105,348 94,878 241,890 336,768 Non-financial companies-Other — 605,540 605,540 — 646 646 Other loans — 12,154,809 12,154,809 — 13,961 13,961 Total 1,227,383 85,402,338 86,629,721 588,759 1,039,469 1,628,228 As at 31 December 2023, the financial assets at amortised cost, guarantees and other commitments subject to individual and collective impairment, by sector of activity are presented in the following table: (Thousands of euros) 2023 Gross Exposure Impairment losses Sector of activity Individual Collective Total Individual Collective Total Loans to individuals 36,491 38,180,622 38,217,113 14,056 638,360 652,416 Non-financial companies-Trade 63,282 6,128,545 6,191,827 33,799 82,081 115,880 Non-financial companies-Construction 212,160 3,035,513 3,247,673 88,160 52,447 140,607 Non-financial companies-Manufacturing industry 110,203 6,651,255 6,761,458 57,795 147,865 205,660 Non-financial companies-Other activities 48,448 2,673,781 2,722,229 37,216 39,644 76,860 Non-financial companies-Other services 373,443 13,311,176 13,684,619 293,277 165,950 459,227 Other Services/Other activities 48,444 19,234,690 19,283,134 34,439 44,747 79,186 Total 892,471 89,215,582 90,108,053 558,742 1,171,094 1,729,836 2023 REPORT & ACCOUNTS 388 | As at 31 December 2022, the financial assets at amortised cost, guarantees and other commitments subject to individual and collective impairment, by sector of activity are presented in the following table: (Thousands of euros) 2022 (restated) Gross Exposure Impairment losses Sector of activity Individual Collective Total Individual Collective Total Loans to individuals 57,653 37,446,685 37,504,338 27,929 550,070 577,999 Non-financial companies-Trade 56,649 6,239,615 6,296,264 30,640 76,452 107,092 Non-financial companies-Construction 308,289 2,875,355 3,183,644 158,454 43,117 201,571 Non-financial companies-Manufacturing industry 173,248 6,972,108 7,145,356 93,885 142,647 236,532 Non-financial companies-Other activities 95,832 2,531,138 2,626,970 44,541 32,325 76,866 Non-financial companies-Other services 454,653 13,531,096 13,985,749 195,688 170,535 366,223 Other Services/Other activities 81,059 15,806,341 15,887,400 37,622 24,323 61,945 Total 1,227,383 85,402,338 86,629,721 588,759 1,039,469 1,628,228 As at 31 December 2023, the financial assets at amortised cost, guarantees and other commitments subject to individual and collective impairment, by geography, are presented in the following table: (Thousands of euros) 2023 Gross Exposure Impairment losses Geography Individual Collective Total Individual Collective Total Portugal 758,022 62,346,402 63,104,424 516,336 593,406 1,109,742 Poland 121,548 25,127,326 25,248,874 36,255 548,289 584,544 Mozambique 12,901 1,741,854 1,754,755 6,151 29,399 35,550 Total 892,471 89,215,582 90,108,053 558,742 1,171,094 1,729,836 As at 31 December 2022, the financial assets at amortised cost, guarantees and other commitments subject to individual and collective impairment, by geography, are presented in the following table: (Thousands of euros) 2022 (restated) Gross Exposure Impairment losses Geography Individual Collective Total Individual Collective Total Portugal 1,053,955 62,667,178 63,721,133 511,657 531,291 1,042,948 Poland 98,717 20,446,675 20,545,392 37,219 488,394 525,613 Mozambique 74,711 2,288,485 2,363,196 39,883 19,784 59,667 Total 1,227,383 85,402,338 86,629,721 588,759 1,039,469 1,628,228 The columns Gross exposure and Collective impairment losses of the previous tables include loans subject to individual analysis for which the Group has concluded that there is no objective evidence of impairment. 2023 REPORT & ACCOUNTS | 389 As at 31 December 2023, the following table includes the loans portfolio (including guarantees and commitments) by segment and by year of production (date of the beginning of the operations, in the portfolio at the date of balance sheet - it does not include restructured loans): 2023 Year of production Construction and Commercial Real Estate Companies - Other Activities Mortgage loans Individuals - Other Other loans Total 2013 and previous Number of operations 13,988 27,550 275,796 637,888 380 955,602 Value (Euros '000) 928,757 3,261,687 8,790,207 1,229,144 89,608 14,299,403 Impairment constituted (Euros '000) 73,508 58,659 113,180 22,494 812 268,653 2014 Number of operations 1,310 5,156 7,877 63,545 85 77,973 Value (Euros '000) 69,788 447,850 327,925 111,200 184,307 1,141,070 Impairment constituted (Euros '000) 7,137 5,895 5,441 4,563 873 23,909 2015 Number of operations 1,740 7,093 9,709 84,470 114 103,126 Value (Euros '000) 85,463 591,723 464,924 145,749 8,498 1,296,357 Impairment constituted (Euros '000) 1,952 22,286 4,621 7,655 577 37,091 2016 Number of operations 2,053 8,438 10,979 110,408 49 131,927 Value (Euros '000) 141,513 1,117,972 542,229 213,263 3,067 2,018,044 Impairment constituted (Euros '000) 2,314 12,494 5,106 13,662 179 33,755 2017 Number of operations 2,482 9,808 17,985 120,635 99 151,009 Value (Euros '000) 157,801 978,292 1,047,446 246,833 14,258 2,444,630 Impairment constituted (Euros '000) 10,391 17,786 6,592 17,477 774 53,020 2018 Number of operations 4,819 15,084 23,954 213,882 165 257,904 Value (Euros '000) 384,262 1,901,330 1,604,675 530,572 301,822 4,722,661 Impairment constituted (Euros '000) 5,771 33,804 8,220 37,433 1,227 86,455 2019 Number of operations 7,245 21,732 27,329 521,238 150 577,694 Value (Euros '000) 499,121 1,658,088 1,956,352 982,211 79,619 5,175,391 Impairment constituted (Euros '000) 7,673 43,210 7,137 67,067 1,144 126,231 2020 Number of operations 9,258 31,822 32,966 244,303 189 318,538 Value (Euros '000) 862,852 2,855,711 2,410,351 617,566 104,195 6,850,675 Impairment constituted (Euros '000) 14,538 76,473 8,944 38,516 1,913 140,384 2021 Number of operations 9,130 33,058 48,727 363,405 219 454,539 Value (Euros '000) 792,772 2,539,394 3,981,918 1,016,489 333,477 8,664,050 Impairment constituted (Euros '000) 11,334 42,963 10,857 67,703 3,131 135,988 2022 Number of operations 9,311 34,292 35,724 571,063 396 650,786 Value (Euros '000) 1,397,283 4,265,544 3,490,509 1,677,789 126,587 10,957,712 Impairment constituted (Euros '000) 15,286 51,293 6,233 79,493 1,704 154,009 2023 Number of operations 14,388 113,890 31,737 1,312,681 4,733 1,477,429 Value (Euros '000) 1,967,654 6,445,098 3,317,913 2,949,518 179,760 14,859,943 Impairment constituted (Euros '000) 16,782 217,800 6,768 70,824 2,232 314,406 Total Number of operations 75,724 307,923 522,783 4,243,518 6,579 5,156,527 Value (Euros '000) 7,287,266 26,062,689 27,934,449 9,720,334 1,425,198 72,429,936 Impairment constituted (Euros '000) 166,686 582,663 183,099 426,887 14,566 1,373,901 In the year of the current production, are included operations that, by their nature, are contractually subject to renewals. In these cases, the date of the last renewal is considered, namely for overdraft operations, secured current account and factoring operations. 2023 REPORT & ACCOUNTS 390 | As at 31 December 2022, the following table includes the loans portfolio (including guarantees and commitments) by segment and by year of production (date of the beginning of the operations, in the portfolio at the date of balance sheet - it does not include restructured loans): 2022 (restated) Year of production Construction and Commercial Real Estate Companies - Other Activities Mortgage loans Individuals - Other Other loans Total 2012 and previous Number of operations 15,703 25,791 293,344 677,001 384 1,012,223 Value (Euros '000) 970,246 3,194,423 10,117,624 1,228,014 81,780 15,592,087 Impairment constituted (Euros '000) 73,617 51,428 106,931 17,378 646 250,000 2013 Number of operations 1,121 3,600 10,115 65,523 17 80,376 Value (Euros '000) 64,192 510,025 376,049 106,759 2,537 1,059,562 Impairment constituted (Euros '000) 3,236 3,441 5,681 3,329 6 15,693 2014 Number of operations 1,234 4,859 8,737 82,035 86 96,951 Value (Euros '000) 76,217 509,250 356,743 126,516 183,780 1,252,506 Impairment constituted (Euros '000) 5,049 9,235 4,719 4,618 855 24,476 2015 Number of operations 1,691 6,284 10,836 112,676 124 131,611 Value (Euros '000) 106,007 908,354 515,361 185,482 44,947 1,760,151 Impairment constituted (Euros '000) 1,947 23,398 3,874 9,116 27,758 66,093 2016 Number of operations 1,911 8,196 12,280 134,403 55 156,845 Value (Euros '000) 154,183 1,209,277 616,181 256,858 4,248 2,240,747 Impairment constituted (Euros '000) 5,274 13,961 4,432 17,195 174 41,036 2017 Number of operations 2,568 11,100 20,277 142,014 96 176,055 Value (Euros '000) 219,318 1,228,140 1,202,742 305,913 13,230 2,969,343 Impairment constituted (Euros '000) 2,807 17,900 5,830 21,347 720 48,604 2018 Number of operations 5,312 19,488 26,701 286,638 203 338,342 Value (Euros '000) 498,338 2,227,925 1,833,809 655,719 309,885 5,525,676 Impairment constituted (Euros '000) 7,262 32,931 6,511 43,836 1,607 92,147 2019 Number of operations 8,703 27,962 30,166 595,430 185 662,446 Value (Euros '000) 632,970 2,098,246 2,198,981 1,221,662 144,135 6,295,994 Impairment constituted (Euros '000) 7,295 45,754 5,735 75,179 3,002 136,965 2020 Number of operations 9,891 37,416 36,088 313,758 255 397,408 Value (Euros '000) 1,148,968 4,324,442 2,656,294 809,745 165,228 9,104,677 Impairment constituted (Euros '000) 13,228 83,686 7,361 42,424 1,638 148,337 2021 Number of operations 10,744 37,545 53,486 524,347 340 626,462 Value (Euros '000) 1,146,704 3,355,457 4,464,436 1,376,201 388,696 10,731,494 Impairment constituted (Euros '000) 15,760 51,953 8,848 61,243 2,299 140,103 2022 Number of operations 14,046 117,544 38,354 1,108,878 4,678 1,283,500 Value (Euros '000) 2,097,778 7,566,584 3,822,846 2,514,949 364,556 16,366,713 Impairment constituted (Euros '000) 19,365 169,939 5,788 64,160 2,593 261,845 Total Number of operations 72,924 299,785 540,384 4,042,703 6,423 4,962,219 Value (Euros '000) 7,114,921 27,132,123 28,161,066 8,787,818 1,703,022 72,898,950 Impairment constituted (Euros '000) 154,840 503,626 165,710 359,825 41,298 1,225,299 2023 REPORT & ACCOUNTS | 391 In the year of the current production, are included operations that, by their nature, are contractually subject to renewals. In these cases, the date of the last renewal is considered, namely for overdraft operations, secured current account and factoring operations. As at 31 December 2023, the following table includes the fair value of the collaterals by segments (not limited by the value of the collateral) associated to the loan's portfolio: 2023 Construction and Commercial Real Estate Companies - Other Activities Mortgage loans Fair Value Real Estate (*) Other real Collateral () Real Estate () Other real Collateral () Real Estate () Other real Collateral () < 0.5 M€ Number 7,433 10,521 8,995 74,256 453,097 247 Value (Euros '000) 957,351 270,085 1,360,898 1,715,200 64,939,467 14,258 >= 0.5 M€ and < 1 M€ Number 788 68 1,221 261 6,910 5 Value (Euros '000) 548,653 46,495 856,785 181,934 4,459,854 2,833 >= 1 M€ and < 5 M€ Number 752 49 1,137 180 1,169 1 Value (Euros '000) 1,564,212 90,200 2,317,694 351,774 1,828,625 1,121 >= 5 M€ and < 10 M€ Number 126 1 128 15 16 — Value (Euros '000) 883,759 5,424 892,174 111,364 102,113 — >= 10 M€ and < 20 M€ Number 52 1 62 12 2 — Value (Euros '000) 705,360 10,415 882,748 176,111 21,129 — >= 20 M€ and < 50 M€ Number 32 1 47 2 — — Value (Euros '000) 900,127 20,241 1,393,377 46,125 — — >= 50 M€ Number 4 — 15 4 — — Value (Euros '000) 263,193 — 1,124,438 855,609 — — Total Number 9,187 10,641 11,605 74,730 461,194 253 Total Value (Euros '000) 5,822,655 442,860 8,828,114 3,438,117 71,351,188 18,212 (*) The fair value of real estate collateral relates to the PVT included in valuations. () Includes, namely, securities, deposits and fixed assets pledges. 2023 REPORT & ACCOUNTS 392 | As at 31 December 2022, the following table includes the fair value of the collaterals by segments (not limited by the value of the collateral) associated to the loan's portfolio: 2022 (restated) Construction and Commercial Real Estate Companies - Other Activities Mortgage loans Fair Value Real Estate () Other real Collateral () Real Estate () Other real Collateral () Real Estate (*) Other real Collateral () < 0.5 M€ Number 6,822 9,575 9,030 71,315 468,372 303 Value (Euros '000) 882,242 223,661 1,369,613 1,489,242 62,924,078 17,038 >= 0.5 M€ and < 1 M€ Number 741 70 1,189 236 6,321 4 Value (Euros '000) 520,105 47,186 832,819 162,741 4,080,818 2,230 >= 1 M€ and < 5 M€ Number 634 47 1,110 205 1,062 1 Value (Euros '000) 1,307,513 84,190 2,223,387 395,940 1,636,182 1,267 >= 5 M€ and < 10 M€ Number 108 2 118 15 14 — Value (Euros '000) 737,705 10,838 852,256 102,251 86,476 — >= 10 M€ and < 20 M€ Number 50 2 57 13 1 — Value (Euros '000) 651,146 21,833 809,825 194,916 11,110 — >= 20 M€ and < 50 M€ Number 22 — 40 1 — — Value (Euros '000) 636,352 — 1,208,432 20,452 — — >= 50 M€ Number 6 — 14 2 — — Value (Euros '000) 455,600 — 1,245,381 523,630 — — Total Number 8,383 9,696 11,558 71,787 475,770 308 Total Value (Euros '000) 5,190,663 387,708 8,541,713 2,889,172 68,738,664 20,535 () The fair value of real estate collateral relates to the PVT included in valuations. () Includes, namely, securities, deposits and fixed assets pledges. 2023 REPORT & ACCOUNTS | 393 As at 31 December 2023, the following table includes the LTV (loan-to-value) ratio by segments Construction and Commercial Real Estate (CRE), Companies - Other Activities and Mortgage loans: (Thousands of euros) 2023 Segment/Ratio Number of properties Stage 1 Stage 2 Stage 3 Impairment Construction and CRE Without associated collateral n.a. 1,325,209 368,506 61,341 69,194 <60% 26,471 1,231,512 314,464 27,331 22,492 >=60% and <80% 4,107 405,123 124,352 25,326 17,357 >=80% and <100% 858 115,631 26,141 2,513 3,689 >=100% 915 83,185 56,059 49,530 30,584 Companies - Other Activities Without associated collateral n.a. 9,520,386 1,406,516 244,982 438,065 <60% 49,955 1,888,694 528,115 128,724 75,157 >=60% and <80% 15,150 965,433 277,671 80,993 42,715 >=80% and <100% 9,050 457,684 378,185 48,634 34,873 >=100% 2,328 492,635 159,776 258,397 208,054 Mortgage loans Without associated collateral n.a. 62,011 3,510 9,719 12,435 <60% 380,896 13,666,658 1,351,098 264,041 119,276 >=60% and <80% 119,725 8,368,284 896,151 117,924 39,255 >=80% and <100% 33,465 2,594,964 349,466 50,104 20,302 >=100% 4,814 168,138 53,712 19,770 10,447 As at 31 December 2022, the following table includes the LTV (loan-to-value) ratio by segments Construction and Commercial Real Estate (CRE), Companies - Other Activities and Mortgage loans: (Thousands of euros) 2022 (restated) Segment/Ratio Number of properties Stage 1 Stage 2 Stage 3 Impairment Construction and CRE Without associated collateral n.a. 1,528,695 453,957 73,399 70,799 <60% 25,799 1,019,694 259,169 42,667 31,589 >=60% and <80% 2,771 376,094 81,106 21,337 9,536 >=80% and <100% 1,067 131,874 46,414 58,121 49,541 >=100% 979 74,888 73,472 61,705 40,249 Companies - Other Activities Without associated collateral n.a. 10,285,172 1,651,463 284,131 393,519 <60% 49,259 1,563,296 495,030 141,344 65,781 >=60% and <80% 16,491 991,449 329,502 128,863 48,995 >=80% and <100% 11,106 576,326 406,133 72,826 47,386 >=100% 2,741 654,901 202,769 280,711 146,244 Mortgage loans Without associated collateral n.a. 53,715 2,892 10,403 10,816 <60% 383,344 13,363,029 1,310,064 261,616 102,636 >=60% and <80% 129,126 8,530,613 844,549 112,000 32,431 >=80% and <100% 39,677 2,884,194 357,767 58,421 19,953 >=100% 6,013 235,017 60,244 30,008 15,674 2023 REPORT & ACCOUNTS 394 | As at 31 December 2023, the following table includes the fair value and the net book value of the properties classified as Non-current assets held for sale (note 27) and as Other assets (note 32), by type of asset: (Thousands of euros) 2023 Assets arising from recovered loans results Assets belong to investments funds and real estate companies Total Asset Appraised value Book value Appraised value (1) Book value Appraised value Book value Land Urban 80,526 49,779 84,684 84,684 165,210 134,463 Rural 4,622 2,188 17,560 17,560 22,182 19,748 Buildings in development Commercials 790 529 — — 790 529 Mortgage loans 2,474 1,438 — — 2,474 1,438 Constructed buildings Commercials 29,968 15,391 — — 29,968 15,391 Mortgage loans 52,120 35,758 — — 52,120 35,758 Other 30,495 30,261 — — 30,495 30,261 Other assets 5,400 5,400 — — 5,400 5,400 206,395 140,744 102,244 102,244 308,639 242,988 (1) Value deducted from haircuts or other applicable impairments As at 31 December 2022, the following table includes the fair value and the net book value of the properties classified as Non-current assets held for sale (note 27), by type of asset: (Thousands of euros) 2022 (restated) Assets arising from recovered loans Assets belong to investments funds and real estate companies Total Asset Appraised value Book value Appraised value (1) Book value Appraised value Book value Land Urban 126,593 84,970 199,094 199,094 325,687 284,064 Rural 5,318 2,996 20,768 20,768 26,086 23,764 Buildings in development Commercials 869 517 — — 869 517 Mortgage loans 2,550 1,491 — — 2,550 1,491 Other 11 11 — — 11 11 Constructed buildings Commercials 62,390 43,304 — — 62,390 43,304 Mortgage loans 82,549 64,015 185 185 82,734 64,200 Other 38,697 38,574 — — 38,697 38,574 318,977 235,878 220,047 220,047 539,024 455,925 (1) Value deducted from haircuts or other applicable impairments 2023 REPORT & ACCOUNTS | 395 Credit portfolio monitoring process The Bank has in place a credit portfolio management and monitoring processes, namely with regard to the assessment of the risk profile of the exposure in different portfolios/segments. These procedures have the purpose of identifying and closely monitoring the customers potentially more affected by the prevailing macroeconomic context, anticipating possible difficulties in complying the responsibilities and defining credit and performance strategies adjusted to the specificities of each customer/group of customers, with a view to both maintaining support to customers considered viable and mitigating credit risk in cases where there are risks of loss in the exposure value. The importance of this approach is reinforced by the uncertainty that has marked the activity in recent years, with special emphasis on the pandemic context that emerged at the beginning of 2020 and the effects resulting from multiple geopolitical conflicts, with impacts on various aspects such as a more modest level of economic growth, budgetary pressures to cope with the impacts felt by economic agents, the need to allocate budgetary amounts to areas such as Defence, limitations on the transportation of goods, pressure on energy costs, inflationary impacts, high levels of interest rates and rising unemployment rates. In the specific case of Portugal, the context described translated into lower demand for credit instruments from customers, especially in the corporate segment. The main guidelines of the credit portfolio monitoring approach can be characterized as presented below: - Global and transversal: Analysis of the entire credit portfolio of the Bank, being excluded from the monitoring process only customers with a better risk profile (in the case of retail) or with exposures of a lower size (in the case of retail and corporate). - Specialized: Monitoring by the “Comité de Acompanhamento de Risco de Empresas” (CARE), and Credit Division in coordination with the Rating Division for the corporate segment and by the Credit Division and Retail Recovery Division for individuals and small businesses. The cases monitored by the CARE committee, are related to clients covered by a set of criteria that combine exposure size and risk factors like the rating assigned, IFRS 9 staging and, for the corporate segment, the level of leverage and whether the sector in which it operates is considered highly vulnerable. - Segmented: Prioritization of approach/analysis recurrence based on risk signs, in order to gather additional information and agree on appropriate and sustainable financial restructuring solutions in a timely manner. - Prospective: Use of predictive models, in order to anticipate potential future defaults, avoiding a reactive approach. - Standardized: Both in terms of risk models and monitoring, and in terms of credit solutions for which it is possible to identify pre-defined alternatives (retail segments). - Convenient and innovative: Making the restructuring journey simpler and more convenient both in terms of credit solutions and channels, extending the restructuring offer to the App for consumer credit and mortgages. Specifically in the corporate segment, the process of portfolio follow-up and monitoring can be generically characterized as described below, having as a fundamental component the attribution of credit strategies, among pre- defined options, with review periods differentiated according to the level of risk associated to the strategy attributed: 1. Client Assessment and presentation of Indicative Credit Strategy by the Rating Division (for customers with ratings assigned by corporate rating models); 2. Approval, by the competent credit decision levels, of a credit strategy for each customer, taking into consideration the Indicative Credit Strategy from the Rating Division, the information received from the area that follows the client and the inputs received as a result of the customer interaction process; 2023 REPORT & ACCOUNTS 396 | 3. Decision, negotiation and formalisation of the operations that will ensure that the approved strategy is pursued and the approved credit limits are met (Credit Division, Areas that follow the client and Operations Division); 4. Monitoring the Credit Strategy and the evolution of the customer's activity (Credit Division, Areas that follow the client and Specialised Committees - CARE); 5. Monitoring of the credit portfolio and effectiveness of the portfolio monitoring process and credit strategy attribution (Risk Office), based on a set of KPIs, (e.g. percentage of the credit portfolio with valid risk strategy; evolution of credit exposure to customers with a reduction strategy; adequacy of the credit strategy to the customer's performance); 6. In the attribution of the customer's credit strategy, besides the intrinsic factors of the customer, more transversal factors are taken into consideration, such as the evaluation of the sectorial risk and ESG impacts (periodically reviewed with the support of the Economic, Sustainability and Criptoactives Studies Division) and taking into consideration the attribution of a ESG rating regarding the clients with most relevant exposures; 7. The occurrence of effective and/or potential risk events (signs of default/delinquency; breach of contractual covenants; severe alteration in sector risk; alteration in the corporate/shareholder structure), trigger an extraordinary/anticipated revision of the strategy. Within the scope of this monitoring process and with an impact on other complementary procedures adopted by the Bank, namely for reporting purposes, the Bank defines a list of sectors considered as more vulnerable to the macroeconomic environment, which is reviewed periodically (at least annually), also involving the preparation of report presenting a detailed characterisation of its loan portfolio under a sectoral perspective. Additional measures with impact on the Impairment level i. Updating macroeconomic scenarios and the parameters of the collective impairment model Taking into account the changes and uncertainty of the context and the economic outlook essentially marked by a context conditioned by the maintenance of relatively high levels of inflation and interest rates, an update of the macroeconomic scenarios used in the collective impairment analysis model in Portugal was carried out in December 2023, based on three scenarios (Central Scenario, Optimistic and Pessimistic) prepared by the Bank's Economic Studies area. The referred scenarios, which are used in the Bank for several purposes other than the impairment calculation, took into consideration the existing projections of reputed entities. The tables below systematise the projections for 2023 and 2024 considered for Portugal concerning the central scenarios with regard to some of the critical variables used in the calculation of collective impairment. Update of main macroeconomic scenario assumptions (Base Scenario) - Portugal December 2022 Scenario December 2023 Scenario Difference Variable 2023 2024 2023 2024 2023 2024 Unemployment rate 5.88% 5.92% 6.53% 7.15% 0.65% 1.23% 3 months Euribor Rate 3.17% 3.10% 3.43% 3.18% 0.26% 0.08% Savings Rate 5.80% 6.00% 6.40% 8.40% 0.60% 2.40% Inflation Rate 5.83% 3.25% 5.34% 2.93% -0.49% -0.33% 2023 REPORT & ACCOUNTS | 397 Regarding Poland, an update of the macroeconomic assumptions was also carried out in relation to those considered in December 2022, which translates into the terms presented in the table below regarding the projections for 2023 and 2024 foreseen in the central scenario. Update of main macroeconomic scenario assumptions (Base Scenario) - Poland Variable December 2022 Scenario December 2023 Scenario Difference 2023 2024 2023 2024 2023 2024 Unemployment rate 5.80% 6.00% 5.20% 5.30% -0.60% -0.70% Nominal GDP annual evolution 13.80% 9.00% 11.70% 7.60% -2.10% -1.40% Consumption annual evolution 0.70% 1.50% -1.00% 3.50% -1.70% 2.00% Disposable Income 4.90% 4.80% 12.60% 8.10% 7.70% 3.30% EUR/PLN exchange rate 4,64 4,52 4,48 4,42 -0.16 -0,10 CHF/PLN exchange rate 4,65 4,48 4,60 4,58 -0.05 0,10 The following tables describe the weightings assigned in Portugal and Poland to the different macroeconomic scenarios considered at the end of 2022 and 2023, which can be considered as conservative: Weightings of the macroeconomic scenarios considered Scenario Weightings Portugal Poland Dec 2022 Dec 2023 Dec 2022 Dec 2023 Central 60% 60% 65% 70% Upside 10% 10% 10% 10% Downside 30% 30% 25% 20% For Portugal, a simulation of an additional one percentage point worsening in the evolution of the key indicators for the collective impairment estimate was carried out, which translates into the impacts shown in the table below, based on the collective impairment of the portfolio in Portugal as at 31 December 2023, which amounted to Euros 488 million (this figure does not include the impairment amounts calculated by the overlays methodology described in point ii. of this section). Sensitivity analysis on the calculation of collective impairment (December 2023) Variable Estimated impact (% variation) 100 bp Unemployment Rate aggravation 4,68% 100 bp 3 months Euribor aggravation 6,76% 100 bp Savings Rate aggravation 0,55% 100 bp Inflation Rate aggravation 4,62% ii. Impairment overlays In order to incorporate an additional level of conservatism in the impairment values, the Bank defined and implemented a methodology of complementary of identification of significant increase in credit risk situations and potential signs of impairment. This approach adopts differentiated criteria in relation to the base methodologies in force, with distinct processes having been adopted for the calculation of overlays for the corporate and individual customers segments. The overlays currently in force seek in particular to address the context of uncertainty that continues to prevail, associated with a context of multiple geopolitical crisis, the constraints that still exist with regard to economic growth, inflationary pressures and the high level of interest rates, an environment that constitutes a disruption of the context that prevailed until the end of 2021, characterized by low levels of interest rates and inflation. 2023 REPORT & ACCOUNTS 398 | This positioning is in line with the guidelines on this matter issued by the Supervisors in what regards the identification and measurement of credit risk in contexts of uncertainty, so that the release of overlays initially constituted in the context of the pandemic should be carried out with prudence and taking into account the possible need for new overlays to respond to the current context. The exercise carried out reflected, in terms of impairment value, in the calculation of the estimated impact arising from potential migrations of customers with higher risk to Stage 2 and Stage 3, based on the various factors considered in the analysis. It should be noted that the most significant impact occurred in the corporate segment. The methodology developed by the Bank was considered for the calculation and recording of impairment at the reference date of the accounts, without affecting the classification of credit exposures by stages in the Bank's loan portfolio. In Poland, the Bank also adopted a policy of recording overlays. Taking into consideration the country's specific reality, adjustments to the overlay's methodology had already been incorporated in 2022 to address the impacts of the geopolitical crisis. As a result of the implementation of this methodology, the Bank calculated an additional impairment to that resulting from the collective analysis model, therefore with characteristics of overlays, whose amount on 31 December 2023 was approximately Euros 99.0 million in Portugal (Euros 95.0 million in December 2022), Euros 48.3 million in Poland (Euros 33.9 million in December 2022) and Euros 2.8 million in Mozambique (in the end of 2022 there weren’t overlay allocations in this geography). Government measures to mitigate the impacts on mortgage contracts Decree-Law 80-A/2022 Specifically with regard to Decree-Law 80-A/2022, a Portuguese Government act of 25 November 2022 that established measures to mitigate the effects of the increase in the reference indexing factors of credit contracts for the acquisition or construction of permanent house ownership, it is worth highlighting the fact that it introduced the obligation for Financial Institutions to approach individual customers with mortgage credit who potentially fit into the requirements set out in that act. In what concerns Millennium bcp, a contact was promoted with about 180 thousand customers, requesting information in order to calculate the respective effort rate. On 31 December 2023, date when the period to adhere to this measure expired, the number of clients that had shown interest in evaluating the support mechanisms provided for under Decree Law 80-A/2022 amounted to around 15 thousand. Decree-Law 20-B/2023 Decree-Law 20-B/2023, a Portuguese Government regulation of 22 March 2023, embodied the legislative package "Mais Habitação", providing extraordinary support to families, namely through the creation of support for borrowers of credit agreements for permanent own housing in the form of a temporary subsidy of the interest component, in situations where the index rate exceeds a certain threshold. On 13 February 2024, loans with subsidies already processed amounted to exposures of approximately Euros 520 million, with an average monthly subsidy of Euros 49. Decree-Law 91/2023 Also with regard to the promotion of support measures for borrowers of mortgage loan contracts, it is worth noting the publication of Decree-Law 91/2023, a Portuguese government decree of 11 October 2023, which allows to fix the installment over a period of 24 months, taking into account an interest rate benchmark defined in the decree-law, and with an adherence period until 31 March 2024. By 31 January 2024, at the request of customers, the Bank had implemented this measure in around 1,800 contracts. 2023 REPORT & ACCOUNTS | 399 Credit concentration risk The Group’s policy relating to the identification, measurement, and evaluation of the concentration risk in credit risk is approved by the Bank’s management body, applied to all Group entities, and is based on the following guidelines: The monitoring of the concentration risk and the follow-up of major risks is made, at Group level, based on the concept of "Economic Groups" and “Customer Groups” - sets of connected Customers (individual persons or companies), which represent a single entity from a credit risk perspective, such that if one of them is affected by financial problems, one or all of the others, will probably face difficulties to fulfil their debtor obligations. The Customer connections that originate a Customer group include the formal participation on the same economic group, the evidence that a direct or indirect control relationship exists, including the control by an individual Customer (criteria of capacity of control) of a company or the existence of a strong commercial interdependency or common sources of funding that cannot be replaced on a short term (criteria of economic dependency).The identification of connected clients is an integral part of the credit granting and monitoring processes of each entity, with the Risk Office monitoring the economic and customers’ groups maintenance. For the control of credit concentration risk and limit the exposure to this risk, there are limits defined for: 1) Exposures to Sovereigns; 2) Exposures to Institutions (Banks/financial institutions); 3) Single-name exposures (Large Corporate exposures); 4) Geographic concentration (country risk); 5) Exposure to sectors of activity. These limits apply to the ‘Net exposures’ (), relating either to a counterparty or a group of counterparties – cases for 1), 2) and 3) – or to the set of exposures to an activity sector or to a country (the counterparty country of residence) – cases for 4) and 5). The metrics regarding the concentration of exposure to Sovereigns and geographic concentration exclude the countries in which the Group has significant operations (Portugal, Poland and Mozambique) and the respective Sovereigns. Except for exposure to sectors of activity, the concentration limits are established by taking into consideration the credit worthiness of the debtors at stake in what concerns their rating grades/probability of Default (PD) (internal or external ratings; country rating in the case of geographic concentration). The concentration limits for Corporate single-name exposures apply only to non-NPE positions, since the NPE (Non- performing exposures) positions are considered “always in excess” and its framed by the actions covered by the NPE reduction Plan defined and executed at Group BCP level. The limits in force as at 31 December 2023, for the exposure to Single-name, in terms of the Net Exposure weight over the Consolidated Own Funds, are the following: Risk quality Risk grade Single-name High quality 1 - 5 7.0% Average/good quality 6 - 7 4.5% Average low/quality 8 - 9 2.8% Low quality 10 - 11 0.5% Restricted credit 12 - 13 0.3% () Net exposure = EAD x LGD, considering LGD=45% whenever own estimates for LGD are not available or applicable. EAD = Exposure at default ; LGD = Loss given Default. 2023 REPORT & ACCOUNTS 400 | As at 31 December 2023: - There were no exposure excesses to Sovereigns, Institutions or countries; - There were 4 Economic Groups with net exposure above the established Single-name limits for their respective risk grade. For each client with an exposure excess a specific plan is prepared, aiming at reducing the exposure and bringing it within the established limits. It should also be referred that the assessment of the Single-name concentration is also performed within the Group RAS (Risk Appetite Statement) scope. In what concerns the limit for exposure to sectors of activity, in force on 31 December 2023, this is defined as a maximum of 40% per sector of activity, in terms of the weight of the Net Exposure for each sector of activity over the Own Funds of each Group Entity. At this date, there was no excess over this limit. The Bank's management body and the Risk Assessment Committee are regularly informed on the evolution of the credit concentration risk metrics (against the mentioned limits) and on major risks. The credit concentration risk is measured and monitored by the Risk Office supported on a database on credit exposures (the Risk Office Datamart), monthly updated by the Group’s systems, which feeds the risk management system of the Group. The Risk Office maintains a simulation tool for supporting the analysis of the impact on changes on the Customers exposures in the consumption of the respective concentration limits, which is used by the Credit Division and by the Commercial Networks within the scope of credit analysis for large clients with the purpose of ensuring exposures are kept within the approved limits. Real state risk Real estate risk materializes through losses associated with changes in the value of assets held by the Bank or, indirectly, through funds and/or real estate companies. The Group detains a real estate portfolio, that comes from repossessed assets linked with recovery processes of non- performing exposures, that is subject to fluctuations and risks in the real estate market and the obligations arising from ownership of the properties. As a credit institution operating in the financial market, the Bank does not operate directly in the real estate sector, neither as a sales agent nor as an operator in the rental segment. In this context, the management of this portfolio is based on the following objectives: • Minimize the risks associated with the real estate portfolio; • Minimize management costs, maintenance and sale of properties; • Maximize the financial results from the sale of foreclosed assets; • Mitigate the portfolio's impact on the Bank's cost of capital and liquidity. Within this framework, the Bank should optimize the outflow of foreclosed assets from the real estate portfolio, developing appropriate commercial strategies and exploring the distribution channels that are expected to be most effective at any given time to sell the different types of properties held by the Bank. 2023 REPORT & ACCOUNTS | 401 By managing this portfolio, the following risks were identified and monitored by the Bank: • Price risk – Risk associated with the devaluation of the property due to unfavourable developments in the real estate market, whether due to a decrease in demand or strong pressure on property sales; • Liquidity risk - Inherent to the nature of real estate assets and the impact on the Bank's liquidity position and respective financial costs of holding the property; • Operational risk - associated with the processes of acquiring, maintaining and selling properties, which can result in costs or lost revenue (includes the risks of vandalization and deterioration of properties); • Compliance risk - compliance with legal standards from the property acquisition process, to the requirements to be observed in its sale, including the responsibility associated with your status as owner; • Fiscal risk – associated with possible tax contingencies relating to properties owned by the Bank and monitoring the administrative and judicial processes; • Reputational risk - related to the risks mentioned above, but also with the image projected by the Bank in the way it manages its operations in the real estate market. The risks associated above are mitigated by the Bank through the existence of a team specialized in the management of this type of assets; a set of internal policies and standards that regulate the asset management processes on the balance sheet; and an insurance policy. The portfolio of real estate assets has been progressively reduced by the Bank over the last few years. Market risk Market risks consist of the potential losses that may arise within a portfolio as a result of changes in interest or exchange rates, and/or in the prices of the different financial instruments within the portfolio, considering not only the correlations that exist between those instruments but also their volatilities. For the purpose of profitability analysis and market risks quantification and control, the following management areas are defined for each entity within the Group: - Trading: Management of positions aimed at achieving short-term gains through sale or revaluation. These positions are actively managed, tradable without restriction, and may be valued frequently and accurately. These positions include securities and derivatives resulting from sales activities; - Funding: Management of institutional funding (wholesale funding) and money market positions; – Investment: Management of all positions in securities to be held to maturity or for an extended period, or positions not tradable on liquid markets; - Commercial: Management of positions arising from commercial activities with Customers; - Structural: Management of balance sheet items or operations which, due to their nature, are not directly related to any of the management areas referred to above; and - ALM: Assets and Liabilities Management. The definition of these areas allows for an effective management separation between trading and banking books, as well as a proper allocation of each operation to the most suitable management area, according to the respective context and strategy. To ensure that risk levels incurred in the different portfolios of the Group align with predefined tolerance risk levels, various market risks limits are established, typically on an annual basis, applying to all portfolios of the risk management areas where the risks are incident. These limits are monitored daily (or intra-daily, in the case of financial markets) by the Risk Office. Stop loss limits are also set for portfolios in the financial markets' areas – Trading and Funding – based on multiples of the risk limits defined for them, aiming to limit the maximum losses that may occur in these areas. If these limits are breached, a mandatory review of the underlying business strategy and assumptions regarding the management of the positions in question ensues. 2023 REPORT & ACCOUNTS 402 | Market risks of the prudential trading book (1) For the daily measurement of generic market risk, which includes interest rate risk, exchange rate risk, equity risk and credit default swap price risk (indexes) - a Value-at-Risk (VaR) model is used, considering a time horizon of 10 business days and a 99% significance level. Additionally, the Group uses an integrated market risk measure that monitors all relevant sub-types of risk. This measure integrates assessment of generic, specific, non-linear and commodity risks. Each sub-type of risk is measured individually using appropriate risk models, with the integrated measure calculated from individual measures for each, without considering any type of diversification between the sub-types (worst-case scenario approach). For non-linear risk, an internally developed methodology is applied, replicating the effect of main non-linear elements of options on P&L results of the different portfolios in which these are included, similarly to what is considered in the VaR methodology, using the same time horizon and significance level. Specific and commodity risks are measured using standard methodologies defined in the applicable regulations, with an appropriate change of the time horizon considered. The table below presents the amounts at risk for the Trading Book, measured by the methodologies referred to above: (Thousands of euros) 2023 Max of global risk in the period Min of global risk in the period 2022 (restated) Generic Risk ( VaR ) 889 4,250 683 1,322 Interest Rate Risk 587 4,458 555 1,011 FX Risk 551 1,438 566 841 Equity Risk 499 218 80 585 Diversification effects (748) (1,864) (518) (1,114) Specific Risk 624 428 16 13 Non-Linear Risk — — — — Commodities Risk — — — — Global Risk 1,513 4,678 699 1,335 Validation of the internal VaR model’s appropriateness for the assessment of risks involved in the positions held, is conducted over time, with different scopes and frequency, including back testing, diversification effects estimation, and analysis of risk factor comprehensiveness. In addition to VaR assessment, the Group continuously tests a broad range of stress scenarios analysing the respective results to identify risk concentrations not captured by the VaR model. (1) Trading Book - positions allocated to the Trading Management Area (and not specifically to the accounting trading book) 2023 REPORT & ACCOUNTS | 403 Interest rate risk The evaluation of interest rate risk derived from Banking Book operations is assessed through a process of risk sensitivity analysis, undertaken every month, covering all the operations included in the Group's consolidated Balance Sheet and discriminated by exposure currency. Variations of market interest rates influence the Group's net interest income, both in the short term and medium/long term, affecting its economic value in a long-term perspective. The main risk factors arise from the repricing mismatch of portfolio positions (repricing risk) and from the risk of variation in market interest rates (yield curve risk). Besides this, although with less impact, there is the risk of unequal variations in different reference rates with the same repricing period (basis risk). In order to identify the exposure of the Group's banking book to these risks, the monitoring of the interest rate risk takes into consideration the financial characteristics of each of the relevant contracts, with the respective expected cash-flows (principal and interest, without the spread component but including costs for liquidity, capital, operational and other) being projected according to the repricing dates, thus calculating the impact on economic value resulting from alternative scenarios of change of market interest rate curves. The interest rate sensitivity of the balance sheet, by currency, is calculated as the difference between the present value of the interest rate mismatch discounted at market interest rates and the discounted value of the same cash flows simulating parallel shifts of the market interest rates. The following tables show the expected impact on the banking book economic value of parallel shifts of the yield curve by +/- 100 and +/- 200 basis points, for each of the main currencies in which the Group holds material positions: (Thousands of euros) 2023 Currency -200 bp() - 100 bp () + 100 bp + 200 bp CHF 2,726 1,368 (1,378) (2,763) EUR (52,312) (24,650) 21,646 38,925 PLN 130,883 63,939 (61,469) (120,974) USD (8,362) (4,103) 3,954 7,764 72,935 36,554 (37,247) (77,048) () Decrease in rates scenario, limited to non-negative rates (which implies effective variations of lesser amplitude than 100 bp, especially in shorter periods). (Thousands of euros) 2022 (restated) Currency -200 bp() - 100 bp () + 100 bp + 200 bp CHF 1,422 741 (763) (1,544) EUR (99,549) (50,069) 50,011 99,465 PLN (71,253) (35,436) 34,996 69,502 USD (32,091) (15,661) 14,937 29,193 (201,471) (100,425) 99,181 196,616 () Decrease in rates scenario, limited to non-negative rates (which implies effective variations of lesser amplitude than 100 bp, especially in shorter periods). 2023 REPORT & ACCOUNTS 404 | As described in accounting policy 1.B, the financial statements of the Group's subsidiaries and associates placed abroad are prepared in their functional currency and translated into Euros at the end of each financial period. The exchange rates used for the conversion of balance sheet foreign currency amounts are the ECB reference rates at the end of each period. In foreign currency conversion of results, are calculated average exchange rates according to the closing exchange rates of each month of the year. The rates used by the Group are as follows: Closing exchange rates Average exchange rates (Balance sheet) (Income statement) Currency 2023 2022 (restated) 2023 2022 (restated) AOA 924.8560 543.2680 748.1139 487.7116 BRL 5.3614 5.6390 5.4066 5.4153 CHF 0.9297 0.9872 0.9729 1.0042 MOP 8.8865 8.5744 8.8865 8.5744 MZN 70.5700 68.1850 69.2471 67.5585 PLN 4.3437 4.6816 4.5396 4.6823 USD 1.1049 1.0667 1.0819 1.0537 Foreign exchange and equity risk of the banking book The foreign exchange risk of the banking book is transferred internally to the Trading Area, in accordance with the Group’s risk specialization model for the management of balance sheet foreign exchange risk. Structural foreign exchange exposures, including those resulting from financial holdings in subsidiaries, are not transferred and may be covered by market operations, in line with the defined strategy for managing structural foreign exchange risk, aiming at hedging against volatility in the CET1 ratio stemming from exchange rates changes. As at 31 December 2023, the Group 's financial investments in foreign currency were not hedged. On a consolidated basis these are identified as net investment hedges in accounting terms, according with IFRS nomenclature. On an individual basis, they are designated as fair value hedges of equity investments. Gains and losses on instruments used to hedge net investments in foreign institutions are recognized in foreign exchange reserves and presented in the statement of comprehensive income. The transfer of funds to Portugal, including dividends, owed by BCP's subsidiaries or associates in third countries, particularly outside the European Union, may be subject to the restrictions and exchange controls that, at any given time, are in force in the country where the subsidiaries are incorporated or associated. Regarding equity risk, the Group maintains a set of small-scale, low-risk positions, primarily in the investment portfolio, mainly resulting from execution/payment processes. Management of these positions is conducted by a specialized area of the Group, with risk controlled through defined metrics and limits for market risk control. 2023 REPORT & ACCOUNTS | 405 Liquidity risk The evaluation of the Group’s liquidity risk is carried out using indicators set by the supervisory authorities on a regular basis and other internal metrics for which exposure limits are also fixed. The monitoring of the liquidity position of the Group's operations in short-term time horizons (up to 3 months) is based on two internally defined indicators (immediate liquidity and quarterly liquidity). These indicators are calculated on a daily basis, taking into account the impact in the liquidity buffers available to discount with the respective central banks at the reference date of future estimated cash flows for each of the respective time horizon (3 days or 3 months) considering the set of transactions intermediated by the market areas, including in this context transactions with clients of the Corporate and Private networks, which, due to their size, must be quoted by the Trading Room. The remaining buffer in each time bucket is then compared to the amount of customer deposits, being the indicators assessed against exposure limits defined in the Bank's regulations. In parallel, the evolution of the Group’s structural liquidity position is calculated on a regular basis identifying all the factors that justify the variations that occur. This analysis is submitted to the Capital and Assets and Liabilities Committee (CALCO) for appraisal, to enable the decision making that leads to the maintenance of financing conditions adequate to the business sustainability. The methodological aspects of the control of liquidity risk are a responsibility of the Risk Commission. This control includes the regular execution of stress tests, to characterize the Bank's risk profile and to ensure that the Group and each of its subsidiaries fulfil its obligations in the event of a liquidity crisis. These tests are also used to support the liquidity contingency plan and management decisions. Throughout 2023, the Group's three operations - BCP, Bank Millennium and Banco Internacional de Moçambique - maintained robust liquidity positions, supported mainly by retail deposit bases with proven stability and which allowed maintaining all liquidity indicators, regulatory and internal, comfortably above the minimum requirements. At the end of the year and on a consolidated basis, the regulatory short term standard (LCR: Liquidity Coverage Ratio) reached 276%, compared to 212% in December 2022, well above the minimum regulatory requirement of 100%. The other short-term liquidity indicator included in the Group's Risk Appetite Statement (RAS), which represents the degree of coverage of customer deposits by the liquidity buffers available for discounting at European central banks, also had a favorable evolution, having evolved from 42% to 45%. From a structural liquidity perspective, the Group continued to reinforce its stable financing base, characterized by the high weight of customer deposits in the funding structure, complemented by medium and long-term instruments, consisting mainly of MREL (Minimum Requirements for Own Funds and Eligible Liabilities). The regulatory stable funding ratio (NSFR: Net Stable Funding Ratio; Article 428 of Regulation (EU) 2019/876) reached 167% in December 2023, vs. 154% a year earlier. As at 31 December 2023, the Group maintains a structurally comfortable liquidity profile with a loan-to-deposit ratio of 71% (according to Bank of Portugal Instruction No. 16/2004), compared to 74% as at 31 December 2022, indicating a slight improvement over this period. In Portugal, following the significant migration of deposits to non-bank savings products that occurred mainly in the first quarter of 2023, the volume of customer funds showed a stable behavior throughout the 2nd half of the year, allowing the Bank to protect its market share. In what concerns wholesale funding, BCP carried out in January 2023 the early repayment of the second and last tranche of the Targeted Longer-Term Refinancing Operation III (TLTRO III, "T LTRO III" in the English abbreviation, in the gross amount of Euros 600,000,000), with no significant impact on the liquidity risk indicators. In September 2023, after regaining investment grade status by the four main rating agencies, BCP returned to the market, placing an issue of senior preferred debt eligible for MREL (Minimum Requirements for Own Funds and Eligible Liabilities) under its Euro Note Program. The issue, in the amount of Euros 500,000,000, has a term of 3 years, with an option for early repayment by the Bank at the end of the second year, an issue price of 99.825% and a fixed interest rate of 5.625%, per year, during the first 2 years (corresponding to a spread of 1.90% over the 2-year mid-swaps rate). In the third year, the interest rate will result from the sum of the 3-month Euribor with a spread of 1.90%. The issue was placed among a very diversified base of institutional investors, with demand exceeding the transaction amount by more than 3 times. The high demand and profile of investors involved in the issue made it possible to narrow the spread by 30 basis points during the execution phase, also reflecting an excellent market response to the Bank's recent rating upgrades. 2023 REPORT & ACCOUNTS 406 | The liquidity buffer available for discounting at the ECB stood at Euros 27,859,364,000 at the end of 2023, Euros 1,351,735,000 higher than a year earlier, to which contributed the cash flow from operations, the reduction in derivative margin accounts, the placement of the MTN issuance and the market price increase of assets integrated in the portfolio of assets discountable with the ECB, which offset the impacts in the opposite direction of the evolution of the commercial gap and the reversal of haircuts applicable to eligible assets at the values in force before the extraordinary measures taken by the ECB following the COVID-19 pandemic. At the end of 2023, the liquidity buffer comprised a long position of Euros 2,050,654,000 with the ECB, slightly lower than that observed a year earlier (Euros 2,574,146,000). Throughout 2023, Bank Millennium showed a significant growth of 11% in its retail deposits base. The operation's liquidity position was further reinforced by the market placement of a senior non-preferred issue of Euros 500,000,000. Initially with an amount of Euros 400,000,000, it was subsequently increased by an additional amount of Euros 100,000,000. It has a maturity of four years and a remuneration of 9.875% and qualifies for MREL purposes, thus meaning the fulfilment of another stage of the institution's recovery plan. Banco Internacional de Moçambique continued to display a resilient liquidity position, supported by a very conservative loan to deposits ratio and a robust buffer discountable at the respective central bank, despite the strong increase in minimum mandatory reserve rates in national and foreign currency imposed by the respective central bank in the first half of 2023. The pool of eligible assets for funding operations in the European Central Bank and other central banks, after haircuts, is detailed as follows: (Thousands of euros) 2023 2022 (restated) European Central Bank 14,677,769 13,677,518 Other Central Banks 7,346,514 5,213,823 22,024,283 18,891,341 As at 31 December 2023 the gross amount discounted with the European Central Bank is null (31 December 2022: Euros 600,000,000). The amount discounted with the Bank of Mozambique amounts to Euros 1,469,000 (31 December 2022: Euros 2,165,000). There are no discounted amounts with other central banks. The evolution of the ECB’s Monetary Policy Pool, the net borrows at the ECB and liquidity buffer is analysed as follows: (Thousands of euros) 2023 2022 (restated) Collateral eligible for ECB, after haircuts: The pool of ECB monetary policy (i) 14,677,769 13,677,518 Outside the pool of ECB monetary policy 11,130,941 10,269,081 25,808,710 23,946,599 Net borrowing at the ECB (ii) (2,050,654) (2,574,146) Liquidity buffer (iii) 27,859,364 26,520,745 i) Corresponds to the amount reported in COLMS (Bank of Portugal application). ii) Includes as at 31 December 2023 the amount of deposits with the Bank of Portugal and other liquidity with the Eurosystem (Euros 2,050,654,000) in excess over the minimum cash reserves (Euros 499,338,000). iii) Eligible collateral available for discount with the ECB, after haircuts, deducted from the net funding at the ECB. The Group's counterbalancing capacity is defined by the ability to generate additional liquidity in the short term to deal with possible situations of financial stress. The measures for its reinforcement are described in the Recovery Plan which, as at 31 December 2023, projected a total estimated value for Portugal of Euros 2,735,000,000, arising from the sale of corporate bonds and commercial paper, securitization of a portfolio of consumer credit and issuance of retained covered bonds to be mobilized for the ECB's monetary policy pool. In consolidated terms, the refinancing risk of medium and long-term instruments will remain at very low levels over the next years, with no material expression. 2023 REPORT & ACCOUNTS | 407 Encumbered and Unencumbered assets Within the scope of the European Banking Authority's guidance on the disclosure of encumbered assets and unencumbered assets, taking into account the recommendation made by the European Systemic Risk Committee, the following information is presented in accordance with Commission Implementing Regulation (EU) 2021/637 of 15 March 2021 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for disclosure of encumbered and unencumbered assets. (Thousands of euros) 2023 (1) Carrying amount of encumbered assets Fair value of encumbered assets Carrying amount of unencumbered assets Fair value of unencumbered assets of which notionally eligible EHQLA and HQLA (2) of which notionally eligible EHQLA and HQLA (2) of which EHQLA and HQLA (2) of which EHQLA and HQLA (2) Assets of the disclosing institution 2,209,334 1,732,985 88,478,010 23,355,398 Equity instruments — — — — 108,617 — 108,617 — Debt securities 1,732,985 1,732,985 1,600,621 1,600,621 24,139,055 19,569,285 23,462,376 18,923,903 of which: covered bonds — — — — 49,735 — 49,735 — of which: securitisations — — — — 7,329 3,348 7,329 3,348 of which: issued by general governments 1,693,088 1,693,088 1,561,888 1,561,888 17,567,226 17,177,757 16,922,286 16,543,663 of which: issued by financial corporations — — — — 1,704,878 259,885 1,713,561 259,586 of which: issued by non- financial corporations 39,897 39,897 38,734 38,734 2,939,512 491,430 2,952,759 491,430 Other assets 459,458 — 64,159,488 3,797,102 (1) Table's figures are calculated by the median of the values disclosed in the regulatory information for the previous 4 quarters. (2) EHQLA (Set as Extremely High-Quality Liquid Assets) e HQLA (High-Quality Liquid Assets). Collateral received and own debt securities issued (Thousands of euros) 2023 (1) Fair value of encumbered collateral received or own debt securities issued Unencumbered Fair value of collateral received or own debt securities issued available for encumbrance of which notionally eligible EHQLA and HQLA (2) of which EHQLA and HQLA (2) Collateral received by the disclosing institution — — 253,362 139,971 Debt securities — — 139,971 139,971 of which: issued by general governments — — 139,971 139,971 Loans and advances other than loans on demand — — 111,455 — Own covered bonds and securitisations issued and not yet pledged 9,114,834 — TOTAL COLLATERAL RECEIVED AND OWN DEBT SECURITIES ISSUED 2,209,334 1,732,985 (1) Table's figures are calculated by the median of the values disclosed in the regulatory information for the previous 4 quarters. (2) EHQLA (Set as Extremely High-Quality Liquid Assets) e HQLA (High-Quality Liquid Assets). 2023 REPORT & ACCOUNTS 408 | Sources of encumbrance (Thousands of euros) Sources of encumbrance Matching liabilities, contingent liabilities and securities lent Assets, collateral received and own debt securities issued other than covered bonds and securitisations encumbered Carrying amount of selected financial liabilities 1,163,408 1,687,935 The table's figures are calculated by the median of the values disclosed in the regulatory information for the previous 4 quarters. At the end of 2023, and according to the EBA methodology, the total encumbered assets represents 2% of the Group's total balance sheet assets. The encumbered Loans to customers represents 13% of the total encumbered assets, while Debt securities represents 78%. The main sources of asset encumbrance stem from financing operations in Portugal, notably transactions with the European Investment Bank (EIB), collateralization of derivative operations and securitization programs. Collateralization of securitization operations in Poland and derivatives, as well as financing operations with the European Investment Bank and other commitments with the Deposit Guarantee Fund, are primarily supported by eligible sovereign debt held with central banks. On the other hand, securitization programs in Portugal are collateralised by certain Loans to Customers’ portfolios. As at 31 December 2023, the Other assets includes unencumbered assets in the amount of Euros 3,350,705,000 related to Loans on demand, the amount of Euros 54,466,987,000 related to Loans and advances other than loans on demand (of which encumbered assets in the amount of Euros 276,263,000) and the amount of Euros 6,872,185,000, mostly unencumbered and related to the Group’s activity, namely, to: investments in associated companies and subsidiaries, tangible assets and investment properties, intangible assets, assets associated with derivatives and current and deferred taxes. As at 31 December 2023, BCP Group has a Euros 12.5 billion BCP Covered Bond Programme (“BCP Programme”) with Euros 9.2 billion of covered bonds outstanding. The BCP Programme is backed by a Euros 10.9 billion portfolio of residential mortgages, as well as by a liquidity buffer of Euros 50 million, providing an overcollateralization of 18.8%, which is above the minimum of 14% currently required by rating agencies. The new Portuguese covered bond legislation, under which the BCP Programme has been recently updated and authorised for the issuance of “Covered Bonds (Premium)” (label now born by all its outstanding covered bonds), affords covered bond holders a dual-recourse, firstly over the issuer, secondly over the cover pool that may also include other eligible assets, over which they benefit from a special preferential claim. The Portuguese covered bond legislation ensures total segregation of the covered pool from any future issuer’s insolvent estate, for the benefit of covered bond holders, who have precedence over claims of any other of the issuer’s creditors in case of issuer insolvency, thus and to this extent superseding the general insolvency and recovery legislation. Residential mortgages in a cover pool are subject to certain eligibility criteria inscribed in the Portuguese covered bond legislation, among them a maximum LTV of 80%, in the case of programmes issuing Covered Bonds (Premium), delinquency of no more than 90 days, and them being first lien mortgages (or, if otherwise, all preceding liens being in the cover pool) over properties located in the EU. The BCP’s Programme documentation limits property location to Portugal only. 2023 REPORT & ACCOUNTS | 409 The analysis of the balance sheet items by maturity dates is as follows: (Thousands of euros) 2023 Up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Undetermined maturity At sight Total Assets Cash and deposits at Central Banks 4,545,526 — — — — — 4,545,526 Loans and advances to Credit Institutions - Repayable on demand 337,687 — — — — — 337,687 Other loans and advances (a) — 703,056 205,645 — — — 908,701 Loans and advances to customers (a) — — 8,758,135 13,062,576 32,451,042 616,056 54,887,809 Other financial assets (b) — 2,573,933 2,463,873 5,409,172 1,004,966 704,509 12,156,453 4,883,213 3,276,989 11,427,653 18,471,748 33,456,008 1,320,565 72,836,176 Liabilities Resources from Credit Institutions — 516,776 312,350 — — — 829,126 Resources from costumers 45,049,544 15,685,920 14,117,747 693,602 60,000 — 75,606,813 Debt securities issued — — 311 2,360,372 351,999 — 2,712,682 Subordinated debt — — — 328,679 1,068,746 — 1,397,425 45,049,544 16,202,696 14,430,408 3,382,653 1,480,745 — 80,546,046 (a) Gross of impairment (b) Financial assets at fair value through profit or loss and Financial assets at fair value through other comprehensive income. Operational Risk The operational risk management system is framed by the “3 Lines of Defence” Corporate Governance model and is based on an integrated structure of end-to-end processes, considering that a vision which is transversal to the functional units of the organisational structure is the most suitable approach for the perception of risks and to estimate the effects of the corrective measures introduced for their mitigation. Furthermore, these processes model also underlies other strategic initiatives related to the management of this risk such as the actions to improve operating efficiency and the management of business continuity. Hence, the most relevant Group subsidiaries have their own process's structure, which is periodically adjusted according to business evolution, in order to ensure suitable coverage of the business activities (or business support activities) developed, ensuring thus, the replication of the 3 Lines of Defence model in the management of operational risk. The responsibility for the day-to-day processes’ management lies with the 1st Line of Defence: the process owners (seconded by process managers), whose mission is to characterise the operational losses captured under their processes, to monitor the respective Key Risk Indicators (KRI), to perform the Risks Self-Assessment (RSA) exercises, as well as to identify and implement suitable actions to mitigate operational risk exposures, thus contributing to the strengthening of control mechanisms and the improvement of the internal control environment. The periodic revision of the main processes in each geography is ensured by local structure units. The Risk Management function (materialised in the Risk Office) and the Compliance function (materialised in the Compliance Office) represent the 2nd Line of Defence and are responsible for implementing the risk policy defined for the Group, proposing and developing approaches for managing this risk, supervising their implementation and challenging the 1st Line of Defence regarding the risk levels incurred. The Internal Audit function embodies the 3rd Line of Defence and supervises the appropriate fulfilment of the functions and activities of the remaining two lines of defence. 2023 REPORT & ACCOUNTS 410 | In 2023, the usual operational risk management activities continued to be executed by the various players involved in the management of this risk, aiming at an efficient and systematic identification, evaluation, mitigation and control of exposures, as well as at the appropriate reporting tasks, either to the Group’s management bodies or within regulatory duties. The results of the RSA exercises evidence a robust control environment, demonstrating the Group's commitment to operational risk management through the continuous development of improvement actions that help mitigate exposures to this risk. Regarding the operational losses registered, it should be highlighted that their pattern was not different from what is usual and expected, with a higher frequency of losses of low amounts, without concentration in significant amounts. The monitoring of KRI has allowed to identify opportunities for improvement that, together with the RSA exercises and the process of identification and registration of losses, provide for an effective management of this risk. The Bank's mobilisation to reinvent the banking experience, based on the digitization and use of new technologies, entails relevant challenges in the management of operational risk, which include the reinforcement of the security of digital banking channels, the reinforcement of mechanisms for the prevention and detection of potential fraud, proper management of personal data and compliance with the information duties legally provided for in sales through digital banking channels. Covenants The contractual terms of instruments of various wholesale funding instruments encompass obligations assumed by entities belonging to the Group as borrowers or issuers, concerning general duties of corporate conduct, maintenance of banking activity and the inexistence of special guarantees constituted for the benefit of other creditors (“negative pledge”). These terms essentially reflect the internationally adopted standards for each of the types of debt instruments used by the Group. The terms of the Group’s intervention in rated securitization transactions involving its own assets are subject to changes in case the Group triggers certain rating criteria. The criteria established in each transaction results mainly from the analysis performed at the moment that the transaction was structured, being usually applied by each rating agency in a standardised way to the securitization transactions involving the same type of assets. Regarding the Covered Bond Programs of Banco Comercial Português, there are no relevant covenants related to a possible downgrade of BCP. 2023 REPORT & ACCOUNTS | 411 Hedge accounting The detailed information of the strategies, hedge transactions, hedged items and hedging instruments applied by the Group, is shown in a table below: Strategy Description of hedge transactions Hedged items Hedging instruments Cash flow volatility hedge of the flows generated by the portfolio of Euros floating rate mortgage loans (a) Group hedges the risk of the volatility of interest payments from floating rate mortgages. The volatility of cash flows results from interest rate risk Floating rate mortgage loans (BCP S.A.) IRS transactions Cash flow volatility hedge due to future income and interest costs denominated in foreign currencies (a) The Group hedges the risk of the volatility of cash flows generated by income and interest costs denominated in foreign currencies. The volatility of cash flows results from the currency risk Cash flows resulting from income and interest costs denominated in foreign currencies (Bank Millennium S.A.) FX position transactions Cash flow volatility hedge for the flows generated by FX mortgage portfolio and its underlying PLN liabilities (a) The Group hedges the risk of the volatility of cash flows generated by FX mortgages and by PLN liabilities financially underlying such loans. The volatility of cash flows results from the currency risk and interest rate risk Cash flows resulting from the FX mortgage loan portfolio and PLN deposits together with issued debt PLN securities funding them (Bank Millennium S.A.) CIRS transactions Hedge of volatility of the cash flows generated by PLN denominated financial assets (a) The Group hedges the risk of the volatility of cash flows generated by PLN denominated financial assets. The volatility of cash flows results from interest rate risk Cash flows resulting from PLN denominated financial assets (Bank Millennium S.A.) IRS transactions Fair value hedge of fixed rate mortgage loans (a) Group hedges changes in the fair value of cash flows of fixed rate mortgage loans due to changes in market interest rates Fixed rate mortgage loans (BCP S.A.) IRS transactions Fair value hedge of fixed rate debt instruments (a) Group hedges changes in the fair value of fixed rate bonds due to changes in market interest rates Fixed rate debt securities, classified as Financial assets at amortised cost (BCP S.A.) IRS transactions Fair value hedge of fixed rate debt instruments in Euros (a) Group hedges changes in the fair value of fixed rate bonds due to changes in market interest rates Fixed rate debt securities, classified as Financial assets at fair value through other comprehensive income (BCP S.A. and ActivoBank S.A.) IRS transactions Fair value hedge of fixed rate issued debt instruments in Euros (a) Group hedges changes in the fair value of fixed rate bonds due to changes in market interest rates Fixed rate Issued debt (BCP S.A.) IRS transactions Fair value hedge of fixed rate deposits in Euros (a) Group hedges changes in the fair value of fixed rate deposits due to changes in market interest rates Term deposits (BCP S.A.) IRS transactions Fair value hedge of fixed rate deposits in Euros (macro hedge) (b) Group hedges changes in the fair value of fixed rate deposits due to changes in market interest rates Repayable demand deposits without maturity (BCP S.A. and ActivoBank S.A.) IRS transactions Fair value hedge of fixed rate debt instruments in USD (a) Group hedges changes in the fair value of fixed rate bonds due to changes in market interest rates Fixed rate debt securities, classified as Financial assets at fair value through other comprehensive income or amortised cost (BCP S.A.) CIRS transactions Fair value hedge of a fixed interest rate debt instrument (macro hedge) (a) The Group hedges part of the interest rate risk associated with the change in the fair value of a fixed-rate debt instrument recorded in other comprehensive income, resulting from fluctuations in market interest rate A portfolio of fixed coupon debt securities classified as financial assets measured at fair value through other comprehensive income denominated in PLN (Bank Millennium S.A.) IRS transactions Hedging the fair value of cash flows from issued fixed-rate liabilities denominated in foreign currencies (b) The Group hedges part of the interest rate risk related to changes in the fair value of cash flows from issued fixed-rate liabilities denominated in foreign currencies, resulting from the volatility of market interest rates Cash flows from issued fixed- rate liabilities denominated in foreign currencies (Bank Millennium S.A.) IRS transactions (a) - Strategy applied in 2023 and 2022. (b) - Strategy applied in 2023. 2023 REPORT & ACCOUNTS 412 | As at 31 December 2023, the table below includes the detail of the hedging instruments used in the Group's hedging strategies and accounted at the Balance sheet item - Hedging derivatives: (Thousands of euros) 2023 Hedging instruments Book value Change in fair value (A) Type of hedging Notional Assets Liabilities Fair value hedge Interest rate risk Interest rate swaps 11,482,214 34,716 8,441 (43,031) Foreign exchange risk Currency and interest rate swap 348,464 2,279 6,272 856 11,830,678 36,995 14,713 (42,175) Cash flows hedging Interest rate risk Interest rate swaps 10,258,928 164 14,965 1,310,159 Foreign exchange risk Currency and interest rate swap 454,268 3,469 38,147 16,544 10,713,196 3,633 53,112 1,326,703 Total 22,543,874 40,628 67,825 1,284,528 (A) Changes in fair value used to calculate the ineffectiveness of the hedge As at 31 December 2022, the table below includes the detail of the hedging instruments used in the Group's hedging strategies and accounted at the Balance sheet item - Hedging derivatives: (Thousands of euros) 2022 (restated) Hedging instruments Book value Change in fair value (A) Type of hedging Notional Assets Liabilities Fair value hedge Interest rate risk Interest rate swaps 11,962,045 27,696 7,031 309,506 Foreign exchange risk Currency and interest rate swap 431,257 2,999 18,432 (717) 12,393,302 30,695 25,463 308,789 Cash flows hedging Interest rate risk Interest rate swaps 14,559,138 — 110,562 (1,513,397) Foreign exchange risk Currency and interest rate swap 1,273,663 29,008 41,975 (10,527) 15,832,801 29,008 152,537 (1,523,924) Total 28,226,103 59,703 178,000 (1,215,135) (A) Changes in fair value used to calculate the ineffectiveness of the hedge 2023 REPORT & ACCOUNTS | 413 As at 31 December 2023, the table below includes the detail of the hedged items: (Thousands of euros) 2023 Hedged items Type of hedging Balance sheet item Cumulative value of the adjustments Change in fair value (A) Cash flow hedge reserve / Currency translation reserve Book value Hedging relationships in effect Hedging relationships discontinued Assets Liabilities Assets Liabilities Fair value hedge Interest rate risk Interest rate swaps (B) 288,106 — (24,592) 13,551 (33,462) n/a n/a (H) 1,599,095 — (21,780) — 55,434 n/a n/a (C) 2,997,010 — (126,169) — 93,925 n/a n/a (D) — 10,000 — (221) 221 n/a n/a (E) — 2,387,825 — 103,603 (16,516) n/a n/a (F) — 1,329,345 — (34,224) (32,636) n/a n/a (G) — 1,037,079 — (41,831) (30,208) n/a n/a Foreign exchange risk Currency and interest rate swap — 348,464 — 51 (173) n/a n/a 4,884,211 5,112,713 (172,541) 40,929 36,585 n/a n/a Cash flows hedging Interest rate risk Interest rate swaps (B) 10,258,698 — — — (1,310,159) (470,250) (808,471) Foreign exchange risk Currency and interest rate swap (B) 454,268 — — — (16,027) (2,138) (51) 10,712,966 — — — (1,326,186) (472,388) (808,522) Total 15,597,177 5,112,713 (172,541) 40,929 (1,289,601) (472,388) (808,522) (A) Fair value changes used to calculate the ineffectiveness of the hedge (B) Financial assets at amortised cost - Loans and advances to customers (C) Financial assets at fair value through other comprehensive income (D) Financial liabilities at amortised cost - Resources from credit institutions (E) Financial liabilities at amortised cost - Resources from customers (F) Financial liabilities at amortised cost - Non subordinated debt securities issued (G) Financial liabilities at amortised cost - Subordinated debt (H) Debt securities held not associated with credit operations 2023 REPORT & ACCOUNTS 414 | As at 31 December 2022, the table below includes the detail of the hedged items: (Thousands of euros) 2022 (restated) Hedged items Type of hedging Balance sheet item Cumulative value of the adjustments Change in fair value (A) Cash flow hedge reserve / Currency translation reserve Book value Hedging relationships in effect Hedging relationships discontinued Assets Liabilities Assets Liabilities Fair value hedge Interest rate risk Interest rate swaps (B) 814,689 — (71,691) — (70,012) n/a n/a (H) 1,524,001 — (510,086) — (181,718) n/a n/a (C) 3,437,415 — (285,374) (3,278) (210,181) n/a n/a (D) — 10,000 — 517 580 n/a n/a (E) — 12,350 — (1,232) 718 n/a n/a (F) — 1,295,542 — (66,860) 65,881 n/a n/a (G) — 998,066 — (72,040) 67,509 n/a n/a Foreign exchange risk Currency and interest rate swap — 431,257 — (1,131) 1,079 n/a n/a 5,776,105 2,747,215 (867,151) (144,024) (326,144) n/a n/a Cash flows hedging Interest rate risk Interest rate swaps (B) 14,558,924 — — — 1,513,397 (1,775,249) 7,644 Foreign exchange risk Currency and interest rate swap (B) 1,273,663 — — — 11,473 (20,123) (280) 15,832,587 — — — 1,524,870 (1,795,372) 7,364 Total 21,608,692 2,747,215 (867,151) (144,024) 1,198,726 (1,795,372) 7,364 (A) Fair value changes used to calculate the ineffectiveness of the hedge (B) Financial assets at amortised cost - Loans and advances to customers (C) Financial assets at fair value through other comprehensive income (D) Financial liabilities at amortised cost - Resources from credit institutions (E) Financial liabilities at amortised cost - Resources from customers (F) Financial liabilities at amortised cost - Non subordinated debt securities issued (G) Financial liabilities at amortised cost - Subordinated debt (H) Debt securities held not associated with credit operations 2023 REPORT & ACCOUNTS | 415 The reconciliation of each equity component and an analysis of other comprehensive income attributable to hedge accounting, with reference to 31 December 2023 and 2022, is as follows: (Thousands of euros) Cash flow hedge reserve Exchange differences 2023 2022 (restated) 2023 2022 (restated) Balance as at 1 January (1,788,008) (141,642) — 55,326 Amounts recognised in other comprehensive income: Hedging cash flows Changes in fair value of currency and interest rate swaps 1,326,186 (1,523,207) — — Foreign exchange changes (6,747) 1,725 — — Hedge breakage (816,115) (123,938) — — Ineffectiveness of coverage recognised in results (517) 1,333 — — Others 4,291 (2,279) — — Hedging of net investments - foreign exchange risk Reclassified to the income statement — — — 3,685 Change in the fair value of settled transactions — — — (59,011) Balance at the end of the year (1,280,910) (1,788,008) — — The table below includes information on the effectiveness of hedging relationships, as well as impacts on results and other comprehensive income, with reference to 31 December 2023: (Thousands of euros) 2023 Income statement item (A) Gains/(losses) recognised in Other comprehensive income Hedging ineffectiveness recognised in Income statement (A) Amounts reclassified from reserves to results for the following reasons: Income statement item (B) Cash flows that were being hedged (C) Hedged item with an impact on results Type of hedging Fair value hedge Interest rate risk Interest rate swaps (D) — (6,273) — — Foreign exchange risk Currency and interest rate swap (D) — 683 — — — (5,590) — — Cash flows hedging Interest rate risk Interest rate swaps (D) 61,205 — (E) (45,947) — Foreign exchange risk Currency and interest rate swap (D) 19,801 517 — — 81,006 517 (45,947) — Total 81,006 (5,073) (45,947) — (A) Income Statement item in which the ineffectiveness of the hedge was recognised (B) Income Statement item in which the reclassified amount was recognised (C) but which are no longer expected to occur (D) Net gains/(losses) from hedge accounting operations (E) Interest income 2023 REPORT & ACCOUNTS 416 | The table below includes information on the effectiveness of hedging relationships, as well as impacts on results and other comprehensive income, with reference to 31 December 2022: (Thousands of euros) 2022 (restated) Income statement item (A) Gains/(losses) recognised in Other comprehensive income Hedging ineffectiveness recognised in Income statement (A) Amounts reclassified from reserves to results for the following reasons: Income statement item (B) Cash flows that were being hedged (C) Hedged item with an impact on results Type of hedging Fair value hedge Interest rate risk Interest rate swaps (D) — (17,717) — — Foreign exchange risk Currency and interest rate swap (D) — 362 — — — (17,355) — — Cash flows hedging Interest rate risk Interest rate swaps (D) (66,333) (238) (E) 54,861 — Foreign exchange risk Currency and interest rate swap (D) (15,838) (1,333) — — (82,171) (1,571) 54,861 — Total (82,171) (18,926) 54,861 — (A) Income Statement item in which the ineffectiveness of the hedge was recognised (B) Income Statement item in which the reclassified amount was recognised (C) but which are no longer expected to occur (D) Net gains/(losses) from hedge accounting operations (E) Interest income 2023 REPORT & ACCOUNTS | 417 The table below shows the detail of hedging instruments, as at 31 December 2023, by maturity: (Thousands of euros) 2023 Remaining period Fair value Type of hedging Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities Fair value hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps Notional 7,750 508,735 10,965,729 11,482,214 34,716 8,441 Fixed interest rate (average) 3.56% 6.17% 2.91% 3.07% Fair value hedging derivatives related to currency risk changes OTC Market: Currency and interest rate swap 140,291 208,173 — 348,464 2,279 6,272 Cash flow hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps 499,574 1,600,000 8,159,354 10,258,928 164 14,965 Cash flow hedging derivatives related to currency risk changes: OTC Market: Currency and interest rate swap 354,009 19,885 80,374 454,268 3,469 38,147 Total derivatives traded by OTC Market: 1,001,624 2,336,793 19,205,457 22,543,874 40,628 67,825 The table below shows the detail of hedging instruments, as at 31 December 2022, by maturity: (Thousands of euros) 2022 (restated) Remaining period Fair value Type of hedging Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities Fair value hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps Notional 293,467 377,114 11,291,464 11,962,045 27,696 7,031 Fixed interest rate (average) 1.05% 1.44% 2.44% 2.38% Fair value hedging derivatives related to currency risk changes OTC Market: Currency and interest rate swap 98,439 332,818 — 431,257 2,999 18,432 Cash flow hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps 240,409 278,751 14,039,978 14,559,138 — 110,562 Cash flow hedging derivatives related to currency risk changes: OTC Market: Currency and interest rate swap 153,720 685,365 434,578 1,273,663 29,008 41,975 Total derivatives traded by OTC Market: 786,035 1,674,048 25,766,020 28,226,103 59,703 178,000 2023 REPORT & ACCOUNTS 418 | Climate risks - Integration of ESG Factors in Risk Management In its risk classification, Millennium BCP recognises the ESG category which includes factors associated with the climate and environmental components, and also with social and governance aspects. These factors are not considered separately; in fact, they are seen as elements likely to affect positively or negatively the financial performance and solvency of the Bank's customer’s and counterparties. This way, the materialisation of their impacts occurs by means of the “traditional” categories: credit risk, market risk, operational & reputation risk, liquidity and financing risks. Within this context, and with the purpose of promoting the integration of ESG factors in risk management, the Bank implemented a set of processes and methodologies to identify, assess, manage and monitor the impact of the ESG category in overall risk, in accordance with the framework and policies already established for the remaining financial and non-financial risks. Governance Model The governance model for risks arising from ESG factors follows a structure based on three lines of defence which, under the leadership of the Board of Directors (and respective delegations on the Executive Committee), ensure its adequate assessment and management. The first-line functions comprise all the departments and business areas that interact with the Bank’s customers, counterparties and suppliers, collect the information and data that support the assessment of their risk profiles (and of their respective operations) and structure the commercial solutions with characteristics associated with the ESG or with the promotion of control of their impacts on the Bank's risk profile. The Sustainability Function fits in the first line of defence and its responsibilities include: • the overall management of the sustainability strategy and plans of Millennium BCP and of its financial group; • the development of policies, methodologies, analyses and reports that address ESG issues; • the management of commitments and external communications by the Bank and the Group in this area; and • the direct orientation and operational support to the first and second lines of defence in the performance of their main responsibilities in this scope. In the second line of defence, the responsibility for risk control, is assumed by the Risk Office and by the Compliance Office. These functions ensure the procedures for the design, implementation of the policies/methodologies/ risk management models, which are paramount in keeping the risk profile of the Group in appropriate levels. Among other, these responsibilities, include: • Integrate the ESG dimension in risk appetite (Risk Appetite Framework - RAF); • Syndicating with the Sustainability Function the proposal of ESG metrics to be included in the Risk Appetite Statement (RAS); • Carry out stress tests focused on climate and environmental risk factors; • Introduce the ESG dimension in capital and liquidity adequacy exercises. Specifically in terms of compliance, we emphasise the following controls: • Reporting, disclosure and prudential obligations; • Design and approval of new products, especially in the cases of ESG product design and labelling; • Incorporation of ESG-related conditions and requirements into the forms and contracts; • Ensuring the timely application of the legal and regulatory dispositions related to ESG; • Potential for conflicting interest or litigation in the provision of ESG-related services and products. 2023 REPORT & ACCOUNTS | 419 Within the scope of the Committees of the Board of Directors, the Committee for Corporate Governance, Ethics and Sustainability is the body responsible for recommending the adoption by the Board of Directors of policies in line with ethical principles and social responsibility and best practices in matters of corporate governance and sustainability, but also for monitoring the evolution of the Sustainability Master Plan and the Corporate Social Responsibility Plan and issuing an opinion on the annual corporate governance and sustainability reports. The Committee for Risk Assessment, among its competences and attributions, is also responsible for monitoring ESG risks, including climate risks and advise the Board of Directors in terms of the identification, management and control of ESG risk factors, while monitoring the Group’s risk appetite and underlying performance, as well as supervising the adequacy of the ESG internal control system, with special focus on a) the effectiveness of the risk management system to deal with the ESG risk drivers; and b) dealing with any instance of reputational risk related to ESG to which the Group may be associated to (directly or indirectly). The third line of defence assumes responsibility for the independent review of all ESG aspects through the annual work plans of the Audit Division. Identification of ESG risks Climate changes and environmental degradation factors are elements that potentially affect economic activity, through factors related with issues such as climate changes (mitigation, and adaptation), sustainable use and protection of hybrid and marine resources, transition towards a circular economy, prevention and control of pollution, protection and restoration of biodiversity (cf. EU Taxonomy). The materialisation of these risks fundamentally stems from the exposure of Millennium BCP's banking portfolio to customers, counterparties and invested assets whose performance may be affected or contribute to the negative impacts of climate change and other environmental factors. These factors may generate negative financial impacts which are identified and assessed by means of two main dimensions: • Physical risk factors: arising from the physical effects of climate change and environmental degradation. They should be categorized as a) severe risks, if they arise from extreme weather events such as wildfires or floods; b) chronic risks, if they arise from progressive changes in weather and climate patterns or from a gradual loss of natural ecosystems. • Transition risk factors: are the risks of any negative financial impact arising from the effort, in progress or to happen in the future, of transition into a low-carbon and environmentally sustainable economy. These may result, for example, from technological changes, the impact of public policies or behavioural changes in terms of demand for goods or services (including banking services). • The biodiversity or nature-related risks: The depreciation of natural capital, which in this context encapsulates the environmental-driven risks, is another key component of a holistic approach to C&E concerns. Natural capital refers to the world’s stocks of natural assets which include geology, soil, air, water and all living things as well as the organization and distribution of ecosystems. The depreciation of natural capital undermines the ability of nature to provide ecosystem services (provisioning services, such as food, raw materials and fresh water; maintenance and regulating services, such as climate, water and air quality regulation, pollination, and pest and disease control; and cultural services, supporting recreation, mental and physical health, and spiritual and religious values) on which the Human society, economies and other species rely. Natural capital degradation can have chronic as well as acute economic effects. The materialisation of social risks is also assessed, considering the issues related with rights, well-being and interests of persons and communities and include factors such as (in)equality, health, diversity, inclusion, labour relations, workplace health and safety, human capital and communities. In addition, the governance risk factors are also identified by Millennium BCP, through issues relating to leadership, executive remuneration, shareholder rights, corruption and bribery, management and prevention of conflicts of interest, quality of internal control and independent reviews/auditing, transparency and good tax practices, for example. A methodology for assessing the materiality of ESG risks was developed in order to determine the potential impact of those risks on the Bank’s profile. 2023 REPORT & ACCOUNTS 420 | Management and monitoring principles ESG risks management and respective strategy follows a different logic compared to 'traditional' risks, which are based on short-term timeframes. In contrast, the materialization of ESG risks is expected to occur over extended timeframes, which is why the establishment of strategy and risk appetite follows different timeframes. For example, if the assessment of physical (severe) risks can determine an action strategy more focused on the short term (e.g., considering the establishment of additional mitigation measures, at the level of policies for granting credit and insurance policy), the transition risks justify a more structural approach, based on collecting information, evaluating customers and monitoring their performance over time. From this perspective, Millennium BCP's management of ESG impacts follows the following principles: • Establishment of a responsible corporate financing policy, which excludes or conditions the Group's operations in sectors and/or activities with greater environmental and social impact. • Integration of the strategy for managing risks arising from ESG factors into the Bank's global sustainability plan, which steers the integration of the ESG dimension into business processes, establishing goals, timelines and a model for controlling proper observance. • Communication Transparency: The Bank publicly discloses its sustainability objectives and key practices, as well as its management of ESG (Environmental, Social, and Governance) impact factors. This allows all stakeholders to assess the robustness of its approach, including its exposure to risks arising from ESG factors. • Regular Monitoring of Exposure to Risks Arising from ESG Factors: This is done through established management information routines for each risk category. • Internal Standardization of ESG References: This involves implementing a corporate taxonomy that enables the identification and classification of exposures demonstrating characteristics that actively support the transition of the Portuguese and European economies. • Focus on Credit Risk Management: This is achieved through models that facilitate the integration of the ESG dimension in the risk assessment of the bank's key companies/clients. This ensures that business decisions incorporate an evaluation of the primary impacts of ESG factors. • Collection and Structuring of Information: Utilizing public sources and information provided directly by clients, this approach aims to enhance understanding of clients' environmental performance and potential financial impacts associated with any limitations in that performance. The operationalization of these principles is facilitated through an internal policy for managing risks arising from ESG factors, which establishes the following key risk tools: • Regular assessment of the materiality of risks arising from ESG factors to confirm alignment with risk appetite and the need for implementing mitigation actions. • Methodologies for assessing risks arising from ESG factors integrated into credit risk assessment models. • Risk classification methodologies at the portfolio level, allowing the identification of sectors, companies, and exposures most susceptible to transition and/or physical risks and/or nature-related. • Models for quantifying financed greenhouse gas emissions, fostering strategic discussions regarding the management of these emissions and their alignment (in the long term) with the goals of the Paris Agreement. • Sensitivity analyses and stress tests focusing on climate risks. Climate risk stress tests The Bank uses sensitivity analysis methodologies and stress tests on the risks arising from ESG factors (with a focus on the climate risk component). Considering the horizons of materialization of ESG risks, this is an important risk management technique, which allows the assessment of the impacts of climate change (and respective scenarios) on the financial variables that affect the value of Millennium bcp's banking portfolio. Based on their results, new exposures at risk may be identified that require the Bank to take additional management measures to mitigate the impacts of climate risks. 2023 REPORT & ACCOUNTS | 421 55. Mozambique's sovereign debt Following a period of deceleration in economic activity and increase of inflation, reduction of Republic of Mozambique rating, depreciation of Metical and decrease in foreign direct investment, the Bank of Mozambique has adopted a restrictive policy, with increases in the reference rate since December 2015, as well as increasing the reserve ratio. This set of factors constrained commercial banking in Mozambique, pushing it to pursue a strict liquidity management, emphasis on raising funds, despite contributing to the improvement of net interest income. According to an International Monetary Fund (IMF) statement dated 23 April 2016, existing debt guaranteed by the State of Mozambique in an amount over USD 1 billion that had not been disclosed to the IMF. Following this disclosure, the economic program supported by the IMF was suspended. According to an IMF statement dated 13 December 2016, discussions were initiated on a possible new agreement with the Government of Mozambique and the terms of reference for an external audit were agreed. In June 2017, the Attorney General's Office of the Republic of Mozambique published an Executive Summary regarding the above-mentioned external audit. On 24 June 2017, the IMF released in a statement that due to the existence of information gaps in this audit, an IMF mission would visit the country to discuss audit results and possible follow-up measures. Following this visit, the IMF requested the Government of Mozambique to obtain additional information on the use of the funds. On 14 December 2017, in a statement from the IMF staff, after the end of the mission held between 30 November and 13 December 2017, it was reiterated the need for the Mozambican State to provide missing information. In the statement of the Mozambican Attorney General's Office dated 29 January 2018, it is mentioned, among other things, that the Public Prosecutor submitted to the Administrative Court, on 26 January 2018, a complaint regarding the financial responsibility of public managers and companies participated by the State, participants in the execution and management of contracts for financing, supplying and providing services related to debts not disclosed to the IMF. In the statements dated of 16 January 2017 and 17 July 2017, the Ministry of Economy and Finance of Mozambique informed the holders of bonds issued by the Republic of Mozambique specifically "US$726.524 million, 10.5%, repayable securities in 2023" that the interest payment due on 18 January 2017 and 18 July 2017, would not be paid by the Republic of Mozambique. In November 2018, the Ministry of Economy and Finance of the Republic of Mozambique announced that it has reached an agreement in principle on the key commercial terms of a proposed restructuring transaction related to this debt securities with four members of the Global Group of Mozambique Bondholders. The Bondholders currently own or control approximately 60% of the outstanding Bonds. The agreement in principle reached by the parties, and the support of the Bondholders for the proposed restructuring, is conditional on the parties reaching an agreement on mutually satisfactory documentation setting out the detailed terms of the restructuring including implementation, and the mentioned Ministry obtaining all necessary approvals, including Parliamentary and government approvals of Mozambique. On 6 September 2019, the Ministry of Economy and Finance of the Republic of Mozambique announced the approval by 99.95% of the Bondholders of a written decision containing the terms and conditions of the restructuring proposal. The Group has no exposure to this debt. In May 2020, the Constitutional Council of the Republic of Mozambique issued a Judgment, declaring the nullity of the acts related with the loans contracted by Proindicus, SA ("Proindicus") and Mozambique Asset Management, MAM, SA ("MAM"), and the respective sovereign guarantees granted by the Government in 2013 and 2014, respectively, and on 19 October 2020, the dissolution of the two companies was registered based on an order issued by the Judicial Court of the City of Maputo. In the context of the liquidation of Proindicus and MAM, the Liquidator published, on 3 May 2022, an announcement in the Jornal de Notícias de Moçambique, through which the creditors of those companies are notified to submit, within thirty days counted from the said publication, the supporting documents of their credits. Following the publication of the said announcement, BIM and BCP submitted, on 1 June 2022, their credit claims on Proindicus and MAM, respectively. However, with respect to Proindicus, the BIM’s credit claim is prejudiced by the settlement mentioned below. 2023 REPORT & ACCOUNTS 422 | An action brought on 27 February 2019 (amended on 30 April 2020), by the Republic of Mozambique (represented by the Attorney General of the Republic) against the arranger and originating lender of the loan to Proindicus and other entities, by which the Republic of Mozambique requested, inter alia, the declaration of nullity of the sovereign guarantee of the Mozambican State to the Proindicus loan. Following this lawsuit, on 27 April 2020, the Banco Internacional de Moçambique (BIM) filed a lawsuit, in the London Commercial Court, against the arranger and lender of the loan to Proindicus, claiming, inter alia, payment of BIM's exposure to the Proindicus, in the event that the said sovereign guarantee of the State of Mozambique to Proindicus was, in a court of law declared null and void. However, on 30 September 2023, the Republic of Mozambique and the arranger and originating lender of the loan to Proindicus announced that they have settled amicably the legal proceedings in London concerning the loan to Proindicus and associated guarantee. This settlement was subscribed by the majority lenders of the said credit facility, including BIM. The signing parties to the agreement have mutually released each other from any liabilities and claims relating to the loan to Proindicus. Regarding MAM, as far as we are aware, no lawsuit with the same purpose was brought by the Republic of Mozambique at the London Commercial Court. However, it is expected that, in the context of ongoing legal proceedings, that several creditors of MAM (including BCP) have filed, at the London Commercial Court, against MAM and the Republic of Mozambique in order to recover their credits, the question of the validity of the sovereign guarantee of the Mozambican State to the MAM loan will be raised by the Republic of Mozambique. The Court decided that these lawsuits would be judged trough a unitary trial. Trial sessions aimed at producing evidence took place between October and December 2023 and we expect that the Judgment will occur during the second half of the current year. As at 31 December 2023, considering the 66.7% indirect investment in BIM, the Group's interest in BIM's equity amounted to Euros 356,514,000 (31 December 2022: Euros 347,559,000), with the exchange translation reserve associated with this participation, accounted in Group's consolidated equity, in a negative amount of Euros 152,108,000 (31 December 2022: negative amount of Euros 139,373,000). BIM's contribution to consolidated net income for 2023, attributable to the shareholders of the Bank, amounts to Euros 67,787,000 (2022: Euros 70,707,000). As at 31 December 2023, the subsidiary BIM's exposure to the State of Mozambique and to the Central Bank includes public debt securities denominated in Metical classified as Financial assets measured at amortised cost - Debt instruments in the gross amount of MZN 40,995,115,000 corresponding to Euros 580,914,000 (31 December 2022: MZN 57,909,918,000 corresponding to Euros 849,306,000) and Financial assets at fair value through other comprehensive income in the gross amount of MZN 6,989,511,000 corresponding to Euros 99,044,000 (31 December 2022: MZN 7,090,486,000 corresponding to Euros 103,989,000). Additionally, the Group has also registered as at 31 December 2023, in the balance Loans and advances to customers, a direct gross exposure to the Mozambican State in the amount of MZN 18,228,666,000 corresponding to Euros 258,306,000 (31 December 2022: MZN 19,081,523,000 corresponding to Euros 279,849,000) and in the balance Guarantees granted revocable and irrevocable commitments, an amount of MZN 1,035,157,000 corresponding to Euros 14,663,000 (31 December 2022: MZN 4,818,871,000 corresponding to Euros 70,704,000). 2023 REPORT & ACCOUNTS | 423 56. Contingent liabilities and other commitments In accordance with accounting policy 1.U3, the main contingent liabilities and other commitments under IAS 37 are the following: 1. In 2012, the Portuguese Competition Authority ("PCA") initiated an administrative proceeding relating to competition restrictive practices (no. PRC 2012/9). On 6 March 2013, unannounced inspections were conducted in the premises of Banco Comercial Português, S.A. ("BCP" or "Bank") and other credit institutions, where documentation was seized to investigate allegations of a commercially sensitive information exchange between Portuguese banks. The administrative proceeding was subject to judicial secrecy by the PCA, as the publicity of the process would not be compatible with the interests of the investigation and with the rights of the investigated companies. On 2 June 2015, the Bank was notified of the PCA’s statement of objections (“SO”) in connection with the administrative offence no. 2012/9, by which the Bank is accused of participating in a commercially sensitive information exchange between other fourteen banks related to retail credit products, namely housing, consumer and small and medium enterprises credit products. The proceedings, including the deadline to submit a response to the SO, were suspended for several months between 2015 and 2017, following the appeals lodged by some defendants (including the Bank) before the Portuguese Competition, Regulation and Supervision Court (“Competition Court”) on procedural grounds (namely, on the right to have access to confidential documents which were not used as evidence by the Authority – for several months, the PCA denied the Defendant’ right to have access to confidential documents not used as evidence). In the end of June 2017, the suspension on the deadline to reply to the SO was lifted. On 27 September 2017, BCP submitted its reply to the statement of objections. A non-confidential version of the Bank’s defence was sent to the PCA, at the latter’s request, on 30 October 2017. The witnesses indicated by the Bank were interrogated by the PCA in December 2017 (although without the presence of BCP’s legal representatives). In May 2018, the PCA refused the BCP’s application for confidential treatment of some of the information in the Bank’s reply to the SO, having also imposed that the Bank protects the confidential information of the co-defendants (providing a summary of the information). On 1 June 2018, the Bank filed an appeal with the Competition Court, which, upholding the appeal, concluded that the PCA infringed on the right to a prior hearing. Complying with the judgment, in November 2018, the PCA notified the Bank of its intention to deny the application for confidential treatment of some of the information included in the Bank’s defence; subsequently, in January 2019, it requested BCP to provide summaries for the co-defendants’ confidential information. The Bank filed an appeal before the Competition Court, which ruled in favour of BCP, as it considered that the elaboration by the Bank of summaries for its co-defendants’ confidential information an illegitimate burden. In April 2019, at the PCA’s request, BCP declared to be in favour of the re-examination of its witnesses, requested in its defence and previously held. The witnesses were re-inquired on 16-17 April 2019 with the presence of the Bank’s legal representatives. The PCA denied the request of BCP to be allowed to conduct cross-examination of the witnesses appointed by its co- defendants. The Bank appealed to the Competition Court, which denied the appeal, through a decision which was latter upheld by the Lisbon Court of Appeal. BCP then lodged an appeal before the Portuguese Constitutional Court for breach of the constitutional right of defence. The Constitutional Court dismissed the appeal on 29 April 2021, on the grounds that the requested cross-examination was not required by the Portuguese Constitution, at that stage of the proceedings. On 12 August 2020, the Bank lodged a complaint before the European Court of Human Rights on this matter. On 2 July 2019, the Bank submitted its observations to the PCA’s report on complementary evidence measures. 2023 REPORT & ACCOUNTS 424 | On 3 June 2019, BCP was notified of the partial dismissal of the complementary evidence measures it had requested in its reply to the SO, which it judicially contested. By judgment of September 2019, the Competition Court declared the nullity of the PCA’s decision, for breach of the right of the parties to be heard on the PCA’s draft decision. The Bank appealed to the Lisbon Court of Appeal in what concerned the limitation by the Competition Court of the effects of the nullity declaration of the PCA’s decision. Although this appeal was ultimately admitted by the panel of judges of the Lisbon Court of Appeal, it ends up being denied. In order to give compliance to BCP’s right to be heard, the PCA notified the BCP of its intention to reject the above- mentioned complementary evidence measures. Following BCP’s observations in November 2019, the PCA adopted its final decision rejecting the measures, which was judicially contested by the BCP in December 2019. In March 2020, the Competition Court rejected the appeal. This judgment was upheld by the Lisbon Court of Appeal in October 2020. On 9 September 2019, the PCA adopted its final decision in this proceeding, fining the Bank in a Euros 60 million fine for its alleged participation in an information exchange system with its competitors in the housing, consumer and SME credit segments. The BCP considers that the Decision contains serious factual and legal errors, having, on 21 October 2019, filed an appeal before the Competition Court requesting the annulation of the Decision and the suspensory effect of the appeal. On 8 May 2020, BCP’s appeal was admitted. On 8 June 2020, the BCP submitted a request before the Court, claiming that the rule according to which appeals do not have, in principle, suspensory effect violates the Portuguese Constitution, submitting elements aimed at demonstrating considerable harm in the advance provisional payment of the fine, and offering a guarantee in lieu (indicating the respective percentage of the fine to be offered as a guarantee). On 14 December 2020, a hearing was held before the Competition Court, and a consensual solution was reached between the PCA and the defendant banks, including BCP, as to the dosimetry (i.e., 50% of the amount of the fine) and the forms of the guarantee to be provided, in order for the appeal of the PCA’s decision to have suspensory effect. On 21 December 2020, BCP submitted a bank guarantee issued by the BCP, which was accepted by the Competition Court. On 1 March 2021, the Competition Court notified BCP that the guarantee had been presented in a timely manner and in the agreed form, and, as a result, attributed suspensory effect to the appeal. By order of 20 March 2021, the Competition Court lifted the judicial secrecy and informed the appellants that the trial would, in principle, start in September 2021. On 9 July 2020, the BCP requested the Court to declare the nullity of the fining decision of the PCA for failure to assess the economic and legal context, as determined by the recent case-law of the Court of Justice of the European Union. The Competition Court clarified that this and other prior questions would not be assessed before the hearing phase. On 13 January 2021, BCP was notified of an application submitted by "Associação Ius Omnibus – Nova Associação de Consumidores" to the Competition Court asking it to have access to a non-confidential version of the file, based on the need to assert the “rights to indemnification of the consumers whose rights and interests it represents, and the possible exercise and proof of those rights in the context of an action for damages”. On the same date, BCP was notified by the Competition Court of its decision authorizing the news agency "Lusa" to access the file of the administrative phase of the case. BCP appeal of this decision to the Appeal Court of Lisbon, on 25 January 2021 and opposed to the request of "Ius Omnibus" on 2 February 2021. On 20 March 2021, the Competition Court determined: (i) the lifting of the judicial secrecy; (ii) the forwarding to the Public Prosecutor of the appeal of BCP against the decision of the Competition Court relating to "Lusa", for reply; (iii) the provisional start date of the judgement hearing on September 2021, having requested suggestions by the co- appellants for venues. By decision of 9 April 2021 of the Competition Court, a preparatory hearing took place on 30 April 2021 for discussion of issues precedent to the begging of the judgment hearings, in which the procedures relating to the treatment of confidential information of the co-appellants in the appeals was defined, as well as the conditions relating to access to file. The Competition Court also set forth preliminary dates for the judgement hearing and scheduled a preparatory hearing for 7 July 2021. On 28 June 2021, BCP was notified by the Competition Court to reply to the requests submitted by some of the co- appellants and confirm that all confidential information had been duly eliminated from non-confidential versions submitted by each co-appellant. The Competition Court also determined that the hearing of 7 July 2021 was cancelled and its object would be transferred to the next hearing date (6 September 2021). 2023 REPORT & ACCOUNTS | 425 On 8 July 2021, BCP presented its reply to the notification of 28 June 2021, having also requested confirmation in relation to the scheduling of the judgement hearing, namely confirmation of whether it was actually scheduled for 6 September 2021 the preparatory hearing and the start of the judgement hearing sessions. Several representatives of the banks raised the question of the possible unconstitutionality of the seizure proceedings of e-mail messages used as evidence in the PCA’s decision, which objection appeal will now take place. This issue was raised bearing in mind the recent Decision of the Constitutional Court no. 687/2021 on the administrative offence case no. 225/15.4YUSTR-W. A petition on this matter was filed with the Court on 10 October 2021, requesting the Court to take a position on the matter before the beginning of the trial. The Court issued an order rejecting the banks' request to rule on those nullities raised by them, having refused to prohibit the use during the judgment of electronic messages seized, allowing witnesses to be confronted with their content. The requesting banks lodged an appeal against this order, which was admitted by the Lisbon Court of Appeal. On 28 April 2022, TCRS ("Tribunal da Concorrência, Regulação e Supervisão") handed down a decision under the scope of Proc. 225/15.4YUSTR-W, regarding the appeal to challenge the decision of the Portuguese Competition Authority of September 2019 (PRC/2012/09), which imposed fines on a number of banking institutions for alleged violation of competition rules in virtue of participating in a process of exchanging information on mortgage loans, consumer credit and credit to SMEs. In this extensive decision, TCRS lists the facts given as proven, bearing in mind the testimonial evidence produced and the documents attached to the case file, both in the administrative phase and in the trial, however, at this stage, the TCRS does not yet conclude by the legal framework of the facts as proven, nor, consequently, by the imposition of fines, having the TCRS instead chosen to make the reference for a preliminary ruling to the Court of Justice of the European Union (CJEU) in order to answer two preliminary questions that it sets out, requesting that this reference follows further terms in the form of an accelerated procedure, taking into account the risk of prescription. It should be noted that it is not up to the CJEU to adjudicate on the case, but only to interpret the rules of community law by answering in abstract to the questions submitted to it by the referring court. CJEU rejected TCRS's request for an accelerated procedure and for priority to be given in the assessment of this case, hence CJEU's assessment must be given within the normal deadline for these prejudicial proceedings, after which the judgment of this Court will then be concluded. The Bank has been notified by the CJEU to, if it wishes, submit its written observations, and must do so by 2 September 2022. The Bank forwarded its observations to the CJEU on 1 September 2022. The Oral Hearing took place on 22 June 2023 at the CJEU, and the parties' lawyers made their respective presentations and answered the questions that the Judge and the Advocate General intended to raise. The reading of the Opinion by the Advocate General was scheduled to take place on 5 October 2023. If this judicial ruling so determines, the trial may be "reopened" for some additional evidence to be produced. This not being the case, the CRSC will deliver the corresponding sentence, which can also be appealed to the Lisbon Court of Appeal and the Constitutional Court. After receiving an answer from the CJEU, it is expected that the CRSC will be able to issue a Judgment, where it may cancel, confirm, reduce or increase the fine applied by the CA (Competition Authority) to the Bank. On the appeal submitted, and at the trial hearing, arguments of fact and law were presented, which we believe to be solid and sufficient to justify the acquittal of BCP from the conviction against it. However, given the complexity of the case, its several legal and extra-legal implications, and the position that the CRSC has already taken on the facts, it is not possible to anticipate the final decision of the case. The Bank does not anticipate that this lawsuit may result in any responsibility that could have impact on the respective financial statements. 2023 REPORT & ACCOUNTS 426 | The Advocate General's conclusions were made public on 5 October 2023: 1) Article 101 TFEU must be interpreted as meaning that it does not preclude the classification as a restriction of competition by object of an exchange between competitors of information concerning the commercial conditions applicable to transactions (in particular, current and future credit spreads and risk variables) and production figures for home loan offers, corporate lending offers and consumer credit offers in the banking sector, where such a practice has artificially increased transparency and reduced uncertainty as to the functioning of the market. 2) Article 101 TFEU does not preclude such classification where it has been impossible to identify or establish any gain in efficiency or any uncertain or positive effect on competition resulting from that exchange of information. The Advocate General's conclusions are not in the nature of a judgement by the CJEU, they are not binding on the Court of Justice, and it is therefore necessary to await the subsequent delivery of the CJEU judgement which in that case will set out the interpretation of Community law on the questions referred to it for a preliminary ruling by the TCRS in case no. 225/15.4YUSTR-W. On 11 March 2024, BCP, along with 8 banking institutions, was served in order to, once willing, contest a “popular declaratory action of condemnation in the form of a common process aimed at protecting competition, the rights of consumers, and diffuse and/or collective interests associated with the consumption of goods and services”, an action brought by the Ius Omnibus Association, under the terms n.º 2/24.1YQSRT at the TCRS, entirely based on the alleged infringement of competition in mortgage and consumer credit transactions declared in the AdC Decision of 9 September 2019 (PRC/2012/09), a decision that was subject to judicial opposition by BCP, an opposition that has not yet been definitively judged. The Bank is analysing that class action in order to present its response in a timely manner. 2. On 7 June 2022, the Bank was notified by the Court to contest a lawsuit brought by Fundação José Berardo and José Manuel Rodrigues Berardo against Banco Comercial Português, S.A., Caixa Geral de Depósitos, S.A., Novo Banco, S.A. and Banco Espírito Santo, S.A., in liquidation. In this lawsuit, the Plaintiffs allege that they incurred in a mistake regarding the endogenous situation of the defendant banks and the financial system, without which they would have sold the pledged shares and paid their loans. If this is not the case, the plaintiffs request the defendant banks to be ordered to pay compensation to Fundação José Berardo for damages caused by breach of contract, since the moment when they should have been sold in execution of the pledge due to failure to verify coverage ratios until the moment when they were sold, that is, the difference between the price at which the pledged shares would have been sold on the dates of coverage ratios default and the price at which they were actually sold, plus interest and all other loan charges since those dates, in any case the global amount of compensation not being less than Euros 800,000,000. In any case, the plaintiffs ask the defendant banks to be jointly condemned to pay José Manuel Rodrigues Berardo compensation for moral damages, in the already calculated amount of Euros 100,000,000 and also in the amount that is settled as soon as the full extent of the damages is known. In the meantime, through Order No. 8765/2022 of Mr. Secretary of State for the Presidency of the Council of Ministers, published in Republic Diary, Series 2, part C, of 19 July 2022, the Plaintiff of this lawsuit, Fundação José Berardo, was declared extinct. This decision was legally contested by the José Berardo Foundation, and in April 2023, the Administrative and Fiscal Court of Funchal cancel the decision that ordered its extinction. Dissatisfied, the Portuguese State appealed against this latter and is awaiting the outcome. The lawsuit was contested on 27 September 2022 and is awaiting subsequent terms. Nothing relevant to the judgment on the merit of the case happened. The lawsuit is suspended until the motions submitted by FJB in the execution filed by the Banks (8489/19.8T8LSB) have been definitively judged. The Bank does not anticipate that this lawsuit may result in any responsibility that could have impact on the respective financial statements. 2023 REPORT & ACCOUNTS | 427 3. On 3 January 2018, Bank Millennium received decision of the Chairman of the Office for Protection of Competition and Consumers (OPCC Chairman), in which the OPCC Chairman found infringement by Bank Millennium of the rights of consumers. In the opinion of the OPCC Chairman the essence of the violation is that Bank Millennium informed consumers (it regards 78 agreements) in responses to their complaints, that the court verdict stating the abusiveness of the provisions of the loan agreement regarding exchange rates does not apply to them. According to the position of the OPCC Chairman the abusiveness of contract’s clauses determined by the court in the course of abstract control is constitutive and effective for every contract from the beginning. As a result of the decision, Bank Millennium was obliged to: 1) send information on the UOKiK’s decision to the said 78 clients; 2) place the information on decision and the decision itself on the website and on Twitter; 3) to pay a fine amounting to PLN 20.7 million (Euros 4.8 million). Bank Millennium lodged an appeal within the statutory time limit. On 7 January 2020, the first instance court dismissed Bank Millennium's appeal in its entirety. Bank Millennium appealed against the judgment within the statutory deadline. The court presented the view that the judgment issued in the course of the control of a contractual template (in the course of an abstract control), recognizing the provisions of the template as abusive, determines the abusiveness of similar provisions in previously concluded contracts. Therefore, the information provided to consumers was incorrect and misleading. As regards the penalty imposed by OPCC, the court pointed out that the policy of imposing penalties by the Office had changed in the direction of tightening penalties and that the court agrees with this direction. In Bank Millennium's assessment, the Court should not assess Bank Millennium's behaviour in 2015 from the perspective of today's case-law views on the importance of abstract control (it was not until January 2016 that the Supreme Court's resolution supporting the view of the OPCC Chairman was published), the more penalties for these behaviours should not be imposed using current policy. The above constitutes a significant argument against the validity of the judgment and supports the appeal which Bank Millennium submitted to the Court of second instance. The second instance court, in its judgment of 24 February 2022, completely revoked the decision of the OPCC Chairman. On 31 August 2022, the OPCC Chairman lodged a cassation appeal to the Supreme Court. Bank Millennium believes that the prognosis regarding the litigation chances of winning the case before the Supreme Court is positive. Bank Millennium (along with other banks) is also a party to the dispute with OPCC, in which the OPCC Chairman recognized the practice of participating banks, including Bank Millennium, in an agreement aimed at jointly setting interchange fee rates charged on transactions made with Visa and Mastercard cards as restrictive of competition, and by decision of 29 December 2006 imposed a fine on Bank Millennium in the amount of PLN 12.2 million (Euros 2.8 million). Bank Millennium, along with other banks, appealed the decision. In connection with the judgment of the Supreme Court and the judgment of the Court of Appeal in Warsaw of 23 November 2020, the case is currently pending before the court of first instance - the Court of Competition and Consumer Protection. Bank Millennium has created a provision in the amount equal to the imposed penalty. 4. On 22 September 2020, Bank Millennium received decision of the Chairman of the Office for Protection of Competition and Consumers (OPCC Chairman) recognising clauses stipulating principles of currency exchange applied in the so-called anti-spread annex as abusive and prohibited the use thereof. Penalty was imposed upon Bank Millennium in the amount of PLN 10.5 million (Euros 2.4 million). Penalty amount takes account of two mitigating circumstances: cooperation with the Office for Protection of Competition and Consumers and discontinuation of the use of provisions in question. Bank Millennium was also requested, after the decision becomes final and binding, to inform consumers, by registered mail, to the effect that the said clauses were deemed to be abusive and therefore not binding upon them (without need to obtain court’s decision confirming this circumstance) and publish the decision of the case on Bank Millennium’s website. 2023 REPORT & ACCOUNTS 428 | In the decision justification delivered in writing the OPCC Chairman stated that FX rates determined by Bank Millennium were determined at Bank Millennium’s discretion (on the basis of a concept, not specified in any regulations, of average inter-bank market rate). Moreover, client had no precise knowledge on where to look for said rates since provision referred to Reuters, without precisely defining the relevant site. Provisions relating to FX rates in Bank Millennium’s tables were challenged since Bank Millennium failed to define when and how many times a day these tables were prepared and published. In justification of the decision, the OPCC Chairman also indicated that in the course of the proceeding, Bank Millennium presented various proposed solutions, which the OPCC Chairman deemed to be insufficient. Bank Millennium appealed against the said decision within statutory term. On 31 March 2022, the first instance court revoked the entire decision of the Chairman of the OPCC. On 23 May 2022, the Chairman of the OPCC filed an appeal. On 26 October 2022, the Court of Appeals changed the judgment of the court of first instance and shared the position of the Chairman of the OPCC as to the abusiveness of the provisions regarding the determination of exchange rates in the annexes concluded with foreign currency borrowers. On 21 November 2022, the Court of Appeal, at the request of Bank Millennium, suspended the execution of the judgment until the end of the cassation proceedings. On 30 January 2023, Bank Millennium filled a cassation appeal to the Supreme Court. 5. Bank Millennium is a defendant in court proceedings brought by PKN Orlen SA, in which the subject of the dispute is the amount of the interchange fee and the plaintiff demands payment of PLN 635.7 million (Euros 146.3 million). The plaintiff in this proceeding alleges that the banks acted under an agreement restricting competition on the acquiring services market by jointly setting the level of the national interchange fee in the years 2006-2014. In this case, Bank Millennium was sued jointly with another bank and card organizations. According to current estimates of the risk of losing a dispute in these matters, Bank Millennium did not create a provision. In addition, we point out that Bank Millennium participates as a side intervener in four other proceedings regarding the interchange fee. Other banks are the defendant. Plaintiffs in these cases also accuse banks of acting as part of an agreement restricting competition on the acquiring services market by jointly setting the level of the national interchange fee in the years 2008-2014. - A lawsuit brought up by shareholder of PCZ S.A. in bankruptcy (PHM, then the European Foundation for Polish-Belgian Cooperation - EFWP-B, currently called The European Foundation for Polish-Kenyan Cooperation) against Bank Millennium S.A., worth of the dispute PLN 521.9 million (Euros 120.2 million) with statutory interest from 5 April 2016 until the day of payment. The plaintiff filed the suit dated 23 October 2015 to the Regional Court in Warsaw; the suit was served to Bank Millennium on 4 April 2016. According to the plaintiff, the basis for the claim is damage to their assets, due to the actions taken by Bank Millennium and consisting in the wrong interpretation of the Agreement for working capital loan concluded between Bank Millennium and PCZ S.A., which resulted in placing the loan on demand. Bank Millennium is requesting complete dismissal of the suit, stating disagreement with the charges raised in the claim. Supporting the position of Bank Millennium, Bank Millennium’s attorney submitted a binding copy of final verdict of Appeal Court in Wrocław favourable to Bank Millennium, issued in the same legal state in the action brought by PCZ SA against Bank Millennium. On 10 May 2023, the Court of first instance announced a judgment dismissing the claim in its entirety. The verdict is not final, the plaintiff filed an appeal, the date of the appeal hearing has not yet been set. As at 31 December 2023, the total value of the subjects of the other litigations in which the Bank Millennium Group’s companies appeared as defendant, stood at PLN 5,547.3 million (Euros 1,277.1 million) (excluding the class actions described below and in note 57). In this group the most important category are cases related with FX loans mortgage portfolio. 6. On 3 December 2015 a class action was served on Bank Millennium. A group of Bank Millennium's debtors (454 borrowers party to 275 loan agreements) is represented by the Municipal Consumer Ombudsman in Olsztyn. The plaintiffs demanded payment of the amount of PLN 3.5 million (Euros 0.8 million), claiming that the clauses of the agreements, pertaining to the low down payment insurance, are unfair and thus not binding. Plaintiff extended the group in the court letter filed on 4 April 2018, therefore the claims increased from PLN 3.5 million (Euros 0.8 million) to over PLN 5 million (Euros 1.2 million). 2023 REPORT & ACCOUNTS | 429 Actual status: On 1 October 2018, the group's representative corrected the total amount of claims pursued in the proceedings and submitted a revised list of all group members, covering the total of 697 borrowers – 432 loan agreements. The value of the subject of the dispute, as updated by the claimant, is PLN 7,371,107.94 (Euros 1,696,986). By the resolution of 1 April 2020 the court established the composition of the group as per request of the plaintiff and decided to take witness evidence in writing. The hearing date was set for 18 October 2024. As at 31 December 2023, there were also 138 individual court cases regarding LTV (loans-to-value) insurance (cases in which only a claim for the reimbursement of the commission or LTV insurance fee is presented). 7. On 13 August 2020, Bank Millennium received lawsuit from the Financial Ombudsman. The Financial Ombudsman, in the lawsuit, demands that Bank Millennium and the Insurer (TU Europa) be ordered to discontinue performing unfair market practices involving, as follows: - presenting the offered loan repayment insurance as protecting interests of the insured in case when insurance structure indicates that it protects Bank Millennium’s interests; - use of clauses linking the value of insurance benefit with the amount of borrower’s debt; - use of clauses determining the amount of insurance premium without prior risk assessment (underwriting); - use of clauses excluding insurer’s liability for insurance accidents resulting from earlier causes. Furthermore, the Ombudsman requires Bank Millennium to be ordered to publish, on its website, information on use of unfair market practices. The lawsuit does not include any demand for payment, by Bank Millennium, of any specified amounts. Nonetheless, if the practice is deemed to be abusive it may constitute grounds for future claims to be filed by individual clients. The case is being examined by the court of first instance. 8. By 31 December 2023, Bank Millennium recorded the receipt of 63 lawsuits by borrowers of mortgage loans in PLN for reimbursement of benefits provided under the loan agreement. One final judgment was issued dismissing the borrowers' claim. The borrowers' allegations focus on the WIBOR ratio as an incomprehensible, unverifiable element affecting the consumer's liability, as well as the issue of insufficient information on the effects of variable interest rates provided to the consumer by the bank before the conclusion of the contract. Based on publicly available information, it can be assumed that there will be an increase in the number of lawsuits concerning mortgage loans in PLN. This phenomenon affects the entire sector of banking services. It is possible that a "new business model" will be created in the area of law firms, which consists in questioning mortgage contracts containing a variable interest rate clause based on the WIBOR reference index. On 29 June 2023, the Polish Financial Supervision Authority (KNF) announced that it had assessed the ability of the WIBOR interest rate reference index to measure the market and economic realities. The KNF stated that the WIBOR interest rate reference index is capable of measuring the market and economic realities for which it was established. According to the Commission's assessment, the WIBOR ratio responds appropriately to changes in liquidity conditions, changes in central bank rates and economic realities. 2023 REPORT & ACCOUNTS 430 | On 26 July 2023, the Polish Financial Supervision Authority (KNF) presented its position on legal and economic issues related to mortgage loan agreements in Polish currency in which the WIBOR interest rate reference index is used. This position can be used in court proceedings and can then be treated as an 'amicus curiae' opinion. The Polish Financial Supervision Authority stated that the WIBOR reference index meets all legal requirements. In the opinion of the Polish Financial Supervision Authority, there are no grounds to question the credibility and legality of WIBOR, in particular in the context of the use of this indicator in mortgage loan agreements in the Polish currency. 9. By 31 December 2023, Bank Millennium received 419 lawsuits in which the plaintiffs (both clients and companies purchasing claims), alleging violation of the information obligations provided in Art. 30 of the Consumer Credit Act, demand reimbursement of interest and other costs incurred in connection with taking out a loan (free loan sanction within the meaning of Article 45). As of 31 December 2023, 16 cases have been legally concluded, and in all these cases the Bank won the dispute. The Bank believes that the prognosis regarding the litigation chances of winning the remaining disputes are positive and therefore it has not created provisions in this respect. 10. On 22 December 2023, the Polish Financial Supervision Authority (KNF) started administrative proceedings against bank Millennium S.A. that might result in a penalty being imposed on the Bank under Article 176i(1)(4) of the Act on trading in financial instruments. At this stage of the proceedings, the amount of the potential penalty cannot be estimated. 11. On 1 October 2015, a set of entities connected to a group with debts in default to BCP amounting to Euros 170 million, resulting from a loan agreement signed in 2009 - debts already fully provisioned in the Bank's accounts -, filed against BCP, after receiving the Bank's notice for mandatory payment, a lawsuit requesting that: a) the court declares that two of the defendants are mere fiduciary owners of 340,265,616 BCP shares, since they acted pursuant to a request made by the Bank for the making of the respective purchases, and also that the court orders the cancellation of the registration of those shares in the name of those companies; b) the court declares the nullity of the financing agreement established between the plaintiffs and the Bank, due to relative simulation; c) the court sentences the Bank, in accordance with the legal regime of the mandate without representation, to become liable for the amounts due to the institution, abstaining from requesting those amounts to the plaintiffs and to refund them the cost they incurred while complying with that mandate, namely, Euros 90,483,816.83 regarding Banco Espírito Santo, S.A. (BES) and Euros 52,021,558.11 regarding Caixa Geral de Depósitos, S.A. (CGD), plus default interests; d) the amount of the lawsuit determined by the plaintiffs is Euros 317,200,644.90; e) the Bank opposed and presented a counter claim, wherein it requests the conviction, namely, of a plaintiff company in the amount of Euros 185,169,149.23 for the loans granted, plus default interests and stamp tax. The court issued a curative act and already ascertained the factual basis that are proven and that must be proven. The expertise was carried out and the expert report was submitted. There is a deadline for completing and concluding the expert report, in its final version, since the Bank presented a complaint about various aspects of the expert's report, in its first version. The expertise was carried out and the expert report submitted. In November 2022 the Bank complained about the Experts' Report: (i) they considered documents that the Court had ordered to be removed from the proceedings, which had not been done due to the Court's inertia, (ii) they considered written notes on documents, that may have been written by Mr. Gois Ferreira, and (iii) they did not consider much information that was contained in the statements, and (iv) they made errors in the calculation of interest and the amount of financing granted. In view of the experts' new reply, BCP claimed all the expertise, in March 2023. For the Court's final decision, BCP added, in June this year, thousands of documents supporting its position. 2023 REPORT & ACCOUNTS | 431 12. Resolution Fund Resolution measure of Banco Espírito Santo, S.A. On 3 August 2014, with the purpose of safeguarding the stability of the financial system, Banco de Portugal applied a resolution measure to Banco Espírito Santo, S.A. (BES) in accordance with the Article 145-C (1.b) of the Decree-law no. 298/92, of 31 December 1992, as amended (the “Banking Law”), which entailed, inter alia, the partial transfer of assets, liabilities, off-balance sheet items and assets under management into a transition bank, Novo Banco, S.A. (Novo Banco), incorporated on that date by a decision issued by Banco de Portugal. Within the scope of this process, the Resolution Fund made a capital contribution to Novo Banco amounting to Euros 4,900 million, becoming, on that date, the sole shareholder. Further, in accordance with information published on the Resolution Fund’s website, the Resolution Fund borrowed Euros 4,600 million, of which Euros 3,900 million were granted by the Portuguese State and Euros 700 million by a group of credit institutions, including the Bank. As announced on 29 December 2015, Banco de Portugal transferred to the Resolution Fund the liabilities emerging from the “eventual negative effects of future decisions regarding the resolution process that may result in liabilities or contingencies”. On 7 July 2016, the Resolution Fund declared that it would analyse and evaluate the diligences to be taken, following the publication of the report on the result of the independent evaluation, made to estimate the level of credit recovery for each category of creditors under a hypothetical scenario of a normal insolvency process of BES on 3 August 2014. In accordance with the applicable law, when the BES liquidation process is over, if it is verified that the creditors, whose credits were not transferred to Novo Banco, would take on a higher loss than the one they would hypothetically take if BES had gone into liquidation right before the application of the resolution measure, such creditors shall be entitled to receive the difference from the Resolution Fund. On 31 May 2019, the Liquidation Committee of BES presented a list of all the acknowledged and a list of the non- acknowledged creditors before the court and the subsequent terms of the proceedings. These lists detail that the total acknowledged credits, including capital, remunerative and default interest amounts to Euros 5,056,814,588, of which Euros 2,221,549,499 are common credits and Euros 2,835,265,089 are subordinated claims, and no guaranteed or privileged claims exist. Both the total number of acknowledged creditors and the total value of the acknowledged credits and their ranking will only be ultimately determined upon the definitive judicial judgment of the verification and ranking of credits to be given in the liquidation proceedings. According to the Resolution Fund's 2022 Annual Report, the Resolution Fund filed an appeal against the list of creditors with the Judicial Court of the District of Lisbon, requesting the recognition of its claims. The appeal was upheld, and the Liquidation Committee of BES filed an appeal. In 2023, the Lisbon Court of Appeal rejected the appeal filed by the Liquidation Committee of BES and, in favour of the position defended by the Resolution Fund, confirmed the decision of the Court of First Instance and the recognition, in the amount of Euros 1,242,568.9 thousand of the credits claimed by the Resolution Fund as privileged credits. In February 2023, the Liquidation Committee of BES filed a review appeal with the Supreme Court of Justice, which decision is expected during 2023. On 11 August 2023, the BES Liquidation Committee announced that this amount had been recognized and qualified as privileged by a judgment of the Supreme Court of 11 July 2023. On 10 August 2023, an order was issued in the BES liquidation proceedings, which reads as follows: "(...) On 11 July 2023, the Supreme Court of Justice dismissed the appeal filed by the Banco Espírito Santo, S.A. bankruptcy estate, recognizing that the Resolution Fund's claim is privileged in these proceedings. This means that only the Resolution Fund, as a creditor, will have its claim satisfied from the funds available to the Banco Espírito Santo, S.A. bankruptcy estate (...)". Following the resolution measure of BES, a significant number of lawsuits against the Resolution Fund was filed and is underway. According to note 20 of the Resolution Fund’s annual report of 2022, “Legal actions related to the application of resolution measures have no definitive legal precedents, which makes it impossible to use case law in its evaluation, as well as to obtain a reliable estimate of the associated contingent financial impact. (…) The Resolution Fund, supported by legal advice of the attorneys for these actions, and in light of the legal and procedural information available so far, considers that there is no evidence to cast doubt on their belief that the probability of success is higher than the probability of failure”. 2023 REPORT & ACCOUNTS 432 | According to note 22 of the Resolution Fund’s annual report of 2022, "In addition to the Portuguese courts, it is important to take into account the litigation of Novo Banco, S.A., in other jurisdictions, being noteworthy, for its materiality and respective procedural stage, the litigation in the Spanish jurisdiction. Regarding litigation in the Spanish jurisdiction, during the years 2018 to 2022, twelve (decisions) have become final and unappealable condemning Novo Banco, Spanish branch, as well as four sentences in relation to which due compensation has been requested from the Resolution Fund”. On 31 March 2017, Banco de Portugal communicated the sale of Novo Banco, where it states the following: "Banco de Portugal today selected Lone Star to complete the sale of Novo Banco. The Resolution Fund has consequently signed the contractual documents of the transaction. Under the terms of the agreement, Lone Star will inject a total of Euros 1,000 million in Novo Banco, of which Euros 750 million at completion and Euros 250 million within a period of up to 3 years. Through the capital injection, Lone Star will hold 75% of the share capital of Novo Banco and the Resolution Fund will maintain 25% of the share capital”. The terms agreed also included a Contingent Capital Agreement (CCA), under which the Resolution Fund, as a shareholder, undertakes to make capital injections if certain cumulative conditions are met related to the performance of a specific portfolio of assets and to the capital ratios of Novo Banco going forward. If these conditions are met, the Resolution Fund may be called upon to make a payment to Novo Banco for the lesser of the accumulated losses in the covered assets and the amount necessary to restore the capital ratios at the agreed levels. Any capital injections to be carried out pursuant to this contingent mechanism are limited to an absolute cap. The terms agreed also provide for mechanisms to safeguard the interests of the Resolution Fund, to align incentives as well as monitoring mechanisms, notwithstanding the limitations arising from State Aid rules. On 18 October 2017, following the resolution of the Council of Ministers no. 151-A/2017 of 2 October 2017, Banco de Portugal communicated the conclusion of the sale of Novo Banco to Lone Star, with an injection by the new shareholder of Euros 750 million, followed by a further capital increase of Euros 250 million by the end of 2017. Upon completion of the transaction, the status of Novo Banco as a bridge institution ceased, fully complying with the purposes of the resolution of BES. On 26 February 2018, the European Commission published the non-confidential version of its decision regarding the approval of State aid underlying Novo Banco’s sale process. This statement identifies the three support measures by the Resolution Fund and the Portuguese State that are part of the sale agreement associated with a total gross book value of around Euros [10-20] billion(1) that revealed significant uncertainties regarding adequacy in provisioning(2): (i) Contingent Capital Agreement (CCA) which allows Lone Star to reclaim, from the Resolution Fund, funding costs, realised losses and provisions related to an ex-ante agreed portfolio of existing loan stock, up to a maximum of Euros 3.89 billion, subject to a capital ratio trigger (CET1 below 8%-13%) as well as to some additional conditions(1)(2)(3); (ii) underwriting by the Resolution Fund of a Tier 2 instrument to be issued by Novo Banco up to the amount necessary (but no more than Euros 400 million). The amount that can be reclaimed by the Resolution Fund under the CCA is subject to the cap of Euros 3.89 billion(2); (iii) in case the Supervisory Review and Evaluation Process (“SREP”) total capital ratio of Novo Banco falls below the SREP total capital requirement, the Portuguese State will provide additional capital in certain conditions and through different instruments(2). According to the audit report on the management of Novo Banco conducted by the Court of Auditors and released on 12 July 2022, "the risk of triggering the additional capital mechanism (capital backstop), up to Euros 1.6 billion, provided for in the commitments made by the Portuguese State to ensure the viability of NB, exists”. According to an Investor Presentation dated January 2024, from Novo Banco’s, Novo Banco still has Euros 485 million under the MCC in addition to the Euros 209 million included in the capital call for 2021. The mechanism is in place until December 2025, date that can be extended, under certain conditions, by one additional year. (1) Exact value not disclosed by the European Commission for confidentiality reasons (2) As referred to in the respective European Commission Decision (3) According to 2018 Novo Banco’s earnings institutional presentation, the “minimum capital condition” is (i) CET1 or Tier 1 < CET1 or Tier 1 SREP requirement plus a buffer for the first three years (2017-2019); (ii) CET1 < 12% 2023 REPORT & ACCOUNTS | 433 According to a statement issued by the Resolution Fund on 13 February 2023, "the Ministry of Finance has disclosed that the European Commission intends to consider the restructuring process of Novo Banco as completed. The information disclosed today confirms the successful restructuring of Novo Banco, resulting from the combined execution of the restructuring plan agreed in 2017, under the sale transaction conducted by Banco de Portugal, and the sale agreements, namely the CCA, under which the Resolution Fund transferred to Novo Banco Euros 485 million, less than the maximum amount set in the contract (Euros 3,890 million). The completion of the restructuring of Novo Banco, is also another indicator that Novo Banco should not need to request any further payment to the Resolution Fund under the CCA, without prejudice to the ongoing litigation or that still may occur regarding the amounts already requested by Novo Banco in relation to past years and that the Resolution Fund considers that are not due. On the same day, Banco de Portugal issued the following statement "The conclusion of the Novo Banco restructuring process also results in the end of the backstop mechanism, which provided for the possibility, which was always considered remote, of the Portuguese State providing extraordinary support to Novo Banco in extreme scenarios. This mechanism protected Novo Banco and the national financial system from more adverse scenarios, which did not materialize. With the end of the backstop, the financial risk for the Portuguese State is eliminated". According to the 2018 Resolution Fund’s annual report, the Resolution Fund and Novo Banco have agreed that a Verification Agent - an independent entity which is essentially responsible for clarifying any differences that may exist between Novo Banco and the Resolution Fund regarding the set of calculations inherent to the CCA or regarding the practical application of the principles stipulated in the contract - is in charge of confirming that the perimeter of the mechanism is correct and that the balance sheet values of Novo Banco are being correctly reflected in the mechanism, as well as verifying the underlying set of calculations, namely by confirming the correct calculation of losses and the reference value of the assets. According to the 2022 Resolution Fund’s annual report, the Resolution Fund follows the work carried out by the Verification Agent, while specific analyses are being requested. The Resolution Fund disclosed on 17 June 2019 a set of clarifications related to the payment due in 2019 under the CCA with Novo Banco, namely: - For payments from the Resolution Fund to be made (limited to a maximum of Euros 3,890 million over the lifetime of the mechanism), losses on the assets under the contingent mechanism should be incurred and the capital ratios of Novo Banco should stand below the agreed reference thresholds; - The payment to be made by the Resolution Fund corresponds to the lower of the accumulated losses on the assets covered and the amount necessary to restore the capital ratios above the minimum reference threshold; - The reference capital ratios are, in 2017, 2018 and 2019, linked to the regulatory requirements applicable to Novo Banco (CET1 ratio of 11.25% and Tier 1 ratio of 12.75%), but, as from 2020, the reference ratio will correspond to a CET1 ratio of 12%; - The initial reference value of the portfolio comprising the CCA was, as of 30 June 2016, Euros 7,838 million (book value of the associated assets, net of impairments); In a statement dated 2 February 2024, the Resolution Fund clarifies that it has been informed of the Supreme Court's ruling on the appeal filed by Novo Banco, following the decision of the Lisbon Court of Appeal, which rejected the petition for annulment of the decision of the Court of Arbitration, issued in October 2021, relating to the first arbitration between the Resolution Fund and Novo Banco, which began in 2020. This ruling definitively confirms the validity and correctness of the position taken by the Resolution Fund in 2019, when it opposed being charged, through the CCM, for the impact of Novo Banco's intention to waive the transitional regime related to the implementation of IFRS 9. The Resolution Fund's action in this process resulted in a saving of its resources of Euros 169 million. Regarding the intervention of the Resolution Fund concerning the transitional regime of the implementation of the dynamic component of IFRS 9, Novo Banco estimates a positive impact on its own funds in the amount of Euros 171 million (which implies a reduction in the capital requirements that Novo Banco intended to pass on to the CCM in the amount of Euros 161.6 million). Accordingly, the Resolution Fund has an arbitration proceeding underway, also under the aegis of the International Chamber of Commerce, with a view to settling the difference between the parties. This process is in progress, and it is estimated that an award will be rendered in the first half of 2024. 2023 REPORT & ACCOUNTS 434 | According to a statement by the Resolution Fund on 3 September 2020, following the payment made in May 2019 by the Resolution Fund to Novo Banco in compliance with the CCA, a special audit determined by the Government was carried out. The information was presented by the independent entity that carried out the special audit, showed that Novo Banco has been operating with a strong influence of the vast legacy of non-productive assets, originated in BES, which resulted in impairment charges and provisions, but have also contributed to rendering Novo Banco’s internal procedures more robust. Regarding the exercise of the powers of the Resolution Fund under the CCA, the audit results reflect the adequacy of the principles and the adopted criteria. According to Resolution Fund’s annual report of 2022, Novo Banco submitted to the International Chamber of Commerce a request for arbitration to have recognized the right to receive an aggregate amount of Euros 165,441.9 thousand (divestment of Novo Banco's activity in Spain in the amount of Euros 147,441.9 thousand and valuation differences regarding a set of assets held by Novo Banco in the amount of Euros 18,000 thousand) which the Resolution Fund considered, and considers, not to merit the coverage of the CCM. On 3 May 2021, following the request of the Portuguese parliament in October 2020 to review the operations and management of Novo Banco that led to the need to transfer funds from the Resolution Fund to Novo Banco, the Resolution Fund announced that the audit report conducted by Tribunal de Contas (“Court of Auditors”) was released. The Court of Auditors concluded that the public financing of Novo Banco through the CCA contributed to the stability of the financial system, particularly as it avoided the bank’s liquidation and reduced systemic risk. According to the Resolution Fund, the audit does not identify any impediment to the fulfilment of commitments and contracts arising from BES’s resolution process, initiated in August 2014. On 9 September 2020, BCP informed that it has decided not to continue with the legal proceeding before the General Court of the European Union with a view to partially annul the European Commission’s decision regarding its approval of the CCA of Novo Banco. According to Novo Banco’s 2023 annual report (note 28), Novo Banco adhered to the Special Regime applicable to Deferred Tax Assets under Law No. 61/2014, of 26 August (REAID), according to which, the deferred tax assets recorded until 31 December 2015 can be converted into tax credits when the taxable entity reports an annual net loss, in accordance to the proportion of the amount of the said net loss to total equity at the individual company level, A special reserve was established with an amount identical to the tax credit approved, increased by 10%. The conversion rights are securities that entitle the State to require Novo Banco to increase its share capital by incorporating the amount of the special reserve and consequently issuing and delivering free of charge ordinary shares. The shareholders have the right to acquire the conversion rights attributed to the Portuguese State. According to the Resolution Fund’s 2022 annual report, under the terms of the sale of Novo Banco, the 75% of the share capital of Novo Banco held by Nani Holdings is not affected by the dilution associated with the REAID. On 17 December 2021, Novo Banco, carried out a capital increase in the amount of Euros 154,907.3 thousand, through the conversion of the rights that had been attributed to the State due to the conversion of the deferred tax assets of Novo Banco, into tax credits, with reference to the 2015 tax period, under the REAID. As of that date, the State became a shareholder of Novo Banco, having been attributed a participation corresponding to 1.56% of the share capital. Later, on 4 November 2022, Novo Banco made a further capital increase of Euros 249,753 thousand conferred the State an additional stake of 4.13% in Novo Banco. In April 2023, a capital increase of Euros 263,183 thousand was carried out through a rights conversion related to 2018 and 2019, which gave the State an additional stake of 6.27% in Novo Banco. With reference to the 2020 financial year, conversion rights representing 3.64% of the capital were issued which will only dilute, in accordance with the sale contract, the Resolution Fund's participation if the shareholders do not exercise their potestative right to acquire the conversion rights. According to Novo Banco's 2023 annual report, Lone Star owns 75% of Novo Banco, the Resolution Fund 13%, and the Portuguese State 12%. 2023 REPORT & ACCOUNTS | 435 Resolution measure of Banif – Banco Internacional do Funchal, S.A. On 19 December 2015, the Board of Directors of Banco de Portugal announced that Banif “was failing or likely to fail” and started an urgent resolution process of the institution through the partial or total sale of its activity, which was completed on 20 December 2015 through the sale to Banco Santander Totta S.A. (BST) of the rights and obligations of Banif, formed by the assets, liabilities, off-balance sheet items and assets under management. The largest portion of the assets that were not sold, were transferred to an asset management vehicle denominated Oitante, S.A. (Oitante) specifically created for that purpose, having the Resolution Fund as the sole shareholder. For that matter, Oitante issued bonds representing debt in the amount of Euros 746 million. The Resolution Fund provided a guarantee and the Portuguese State a counter-guarantee. The operation also involved State aid, of which Euros 489 million were provided by the Resolution Fund, which was funded by a loan granted by the State. On 4 July 2022, Oitante - 100% owned by the Resolution Fund - completed the process of repayment of the bonds issued in connection with the resolution of BANIF. Oitante's debt, which initially amounted to Euros 746 million, was thus fully repaid. With the repayment of the debt, the Resolution Fund's responsibility as guarantor also ceases, as well as the Portuguese State's responsibility as provider of a counter-guarantee. According to the Resolution Fund (press release dated 29 December 2023), Oitante has already paid a total of Euros 78.8 million to the Resolution Fund, of which Euros 63.8 million will be paid in 2023. The amounts received and to be received by the Resolution Fund, given its 100% participation in Oitante's capital, will contribute to reducing the losses of Euro 489 million incurred by this Fund in the resolution of BANIF and will be used to repay the debts of the Resolution Fund, namely to the State. On 16 January 2023, the Liquidation Committee of Banif announced a list of all the acknowledged and a list of the non- acknowledged creditors. According to the Resolution Fund’s 2022 annual report, the Resolution Fund holds a claim on Banif of Euros 489 million, which has a higher claim ranking provided for in article 166-A of the RGICSF. Under the judicial liquidation process of Banif, which was initiated following the resolution, the independent evaluator estimates that the level of recovery of the financial support made available by the Resolution Fund, as having a higher ranking at the end of the liquidation, is expected to be 7.6%. On 12 January 2021, Banco de Portugal was informed that the Administrative and Fiscal Court of Funchal dismissed a lawsuit involving several disputes associated to Banif’s resolution measures applied by Banco de Portugal. In its decision, the Court determined the legality and maintenance of Banco de Portugal’s measures. Liabilities and financing of the Resolution Fund Pursuant to the resolution measures applied to BES and Banif, the Resolution Fund incurred on loans and assumed other responsibilities and contingent liabilities resulting from: - The State loans, on 31 December 2021, included the amounts made available (i) in 2014 for the financing of the resolution measure applied to BES (Euros 3,900 million); (ii) to finance the absorption of Banif's losses (Euros 353 million); (iii) under the framework agreement concluded with the State in October 2017 for the financing of the measures under the CCA (Euros 430 million plus Euros 850 million of additional funding requested in 2019 and Euros 850 million made available in 2020); - Other funding granted: • in 2014 by the institutions participating in the Resolution Fund in the amount of Euros 700 million, in which the Bank participates, within the scope of BES resolution measure; • in 2021 by seven domestic credit institutions, including BCP, to finance payments due under the CCA up to a maximum of Euros 429 million; 2023 REPORT & ACCOUNTS 436 | - The underwriting by the Resolution Fund of a Tier 2 instrument to be issued by Novo Banco up to the amount of Euros 400 million did not take place as the instruments were placed with third party investors as disclosed by Novo Banco on 29 July 2018; - Effects of the application of the principle that no creditor of the credit institution under resolution may assume a loss greater than the one it would take if that institution did not go into liquidation; - Negative effects resulting from the resolution process that result in additional liabilities or contingencies for Novo Banco, which must be neutralized by the Resolution Fund; - Legal proceedings filed against the Resolution Fund; - Guarantee granted to secure the bonds issued by Oitante, totally reimbursed, as described above. - CCA allows Lone Star to claim, from the Resolution Fund, funding costs, realised losses and provisions related to the aforementioned ex-ante portfolio of existing loan stock agreed upon the sale process to Lone Star up to Euros 3.89 billion under the aforementioned conditions, among which a reduction of Novo Banco’s CET1 below 8%-13%; - In case the Supervisory Review and Evaluation Process (SREP) total capital ratio of Novo Banco falls below the SREP total capital requirement, the State will provide additional capital in certain conditions and through different instruments as referred to in the respective European Commission Decision. According to Resolution Fund’s annual report of 2022, contingent liabilities from the CCA are limited to a maximum aggregate amount of Euros 3,890 million and that the aggregate amount of this contingent liability, which corresponds to the difference between that maximum amount and the amounts already paid by the Resolution Fund, amounts to Euros 485 million. The expectation of the Resolution Fund is that, except for what may eventually result from the pending arbitration disputes with Novo Banco, no further payments will occur under the CCA. On the other hand, the value of payments already made may be compensated, under the terms of the contracts, by the eventual recovery of credits that may occur, to which the value of the shareholding of the Resolution Fund in Novo Banco must be added. According to note 22 of the Resolution Fund’s 2022 annual report, the Resolution Fund considers that, to date, there are no elements that allow a reliable estimate of the potential financial effect of these potential liabilities. By a public statement on 28 September 2016, the Resolution Fund and the Ministry of Finance communicated the agreement based on a review of the terms of the Euros 3,900 million loan originally granted by the State to the Resolution Fund in August 2014 to finance the resolution measure applied to BES. According to the Resolution Fund, the extension of the maturity of the loan was intended to ensure the ability of the Resolution Fund to meet its obligations through its regular revenues, regardless of the contingencies to which the Resolution Fund is exposed. On the same day, the Office of the Minister of Finance also announced that increases in the liabilities arising from the materialization of future contingencies will determine the maturity adjustment of State and bank loans to the Resolution Fund, required from to maintain the contributory effort required from the banking sector at prevailing levels at that time. According to the statement of the Resolution Fund of 21 March 2017: - “The conditions of the loans obtained from the Fund to finance the resolution measures applied to Banco Espírito Santo, S.A. and to Banif – Banco Internacional do Funchal, S.A. were changed. These loans amount to Euros 4,953 million, of which Euros 4,253 million were granted by the Portuguese State and Euros 700 million were granted by a group of banks"; 2023 REPORT & ACCOUNTS | 437 - “Those loans are now due in December 2046, without prejudice to the possibility of early repayment based on the use of the Resolution Fund's revenues. The revision of the loan’s terms aimed to ensure the sustainability and financial balance of the Resolution Fund. The terms allow the Resolution Fund to fully meet its liabilities based on regular revenues and without the need for special contributions or any other type of extraordinary contributions". According to the audit report on the management of Novo Banco conducted by the Court of Auditors and released on 12 July 2022, "the repayment of the Euros 2,130 million loans granted by the Portuguese State to the Resolution Fund will not end in 2046, as expected, rather in 2056 (without payments under the CCA after 2021) or in 2059 (with the use of the CCA cap). (...) In other, more pessimistic scenarios, these loans will still be being repaid in 2062”. On 2 October 2017, by Resolution no. 151-A/2017, of the Council of Ministers of the Portuguese State, as the ultimate guarantor of financial stability, was authorised to enter into a framework agreement with the Resolution Fund, to make available the necessary financial resources to the Resolution Fund, if and when the State deemed necessary, to satisfy any contractual obligations that may arise from the sale of the 75% stake in Novo Banco. The above-mentioned resolution further set out that the framework agreement should be subject to a time period that is consistent with the undertakings of the Resolution Fund and should preserve the Resolution Fund’s capacity to satisfy said obligations in due time. On 31 December 2022, the Resolution Fund's own resources had a negative equity of Euros 6,974.7 million, as opposed to Euros 7,207.6 million at the end of 2021, according to the latest 2022 annual report of the Resolution Fund. To repay the loans obtained and to meet other liabilities that it may take on, the Resolution Fund receives proceeds from the initial and regular contributions from the participating institutions (including the Bank) and from the contribution over the banking sector (created under Law no. 55-A/2010). It is also provided for the possibility of the member of the Government responsible for the area of Finance to determine, by ordinance that the participating institutions make special contributions, in the situations provided for in the applicable legislation, particularly if the Resolution Fund does not have resources to satisfy its obligations. Pursuant to Decree-Law no. 24/2013 of 19 February, which establishes the method for determining the initial, periodic and special contributions to the Resolution Fund, provided for in the Banking Law, the Bank has been paying, since 2013, its mandatory contributions set out in the aforementioned decree-law. On 3 November 2015, the Banco de Portugal issued Circular Letter no. 085/2015/DES, under which it is clarified that the periodic contribution to the Resolution Fund should be recognised as an expense at the time of the occurrence of the event which creates the obligation to pay the contribution, i.e. on the last day of April of each year, as stipulated in Article 9 of the referred Decree-Law no. 24/2013, of 19 February, thus the Bank is recognising as an expense the contribution to the Resolution Fund in the year in which it becomes due. Decree-Law no. 24/2013 of 19 February further sets out that Banco de Portugal has the authority to determine, by way of instruction (“instrução”), the applicable yearly rate based on objective incidence of periodic contributions. The instruction of Banco de Portugal no. 28/2023, published on 15 December 2023, set the base rate for 2024 for the determination of periodic contributions to the Resolution Fund at 0.032% (0.029% in 2023). The Resolution Fund issued, on 15 November 2015, a public statement declaring: "...it is further clarified that it is not expected that the Resolution Fund will propose the setting up of a special contribution to finance the resolution measure applied to BES. Therefore, the potential collection of a special contribution appears to be unlikely". In 2015, following the establishment of the Single Resolution Fund (SRF), the Group made an initial contribution in the amount of Euros 31,364 thousand. In accordance with the Intergovernmental Agreement on the Transfer and Mutualisation of Contributions to the SRF, this amount was not transferred to the SRF but was used instead to partially cover for the disbursements made by the RF in respect of resolution measures prior to the date of application of this Agreement. This amount will have to be reinstated over a period of 8 years (started in 2016) through the periodic contributions to the SRF. The Single Resolution Fund does not cover undergoing situations with the National Resolution Fund as at 31 December 2015. The total amount of the contribution attributable to the Group of 2023 was Euros 22,861 thousand, of which the Group delivered Euros 17,729 thousand and the remaining was constituted as irrevocable payment commitment. 2023 REPORT & ACCOUNTS 438 | In 2023, the Group made regular contributions to the Portuguese Resolution Fund in the amount of Euros 9,491 thousand. The amount related to the contribution on the banking sector in Portugal, registered in this period was Euros 44,807 thousand. These contributions were recognized as a cost in 2023, in accordance with IFRIC no. 21 – Levies. It is not possible, on this date, to assess the effects on the Resolution Fund due to: (i) the sale of the shareholding in Novo Banco in accordance with the communication of Banco de Portugal dated 18 October 2017 and the information provided by the European Commission on this subject under the terms described above, including the effects of the application of the Contingent Capital Agreement and the Special Regime applicable to Deferred Tax Assets; (ii) the application of the principle that no creditor of the credit institution under resolution may take on a loss greater than the one it would take if that institution did not go into liquidation; (iii) additional liabilities or contingencies for Novo Banco which need to be neutralized by the Resolution Fund; and, (iv) legal proceedings against the Resolution Fund. According to Article 5 (e) of the Regulation of the Resolution Fund, approved by the Ministerial Order no. 420/2012, of 21 December, the Resolution Fund may submit to the member of the Government responsible for finance a proposal with respect to the determination of amounts, time limits, payment methods, and any other terms related to the special contributions to be made by the institutions participating in the Resolution Fund. According to public communications from both the Resolution Fund and from the Government, there is no indication that any such special contributions are foreseen. According to the Resolution Fund’s 2022 annual report, under note 8, "the Resolution Fund is not obliged to present positive equity. In case of insufficient resources, the Resolution Fund may receive special contributions, as determined by the member of the Government responsible for finance, in accordance with article 153-I of the Banking Act, although no such contributions are expected. The Resolution Fund may also, exceptionally, obtain financial support from the State, namely through loans or guarantees, as set out in article 153-J of the same regime". To meet a payment from the Resolution Fund to Novo Banco, as per to Resolution no. 63-A/2021 of 27 May 2021 of the Council of Ministers and Order from the Minister of State and Finance, of 31 May 2021 - intended to provide the Resolution Fund with the financial resources necessary to meet any obligations arising from the Contingent Capitalization Agreement in the years 2021 and 2022 – rendering a new loan from the State to the Resolution Fund, a number of national financial institutions offered to finance the Resolution Fund, increasing up to Euros 475 million the direct financing of banks to the Resolution Fund and waiving a Portuguese State loan to the Resolution Fund. According to the Resolution Fund’s 2022 annual report from the maximum amount of Euros 475 million. The Resolution Fund used Euros 429 million, which corresponds to the payment made to Novo Banco in 2021. The loan matures in 2046 and bears interest at a rate corresponding to the sovereign cost of funding for the period between the contract date (31 May 2021) and 31 December 2026, plus a margin of 15 b.p. The interest rate will be reviewed on 31 December 2026 and, after that, every five-years. The payment obligations arising from this loan benefit from a pari passu treatment with the payment obligations of the loans entered into with the Portuguese State on 7 August 2014 and 31 December 2015 and with the Portuguese credit institutions on 28 August 2014. The funding costs of the Resolution Fund (from the State and from banks) will continue to be exclusively borne by periodic revenues, corresponding to the contributions paid by the banking sector. 13. Banco Comercial Português, S.A., Banco ActivoBank S.A. and Banco de Investimento Imobiliário, S.A. (company merged into Banco Comercial Português, S.A.) initiated an administrative proceeding to contest the resolution adopted by Bank of Portugal on 31 March 2017 to sell Novo Banco (NB), and also, as a precaution, the deliberation adopted by the Resolution Fund on the same date, as they foresee the sale of NB by resorting to a contingent capitalization agreement under which the Resolution Fund commits to inject capital in Novo Banco up to Euros 3,9 billion, under determined circumstances. In the proceedings, the claimants request the declaration of nullity or annulment of those acts. 2023 REPORT & ACCOUNTS | 439 The proceedings were filed based on the information contained in the Communication from Bank of Portugal dated 31 March 2017, of which the claimants were not notified. The proceedings were filed in court on 4 September 2017. Bank of Portugal and the Resolution Fund presented their arguments and, only very recently, Nani Holdings SGPS, S.A. did the same since, by delay of the court, this company was only very recently notified to act as a party in the proceedings. In addition to opposing to it, the defendants invoke three objections (i) the illegitimacy of the claimants, (ii) the argument that the act performed by Bank of Portugal cannot be challenged and (iii) the material incompetence of the court. The opponent party invoked the issue of passive illegitimacy since Novo Banco was not notified as an opponent party. The claimants replied to the arguments presented by the defendants and to the arguments presented by the opponent party. After the presentation of the arguments, Bank of Portugal attached to the proceedings what it called an evidence process (allegedly in compliance with the law) but most of the documents delivered were truncated in such a way that neither the court nor the claimants are able to obtain adequate knowledge thereof. That issue was already raised in the proceedings (requesting the court to order Bank of Portugal to deliver a true evidence process) but no decision thereon has been made yet. Currently, the proceedings are prepared for confirmation of the decision accepting the formalities of the right of action (with the making of a decision on the specific objections invoked). In case the judge considers that Novo Banco is an opponent party, the judge must start by issuing a pre-confirmation in order to request the claimants to identify it. Afterwards, that Bank will be notified to present its opposition arguments. The case was sent to the judge on 23 September 2019 and the Bank is awaiting a decision. BCP added legal opinions to the records (Professors Mário Aroso de Almeida and Manuel Fontaine de Campos). 14. Following the restructuring process agreed with the Directorate-General for Competition (DGComp) and the Portuguese State, Group Banco Comercial Português implemented in 2014 a salary adjustment process for employees, with a temporary effect. Additionally, it was agreed between the Bank and the Unions that, in the years after the State intervention and if there are distributable profits, the Board of Directors and the Executive Committee would submit for approval of the Shareholders’ General Meeting a proposal of distribution of profits to the employees, which allows the distribution of an accumulated total global amount at least equal to the total amount that was not received over the temporary term of the salary adjustment, as described in the clause no. 151-E of BCP’s Collective Labour Agreement, effective between 2014 and 2017. At the General Meeting held on 24 May 2023, the proposal submitted by the Board of Directors, the application of profits relating to the financial year of 2022 was approved, which included an extraordinary distribution to the employees to Euros 9,972,000, with the concrete determination of the amount to be attributed to each employee to be fixed by the Executive Committee to employees who, having not already been fully compensated with the results distributed in 2019 and 2020 and 2022, remain in office on the date of payment of the remuneration of June 2023. This extraordinary distribution of results, together with those of 2019, 2020 and 2022 allowed the distribution to the employees in office in June 2023 of an accumulated amount equal to the total amount not received during the period of temporary salary adjustment indicated in the previous paragraph. 15. The Bank was subject to tax inspections for the years up to 2019. As a result of the inspections in question, corrections were made by the tax authorities, arising from the different interpretation of some tax rules. The main impact of these corrections occurred regarding IRC, including in terms of the tax loss carry forwards and, in the case of indirect tax, in the calculation of the Value-Added Tax (VAT) deduction pro rata used for the purpose of determining the amount of deductible VAT and at the Stamp Duty level. Most of additional liquidations/corrections made by the tax administration were the object of contestation by administrative and/or judicial means. The Bank recorded provisions, current tax liabilities or deferred tax liabilities at the amount considered sufficient to offset the tax or tax loss carry forwards, as well as the contingencies related to the fiscal years not yet reviewed by the tax administration. 2023 REPORT & ACCOUNTS 440 | 57. Provisions for legal risk related to foreign currency-indexed mortgage loans in Bank Millennium (Poland) 1. Court claims and current provisions for legal risk On 31 December 2023, Bank Millennium had 20,914 loan agreements and additionally 1,780 loan agreements from former Euro Bank under individual ongoing litigations (excluding claims submitted by Bank Millennium against clients i.e. debt collection cases) concerning indexation clauses of FX mortgage loans submitted to the courts (64% loans agreements before the courts of first instance and 36% loans agreements before the courts of second instance) with the total value of claims filed by the plaintiffs amounting to PLN 4,130.6 million (Euros 950.9 million) and CHF 281.5 million (Euros 302.8 million) [(Bank Millennium portfolio: PLN 3,780.2 million (Euros 870.3 million) and CHF 272.6 million (Euros 293.2 million) and former Euro Bank portfolio: PLN 350.4 million (Euros 80.7 million) and CHF 8.8 million (Euros 9.5 million)]. Out of 20,914 Bank Millennium's loan agreements in ongoing individual cases 240 are also part of class action. From the total number of individual litigations against the Bank approximately 2,260 or 11% were submitted by borrowers that had already naturally or early fully repaid the loan or were converted to polish zloty at the moment of submission and had not a settlement agreement and approximately another 730 cases correspond to loans that were fully repaid since then (as court proceedings are lengthy). The claims formulated by the clients in individual proceedings primarily concern the declaration of invalidity of the contract and payment for reimbursement of paid principal and interest instalments as undue performance, due to the abusive nature of indexation clauses, or maintenance of the agreement in PLN with interest rate indexed to CHF Libor. In addition, Bank Millennium is a party to the group proceedings (class action) subject matter of which is to determine Bank Millennium's liability towards the group members based on unjust enrichment (undue benefit) ground in connection with the foreign currency mortgage loans concluded. It is not a payment dispute. The judgment in these proceedings will not directly grant any amounts to the group members. The number of credit agreements covered by these proceedings is 3,273. Out of 3,273 loan agreements in class action 240 are also part of ongoing individual cases, 858 concluded settlements and 7 received final verdicts (invalidation of loan agreement). On 24 May 2022 the court issued a judgment on the merits, dismissing the claim in full. On 13 December 2022 the claimant filed an appeal against the judgment of 24 May 2022. On 20 November 2023 the claimant requested granting interim measures to secure the claims against the Bank. In a decision of 27 December 2023, the request for granting interim measures was dismissed. The pushy advertising campaign observed in the public domain affects the number of court disputes. Until the end of 2019, 1,985 individual claims were filed against Bank Millennium (in addition, 236 against former Euro Bank), in 2020 the number increased by 3,005 (265), in 2021 the number increased by 6,159 (423), in 2022 the number increased by 5,755 (408), while in 2023 the number increased by 6,871 (647). Based on ZBP (the Polish Banking Association) data gathered from all banks having FX mortgage loans, vast majority of disputes were finally resolved against the banks. As far as Bank Millennium (including the former Euro Bank portfolio) is concerned, from 2015 until the end of 2023, 3,341 cases were finally resolved (3,263 in claims submitted by clients against Bank Millennium and 78 in claims submitted by Bank Millennium against clients i.e. debt collection cases) out of which 925 were settlements, 56 were remissions, 64 rulings were favourable for Bank Millennium and 2,296 were unfavourable including both invalidation of loan agreements as well as conversions into PLN+LIBOR. Bank Millennium files appeals against negative judgements of the courts of 1st instance declaring invalidation of loan agreements. Simultaneously Bank Millennium undertakes proper legal actions in order to secure repayment of initially disbursed capital of the loan. 2023 REPORT & ACCOUNTS | 441 The outstanding gross balance of the loan agreements under individual court cases and class action against Bank Millennium (including the former Euro Bank portfolio) on 31 December 2023 was PLN 6,264 million (Euros 1,442.1 million) [of which the outstanding amount of the loan agreements under the class action proceeding was PLN 763 million (Euros 175.7 million)]. If all Bank Millennium’s originated loan agreements currently under individual and class action court proceedings would be declared invalid without any compensation for the use of capital, the pre-tax cost could reach PLN 6,955 million (Euros 1,601.2 million), excluding potential amounts connected with interest. Overall losses would be higher or lower depending on the final court jurisprudence in this regard. In the 12 months of 2023, Bank Millennium created PLN 2,828.1 million (Euros 623 million) provisions for Bank Millennium originated portfolio and PLN 237.3 million (Euros 52.2 million) for former Euro Bank originated portfolio. The balance sheet value of provisions for Bank Millennium's portfolio at the end of December 2023 was at the level of PLN 7,268.8 million (Euros 1,673.4 million), and PLN 603 million (Euros 138.8 million) for former Euro Bank originated portfolio. The methodology developed by Bank Millennium of calculating provisions for legal risk involved with indexed loans is based on the following main parameters: (1) the number of ongoing cases (including class action agreements) and potential future lawsuits that will arise within the specified (three-year) time horizon. As regards the number of future court cases, Bank Millennium monitors customer behaviours, follows market trends and expert comments, which resulted in the adjustment of previous assumptions. As a result, in the methodology of calculating provisions for legal risk in the case of active loans (loans with an outstanding balance as at the date of filing the lawsuit), Bank Millennium increased the estimated percentage of customers covered by methodology in this group of clients to 83% of the total number of currently active loans compared to 77% at the end of 3rd quarter of 2023. Regarding loans already fully repaid or converted to polish zloty, Bank Millennium attributes a much lower probability of becoming the subject of a court case based on statistical analysis. In particular: a) Bank Millennium assesses the risk connected with the settlements reached with the clients in the past as negligible b) from the group of loans that have been repaid (naturally or early or converted into polish zloty loan) and were not subject of a settlement agreement, Bank Millennium assumes that circa 16% sued or will decide to sue the Bank in the future; (2) the currently estimated amount of Bank Millennium's potential loss in the event of a specific court judgment; (3) the probability of obtaining a specific court judgment calculated on the basis of statistics of judgments in cases where Bank Millennium is a party and legal opinions obtained; (4) Bank Millennium does not include in the methodology of calculating an element related to the potential claim for remuneration for the client in connection with the repayments made by him or her; (5) estimates involved with amicable settlements with clients, concluded in court or out of court: a. Bank Millennium assumes 12% probability of success of reaching a settlement within negotiations made with clients during court proceedings; b. negotiations in court or out of court are conducted on a case-by-case basis and can be stopped at any time by Bank Millennium; c. due to significant negotiation efforts already made in the past, the probability of success in these negotiations in the future is decreasing, and at the same time most customers have already been contacted by or contacted the Bank regarding the possible conversion of loans into PLN, so at the moment the Bank adopts a conservative approach when taking into account the potential impact of this factor. 2023 REPORT & ACCOUNTS 442 | Bank Millennium is open to negotiate case by case favourable conditions for early repayment or conversion of loans to PLN. As a result of these negotiations, the number of active FX mortgage loans originated by Bank Millennium decreased by 21,428: 1,363 in 2020; 8,450 in 2021; 7,943 in 2022 and 3,672 in 2023. As of the end of 2023, the Bank had 32,425 active FX mortgage loans. Cost incurred in conjunctions with these negotiations totalled PLN 1,340.1 million (Euros 295.2 million): PLN 44.5 million (Euros 9.8 million) in 2020; PLN 364.6 million (Euros 80.3 million) in 2021; PLN 515.2 million (Euros 113.5 million) in 2022 and PLN 415.8 million (Euros 91.6 million) in 2023 and is presented mainly in ‘Result on exchange differences’ and also in ‘Result on modification’ in the profit and loss statement. Legal risk from former Euro Bank portfolio is fully covered by Indemnity Agreement with Société Générale. Bank Millennium analysed the sensitivity of the methodology for calculating provisions, for which a change in the parameters would affect the value of the estimated loss to the legal risk of litigation: Parameter Scenario Impact on the loss Change in the assumed number of court cases In addition to above assumed numbers, 1,000 new customers file a lawsuit against the Bank PLN 167 million (Euros 36.8 million) Change of estimated losses for each variant of judgment Change of losses for each judgment variant by 1 p.p PLN 75 million (Euros 16.5 million) Change in probability of success in negotiations with court client Change of probability by 1 p.p PLN 18 million (Euros 4 million) On 8 December 2020, Mr. Jacek Jastrzębski, the Chairman of the Polish Financial Supervision Authority (‘PFSA’) proposed a ‘sector’ solution to address the sector risks related to FX mortgages. The solution would consist in offering banks’ clients a voluntary possibility of concluding arrangements based on which a client would settle a CHF Mortgage Loan as if it was a PLN loan bearing interest at an appropriate WIBOR rate increased by the margin historically employed for such loans. The decision to generally implement this solution could imply the need of creating upfront provisions for the losses resulting from the conversion of CHF Mortgage Loans. Bank Millennium in practice has been using elements of the proposal of above system solution on many individual negotiations with FX mortgage borrowers, including in the course of court proceedings. Due to the circumstances stemming from the CJEU which excludes demanding by the Bank amounts exceeding the return of disbursed capital, the possibility of successful implementation of a general offer of KNF solution is low. Finally, it should also be mentioned that Bank Millennium, as at 31 December 2023, had to maintain additional own funds for the coverage of additional capital requirements related to FX mortgage portfolio risks (Pillar II FX buffer) in the amount of 1.47 p.p. (1.46 p.p. at the Group level), part of which is allocated to operational/legal risk. Taking into consideration the recent negative evolution in the court verdicts regarding FX mortgage loans, the Bank will have to regularly review and may need to continue to increase the balance of provisions allocated to court litigations. It can reasonably be assumed that the legal issues relating to foreign currency mortgage loans will be further examined by the polish courts within the framework of disputes considered which would possibly result in the emergence of further interpretations, which are relevant for the assessment of the risks associated with subject matter proceedings. This circumstance indicates the need for constant analysis of these matters. 2023 REPORT & ACCOUNTS | 443 The Court of Justice of the European Union and the Polish Supreme Court rulings relevant to risk assessment Jurisprudence of the Court of Justice of the European Union On 3 October 2019, the Court of Justice of the European Union (the CJEU) issued the judgment in Case C-260/18 in connection with the preliminary questions formulated by the District Court of Warsaw in the case against Raiffeisen Bank International AG. The judgment of the CJEU, as regards the interpretation of European Union law made therein, is binding on domestic courts. The judgment in question interpreted Article 6 of Directive 93/13. In the light of the subject matter judgment the said provision must be interpreted in such a way that: (i) the national court may invalidate a credit agreement if the removal of unfair terms detected in this agreement would alter the nature of the main subject-matter of the contract; (ii) the effects for the consumer’s situation resulting from the cancellation of the contract must be assessed in the light of the circumstances existing or foreseeable at the time when the dispute arose and the will of the consumer is decisive as to whether he wishes to maintain the contract; (iii) Article 6 of the Directive precludes the filling-in of gaps in the contract caused by the removal of unfair terms from the contract solely on the basis of national legislation of a general nature or established customs; (iv) Article 6 of the Directive precludes the maintenance of unfair terms in the contract if the consumer has not consented to the maintenance of such terms. It can be noticed the CJEU found doubtful the possibility of a credit agreement being performed further in PLN while keeping interest calculated according to LIBOR. The CJEU judgment concerns only the situation where the national court has previously found the contract term to be abusive. It is the exclusive competence of the national courts to assess, in the course of judicial proceedings, whether a particular contract term can be regarded as abusive in the circumstances of the case. On 29 April 2021, the CJEU issued the judgement in the case C-19/20 in connection with the preliminary questions formulated by the District Court in Gdańsk in the case against of ex-BPH S.A., the CJEU said that: (i) it is for the national court to find that a term in a contract is unfair, even if it has been contractually amended by those parties. Such a finding leads to the restoration of the situation that the consumer would have been in in the absence of the term found to be unfair, except where the consumer, by means of amendment of the unfair term, has waived such restoration by free and informed consent. However, it does not follow from Council Directive 93/13 that a finding that the original term is unfair would, in principle, lead to annulment of the contract, since the amendment of that term made it possible to restore the balance between the obligations and rights of those parties arising under the contract and to remove the defect which vitiated it; (ii) the national court may remove only the unfair element of a term in a contract concluded between a seller or supplier and a consumer where the deterrent objective pursued by Council Directive 93/13 is ensured by national legislative provisions governing the use of that term, provided that that element consists of a separate contractual obligation, capable of being subject to an individual examination of its unfair nature. At the same time, provisions of the Directive preclude the referring court from removing only the unfair element of a term in a contract concluded between a seller or supplier and a consumer where such removal would amount to revising the content of that term by altering its substance; (iii) the consequences of a judicial finding that a term if a contract concluded between a seller or supplier and a consumer is unfair are covered by national law and the question of continuity of the contract should be assessed by the national court of its own motion in accordance with an objective approach on the basis of those provisions; 2023 REPORT & ACCOUNTS 444 | (iv) the national court, finding that a term in a contract concluded between a seller or supplier and a consumer is unfair, shall inform the consumer, in the context of the national procedural rules after both parties have been heard, of the legal consequences entailed by annulment of the contract, irrespective of whether the consumer is represented by a professional representative. On 18 November 2021, the Court of Justice of the European Union (CJEU) issued a judgment in case C-212/20 in connection with questions submitted by the District Court for Warsaw Wola in Warsaw in the case against Raiffeisen Bank International AG. The CJEU stated that: (i) the content of the clause of the loan agreement concluded between the entrepreneur and the consumer fixing the purchase and sale price of the foreign currency to which the loan is indexed should, on the basis of clear and comprehensible criteria, enable the consumer who is reasonably well informed and sufficiently observant and rational to understand how the exchange rate of the foreign currency used to calculate the amount of the loan instalments is determined, so that the consumer is able to determine himself at any time the exchange rate used by the entrepreneur; (ii) a national court which has found that a term of the agreement concluded between an entrepreneur and a consumer is unfair cannot interpret that term in order to mitigate its unfairness, even if such an interpretation would correspond to the common will of the parties. On 10 June 2021, the Court of Justice of the European Union (CJEU) issued an order in case C-198/20 in connection with questions submitted by the District Court for Warsaw Wola in Warsaw in the case against Santander Bank Polska SA. The CJEU stated that the protection provided for in Council Directive 93/13/EEC is granted to all consumers, not just those who can be considered to be 'duly informed and reasonably observant and circumspect average consumer'. On 8 September 2022, the Court of Justice of the European Union (CJEU) issued a judgment in joined cases C-80/21, C-81/21, C-82/21 in connection with questions submitted by the District Court for Warsaw Śródmieście in Warsaw in cases against Deutsche Bank SA and mBank SA. The CJEU stated that: (i) a national court may find that the parts of a contractual term of the agreement concluded between a consumer and an entrepreneur which render it unfair are unfair, if such a deletion would not amount to a change in the content of that term that affects its substance, which is for the referring court to verify; (ii) a national court cannot, after annulling an unfair term contained in an agreement concluded between a consumer and an entrepreneur which does not render the agreement invalid in its entirety, replace that term with a supplementary provision of the national law; (iii) a national court may not, after having declared invalid an unfair term contained in an agreement concluded between a consumer and an entrepreneur which entails the invalidity of that agreement in its entirety, replace the contractual term which has been declared invalid either by interpretation of the parties' declaration of intent in order to avoid the cancellation of that agreement or by a provision of national law of a supplementary nature, even if the consumer has been informed of the effects of the invalidity of that agreement, and accepted them; (iv) the ten-year limitation period for a consumer's claim seeking reimbursement of sums unduly paid to the entrepreneur in performance of an unfair term of a loan agreement does not start to run on the date of each performance made by the consumer if the consumer was not able on that date to assess on his own the unfairness of the contractual term or if he had not become aware of the unfair nature of that term and without taking into account the circumstances that the agreement provided for a repayment period – in this case thirty years – well in excess of the ten-year statutory limitation period. 2023 REPORT & ACCOUNTS | 445 On 16 March 2023, the Court of Justice of the European Union issued a judgment in a case registered under case number C-6/22, following preliminary questions submitted by the District Court for Warsaw-Wola in a case against the former Getin Noble Bank S.A.. In the judgment, the CJEU ruled that: (i) in the event that a contract concluded between a consumer and a seller or supplier is declared invalid because one of its terms is unfair, it is for the Member States, by means of their national law, to make provision for the effects of that invalidation, in compliance with the protection granted to the consumer by that directive, in particular, by ensuring the restoration of the legal and factual situation that he or she would have been in if that unfair term had not existed. (ii) a national court is not allowed: a. to examine of its own motion, without any prerogative conferred on it by national law in that regard, the financial situation of a consumer who has sought the invalidation of the contract between him or her and a seller or supplier on account of the presence of an unfair term without which the contract cannot legally continue to exist, even if that invalidation is liable to expose the consumer to particularly unfavourable consequences and, b. to refuse to declare that invalidation where the consumer has expressly sought it, after being objectively and exhaustively informed of the legal consequences and the particularly unfavourable financial consequences which it may have for him or her. (iii) a national court is not allowed, after it has found that a term in a contract concluded between a seller or supplier and a consumer is unfair, to fill gaps resulting from the removal of the unfair term contained therein by the application of a provision of national law which cannot be characterised as a supplementary provision. However, it is for the national court, taking account of its domestic law as a whole, to take all the measures necessary to protect the consumer from the particularly unfavourable consequences which annulment of the contract might entail for him or her. On 8 June 2023, the Court of Justice of the European Union issued a judgment in a case registered under case number C-570/21, following preliminary questions submitted by the District Court in Warsaw in a case against the former Getin Noble Bank S.A. In the judgment, the CJEU ruled that: (i) provisions of Council Directive 93/13 must be interpreted as meaning that the concept of ‘consumer’, within the meaning of that provision, covers a person who has concluded a loan contract intended for a purpose in part within and in part outside his or her trade, business or profession, together with a joint-borrower who did not act within his or her trade, business or profession, where the trade, business or professional purpose is so limited as not to be predominant in the overall context of that contract. (ii) provisions of Directive 93/13 must be interpreted as meaning that in order to determine whether a person falls within the concept of ‘consumer’, within the meaning of that provision, and, specifically, whether the trade, business or professional purpose of a loan contract concluded by that person is so limited as not to be predominant in the overall context of that contract, the referring court is required to take into consideration all the relevant circumstances surrounding that contract, both quantitative and qualitative, such as, in particular, the distribution of the borrowed capital between, on the one hand, a trade, business or profession and, on the other hand, a non-professional activity and, where there are several borrowers, the fact that only one of them is pursuing a professional purpose or that the lender made the grant of credit intended for consumer purposes conditional on a partial allocation of the amount borrowed to the repayment of debts connected with a trade, business or profession. On 15 June 2023, the Court of Justice of the European Union issued a judgment in a case registered under case number C-287/22, following preliminary questions submitted by the District Court in Warsaw in a case against the former Getin Noble Bank S.A. In the judgment, the CJEU ruled that provisions of the Directive 93/13 must be interpreted as precluding national case-law according to which a national court may dismiss an application for the grant of interim measures lodged by a consumer seeking the suspension, pending a final decision on the invalidity of the loan agreement concluded by that consumer on the ground that that loan agreement contains unfair terms, of the payment of the monthly instalments due under that loan agreement, where the grant of those interim measures is necessary to ensure the full effectiveness of that decision. 2023 REPORT & ACCOUNTS 446 | On 15 June 2023, the CJEU issued a judgment in a case registered under case number C-520/21, following preliminary questions submitted by the District Court in Warsaw in a case against Bank Millennium, in which indicated that Directive 93/13 does not expressly regulate the consequences of invalidity of a contract concluded between a credit institution and a consumer after the removal of unfair terms contained therein. The CJEU stated that: (i) the provisions of the Directive do not preclude a judicial interpretation of national law, according to which the consumer has the right to demand compensation from the credit institution beyond the reimbursement of monthly instalments and costs paid for the performance of this contract and the payment of statutory default interest from the date of the request for payment provided that the objectives of Directive 93/13 and the principle of proportionality are respected. (ii) the provisions of Directive 93/13 preclude the judicial interpretation of national law, according to which a credit institution has the right to demand compensation from the consumer that goes beyond the return of the capital paid for the performance of this contract and beyond the payment of statutory default interest from the date of the request for payment. On 21 September 2023, the CJEU issued a judgement in a case registered under case number C-139/22, following preliminary questions submitted by the District Court in Warsaw in a case against mBank. The CJEU stated that: (i) provisions of the Directive 93/13 must be interpreted as not precluding a contractual term which has not been individually negotiated from being regarded as unfair by the national authorities concerned merely by virtue of the fact that its content is equivalent to that of a standard contract term entered in the national register of standard business terms held to be unlawful; (ii) the contractual term which, because of the circumstances for the performance of certain obligations of the consumer concerned provided for in that term, must be regarded as unfair, may not cease to be considered unfair on account of another term of that contract which provides for the possibility for that consumer to perform those obligations under different circumstances; (iii) a seller or supplier is obliged to inform the consumer concerned of the essential characteristics of the contract concluded with that seller or supplier and the risks associated with that contract, even though that consumer is its employee and has relevant knowledge in the field of the contract. On 7 December 2023, the CJEU issued the judgement in the case C-140/22 in connection with the preliminary questions formulated by the District Court in Warsaw in the case against of mBank S.A. The Court stated that provisions of the Directive 93/13 must be interpreted as meaning that, in the context of the cancellation, in its entirety, of a mortgage loan agreement concluded with a consumer by a banking institution on the ground that that agreement contains an unfair term without which it cannot continue in existence: (i) they preclude the judicial interpretation of national law according to which the exercise of the rights which that consumer draws from that directive is conditional on the lodging, by that consumer, before a court, of a declaration by which he or she states, first, not to consent to that unfair term remaining effective, secondly, to be aware of the fact that the nullity of that term entails the cancellation of that agreement and, moreover, of the consequences of that cancellation and, thirdly, to consent to the cancellation of that agreement; (ii) they preclude the compensation sought by the consumer concerned in respect of the restitution of the sums paid by him or her in the performance of the agreement at issue being reduced by the equivalent of the interest which that banking institution would have received if that agreement had remained in force. 2023 REPORT & ACCOUNTS | 447 The Court of Justice of European Union by an order of 11 December 2023, closed the case registered under case number C-756/22 initiated by the District Court in Warsaw in the case brought by Bank Millennium and ruled that the provisions of Directive 93/13 must be interpreted as meaning that, in the context of declaring a mortgage loan agreement concluded with a consumer by a banking institution to be invalid in its entirety on the grounds that, that the contract contains unfair terms without which it cannot be continued, they preclude a judicial interpretation of the law of a Member State according to which that institution is entitled to recover from that consumer amounts other than the capital paid in performance of that contract and statutory interest for delay from the time of the demand for payment. On 14 December 2023, the CJEU issued the judgement in the case C-28/22 in connection with the preliminary questions referred by the District Court in Warsaw in the case of ex-Getin Noble Bank S.A. The Court stated that: (i) provisions of Directive 93/13 read in the light of the principle of effectiveness must be interpreted as precluding a judicial interpretation of national law according to which, following the cancellation of a mortgage loan agreement concluded with a consumer by a seller or supplier, on account of unfair terms contained in that agreement, the limitation period for the claims of that seller or supplier stemming from the nullity of that agreement starts to run only as from the date on which the agreement becomes definitively unenforceable, whereas the limitation period for the claims of that consumer stemming from the nullity of that agreement begins to run as from the day on which the consumer became aware, or should reasonably have become aware, of the unfair nature of the term entailing such nullity; (ii) provisions of the Directive 93/13 must be interpreted as not precluding a judicial interpretation of national law according to which it is not for a seller or supplier who has concluded a mortgage loan agreement with a consumer to ascertain whether the consumer is aware of the consequences of the removal of the unfair terms contained in that agreement or of that agreement being no longer capable of continuing in existence if those terms were removed; (iii) provisions of the Directive 93/13, read in the light of the principle of effectiveness, must be interpreted as precluding a judicial interpretation of national law according to which, where a mortgage loan agreement concluded with a consumer by a seller or supplier is no longer capable of continuing in existence after the unfair terms in that agreement have been removed, that seller or supplier may rely on a right of retention which allows him or her to make the restitution of the sums which it has received from that consumer conditional on that consumer making an offer to repay the sums which he or she has himself or herself received from that seller or supplier or to provide a security for the repayment of those sums, where the exercise by that seller or supplier of that right of retention entails the loss, for that consumer, of the right to obtain default interest as from the expiry of the time limit set for performance by the seller or supplier concerned, following receipt by that seller or supplier of a request to repay the sums he or she had been paid in performance of that agreement. The Court of Justice of the European Union by an order of January 15, 2024, closed the case registered under case number C-488/23 following a question from the District Court of Warsaw, indicating that the right of a financial institution to demand the valorization of the disbursed capital after a loan agreement has been declared invalid was excluded in the judgment of June 15, 2023 issued in case C-520/21. On January 18, 2024, the CJEU issued the judgement in the case C-531/22 in connection with the preliminary questions referred by the District Court in Warsaw in the case of ex-Getin Noble Bank S.A. The Court stated that: (i) the provisions of Directive 93/13 preclude national legislation which provides that a national court may not examine of its own motion the potentially unfair nature of the terms contained in a contract and draw the consequences thereof, where it is supervising enforcement proceedings carried out on the basis of a final decision to issue an order for payment which is subject to res judicata: a. if the regulations do not provide for such an examination at the stage of issuing a payment order, or b. if such examination is provided for only at the stage of opposition to the order for payment in question, provided that there is a significant risk that the consumer in question will not file the required opposition either because the time limit specified for this purpose is very short, or because of the cost of the proceedings before the court in relation to the amount of the disputed debt, or because the national legislation does not provide for the obligation to provide that consumer with all the information necessary for him to establish the extent of his rights; 2023 REPORT & ACCOUNTS 448 | (ii) the provisions of Directive 93/13 do not preclude national case law according to which the entry of a term of a contract in a national register of prohibited clauses has the effect of declaring that term unfair in any proceedings involving a consumer, including against a trader other than the one against whom proceedings for the entry of the said term in that national register were pending, and where that term does not have the same wording as the term entered in the said register, but has the same meaning and has the same effect with respect to the consumer in question. Jurisprudence of the Polish Supreme Court On 7 May 2021, the Supreme Court composed of 7 judges of the Supreme Court, issued a resolution for which the meaning of legal principle has been granted, stating that: 1. An abusive contractual clause (art. 385(1) § 1 of the Polish Civil Code), by force of the law itself, is ineffective to the benefit of the consumer who may consequently give conscious and free consent to this clause and thus restore its effectiveness retroactively. 2. If without the ineffective clause the loan agreement cannot bind, the consumer and the lender shall be eligible for separate claims for return of monetary performances made in exercising this agreement (art. 410 § 1 in relation to art. 405 of the Polish Civil Code). The lender may demand return of the performance from the moment the loan agreement becomes permanently ineffective. On 28 April 2022 the Supreme Court issued a resolution (III CZP 40/22) in which it indicated that in disputes with consumers, the provision of Article 358(1) of the Polish Civil Code is a special provision to Article 353(1) of the Polish Civil Code, which means that if the prerequisites for the application of both provisions exist, the court should apply the special provision and declare the contractual provision permanently ineffective, rather than invalid. This decision of the Supreme Court should be perceived as significantly limiting the risk of Bank Millennium's claims for return of capital being time-barred. The effect of the Supreme Court's resolution of 7 May 2021 is that Bank Millennium is entitled to a refund of the cash benefit provided by Bank Millennium in performance of a permanently ineffective contract. Taking into account the uncertainty as to the starting point of the limitation period for the bank's claims, Bank Millennium, in order to protect its interests, files lawsuits for payment against borrowers in a court dispute with the bank. Bank Millennium's demand consists of a claim for return of the capital made available to the borrower under the contract. By 31 December 2023 the Bank filed about 8.1 thousand lawsuits against the borrowers. Due to the CJEU jurisprudence interpreting the causes and effects of invalidity of foreign currency mortgage loan agreements, the area of interpretation of regulations by Polish courts in this respect appears to be limited. However, further jurisprudential practice of the Polish courts will play an important role in fulfilling the content of the CJEU's guidance and, moreover, this practice will be of significant importance as regards issues that, given the scope of the CJEU's competence, are subject to national jurisprudence. 2. Events that may impact foreign currency-indexed mortgage loans legal risk and related provision The issues related to the statute of limitations for the Bank's and the customer's restitutionary claims following the invalidation of a loan agreement remain an area that may be subject to further analysis in the jurisprudence of Polish courts. Legal interpretations in this subject may be particularly significant for the Bank's claims as to the commencement of the running of the limitation period of its claims, by eliminating or confirming the risk of its claims being deemed time-barred in a given case. In addition, the extent of the consumer's and the bank's entitlement to statutory interest for delay on restitution claims may be an important legal issue. The issue that remains unresolved in the jurisprudence of common courts and the Supreme Court is also the issue of the admissibility of borrowers’ claims in the event of the invalidity of a loan agreement for payment of amounts beyond the reimbursement of monthly instalments and costs paid for the execution of that agreement and beyond the payment of statutory default interest from the date of the demand for payment, which, in light of the CJEU's judgment of 15 June 2023 in case C-520/21, remains not excluded. Due to the uncertainty of the direction of case law in this area, as of the date of publication of the Bank Millennium's report, it is difficult to reliably assess the impact of potential rulings. 2023 REPORT & ACCOUNTS | 449 58. Recently issued accounting standards 1 - Recently issued accounting standards and interpretations that came into force in the current financial year At the date of approval of these financial statements, the following accounting standards, interpretations, amendments and revisions were endorsed by the European Union (EU) with mandatory application for the financial year of the Group started on 1 January 2023: IFRS 17 — Insurance contracts This standard establishes, for insurance contracts within its scope, the principles for their recognition, measurement, presentation and disclosure. This standard replaced IFRS 4 – Insurance contracts. The impacts resulting from the adoption of this standard are disclosed in note 59 - Adoption of IFRS 17 - Insurance Contracts and IFRS 9 – Financial instruments by Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A.. Amendment to IAS 8: Definition of accounting estimates This amendment emphasizes how companies should distinguish changes in accounting policies from changes in accounting estimates, which is relevant since changes in accounting estimates are applied prospectively, only to future transactions and other events, while changes in accounting policies are generally applied retrospectively to past transactions and other events. The definition of a change in accounting estimates is replaced with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”, used to achieve the objective(s) of an accounting policy. There were no material impacts on the application of this amendment in the Group's financial statements. Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of accounting policies Amendments to IAS 1 require companies to disclose their material accounting policy information rather than their significant accounting policies, further explaining how an entity can identify a material accounting policy. On the other hand, Amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures. There were no material impacts on the application of this amendment in the Group's financial statements. Amendment to IAS 12: Deferred tax related to assets and liabilities arising from a single transaction This amendment requires companies to recognise deferred tax on particular transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The proposed amendment will mostly apply to transactions such as leases and decommissioning obligations. There were no material impacts on the application of this amendment in the Group's financial statements. Amendment to IFRS 17: Initial application of IFRS 17 and IFRS 9 — Comparative information This amendment is aimed at helping entities to avoid temporary accounting mismatches between financial assets and insurance contract liabilities by providing insurers with an option for the presentation of comparative information about financial assets, thus improving the usefulness of comparative information for users of financial statements. There were no material impacts on the application of this amendment in the Group's financial statements. Amendments to IAS 12 Income taxes: International Tax Reform – Pilar Two Model Rules The amendments introduce a temporary exception to the recognition of disclosures of information on deferred tax assets and liabilities related to the application of the OECD Pillar 2 model rules and new additional disclosure requirements for affected entities (entities belonging to multinational groups with consolidated revenues of Euros 750 million in at least two of the last four years). The amendments are mandatory for annual reporting periods beginning on or after 1 January 2023. There were no material impacts on the application of this amendment in the Group’s financial statements. 2023 REPORT & ACCOUNTS 450 | 2 - Standards, interpretations, amendments and revisions that will take effect in future financial years The following standards, interpretations, amendments and revisions, with mandatory application in future financial years, have been endorsed by the European Union until the date of approval of these financial statements: Amendment to IAS 1: Classification of liabilities as current or non-current and Classification of liabilities as current or non-current — Deferral of effective date (applicable for years beginning on or after 1 January 2024) On 23 January 2020, Amendment to IAS 1: Classification of liabilities as current or non-current was issued, which aims to clarify that the classification of liabilities as current or non-current should be made based on the existing rights at the end of the financial reporting period, not being affected by expectations related to the exercise of the right to defer the settlement of a liability and, additionally, that the settlement corresponds to the extinction of a liability by transferring cash, equity instruments, other assets or services to a counterparty. On 15 July 2020, it was decided to postpone by a year the effective date of the referred amendment. This amendment, although endorsed by the European Union, was not adopted by the Group in 2023 as its application is not mandatory yet. Amendment to IFRS 16: Lease liability in a sale and leaseback (applicable for years beginning on or after 1 January 2024) This amendment was issued on 22 September 2022 and it provides changes that specify how a seller-lessee should apply the subsequent measurement requirements in IFRS 16 to the lease liability that arises in sale and leaseback operations. This amendment, although endorsed by the European Union, was not adopted by the Group in 2023 as its application is not mandatory yet. 3 - Standards, interpretations, amendments and revisions not adopted by the European Union yet The following standards, interpretations, amendments and revisions, with mandatory application in future financial years, have not been endorsed by the European Union until the date of approval of these financial statements, and, therefore, have not been applied by the Group: Amendment to IAS 7: Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements (applicable for years beginning on or after 1 January 2024) This amendment was issued on 25 May 2023 and it which address the disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on a company’s liabilities, cash flows and exposure to liquidity risk. Supplier finance arrangements are often referred to as supply chain finance, trade payables finance or reverse factoring arrangements. Amendment to IAS 21: The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (applicable for years beginning on or after 1 January 2025) This amendment was issued on 15 August 2023 and it provides changes in specify when a currency is exchangeable into another currency and when it is not, specify how an entity determines the exchange rate to apply when a currency is not exchangeable and require the disclosure of additional information when a currency is not exchangeable. 2023 REPORT & ACCOUNTS | 451 59. Adoption of IFRS 17 - Insurance Contracts and IFRS 9 - Financial Instruments by Millenniumbcp Ageas Grupo Segurador , S.G.P.S., S.A. Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. dedicates to the management of life insurance and pension funds. On 1 January 2023 Millenniumbcp Ageas made the simultaneous adoption of IFRS 9 - Financial Instruments and IFRS 17 - Insurance Contracts. It opted for the possibility given to Insurance Companies to defer the application of IFRS9, since the combined implementation with IFRS 17 would minimize the distortion of results. IFRS 17 replaces IFRS 4 - "Insurance Contracts" and is applicable to all entities that issue insurance contracts, reinsurance contracts and investment contracts with discretionary participation features if they are also issuers of insurance contracts. In accordance with IFRS 17, at initial recognition, Millenniumbcp Ageas Grupo Segurador has identified the contracts that are subject to similar risks and that are managed together, being aggregated in portfolios. For measurement purposes, further divides portfolios of insurance contracts into groups of insurance contracts. A group of insurance contracts is determined by first dividing the portfolio of insurance contracts into annual cohorts. Each annual cohort is then further divided in the following groups: i) group of contracts that are onerous at initial recognition; ii) group of contracts that at initial recognition have no significant possibility of becoming onerous subsequently; and iii) a group of the remaining contracts in the portfolio. Insurance contracts are now measured using estimates and updated assumptions that reflect the timing of cash flows discounted and any uncertainty related to insurance contracts. Income is now recognized as it provides insurance services (rather than when it receives premiums) provide information on the insurance contract earnings that it expects to recognize in the future. In the measurement of insurance contracts, Millenniumbcp Ageas Grupo Segurador has opted for two measurement methods: i) Premium allocation approach ("PAA") for contracts with duration equal to or less than one year and ii) General measurement model measurement model ("GMM") for the remaining contracts. Initial application of IFRS 17 and IFRS 9 requires comparative information. Therefore, Millenniumbcp Ageas Grupo Segurador made the transition exercise on 1 January 2022. The estimated impacts of the Transition to IFRS 9 / 17 on that date on the Equity of Millenniumbcp Ageas Grupo Segurador represent a reduction of approximately Euros 206.6 million, changing from Euros 827.3 million in IFRS 4/IAS 39, for Euros 620.7 million. Euros 206.6 million incorporate the negative value of Euros 250.6 million of impact from the adoption of IFRS 17, offset by a positive value of Euros 44 million resulting from the adoption of IFRS 9. IFRS 17 is retrospective with exemptions provided for the transition date. These exemptions are related to the impracticability and complexity involved e.g. in calculating the liability, the current service margin ("CSM"), loss component, or other comprehensive income ("OCI option") at transition date. When impracticable, the standard provides for the use of the Modified Retrospective Approach or the Fair Value Approach. Millenniumbcp Ageas Grupo Segurador, for contracts prior to 2018 adopted the fair value and for contracts after 2018 the full retrospective approach. Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A., ('Millenniumbcp Ageas' or 'Group'), is owned by Ageas Insurance International, N.V. (51%), through Ageas Portugal Holdings S.G.P.S., S.A. (51%), and by Banco Comercial Português, S.A. (49%). In terms of accounting policies that present the greatest changes compared to the past, they are those relating to Insurance Contracts (IFRS 17) and Financial Investments (IFRS 9) and also the issue of costs, which are now divided into those attributable to the insurance contract and those not attributable. 2023 REPORT & ACCOUNTS 452 | IFRS 17 – Insurance Contracts Ocidental adopted IFRS 17 – Insurance Contracts from 1 January 2023. This change resulted in significant changes in the accounting of insurance and reinsurance contracts. Transition At the time of transition, the regulations require the Company to apply the retrospective approach to recognize and measure both insurance and reinsurance contracts ceded. In light of this approach, IFRS 17 would have to be applied as if it had always been in force. However, if this is impracticable, the regulations provide for two possible alternatives: the modified retrospective approach and the fair value approach. The Company can only apply the retrospective approach if there is complete necessary historical data for all accounting movements in question. Given some limitations in some available historical data, the Company decided to apply, in addition to the total retrospective approach, the two alternative approaches according to the availability of information and data. On the transition date, Ocidental Vida identified, evaluated and recognized each group of insurance contracts, reinsurance contracts and investment contracts with discretionary participation features retrospectively, as if the requirements of IFRS 17 applied to these groups of contracts from the date of its initial recognition (i.e. the 'Retrospective Approach') unless it is impracticable. This included the identification, measurement and recognition of any insurance acquisition cash flows (assets). On the transition date, an assessment of the recoverability of cash flows from the acquisition of insurance (assets) was carried out. No recoverability assessment was performed prior to this date. In some situations, Ocidental was unable to measure a group of contracts retrospectively on the transition date. This is what happened when: • The information in Ocidental's existing reporting systems about historical cash flows was based on assumptions that were developed based on retrospective; • Some reasonable and sustainable information about historical cash flows was not available in Occidental's existing reporting systems, or was only available at levels of aggregation higher than or different from the contract grouping requirements under IFRS 17; • The information in Ocidental's existing reporting systems did not allow to adequately estimate the movement of CSM before the transition date. In these cases, Ocidental measured these groups of contracts at the transition date applying the “Modified Retrospective Approach” or applying the “Fair Value Approach” (see below). The aim of these alternative measurement approaches in the transition was to achieve the closest possible result to the retrospective approach, using reasonable and sustainable information that was available without undue cost or effort at the transition date. The approaches used by Ocidental Vida can be summarized as: Liabilities for future services / Liabilities for incurred claims IFRS 17 measurement models Year Transition Approach Liabilities for future services General Measurement Model 2018-2021 Retrospective approach Before 2018 Fair Value Approach Premium Allocation Approach All Retrospective approach Liabilities for claims incurred General Measurement Model 2016-2021 Retrospective approach Before 2016 Modified retrospective approach 2023 REPORT & ACCOUNTS | 453 Modified retrospective approach The objective of the modified retrospective approach is to achieve the closest outcome to retrospective application possible using reasonable and supportable information available without undue cost or effort. However, this approach introduces some simplifications to the retrospective approach, namely with regard to: • the assessments of insurance contracts or groups of insurance contracts that would have been made at the date of inception or initial recognition;; • the amounts related to the contractual service margin or the loss component for insurance contracts without direct participation features; • the amounts related to the contractual service margin or the loss component for insurance contracts with direct participation features; • the insurance finance income or expenses. Fair value approach The application of the fair value approach only requires the measurement of contracts at the transition date, so it is not necessary to use historical information about them. Considering this approach, the contractual service margin or the loss component of the remaining coverage liability, at transition, corresponds to the difference between the fair value of a group of insurance contracts at that date and the fulfilment cash flows measured at that date. To determine the previously mentioned fair value, the Company applied, when necessary, IFRS 13 – Fair value measurement. Financial Instruments (IFRS 9) The classification of financial assets depends on the business model followed by the Company in managing financial assets (receipt of cash flows or appropriation of changes in fair value) and the contractual terms of the cash flows receivable. Changes to the classification of financial assets can only be made when the business model is changed, except for financial assets at fair value through other comprehensive income, which constitute equity instruments, which can never be reclassified to another category. Financial assets can be classified into the following measurement categories:: – Financial assets at amortized cost – Financial assets at fair value through other comprehensive income (FVOCI) – Financial assets at fair value through profit or loss (FVPL) 2023 REPORT & ACCOUNTS 454 | Impacts on the consolidated financial statements of Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. as at 1 January 2022 IAS39/IFRS9 transition With the adoption of IFRS 9, investments that were at amortized cost are now recorded at fair value through comprehensive income, with a positive impact of Euros 51.6 million on financial investments and Euros 10.8 million on loans. In gross terms, the impact on retained earnings was Euros 118.4 million gross: a positive amount of Euros 24.4 million from the reclassification of ETFs from Financial assets available for sale (AFS) to Financial assets at fair value through profit or loss (FVPL), a positive impact of Euros 50.6 million from the reclassification of investment funds from AFS to FVPL, a positive impact of impairment of shares of Euros 44.2 million and a negative impact of Euros 0.8 million related to expected credit losses (ECL). The net tax value was a positive impact of Euros 83.5 million. At the level of the remaining equity items of Millenniumbcp Ageas, the gross impact was negative at Euros 55.9 million: a positive impact on the measurement of securities at amortized cost for Financial assets at fair value through other comprehensive income (FVOCI) of Euros 51.6 million, a positive impact on the fair value of loans of Euros 10.8 million, a negative impact of Euros 24.4 million from reclassification of ETFs from AFS to FVPL, a negative impact of Euros 50.6 million from reclassification of investment funds from AFS to FVPL, a negative impact on impairment of shares of Euros 44.2 million and positive impact of Euros 0.8 million on ECL. The net tax value was a negative impact of Euros 39.4 million. Thus, the net tax value was a positive impact of Euros 44.075 million related to the adoption of IFRS 9, considering the financial statements of Millenniumbcp Ageas that were part of the consolidation. IFRS 4/IFRS 17 transition With regard to the liabilities for remaining coverage, the contractual service margin for insurance contracts issued before 2018 and measured according to the General Measurement Model was determined by applying the fair value approach (according to IFRS 13). To determine the OCI, a retrospective "replicating portfolio" technique was used. For insurance contracts issued during and after 2018, the Full Retrospective Approach was used. Liabilities with Insurance Contracts registered an increase of Euros 322.7 thousand compared to the previous regulations (excluding Euros 1.2 million related to reclassified debtors and creditors). It should be noted that, in addition to the recalculation of provisions according to the new standard, the liabilities for remaining coverage include the contractual service margin (CSM) of Euros 112 thousand (of which, Euros 96.5 thousand relate to the CSM of contracts for which the fair value approach was used in the Transition, according to IFRS 13). A negative impact was also recorded resulting from the cancellation of the VOBA of Euros 32.840 million relating to the Value of Business Acquired (“VOBA”) which was recorded as intangible assets under IFRS 4, this impact had no effect BCP Group's consolidated accounts. Considering others effects related to the adoption of IFRS 17, the net tax value was a negative impact of Euros 250.611 million, considering the financial statements of Millenniumbcp Ageas that were part of the consolidation. 2023 REPORT & ACCOUNTS | 455 Impacts on the BCP Group´s consolidated financial statements The Group owns 49% of Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A., being accounted for under the equity method, as Investments in associated companies. The impacts of the adoption of IFRS 17 and IFRS 9 by Millenniumbcp Ageas Group Segurador, SGPS, SA on the consolidated balance sheet with reference to 1 January 2022 (transition date), are detailed as follows: (Thousands of euros) 31 December 2021 (reported) Transition adjustments 1 January 2022 ASSETS Cash and deposits at Central Banks 7,796,299 — 7,796,299 Loans and advances to credit institutions repayable on demand 361,786 — 361,786 Financial assets at amortised cost Loans and advances to credit institutions 453,213 — 453,213 Loans and advances to customers 54,972,401 — 54,972,401 Debt securities 8,205,196 — 8,205,196 Financial assets at fair value through profit or loss Financial assets held for trading 931,485 — 931,485 Financial assets not held for trading mandatorily at fair value through profit or loss 990,938 — 990,938 Financial assets at fair value through other comprehensive income 12,890,988 — 12,890,988 Hedging derivatives 109,059 — 109,059 Investments in associated companies 462,338 (89,858) 372,480 Non-current assets held for sale 780,514 — 780,514 Investment property 2,870 — 2,870 Other tangible assets 600,721 — 600,721 Goodwill and intangible assets 256,213 — 256,213 Current tax assets 17,283 — 17,283 Deferred tax assets 2,688,216 — 2,688,216 Other assets 1,385,292 — 1,385,292 TOTAL ASSETS 92,904,812 (89,858) 92,814,954 LIABILITIES Financial liabilities at amortised cost Resources from credit institutions 8,896,074 — 8,896,074 Resources from customers 69,560,227 — 69,560,227 Non subordinated debt securities issued 2,188,363 — 2,188,363 Subordinated debt 1,394,780 — 1,394,780 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 231,241 — 231,241 Financial liabilities at fair value through profit or loss 1,581,778 — 1,581,778 Hedging derivatives 377,206 — 377,206 Provisions 458,744 — 458,744 Current tax liabilities 20,427 — 20,427 Deferred tax liabilities 16,932 — 16,932 Other liabilities 1,116,983 — 1,116,983 TOTAL LIABILITIES 85,842,755 — 85,842,755 EQUITY Share capital 4,725,000 — 4,725,000 Share premium 16,471 — 16,471 Other equity instruments 400,000 — 400,000 Legal and statutory reserves 259,528 — 259,528 Reserves and retained earnings 580,304 (89,858) 490,446 Net income for the year attributable to Bank's Shareholders 138,082 — 138,082 Non-controlling interests 942,672 — 942,672 TOTAL EQUITY 7,062,057 (89,858) 6,972,199 TOTAL LIABILITIES AND EQUITY 92,904,812 (89,858) 92,814,954 2023 REPORT & ACCOUNTS 456 | The impacts of adopting IFRS 17 and IFRS 9 on equity of Millenniumbcp Ageas Grupo Segurador, S.G.P.S, S.A. and of BCP Group, on the transition date, 1 January 2022, are as follows: (Thousands of euros) IFRS 9 transition 44,075 IFRS 17 transition (250,611) Impact of transition on equity (Ageas) (206,536) VOBA (Value of business acquired) 23,152 Impact of transition on equity (Ageas - BCP Gaap) * (183,384) Impact of the transition on the equity of the BCP Group (49%) * (89,858) () The VOBA corresponds to the estimated current value of the future cash flows of the contracts in force at the date of acquisition under IFRS 4. On 31 December 2021, the gross value of VOBA was reflected in the caption Other intangible assets of Millenniumbcp Ageas in accordance with IFRS 4, and with the implementation of IFRS 17 this concept was cancelled in the consolidated accounts of Millenniumbcp Ageas. Considering that the VOBA recorded in the accounts of Millenniumbcp Ageas was not included in the value of this investment in the accounts of the BCP Group (note 26), the derecognition of the VOBA in the accounts of Millenniumbcp Ageas had no impact on the BCP Group's consolidated accounts (note 26). The impacts of the adoption of IFRS 17 and IFRS 9 on the balance Investments in associates (note 26) of Group, are as follows: (Thousands of euros) 1 January 2022 (restated) 31 December 2022 (restated) Investment held in Millennium Ageas ( IAS 39 and IFRS 4) 261,446 59,766 Transition to IFRS 9 and IFRS 17 (89,858) (89,858) Other comprehensive income — 116,152 Other reserves — 19 Net income — (10,111) Investment held in Millennium Ageas (IFRS 9 and IFRS 17) 171,588 75,968 2023 REPORT & ACCOUNTS | 457 The consolidated balance sheet with reference to 31 December 2022 was restated as a result of the adoption of IFRS 17 and IFRS 9 by Millenniumbcp Ageas Group Segurador, SGPS, SA, with the impacts detailed as follows: (Thousands of euros) 31 December 2022 (reported) Impact of the adoption of IFRS 17 and IFRS 9 31 December 2022 (restated) ASSETS Cash and deposits at Central Banks 6,022,001 — 6,022,001 Loans and advances to credit institutions repayable on demand 213,460 — 213,460 Financial assets at amortised cost Loans and advances to credit institutions 963,434 — 963,434 Loans and advances to customers 54,675,793 — 54,675,793 Debt securities 13,035,582 — 13,035,582 Financial assets at fair value through profit or loss Financial assets held for trading 766,597 — 766,597 Financial assets not held for trading mandatorily at fair value through profit or loss 552,679 — 552,679 Financial assets at fair value through other comprehensive income 7,461,553 — 7,461,553 Hedging derivatives 59,703 — 59,703 Investments in associated companies 298,717 16,202 314,919 Non-current assets held for sale 499,035 — 499,035 Investment property 15,217 — 15,217 Other tangible assets 574,697 — 574,697 Goodwill and intangible assets 182,687 — 182,687 Current tax assets 17,945 — 17,945 Deferred tax assets 2,938,986 — 2,938,986 Other assets 1,582,455 — 1,582,455 TOTAL ASSETS 89,860,541 16,202 89,876,743 LIABILITIES Financial liabilities at amortised cost Resources from credit institutions 1,468,360 — 1,468,360 Resources from customers 75,430,143 — 75,430,143 Non subordinated debt securities issued 1,482,086 — 1,482,086 Subordinated debt 1,333,056 — 1,333,056 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 241,506 — 241,506 Financial liabilities at fair value through profit or loss 1,817,678 — 1,817,678 Hedging derivatives 178,000 — 178,000 Provisions 561,786 — 561,786 Current tax liabilities 23,680 — 23,680 Deferred tax liabilities 11,708 — 11,708 Other liabilities 1,391,973 — 1,391,973 TOTAL LIABILITIES 83,939,976 — 83,939,976 EQUITY Share capital 3,000,000 — 3,000,000 Share premium 16,471 — 16,471 Other equity instruments 400,000 — 400,000 Legal and statutory reserves 268,534 — 268,534 Reserves and retained earnings 1,245,949 26,313 1,272,262 Net income for the year attributable to Bank's Shareholders 207,497 (10,111) 197,386 Non-controlling interests 782,114 — 782,114 TOTAL EQUITY 5,920,565 16,202 5,936,767 TOTAL LIABILITIES AND EQUITY 89,860,541 16,202 89,876,743 2023 REPORT & ACCOUNTS 458 | The Consolidated Income Statement with reference to 31 December 2022 was restated resulting from the adoption of IFRS 17 and IFRS 9 by Millenniumbcp Ageas Group Segurador, SGPS, SA, which impacts are detailed as follows: (Thousands of euros) 31 December 2022 (reported) Impact of the adoption of IFRS 17 and IFRS 9 31 December 2022 (restated) Interest and similar income 2,737,235 — 2,737,235 Interest expense and similar charges (587,463) — (587,463) NET INTEREST INCOME 2,149,772 — 2,149,772 Dividends from equity instruments 10,086 — 10,086 Net fees and commissions income 771,908 — 771,908 Gains/(losses) on financial operations at fair value through profit or loss 27,306 — 27,306 Foreign exchange gains/(losses) 19,390 — 19,390 Gains/(losses) on hedge accounting (2,233) — (2,233) Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss 5,497 — 5,497 Other operating income/(losses) (193,112) — (193,112) TOTAL OPERATING INCOME 2,788,614 — 2,788,614 Staff costs 580,807 — 580,807 Other administrative costs 352,961 — 352,961 Amortisations and depreciations 139,250 — 139,250 TOTAL OPERATING EXPENSES 1,073,018 — 1,073,018 NET OPERATING INCOME BEFORE PROVISIONS AND IMPAIRMENTS 1,715,596 — 1,715,596 Impairment of financial assets at amortised cost (300,829) — (300,829) Impairment of financial assets at fair value through other comprehensive income 5,023 — 5,023 Impairment of other assets (192,059) — (192,059) Other provisions (568,297) — (568,297) NET OPERATING INCOME 349,569 — 349,569 Share of profit of associates accounted for using the equity method 68,722 (10,111) 58,611 Gains/(losses) on disposal of subsidiaries and other assets 10,167 — 10,167 NET INCOME BEFORE INCOME TAXES 428,458 (10,111) 418,347 Income taxes Current (109,632) — (109,632) Deferred (194,688) — (194,688) NET INCOME AFTER INCOME TAXES FROM CONTINUING OPERATIONS 124,138 (10,111) 114,027 Net income from discontinued or discontinuing operations 5,537 — 5,537 NET INCOME AFTER INCOME TAXES 129,675 (10,111) 119,564 Net income for the year attributable to: Bank's Shareholders 207,497 (10,111) 197,386 Non-controlling interests (77,822) — (77,822) NET INCOME FOR THE YEAR 129,675 (10,111) 119,564 2023 REPORT & ACCOUNTS | 459 60. List of subsidiary and associated companies of Banco Comercial Português Group As at 31 December 2023, the Group's subsidiary companies included in the consolidated accounts using the full consolidation method were as follows: Group Bank Subsidiary companies Head office Share capital Currency Sector of activity % economic interests % effective held % direct held Banco ActivoBank, S.A. Lisbon 127,600,000 EUR Banking 100% 100% 100% Bank Millennium, S.A. Warsaw 1,213,116,777 PLN Banking 50.1% 50.1% 50.1% Millennium Bank Hipoteczny S.A. Warsaw 90,000,000 PLN Banking 100% 50.1% — BCP África, S.G.P.S., Lda. Funchal 214,223,800 EUR Holding company 100% 100% 100% BIM - Banco Internacional de Moçambique, S.A. Maputo 4,500,000,000 MZN Banking 66.7% 66.7% — BCP Finance Bank, Ltd. George Town 246,000,000 USD Banking 100% 100% — BCP International B.V. Amsterdam 18,000 EUR Holding company 100% 100% 100% M Representações Ltda São Paulo 77,780,760 BRL Financial Services 100% 100% 100% Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. Funchal 25,000 EUR Holding company 100% 100% 100% Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. Oeiras 1,500,000 EUR Real estate investment fund management 100% 100% 100% Monumental Residence - Sociedade de investimento coletivo imobiliária fechada, S.A. Oeiras 31,900,000 EUR Real-estate management 100% 100% 100% Millennium bcp - Prestação de Serviços, A.C.E. Lisbon 331,750 EUR Services 98.6% 97.7% 93.2% Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. Lisbon 50,004 EUR E-commerce 100% 100% 100% Imoserit, S.A. Oeiras 50,000 EUR Real-estate company 100% 100% 100% Bichorro – Empreendimentos Turísticos e Imobiliários S.A. Oeiras 2,150,000 EUR Real-estate management 100% 100% — Finalgarve – Sociedade de Promoção Imobiliária Turística, S.A. Oeiras 250,000 EUR Real-estate management 100% 100% — Fiparso – Sociedade Imobiliária S.A Oeiras 50,000 EUR Real-estate company 100% 100% — Millennium Consulting S.A. Warsaw 4,339,500 PLN Consulting services 100% 50.1% — Millennium Goodie Sp.z.o.o. Warsaw 500,000 PLN Web portals 100% 50.1% — Millennium Leasing, Sp.z o.o. Warsaw 48,195,000 PLN Leasing 100% 50.1% — Millennium Service, Sp.z o.o. Warsaw 1,000,000 PLN Services 100% 50.1% — Piast Expert Sp. z o.o (em liquidação) Tychy 100,000 PLN Marketing services 100% 50.1% — Millennium Telecommunication Services Sp. z o.o. Warsaw 100,000 PLN Brokerage services 100% 50.1% — Millennium TFI - Towarzystwo Funduszy Inwestycyjnych, S.A. Warsaw 10,300,000 PLN Investment fund management 100% 50.1% — BCPBT CI Liquidation Company I George Town 1 USD Liquidation trust 100% 100% — BCPBT CI Liquidation Company II George Town 1 USD Liquidation trust 100% 100% — 2023 REPORT & ACCOUNTS 460 | As at 31 December 2023, the investment funds included in the consolidated accounts using the full consolidation method, as referred in the accounting policy presented in note 1 B, were as follows: Group Bank Investment funds Head office Share capital Currency Activity % economic interests % effective held % direct held Imosotto acumulação – Fundo de Investimento Imobiliário Fechado Oeiras 102,385,157 EUR Real-estate investment fund 100% 100% 100% Imorenda – Fundo de Investimento Imobiliário Fechado Oeiras 85,156,715 EUR Real-estate investment fund 100% 100% 100% Sand Capital - Fundo de Investimento Imobiliário Fechado Oeiras 88,082,695 EUR Real-estate investment fund 100% 100% 100% Fundial – Fundo de Investimento Imobiliário Fechado Oeiras 17,340,985 EUR Real-estate investment fund 100% 100% 100% Fundipar – Fundo de Investimento Imobiliário Fechado Oeiras 11,345,348 EUR Real-estate investment fund 100% 100% 100% Domus Capital– Fundo de Investimento Imobiliário Fechado Oeiras 3,799,969 EUR Real-estate investment fund 95.8% 95.8% 95.8% Predicapital – Fundo de Investimento Imobiliário Fechado () Oeiras 88,951,500 EUR Real-estate investment fund 60% 60% 60% () - Company classified as non-current assets held for sale. During 2023, the Group proceeded with the liquidation of the funds Oceânico II – Fundo de Investimento Imobiliário Fechado and Funsita - Fundo de Investimento Imobiliário Fechado. The Group holds a securitization transaction regarding mortgage loans which was set through specifically created SPE. As referred in accounting policy 1 B, when the substance of the relationships with the SPEs indicates that the Group holds control of its activities, the SPE is fully consolidated, following the application of IFRS 10. As at 31 December 2023, the Special Purpose Entity included in the consolidated accounts under the full consolidation method is as follows: Group Bank Special Purpose Entities Head office Share capital Currency Activity % economic interests % effective held % direct held Magellan Mortgages No.3 Limited Dublin 40,000 EUR Special Purpose Entities 82.4% 82.4% 82.4% During the 3rd quarter of 2023, the Group settled the Magellan Mortgages No.1 securitization operation. 2023 REPORT & ACCOUNTS | 461 As at 31 December 2023, the Group's associated companies included in the consolidated accounts under the equity method are as follows: Group Bank Associated companies Head office Share capital Currency Activity % economic interests % effective held % direct held Banco Millennium Atlântico, S.A. Luanda 53,821,603,000 AOA Banking 22.7% 22.5% — Banque BCP, S.A.S. Paris 215,335,898 EUR Banking 19% 19% 19% Lubuskie Fabryki Mebli, S.A. (em liquidação) Swiebodzin 13,400,050 PLN Furniture manufacturer 50% 25.1% — Europa Millennium Financial Services sp. z o.o. () Warsaw 100,000 PLN Services 20% 10% — SIBS, S.G.P.S., S.A. Lisbon 24,642,300 EUR Banking services 23.3% 21.9% — UNICRE - Instituição Financeira de Crédito, S.A. Lisbon 10,000,000 EUR Credit cards 32% 32% 0.5% Webspectator Corporation Delaware 950 USD Digital advertising services 25.1% 25.1% 25.1% () previous Millennium Financial Services sp. z o.o. As described in note 48, the Group sold 80% of shares of Millennium Financial Services sp. z o.o. so now holds a minority stake of 20%. As at 31 December 2023, the Group's associated insurance companies included in the consolidated accounts under the equity method were as follows: Group Bank Associated companies Head office Share capital Currency Activity % economic interests % effective held % direct held Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. Lisbon 50,002,375 EUR Holding company 49% 49% 49% Ocidental - Companhia Portuguesa de Seguros de Vida, S.A. Lisbon 22,375,000 EUR Life insurance 49% 49% — Ageas - Sociedade Gestora de Fundos de Pensões, S.A. Lisbon 1,200,000 EUR Pension fund management 49% 49% — Fidelidade Moçambique - Companhia de Seguros S.A. Maputo 295,000,000 MZN Insurance 22% 14.7% — 2023 REPORT & ACCOUNTS 462 | Some indicators of the main subsidiaries and associated companies are analysed as follows: (Thousands of euros) 2023 2022 Subsidiaries and associated companies Total Assets Total Equity Net income for the year Total Assets Total Equity Net income for the year Banco Comercial Português, S.A. 61,519,392 6,127,916 680,276 62,649,975 5,266,068 478,408 Banco ActivoBank, S.A. 3,501,901 254,201 39,400 3,271,355 213,017 19,142 Bank Millennium, S.A. (1) 28,897,024 1,587,332 126,821 23,697,447 1,173,617 (216,683) BIM - Banco Internacional de Moçambique, S.A. (1) 2,711,174 534,619 105,099 2,824,409 521,192 106,030 BCP International B.V. 523,962 523,935 (691) 524,966 524,627 87,434 BCP Finance Bank, Ltd. 519,337 519,331 (647) 520,294 519,976 4,996 BCP África, S.G.P.S., Lda. 280,742 279,680 2,338 561,713 560,269 60,975 Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. 175,824 174,679 7,788 179,441 178,297 11,406 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. 9,301 7,625 1,724 9,731 8,113 2,084 Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (1) (3) 8,295,959 497,686 82,494 8,876,759 401,717 74,425 Banco Millennium Atlântico, S.A. (2) 2,224,997 196,853 13,097 2,910,070 292,893 10,693 Banque BCP, S.A.S. 5,732,286 279,722 14,477 4,944,774 268,097 23,499 1) Consolidated accounts. 2) These indicators correspond to the statutory financial statements that do not include the effects of applying IAS 29. 3) The 2023 amounts refer to the estimated financial statements. 61. Subsequent events In addition to the aspects disclosed in the other notes and according to the accounting policy 1 Z, the events that occurred after the date of the financial statements and until the date of its approval, were as follows: S&P Global Ratings upgraded BCP's Outlook On 12 March 2024, S&P Global Ratings upgraded BCP's Outlook from Stable to Positive. Bank Millennium Poland - Credit holidays The Bank Millennium is aware of risks connected with a potential extension of the so-called credit holidays for 2024. A legislative proposal was made public and approved by the Government on 5 March 2024 and submitted to the Polish Parliament for appreciation. At the time of publication of these financial statements, the proposal has not yet been approved by Parliament. If such risk would materialize, it could imply upfront provision for such cost that would decrease the net interest income and the net result of the Bank/Group. EIB signed an agreement with Millennium bcp As at 11 January 2024, the EIB signed an agreement with Millennium bcp to provide 400 million euros in new loans to Portuguese companies. Banco Comercial Português, S.A. informed about the issuance of perpetual subordinated notes (Additional Tier 1) As at 11 January 2024, Banco Comercial Português, S.A. (“Millennium bcp”) informed it has set the conditions for a new issue of Additional Tier 1, in the amount of Euros 400 million, with the option of early repayment by Millennium bcp from the end of 5th year onwards with a coupon of 8.125% per year for the first 5.5 years, which will be refixed from that date every 5 years, with reference to the then prevailing 5-year mid-swap rate plus a spread of 5.78%. 2023 REPORT & ACCOUNTS | 463 Banco Comercial Português, S.A. informed about the resignation of a member of the Board of Directors As at 5 January 2024, Banco Comercial Português, S.A. (“Bank”) informed, under the terms and for the purposes of article 6 of CMVM Regulation No. 1/2023, that the Non-Executive Director Xiaoxu Gu (also known as Julia Gu) presented today its resignation to the position of non-executive member of the Board of Directors, effective from February 29, 2024. The Bank informs that it will begin the process of identifying and selecting a new non-executive member to join its Board of Directors in accordance with the applicable Bank's regulations. The conclusion of this process will be announced in due course and will not affect the regular functioning of the Board of Directors. Banco Comercial Português S.A. informed about decision to call the currently outstanding Additional Tier 1 instrument (“AT1”) in the amount of Euros 400 million As at 1 January 2024, Banco Comercial Português, S.A. informed that it has decided to exercise its option to early redeem all of its Additional Tier 1 notes “Fixed Rate Reset Perpetual Temporary Write Down Additional Tier 1 Capital Notes” (ISIN: PTBCPFOM0043), issued on 31 January 2019 (the “Notes”), in accordance with Condition 9.2 of the terms and conditions of the Notes. The early redemption of the Notes took place on their first call date according with its terms and conditions, 31 January 2024, at their outstanding principal amount together with accrued interest. 2023 REPORT & ACCOUNTS 464 | Accounts and Notes to the Individual Accounts 2023 REPORT & ACCOUNTS | 465 SEPARATE INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022 (Thousands of euros) Notes 2023 2022 Interest and similar income 2 2,171,317 1,064,034 Interest expense and similar charges 2 (760,141) (147,703) NET INTEREST INCOME 1,411,176 916,331 Dividends from equity instruments 3 76,122 158,365 Net fees and commissions income 4 537,334 534,048 Gains/(losses) on financial operations at fair value through profit or loss 5 (32,378) 10,420 Foreign exchange gains/(losses) 5 21,245 43,430 Gains/(losses) on hedge accounting 5 19,716 970 Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss 5 (7,165) (26,997) Other operating income / (losses) 6 (44,451) (62,869) TOTAL OPERATING INCOME 1,981,599 1,573,698 Staff costs 7 341,963 326,905 Other administrative costs 8 192,661 189,719 Amortisations and depreciations 9 74,177 80,051 TOTAL OPERATING EXPENSES 608,801 596,675 OPERATING NET INCOME BEFORE PROVISIONS AND IMPAIRMENTS 1,372,798 977,023 Impairment of financial assets at amortised cost 10 (204,714) (213,836) Impairment of financial assets at fair value through other comprehensive income 11 (1,098) 5,273 Impairment of other assets 12 (61,448) (12,542) Other provisions 13 (111,410) (103,901) NET OPERATING INCOME 994,128 652,017 Gains/(losses) on disposal of subsidiaries and other assets 14 2,872 12,826 NET INCOME BEFORE INCOME TAXES 997,000 664,843 Income taxes Current 27 6,818 2,343 Deferred 27 (323,542) (188,778) NET INCOME FOR THE YEAR 680,276 478,408 Earnings per share (in Euros) Basic 15 0.043 0.029 Diluted 15 0.043 0.029 CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the separate financial statements. 2023 REPORT & ACCOUNTS 466 | SEPARATE STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022 (Thousands of euros) Notes 2023 2022 NET INCOME FOR THE YEAR 680,276 478,408 ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME STATEMENT 39 Debt instruments at fair value through other comprehensive income Gains / (losses) for the year 56,032 (225,728) Reclassification of (gains) / losses to profit or loss (note 5) 9,928 45,411 Cash flows hedging Gains / (losses) for the year 432,839 (1,642,293) Fiscal impact (156,123) 570,476 342,676 (1,252,134) ITEMS THAT WILL NOT BE RECLASSIFIED TO THE INCOME STATEMENT 39 Equity instruments at fair value through other comprehensive income Gains / (losses) for the year 4,164 (13,261) Changes in credit risk of financial liabilities at fair value through profit or loss 39 (2,801) (63) Actuarial gains / (losses) for the year 45 (220,483) 367,323 Fiscal impact 95,002 (133,892) (124,118) 220,107 Other comprehensive income / (loss) for the year 218,558 (1,032,027) TOTAL COMPREHENSIVE INCOME FOR THE YEAR 898,834 (553,619) CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the separate financial statements. 2023 REPORT & ACCOUNTS | 467 SEPARATE BALANCE SHEET AS AT 31 DECEMBER 2023 AND 2022 (Thousands of euros) Notes 2023 2022 ASSETS Cash and deposits at Central Banks 16 1,709,232 2,956,492 Loans and advances to credit institutions repayable on demand 17 155,794 131,400 Financial assets at amortised cost Loans and advances to credit institutions 18 370,409 384,164 Loans and advances to customers 19 35,310,145 37,334,829 Debt securities 20 11,584,291 10,255,688 Financial assets at fair value through profit or loss Financial assets held for trading 21 685,971 692,796 Financial assets not held for trading mandatorily at fair value through profit or loss 21 647,871 789,153 Financial assets designated at fair value through profit or loss 21 32,004 — Financial assets at fair value through other comprehensive income 21 4,714,386 2,914,514 Hedging derivatives 22 22,335 28,426 Investments in subsidiaries and associated companies 23 2,207,974 2,481,732 Non-current assets held for sale 24 97,213 257,616 Other tangible assets 25 323,354 300,169 Intangible assets 26 99,696 77,923 Current tax assets 27 14,044 10,926 Deferred tax assets 27 2,439,081 2,750,881 Other assets 28 1,105,592 1,283,266 TOTAL ASSETS 61,519,392 62,649,975 LIABILITIES Financial liabilities at amortised cost Resources from credit institutions 29 1,522,945 2,244,784 Resources from customers 30 45,786,768 49,625,808 Non subordinated debt securities issued 31 1,835,210 1,297,551 Subordinated debt 32 1,037,079 998,066 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 33 107,415 187,438 Financial liabilities at fair value through profit or loss 34 3,602,285 1,817,679 Hedging derivatives 22 22,536 59,548 Provisions 35 465,961 363,699 Current tax liabilities 27 65,291 2,027 Other liabilities 36 945,986 787,307 TOTAL LIABILITIES 55,391,476 57,383,907 EQUITY Share capital 37 3,000,000 3,000,000 Share premium 37 16,471 16,471 Other equity instruments 37 400,000 400,000 Legal and statutory reserves 38 316,375 268,534 Reserves and retained earnings 39 1,714,794 1,102,655 Net income for the year 680,276 478,408 TOTAL EQUITY 6,127,916 5,266,068 TOTAL LIABILITIES AND EQUITY 61,519,392 62,649,975 CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the separate financial statements. 2023 REPORT & ACCOUNTS 468 | SEPARATE STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022 (Thousands of euros) 2023 2022 CASH FLOWS ARISING FROM OPERATING ACTIVITIES Interests received 1,858,296 963,703 Commissions received 702,118 721,513 Fees received from services rendered 56,060 60,889 Interests paid (661,012) (13,268) Commissions paid (109,756) (121,771) Recoveries on loans previously written off 10,532 6,217 Payments (cash) to suppliers and employees () (612,933) (636,594) Income taxes (paid) / received (2,346) 1,769 1,240,959 982,458 Decrease / (increase) in operating assets: Receivables from / (Loans and advances to) credit institutions 17,383 (332,692) Loans and advances to customers receivable / (granted) 1,859,280 (847,592) Short term trading securities 11,916 122,529 Increase / (decrease) in operating liabilities: Loans and advances to credit institutions repayable on demand 28,271 453,017 Deposits from credit institutions with agreed maturity date (756,766) (9,335,071) Loans and advances to customers repayable on demand (5,306,932) 1,330,581 Deposits from customers with agreed maturity date 3,240,324 3,249,209 334,435 (4,377,561) CASH FLOWS ARISING FROM INVESTING ACTIVITIES Sale of investments held in associated companies 225,000 542,524 Acquisition of shares in subsidiaries and associated companies (1,429) (1,208) Dividends received 72,351 154,482 Interest income from financial assets at fair value through other comprehensive income and at amortised cost 211,696 103,295 Sale of financial assets at fair value through other comprehensive income and at amortised cost 2,045,634 7,372,586 Acquisition of financial assets at fair value through other comprehensive income and at amortised cost (16,963,014) (15,406,563) Maturity of financial assets at fair value through other comprehensive income and at amortised cost 11,703,534 9,526,056 Acquisition of tangible and intangible assets (61,614) (67,780) Sale of tangible and intangible assets 746 983 Decrease / (increase) in other sundry assets 575,176 (296,144) (2,191,920) 1,928,231 CASH FLOWS ARISING FROM FINANCING ACTIVITIES Issuance of subordinated debt — 133,700 Reimbursement of subordinated debt — (133,700) Issuance of debt securities 499,998 350,465 Reimbursement of debt securities (208,181) (1,838,664) Issuance of commercial paper and other securities 32,137 34,505 Reimbursement of commercial paper and other securities (33,623) (12,374) Dividends paid to shareholders of the Bank (note 43) — (13,603) Dividends paid of perpetual subordinated bonds (Additional Tier 1) (37,000) (37,000) Increase / (decrease) in other sundry liabilities () 381,288 87,865 634,619 (1,428,806) Net changes in cash and equivalents (1,222,866) (3,878,136) Cash (note 16) 326,291 340,871 Deposits at Central Banks (note 16) 2,630,201 6,428,190 Loans and advances to credit institutions repayable on demand (note 17) 131,400 196,967 CASH AND EQUIVALENTS AT THE BEGINNING OF THE YEAR 3,087,892 6,966,028 Cash (note 16) 415,873 326,291 Deposits at Central Banks (note 16) 1,293,359 2,630,201 Loans and advances to credit institutions repayable on demand (note 17) 155,794 131,400 CASH AND EQUIVALENTS AT THE END OF THE YEAR 1,865,026 3,087,892 (*) In 2023, this balance includes the amount of Euros 34,000 (31 December 2022: Euros 30,000) related to short-term lease contracts and the amount of Euros 1,808,000 (31 December 2022: Euros 1,742,000) related to lease contracts of low value assets. () In 2023, this balance includes the amount of Euros 33,202,000 (31 December 2022: Euros 19,592,000) corresponding to payments of lease liabilities’ shares of capital. CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the separate financial statements. 2023 REPORT & ACCOUNTS | 469 SEPARATE STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022 (Thousands of euros) Share capital Share premium Other equity instruments Legal and statutory reserves Reserves and retained earnings Net income for the year Total equity BALANCE AS AT 31 DECEMBER 2021 4,725,000 16,471 400,000 259,528 379,231 90,060 5,870,290 Net income for the year — — — — — 478,408 478,408 Other comprehensive income — — — — (1,032,027) — (1,032,027) TOTAL COMPREHENSIVE INCOME — — — — (1,032,027) 478,408 (553,619) Results applications: Legal reserve (note 38) — — — 9,006 (9,006) — — Transfers for Reserves and retained earnings — — — — 90,060 (90,060) — Dividends paid — — — — (13,603) — (13,603) Interests of the perpetual subordinated bonds (Additional Tier 1) — — — — (37,000) — (37,000) Reduction of the share capital (1,725,000) — — — 1,725,000 — — BALANCE AS AT 31 DECEMBER 2022 3,000,000 16,471 400,000 268,534 1,102,655 478,408 5,266,068 Net income for the year — — — — — 680,276 680,276 Other comprehensive income — — — — 218,558 — 218,558 TOTAL COMPREHENSIVE INCOME — — — — 218,558 680,276 898,834 Results applications: Legal reserve (note 38) — — — 47,841 (47,841) — — Transfers for Reserves and retained earnings — — — — 478,408 (478,408) — Interests of the perpetual subordinated bonds (Additional Tier 1) — — — — (37,000) — (37,000) Other reserves — — — — 14 — 14 BALANCE AS AT 31 DECEMBER 2023 3,000,000 16,471 400,000 316,375 1,714,794 680,276 6,127,916 CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE See accompanying notes to the separate financial statements. 2023 REPORT & ACCOUNTS 470 | 1. Accounting policies A. Basis of presentation Banco Comercial Português, S.A. (the 'Bank') is a private capital bank, established in Portugal in 1985. It started operating on 5 May 1986, and these separate financial statements reflect the results of the operations of the Bank for the years ended on 31 December 2023 and 2022. In accordance with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of 19 July 2002, and Bank of Portugal Notice no. 5/2015 (which revoked Bank of Portugal Notice no. 1/2005), the Bank’s separate financial statements are required to be prepared in accordance with International Financial Reporting Standards (IFRS), as endorsed by the European Union (EU), since 2016. IFRS comprise accounting standards issued by the International Accounting Standards Board (IASB), as well as interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and its predecessor bodies. The separate financial statements and the accompanying notes were approved on 25 March 2024 by the Bank's Board of Directors and are presented in thousands of euros, rounded to the nearest thousand. All the references in this document related to any normative always report to the respective current version. The separate financial statements for the year ended on 31 December 2023 were prepared for the purpose of recognition and measurement, in accordance with the IFRS approved by the EU that are effective on that date. These separate financial statements are a translation of the financial statements originally issued in Portuguese. In the event of discrepancies, the Portuguese version prevails. A1. Comparative information The Bank has adopted IFRS and interpretations mandatory for accounting periods beginning on or after 1 January 2023. The accounting policies are consistent with those used in the preparation of the financial statements of the previous period. The Bank's financial statements were prepared under the going concern assumption, the accrual-based accounting regime and under the historical cost convention, as modified by the application of fair value for derivative financial instruments, financial assets and liabilities at fair value through profit or loss and financial assets at fair value through other comprehensive income. Financial assets and liabilities that are covered under hedge accounting are stated at fair value in respect of the risk that is being hedged, if applicable. Other financial assets and liabilities and non-financial assets and liabilities are stated at amortised cost or historical cost. Non-current assets and disposal groups held for sale are stated at the lower of carrying amount or fair value less costs to sell. The liability for defined benefit obligations is recognised as the present value of the past liabilities with pensions net of the value of the fund's assets. The preparation of the financial statements in accordance with IFRS requires the Board of Directors, under advice of the Executive Committee, to make judgments, estimations and assumptions that affect the application of the accounting policies and reported amounts of assets, liabilities, income and expenses. The estimations and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances and form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimations. The issues involving a higher degree of judgment or complexity or for which assumptions and estimations are significant are presented in note 1.X. 2023 REPORT & ACCOUNTS | 471 B. Financial instruments (IFRS 9) B1. Financial assets B1.1. Classification, initial recognition and subsequent measurement At the initial recognition, financial assets are classified into one of the following categories: - “Financial assets at amortised cost”; – “Financial assets at fair value through other comprehensive income”; or, – “Financial assets at fair value through profit or loss”. The classification is made taking into consideration the following aspects: – the Bank's business model for the management of the financial asset; and, – the characteristics of the contractual cash flows of the financial asset. Business Model Evaluation With reference to 1 January 2018, the Bank carried out an evaluation of the business model in which the financial instruments are held at portfolio level, since this approach reflects how assets are managed and how that information is made available to management bodies. The information considered in this evaluation included: – the policies and purposes established for the portfolio and the practical operability of these policies, including how the management strategy focuses on receiving contractual interest, maintaining a certain interest rate profile, adjusting the duration of financial assets to the duration of liabilities that finance these assets or on the realization of cash flows through the sale of the assets; – how the performance of the portfolio is evaluated and reported to the Bank's management bodies; – the evaluation of the risks that affect the performance of the business model (and of the financial assets held under this business model) and the way these risks are managed; – the remuneration of business managers, i.e., in what way the compensation depends on the fair value of the assets under management or on contractual cash flows received; and, – the frequency, volume and sales periodicity in previous periods, the reasons for these sales and the expectations about future sales. However, sales information should not be considered individually, but as part of an overall assessment of how the Bank establishes financial asset management objectives and how cash flows are obtained. Financial assets held for trading and financial assets managed and evaluated at fair value by option are measured at fair value through profit or loss because they are not held either for the collection of contractual cash flows (HTC), nor for the collection of cash flows and sale of these financial assets (HTC and Sell). Evaluation if the contractual cash flows correspond to Solely Payments of Principal and Interest (SPPI) For the purposes of this assessment, "principal" is defined as the fair value of the financial asset at initial recognition. "Interest" is defined as the counterparty for the time value of money, for the credit risk associated with the amount owed over a given period of time and for other risks and costs associated with the activity (e.g., liquidity risk and administrative costs), as well as for a profit margin. In the evaluation of the financial instruments in which contractual cash flows refer exclusively to the receipt of principal and interest, the Bank considered the original contractual terms of the instrument. This evaluation included the analysis of the existence of situations in which the contractual terms can modify the periodicity and the amount of the cash flows so that they do not fulfil the SPPI condition. In the evaluation process, the Bank considered: – contingent events that may change the periodicity and the amount of the cash flows; – characteristics that result in leverage; – terms of prepayment and extension of maturity; – terms that may limit the right of the Bank to claim cash flows in relation to specific assets (e.g., contracts with terms that prevent access to assets in case of default – non-recourse asset); and, – characteristics that may change the time value of money. 2023 REPORT & ACCOUNTS 472 | In addition, an advance payment is consistent with the SPPI criterion if: – the financial asset is acquired or originated with a premium or discount in relation to the contractual nominal value; – the prepayment represents substantially the nominal amount of the contract plus accrued contractual interest, but not paid (may include reasonable compensation for prepayment); and, – the prepaid fair value is insignificant at initial recognition. B1.1.1. Financial assets at amortised cost Classification A financial asset is classified under the category "Financial assets at amortised cost" if both of the following conditions are met: – the financial asset is held within a business model whose objective is to hold financial assets in order to collect their contractual cash flows; and, – its contractual cash flows occur on specific dates and are solely payments of principal and interest on the principal amount outstanding (SPPI). The "Financial assets at amortised cost" category includes loans and advances to credit institutions, loans and advances to customers and debt instruments managed based on a business model whose purpose is to receive their contractual cash flows (government bonds, bonds issued by companies and commercial paper). Initial recognition and subsequent measurement Loans and advances to credit institutions and loans and advances to customers are recognised at the date the funds are made available to the counterparty (settlement date). Debt instruments are recognised on the trade date, that is, on the date the Bank accepts to acquire them. Financial assets at amortised cost are initially recognised at fair value plus transaction costs and are subsequently measured at amortised cost. In addition, they are subject, at their initial recognition, to the measurement of impairment losses for expected credit losses (note B1.5), which are recognised in "'Impairment of financial assets measured at amortised cost". Interest of financial assets at amortised cost is recognised under "Interest and similar income", based on the effective interest rate method and in accordance with the criteria described in note B3. Gains or losses generated at the time of derecognition are registered in "Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss". B1.1.2. Financial assets at fair value through other comprehensive income Classification A financial asset is classified under the category of "Financial assets at fair value through other comprehensive income" if both of the following conditions are met: – the financial asset is held within a business model whose objective is both to collect its contractual cash flows and to sell this financial asset; and, – its contractual cash flows occur on specific dates and are solely payments of principal and interest on the principal amount outstanding (SPPI). In addition, at the initial recognition of an equity instrument that is not held for trading, nor a contingent retribution recognised by an acquirer in a business combination to which IFRS 3 applies, the Bank may irrevocably choose to classify it in the category of "Financial assets at fair value through other comprehensive income" (FVOCI). This option is exercised on a case-by-case basis and is only available for financial instruments that comply with the definition of equity instruments provided in IAS 32 and cannot be used for financial instruments whose classification as an equity instrument under the scope of the issuer is made under the exceptions provided in paragraphs 16A to 16D of IAS 32. 2023 REPORT & ACCOUNTS | 473 Initial recognition and subsequent measurement Debt instruments at fair value through other comprehensive income are initially recognised at fair value plus transaction costs and are subsequently measured at fair value. Changes in the fair value of these financial assets are recognised against other comprehensive income and, at the time of their disposal, the respective gains or losses accumulated in other comprehensive income are reclassified to a specific income statement item designated "Gains or losses on derecognition of financial assets at fair value through other comprehensive income”. Debt instruments at fair value through other comprehensive income are also subject, from their initial recognition, to the measurement of impairment losses for expected credit losses (note B1.5). Impairment losses are recognised in the income statement under "Impairment of financial assets at fair value through other comprehensive income", against “Other comprehensive income”, and do not reduce the carrying amount of the financial asset in the balance sheet. Interest, premiums or discounts on financial assets at fair value through other comprehensive income are recognised in "Interest and similar income", based on the effective interest rate method and in accordance with the criteria described in note B3. Equity instruments at fair value through other comprehensive income are initially recognised at fair value plus transaction costs and are subsequently measured at fair value. The changes in the fair value of these financial assets are recognised against “Other comprehensive income”. Dividends are recognised in the income statement when the right to receive them is attributed. Impairment is not recognised for equity instruments at fair value through other comprehensive income, and the respective accumulated gains or losses recognised in “Fair value changes” are transferred to “Retained earnings” at the time of their derecognition. B1.1.3. Financial assets at fair value through profit or loss Classification A financial asset is classified in the category "Financial assets at fair value through profit and loss" if the business model defined by the Bank for its management or the characteristics of its contractual cash flows do not meet the conditions described above to be measured at amortised cost or at fair value through other comprehensive income (FVOCI). In addition, the Bank may irrevocably designate a financial asset at fair value through profit or loss that meets the criteria to be measured at amortised cost or at FVOCI at the time of its initial recognition if this eliminates or significantly reduces an inconsistency in measurement or recognition (accounting mismatch), that will otherwise arise from measuring assets or liabilities or recognising their gains and losses in different bases. The Bank classified "Financial assets at fair value through profit and loss" in the following items: a) “Financial assets held for trading” These financial assets are acquired with the purpose of short-term selling; at the initial recognition, they are part of a portfolio of identified financial instruments and for which there is evidence of profit-taking in the short-term; or they can be defined as derivatives (except for hedging derivatives). b) “Financial assets not held for trading mandatorily at fair value through profit or loss” This item classifies debt instruments whose contractual cash flows do not correspond only to repayments of principal and interest on the principal amount outstanding (SPPI). c) “Financial assets designated at fair value through profit or loss” (Fair Value Option) This item includes the financial assets that the Bank has chosen to designate at fair value through profit or loss to eliminate accounting mismatch. 2023 REPORT & ACCOUNTS 474 | Initial recognition and subsequent measurement Considering that the transactions carried out by the Bank in the normal course of its business are in market conditions, financial assets at fair value through profit or loss are initially recognised at their fair value, with the costs or income associated with the transactions recognised in profit and loss at the initial moment. Subsequent changes in the fair value of these assets are recognised in profit and loss. The accrual of interest and of the premium/discount (when applicable) is recognised in "Net interest income", based on the effective interest rate of each transaction, except the accrual of interest from trading derivatives that are recognised in “Gains/(losses) on financial operations at fair value through profit or loss”. Dividends are recognised in profit and loss when the right to receive them is attributed. Trading derivatives with a positive fair value are included in the item "Financial assets held for trading", while trading derivatives with negative fair value are included in "Financial liabilities held for trading". B1.2. Reclassification between categories of financial assets Financial assets should be reclassified into other categories only if the business model used in their management has changed. In this case, all financial assets affected must be reclassified. The reclassification must be applied prospectively from the date of reclassification and any gains, losses (including the ones related to impairment) or interest previously recognised should not be restated. The reclassification of investments in equity instruments measured at fair value through other comprehensive income is not allowed, nor of financial instruments designated at fair value through profit or loss. B1.3. Modification and derecognition of financial assets General principles i) The Bank shall derecognise a financial asset when, and only when: – the contractual rights to the cash flows from the financial asset expire; or, – it transfers the financial asset as set out in notes ii) and iii) below and the transfer qualifies for derecognition in accordance with note iv). ii) The Bank transfers a financial asset if, and only if, it either: – transfers the contractual rights to receive the cash flows of the financial asset; or, – retains the contractual rights to receive the cash flows of the financial asset but assumes a contractual obligation to pay the cash flows to one or more recipients in an arrangement that meets the conditions presented in note iii). iii) When the Bank retains the contractual rights to receive the cash flows of a financial asset (the 'original asset'), but assumes a contractual obligation to pay these cash flows to one or more entities (the 'eventual recipients'), the Bank shall treat the transaction as a transfer of a financial asset if all the following three conditions are met: – the Bank does not have any obligation to pay amounts to the eventual recipients, unless it collects equivalent amounts from the original asset. Short-term advances with the right of full recovery of the amount lent, plus accrued interest at market rates, do not violate this condition; – the Bank is contractually prohibited from selling or pledging the original asset other than as a security to the eventual recipients due its obligation to pay them cash flows; and, – the Bank has an obligation to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, it is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents (as defined in IAS 7 – Statement of Cash Flows) during the short settlement period from the collection date until the date of required remittance to the eventual recipients, and interest earned on such investments is passed to the eventual recipients. iv) When the Bank transfers a financial asset (see note ii) above), it shall evaluate the extent to which it retains the risks and benefits arising from owning the financial asset. In this case: – if the Bank transfers substantially all the risks and benefits arising from owning the financial asset, it shall derecognise the financial asset and recognise separately any rights and obligations created or retained in the transfer, as assets or liabilities; – if the Bank retains substantially all the risks and benefits arising from owning the financial asset, it shall continue to recognise the financial asset; 2023 REPORT & ACCOUNTS | 475 – if the Bank neither transfers nor retains substantially all the risks and benefits arising from owning the financial asset, it shall determine whether it retained control of the financial asset. In this case: a) if the Bank did not retain control, it shall derecognise the financial asset and recognise separately, as assets or liabilities, any rights and obligations created or retained in the transfer; b) if the Bank retained control, it shall continue to recognise the financial asset to the extent of its continued involvement in the financial asset. v) The transfer of risks and benefits (see prior note) is evaluated by comparing the Bank’s exposure, before and after the transfer, with the variability in the amounts and timing of the net cash flows of the transferred asset. vi) The question of whether the Bank retained or not control (see note iv) above) over the transferred asset depends on the transferee's ability to sell the asset. If the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and can exercise that ability unilaterally without needing to impose additional restrictions on the transfer, the entity did not retain control. In all other cases, the entity retained control. Derecognition criteria In the context of the general principles listed in the previous section, and considering that contract modification processes may lead, in some circumstances, to the derecognition of the original financial assets and recognition of new ones (subject to POCI identification), the purpose of this section is to set the criteria and circumstances that may lead to the derecognition of a financial asset. The Bank considers that a modification of the terms and conditions of a credit exposure will result in derecognition of the transaction and in recognition of a new transaction when the modification translates into at least one of the following conditions: – Creation of a new exposure that results from a debt consolidation, without any of the derecognized instruments having a nominal value higher than 90% of the nominal amount of the new instrument; – Double extension of the residual maturity, provided that the extension is not shorter than 3 years compared to the residual maturity in the moment of the modification; – Increase of on balance exposure by more than 10% compared to the nominal amount (refers to the last approved amount on the operation subject to modification); – Change in qualitative features, namely: i) Change of currency, unless the exchange rate between the old and the new currency is pegged or managed within limits restricted by law or the relevant monetary authorities; ii) Exclusion or addition of a substantial equity conversion feature to a debt instrument, unless it is not reasonably possible that it will be exercised over its term; iii) Transfer of the instrument’s credit risk to another borrower, or a significant change in the structure of borrowers within the instrument. iv) Deletion or addition to the debt instrument of features of the "Pay If You Can" type or dependent on the financial performance of the debt instrument. In the case of a restructuring due to financial difficulties of the debtor, only the criteria set out in items ii, iii and iv of the above paragraphs should be checked (the other criteria listed in this paragraph are not relevant in such situations). 2023 REPORT & ACCOUNTS 476 | Loans written-off The Bank writes off a loan when it does not have reasonable expectations of recovering a financial asset in its entirety or partially. Loans written-off are recognised in off-balance sheet accounts. B1.4. Purchased or originated credit-impaired assets Purchased or originated credit-impaired (POCI) assets are assets that present objective evidence of credit impairment in the moment of their initial recognition. An asset is credit-impaired if one or more events have occurred with a negative impact on the estimated future cash flows of the asset. The two events that lead to the origin of a POCI exposure are presented as follows: – financial assets arising from a recovery process, where there have been changes to the terms and conditions of the original agreement, which presented objective evidence of impairment that resulted in its derecognition (note B1.3) and recognition of a new contract that reflects the credit losses incurred; – financial assets acquired with a significant discount, where the existence of a significant discount reflects credit losses incurred at the time of their initial recognition. At initial recognition, POCI assets do not carry an impairment allowance. Instead, lifetime expected credit losses (ECL) are incorporated into the calculation of the effective interest rate (EIR). Consequently, at initial recognition, the gross book value of POCI (initial balance) is accounted for at fair value and it's equal to the net book value before being recognised as POCI (difference between the initial balance and the total discounted cash flows). B1.5. Impairment losses B1.5.1. Financial instruments subject to impairment losses recognition The Bank recognises impairment losses for expected credit losses on financial instruments recognised in the following accounting items: B1.5.1.1. Financial assets at amortised cost Impairment losses on financial assets at amortised cost reduce the balance sheet value of these financial assets against the item "Impairment of financial assets at amortised cost" (in the income statement). B1.5.1.2. Debt instruments at fair value through other comprehensive income Impairment losses for debt instruments at fair value through other comprehensive income are recognised in the income statement under "Impairment of financial assets at fair value through other comprehensive income", against other comprehensive income (they do not reduce the balance sheet amount of these financial assets). B1.5.1.3. Credit commitments, documentary credits and financial guarantees Impairment losses associated with credit commitments, documentary credits and financial guarantees are recognised in liabilities, under the balance "Provisions for guarantees and other commitments", against "Other provisions" (in the income statement). B1.5.2. Classification of financial instruments by stages Changes in credit risk since the initial recognition Stage 1 Stage 2 Stage 3 Classification criterion Initial recognition Significant increase in credit risk since initial recognition Impaired Impairment losses 12-month expected credit losses Lifetime expected credit losses 2023 REPORT & ACCOUNTS | 477 The Bank determines the expected credit losses of each operation as a result of the deterioration of credit risk since its initial recognition. For this purpose, operations are classified into one of the following three stages: – Stage 1: the operations in which there is no significant increase in credit risk since its initial recognition are classified in this stage. Impairment losses associated with operations classified in this stage correspond to expected credit losses resulting from a default event that may occur within 12 months after the reporting date (12-month expected credit losses); – Stage 2: the operations in which there is a significant increase in credit risk since its initial recognition (note B1.5.3) but are not impaired (note B1.5.4) are classified in this stage. Impairment losses associated with operations classified in this stage correspond to the expected credit losses resulting from default events that may occur over the expected residual life of the operations (lifetime expected credit losses); – Stage 3: impaired operations are classified in this stage. Impairment losses associated with operations classified at this stage correspond to lifetime expected credit losses. B1.5.3. Significant increase in credit risk (SICR) Significant increase in credit risk (SICR) is determined according to a set of mostly quantitative, but also qualitative criteria. These criteria are mainly based on the risk grades of customers, according to the Bank's Rating Master Scale, and on its evolution, in order to detect significant increases in Probability of Default (PD), complemented by other information regarding the customers’ behaviour towards the financial system. B1.5.4. Definition of financial assets in default and impaired All customers who meet at least one of the following conditions are marked as default and, consequently, in NPE: a) Delay over 90 days of material payment: - Amounts of principal, interest or fees not paid on the due date that, cumulatively, represent: i) more than Euros 100 (retail) or more than Euros 500 (non-retail); and, ii) more than 1% of the total debt (direct liabilities). After these two conditions are met, the counting of days of delay begins: if more than 90 consecutive days in which the customer is in this situation have been counted, it is classified as default (or GR15). The existence of a material payment delay gives rise to the default setting (GR15) of all holders of the operation (or operations). b) Signs of low probability of payment: i. Credit restructuring due to financial difficulties with loss of value; ii. Delay after restructuring due to financial difficulties; iii. Recurrence of restructuring due to financial difficulties; iv. Credit with signs of impairment (or stage 3 of IFRS 9); v. Insolvency or equivalent proceedings; vi. Litigation; vii. Guarantees of operations in default; viii. Credit sales with losses; ix. Credit fraud; x. Unpaid credit status; xi. Breach of covenants in a credit agreement; xii. Spread of default in an economic group; xiii. Cross default in BCP Group. 2023 REPORT & ACCOUNTS 478 | B1.5.5. Estimates of expected credit losses - Individual analysis 1. Customers who are in one of the following conditions are subject to individual analysis: Customers in default Customers in litigation or insolvency, if the total exposure of the group members in these situations exceeds Euros 1 million Customers integrated into groups with an exposure over Euros 5 million, if they have a risk grade 15 Groups or customers who are not in default Other customers belonging to groups in the above conditions Groups or customers with an exposure over Euros 5 million, if a group member has a risk grade 14 Groups or customers with an exposure over Euros 5 million, if a member of the group has a restructured loan and a risk grade 13 Groups or customers with an exposure over Euros 10 million, if at least one member of the group is in stage 2 Groups or customers not included in the preceding paragraphs, whose exposure exceeds Euros 25 million 2. Regardless of the criteria described in the previous point, the individual analysis is only performed for customers with a credit exposure over Euros 500,000, while customers with exposure below this limit are not considered for the purpose of determining the exposure referred to in the previous point. 3. Other customers that do not meet the criteria defined in 1 will also be subject to individual analysis, if under the following conditions: – they have impairment as a result of the latest individual analysis; – are classified in stage 2 as a result of the last revision of the questionnaire analysing the indications of financial difficulties; – according to recent information, they show a significant deterioration in risk levels; or, – are a Special Purpose Vehicle (SPV). 4. The individual analysis includes the following procedures: – for customers that are not in default, the analysis of financial difficulties indicators to determine whether the customer has objective signs of impairment, or whether it should be classified in stage 2 given the occurrence of a significant increase in credit risk, considering for this purpose a set of predetermined signs; – for customers in default or for which the previous analysis has allowed to conclude that the customer has objective signs of impairment, determination of the loss. 5. For the situations identified in the first paragraph of the previous point involving corporate clients, the analysis is the responsibility of the Rating Division, and the responsibility of the Credit Division for the remaining clients. 6. For the situations identified in the second paragraph of the previous point, the individual analysis to determine the loss is the responsibility of the client's management divisions and of the Credit Division, the latter with regard to the customers managed by the Commercial Networks. The assessment of existence of impairment losses in individual terms is determined through an analysis of the total credit exposure on a case-by-case basis. For each loan considered individually significant, the Bank assessed, at each balance sheet date, the existence of objective evidence of impairment. In the assessment of impairment losses in individual terms, the following factors were considered: – total exposure of each customer towards the Bank and the existence of overdue loans; – viability of the customer’s business and its capacity to generate enough cash flows to service debt obligations in the future; – the existence, nature and estimated value of the collaterals associated to each loan; – significant deterioration of the customer's rating; – the customer’s available assets in liquidation or insolvency situations; – the existence of preferential creditors; – the amount and expected recovery term. 2023 REPORT & ACCOUNTS | 479 7. Each of the units referred to in the previous point is responsible for assigning an expectation and a recovery period to exposures relating to customers subject to individual analysis, which must be transmitted to the Risk Office as part of the regular process of collecting information, accompanied by detailed justification of the proposed impairment. 8. The expected recovery shall be represented by a recovery rate of the total outstanding exposure, which may be a weighted rate considering the different recovery prospects for each part of the customer's liabilities. 9. The recovery estimation referred to in the previous point should be influenced by future prospects (forward- looking), contemplating not only a more expected scenario but also alternative scenarios (an unbiased and probability-weighted amount). The application and weighting of the scenarios should be carried out both in a global perspective and in an individualized perspective, the latter when cases that, due to their specificity, have a high degree of uncertainty regarding the expected recovery estimation are identified. 10. The macroeconomic adjustment set out in point 8 should be analysed annually and weighted according to the type of recovery strategy associated with the exposure under analysis: – for Going Concern strategies (i.e., the estimation is based on the cash flows of the business), the possibility of applying the 2 additional macroeconomic scenarios (optimistic and pessimistic) should be analysed in a global way, to ascertain if there is the risk of a skewed view of the expected losses from the consideration of only one scenario; – for Gone Concern strategies (i.e., the recovery estimation is based on the realization of the collateral), the impact of the macroeconomic scenario on collaterals should be analysed, for example, to what extent the projected real estate index indicates significant changes ahead for the current valuation values. 11. It is the responsibility of the units referred to in point 5 to consider in their projection macroeconomic expectations that may influence the recoverability of the debt. 12. For the purposes of the preceding paragraphs, the Economic Studies, Sustainability and Cryptoassets Department shall disclose the macroeconomic data that allow the estimations to be made. 13. The decision to consider global impacts related to the going and gone concern scenarios should be made by the Risk Committee, as proposed by the Risk Office. 14. For specific cases with a high degree of uncertainty, the allocation of alternative scenarios should be considered casuistically. Examples of recovery situations with a degree of uncertainty include: – recovery of collateral in geographies in which the Bank has no relevant recovery experience; – recovery of debt related to geographies in which there is strong political instability; – recovery of non-real estate collateral for which there is no evidence of market liquidity; – recovery of related collateral or government guarantees in a currency other than the country's own; – recovery of debt related to debtors for whom there is a strong negative public exposure. 15. The Risk Office is responsible for reviewing the information collected and for clarifying all identified inconsistencies, as well as for the final decision on the customer's impairment. 16. Customers that have objective signs of impairment, but an individual impairment amount is equal to zero, are included in the collective analysis, assuming a PD 12 months equivalent to the risk grade 12 of the Master Scale. 17. The individual impairment analysis must be carried out annually, and may be lower for clients who fall into certain situations of possible increased risk. In case significant signs of deterioration or improvement in the customer’s economic and financial situation are detected, as well as the macroeconomic conditions affecting the customer's ability to accomplish debt, it is the responsibility of the Risk Office to promote the review of the expected impairment of this customer. B1.5.6. Estimates of expected credit losses - Collective analysis Transactions that are not subject to an individual impairment analysis are grouped considering their risk characteristics and subject to a collective impairment analysis. The Bank's credit portfolio is divided by internal risk grades and according to the following segments: a) Segments with a reduced history of defaults, designated ‘low default’: Large corporate exposures, Project finance, Institutions (banks/financial institutions) and Sovereigns; b) Segments not ‘low default’: - Retail: Mortgages; Overdrafts; Credit cards; Small and medium enterprises - Retail (‘SME Retail’); and Others - Corporate: Small and medium enterprises - Corporate (‘Large SME’); and Real Estate. The Bank performs statistical tests in order to prove the homogeneity of the segments mentioned above, with a minimum period of one year. 2023 REPORT & ACCOUNTS 480 | Expected credit losses are estimates of credit losses that are determined as follows: – financial assets with no signs of impairment at the reporting date: the present value of the difference between the contractual cash flows and the cash flows that the Bank expects to receive; – financial assets with impairment at the reporting date: the difference between the gross book value and the present value of the estimated cash flows; – unused credit commitments: the present value of the difference between the resulting contractual cash flows if the commitment is made and the cash flows that the Bank expects to receive; – financial guarantees: the current value of the expected repayments less the amounts that the Bank expects to recover. The main inputs used to measure ECLs on a collective basis should include the following variables: – Probability of Default – PD; – Loss Given Default – LGD; and, – Exposure at Default – EAD. These parameters are obtained through internal statistical models and other relevant historical data, considering the already existing regulatory models adapted to the requirements of IFRS 9. PDs are estimated based on a certain historical period and will be calculated based on statistical models. These models are based on internal data including both quantitative and qualitative factors. If there is a change in the risk of the counterparty or exposure, the estimate of the associated PD will also vary. The PDs will be calculated considering the contractual maturities of exposures. The risk grades are a highly relevant input for determining the PD associated with each exposure. The Bank collects performance and default indicators about their credit risk exposures with analysis by types of customers and products. LGD is the magnitude of the loss that is expected to occur if an exposure goes into default. The Bank estimates the LGD parameters based on the historical recovery rates after entry into counterparty defaults. The LGD models consider the associated collaterals, the counterparty activity sector, the default time, as well as the recovery costs. In the case of contracts secured by real estate, it is expected that the LTV (loan-to-value) ratios are a parameter of high relevance in the determination of LGD. The EAD represents the expected exposure if the exposure and/or customer defaults. The Bank obtains the EAD values from the counterparty's current exposure and potential changes to its current value as a result of the contractual conditions, including amortisations and prepayments. For commitments and financial guarantees, the value of the EAD will consider both the amount of credit used and the expectation of future potential value that may be used in accordance with the agreement. As described above, except for financial assets that consider a 12-month PD as they do not present a significant increase in credit risk, the Bank will calculate the ECL value considering the risk of default during the maximum contractual maturity period of the contract, even if, for the purpose of risk management, it is considered to be a longer period. The maximum contractual period shall be considered as the period up to the date on which the Bank has the right to require payment or end the commitment or guarantee. The Bank adopted as a residual term criterion for renewable operations, when in stage 2, a term of 5 years. This term was determined based on the behavioural models of this type of product applied by the Bank in the liquidity risk and interest rate (ALM) analysis. According to these models, the maximum period of repayment of these operations is the 5 years considered conservatively in the scope of the calculation of credit impairment. 2023 REPORT & ACCOUNTS | 481 The Bank uses models to forecast the evolution of the most relevant parameters for the expected credit losses, namely probability of default, which incorporate forward-looking information. This incorporation of forward-looking information is carried out in the relevant elements considered for the calculation of expected credit losses (ECL). In particular, the PD point-in-time (PDpit) considered for the determination of the probability of performing exposures at the reference date becoming defaulted exposures considers the expected values for a set of macroeconomic variables, based on three scenarios (Central, Upside and Downside Scenario) prepared by the Bank's Economic Studies area. These scenarios, which are used across the Bank for various purposes besides calculating impairment, consider existing projections by reference entities. In December 2023 the Bank carried out an update of the macroeconomic scenarios and of the corresponded adjustment of the parameters considered in the collective impairment model. B2. Financial liabilities B2.1. Classification, initial recognition and subsequent measurement At initial recognition, financial liabilities are classified in one of the following categories: – “Financial liabilities at amortised cost”; – “Financial liabilities at fair value through profit or loss”. B2.1.1. Financial liabilities at fair value through profit or loss Classification Financial liabilities classified under "Financial liabilities at fair value through profit or loss" include: a) “Financial liabilities held for trading” In this balance the issued liabilities are classified with the purpose of repurchasing in the near term, those that form part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or is a derivative (except for a derivative classified as hedging instrument). b) “Financial liabilities designated at fair value through profit or loss” The Bank may irrevocably assign a financial liability at fair value through profit or loss at the time of its initial recognition if at least one of the following conditions is met: – the financial liability is managed, evaluated and reported internally at its fair value; or, – the designation eliminates or significantly reduces the accounting mismatch of transactions. Initial recognition and subsequent measurement Considering that the transactions carried out by the Bank in the normal course of its business are made in market conditions, financial liabilities at fair value through profit or loss are initially recognised at fair value with the costs or income associated with the transactions recognised in profit or loss at the initial moment. Subsequent changes in the fair value of these financial liabilities are recognised as follows: – the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income; – the remaining amount of change in the fair value of the liability shall be presented in profit or loss. The accrual of interest and the premium/discount (when applicable) is recognised in "Interest expense and similar charges" based on the effective interest rate of each transaction. 2023 REPORT & ACCOUNTS 482 | B2.1.2. Financial guarantees If they are not designated at fair value through profit or loss at the time of initial recognition, the financial guarantee contracts are subsequently measured at the highest of the following amounts: – the provision for losses determined according to the criteria described in note B1.5; – the amount initially recognised deducted, when appropriate, from the accumulated amount of income recognised according to IFRS 15 - Revenue from contracts with customers. Financial guarantee contracts that are not designated at fair value through profit or loss are presented under "Provisions". B2.1.3. Financial liabilities at amortised cost Classification Financial liabilities that were not classified at fair value through profit or loss, or correspond to financial guarantee contracts, are measured at amortised cost. The category "Financial assets at amortised cost" includes resources from credit institutions and from customers, as well as subordinated and non-subordinated debt securities. Initial recognition and subsequent measurement Financial liabilities at amortised cost are initially recognised at fair value plus transaction costs and are subsequently measured at amortised cost. Interest on financial liabilities at amortised cost are recognised in "Interest expense and similar charges", based on the effective interest rate method. B2.2. Reclassification between categories of financial liabilities Reclassifications of financial liabilities are not allowed. B2.3. Derecognition of financial liabilities The Bank derecognises financial liabilities when these are cancelled or extinct. B3. Interest recognition Income and expense related to interest from financial instruments measured at amortised cost are recognised in "Interest and similar income" and "Interest expense and similar charges" (net interest income) through the effective interest rate method. Interest related to financial assets at fair value through other comprehensive income is also recognised in net interest income. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument (or, when appropriate, for a shorter period), to the net carrying amount of the financial asset or financial liability. For calculating the effective interest rate, the Bank estimates future cash flows considering all contractual terms of the financial instrument (e.g., early payment options) but without considering future impairment losses. The calculation includes all fees paid or received considered as included in the effective interest rate, transaction costs and all other premiums or discounts directly related to the transaction, except for assets and liabilities at fair value through profit and loss. Interest income recognised in income associated with contracts classified in stage 1 or 2 are determined by applying the effective interest rate for each contract on its gross book value. The gross balance of a contract is its amortised cost, before deducting the respective impairment. For financial assets included in stage 3, interest is recognised in the income statement based on its net book value (less impairment). The interest recognition is always made in a prospective way, i.e., for financial assets entering stage 3, interest is recognised at the amortised cost (net of impairment) in subsequent periods. For purchased or originated credit-impaired assets (POCI), the effective interest rate reflects the expected credit losses in determining the expected future cash flows receivable from the financial asset. 2023 REPORT & ACCOUNTS | 483 B4. Hedge accounting As allowed by IFRS 9, the Bank opted to continue to apply the hedge accounting requirements in accordance with IAS 39. The Bank designates derivatives and other financial instruments to hedge its exposure to interest rate and foreign exchange risk, resulting from financing and investment activities. Derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative hedging instruments are stated at fair value and gains and losses on revaluation are recognised in accordance with the hedge accounting model adopted by the Bank. A hedge relationship exists when: – at the inception of the hedge there is formal documentation of the hedge; – the hedge is expected to be highly effective; – the effectiveness of the hedge can be reliably measured; – the hedge is assessed in a continuous basis and highly effective throughout the reporting period; and, – for hedges of a forecasted transaction, the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit or loss. When a derivative financial instrument is used to hedge foreign exchange variations arising from monetary assets or liabilities, no hedge accounting model is applied. Any gain or loss associated to the derivative is recognised through profit and loss, as well as changes in currency risk of the monetary items. B4.1. Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedge instruments are recognised in profit and loss, together with changes in the fair value attributable to the hedged risk of the asset or liability or group of assets and liabilities. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative gains and losses due to variations of hedged risk linked to the hedge item recognised until the discontinuance of the hedge accounting are amortised through profit and loss over the residual term of the hedged item. B4.2. Cash flow hedge In a hedge relationship, the effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity - cash flow hedge reserves in the effective part of the hedge relations. Any gain or loss relating to the ineffective portion of the hedge is immediately recognised in profit and loss when occurred. Amounts accumulated in equity are reclassified to profit and loss in the periods in which the hedged item will affect profit or loss. In case of hedging variability of cash flows, when the hedge instrument expires or is disposed or when the hedging relationship no longer meets the criteria for hedge accounting, or when the hedge relation is revoked, the hedge relationship is discontinued on a prospective basis. Therefore, the fair value changes of the derivative accumulated in equity until the date of the discontinued hedge accounting can be: – deferred over the residual period of the hedged instrument; or, – recognised immediately in results, if the hedged instrument is extinguished. In the case of a discontinued hedge of a forecast transaction, the change in fair value of the derivative recognised in equity at that time remains in equity until the forecasted transaction is ultimately recognised in the income statement. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to profit and loss. B4.3. Hedge effectiveness For a hedge relationship to be classified as such according to IAS 39, effectiveness must be demonstrated. As such, the Bank performs prospective tests at the beginning date of the initial hedge, if applicable, and retrospective tests in order to demonstrate at each reporting period the effectiveness of the hedging relationships, demonstrating that the variations in fair value of the hedging instrument are hedged by the fair value variations of the hedged item in the portion assigned to the risk covered. Any ineffectiveness is recognised immediately in profit and loss when incurred. 2023 REPORT & ACCOUNTS 484 | B4.4. Hedge of a net investment in a foreign operation Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any exchange gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss relating to the ineffective portion is immediately recognised in profit and loss. Gains and losses accumulated in equity related to the investment in a foreign operation and to the associated hedge operation are recognised in equity and transferred to profit and loss, on the disposal of the foreign operation as part of the gain or loss from the disposal. B5. Embedded Derivatives An embedded derivative is a component of a hybrid agreement, which also includes a non-derived host instrument. If the main instrument included in the hybrid contract is considered a financial asset, the classification and measurement of the entire hybrid contract is carried out in accordance with the criteria described in note B1.1.3. Derivatives embedded in contracts that are not considered financial assets are treated separately whenever the economic risks and benefits of the derivative are not related to those of the main instrument, since the hybrid instrument is not initially recognised at fair value through profit or loss. Embedded derivatives are recorded at fair value with subsequent fair value changes recorded in profit or loss for the period and presented in the trading derivatives portfolio. C. Securitization operations C1. Traditional securitizations As at 31 December 2023, the Bank has two residential mortgage credit securitization operations, Magellan Mortgages no.3 and no.4, in which the respective portfolios were derecognised from the Bank’s individual balance sheet, as the risks and rewards related to the residual portions of the referred transactions, were transferred to institutional investors. By purchasing a part or all of the most subordinated residual portion, the Bank maintained control of the assets and liabilities of Magellan Mortgages no.3, this Special Purpose Entity (SPE) being consolidated in the Group’s financial statements, in accordance with the accounting policy referred to in note 1 B. The two operations are traditional securitizations, where each mortgage loan portfolio was sold to a Portuguese Loan Titularization Fund, which has financed this purchase through the sale of titularization units to a SPE with office in Ireland. At the same time, this SPE issued and sold in capital markets a group of different portions of bonds. C2. Synthetic securitizations As at 31 December 2023, the Bank has three synthetic securitization operations, with similar characteristics, with reference to credit portfolios granted by the Bank mainly to Small and Medium Enterprises (SMEs). Caravela SME no.3, which started on 28 June 2013, has a medium and long-term loan portfolio of current accounts and authorized overdrafts. Caravela SME no.4, initiated on 5 June 2014, has a reference portfolio of vehicle, real estate and equipment leasing. Caravela SME no.5, initiated on 20 December 2022, is supported on a credit portfolio of medium and long term loans, leasing contracts and commercial paper programmes. In any of these operations, the Bank contracted a Credit Default Swap (CDS) from a Special Purpose Entity (SPE), buying, this way, protection over the total referenced portfolio. As in all synthetic securitizations, under CDS, the risk of the respective portfolios was divided in 3 tranches: senior, mezzanine and equity. In the case of both Caravela no. 3 and no. 4, the mezzanine and part of the equity (20%) were placed in the market through the issuance of Credit Linked Notes (CLNs) by the above mentioned SPE which were subscribed by investors, while the Group retained the senior risk and the remaining part of the equity (80%). In the case of Caravela SME no. 5, only the full amount of the mezzanine was placed in the market, while the Group retained the risk of the full amount of the senior and equity tranches. 2023 REPORT & ACCOUNTS | 485 Note that in all of the above mentioned synthetic transactions, the product of the CLNs issue was invested by the SPE in a deposit, which fully collateralizes the responsibilities in the presence of its creditors including BCP in accordance with the CDS. D. Equity instruments A financial instrument is an equity instrument only if: i) the instrument includes no contractual obligation to deliver cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; and, ii) the instrument will or may be settled in the issuer's own equity instruments, it is either a non-derivative that includes no contractual obligation for the issuer to deliver a variable number of its own equity instruments or a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments. An equity instrument, independently from its legal form, evidences a residual interest in the assets of an entity after deducting all of its liabilities. Transaction costs directly attributable to an equity instrument issuance are recognised in equity as a deduction to the amount issued. Amounts paid or received related to sales or acquisitions of equity instruments are recognised in equity, net of transaction costs. Preference shares issued by the Bank are considered as an equity instrument when redemption of the shares is solely at the discretion of the Bank and dividends are paid at the discretion of the Bank. Income from equity instruments (dividends) are recognised when the obligation to pay is established and are deducted to equity. E. Securities borrowing and repurchase agreement transactions E1. Securities borrowing Securities lent under securities lending arrangements continue to be recognised in the balance sheet and are measured in accordance with the applicable accounting policy. Cash collateral received in respect of securities lent is recognised as a financial liability. Securities borrowed under securities borrowing agreements are not recognised. Cash collateral placements in respect of securities borrowed are recognised under loans and advances to either banks or customers. Income and expenses arising from the securities borrowing and lending business are recognised on an accrual basis over the period of the transactions and are included in interest income or expense (net interest income). E2. Repurchase agreements The Bank performs acquisition/sale of securities under reselling/repurchase agreements of securities substantially equivalent in a future date at a predetermined price ('repos'/'reverse repos'). The securities related to reselling agreements in a future date are not recognised in the balance sheet. The amounts paid are recognised in loans and advances to customers or loans and advances to credit institutions. The receivables are collateralised by the related securities. Securities sold through repurchase agreements continue to be recognised in the balance sheet and are revaluated in accordance with the applicable accounting policy. The amounts received from the proceeds of these securities are considered as deposits from customers and deposits from credit institutions. The difference between the acquisition/sale and reselling/repurchase conditions is recognised on an accrual basis over the period of the transaction and is included in interest income or expenses. F. Investments in subsidiaries and associates Investments in subsidiaries and associates are accounted for in the Bank's financial statements at their historical cost less any impairment losses. Subsidiaries are entities controlled by the Bank (including investment funds and securitization vehicles). The Bank controls an entity when it holds the power to designate the relevant activities of the entity, and when it is exposed or has rights to variable returns from its involvement with the entity and is able to take possession of those results through the power it holds over the relevant activities of that entity (de facto control). 2023 REPORT & ACCOUNTS 486 | Investments in associates Associates are those entities in which the Bank has significant influence but not control over the financial and operating policy decisions of the investee. It is assumed that the Bank has significant influence when it holds, directly or indirectly, 20% or more of the voting rights of the investee. If the Bank holds, directly or indirectly less than 20% of the voting rights of the investee, it is presumed that the Bank does not have significant influence, unless such influence can be clearly demonstrated. The existence of significant influence by the Bank is usually evidenced in one or more of the following ways: – representation on the Board of Directors or equivalent governing body of the investee; – participation in policy-making processes, including participation in decisions about dividends or other distributions; – material transactions between the Bank and the investee; – interchange of the management team; or – provision of essential technical information. Impairment The recoverable amount of the investments in subsidiaries and associates is assessed annually, with reference to the end of the year or whenever exists any impairment triggers. Impairment losses are calculated based on the difference between the recoverable amount of the investments in subsidiaries and associates and their book value. Impairment losses identified are charged against results and subsequently, if there is a reduction of the estimated impairment loss, the charge is reversed, in a subsequent period. The recoverable amount is determined based on the higher between the assets value in use and the fair value deducted of selling costs, calculated using valuation methodologies supported by discounted cash flow techniques, considering market conditions, the time value of money and the business risks. Merger of companies The process of merging companies by incorporation corresponds to the incorporation of the assets and liabilities of a company (merged) into another company (acquirer). In the event that the Bank is the acquirer company and the merged company is controlled by the Bank, the merger is classified as a transaction between companies under common control, and the Bank uses the denominated ‘predecessor approach’ as a criterion for recording in its individual accounts, which consists of recording the assets and liabilities of the merged company at their book value as presented in the Bank's consolidated accounts. This criterion provides for intra-group balances and historical transactions between the two companies to be eliminated and the amounts regarding assets and liabilities to be adjusted accordingly. The net difference between the amount recorded by the Bank and the amounts of the assets and liabilities incorporated is recorded as a “Merger reserve”. G. Non-current assets held for sale and Discontinued or discontinuing operations Non-current assets, groups of non-current assets held for sale (groups of assets together with related liabilities that include at least a non-current asset) and discontinued operations are classified as held for sale when the intention is to sell the referred assets and liabilities and when the referred assets or group of assets are available for immediate sale, subject to the terms of sale usually applicable to these types of assets, and its sale is highly probable, in accordance with IFRS 5. For the sale to be considered highly probable, the Bank must be committed to a plan to sell the asset (or disposal group) and must have initiated an active program to locate a buyer and complete the plan. In addition, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. Furthermore, it should be expected that the sale qualifies for recognition as a completed sale within one year from the date of classification, except as permitted by paragraph 9 of IFRS 5, and that the Bank remains committed to the asset sales plan and the delay is caused by events or circumstances beyond its control. If the requirements set out in IFRS 5 for these assets are not met, the balance sheet value and respective impairment are reflected in the caption "Other assets". In 2023, a group of properties was reclassified, as described in notes 24 and 28. 2023 REPORT & ACCOUNTS | 487 The Bank also classifies as non-current assets held for sale those non-current assets or groups of assets acquired exclusively with a view to its subsequent disposal, which are available for immediate sale and its sale is highly probable. Immediately before classification as held for sale, the measurement of the non-current assets or all assets and liabilities in a disposal group, is performed in accordance with the applicable IFRS. After their reclassification, these assets or disposal groups are measured at the lower of their cost and fair value less costs to sell. G1. Non-operating real estate (INAE) The Bank also classifies as non-current assets held for sale the non-operating real estate (INAE), which include properties acquired by the Bank as a result of the resolution of customer credit processes, as well as own properties that are no longer used by the Bank's services. At the time of acquisition, real estate classified as INAE is recognised at the lower of the value of the loans existing on the date on which the recovery occurs, or the judicial decision is formalised, and the fair value of the property, net of estimated costs for sale. Subsequent measurement of INAE is made at the lower of their book value and the corresponding fair value, net of the estimated costs for their sale and are not subject to amortisation. Impairment losses are recorded in the results of the period in which they arise. The fair value is determined based on the market value, which is determined based on the expected sales price obtained through periodic evaluations made by expert external evaluators accredited to the Comissão do Mercado de Valores Mobiliários (CMVM). Whenever the net fair value of the selling costs calculated for an INAE is less than the amount by which the same is recognised in the Bank's balance sheet, an impairment loss is recorded in the amount of the decrease in value ascertained. Impairment losses are recorded against income for the year. If the net fair value of the selling costs of an INAE, after recognition of impairment, indicates a gain, the Bank may reflect that gain up to the maximum of the impairment that has been recorded on that property. H. Lease transactions (IFRS 16) This standard establishes the requirements regarding the scope, classification/recognition and measurement of leases: – from the lessor's perspective, leases will continue to be classified as finance leases or operating leases; – from the lessee’s perspective, the standard defines a single model of accounting for lease contracts, which results in the recognition of a right-of-use asset and a lease liability for all leases, except for those which the lease term ends within 12 months or for those which the underlying asset is of low-value and, in these cases, the lessee may opt for the exemption from recognition under IFRS 16, and shall recognise the lease payments associated with these leases as an expense. The Bank chose not to apply this standard to short-term lease contracts, i.e. contracts with a term shorter than or equal to one year, and to lease contracts in which the underlying asset’s value is below Euros 5,000. Additionally, this standard was not applied to leases of intangible assets. Lease definition The lease definition focuses on the control of the identified asset, establishing that a contract constitutes or contains a lease if it carries the right to control the use of an identified asset, i.e., the right to obtain substantially all the economic benefits of using it, and the right to choose how to use the identified asset over a period in exchange of a payment. 2023 REPORT & ACCOUNTS 488 | Impacts from the lessee’s perspective The Bank recognises for all leases, except for those with a term under 12 months or for leases of low-value assets: – a right-of-use asset initially measured at cost must consider the Net Present Value (NPV) of the lease liability plus the value of payments made (fixed and/or variable), deducted from any lease incentives received, penalties for terminating the lease (if reasonably certain), as well as any cost estimates to be supported by the lessee with the dismantling and removal of the underlying asset and/or with the recovery of its location. Subsequently, it will be measured according to the cost model (subject to depreciations/amortisations and impairment tests); – a lease liability initially recorded at the present value of the remaining lease payments (NPV), which includes: – fixed payments deducted from any lease incentives receivable; – variable lease payments that depend on a rate or an index, initially measured considering the rate or index as at the commencement date; – amounts expected to be paid by the lessee under residual values guarantees; – the exercise price of a purchase option, if the lessee is reasonably certain to exercise that option; – payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to end the lease. Since it is not possible to easily determine the implicit interest rate in the lease (paragraph 26 of IFRS 16), lease payments are discounted according to the lessee’s incremental borrowing rate, which embodies the risk-free rate curve (swap curve) plus the Bank’s spread of risk, applied over the weighted average term of each lease contract. For term contracts, that date is considered as the end of lease date, while for contracts without term, or with renewable terms, it is assessed using the date in which the contract is enforceable, as well as eventual economic penalties associated with the lease contract. In the evaluation of enforceability, the particular clauses of the contracts are considered, as well as the current law on Urban Leases. Subsequently, lease payments are measured as follows: – by increasing their carrying amount to reflect interest; – by reducing their carrying amount to reflect lease payments; – carrying amount shall be remeasured to reflect any leases’ revaluations or changes, as well as to reflect the review of in-substance fixed payments and the review of the lease term. The Bank remeasures the lease liability (and makes a corresponding adjustment to the right-of-use asset) whenever: – the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using the revised discount rate; – the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); – a lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using the revised discount rate. The Bank did not make any adjustment during the periods presented. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If the lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Bank expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. 2023 REPORT & ACCOUNTS | 489 The implementation of this standard implies changes in the Bank’s financial statements, namely: – in the income statement: (i) recording in “Interest Income” the interest expenses related to lease liabilities; (ii) recording in “Other administrative costs” the amounts related to short-term lease contracts and to lease contracts of low-value assets; and, (iii) recording in “Amortisations and depreciations” the depreciation expenses related to right-to-use assets. – in the balance sheet: (i) recording in “Other tangible assets” the recognition of right-to-use assets; and, (ii) recording in “Other liabilities” the amount of recognised lease liabilities. – in the statement of cash flows, the balance “Cash flows arising from operating activities – Payments (cash) to suppliers and employees” includes amounts related to short-term lease contracts and to lease contracts of low- value assets, and the balance “Cash flows arising from financing activities - Decrease in other sundry liabilities and non-controlling interests” includes amounts related to payments of lease liabilities’ capital portions, as detailed in the separate statement of cash flows. Impact from the lessor’s perspective In accordance with IFRS 16, paragraph 62, lessors shall classify leases as finance or operational leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards inherent to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards inherent to ownership of an underlying asset. Subleases A sublease implies that the lessee establishes a lease contract with a third party, which acts as an intermediary, and the lease contract with the original lessor is kept in force. IFRS 16 – Leases requires that the lessor evaluates subleases regarding right-to-use and not regarding the underlying asset. The sublease’s lessor, simultaneously lessee regarding the original lease, shall recognise an asset in the financial statement – a right-to-use related to the initial lease (if the lease is classified as operating) or a financial asset, measured according to IFRS 9, related to the sublease (if the lease is classified as financing). In case the primary lease is short-term, then the sublease should be classified as an operating lease. I. Recognition of income from services and commissions In accordance with IFRS 15, the Bank recognizes revenue associated with services and commissions when (or as) a performance obligation is satisfied when transferring a service, based on the transaction price associated with this performance obligation. In this context, the Bank takes the following steps to recognize revenue associated with services and commissions: – Recognition (satisfaction of the performance obligation): (i) identification of the contract associated with the service provided and whether it should be covered by IFRS 15; (ii) identification of performance obligations associated with each contract; (iii) definition of the criteria for the fulfilment of performance obligations, also considering the contractual terms established with the counterparty. According to this definition, a service is transferred when the customer obtains the benefits and control associated with the service provided. In this context, the Bank also identifies whether performance obligations are met over time (“over time”) or at an exact moment (“point in time”), with revenue being recognized accordingly. – Measurement (price to be recognized associated with each performance obligation): (i) determine the transaction price associated with the service provided, considering the contractual terms established with the counterparty and its usual commercial practices. The transaction price is the amount of consideration to which the Bank expects to be entitled in exchange for transferring promised services to the customer, excluding amounts collected on behalf of third parties. The Bank includes in the transaction price part or all of the estimated amount of the variable consideration associated with a performance obligation, only to the extent that it is highly probable that a significant reversal in the amount of the accrued revenue recognized will not occur when the uncertainty associated with that variable consideration is subsequently resolved; and (ii) allocate the transaction price to each of the performance obligations identified under the contract established with the customer. It should be noted that when services or commissions are an integral part of the effective interest rate of a financial instrument, income resulting from services and commissions is recorded in net interest income (Note B.3). 2023 REPORT & ACCOUNTS 490 | J. Gains/(losses) on financial operations at fair value through profit or loss, Foreign exchange gains/(losses), Gains/(losses) on hedge accounting, Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss These balances include gains and losses on financial assets and liabilities at fair value through profit and loss, i.e., fair value changes and interest on trading derivatives and embedded derivatives, as well as the corresponding dividends received. This balance also includes the gains and losses on sale of financial assets at fair value through other comprehensive income and financial assets and financial liabilities at amortised cost. The changes in fair value of hedging derivatives and hedged items, when fair value hedge is applicable, are also recognised in this balance, as well as the foreign exchange gains or losses. K. Fiduciary activities Assets held in the scope of fiduciary activities are not recognised in the Bank’s financial statements. Fees and commissions arising from this activity are recognised in the income statement in the period in which they occur. L. Other tangible assets Other tangible assets are stated at acquisition cost less accumulated depreciation and impairment losses. Subsequent costs are recognised as a separate asset only when it is probable that future economic benefits will result for the Bank. All other repairs and maintenance expenses are charged to the income statement during the financial period in which they are incurred, under the principle of accrual-based accounting. Depreciation is calculated on a straight-line basis, over the following periods which correspond to their estimated useful life: Number of years Buildings 50 Expenditure on freehold and leasehold buildings 10 Equipment 4 to 12 Other tangible assets 3 Whenever there is an indication that a fixed tangible asset might be impaired, its recoverable amount is estimated and an impairment loss shall be recognised if the net value of the asset exceeds its recoverable amount. The recoverable amount is determined as the highest between the fair value less costs to sell and its value in use calculated based on the present value of future cash flows estimated to be obtained from the continued use of the asset and its sale at the end of the useful life. The impairment losses of the fixed tangible assets are recognised in the income statement of the period. M. Investment properties Real estate properties owned by the Bank are recognised as ‘Investment properties’, considering that the main objective of these buildings is their capital appreciation on a long-term basis and not their sale in a short-term period, nor their maintenance for own use. These investments are initially recognised at their acquisition cost, including transaction costs, and subsequently revaluated at their fair value. The fair value of investment properties should reflect the market conditions at the balance sheet date. Changes in fair value are recognised in the income statement, as "Other operating income/ (losses)" (note 6). The experts responsible for the valuation of the assets are properly certified for that purpose, being registered in CMVM. 2023 REPORT & ACCOUNTS | 491 N. Intangible assets N1. Research and development expenditure The Bank does not capitalise any research and development costs. All expenses are recognised as costs in the period in which they occur. N2. Software The Bank recognises as intangible assets the costs associated to software acquired from external entities, and depreciates them on a straight-line basis by an estimated lifetime of 6 years. The Bank does not capitalise internal costs arising from software development. O. Cash and cash equivalents For the purposes of the cash flow statement, the item “Cash and cash equivalents” comprises balances with less than three months maturity from the balance sheet date, where the items "Cash and deposits at Central Banks" and "Loans and advances to credit institutions" are included. P. Offsetting Financial assets and liabilities are offset and recognised at their net book value when: i) the Bank has a legal right to offset the amounts recognised and transactions can be settled at their net value; and, ii) the Bank intends to settle on a net basis or realize the asset and settle the liability simultaneously. Considering the current operations of the Bank, no compensation of material amount is made. In case of reclassification of comparative amounts, the provisions of IAS 1.41 are disclosed: i) the nature of the reclassification; ii) the amount of each item (or class of items) reclassified; and, iii) the reason for the reclassification. Q. Foreign currency transactions Transactions in foreign currencies are converted into the respective functional currency of the operation at the foreign exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are converted into the respective functional currency of the operation at the foreign exchange rate on the reporting date. Foreign exchange differences arising from conversion are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are converted into the respective functional currency of the operation at the foreign exchange rate on the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are converted into the respective functional currency of the operation at the foreign exchange rate on the date that the fair value was determined against profit and loss, except for financial assets at fair value through other comprehensive income, for which the difference is recognised against equity. R. Employee benefits R1. Defined benefit plans The Bank has the responsibility to pay its employees' retirement pensions, invalidity pensions and survivor's pensions for their death, in accordance with the terms of the two collective labour agreements approved. These benefits are provided for in the pension plans ‘Plano ACT’ and ‘Plano ACTQ’ of the Banco Comercial Português Group Pension Fund. Following the publication of Decree-Law no. 54/2009, of 2 March, banking entities are obligatorily enrolling new employees in the General Social Security System (RGSS). These employees have the RGSS as their basic retirement scheme, and do not have any benefits under the ACT (base plan). Under the scope of its management and human resources, the Bank had already adopted as a rule the inclusion of new employees in the RGSS since July 2005. However, until the transposition into the ACT of the alterations resulting from the referred Decree-Law no. 54/2009, all employees were covered by the provisions of the social security chapter of the ACT, and for employees who were already registered with the RGSS, the ACT benefit worked as a complement to the RGSS. As of 1 July 2009, in accordance with the ACT, all new employees only have the RGSS as their basic social security scheme. 2023 REPORT & ACCOUNTS 492 | Until 2011, in addition to the benefits provided for in the two plans above-mentioned, the Bank had assumed the responsibility, if certain conditions of profitability were verified in each year, of assigning retirement supplements to the Bank's employees hired up to 21 September 2006 (Complementary Plan). The Bank, at the end of 2012, determined the extinction (cut) of the old-age benefit of the Complementary Plan. On 14 December 2012, Instituto de Seguros de Portugal (ISP) formally approved this change to the Bank's benefit plan, effective from 1 January 2012. The plan was cut, and employees were given individual acquired rights. On that date, the Bank also proceeded to the settlement of the respective liability. From 1 January 2011, Bank employees were integrated in the General Social Security Scheme which now covers their maternity, paternity, adoption and pension benefits. However, the banks remain liable for benefits that concern illness, disability and life insurance (Decree-Law no. 1-A/2011, of 3 January). The contributory rate is 26.6% divided between 23.6% supported by the employer and 3% supported by the employee, replacing the Banking Social Healthcare System which was extinguished by the decree law referred above. As a consequence of this amendment the capability to receive pensions by the actual employees are covered by the General Social Security Scheme regime, considering the service period between 1 January 2011 and the retirement age. The banks support the remaining difference for the total pension assured in the Collective Labour Agreement (ACT). This integration has led to a decrease in the present value of the total benefits reported to the retirement age to be borne by the Pension Fund, and this effect is to be recorded in accordance with the Projected Unit Credit during the average lifetime of the pension until the normal retirement age is reached. The calculation of the liability for pensions carried out periodically by the actuary considers this effect and is calculated considering the actuarial assumptions in force, ensuring that the liabilities calculated with reference to 31 December 2010, not considering the effect of the integration of bank employees into the General Social Security Scheme are fully covered and deducted from the amount of the effect recognised until the date. The component of this effect for the year is recognised under the heading "Current service costs". Following the approval by the Government of the Decree-Law no. 127/2011, which was published on 31 December, an agreement was established between the Government, the Portuguese Banking Association and the Banking Labour Unions in order to transfer, to the Social Security, the liabilities related to pensions currently being paid to pensioners and retirees, as at 31 December 2011. This agreement established that the responsibilities to be transferred related to the pensions in payment as at 31 December 2011 at fixed amounts (discount rate 0%) in the component established in the IRCT - Instrument of Collective Regulation of Work of the retirees and pensioners. The responsibilities related to the increase in pensions as well as any other complements namely, contributions to the Health System (SAMS), death benefit and death before retirement benefit continued to be under the responsibility of the Financial Institutions. At the end of December 2016, a revision of the ACT was reached between the BCP Group and four unions from the two union federations of the unions that represent the Group's employees, which introduced changes in the Social Security clause and consequently in the pension plan financed by the BCP Group Pension Fund. The new ACT was published by the Ministry of Labour in the Bulletin of Labour and Employment on 15 February 2017 and the effects were recorded in the financial statements of 31 December 2016, for employees associated with these four unions. The negotiation with Sindicato dos Bancários do Norte (SBN), which was also involved in the negotiations of the new ACT, was concluded in April 2017 with the publication of the Bulletin of Labour and Employment, with the effects of this new ACT recorded in the financial statements as at 31 December 2017, for employees associates of SBN. The most relevant changes in the ACT were the change in the retirement age (presumed disability) from 65 years to 66 years and two months in 2016 and the subsequent update of an additional month in each year, which cannot, in any case, be higher than the one in force at any moment in the General Regime of Social Security, the change in the formula for determining the employer's contribution to SAMS and, lastly, the introduction of a new benefit called the End of Career Premium, which replaces the Seniority Premium. 2023 REPORT & ACCOUNTS | 493 These changes were framed by the Bank as a change to the pension plan under the terms of IAS 19, as such had an impact on the present value of the liabilities with services rendered and were recognised in the income statement for the year under "Staff costs". In 2017, after the authorization of the Autoridade de Supervisão de Seguros e Fundos de Pensões (ASF - Portuguese Insurance and Pension Funds Supervision Authority), the BCP Group's pension fund agreement was amended. The main purpose of the process was to incorporate into the pension fund the changes introduced in the Group's ACT in terms of retirement benefits, as well as to transfer to the pension fund the responsibilities that were directly chargeable to the company (extra-fund liabilities). The pension fund has a part exclusively for the financing of these liabilities which, in the scope of the fund, is called Additional Complement. The End of Career Premium also became the responsibility of the pension fund under the basic pension plan. The Bank’s net obligation in respect of pension plans (defined benefit pensions plan) is calculated on a half year basis at 31 December and 30 June of each year, and whenever there are significant market fluctuations or significant specific events, such as changes in the plan, curtailments or settlements since the last estimation. The responsibilities with past service are calculated using the Projected Unit Credit method and actuarial assumptions considered adequate. Pension liabilities are calculated by the responsible actuary, who is certified by the ASF. The Bank’s net obligation in respect of defined benefit pension plans and other benefits is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. The benefit is discounted in order to determine its present value, using a discount rate determined by reference to interest rates of high quality corporate bonds that have maturity dates approximating the terms of the Bank’s obligations. The net obligations are determined after the deduction of the fair value of the Pension Plan's assets. The income/cost of interest with the pension plan is calculated by the Bank, multiplying the net asset/liability with retirement pension (liabilities less the fair value of the plan's assets) by the discount rate used in the determination of the retirement pension liabilities. On this basis, the income/cost net of interest includes the interest costs associated with retirement pension liabilities and the expected return of the plan's assets, both measured based on the discount rate used to calculate the liabilities. Gains and losses from the re-measurement, namely (i) actuarial gains and losses resulting from differences between actuarial assumptions used and the amounts actually observed (experienced gains and losses) and changes in actuarial assumptions and (ii) gains and losses arising from the difference between the expected return of the plan's assets and the amounts obtained, are recognised against equity under "Other comprehensive income". The Bank recognises in its income statement a net total amount that comprises (i) the current service cost, (ii) the income/cost net of interest with the pension plan, (iii) the effect of early retirement, (iv) past service costs and, (v) the effects of any settlement or curtailment occurred during the period. The net income/cost with the pension plan is recognised as interest and similar income or interest expense and similar costs depending on their nature. The costs of early retirements correspond to the increase in liabilities due to the employee's retirement before reaching the age of retirement. Employee benefits, other than pension plans, namely post-retirement health care benefits and benefits for the spouse and descendants for death before retirement are also included in the benefit plan calculation. The contributions to the funds are made annually by each company of the Group, according to a specific contribution plan that ensures the solvency of the fund. In the end of each year, according to Bank of Portugal Notice no. 12/2001, the minimum level required for the responsibilities funding must be 100% regarding pension payments and 95% regarding past services of active employees. 2023 REPORT & ACCOUNTS 494 | R2. Revision of the salary tables for employees in service and pensions in payment In 2023, negotiations continued with all the unions subscribing to the Bank's Collective Labour Agreements, for the conclusion of the full review of the respective clauses, negotiations which are still ongoing. At the same time, negotiations took place with all the unions that subscribed the Group's Collective Labour Agreements, for the review of the Salary Tables and remaining pecuniary clauses relating to the year 2023, having been agreed on 9 and 17 October with all the Unions subscribing to the Group's Collective Labour Agreements, the update of the Salary Tables in 2023 with differentiated increases by contractual level between 4.00% and 7.80%. An increase of 4.50% was agreed for the Bank's Contributions to SAMS and other pecuniary clauses, such as study subsidies, diuturnities, among others, and an increase of 21.43% was agreed for the lunch subsidy, whose daily value increased to Euros 12.75. The agreed updates took effect on January 1, 2023, with the exception of remuneration related to subsistence and travel allowances, which were updated after the agreed updates were operationalized. Regarding the unions SNQTB – Sindicato Nacional dos Quadros e Técnicos Bancários e SIB – Sindicato Independente da Banca, an agreement was also reached regarding the revision of the Salary Tables and other pecuniary clauses relating to the year 2022, as already agreed in 2022 with the remaining unions. R3. Defined contribution plan For the defined contribution plans, the responsibilities related to the benefits attributed to the Bank's employees are recognised as expenses when incurred. As at 31 December 2023, the Bank has two defined contribution plans. One plan covers employees who were hired before 1 July 2009. For this plan, called non-contributory, Bank's contributions will be made annually and equal to 1% of the annual remuneration paid to employees in the previous year. Contributions shall only be made if the following requirements are met: (i) the Bank's ROE equals or exceeds the rate of government bonds of 10 years plus 5 percentage points, and (ii) distributable profits or reserves exist in the accounts of Banco Comercial Português. In 2022 the indicated requirements were fulfilled, in 2023 the planned annual contribution was accomplished, the expect value of which was recorded in the costs of 2022. As in the year 2023, the indicated requirements were also fulfilled, a provision for the annual contribution to be made during 2024 was recorded in the 2023 costs. The other plan covers employees who have been hired after 1 July 2009. For this plan, designated contributory, monthly contributions will be made equal to 1.5% of the monthly remuneration received by employees in the current month, either by themselves or by the Bank and employees. This contribution has a mandatory character and is defined in the Collective Labour Agreement of the BCP Group and does not have a performance criterion. R4. Variable remuneration paid to employees In the remuneration policy for employees in force, it is foreseen an annual variable remuneration system for employees not covered by commercial incentive systems, based on the performance assessment of each employee, in accordance with quantitative and qualitative criteria, that is carried out annually. As a result of this assessment and of the annual fixed remuneration of reference for the role performed, and provided that the Bank's minimum level of performance, as measured by a set of quantitative indicators, is met, the amount of the variable remuneration to be attributed to each employee is determined. The Executive Committee is responsible, under the terms defined in the remuneration policy, for setting the respective allocation criteria for each employee, whenever it is attributed. The variable remuneration attributed to employees is recorded against the income statement in the period to which it relates. R5. Share-based compensation plan As at 31 December 2023, a variable compensation plan with BCP shares is in force for the members of the Executive Committee and for the employees considered Key Function Holders (includes Key Management Members), resulting from the Remuneration Policies for the members of the management and supervisory bodies and for the Employees, both approved for the financial year of 2023 and following years, with the changes that may be approved in each financial year, namely by the General Shareholders’ Meeting regarding the Remuneration Policy for the members of the management and supervisory bodies, and by the Board of Directors regarding the Remuneration Policy for Employees. 2023 REPORT & ACCOUNTS | 495 Key Function Holders include Key Management Members, which are the first line directors who report directly to the Board of Directors and the remaining employees whose professional activities have a significant impact on the Bank's risk profile. As defined in the Remuneration Policy for the members of the management and supervisory bodies, an annual variable remuneration system is foreseen, for which an assessment of the performance of each member of the Executive Committee is carried out on an annual basis based on quantitative and qualitative criteria. According to this assessment and the annual fixed remuneration, and provided that the Bank's minimum level of performance as measured by a set of quantitative indicators is met, the amount of the variable remuneration to be attributed to each member of the Executive Committee is decided by the Remuneration and Welfare Board. The payment of the amount of the variable remuneration attributed is subject to a deferral period of 5 years for 50% of its value, being 50% of its value paid in the year following the financial year in question. The amounts related to the non-deferred and deferred portion are paid 50% in cash and 50% in BCP shares. The number of BCP shares attributed results from their valuation at a price defined in accordance with the approved Remuneration Policy. The Remuneration Policy for Employees foresees an annual variable remuneration system for Employees not covered by Commercial Incentives Systems, based on the performance assessment of each employee, in accordance with quantitative and qualitative criteria, that is carried out annually. As a result of this assessment and the fixed reference remuneration for the function performed, and provided that the Bank's minimum level of performance in a set of quantitative indicators is met, the value of the variable remuneration to be attributed to each Employee is decided by the Executive Committee. For Employees considered as Key Function Holders, the payment of the amount of the variable remuneration to be attributed to each Employee is decided by the Nominations and Remunerations Committee, and its payment subject to a deferral period of 5 years for 40% of its value, with 60% of its value paid in the year following the financial year in question. The amounts related to the non-deferred and deferred portion are paid 50% in cash and 50% in BCP shares. The number of BCP shares attributed and to be attributed results from their valuation at a price defined in accordance with the approved Remuneration Policy. As provided for in the Remuneration Policy for Employees, if the amount of the annual variable remuneration awarded to a Key Function Holder is less than Euros 50,000 and does not represent more than one third of the total annual remuneration of the Key Function Holder the payment of the annual variable remuneration will be 100% in cash and there will be no deferral. Employees considered as Key Function Holders are not covered by Commercial Incentives Systems. For the remaining Employees not covered by Commercial Incentive Systems, the payment of the variable remuneration amount awarded is fully paid in cash in the following year to which it relates. As foreseen in the approved Remuneration Policy and in the applicable legislation, the amounts of variable remuneration attributed to the members of the Executive Committee and to the Employees Key Function Holders are subject to reduction and reversal mechanisms, to be applied in case of verification of extremely significant events, duly identified, in which the people covered have had a direct participation. For the members of the Executive Committee and to the employees considered as Key Function Holders, a long-term variable remuneration system is also foreseen, through which these members may receive variable remuneration fully paid in BCP shares after the end of the assessment period, from 1 January 2022 until 31 December 2025 (from 1 January 2023 until 31 December 2025 to the Employees Key Function Holders), provided that a certain level of performance is achieved in a set of long-term objectives. The amount of the long-term variable remuneration attributed is subject to a deferral period of 5 years for 50% of its value, being 50% of its value paid in the year following the assessment period to which it relates. The number of BCP shares attributed results from their valuation at a price defined in accordance with the approved Remuneration Policy. All the shares attributed to the members of the Executive Committee and to the Key Function Holders, within the scope of the payment of variable remuneration, including long-term, are subject to a retention period of 1 year after their payment. The total variable remuneration to be attributed, each year, to each member of the Executive Committee and to the Key Function Holders, regarding the proportion between its amount and the annual fixed remuneration, is limited to the limits provided in the respective Remuneration Policy. 2023 REPORT & ACCOUNTS 496 | S. Income taxes The Bank is subject, in individual terms, to the regime established by the Corporate Income Tax Code (CIRC), the Special Regime applicable to Deferred Tax Assets approved by Law no. 61/2014 of 26 August, to which it adhered, and individual legislation. Additionally, deferred taxes relating to tax losses and to temporary differences between the accounting net income and the net income accepted by the Tax Authorities for Income Taxes calculation are accounted for, whenever there is a reasonable probability that these taxes will be paid or recovered in the future. Income tax registered in net income for the year comprises current and deferred tax effects. Income tax is recognised in the income statement, except when related to items recognised directly in equity, which implies its recognition in equity. Deferred taxes arising from the revaluation of financial assets at fair value through other comprehensive income and cash flow hedging derivatives are recognised in shareholders’ equity and are recognised after in the income statement at the moment the profit and loss that originated the deferred taxes are recognised. Current tax is the value that determines the taxable income for the year, using tax rates enacted or substantively enacted by authorities at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred taxes are calculated in accordance with the liability method based on the balance sheet, considering temporary differences, between the carrying amounts of assets and liabilities and the amounts used for taxation purposes using the tax rates approved or substantially approved at balance sheet date and that is expected to be applied when the temporary difference is reversed. Deferred tax liabilities are recognised for all taxable temporary differences except for non-deductible goodwill for tax purposes, differences arising from initial recognition of assets and liabilities that affect neither accounting nor taxable profit and differences relating to investments in subsidiaries to the extent that probably they will not reverse in the foreseeable future. The item “Deferred tax assets” includes amounts associated with credit impairments not accepted for tax purposes whose credits have been written-off, according to the expectation that the use of such impairments will be deductible for the purposes of determining taxable income for the tax periods in which the legal conditions required for their tax deductibility are met. Deferred tax assets are recognised when it is probable that there will be future taxable profits that absorb the deductible temporary differences for tax purposes (including reportable tax losses). The Bank, as established in IAS 12, paragraph 74, compensates the deferred tax assets and liabilities if, and only if: (i) it has a legally enforceable right to offset current tax assets and current tax liabilities; and, (ii) the deferred tax assets and the deferred tax liabilities relate to income taxes released by the same Tax Authority on either the same taxable entity. The Bank complies with the guidelines of IFRIC 23 – Uncertainty over Income Tax Treatments on the determination of taxable profit, tax bases, tax losses to be reported, tax credits to be used and tax rates in scenarios of uncertainty regarding the income tax treatment, not having occurred any material impact on the Bank’s financial statements resulting from its application. In 2016, the Bank adhered to the Special Tax Regime for Groups of Companies (RETGS) for the purposes of corporate income (IRC) taxation, with BCP being the dominant entity. In the financial years of 2023 and 2022, RETGS application was maintained. The bank's taxable profit is calculated by the algebraic sum of taxable profits and individual tax losses of the companies that integrate it. T. Segmental reporting The Bank adopted IFRS 8 – Operating Segments for the purpose of disclosing financial information by operating and geographic segments. A business segment is a Bank's component: (i) which develops business activities that can obtain revenues or expenses; (ii) whose operating results are regularly reviewed by the management with the aim of taking decisions about allocating resources to the segment and assess its performance; and, (iii) for which separate financial information is available. 2023 REPORT & ACCOUNTS | 497 Since the separate financial statements are presented with the Group's report, in accordance with paragraph 4 of IFRS 8, the Bank is exempt of presenting information on an individual basis regarding segmental reporting. U. Provisions, Contingent liabilities and Contingent assets U1. Provisions Provisions are recognised when (i) the Bank has a present obligation (legal or resulting from past practices or published policies that imply the recognition of certain responsibilities); (ii) it is probable that a payment will be required to settle; and, (iii) a reliable estimation can be made of the amount of the obligation. Additionally, when fundamental reorganizations occur that have a material effect on the nature and focus of the company's operations, and the criteria for recognition of provisions referred to above are met, provisions are recognized for restructuring costs. The measurement of provisions considers the principles set in IAS 37 regarding the best estimate of the expected cost, the most likely result of current actions and considering the risks and uncertainties inherent to the process result. On the cases that the discount effect is material, provision corresponds to the actual value of the expected future payments, discounted at a rate that considers the associated risk of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the best estimate, being reverted through profit and loss in the proportion of the payments that are not probable. Provisions are derecognised through their use in the obligations for which they were initially created, or in the case that these obligations cease to exist. U2. Contingent assets Contingent assets are not recognised in the financial statements and are disclosed when a future economic inflow of resources is probable. U3. Contingent liabilities Contingent liabilities are not recognised in the financial statements, being framed under IAS 37 whenever the possibility of an outflow of resources regarding economic benefits is not remote. The Bank registers a contingent liability when: i) it is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events that are not wholly within the control of the Bank; or, ii) it is a present obligation that arises from past events but is not recognised because: a) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or, b) the amount of the obligation cannot be measured with sufficient reliability. The contingent liabilities identified are subject to disclosure, unless the possibility of an outflow of resources incorporating economic benefits is remote. V. Earnings per share Basic earnings per share are calculated by dividing net income attributable to shareholders of the Bank by the weighted average number of ordinary shares outstanding, excluding the average number of ordinary shares purchased by the Bank and held as treasury shares. For the diluted earnings per share, the weighted average number of ordinary shares outstanding is adjusted to consider conversion of all dilutive potential ordinary shares. Potential or contingent share issues are treated as dilutive when their conversion to shares would decrease net earnings per share. If the earnings per share are changed as a result of an issue with premium or discount or other event that changed the potential number of ordinary shares or as a result of changes in the accounting policies, the earnings per share for all presented periods should be adjusted retrospectively. 2023 REPORT & ACCOUNTS 498 | W. Insurance or reinsurance intermediation services Banco Comercial Português is an entity authorized by the Insurance and Pension Funds Supervisory Authority (ASF - Autoridade de Supervisão de Seguros e Fundos de Pensões) for the practice of the activity of insurance mediation, in the category of tied Insurance Intermediary, in accordance with article 8(a)(i) of Decree-Law no. 144/2006, of 31 July, developing the activity of insurance intermediation in the life and non-life branches. Within the scope of insurance mediation services, the Bank sell insurance contracts. As remuneration for the services provided of insurance mediation, they receive commissions for the mediation of insurance contracts and investment contracts, which are defined in agreements/protocols established with the Insurers. Commissions received by insurance mediation services are recognized in accordance with the accrual principle, so that commissions received at a time other than the period to which it relates are recorded as receivables under "Other assets". Commissions received for insurance mediation services are recognized in accordance with the policy described in note I. Recognition of income from services and commissions. X. Accounting estimates and judgments in applying accounting policies IFRS set forth a range of accounting treatments that require the Board of Directors, under advice of the Executive Committee, to apply judgments and to make estimations when deciding which treatment is the most appropriate. These estimates were made considering the best information available at the date of preparation of the consolidated financial statements, considering the context of uncertainty that results from the current economic scope and the geopolitical conflict in Eastern Europe. The most significant of these accounting estimates and judgments used when applying accounting principles are discussed in this section to improve understanding of how they affect the Bank’s reported results and related disclosure. Considering that in some cases there are several alternatives to the accounting treatment chosen by the Board of Directors, under advice of the Executive Committee, the Bank’s reported results would differ if a different treatment was chosen. The Executive Committee believes that the choices made are appropriate and that the financial statements present the Bank’s financial position and results fairly in all material relevant aspects. The alternative outcomes discussed below are presented solely to assist the reader in understanding the financial statements and are not intended to suggest that other alternatives or estimations would be more appropriate. X1. Income taxes Interpretations and estimations were required to determine the total amount of income taxes on profits. There are many transactions and calculations for which the tax determination is uncertain during the ordinary course of business. Different interpretations and estimations could result in a different level of income taxes, current and deferred, recognised in the year. This aspect assumes greater relevance for the purposes of the analysis of the recoverability of deferred taxes, in which the Bank considers projections of future taxable income based on a set of assumptions, including the estimate of income before tax, adjustments to taxable income, evolution of tax legislation and its interpretation. Thus, the recoverability of deferred tax assets depends on the implementation of the Bank's Board of Directors strategy, namely the ability to generate the estimated taxable income, the evolution of tax law and its interpretation. The Law No. 98/2019, of 4 September established the tax regime for credit impairments and provisions for guarantees for tax periods beginning on or after 1 January 2019, providing for approximation between the accounting and tax rules for the purposes of deductibility of expenses with the reinforcement of credit impairments. The rules in force until 2018 could continue to be applied until the end of the 2023 financial year, unless the option to apply the new regime was exercised in advance. 2023 REPORT & ACCOUNTS | 499 In 2022, the Bank exercised the option to apply the new regime, under the terms of which the impairment losses for credit risk relating to exposures analysed on an individual or on a collective basis recognized in accordance with the applicable accounting standards and regulations are fully deductible for the purposes of determining taxable profit, with the exceptions provided for in the Corporate Income Tax Code. The exceptions apply to impairment losses relating to credits and other rights over natural or legal persons who hold, directly or indirectly, more than 10 % of the Bank's capital, over members of its corporate bodies, over companies in which the Bank holds, directly or indirectly, more than 10 % of the capital or over entities with which it is in a situation of special relations. The Impairment losses and other value corrections for specific credit risk recorded until 31 December 2021 and still not accepted for tax purposes are only deductible up to the amount that, in each tax period, corresponds to the application of the mandatory minimum limits set out in Notice of Bank of Portugal No. 3/95, as amended before its repeal by Notice of Bank of Portugal No. 5/2015, and, between other conditions, provided that they are not credits covered by real estate rights. Following the amendments provided for in Law No. 24-D/2022, of 30 December, within the scope of the State Budget for 2023, the time limit applicable to the carrying forward of tax losses in Portugal was eliminated. This amendment applies to tax losses calculated in tax periods beginning on or after 1 January 2023, as well as to tax losses calculated in tax periods prior to 1 January 2023 and whose deduction period is still in progress on that date. Thus, tax losses calculated in 2014 and subsequent years may be deducted from future taxable income. The deduction limit for tax losses went from 70% to 65%, being increased by ten percentage points when the difference results from the deduction of tax losses calculated in the 2020 and 2021 tax periods, under the terms of the special regime provided for in Law n. 27-A/2020, of 24 July. In the projections of future taxable income, namely for purposes of the analysis of the recoverability of deferred taxes assets carried out with reference to 31 December 2023, the approximation between the accounting and tax rules provided for in the aforementioned Law n.º 98/2019, of 4 September, taking into account the option for applying the new regime exercised in 2022, as well as the changes in terms of the elimination of the time limit on the use of tax losses provided for in said Law no. 24-D/2022, of 30 December. The taxable profit or tax loss calculated by the Bank can be corrected by the Portuguese tax administration within a period of four years, except in the case of any tax losses deduction has been made or tax credit has been used, in which the expiry period is the exercise of that right. The Bank recorded provisions, current tax liabilities or deferred taxes liabilities in the amount it considers appropriate to cover tax corrections or tax losses incurred, as well as contingencies relating to years not yet reviewed by the tax authorities. X2. Valuation of real estate recorded in Non-current assets held for sale and in Others assets The valuation of these assets, and consequently the impairment losses, is supported by evaluations carried out by external experts, which incorporate several assumptions, namely the selling price per square meter, discount rate, better use of the real estate and expectations regarding the development of real estate projects, as applicable, and also considers the Bank's historical experience in the commercialization of real estate, its perspectives on the evolution of the real estate market and the intentions of the management body regarding the commercialization of these assets. The assumptions used in the valuations of these assets have an impact on their valuation and consequently on the determination of impairment. X3. Pension and other employees’ benefits Determining pension liabilities requires the use of assumptions and estimations, including the use of actuarial projections, estimated returns on investment, and other factors, such as discount rate, pensions and salary growth rates, mortality tables, that could impact the cost and liability of the pension plan. The discount rate used to update the Bank's pension fund liabilities, regarding the defined benefit pension plans of its employees and managers, was determined based on an analysis carried out on a set of available information, which includes, among other elements, the market references for this indicator published by internationally recognized specialized entities and which are based, as defined by IAS 19, on market yields of a universe of high quality bond issues (low risk), different maturities, called in Euros and relating to a diverse and representative range of issuers (non- sovereign). X4. Financial instruments – IFRS 9 X4.1. Classification and measurement The classification and measurement of financial assets depends on the results of the SPPI test (analysis of the characteristics of the contractual cash flows to determine if they correspond only to payments of principal and interest on the outstanding capital) and the testing of the business model. 2023 REPORT & ACCOUNTS 500 | The Bank determines the business model at a level that reflects how financial asset groups are managed together to achieve a specific business objective. This evaluation requires judgment, since the following aspects, among others, must be considered: the way in which the performance of assets is evaluated; the risks that affect the performance of the assets and the way these risks are managed; and how asset managers are rewarded. The Bank monitors the financial assets measured at amortised cost and at fair value through other comprehensive income that are derecognised prior to their maturity to understand the underlying reasons for their disposal and to determine whether they are consistent with the purpose of the business model defined for these assets. This monitoring is part of a process of continuous evaluation by the Bank of the business model of the financial assets that remain in the portfolio, to determine if it is adequate and, if it is not, if there was a change in the business model and, consequently, a prospective classification change of these financial assets. X4.2. Impairment losses on financial assets at amortised cost and debt instruments at fair value through other comprehensive income The determination of impairment losses on financial instruments involves judgments and estimations regarding, among others, the following: Significant increase in credit risk: Impairment losses correspond to the expected losses on a 12-month for the assets in Stage 1 and the expected losses considering the probability of a default event occurring at some point up to the maturity date of the instrument financial assets for assets in Stages 2 and 3. An asset is classified in Stage 2 whenever there is a significant increase in its credit risk since its initial recognition. In assessing the existence of a significant increase in credit risk, the Bank considers qualitative and quantitative information, reasonable and sustainable. In order to comply with the Supervisors' guidelines, namely regarding to the identification and measurement of credit risk in the context of uncertainty associated with the current geopolitical crisis, the disruption in distribution chains, rising energy costs and inflationary pressures, the Bank proceeded to record additional impairments in relation to the current models of collective impairment calculation (overlays). The exercise carried out was based on an analysis of migrations from customers identified as having the highest risk for Stage 2 and Stage 3, with the greatest impact on the corporate segment. Definition of groups of assets with common credit risk characteristics: When expected credit losses are measured on a collective basis, the financial instruments are grouped based on common risk characteristics. The Bank monitors the adequacy of credit risk characteristics on a regular basis to assess whether it maintains its similarity. This procedure is necessary to ensure that, in the event of a change in the credit risk characteristics, the asset segmentation is reviewed. This review may result in the creation of new portfolios or in transferring assets to existing portfolios that better reflect their credit risk characteristics. Definition of the number and relative weight of prospective information for each type of product/market and determination of relevant prospective information: In estimating expected credit losses, the Bank uses reasonable and sustainable forecasting information that is based on assumptions about the future evolution of different economic drivers and how each of the drivers impacts the remaining drivers. 2023 REPORT & ACCOUNTS | 501 Probability of default: The probability of default represents a determining factor in the measurement of expected credit losses and corresponds to an estimation of the probability of default in each period, which is calculated based on historical data, assumptions and expectations about future conditions. Loss given default: It corresponds to a loss estimation in a default scenario. It is based on the difference between the contractual cash flows and those that the Bank expects to receive, through the cash flows generated by the customers' business or credit collaterals. The estimation of loss given default is based on, among other aspects, the different recovery scenarios, historical information, the costs involved in the recovery process and the estimation of the valuation of collaterals associated with credit operations. X4.3. Fair value of derivative financial instruments Fair values are based on listed market prices if available, otherwise fair value is determined either by dealer price quotations (either for that transaction or for similar instruments traded) or by pricing models, based on net present value of estimated future cash flows which considers the market conditions for the underlying instruments, time value, yield curve and volatility factors. These pricing models may require assumptions or judgments in estimating their fair values. Consequently, the use of a different model or of different assumptions or judgments in applying a particular model could result in different results from the ones reported. Due to market stress conditions, the Bank needed to reallocate the risk limits, especially in the sensitivity limit of the trading portfolio and to review the stress-test scenarios and their methodologies. In the context of the uncertainty associated with the current macroeconomic framework, the calculation of fair value adjustments was revised considering liquidity discounts, the costs of closing positions (widening the buy and sell spread), credit risk, spreads of financing and increased volatility. X5. Impairment of investments in subsidiary and associated companies The Bank assesses annually the recoverable amount of investments in subsidiary and associated companies, regardless of the existence of any impairment triggers. Impairment losses are calculated based on the difference between the recoverable amount of the investments in subsidiary and associated companies and their book value. Impairment losses identified are recognised against profit and loss, being subsequently reversed by profit and loss if there is a reduction in the estimated impairment loss in a subsequent period. The recoverable amount is determined based on the highest between the value in use of the assets and the fair value deducted of selling costs, calculated using valuation methodologies supported by discounted cash flow techniques, considering market conditions, the time value of money and the business risks, which require the use of assumptions or judgments in establishing fair value estimates. The use of alternative methodologies and different assumptions and estimates could result in a different level of impairment losses recognized, with the consequent impact on the Bank’s consolidated income statement. Y. Subsequent events The Bank analyses events occurred after the balance sheet date, i.e., favourable and/or unfavourable events that occur between the balance sheet date and the date the financial statements were authorized for issue. In this context, two types of events can be identified: i) those that provide evidence of conditions that existed at the balance sheet date (events after the balance sheet date that give rise to adjustments); and, ii) those that are indicative of the conditions that arose after the balance sheet date (events after the balance sheet date that do not give rise to adjustments). Events occurred after the date of the financial statements that are not considered as adjustable events, if significant, are disclosed in the notes to the financial statements. 2023 REPORT & ACCOUNTS 502 | 2. Net interest income The amount of this account is comprised of: (Thousands of euros) 2023 2022 Interest and similar income Interest on deposits at Central Banks and on loans and advances to credit institutions repayable on demand 51,563 19,598 Interest on financial assets at amortised cost Loans and advances to credit institutions 20,295 9,633 Loans and advances to customers 1,651,364 859,008 Debt instruments 229,246 91,540 Interest on financial assets at fair value through profit or loss Financial assets held for trading 30,884 1,718 Financial assets not held for trading mandatorily at fair value through profit or loss 2,462 1,641 Financial assets designated at fair value through profit or loss 452 — Interest on financial assets at fair value through other comprehensive income 63,784 47,361 Interest on hedging derivatives 104,523 26,410 Interest on other assets 16,744 7,125 2,171,317 1,064,034 Interest expense and similar charges Interest on financial liabilities at amortised cost Resources from credit institutions (55,524) 24,472 Resources from customers (159,872) (18,693) Non subordinated debt securities issued (52,643) (39,561) Subordinated debt (52,796) (44,582) Interest on financial liabilities at fair value through profit or loss Financial liabilities held for trading Derivatives associated to financial instruments at fair value through profit or loss (32,522) (1,013) Financial liabilities at fair value through profit or loss Resources from customers (8,582) — Non subordinated debt securities issued (631) (3,565) Interest on hedging derivatives (388,260) (60,127) Interest on leasing (8,520) (2,658) Interest on other liabilities (791) (1,976) (760,141) (147,703) 1,411,176 916,331 The balance Interest on deposits at Central Banks and on loans and advances to credit institutions repayable on demand has accounted for a positive interest of Euros 11,884,000 (2022: negative interest Euros 6,572,000) associated with demand deposits with the Bank of Portugal (do not include overnight operations). The balance Interest and similar income includes the following amounts related to hedge breakages: Interest on financial assets at amortized cost - Loans and advances to customers: negative interest of Euros 32,558,000 (2022: positive interest Euros 58,153,000), Interest on financial assets at amortized cost - Debt securities: positive interest of Euros 63,964,000 (2022: positive interest Euros 30,752,000), Interest on financial assets at fair value through other comprehensive income: positive interest of Euros 10,837,000 (2022: positive interest Euros 12,004,000), no hedge breaks were recorded for customer's deposits. The balance Interest and similar income - Interest on financial assets at amortised cost - Loans and advances to customers includes the amount of Euros 50,653,000 (2022: Euros 40,659,000) related to commissions and other gains accounted for under the effective interest method, as referred in the accounting policy described in note 1.B3. This balance also includes the amount of Euros 41,263,000 (2022: Euros 38,379,000) related to interest income arising from customers classified in stage 3. 2023 REPORT & ACCOUNTS | 503 In 2022, the balance Interest expense and similar charges - Interest on financial liabilities at amortised cost - Resources from credit institutions had recorded a negative cost of Euros 41,555,000 associated with the TLTRO III operation described in note 29. The balances Interest on non-subordinated debt securities issued and Interest on subordinated debt include the amount of Euros 979,000 and Euros 712,000, respectively (2022 : Euros 608,000 and Euros 970,000, respectively) related to commissions and other costs accounted for under the effective interest method, as referred in the accounting policy described in note 1.B3. The balance Interest on leasing refers to the interest cost related to the leasing liabilities recognised under IFRS 16, as referred in accounting policy described 1.H. 3. Dividends from equity instruments The amount of this account is comprised of: (Thousands of euros) 2023 2022 Dividends from financial assets through other comprehensive income 1,136 9,370 Dividends from subsidiaries and associated companies 74,986 148,995 76,122 158,365 The balance Dividends from financial assets through other comprehensive income includes dividends from shares of Tiicc, Sarl and Octal Group, Ltd. in the amount of Euros 615,000 and 412,000, respectively (2022: Euros 7,950,000 and Euros 1,325,000 of Octal Group, Ltd. and Tiicc, Sarl, respectively). This balance also includes income from investment fund units received during the year. The balance Dividends from subsidiaries and associated companies includes in 2023 the amounts of Euros 57,926,000, Euros 11,406,000 and Euros 1,876,000 related to the distribution of dividends from "BCP África,S.G.P.S., Lda.", "Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda." and "Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A.", respectively. This balance included in 2022, the amounts of Euros 132,251,000, Euros 10,353,000 and Euros 2,500,000 related to the distribution of dividends from "Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A.", "Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda." and "Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A.", respectively. 4. Net fees and commissions income The amount of this account is comprised of: (Thousands of euros) 2023 2022 Fees and commissions received From guarantees granted 43,693 40,424 From commitments to third parties 5,245 5,195 Banking services provided 282,041 298,343 Bancassurance 83,174 83,458 Management and intervention commissions 23,381 23,597 Securities operations 62,149 65,853 Management and maintenance of accounts 141,974 140,284 Other commissions 3,829 4,504 645,486 661,658 Fees and commissions paid From guarantees received (8,919) (9,132) Banking services provided by third parties (82,355) (96,042) Securities operations (7,015) (8,119) Other commissions (9,863) (14,317) (108,152) (127,610) 537,334 534,048 2023 REPORT & ACCOUNTS 504 | 5. Gains / (losses) on financial operations The amount of this account is comprised of: (Thousands of euros) 2023 2022 Gains/(losses) on financial operations at fair value through profit or loss Gains/(losses) on financial assets held for trading 161,944 (154,627) Gains/(losses) on financial assets not held for trading mandatorily at fair value through profit or loss (18,246) (5,212) Gains/(losses) on financial assets and liabilities designated at fair value through profit or loss (176,076) 170,259 (32,378) 10,420 Foreign exchange gains/(losses) 21,245 43,430 Gains/(losses) on hedge accounting 19,716 970 Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss (7,165) (26,997) 1,418 27,823 The balances Gains/(losses) on financial operations at fair value through profit or loss is comprised of: (Thousands of euros) 2023 2022 Gains /( losses) on financial assets held for trading Gains Debt securities portfolio 7,772 4,422 Equity instruments 4,166 189 Derivative financial instruments 297,410 196,734 Other operations 1,375 1,963 310,723 203,308 Losses Debt securities portfolio (4,694) (9,834) Equity instruments (371) (8,051) Derivative financial instruments (143,305) (339,426) Other operations (409) (624) (148,779) (357,935) 161,944 (154,627) Gains /( losses) on financial assets not held for trading mandatorily at fair value through profit or loss Gains Debt securities portfolio 47,352 39,670 Equity instruments 9,346 8,016 56,698 47,686 Losses Debt securities portfolio (56,237) (41,027) Equity instruments (18,707) (11,871) (74,944) (52,898) (18,246) (5,212) (continues) 2023 REPORT & ACCOUNTS | 505 (continuation) (Thousands of euros) 2023 2022 Gains/(losses) on financial assets and liabilities designated at fair value through profit or loss Gains Debt securities portfolio 207 — Resources from customers 6,193 3,936 Debt securities issued Certificates and structured securities issued 66,658 142,982 Other debt securities issued 188 25,993 73,246 172,911 Losses Resources from customers (11,464) — Debt securities issued Certificates and structured securities issued (224,547) — Other debt securities issued (13,311) (2,652) (249,322) (2,652) (176,076) 170,259 (32,378) 10,420 In the balances Gains /(losses) on financial assets and liabilities designated at fair value through profit or loss - Gains/ (Losses) - Certificates and structured securities issued are recorded the valuations and devaluations of certificates issued by the Bank. These liabilities are covered by futures, which valuation and devaluation are recorded in Gains / ( losses) on financial assets held for trading - Profit/(Losses) - Derivative financial instruments. The balances Foreign exchange gains/(losses), Gains/(losses) on hedge accounting and Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss, are presented as follows: (Thousands of euros) 2023 2022 Foreign exchange gains/(losses) Gains 65,857 57,312 Losses (44,612) (13,882) 21,245 43,430 Gains/(losses) on hedge accounting Gains Hedging derivatives 191,470 1,279,578 Hedged items 196,888 199,895 388,358 1,479,473 Losses Hedging derivatives (215,194) (361,702) Hedged items (153,448) (1,116,801) (368,642) (1,478,503) 19,716 970 Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss Gains Credit sales 9,827 12,928 Debt securities portfolio at amortized cost 1,070 10,466 Debt securities portfolio at fair value through other comprehensive income 1,795 39,620 Others 6,495 647 19,187 63,661 Losses Credit sales (14,608) (4,637) Debt securities portfolio at fair value through other comprehensive income (11,723) (85,031) Others (21) (990) (26,352) (90,658) (7,165) (26,997) 2023 REPORT & ACCOUNTS 506 | In 2023, the main contributions to the balance Gains/(losses) on hedge accounting were the gains of Euros 10,889,000 and Euros 8,713,000 relating to the deposits portfolio hedge and subordinated issues portfolio hedge, respectively. Regarding the sale of financial assets at fair value through other comprehensive income subject to hedge accounting, the balance Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss - Debt securities portfolio at fair value through other comprehensive income, includes a net gain of Euros 853,000 (2022: net gain of Euros 156,969,000), which is offset in the balance Gains/(losses) on hedge accounting. The balance Gains/(losses) arising from derecognition of financial assets and liabilities not measured at fair value through profit or loss - Gains - Debt securities portfolio at fair value through other comprehensive income includes the amount of Euros 12,000 (2022: Euros 479,000) related to gains resulting from the sale of Portuguese Treasury bonds. 6. Other operating income / (losses) The amount of this account is comprised of: (Thousands of euros) 2023 2022 Operating income Income from services 24,377 25,239 Cheques and others 6,590 7,702 Gains on leasing operations 3,783 3,266 Rents 1,312 1,187 Other operating income 19,278 18,276 55,340 55,670 Operating costs Taxes (7,579) (11,209) Donations and contributions (3,405) (3,638) Contribution to the banking sector (44,387) (43,186) Contribution to the Resolution Fund (9,402) (18,540) Contribution to the Single Resolution Fund (17,679) (25,797) Contributions to the Deposit Guarantee Fund (513) (492) Losses on financial leasing operations (25) (37) Other operating costs (16,801) (15,640) (99,791) (118,539) (44,451) (62,869) The contribution to the banking sector is estimated according to the terms of the Decree-Law no. 55-A/2010. The determination of the amount payable is based on: (i) the annual average liabilities deducted by core capital (Tier 1) and supplementary capital (Tier 2) and deposits covered by the Deposit Guarantee Fund, and (ii) notional amount of derivatives. The balance Contribution to the Resolution Fund corresponds to the periodic contributions that must be paid to the Portuguese Fund, as stipulated in Decree-Law Nº 24/2013. The periodic contributions are determined by a base rate, established by the Bank of Portugal through regulatory instruments, to be applied in each year and which may be adjusted to the credit institution’s risk profile on the basis of the objective incidence of those contributions. The period contributions affect the liabilities of the credit institutions members of the Fund, as per the article 10 of the referred Decree-Law, deducted from the liability elements that are part of the core capital and supplementary and from the deposits covered by the Deposit Guarantee Fund. 2023 REPORT & ACCOUNTS | 507 The balance Contribution to the Single Resolution Fund (‘SRF’) corresponds to the Bank’s annual ex-ante contribution to support the application of resolution measures at EU level. The SRF has been established by Regulation (EU) Nº 806/2014 (the “SRM Regulation”). The SRF is financed from ex-ante contributions paid annually at individual level by all credit institutions within the Banking Union. Contributions to the SRF take into account the annual target level as well as the size and the risk profile of institutions. In calculating the ex-ante contributions, the SRF applies the methodology as set out in the Commission Delegated Regulation (EU) 2015/63 and European Parliament and of the Council Regulation (EU) 806/2014. The annual contribution to the Fund is based on the institution's liabilities excluding own funds and covered deposits considering adjustments due to derivatives and intra group liabilities and on a risk factor adjustment that depends on the risk profile of the institution. In accordance with Article 67 (4) of SRM Regulation and in accordance with the Intergovernmental Agreement on the transfer and mutualisation of contributions to the SRF, the ex-ante contributions are collected by national resolution authorities and transferred to the SRF by 30 June of each year. In 2023, the total value of the contribution to the Single Resolution Fund attributable to the Bank amounted to Euros Euros 22,811,000 (2022: Euros 30,350,000). The Bank delivered the amount of Euros 17,679,000 to the Single Resolution Fund (2022: Euros 25,797,000) and chose to constitute an irrevocable commitment in the amount of Euros 5,132,000 (2022: Euros 4,552,000),under the terms set out in Decree-Law no. 24/2013, of 19 February. As a guarantee of the assumption of the irrevocable payment commitment made in the year with the Single Resolution Fund, a deposit was set up for this purpose, in the amount of Euros 5,132,000 (2022: Euros 4,552,000), which is fully secured and accounted for in Other assets - Deposit account applications (note 28). The accumulated irrevocable payment commitments constituted in the amount of Euros 30,638,000 (2022: Euros 25,506,000), are accounted for in off-balance sheet items (note 40), and are fully collateralized by assets registered in Other assets - Deposit account applications (note 28). In 2023, the total value of the contribution to the Deposit Guarantee Fund attributable to the Bank amounted to Euros 494,000 (2022: Euros 469,000), with the Group delivering the entire contribution to the Deposit Guarantee Fund. Until 2011, inclusive, under the terms set out in Banco de Portugal Notice No. 11/94, the Bank could choose to deliver part of the contribution to the Deposit Guarantee Fund and the other part to constitute an irrevocable payment commitment. As a guarantee of the assumption of irrevocable payment commitments assumed until 2012 with the Deposit Guarantee Fund, a security pledge has been created for this purpose, in the amount of Euros 98,875,000 (2022: Euros 98,813,000). The accumulated irrevocable payment commitments constituted amount to Euros 94,390,000, and are accounted for in off-balance sheet items (note 40). Regarding the irrevocable commitments of the Single Resolution Fund and the Deposit Guarantee Fund, the Bank considered that they qualify as contingent liabilities under IAS 37, meaning that no liabilities or provisions were recorded for this purpose. 7. Staff costs The amount of this account is comprised of: (Thousands of euros) 2023 2022 Remunerations 277,783 259,917 Mandatory social security charges Post-employment benefits (note 45) Service cost (9,376) (11,441) Net interest cost / (income) in the liability coverage balance (16,628) (5,782) Cost with early retirement programs 7,043 2,223 Amount transferred to the Fund resulting from acquired rights unassigned related to the Complementary Plan (9) (7) (18,970) (15,007) Other mandatory social security charges 72,380 69,510 53,410 54,503 Voluntary social security charges 11,174 8,371 Other staff costs (404) 4,114 341,963 326,905 2023 REPORT & ACCOUNTS 508 | The balance Remunerations includes the amount of Euros 9,450,000 (2022: Euros 5,478,000) related to the distribution of profits to Bank's employees. In 2023, the Bank paid severance payments in the amount of 3,683,000 (2022: Euros 1,254,000), of which the highest amounted to Euros 565,000 (2022: Euros 200,000). Of the total severance payments, Euros 3,113,000 had already been recorded as staff costs in the 2022 financial year, given that these were agreements concluded in that year, but whose effective departures only occurred in 2023, as described in note 35. The average number of employees by professional category, at service in the Bank, is analysed as follows by category: 2023 2022 Top Management 852 824 Intermediary Management 1,396 1,384 Specific/Technical functions 2,803 2,756 Other functions 975 1,063 6,026 6,027 Remunerations In compliance with the provisions of Article 47 of Banco de Portugal Notice no. 3/2020, quantitative information is disclosed regarding the remuneration paid to different categories of members of governing bodies and categories of employees provided for in Article 115 C no. 2 of the RGICS, as well as the information provided for in Article 450 g) to i) of Regulation (EU) 2019/876 of the European Parliament and of the Council. A. BCP Board of Directors The fixed remuneration and social charges paid to members of the Board of Directors and key management members are analysed as follows: (Thousands of euros) Board of Directors Executive Committee Non-executive directors 2023 2022 2023 2022 Fixed remuneration 3,064 2,954 2,057 1,831 Variable remuneration Pecuniary 461 370 — — Shares 460 1,322 — — Deferred 534 1,024 — — Supplementary retirement pension 635 611 144 138 Post-employment benefits (14) (42) — — Other mandatory social security charges 763 734 491 443 5,903 6,973 2,692 2,412 Number of beneficiaries 6 6 11 11 Considering that the remuneration of members of the Executive Committee and Directors, with an exclusivity contract, intends to compensate the functions that are performed in the Bank and in all other functions performed in subsidiaries or governing bodies for which they have been designated by indication or in representation of the Bank, in the latter case, the net amount of the remuneration annually received will be deducted from the fixed annual remuneration attributed by the Bank, ensuring that the amount actually paid corresponds to the amount approved by the Remuneration and Welfare Board. In 2023, it was assigned variable remuneration in accordance with the remuneration policies for the members of the management and supervisory bodies and for employees, approved for 2022, as described in accounting policies 1 R4 and 1 R5. In 2023, the variable remuneration attributed was Euros 923,000 in cash, of which Euros 463,000 are deferred for 5 years, and 4,136,539 shares corresponding to Euros 1,846,000, of which 2,068,268 shares are deferred for 5 years. In 2023, the deferred variable remuneration paid refers to the years 2021, 2020, 2019 and 2018, of which Euros 131,000 in cash and 1,811,526 BCP shares in the amount of Euros 403,000. 2023 REPORT & ACCOUNTS | 509 In 2022, the variable remuneration attributed was Euros 616,000 in cash, of which Euros 246,000 are deferred for 5 years, and 12,416,223 shares corresponding to Euros 2,567,000, of which 1,568,846 shares are deferred for 5 years, and 3,397,643 shares are deferred for 3 years. In 2022 the deferred variable remuneration attributed to the Executive Committee is related to 2020, 2019 and 2018 years, and amounts to Euros 590,000 in cash and 2,443,549 BCP shares in the amount of Euros 434,000. During 2023 and 2022, no severance payments were paid to members of the Board of Directors. B. Key Function Holders (KFH) In 2023, the remunerations and social security charges supported with the Bank's Key Function Holders are, by segment, as follows: (Thousands of euros) 2023 Key Function Holder (KFH) Retail Corporate Control Functions Others Total Fixed remuneration 1,391 2,387 2,838 5,098 11,714 Variable remuneration Pecuniary 287 335 475 1,028 2,125 Shares 98 119 166 369 752 Deferred 42 36 19 125 222 Post-employment benefits (72) (39) (146) (234) (491) Other mandatory social security charges 368 504 708 1,283 2,863 2,114 3,342 4,060 7,669 17,185 Number of beneficiaries 10 13 31 38 92 Arising from the application of the Remuneration Policies for Employees, approved for the financial year 2022, as described in accounting policies 1 R4 and 1 R5, in 2023, the 92 Key Function Holders were awarded with variable remuneration, in the amount of Euros 337,000 in cash and 1,494,050 shares deferred for 5 years, as well as 229 participation units from AF Portfólio Imobiliário Fund deferred for 3 years. In 2023, deferred variable remunerations were paid to KFH deferred from 2022, 2021 and 2020 years, corresponding in cash to Euros 102,000 and shares in the amount of Euros 120,000. In 2023, severance payments were paid to 5 KFH in the amount of Euros 267,000, of which the highest payment was Euros 110.000 and end-of-career bonuses in the amount of Euros 35,000. In 2022, the remunerations and social security charges supported with the Bank's Key Function Holders are, by segment, as follows: (Thousands of euros) 2022 Key Function Holder (KFH) Retail Corporate Control Functions Others Total Fixed remuneration 1,317 2,657 2,474 5,494 11,942 Variable remuneration Pecuniary 129 176 224 491 1,020 Shares 80 105 139 280 604 Deferred 48 42 20 129 239 Post-employment benefits (112) (108) (191) (373) (784) Other mandatory social security charges 331 547 649 1,320 2,847 1,793 3,419 3,315 7,341 15,868 Number of beneficiaries 9 15 26 40 90 2023 REPORT & ACCOUNTS 510 | Arising from the application of the Remuneration Policies for Employees, approved for the financial year 2021, as described in accounting policies 1 R4 and 1 R5, in 2022, the 90 Key Function Holders were awarded with variable remuneration, in the amount of Euros 236,000 in cash and 1,534,941 shares deferred for 5 years, as well as 174 participation units from AF Portfólio Imobiliário Fund deferred for 3 years. In 2022, deferred variable remunerations were paid to KFH deferred from 2021, 2020 and 2019 years, corresponding in cash to Euros 57,000 and shares in the amount of Euros 182,000. In 2022, severance payments were paid to 3 Bank's Key Function Holders in the amount of Euros 255,000 of which the highest amounts to Euros 200,000 and end-of-career bonuses in the amount of Euros 65,000. Remunerations paid and social charges supported with the Bank's KFH, broken down by key management elements and staff members whose professional activities have a significant impact on the Bank's risk profile, are the following: (Thousands of euros) Key Function Holder (KFH) Key management members Other KFH Total 2023 2022 2023 2022 2023 2022 Fixed remuneration 7,785 7,865 3,929 4,077 11,714 11,942 Variable remuneration Pecuniary 1,497 705 628 315 2,125 1,020 Shares 538 417 214 187 752 604 Deferred 217 230 5 9 222 239 Post-employment benefits (265) (453) (226) (331) (491) (784) Other mandatory social security charges 1,944 1,934 919 913 2,863 2,847 11,716 10,698 5,469 5,170 17,185 15,868 Number of beneficiaries 54 53 38 37 92 90 In 2023, the Key management members were awarded with deferred variable remuneration in the amount of Euros 337,000 and 1,494,050 shares deferred for 5 years, as well as 229 participation units from AF Portfólio Imobiliário Fund deferred for 3 years. In 2023 deferred variable remunerations from 2022, 2021 and 2020 years were paid in cash to Key management members, in the amount of Euros 99,000, as well as BCP shares and participation units from AF Portfólio Imobiliário Fund corresponding to Euros 118,000. Relatedly to the other KFH, were paid Euros 2,000 in cash deferred from 2020, BCP shares and participation units from AF Portfólio Imobiliário Fund, from the years 2020, corresponding to Euros 3,000. During 2022, deferred variable remunerations from 2021 and 2020 years were paid Euros 55,000 in cash to Key management members, BCP shares and participation units from AF Portfólio Imobiliário Fund from the years 2021, 2020 and 2019 corresponding to Euros 175,000. Relatedly to the other KFH, were paid Euros 3,000 in cash deferred from 2020 and BCP shares and participation units from AF Portfólio Imobiliário Fund, from the years 2020 and 2019, corresponding to Euros 7,000. During 2022, with reference to the financial year of 2021, the Key management members were awarded with deferred variable remuneration in the amount of Euros 236,000 and 1,534.941 shares deferred for 5 years, as well as 174 participation units from AF Portfólio Imobiliário Fund deferred for 3 years. In accordance with regulation (EU) 11º 575/2013, Article 450 point 1.i), in the year 2023 the Bank has 1 employee on the board of directors with remuneration between Euros 1 and Euros 1.5 million. In 2022, the Bank had no employees earning more than Euros 1 million. 2023 REPORT & ACCOUNTS | 511 8. Other administrative costs The amount of this account is comprised of: (Thousands of euros) 2023 2022 Outsourcing and independent labour 79,536 74,034 Rents and leases 9,054 8,241 Other specialised services 18,289 18,873 Communications 7,598 7,631 Information technology services 19,055 18,228 Maintenance and related services 9,360 8,621 Water, electricity and fuel 5,748 10,438 Advertising 6,774 6,486 Advisory services 9,576 11,519 Transportation 7,809 7,195 Legal expenses 3,736 3,340 Travel, hotel and representation costs 2,673 2,254 Insurance 2,428 2,601 Consumables 1,881 1,977 Credit cards and mortgage 1,093 1,163 Training costs 1,294 1,044 Other supplies and services 6,757 6,074 192,661 189,719 The balance Rents and leases includes, the amount of Euros 34,000 (2022 : Euros 30,000) related to short-term lease contracts and the amount of Euros 1,808,000 (2022: Euros 1,742,000) related to lease contracts of low value assets, as described in the accounting policy 1.H. The balance Other specialised services includes fees for services rendered by the Statutory Auditor of the Bank, currently in functions, and by companies in its network as part of its statutory audit functions, as well as other services, are as follows: (Thousands of euros) 2023 2022 Auditing services Legal certification 2,398 2,243 Other assurance services 832 1,085 Other services 698 300 3,928 3,628 2023 REPORT & ACCOUNTS 512 | 9. Amortisations and depreciations The amount of this account is comprised of: (Thousands of euros) 2023 2022 Intangible assets amortisations (note 26): Software 22,970 25,717 Other tangible assets depreciations (note 25): Real estate 7,091 7,517 Equipment Computers 6,911 7,151 Security equipment 651 655 Installations 2,140 2,040 Machinery 429 430 Furniture 1,286 1,452 Motor vehicles 1,660 1,451 Other equipment 8 8 Right-of-use Real estate 31,031 33,626 Vehicles and equipment — 4 51,207 54,334 74,177 80,051 10. Impairment of financial assets at amortised cost The amount of this account is comprised of: (Thousands of euros) 2023 2022 Loans and advances to credit institutions (note 18): Charge for the year 11 221 Reversals for the year (653) (554) (642) (333) Loans and advances to customers (note 19): Charge for the year 210,668 229,531 Reversals for the year (2,742) (6,901) Recoveries of loans and interest charged-off (10,532) (6,217) 197,394 216,413 Debt securities (note 20) Associated to credit operations Charge for the year 3,991 8 Reversals for the year — (2,393) 3,991 (2,385) Not associated to credit operations Charge for the year 3,971 1,473 Reversals for the year — (1,332) 3,971 141 7,962 (2,244) 204,714 213,836 2023 REPORT & ACCOUNTS | 513 11. Impairment of financial assets at fair value through other comprehensive income The detail of these balances is comprised of: (Thousands of euros) 2023 2022 Impairment of financial assets at fair value through other comprehensive income (note 21) Charge for the year 2,417 61 Reversals for the year (1,319) (5,334) 1,098 (5,273) 12. Impairment of other assets The amount of this account is comprised of: (Thousands of euros) 2023 2022 Impairment of investments in associated companies (note 23) Charge for the year 58,933 18,077 Reversals for the year (25,993) (67,374) 32,940 (49,297) Impairment of non-current assets held for sale (note 24) Charge for the year 8,227 51,931 Reversals for the year (69) — 8,158 51,931 Impairment of other assets (note 28) Charge for the year 12,002 10,083 Reversals for the year (677) (175) 11,325 9,908 Impairment of real estate and other assets arising from recovered loans (note 28) () Charge for the year 9,025 — 9,025 — 61,448 12,542 () The 2023 values regard to impairment associated with real estate and assets arising from recovered loans. 13. Other provisions The amount of this account is comprised of: (Thousands of euros) 2023 2022 Provision for guarantees and other commitments (note 35) Charge for the year 12,364 2,042 Reversals for the year (1,236) (448) 11,128 1,594 Other provisions for liabilities and charges (note 35) Charge for the year 100,289 102,328 Reversals for the year (7) (21) 100,282 102,307 111,410 103,901 2023 REPORT & ACCOUNTS 514 | 14. Gains / (losses) on disposal of subsidiaries and other assets The amount of this account is comprised of: (Thousands of euros) 2023 2022 Gains / (losses) on disposal of subsidiaries (2,852) 1,712 Gains / (losses) on disposal of other assets 5,724 11,114 2,872 12,826 The balance Gains /(Losses) on disposal of other assets includes essentially gains on disposal of assets held by the Bank and classified as non-current assets held for sale and as other assets, which corresponds to a gain of Euros 7,232,000 (2022: gain of Euros 15,066,000). 15. Earnings per share The earnings per share are calculated as follows: (Thousands of euros) 2023 2022 Net income / (loss) for the year 680,276 478,408 Interests of the perpetual subordinated bonds (Additional Tier 1) (37,000) (37,000) Adjusted net income 643,276 441,408 Average number of shares 15,113,989,952 15,113,989,952 Basic earnings per share (Euros) 0.043 0.029 Diluted earnings per share (Euros) 0.043 0.029 The Bank's share capital, as at 31 December 2023, amounts to Euros 3,000,000,000 (2022: Euros 3,000,000,000) and is represented by 15,113,989,952 nominative book-entry shares without nominal value, fully subscribed and paid up. There were not identified another dilution effects of the earnings per share as at 31 December 2023 e 2022. 16. Cash and deposits at Central banks This balance is analysed as follows: (Thousands of euros) 2023 2022 Cash 415,873 326,291 Central Banks 1,293,359 2,630,201 1,709,232 2,956,492 The balance Central Banks includes deposits at Central Banks of the countries where the Bank operates to satisfy the legal requirements to maintain a cash reserve calculated based on the value of deposits and other effective liabilities. According to the European Central Bank System for Euro Zone, the cash reserve requirements establishes the maintenance of a deposit with the Central Bank equivalent to 1% of the average value of deposits and other liabilities, during each reserve requirement period. The rate is different for countries outside the Euro Zone. In addition, from the reserve counting period started on 30 October 2019, the ECB introduced the tiering regime, in which the balance with the Central Bank in excess of the minimum cash reserves, up to an estimated maximum of 6 times of the reserves, is remunerated at the central bank's lending rate instead of the deposit rate. 2023 REPORT & ACCOUNTS | 515 17. Loans and advances to credit institutions repayable on demand This balance is analysed as follows: (Thousands of euros) 2023 2022 Credit institutions in Portugal 642 1,280 Credit institutions abroad 82,537 36,254 Amounts due for collection 72,615 93,866 155,794 131,400 The balance Amounts due for collection represents essentially cheques due for collection on other financial institutions. These balances are settled in the first days of the following month. 18. Loans and advances to credit institutions This balance is analysed as follows: (Thousands of euros) 2023 2022 Loans and advances to credit institutions in Portugal Loans (23) 4,222 Term applications to collateralise CIRS and IRS operations () 33,330 26,890 Other 13,717 1,067 47,024 32,179 Loans and advances to credit institutions abroad Term deposits 278,044 288,238 Term deposits to collateralise CIRS and IRS operations () 21,580 38,480 Other 23,921 26,069 323,545 352,787 370,569 384,966 Impairment for loans and advances to credit institutions (160) (802) 370,409 384,164 () Under the scope of derivative financial instruments operations (IRS and CIRS) with institutional counterparties, and as defined in the respective contracts ("Cash collateral"). These deposits are held by the counterparties and are given as collateral of the referred operations (IRS and CIRS), whose revaluation is negative for the Bank. This balance analysed by the period to maturity, before impairment, is as follows: (Thousands of euros) 2023 2022 Up to 3 months 164,988 176,546 3 to 6 months — 72,839 6 to 12 months 200,501 130,000 1 to 5 years 5,080 5,581 370,569 384,966 2023 REPORT & ACCOUNTS 516 | The changes occurred in impairment for other loans and advances to credit institutions are analysed as follows: (Thousands of euros) 2023 2022 Balance on 1 January 802 1,135 Charge for the year (note 10) 11 221 Reversals for the year (note 10) (653) (554) Balance at the end of the year 160 802 19. Loans and advances to customers The analysis of loans and advances to customers, by type of credit, is as follows: (Thousands of euros) 2023 2022 Discounted bills 144,894 188,801 Current account credits 818,909 790,383 Overdrafts 205,389 228,760 Loans 10,612,383 12,401,631 Mortgage loans 19,474,531 19,614,754 Factoring operations 2,334,416 2,387,785 Finance leases 2,466,302 2,451,407 36,056,824 38,063,521 Overdue loans - less than 90 days 20,194 20,720 Overdue loans - Over 90 days 205,264 176,113 36,282,282 38,260,354 Loans impairment (972,137) (925,525) 35,310,145 37,334,829 The balance Loans and advances to customers, as at 31 December 2023, is analysed as follows: (Thousands of euros) 2023 Outstanding loans Overdue loans Gross amount Impairment Net amount Public sector 524,585 — 524,585 (1,118) 523,467 Asset-backed loans 21,679,146 51,331 21,730,477 (381,275) 21,349,202 Other guaranteed loans 4,357,649 54,325 4,411,974 (162,103) 4,249,871 Unsecured loans 2,623,402 74,746 2,698,148 (248,536) 2,449,612 Foreign loans 2,071,324 13,767 2,085,091 (51,812) 2,033,279 Factoring operations 2,334,416 13,281 2,347,697 (52,187) 2,295,510 Finance leases 2,466,302 18,008 2,484,310 (75,106) 2,409,204 36,056,824 225,458 36,282,282 (972,137) 35,310,145 The balances Asset-backed loans and Other guaranteed loans follow the subsequent types of guarantees considered: – Asset-backed loans: Financial collaterals, physical collaterals (movable or immovable) and amounts receivable (income consignment); – Other guaranteed loans: First-demand guarantees issued by banks or other entities and personal guarantees. 2023 REPORT & ACCOUNTS | 517 The balance Loans and advances to customers, as at 31 December 2022, is analysed as follows: (Thousands of euros) 2022 Outstanding loans Overdue loans Gross amount Impairment Net amount Public sector 569,854 — 569,854 (810) 569,044 Asset-backed loans 22,094,392 63,098 22,157,490 (378,664) 21,778,826 Other guaranteed loans 5,307,938 52,050 5,359,988 (172,959) 5,187,029 Unsecured loans 2,815,039 51,203 2,866,242 (165,187) 2,701,055 Foreign loans 2,437,106 2,451 2,439,557 (34,025) 2,405,532 Factoring operations 2,387,785 13,162 2,400,947 (42,484) 2,358,463 Finance leases 2,451,407 14,869 2,466,276 (131,396) 2,334,880 38,063,521 196,833 38,260,354 (925,525) 37,334,829 The balance Loans and advances to customers includes the amount of Euros 10,875,965,000 (31 December 2022: Euros 10,613,589,000) regarding mortgage loans assigned to the cover pool backing the Bank’s covered bond programme issuances. The Bank, as part of the liquidity risk management, holds a pool of eligible assets that can serve as collateral in funding operations with the European Central Bank , which include loans and advances to customers. As referred in note 46, the Bank provides loans to qualifying shareholders holding individually or together with their affiliates, 5% or more of the share capital identified in note 37. The Bank granted credit to qualifying shareholders and entities controlled by them, in the amount of Euros 112,006,000 (31 December 2022: Euros 98,654,000), as referred in note 46 A). The amount of impairment recognised for these contracts amounts to Euros 1,481,000 (31 December 2022: Euros 914,000). The conclusion of business between the Company and holders of qualifying holdings or individuals or legal entities related to them in accordance with the provisions of article 33.º, n.º 3 of Notice 3/2020 of Bank of Portugal, regardless of the amount, is always subject of consideration and deliberation by the Board of Directors, after obtaining a prior opinion from the Audit Committee, and by proposal of the Executive Committee, which in turn deliberates under proposal from the Credit Committee, after obtaining an analysis and opinion from the Compliance Office, which pronounces regarding the compliance of the proposed operations with internal regulations, legal and regulatory provisions and other conditions that may apply to them, and the Risk Office, which evaluates and issues an opinion on the risks inherent to the operation. The analysis of the maturing component of financial lease contracts, by type of client, is presented as follows: (Thousands of euros) 2023 2022 Individuals Home 36,528 43,190 Consumption 24,344 25,384 Others 71,583 75,666 132,455 144,240 Companies Equipment 497,728 459,708 Real estate 1,836,119 1,847,460 2,333,847 2,307,168 2,466,302 2,451,408 2023 REPORT & ACCOUNTS 518 | The analysis of loans and advances to customers, as at 31 December 2023, by sector of activity, is as follows: (Thousands of euros) 2023 Outstanding loans Overdue loans Gross amount Impairment Net amount % Gross amount Agriculture and forestry 408,075 3,191 411,266 (11,390) 399,876 1.13% Fisheries 15,939 3,237 19,176 (3,624) 15,552 0.05% Mining 43,911 1,100 45,011 (5,745) 39,266 0.12% Food, beverage and tobacco 564,609 4,730 569,339 (25,199) 544,140 1.57% Textiles 395,444 10,867 406,311 (54,570) 351,741 1.12% Wood and cork 151,513 1,987 153,500 (4,170) 149,330 0.42% Paper, printing and publishing 98,473 568 99,041 (3,677) 95,364 0.27% Chemicals 501,373 14,951 516,324 (28,841) 487,483 1.42% Machinery, equipment and basic metallurgical 882,744 20,881 903,625 (52,850) 850,775 2.49% Electricity and gas 218,099 11 218,110 (7,234) 210,876 0.60% Water 159,088 361 159,449 (7,882) 151,567 0.44% Construction 1,219,149 16,454 1,235,603 (71,572) 1,164,031 3.41% Retail business 1,160,733 12,450 1,173,183 (29,659) 1,143,524 3.23% Wholesale business 1,287,765 13,850 1,301,615 (59,796) 1,241,819 3.59% Restaurants and hotels 1,307,213 9,789 1,317,002 (68,119) 1,248,883 3.63% Transports 667,980 4,226 672,206 (14,778) 657,428 1.85% Post offices 16,986 108 17,094 (298) 16,796 0.05% Telecommunications 185,925 3,945 189,870 (5,214) 184,656 0.52% Services Financial intermediation 1,415,796 59 1,415,855 (40,098) 1,375,757 3.90% Real estate activities 1,790,512 13,072 1,803,584 (47,690) 1,755,894 4.97% Consulting, scientific and technical activities 896,885 27,830 924,715 (153,414) 771,301 2.55% Administrative and support services activities 366,831 2,882 369,713 (19,262) 350,451 1.02% Public sector 389,599 — 389,599 (1,118) 388,481 1.07% Education 87,302 630 87,932 (1,870) 86,062 0.24% Health and collective service activities 310,949 1,245 312,194 (8,511) 303,683 0.86% Artistic, sports and recreational activities 209,944 546 210,490 (31,906) 178,584 0.58% Other services 105,602 1,003 106,605 (67,631) 38,974 0.29% Consumer loans 2,035,291 35,984 2,071,275 (72,096) 1,999,179 5.71% Mortgage credit 18,594,668 8,229 18,602,897 (52,180) 18,550,717 51.31% Other domestic activities 1,254 197 1,451 (151) 1,300 0.00% Other international activities 567,172 11,075 578,247 (21,592) 556,655 1.59% 36,056,824 225,458 36,282,282 (972,137) 35,310,145 100.00% 2023 REPORT & ACCOUNTS | 519 The analysis of loans and advances to customers, as at 31 December 2022, by sector of activity, is as follows: (Thousands of euros) 2022 Outstanding loans Overdue loans Gross amount Impairment Net amount % Gross amount Agriculture and forestry 435,208 5,605 440,813 (12,324) 428,489 1.15% Fisheries 16,543 3,226 19,769 (2,448) 17,321 0.05% Mining 54,273 1,247 55,520 (4,720) 50,800 0.15% Food, beverage and tobacco 632,730 7,735 640,465 (15,189) 625,276 1.67% Textiles 480,006 8,913 488,919 (16,718) 472,201 1.28% Wood and cork 162,257 3,404 165,661 (3,892) 161,769 0.43% Paper, printing and publishing 127,735 455 128,190 (3,284) 124,906 0.34% Chemicals 646,610 12,508 659,118 (33,780) 625,338 1.72% Machinery, equipment and basic metallurgical 1,039,284 15,897 1,055,181 (46,882) 1,008,299 2.76% Electricity and gas 204,345 396 204,741 (935) 203,806 0.54% Water 170,523 160 170,683 (7,641) 163,042 0.45% Construction 1,241,016 14,036 1,255,052 (130,800) 1,124,252 3.28% Retail business 1,206,601 11,894 1,218,495 (27,512) 1,190,983 3.18% Wholesale business 1,463,879 16,588 1,480,467 (53,646) 1,426,821 3.87% Restaurants and hotels 1,457,643 13,426 1,471,069 (61,449) 1,409,620 3.84% Transports 722,477 3,218 725,695 (10,763) 714,932 1.90% Post offices 15,554 101 15,655 (211) 15,444 0.04% Telecommunications 214,278 1,418 215,696 (7,728) 207,968 0.56% Services Financial intermediation 1,995,786 1,536 1,997,322 (43,973) 1,953,349 5.22% Real estate activities 1,788,113 10,556 1,798,669 (33,270) 1,765,399 4.70% Consulting, scientific and technical activities 886,687 6,492 893,179 (83,357) 809,822 2.33% Administrative and support services activities 405,475 2,405 407,880 (54,090) 353,790 1.07% Public sector 575,166 — 575,166 (810) 574,356 1.50% Education 123,773 614 124,387 (14,202) 110,185 0.33% Health and collective service activities 349,399 792 350,191 (6,403) 343,788 0.92% Artistic, sports and recreational activities 227,772 1,727 229,499 (35,283) 194,216 0.60% Other services 107,747 852 108,599 (97,599) 11,000 0.28% Consumer loans 1,958,181 36,235 1,994,416 (65,214) 1,929,202 5.21% Mortgage credit 18,810,972 15,002 18,825,974 (42,188) 18,783,786 49.21% Other domestic activities 1,231 200 1,431 (37) 1,394 0.00% Other international activities 542,257 195 542,452 (9,177) 533,275 1.42% 38,063,521 196,833 38,260,354 (925,525) 37,334,829 100.00% 2023 REPORT & ACCOUNTS 520 | The analysis of loans and advances to customers, by maturity and by sector of activity as at 31 December 2023 is as follows: (Thousands of euros) 2023 Outstanding loans Due within 1 year 1 year to 5 years Over 5 years Total Outstanding Overdue loans Total % Agriculture and forestry 89,946 170,984 147,145 408,075 3,191 411,266 1.13% Fisheries 4,365 6,904 4,670 15,939 3,237 19,176 0.05% Mining 8,064 30,004 5,843 43,911 1,100 45,011 0.12% Food, beverage and tobacco 280,972 204,580 79,057 564,609 4,730 569,339 1.57% Textiles 146,961 194,616 53,867 395,444 10,867 406,311 1.12% Wood and cork 55,619 61,621 34,274 151,514 1,986 153,500 0.42% Paper, printing and publishing 21,126 53,595 23,752 98,473 568 99,041 0.27% Chemicals 176,866 235,780 88,727 501,373 14,951 516,324 1.42% Machinery, equipment and basic metallurgical 284,397 442,327 156,020 882,744 20,881 903,625 2.49% Electricity and gas 11,938 73,435 132,726 218,099 11 218,110 0.60% Water 14,242 58,627 86,219 159,088 361 159,449 0.44% Construction 451,679 452,847 314,622 1,219,148 16,455 1,235,603 3.41% Retail business 465,665 447,377 247,691 1,160,733 12,450 1,173,183 3.23% Wholesale business 591,788 508,804 187,173 1,287,765 13,850 1,301,615 3.59% Restaurants and hotels 84,773 369,005 853,435 1,307,213 9,789 1,317,002 3.63% Transports 138,213 436,206 93,561 667,980 4,226 672,206 1.85% Post offices 11,249 4,474 1,263 16,986 108 17,094 0.05% Telecommunications 57,333 101,760 26,832 185,925 3,945 189,870 0.52% Services Financial intermediation 224,630 373,021 818,145 1,415,796 59 1,415,855 3.90% Real estate activities 302,920 704,676 782,916 1,790,512 13,072 1,803,584 4.97% Consulting, scientific and technical activities 153,454 313,058 430,373 896,885 27,830 924,715 2.55% Administrative and support services activities 106,583 182,080 78,168 366,831 2,882 369,713 1.02% Public sector 47,034 323,957 18,608 389,599 — 389,599 1.07% Education 21,919 27,948 37,435 87,302 630 87,932 0.24% Health and collective service activities 59,510 121,104 130,335 310,949 1,245 312,194 0.86% Artistic, sports and recreational activities 9,199 51,550 149,195 209,944 546 210,490 0.58% Other services 35,799 38,050 31,753 105,602 1,003 106,605 0.29% Consumer credit 637,598 713,927 683,766 2,035,291 35,984 2,071,275 5.71% Mortgage credit 10,278 226,062 18,358,328 18,594,668 8,229 18,602,897 51.31% Other domestic activities 262 397 595 1,254 197 1,451 0.00% Other international activities 365,823 49,870 151,479 567,172 11,075 578,247 1.59% 4,870,205 6,978,646 24,207,973 36,056,824 225,458 36,282,282 100.00% 2023 REPORT & ACCOUNTS | 521 The analysis of loans and advances to customers, by maturity and by sector of activity, as at 31 December 2022 is as follows: (Thousands of euros) 2022 Outstanding loans Due within 1 year 1 year to 5 years Over 5 years Total Outstanding Overdue loans Total % Agriculture and forestry 92,676 167,590 174,942 435,208 5,605 440,813 1.15% Fisheries 3,246 8,950 4,347 16,543 3,226 19,769 0.05% Mining 10,747 31,782 11,744 54,273 1,247 55,520 0.15% Food, beverage and tobacco 310,259 229,443 93,028 632,730 7,735 640,465 1.67% Textiles 145,424 257,024 77,558 480,006 8,913 488,919 1.28% Wood and cork 49,465 82,635 30,157 162,257 3,404 165,661 0.43% Paper, printing and publishing 31,643 66,711 29,381 127,735 455 128,190 0.34% Chemicals 234,562 286,623 125,425 646,610 12,508 659,118 1.72% Machinery, equipment and basic metallurgical 290,909 539,606 208,769 1,039,284 15,897 1,055,181 2.76% Electricity and gas 36,902 60,164 107,279 204,345 396 204,741 0.54% Water 16,814 66,734 86,975 170,523 160 170,683 0.45% Construction 393,858 518,527 328,631 1,241,016 14,036 1,255,052 3.28% Retail business 359,820 547,579 299,202 1,206,601 11,894 1,218,495 3.18% Wholesale business 622,056 582,942 258,881 1,463,879 16,588 1,480,467 3.87% Restaurants and hotels 56,970 502,954 897,719 1,457,643 13,426 1,471,069 3.84% Transports 129,637 486,858 105,982 722,477 3,218 725,695 1.90% Post offices 10,886 3,840 828 15,554 101 15,655 0.04% Telecommunications 61,411 116,560 36,307 214,278 1,418 215,696 0.56% Services Financial intermediation intermediation 163,353 763,145 1,069,288 1,995,786 1,536 1,997,322 5.22% Real estate activities 271,098 727,418 789,597 1,788,113 10,556 1,798,669 4.70% Consulting, scientific and technical activities 184,913 335,019 366,755 886,687 6,492 893,179 2.33% Administrative and support services activities 70,664 204,228 130,583 405,475 2,405 407,880 1.07% Public sector 83,363 279,833 211,970 575,166 — 575,166 1.50% Education 21,846 35,943 65,984 123,773 614 124,387 0.33% Health and collective service activities 61,683 148,141 139,575 349,399 792 350,191 0.92% Artistic, sports and recreational activities 6,733 61,061 159,978 227,772 1,727 229,499 0.60% Other services 22,704 46,840 38,203 107,747 852 108,599 0.28% Consumer credit 607,515 649,136 701,530 1,958,181 36,235 1,994,416 5.21% Mortgage credit 12,341 207,492 18,591,139 18,810,972 15,002 18,825,974 49.21% Other domestic activities 219 394 618 1,231 200 1,431 0.00% Other international activities 344,088 39,544 158,625 542,257 195 542,452 1.42% 4,707,805 8,054,716 25,301,000 38,063,521 196,833 38,260,354 100.00% 2023 REPORT & ACCOUNTS 522 | The analysis of loans and advances to customers, by type of credit and by maturity, as at 31 December 2023, is as follows: (Thousands of euros) 2023 Outstanding loans Due within 1 year 1 year to 5 years Over 5 years Total Outstanding Overdue loans Total Public sector 7,504 178,811 338,270 524,585 — 524,585 Asset-backed loans 785,172 1,742,201 19,151,773 21,679,146 51,331 21,730,477 Other guaranteed loans 788,307 2,947,446 621,896 4,357,649 54,325 4,411,974 Unsecured loans 825,245 983,785 814,372 2,623,402 74,746 2,698,148 Foreign loans 228,155 385,506 1,457,663 2,071,324 13,767 2,085,091 Factoring operations 2,189,572 144,844 — 2,334,416 13,281 2,347,697 Finance leases 46,250 596,053 1,823,999 2,466,302 18,008 2,484,310 4,870,205 6,978,646 24,207,973 36,056,824 225,458 36,282,282 The analysis of loans and advances to customers, by type of credit and by maturity, as at 31 December 2022, is as follows: (Thousands of euros) 2022 Outstanding loans Due within 1 year 1 year to 5 years Over 5 years Total Outstanding Overdue loans Total Public sector 15,278 16,067 538,509 569,854 — 569,854 Asset-backed loans 725,448 1,776,186 19,592,758 22,094,392 63,098 22,157,490 Other guaranteed loans 734,757 3,659,205 913,976 5,307,938 52,050 5,359,988 Unsecured loans 887,716 1,012,260 915,063 2,815,039 51,203 2,866,242 Foreign loans 170,888 766,297 1,499,921 2,437,106 2,451 2,439,557 Factoring operations 2,123,040 264,745 — 2,387,785 13,162 2,400,947 Finance leases 50,678 559,956 1,840,773 2,451,407 14,869 2,466,276 4,707,805 8,054,716 25,301,000 38,063,521 196,833 38,260,354 The balance credit portfolio split by stage according with IFRS 9, is analysed as follows: (Thousands of euros) 2023 2022 Stage 1 Gross amount 29,688,753 31,148,965 Impairment (164,574) (132,051) 29,524,179 31,016,914 Stage 2 Gross amount 5,505,178 5,760,503 Impairment (207,636) (204,176) 5,297,542 5,556,327 Stage 3 Gross amount 1,088,351 1,350,886 Impairment (599,927) (589,298) 488,424 761,588 Net amount 35,310,145 37,334,829 The exposure and impairment of the above table also includes the operations classified as POCI, as detailed in note 48. 2023 REPORT & ACCOUNTS | 523 The analysis of the exposure covered by collateral associated with loans and advances to customers' portfolio, by stage, according with IFRS 9, considering the fair value of collaterals, is as follows: (Thousands of euros) 2023 2022 Stage 1 Securities and other financial assets 1,290,855 1,163,428 Residential real estate 17,333,817 17,265,901 Other real estate 2,704,773 3,022,511 Other guarantees 6,525,012 7,129,292 27,854,457 28,581,132 Stage 2 Securities and other financial assets 175,580 188,536 Residential real estate 2,371,000 2,295,424 Other real estate 1,127,321 1,131,611 Other guarantees 1,419,675 1,705,234 5,093,576 5,320,805 Stage 3 Securities and other financial assets 20,023 28,430 Residential real estate 265,617 269,387 Other real estate 318,318 492,394 Other guarantees 200,762 232,377 804,720 1,022,588 33,752,753 34,924,525 The balance Other guarantees refers to first-demand guarantees issued by banks or other entities with an internal risk level of “7” or better; personal guarantees, when the guarantors are classified as having an internal risk level of “7” or better. This balance also includes pledges, assets subject to financial leasing operations and personal guarantees, among others. Considering the policy of risk management of the Bank (note 48), the amounts presented do not include the fair value of the personal guarantees provided by clients with lower risk rating. When considered, the fair value of the personal guarantees corresponds to the guaranteed amount. The Bank is applying physical collaterals and financial guarantees as instruments to mitigate the credit risk. The physical collaterals are mainly mortgages on residential buildings for the mortgage portfolio and other mortgages on other types of buildings related to other types of loans. To reflect the market value, these collaterals are regularly reviewed based on independent and certified valuation entities or through the application of revaluation coefficients that reflect the market trends for each specific type of building and geographical area. The financial guarantees are reviewed based on the market value of the respective assets, when available, with the subsequent application of haircuts that reflect the volatility of their prices. Considering the current real estate and financial markets conditions, the Bank continued to negotiate additional physical and financial collaterals with its customers. The loan to customers' portfolio includes contracts that resulted in a formal restructuring with the customers and which arise to the marking of operations as being restructured due to financial difficulties of customers. The restructuring may include in a reinforce of guarantees, liquidation of part of the credit and imply an extension of maturities or changes in interest rate. 2023 REPORT & ACCOUNTS 524 | The analysis of the restructured loans, by sector of activity, is as follows: (Thousands of euros) 2023 2022 Restructured loans Impairment () Net amount Restructured loans Impairment () Net amount Agriculture and forestry 19,158 (1,797) 17,361 12,743 (2,115) 10,628 Fisheries 3,347 (2,698) 649 2,772 (1,762) 1,010 Mining 5,886 (3,207) 2,679 1,279 (163) 1,116 Food, beverage and tobacco 8,431 (1,438) 6,993 14,829 (2,360) 12,469 Textiles 7,731 (1,934) 5,797 14,089 (4,965) 9,124 Wood and cork 3,525 (401) 3,124 5,807 (752) 5,055 Paper, printing and publishing 6,556 (1,863) 4,693 8,676 (1,697) 6,979 Chemicals 22,661 (6,587) 16,074 27,527 (11,643) 15,884 Machinery, equipment and basic metallurgical 32,938 (13,926) 19,012 59,357 (19,883) 39,474 Electricity and gas 367 (6) 361 1,123 (248) 875 Water 1,748 (934) 814 1,765 (734) 1,031 Construction 139,502 (26,883) 112,619 147,205 (91,391) 55,814 Retail business 16,618 (4,230) 12,388 30,375 (7,262) 23,113 Wholesale business 22,467 (5,118) 17,349 61,239 (9,147) 52,092 Restaurants and hotels 49,970 (14,353) 35,617 79,708 (7,845) 71,863 Transports 2,745 (857) 1,888 4,031 (873) 3,158 Post offices 63 (17) 46 58 (21) 37 Telecommunications 1,828 (385) 1,443 6,782 (3,997) 2,785 Services Financial intermediation 24,973 (2,410) 22,563 54,644 (19,796) 34,848 Real estate activities 62,058 (11,015) 51,043 44,600 (9,920) 34,680 Consulting, scientific and technical activities 191,360 (129,967) 61,393 189,861 (63,279) 126,582 Administrative and support services activities 28,470 (10,765) 17,705 66,951 (46,372) 20,579 Education 1,998 (187) 1,811 16,771 (11,313) 5,458 Health and collective service activities 9,108 (1,313) 7,795 7,971 (1,178) 6,793 Artistic, sports and recreational activities 38,702 (27,769) 10,933 19,710 (8,851) 10,859 Other services 7,419 (1,119) 6,300 10,586 (987) 9,599 Consumer credit 46,775 (13,618) 33,157 76,540 (16,304) 60,236 Mortgage credit 425,796 (18,914) 406,882 369,236 (15,930) 353,306 Other domestic activities 3 — 3 — — — Other international activities 8 (4) 4 — — — 1,182,211 (303,715) 878,496 1,336,235 (360,788) 975,447 () The impairment presented in the table does not include the amounts of impairment calculated using the overlays methodology described in point ii. of the section "Additional measures with impact on the Impairment level" of note 48. 2023 REPORT & ACCOUNTS | 525 The breakdown of the restructured loans as at 31 December 2023, by restructuring measure, is as follows: (Thousands of euros) 2023 Number of operations Outstanding loans Overdue loans Gross amount Impairment () Net amount Extension of the repayment term 2,130 125,959 5,149 131,108 (24,894) 106,214 Introduction of the grace period for capital and / or interest 1,593 185,352 3,443 188,795 (44,220) 144,575 Interest rate reduction 1,341 98,922 1,825 100,747 (7,289) 93,458 Payment plan change 2,074 272,307 565 272,872 (118,366) 154,506 Debt relief 82 22,151 1,301 23,452 (21,623) 1,829 Debt-asset swaps 2 — 17 17 (1) 16 Other restructured loans 5,826 400,260 64,960 465,220 (87,322) 377,898 13,048 1,104,951 77,260 1,182,211 (303,715) 878,496 The breakdown of the restructured loans as at 31 December 2022, by restructuring measure, is as follows: (Thousands of euros) 2022 Number of operations Outstanding loans Overdue loans Gross amount Impairment () Net amount Extension of the repayment term 3,099 182,244 8,399 190,643 (34,387) 156,256 Introduction of the grace period for capital and / or interest 2,157 279,774 6,895 286,669 (80,954) 205,715 Interest rate reduction 2,041 137,546 2,567 140,113 (99,666) 40,447 Payment plan change 3,071 161,214 1,301 162,515 (8,313) 154,202 Debt relief 101 884 1,644 2,528 (1,346) 1,182 Debt-asset swaps 4 368 21 389 (31) 358 Other restructured loans 6,637 505,890 47,488 553,378 (136,091) 417,287 17,110 1,267,920 68,315 1,336,235 (360,788) 975,447 () The impairment presented in the tables does not include the amounts of impairment calculated using the overlays methodology described in point ii. of the section "Additional measures with impact on the Impairment level" of note 48. The restructured loans are also subject to an impairment analysis resulting from the revaluation of expectation to meet new cash flows inherent to the new contract terms and considering new collaterals. The Bank has implemented a process for marking operations restructured due to clients' financial difficulties. This marking is part of the credit analysis process, being in charge of the respective decision-making bodies, according to the corresponding competencies, established in the regulations in force. The information on operations restructured due to financial difficulties is available in the Bank's information systems, having a relevant role in the processes of credit analysis, in the marking of customers in default and in the process of determining impairment. In particular: - there are several default triggers related to restructuring due to financial difficulties (restructuring with loss of value, recidivism of restructuring, default on customers with restructured operations); - in the process of individual impairment analysis, in addition to the existence of operations restructured due to financial difficulties, being a reason for customer selection, the loss inherent to the change in the conditions resulting from the restructuring is determined. The demarcation of an operation marked as restructured due to financial difficulties, can only take place at least 2- years periods after the date of marking, provided that a set of conditions exist that allow to conclude by the improvement of the financial condition of the client. In the case of credits marked as Non-Performing Exposure (NPE), this 2-year period will only start on the date of classification of the credit as performing. 2023 REPORT & ACCOUNTS 526 | The definition of Non-Performing Loans for more than 90 days (NPL> 90) incorporates total credit (past due plus outstanding) associated with past due operations for more than 90 days. The amount calculated is Euros 349,813,000 (31 December 2022: Euros 326,157,000). All customers who check at least one of the following conditions are marked in default and therefore in Non-Performing Exposure (NPE): - Material payment delay of more than 90 days in the amounts of principal, interest or unpaid commissions on the due date that, cumulatively, represent: a) More than 100 euros (retail) or more than 500 euros (non-retail); and b) More than 1% of the total debt (direct liabilities). - Indications of low probability of payment: a) Credit restructuring due to financial difficulties with loss of value; b) Delay after restructuring due to financial difficulties; c) Recurrence of restructuring due to financial difficulties; d) Credit with signs of impairment (or Stage 3 of IFRS 9); e) Insolvency or equivalent process; f) Litigation; g) Guarantees of operations in default; h) Loss of credit sales; i) Credit fraud; j) Unpaid credit status; k) Breach of covenants in a credit agreement; l) Contagion of default in an economic group; m) Cross default in the BCP Group. The NPE amounts to Euros 1,088,351,000 (31 December 2022 : Euros 1,350,886,000). The changes occurred in Loans impairment are analysed as follows: (Thousands of euros) 2023 2022 Balance on 1 January 925,525 1,274,364 Charge for the year in net income interest (note 2) 23,751 13,285 Transfers (309) (53,286) Impairment charge for the year (note 10) 210,668 229,531 Reversals for the year (note 10) (2,742) (6,901) Loans charged-off Write-offs (105,481) (378,279) Credit assignments (78,969) (153,724) Exchange rate differences (306) 535 Balance at the end of the year 972,137 925,525 The balance Transfers included, as at 31 December 2022, the amount of Euros 52,794,000 related to impairment for loans that were reclassified to Financial assets not held for trading mandatorily at fair value through profit or loss - Loans and advances to customers at fair value. 2023 REPORT & ACCOUNTS | 527 The analysis of Write-offs, by sector of activity, is as follows: (Thousands of euros) 2023 2022 Agriculture and forestry 942 89 Fisheries — 1 Mining — 2 Food, beverage and tobacco 929 1,095 Textiles 1,105 1,314 Wood and cork 504 767 Paper, printing and publishing 4 99 Chemicals 820 1,319 Machinery, equipment and basic metallurgical 5,814 2,055 Electricity and gas 372 — Water 10 16 Construction 2,639 6,702 Retail business 824 5,075 Wholesale business 2,651 9,433 Restaurants and hotels 791 3,096 Transports 259 2,592 Post offices 42 62 Telecommunications 229 49 Services Financial intermediation 20,169 71,940 Real estate activities 203 126 Consulting, scientific and technical activities 5,469 277 Administrative and support services activities 35,210 251 Education 4 22 Health and collective service activities 126 47 Artistic, sports and recreational activities 178 6,366 Other services 147 240,184 Consumer credit 24,991 24,176 Mortgage credit 106 285 Other domestic activities 761 839 Other international activities 182 — 105,481 378,279 According with the accounting policy described in note 1.B1.3, the Bank writes off a loan when it does not have reasonable expectations of recovering a financial asset in its entirety or partially. Loans written-off are recognised in off-balance sheet accounts. The analysis of Write-offs, by type of credit, is as follows: (Thousands of euros) 2023 2022 Other guaranteed loans — 299,670 Unsecured loans 105,143 77,751 Finance leases 338 858 105,481 378,279 2023 REPORT & ACCOUNTS 528 | The analysis of recovered loans and interest, by sector of activity, is as follows: (Thousands of euros) 2023 2022 Agriculture and forestry 52 2 Food, beverage and tobacco 28 31 Textiles 22 41 Wood and cork 131 43 Chemicals 292 104 Machinery, equipment and basic metallurgical 8 145 Construction 424 2,716 Retail business 1,149 750 Wholesale business 1,558 109 Restaurants and hotels 22 62 Transports 9 25 Post offices — 1 Telecommunications — 2 Services Financial intermediation 2,491 619 Real estate activities 192 483 Consulting, scientific and technical activities 1,956 1 Administrative and support services activities 30 21 Education 1 5 Health and collective service activities 1 1 Artistic, sports and recreational activities 19 3 Other services 1,195 5 Consumer credit 935 1,020 Mortgage credit — 28 Other domestic activities 17 — 10,532 6,217 The analysis of recovered loans and interest, by type of credit, is as follows: (Thousands of euros) 2023 2022 Unsecured loans 8,672 6,136 Foreign loans 1,508 79 Finance leases 352 2 10,532 6,217 The balance Loans and advances to customers includes the effect of synthetic securitization. The characterization of these operations is described in note 1.C. 2023 REPORT & ACCOUNTS | 529 Synthetic securitizations BCP has three operations in progress which form structures of synthetic securitization with similar characteristics, with reference to credit portfolios granted by the Bank mainly to Small and Medium Enterprises (SMEs). Caravela SME No. 3 Caravela SME No.3, supports an operation started on 28 June 2013, based on a medium and long term loans portfolio of current accounts and authorized overdrafts. The legal maturity date of the operation is 25 March of 2036 and the operation amounts to Euros 177,327,000 as at 31 December 2023 (31 December 2022: Euros 276,209,000). The fair value of the relative Credit Default Swap (CDS) is recorded as a positive amount of Euros 172,994,000 (31 December 2022: Euros 179,713,000) and the respective gain registered in 2023 amounts to Euros 959,000 (31 December 2022: loss of Euros 4,824,000). Caravela SME No. 4 Caravela SME No.4 is a similar operation, initiated on 5 June 2014, which portfolio contains car, real estate and equipment leasing. The legal maturity date is 21 September of 2043 and as at 31 December 2023, the operation amounts to Euros 393,247,000 (31 December 2022: Euros 506,117,000). The fair value of the relative CDS is recorded as a positive amount of Euros 60,386,000 (31 December 2022: Euros 61,551,000) and the respective gain registered in 2023 amounts to Euros 648,000 (31 December 2022: loss of Euros 2,026,000). Caravela SME No. 5 Caravela SME No.5, initiated on 20 December 2022, is supported by a portfolio of medium and long term loans, leasing contract and commercial paper programmes. The legal maturity date is 26 September of 2035 and, as at 31 December 2023, the operation amounts to Euros 1,697,747,000 (31 December 2022: Euros 1,918,408,000). The fair value of the relative CDS is recorded as a negative amount of Euros 46,362,000 (31 December 2022: positive amount 76,000) and the respective cost registered in 2023 amounts to Euros 18,010,000 (31 December 2022: Euros 1,424,000). In any of these transactions, the Bank contracted a Credit Default Swap (CDS) with a Special Purpose Entity (SPE), purchasing from it form, credit risk protection on the referenced portfolio. In the case of synthetic structures, in the of this same CDS the risk of the respective portfolios was subdivided into 3 tranches: senior, mezzanine and equity. In this case of Caravela SME no.3 and no.4 operations, the mezzanine tranche and part of equity (20%) were placed on the market through the issuance, by the SPE, of Credit Linked Notes (CLN's) subscribed by investors, while in Caravela SME no.5 has been placed on the market for the entire mezzanine tranche. In turn, the Bank retained the risk of the tranche senior and the remaining part of the equity tranche (80%) in the case of Caravela operations no. 3 and no. 4, and the whole of the equity tranche in the case of Caravela SME no.5. The proceeds of the issuance of the CLNs were applied by the SPE in the constitution of a deposit which fully collateralises its liabilities to its creditors in connection with the transaction, including BCP. These operations allowed the Bank to reduce the risk-weighted assets associated with the credit portfolios supporting the operations, but the Bank did not transfer to third parties most of the rights and obligations arising from the credits included in in the respective portfolios, thus not meeting the derecognition criteria in the accounting policy presented in note 1.B1.3. 2023 REPORT & ACCOUNTS 530 | 20. Debt securities The balance Debt securities is analysed as follows: (Thousands of euros) 2023 2022 Debt securities held associated with credit operations Portuguese issuers Bonds 115,629 183,260 Commercial paper 1,762,453 1,256,557 Foreign issuers Commercial paper 38,900 65,781 1,916,982 1,505,598 Overdue securities - over 90 days 40 40 1,917,022 1,505,638 Impairment (8,668) (4,676) 1,908,354 1,500,962 Debt securities held not associated with credit operations Bonds issued by public entities Portuguese issuers () 3,552,807 3,517,560 Foreign issuers 5,672,975 4,967,920 Bonds issued by public companies and other entities Portuguese issuers 459,392 248,399 Foreign issuers — 26,476 9,685,174 8,760,355 Impairment (9,237) (5,629) 9,675,937 8,754,726 11,584,291 10,255,688 () Includes the negative amount of Euros 129,204,000 (31 December 2022: negative amount of Euros 149,538,000) related to adjustments resulting from the application of fair value hedge accounting. Under the terms of IFRS 9, the balance Debt securities held not associated with credit operations - Bonds issued by public issuers, includes essentially a portfolio of securities to support Bank's ALM (Asset and Liability Management), whose business model seeks to receive the respective income until maturity, that is, of a portfolio Held to Collect, whose value as at 31 December 2023 amounts to Euros 8,814,215,000 ( 31 December 2022: Euros 8,160,779,000). 2023 REPORT & ACCOUNTS | 531 The analysis of the balance Debt securities before impairment, by maturity, as at 31 December 2023 is as follows: (Thousands of euros) 2023 Up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue Total Debt securities held associated with credit operations Portuguese issuers Bonds — — 10,128 105,501 — 115,629 Commercial paper 1,382,628 379,825 — — 40 1,762,493 Foreign issuers Commercial paper 19,407 19,493 — — — 38,900 1,402,035 399,318 10,128 105,501 40 1,917,022 Debt securities held not associated with credit operations Public entities Portuguese issuers — — 2,876,835 675,972 — 3,552,807 Foreign issuers — 6,273 1,531,368 4,135,334 — 5,672,975 Public companies and other entities Portuguese issuers — 50,030 133,699 275,663 — 459,392 — 56,303 4,541,902 5,086,969 — 9,685,174 1,402,035 455,621 4,552,030 5,192,470 40 11,602,196 The analysis of the balance Debt securities before impairment, by maturity, as at 31 December 2022 is as follows: (Thousands of euros) 2022 Up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue Total Debt securities held associated with credit operations Portuguese issuers Bonds — — 13,480 169,780 — 183,260 Commercial paper 860,395 396,162 — — 40 1,256,597 Foreign issuers Commercial paper 31,362 34,419 — — — 65,781 891,757 430,581 13,480 169,780 40 1,505,638 Debt securities held not associated with credit operations Public entities Portuguese issuers — — 1,865,689 1,651,871 — 3,517,560 Foreign issuers — — 6,498 4,961,422 — 4,967,920 Public companies and other entities Portuguese issuers — — 153,548 94,851 — 248,399 Foreign issuers — — — 26,476 — 26,476 — — 2,025,735 6,734,620 — 8,760,355 891,757 430,581 2,039,215 6,904,400 40 10,265,993 2023 REPORT & ACCOUNTS 532 | The analysis of debt securities portfolio, net of impairment, by sector of activity, is analysed as follows: (Thousands of euros) 2023 2022 Debt securities held associated with credit operations Agriculture and forestry 2,479 2,497 Mining 85,939 46,403 Food, beverage and tobacco 102,720 79,447 Textiles 45,203 58,555 Wood and cork 23,720 19,630 Paper, printing and publishing 9,206 8,104 Chemicals 215,972 179,516 Machinery, equipment and basic metallurgical 42,787 65,972 Electricity and gas 211,183 165,676 Water 31,955 5,475 Construction 10,633 13,397 Retail business 28,973 20,507 Wholesale business 64,043 56,699 Restaurants and hotels 8,858 8,789 Transports 33,392 36,591 Telecommunications 4,018 9,706 Services Financial intermediation 114,284 107,372 Real estate activities 55,566 50,844 Consulting, scientific and technical activities 751,610 473,231 Administrative and support services activities 11,217 12,269 Health and collective service activities 4,974 — Artistic, sports and recreational activities 7,058 10,406 Other services 3,664 4,095 Other international activities 38,900 65,781 1,908,354 1,500,962 Debt securities held not associated with credit operations Machinery, equipment and basic metallurgical 11,977 — Electricity and gas 99,846 88,873 Water — 39,704 Services Financial intermediation — 26,476 Consulting, scientific and technical activities 346,117 119,297 457,940 274,350 Government and Public securities 9,217,997 8,480,376 9,675,937 8,754,726 11,584,291 10,255,688 2023 REPORT & ACCOUNTS | 533 The analysis of restructured debt securities portfolio, by sector of activity, is analysed as follows: (Thousands of euros) 2023 2022 Restructured loans Impairment Net amount Restructured loans Impairment Net amount Debt securities held associated with credit operations Food, beverage and tobacco 7,711 (126) 7,585 — — — Chemicals — — — 5,062 (101) 4,961 Services Administrative and support services activities 10,311 (90) 10,221 10,604 (132) 10,472 18,022 (216) 17,806 15,666 (233) 15,433 The changes occurred in impairment of debt securities are analysed as follows: (Thousands of euros) 2023 2022 Debt securities held associated with credit operations Balance on 1 January 4,676 7,059 Charge for the year (note 10) 3,991 8 Reversals for the year (note 10) — (2,393) Exchange rate differences 1 2 Balance at the end of the year 8,668 4,676 Debt securities held not associated with credit operations Balance on 1 January 5,629 5,473 Charge for the year (note 10) 3,971 1,473 Reversals for the year (note 10) — (1,332) Amounts charged-off (357) — Exchange rate differences (6) 15 Balance at the end of the year 9,237 5,629 2023 REPORT & ACCOUNTS 534 | 21. Financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income The balances Financial assets at fair value through profit or loss and Financial assets at fair value through other comprehensive income are analysed as follows: (Thousands of euros) 2023 2022 Financial assets at fair value through profit or loss Financial assets held for trading Debt instruments 332,999 337,037 Equity instruments 53,405 51,517 Trading derivatives 299,567 304,242 685,971 692,796 Financial assets not held for trading mandatorily at fair value through profit or loss Debt instruments 480,964 596,357 Equity instruments 166,907 192,796 647,871 789,153 Financial assets designated at fair value through profit or loss Debt instruments 32,004 — Financial assets at fair value through other comprehensive income Debt instruments 4,678,371 2,872,391 Equity instruments 36,015 42,123 4,714,386 2,914,514 6,080,232 4,396,463 2023 REPORT & ACCOUNTS | 535 The portfolio of Financial assets at fair value through profit or loss and Financial assets at fair value through other comprehensive income, net of impairment, as at 31 December 2023, is analysed as follows: (Thousands of euros) 2023 Financial assets at fair value through profit or loss Held for trading Not held for trading mandatorily at fair value through profit or loss Designated at fair value through profit or loss At fair value through other comprehensive income Total Debt instruments Bonds issued by public entities Portuguese issuers 20,313 — 32,004 958,773 1,011,090 Foreign issuers — — — 701,058 701,058 Bonds issued by public companies and other entities Portuguese issuers — 51 — 403,971 404,022 Foreign issuers 13,319 9,064 — 1,057,682 1,080,065 Treasury bills (Public Issuers and Central Banks) Portuguese issuers 103,661 — — — 103,661 Foreign issuers 192,741 — — 1,556,887 1,749,628 Investment fund units (a) — 467,002 — — 467,002 Shares of foreign companies (b) — 4,847 — — 4,847 Commercial paper 2,965 — — — 2,965 332,999 480,964 32,004 4,678,371 5,524,338 Equity instruments Shares Portuguese companies 142 — — 17,277 17,419 Foreign companies — — — 790 790 Investment fund units (c) (d) — 166,907 — 17,948 184,855 Other securities (e) 53,263 — — — 53,263 53,405 166,907 — 36,015 256,327 Trading derivatives 299,567 — — — 299,567 685,971 647,871 32,004 4,714,386 6,080,232 Level 1 380,107 — 32,004 4,484,734 4,896,845 Level 2 66,181 — — 88,657 154,838 Level 3 239,683 647,871 — 140,995 1,028,549 (a) These Investment fund units are considered as debt instruments because they not fall within the definition of equity instruments provided by IAS 32. As at 31 December 2023 this balance includes Euros 213,072,000 related to units of real estate investment funds mainly owned by the Bank. Additionally, as of 31 December 2023, the Bank has recorded a provision for other risks and charges in the amount of Euros 64,663,000 in relation to the properties held by these real estate funds. As at 31 December 2023 this item also includes Euros 198,426,000 relating to investment fund units in restructuring funds, for which a provision for others risks and charges is recorded. (b) These shares are considered as debt instruments because they do not fall within the definition of equity instruments provided by IAS 32. (c) The financial assets as at fair value through other comprehensive income item includes participation units in real estate investment funds mainly owned by the Bank. As at 31 December 2023, the Bank has recorded a provision for other risks and charges in the amount of Euros 3,232,000 in relation to the properties held by these real estate funds. (d) These are investment fund units in restructuring funds that are considered equity instruments in accordance with the terms provided by IAS 32. As at 31 December 2023, there is a provision for others risks and charges recorded for these funds. (e) Includes the amount of Euros 52,854,000 in Exchange Traded Funds (ETFs). As at 31 December 2023, portfolios are recorded at fair value in accordance with the accounting policy described in note 1B. As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 44. As at 31 December 2023 , the balances Financial assets at fair value through other comprehensive income, Financial assets not held for trading mandatorily at fair value through profit or loss and Financial assets held for trading include the amount of Euros 39,654,000, Euros 9,064,000 and Euros 2,990,000, respectively, relating to bonds issued with different levels of subordination associated with the traditional securitization transactions Magellan Mortgages No. 3 and No. 4, referred in note 1.C. 2023 REPORT & ACCOUNTS 536 | In accordance with the accounting policy B1.1.3 regarding the classification of financial assets, the securities accounted for in Financial assets designated at fair value through profit or loss are covered by the "Treasury Bond Certificates October 2025" issued by Banco Comercial Português, S.A. which are recorded in Financial liabilities designated at fair value through profit or loss (note 34). The portfolio of Financial assets at fair value through profit or loss and Financial assets at fair value through other comprehensive income, net of impairment, as at 31 December 2022, is analysed as follows: (Thousands of euros) 2022 Financial assets at fair value through profit or loss Held for trading Not held for trading mandatorily at fair value through profit or loss At fair value through other comprehensive income Total Debt instruments Bonds issued by public entities Portuguese issuers 21,450 — 1,466,256 1,487,706 Foreign issuers 3,181 — 5,391 8,572 Bonds issued by public companies and other entities Portuguese issuers — 51 542,766 542,817 Foreign issuers 3,470 9,476 857,978 870,924 Treasury bills (Public Issuers and Central Banks) Portuguese issuers 308,936 — — 308,936 Investment fund units (a) — 582,834 — 582,834 Shares of foreign companies (b) — 3,996 — 3,996 337,037 596,357 2,872,391 3,805,785 Equity instruments Shares Portuguese companies — — 19,751 19,751 Foreign companies — — 2,214 2,214 Investment fund units (c) (d) — 192,796 20,158 212,954 Other securities (e) 51,517 — — 51,517 51,517 192,796 42,123 286,436 Trading derivatives 304,242 — — 304,242 692,796 789,153 2,914,514 4,396,463 Level 1 384,759 — 2,525,539 2,910,298 Level 2 63,052 — 234,052 297,104 Level 3 244,985 789,153 154,923 1,189,061 (a) These Investment fund units held by the Bank on the transaction date are considered as debt instruments because they not fall within the definition of equity instruments provided by IAS 32. As at 31 December 2022 this balance includes Euros 294,268,000 related to units of real estate investment funds mainly owned by the Bank. Additionally, as of 31 December 2022 , the Bank has recorded a provision for other risks and charges in the amount of Euros 37,037,000 in relation to the properties held by these real estate funds. As at 31 December 2022 this item also includes Euros 194,778,000 relating to investment fund units in restructuring funds, for which a provision for others risks and charges is recorded. (b) These shares are considered as debt instruments because they do not fall within the definition of equity instruments provided by IAS 32. (c) The financial assets as at fair value through other comprehensive income item includes participation units in real estate investment funds mainly owned by the Bank. As at 31 December 2022, the Bank has recorded a provision for other risks and charges in the amount of Euros 3,232,000 in relation to the properties held by these real estate funds. (d) These are investment fund units in restructuring funds that are considered equity instruments in accordance with the terms provided by IAS 32. As at 31 December 2022, there is a provision for others risks and charges recorded for these funds. (e) Includes the amount of Euros 51,191,000 in Exchange Traded Funds (ETFs). As at 31 December 2022, portfolios are recorded at fair value in accordance with the accounting policy described in note 1B. As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 44. As at 31 December 2022, the balances Financial assets at fair value through other comprehensive income, Financial assets not held for trading mandatorily at fair value through profit or loss and Financial assets held for trading include the amount of Euros 46,023,000, Euros 9,476,000 and Euros 3,470,000, respectively, relating to bonds issued with different levels of subordination associated with the traditional securitization transactions Magellan Mortgages No. 3 and No. 4, referred in note 1.C. 2023 REPORT & ACCOUNTS | 537 The portfolio of financial assets at fair value through other comprehensive income, as at 31 December 2023, is analysed as follows: (Thousands of euros) 2023 Amortised cost (a) Fair value hedge adjustments (note 39) Fair value adjustments (note 39) Total Debt instruments Bonds issued by public entities Portuguese issuers 1,056,979 (77,353) (20,853) 958,773 Foreign issuers 694,527 6,501 30 701,058 Bonds issued by public companies and other entities Portuguese issuers 412,309 (9,040) 702 403,971 Foreign issuers 1,083,016 (49,114) 23,780 1,057,682 Treasury bills (Public Issuers and Central Banks) Foreign issuers 1,553,354 — 3,533 1,556,887 4,800,185 (129,006) 7,192 4,678,371 Equity instruments Shares Portuguese companies 23,548 — (6,271) 17,277 Foreign companies 336 — 454 790 Investment fund units 31,763 — (13,815) 17,948 55,647 — (19,632) 36,015 4,855,832 (129,006) (12,440) 4,714,386 (a) Includes interest accrued and accumulated impairment for debt securities classified as financial assets at fair value through other comprehensive income, as provided by IFRS 9, and in accordance with the requirements defined in note 1.B1.5.1.2. The portfolio of financial assets at fair value through other comprehensive income, as at 31 December 2022, is analysed as follows: (Thousands of euros) 2022 Amortised cost (a) Fair value hedge adjustments (note 39) Fair value adjustments (note 39) Total Debt instruments Bonds issued by public entities Portuguese issuers 1,689,429 (169,699) (53,474) 1,466,256 Foreign issuers 5,388 — 3 5,391 Bonds issued by public companies and other entities Portuguese issuers 566,480 (19,099) (4,615) 542,766 Foreign issuers 942,291 (83,632) (681) 857,978 3,203,588 (272,430) (58,767) 2,872,391 Equity instruments Shares Portuguese companies 33,744 — (13,993) 19,751 Foreign companies 15,733 — (13,519) 2,214 Investment fund units 31,760 — (11,602) 20,158 81,237 — (39,114) 42,123 3,284,825 (272,430) (97,881) 2,914,514 (a) Includes interest accrued and accumulated impairment for debt securities classified as financial assets at fair value through other comprehensive income, as provided by IFRS 9, and in accordance with the requirements defined in note 1.B1.5.1.2. 2023 REPORT & ACCOUNTS 538 | The analysis of Financial assets at fair value through profit or loss and Financial assets at fair value through other comprehensive, net of impairment, by valuation levels, as at 31 December 2023 is as follows: (Thousands of euros) 2023 Level 1 Level 2 Level 3 Total Debt instruments Bonds issued by public entities Portuguese issuers 981,497 29,593 — 1,011,090 Foreign issuers 701,058 — — 701,058 Bonds issued by public companies and other entities Portuguese issuers 279,580 59,064 65,378 404,022 Foreign issuers 1,028,424 — 51,641 1,080,065 Treasury bills and other Government bonds Portuguese issuers 103,661 — — 103,661 Foreign issuers 1,749,628 — — 1,749,628 Investment fund units — — 467,002 467,002 Shares of foreign companies — — 4,847 4,847 Commercial paper — — 2,965 2,965 4,843,848 88,657 591,833 5,524,338 Equity instruments Shares Portuguese companies 142 — 17,277 17,419 Foreign companies — — 790 790 Investment fund units — — 184,855 184,855 Other securities 52,855 — 408 53,263 52,997 — 203,330 256,327 Trading derivatives — 66,181 233,386 299,567 4,896,845 154,838 1,028,549 6,080,232 The analysis of Financial assets at fair value through profit or loss and Financial assets at fair value through other comprehensive, net of impairment, by valuation levels, as at 31 December 2022 is as follows: (Thousands of euros) 2022 Level 1 Level 2 Level 3 Total Debt instruments Bonds issued by public entities Portuguese issuers 1,354,407 133,299 — 1,487,706 Foreign issuers 8,572 — — 8,572 Bonds issued by public companies and other entities Portuguese issuers 416,376 57,212 69,229 542,817 Foreign issuers 768,414 43,615 58,895 870,924 Treasury bills and other Government bonds Portuguese issuers 308,936 — — 308,936 Investment fund units — — 582,834 582,834 Shares of foreign companies — — 3,996 3,996 2,856,705 234,126 714,954 3,805,785 Equity instruments Shares Portuguese companies 2,402 — 17,349 19,751 foreign companies — — 2,214 2,214 Investment fund units — — 212,954 212,954 Other securities 51,191 — 326 51,517 53,593 — 232,843 286,436 Trading derivatives — 62,978 241,264 304,242 2,910,298 297,104 1,189,061 4,396,463 2023 REPORT & ACCOUNTS | 539 As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 42. The balance Debt instruments - Investment fund units classified as level 3, includes units in restructuring funds (described in note 42) which book value resulted from the last disclosure of the Net Asset Value (NAV) determined by the Management Company, which, corresponds to the NAV with reference to that date, after considering the effects of the last audited accounts for the respective funds. These funds have a diverse set of assets and liabilities, valued in their respective accounts at fair value through internal methodologies used by the management company. As at 31 December 2023, the Bank holds mainly investment fund units in Securities and Real Estate Investment Funds that are classified in level 3. The amount recorded under the balance Financial assets at fair value through other comprehensive income, amounts to Euros 17,948,000 (31 December 2022: Euros 20,159,000), with unrealised net losses in the amount of Euros 13,814,000 (31 December 2022: net losses of Euros 11,602,000), and in the balance Financial assets not held for trading mandatorily at fair value through profit or loss, amounts to Euros 213,072,000 ( 31 December 2022: Euros 294,268,000). The analysis of financial assets at fair value through profit or loss (excluding trading derivatives) and Financial assets at fair value through other comprehensive income, by residual maturity, as at 31 December 2023 is as follows: (Thousands of euros) 2023 Up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Undetermined Total Debt instruments Bonds issued by public entities Portuguese issuers 324 30,653 608,544 371,569 — 1,011,090 Foreign issuers — — 531,533 169,525 — 701,058 Bonds issued by public companies and other entities Portuguese issuers — 56,316 319,418 28,288 — 404,022 Foreign issuers 26,778 140,832 547,005 365,450 — 1,080,065 Treasury bills and other Government bonds Portuguese issuers 49,648 54,013 — — — 103,661 Foreign issuers 95,043 1,654,585 — — — 1,749,628 Investment fund units 6,404 5 205,191 37,142 218,260 467,002 Shares of foreign companies — — — — 4,847 4,847 Commercial paper 2,965 — — — — 2,965 181,162 1,936,404 2,211,691 971,974 223,107 5,524,338 Equity instruments Shares Portuguese companies 17,419 17,419 Foreign companies 790 790 Investment fund units 184,855 184,855 Other securities 53,263 53,263 256,327 256,327 181,162 1,936,404 2,211,691 971,974 479,434 5,780,665 2023 REPORT & ACCOUNTS 540 | The analysis of financial assets at fair value through profit or loss (excluding trading derivatives) and Financial assets at fair value through other comprehensive income, by residual maturity, as at 31 December 2022 is as follows: (Thousands of euros) 2022 Up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Undetermined Total Debt instruments Bonds issued by public entities Portuguese issuers — 8,267 1,190,243 289,196 — 1,487,706 Foreign issuers 4,984 407 — 3,181 — 8,572 Bonds issued by public companies and other entities Portuguese issuers 163,229 58,246 300,964 20,378 — 542,817 Foreign issuers 4,414 13,732 371,962 480,816 — 870,924 Treasury bills and other Government bonds Portuguese issuers 127,356 181,580 — — — 308,936 Investment fund units 5,943 38,534 198,766 39,863 299,728 582,834 Shares of foreign companies — — — — 3,996 3,996 305,926 300,766 2,061,935 833,434 303,724 3,805,785 Equity instruments Shares Portuguese companies 19,751 19,751 Foreign companies 2,214 2,214 Investment fund units 212,954 212,954 Other securities 51,517 51,517 286,436 286,436 305,926 300,766 2,061,935 833,434 590,160 4,092,221 The changes occurred in Impairment of financial assets at fair value through other comprehensive income are analysed as follows: (Thousands of euros) 2023 2022 Balance on 1 January — — Transfers (1,098) 5,273 Reversals (1,319) (5,334) Impairment against profit and loss 2,417 61 Balance at the end of the year — — The accumulated impairment associated with the financial assets at fair value through other comprehensive income amounts to Euros 5,562,000 (31 December 2022: Euros 4,784,000) and is recorded against Fair value reserves. 2023 REPORT & ACCOUNTS | 541 The analysis of Financial assets at fair value through profit or loss (excluding loans and advances to customers at fair value and trading derivatives) and Financial assets at fair value through other comprehensive income, by sector of activity, as at 31 December 2023 is as follows: (Thousands of euros) 2023 Bonds and Treasury bills Shares Other Financial Assets Total Paper, printing and publishing 47,416 — — 47,416 Chemicals 7,952 — — 7,952 Machinery, equipment and basic metallurgical 2,477 — — 2,477 Electricity and gas 70,806 — — 70,806 Water 5,025 — — 5,025 Construction — 142 17,948 18,090 Wholesale business 7,067 238 — 7,305 Transports 43,767 — — 43,767 Telecommunications 39,126 4,553 — 43,679 Services Financial intermediation 1,117,030 11,821 686,764 1,815,615 Consulting, scientific and technical activities 111,525 131 — 111,656 Administrative and support services activities 24,216 6,149 — 30,365 Public sector 10,645 — 408 11,053 Other services — 22 — 22 1,487,052 23,056 705,120 2,215,228 Government and Public securities 3,565,437 — — 3,565,437 5,052,489 23,056 705,120 5,780,665 2023 REPORT & ACCOUNTS 542 | The analysis of Financial assets at fair value through profit or loss (excluding loans and advances to customers at fair value and trading derivatives) and Financial assets at fair value through other comprehensive income, by sector of activity, as at 31 December 2022 is as follows: (Thousands of euros) 2022 Bonds and Treasury bills Shares Other Financial Assets Total Paper, printing and publishing 45,562 — — 45,562 Machinery, equipment and basic metallurgical 2,302 — — 2,302 Electricity and gas 44,627 — — 44,627 Water 9,460 — — 9,460 Construction 4,934 — 20,159 25,093 Retail business 20,503 — — 20,503 Wholesale business 6,456 260 — 6,716 Restaurants and hotels — 1,401 — 1,401 Transports 29,491 — — 29,491 Telecommunications 38,869 4,334 — 43,203 Services Financial intermediation 878,343 11,211 826,822 1,716,376 Consulting, scientific and technical activities 303,036 103 — 303,139 Administrative and support services activities 26,691 8,629 — 35,320 Public sector — — 324 324 Other services 3,467 23 — 3,490 1,413,741 25,961 847,305 2,287,007 Government and Public securities 1,805,214 — — 1,805,214 3,218,955 25,961 847,305 4,092,221 2023 REPORT & ACCOUNTS | 543 The analysis of trading derivatives by maturity as at 31 December 2023, is as follows: (Thousands of euros) 2023 Notional (remaining term) Fair value Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities (note 33) Interest rate derivatives: OTC Market: Interest rate swaps 379,434 83,205 5,050,273 5,512,912 55,116 80,916 Interest rate options (purchase) — 2,981 217,292 220,273 172 — Interest rate options (sale) — 2,981 217,293 220,274 — 126 379,434 89,167 5,484,858 5,953,459 55,288 81,042 Stock Exchange transactions: Interest rate futures — — 28,351 28,351 — — Currency derivatives: OTC Market: Forward exchange contract 98,159 37,212 — 135,371 2,611 562 Currency swaps 670,918 129,741 — 800,659 3,264 5,684 Other currency contracts 97,838 — — 97,838 — — 866,915 166,953 — 1,033,868 5,875 6,246 Shares/indexes: OTC Market: Shares/indexes swaps 815,184 1,577,827 228,857 2,621,868 5,024 19,904 815,184 1,577,827 228,857 2,621,868 5,024 19,904 Stock exchange transactions: Shares futures — — 891,352 891,352 — — Commodity derivatives: Stock Exchange transactions: Commodities futures — — 1 1 — — Credit derivatives: OTC Market: Credit default swaps (CDS) — — 358,107 358,107 233,380 223 — — 358,107 358,107 233,380 223 Total derivatives traded in: OTC Market 2,061,533 1,833,947 6,071,822 9,967,302 299,567 107,415 Stock Exchange — — 919,704 919,704 — — 2,061,533 1,833,947 6,991,526 10,887,006 299,567 107,415 2023 REPORT & ACCOUNTS 544 | The analysis of trading derivatives by maturity as at 31 December 2022, is as follows: (Thousands of euros) 2022 Notional (remaining term) Fair value Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities (note 33) Interest rate derivatives: OTC Market: Interest rate swaps 44,922 224,438 5,187,709 5,457,069 52,773 141,277 Interest rate options (purchase) — 118,954 4,930 123,884 700 — Interest rate options (sale) — 118,954 4,930 123,884 — 694 44,922 462,346 5,197,569 5,704,837 53,473 141,971 Stock Exchange transactions: Interest rate futures — — 66,888 66,888 — — Currency derivatives: OTC Market: Forward exchange contract 63,117 158,443 634 222,194 4,879 4,263 Currency swaps 603,136 131,872 — 735,008 4,541 14,011 666,253 290,315 634 957,202 9,420 18,274 Shares/indexes: OTC Market: Shares/indexes swaps — 523,118 459,431 982,549 — 27,193 Shares/indexes options (sale) — — 20,971 20,971 — — — 523,118 480,402 1,003,520 — 27,193 Stock exchange transactions: Shares futures — — 835,835 835,835 — — Commodity derivatives: Stock Exchange transactions: Commodities futures — — 1 1 — — Credit derivatives: OTC Market: Credit default swaps (CDS) 2,000 — 395,831 397,831 241,349 — Other credit derivatives (sale) — — 4,351 4,351 — — 2,000 — 400,182 402,182 241,349 — Total derivatives traded in: OTC Market 713,175 1,275,779 6,078,787 8,067,741 304,242 187,438 of which: Embedded derivatives 2,000 — — 2,000 — 8 Stock Exchange — — 902,724 902,724 — — 713,175 1,275,779 6,981,511 8,970,465 304,242 187,438 2023 REPORT & ACCOUNTS | 545 22. Hedging derivatives This balance is analysed as follows: (Thousands of euros) 2023 2022 Assets Liabilities Assets Liabilities Swaps 22,335 22,536 28,426 59,548 Hedging derivatives are measured in accordance with internal valuation techniques considering observable market inputs and, when not available, on information prepared by the Bank by extrapolation of market data. In accordance with the hierarchy of the valuation sources, as referred in IFRS 13 these derivatives are classified in level 2. The Bank resources to derivatives to hedge interest, exchange rate exposure risks and credit portfolio risk. The accounting method depends on the nature of the hedged risk, namely if the Bank is exposed to fair value changes, variability in cash flows or highly probable forecast transactions. As allowed by IFRS 9, the Bank opted to continue to apply the hedge accounting requirements in accordance with IAS 39, using mainly interest rate and exchange rate derivatives. The fair value hedge model is adopted for debt securities, loans granted at fixed rate and money market loans and deposits, securities and combined hedge of variable rate financial assets and fixed rate financial liabilities. The cash flows hedge model is adopted for future transactions in foreign currency to cover dynamic changes in cash flows from loans granted and variable rate deposits in foreign currency and foreign currency mortgage loans. The relationships that follow the fair value hedge model recorded ineffectiveness of a negative amount of Euros 7,862,000 (31 December 2022: negative amount of Euros 16,984,000) and the hedging relationships that follow the cash flows model recorded no ineffectiveness. Reclassifications of amounts recorded in results for fair reserves were carried out related to cash flow hedge relationships, in a positive amount of Euros 45,947,000 (31 December 2022: positive amount of Euros 54,861,000). The accumulated adjustment on financial risks covered performed on the assets and liabilities which includes hedged items is analysed as follows (note 48). The analysis of hedging derivatives portfolio by maturity as at 31 December 2023 is as follows: (Thousands of euros) 2023 Notional (remaining term) Fair value Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities (note 33) Fair value hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps 7,750 508,735 9,022,264 9,538,749 19,892 7,856 Fair value hedging derivatives related to currency risk changes: OTC Market: Currency and interest rate swap (CIRS) 140,291 208,173 — 348,464 2,279 6,272 Cash flow hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps — 1,600,000 8,050,000 9,650,000 164 8,408 Total derivatives traded by: OTC Market 148,041 2,316,908 17,072,264 19,537,213 22,335 22,536 2023 REPORT & ACCOUNTS 546 | The analysis of hedging derivatives portfolio by maturity as at 31 December 2022 is as follows: (Thousands of euros) 2022 Notional (remaining term) Fair value Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities (note 33) Fair value hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps 113,400 60,000 8,408,750 8,582,150 25,427 7,030 Fair value hedging derivatives related to currency risk changes: OTC Market: Currency and interest rate swap (CIRS) 98,439 332,818 — 431,257 2,999 18,432 Cash flow hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps — — 13,475,000 13,475,000 — 34,086 Total derivatives traded by: OTC Market 211,839 392,818 21,883,750 22,488,407 28,426 59,548 23. Investments in subsidiaries and associated companies This balance is analysed as follows: (Thousands of euros) 2023 2022 Portuguese credit institutions 191,305 191,305 Foreign credit institutions 653,607 649,836 Other Portuguese companies 1,329,040 1,575,073 Other foreign companies 590,590 589,161 2,764,542 3,005,375 Impairment of investments in: Subsidiary companies (556,568) (523,643) (556,568) (523,643) 2,207,974 2,481,732 2023 REPORT & ACCOUNTS | 547 The balance Investments in subsidiaries and associated companies is analysed as follows: (Thousands of euros) 2023 2022 Banco ActivoBank, S.A. 191,305 191,305 Bank Millennium S.A. 608,564 608,564 Banque BCP, S.A.S. 45,043 41,272 BCP África, S.G.P.S., Lda. (a) 458,032 683,032 BCP International B.V. 567,371 567,371 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. 1,500 1,500 Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. 355,475 355,475 M Representações Ltda. () 23,219 21,790 Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. 493,940 493,940 Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. 885 885 Millennium bcp - Prestação de Serviços, A.C.E. 18,000 18,000 Imoserit, S.A. () 1,208 22,241 2,764,542 3,005,375 Impairment of investments in subsidiary and associated companies Bank Millennium S.A. — (19,928) BCP África, S.G.P.S., Lda. (178,351) (122,763) BCP International B.V. (43,435) (42,744) M Representações Ltda. (*) (23,219) (21,790) Millennium bcp Participacöes, S.G.P.S., Sociedade Unipessoal, Lda. (309,578) (315,643) Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. (777) (775) Imoserit, S.A. () (1,208) — (556,568) (523,643) 2,207,974 2,481,732 (a) Capital reduction in October 2023 in the amount of Euros: 225,000,000. () previous Millennium bcp - Escritório de representações e Serviços, S/C Lda. () previous FLITPTREL Tires, S.A. The movements for Impairment of investments in subsidiary and associated companies are analysed as follows: (Thousands of euros) 2023 2022 Balance on 1 January 523,643 696,158 Impairment charge for the year (note 12) 58,933 18,077 Write-back for the year (note 12) (25,993) (67,374) Loans charged-off — (123,087) Exchange rate differences (15) (131) Balance at the end of the year 556,568 523,643 The Bank analysed the impairment related to the investments made in subsidiaries and associated as described in note 1 F). The Bank's subsidiaries and associated companies are presented in note 52. Regarding holding companies, namely, Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. and Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda., the impairment analysis was performed considering the recoverable amount of the business controlled by each one of those companies. 2023 REPORT & ACCOUNTS 548 | The recoverable amounts, as described in note 1.F., was determined based on the higher between the fair value amount less costs to sell and the value in use. The value in use was determined based on: (i) the business plan approved by each company board for the year 2023 and following years (ii) the following assumptions depending on the nature of the companies activities and correspondent geography: 2023 2022 Discount rate Growth rate Discount rate Discount rate Growth rate Explicit period Perpetuity Perpetuity Explicit period Perpetuity Perpetuity Portugal 14.325% 14.325% 0.000% 14.223% 14.223% 0.000% Poland 14.699% 14.699% 0.000% 15.713% 15.713% 0.000% Angola 25.598% n.a. n.a. 26.300% n.a. n.a. Mozambique 28.348% 28.348% 5.500% 29.800% 29.800% 5.500% Regarding Bank Millennium, S.A. in Poland, there were factors identified during 2022 that indicated the deterioration in the value in use of this participation which led, at the end of 2022, to a value in use lower than the fair value amount net of costs to sell of Euros 588.6 million (resulting from the quotation and exchange rate as at 31 December 2022, of 4.58 PLN and 4.6816 PLN/EUR, respectively, to the number of shares held 607,771,505, net of an estimated 1% for costs to sell). The resulting recoverable value of Euros 588.6 million compared to a net accounting value of Euros 608.6 million, which led to an impairment charge of Euros 19.9 million as at 31 December 2022. During the 2023 financial year, both the value in use and the fair value amount net of costs to sell were above the net accounting value of the participation (Euros 608.6 million) which resulted in the reversal in 2023 of the impairment of Euros 19,9 million registered at the end of 2022. Based on the analysis made, the Bank recognized impairment in the financial year 2023, as follows: (Thousands of euros) Balance on 1 January Impairment charges / (Reversals) (note 12) Exchange rate differences Balance on 31 December Bank Millennium S.A. 19,928 (19,928) — — BCP África, S.G.P.S., Lda. 122,763 55,588 — 178,351 BCP International B.V. 42,744 691 — 43,435 M Representações Ltda. 21,790 1,444 (15) 23,219 Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. 315,643 (6,065) — 309,578 Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. 775 2 — 777 Imoserit, S.A. — 1,208 — 1,208 523,643 32,940 (15) 556,568 2023 REPORT & ACCOUNTS | 549 24. Non-current assets held for sale This balance is analysed as follows: (Thousands of euros) 2023 2022 Gross value Impairment Net value Gross value Impairment Net value Imóveis Assets arising from recovered loans (note 48) 77,926 (37,776) 40,150 261,730 (78,412) 183,318 Assets for own use (closed branches) 482 (293) 189 3,575 (531) 3,044 Equipment and other 974 (696) 278 2,871 (1,307) 1,564 Subsidiaries acquired exclusively with the purpose of short-term sale 78,381 (21,785) 56,596 79,294 (22,410) 56,884 Other assets () — — — 12,806 — 12,806 157,763 (60,550) 97,213 360,276 (102,660) 257,616 () includes Price Deposit and Property Adjudication Proposals In 2023, a set of assets with a balance sheet value of 76,981,000 euros (of which 63,054,000 euros in Assets arising from recovered loans) and respective impairment of 11,989,000 euros (of which 11,048,000 euros in Assets arising from recovered loans), were transferred to "Other assets” (note 28) following the analysis of the requirements provided in IFRS 5. The assets included in this balance are accounted for in accordance with the accounting policy described in note 1.G. The balance Real estate - Assets arising from recovered loans includes, essentially, real estate resulted from recovered loans or judicial being accounted for at the time the Bank assumes control of the asset, which is usually associated with the transfer of their legal ownership. Additional information on these assets is presented in note 48. The Bank has a strategy for sale these assets, consistent with the characteristic of each asset as well as with the breakdown of underlying valuations. However, taking into account the actual market conditions, it was not possible in all instances to conclude the sales in the expected time. The sale strategy is based in an active search of buyers, with the Bank having a website where advertises these properties and through partnerships with the mediation of companies having more ability for the product that each time the Bank has for sale. Prices are periodically reviewed and adjusted for continuous adaptation to the market. The Bank requests, regularly, to the European Central Bank, the extension of the period of holding these properties. The referred balance includes real estate for which the Bank has already established contracts for the sale in the gross amount of Euros 53,014,000 (31 December 2022: Euros 27,806,000), which impairment associated is Euros 24,127,000 (31 December 2022: Euros 5,237,000), which was calculated taking into account the value of the respective contracts. The changes occurred in Impairment of non-current assets held for sale are analysed as follows: (Thousands of euros) 2023 2022 Balance on 1 January 102,660 140,654 Transfer to other assets (11,989) — Other transfers (10,428) — Impairment for the year (note 12) 8,158 51,931 Loans charged-off (27,226) (91,047) Exchange rate differences (625) 1,122 Balance at the end of the year 60,550 102,660 2023 REPORT & ACCOUNTS 550 | 25. Other tangible assets This balance is analysed as follows: (Thousands of euros) 2023 2022 Land and buildings 402,796 413,082 Equipment Computer equipment 191,297 186,475 Security equipment 58,407 58,652 Interior installations 106,059 104,728 Machinery 18,715 18,690 Furniture 73,051 73,399 Motor vehicles 14,577 13,431 Other equipment 2,596 2,628 Right of use Real estate 269,787 257,014 Work in progress 633 2,288 Other tangible assets 29 30 1,137,947 1,130,417 Accumulated depreciation Relative to the year (note 9) (51,207) (54,334) Relative to the previous years (763,386) (775,914) (814,593) (830,248) 323,354 300,169 The balance Right-of-use essentially corresponds to lease agreements on real estate (branches and central buildings) and to a residual number of vehicles, which are amortized according to the term of each lease agreement, as described in the accounting policy 1.H. 2023 REPORT & ACCOUNTS | 551 The changes occurred in Other tangible assets, during 2023, are analysed as follows: (Thousands of euros) Initial Balance Acquisitions / Charge Disposals / Charged-off Transfers Exchange differences Balance on 31 December Real estate 413,082 — (8,449) (1,815) (22) 402,796 Equipment: Computer equipment 186,475 10,628 (5,798) — (8) 191,297 Security equipment 58,652 331 (547) (27) (2) 58,407 Interior installations 104,728 251 (1,343) 2,427 (4) 106,059 Machinery 18,690 29 (18) 16 (2) 18,715 Furniture 73,399 214 (600) 42 (4) 73,051 Motor vehicles 13,431 2,610 (1,839) 378 (3) 14,577 Other equipment 2,628 4 (36) — — 2,596 Right of use: Real estate 257,014 116,673 (103,750) — (150) 269,787 Work in progress 2,288 1,436 (137) (2,954) — 633 Other tangible assets 30 — — — (1) 29 1,130,417 132,176 (122,517) (1,933) (196) 1,137,947 Accumulated depreciation: Real estate (298,291) (7,091) 8,257 807 20 (296,298) Equipment: Computer equipment (164,112) (6,911) 5,768 — 5 (165,250) Security equipment (55,688) (651) 537 27 1 (55,774) Interior installations (93,273) (2,140) 1,330 37 1 (94,045) Machinery (17,064) (429) 17 — 2 (17,474) Furniture (69,435) (1,286) 600 2 3 (70,116) Motor vehicles (6,623) (1,660) 1,394 — 2 (6,887) Other equipment (2,606) (8) 36 — — (2,578) Right of use: Real estate (123,126) (31,031) 47,984 — 32 (106,141) Vehicles and equipment (1) — — — — (1) Other tangible assets (29) — — — — (29) (830,248) (51,207) 65,923 873 66 (814,593) 300,169 80,969 (56,594) (1,060) (130) 323,354 2023 REPORT & ACCOUNTS 552 | The changes occurred in Other tangible assets, during 2022, are analysed as follows: (Thousands of euros) Initial Balance Acquisitions / Charge Disposals / Charged-off Transfers Exchange differences Balance on 31 December Real estate 450,443 380 (25,820) (11,960) 39 413,082 Equipment: Computer equipment 193,150 12,568 (19,251) (3) 11 186,475 Security equipment 59,701 371 (1,355) (67) 2 58,652 Interior installations 105,991 567 (1,728) (108) 6 104,728 Machinery 18,411 306 (32) — 5 18,690 Furniture 74,357 367 (1,161) (171) 7 73,399 Motor vehicles 13,360 1,663 (1,598) — 6 13,431 Other equipment 2,703 1 (76) — — 2,628 Right of use: Real estate 254,115 9,512 (6,872) (8) 267 257,014 Vehicles and equipment 65 — (65) — — — Work in progress 868 2,930 (492) (1,018) — 2,288 Other tangible assets 30 — — — — 30 1,173,194 28,665 (58,450) (13,335) 343 1,130,417 Accumulated depreciation: Real estate (321,129) (7,517) 24,820 5,565 (30) (298,291) Equipment: Computer equipment (176,184) (7,151) 19,227 3 (7) (164,112) Security equipment (56,507) (655) 1,323 152 (1) (55,688) Interior installations (93,379) (2,040) 1,701 446 (1) (93,273) Machinery (16,659) (430) 29 — (4) (17,064) Furniture (69,309) (1,452) 1,161 171 (6) (69,435) Motor vehicles (6,442) (1,451) 1,275 — (5) (6,623) Other equipment (2,674) (8) 76 — — (2,606) Right of use: Real estate (96,321) (33,625) 6,851 1 (32) (123,126) Vehicles and equipment (62) (4) 65 — — (1) Other tangible assets (28) (1) — — — (29) (838,694) (54,334) 56,528 6,338 (86) (830,248) 334,500 (25,669) (1,922) (6,997) 257 300,169 2023 REPORT & ACCOUNTS | 553 26. Intangible assets This balance is analysed as follows: (Thousands of euros) 2023 2022 Intangible assets Software 156,316 155,419 Other intangible assets 164 1,308 156,480 156,727 Accumulated amortisation Relative to the year (note 9) (22,970) (25,717) Relative to the previous years (33,814) (53,087) (56,784) (78,804) 99,696 77,923 The changes occurred in Intangible assets balance, during 2023, are analysed as follows: (Thousands of euros) Balance on 1 January Acquisitions / Charge Disposals / Charged-off Exchange differences Balance on 31 December Intangible assets Software 155,419 46,097 (45,183) (16) 156,316 Other intangible assets 1,308 14 (1,154) (4) 164 156,727 46,111 (46,337) (20) 156,480 Accumulated amortisation Software (78,712) (22,970) 44,974 12 (56,695) Other intangible assets (92) — — 3 (89) (78,804) (22,970) 44,974 15 (56,784) 77,923 23,141 (1,363) (5) 99,696 The changes occurred in Intangible assets balance, during 2022, are analysed as follows: (Thousands of euros) Balance on 1 January Acquisitions / Charge Disposals / Charged-off Exchange differences Balance on 31 December Intangible assets Software 107,935 47,467 (11) 28 155,419 Other intangible assets 152 1,160 (10) 6 1,308 108,087 48,627 (21) 34 156,727 Accumulated amortisation Software (52,978) (25,717) 1 (18) (78,712) Other intangible assets (86) — — (6) (92) (53,064) (25,717) 1 (24) (78,804) 55,023 22,910 (20) 10 77,923 2023 REPORT & ACCOUNTS 554 | 27. Income tax Income tax assets and liabilities are analysed as follows: (Thousands of euros) 2023 2022 Assets Liabilities Net Assets Liabilities Net Deferred taxes not depending on the future profits (a) Impairment losses (b) 862,261 — 862,261 982,465 — 982,465 Employee benefits 732,273 — 732,273 835,588 — 835,588 1,594,534 — 1,594,534 1,818,053 — 1,818,053 Deferred taxes depending on the future profits Other tangible assets 834 (2,868) (2,034) 680 (2,930) (2,250) Impairment losses (b) 260,047 — 260,047 310,286 (50,303) 259,983 Employee benefits 98,531 (139,712) (41,181) 46,324 (133,898) (87,574) Financial assets at fair value through other comprehensive income (c) 477,725 (75,033) 402,692 680,516 (124,175) 556,341 Tax losses carried forward (d) 157,450 — 157,450 162,400 — 162,400 Others 91,046 (23,473) 67,573 89,087 (45,159) 43,928 1,085,633 (241,086) 844,547 1,289,293 (356,465) 932,828 Total deferred taxes 2,680,167 (241,086) 2,439,081 3,107,346 (356,465) 2,750,881 Offset between deferred tax assets and deferred tax liabilities (241,086) 241,086 — (356,465) 356,465 — Net deferred taxes 2,439,081 — 2,439,081 2,750,881 — 2,750,881 Current taxes (e) 14,044 (65,291) — 10,926 (2,027) — (a) Special Regime applicable to deferred tax assets. (b) The amounts of 2023 and 2022 include deferred tax assets related with credit impairments non-accepted fiscally of which credits were written-off, according to the expectation that the use of such impairments will be deductible for the purposes of determining taxable income for the tax periods in which the legal conditions required for their tax deductibility are met. (c) Includes a net amount of Euros 397,020,000 resulting from losses on cash flow hedging derivatives of interest rate risk recognized in other comprehensive income, whose average remaining term is 2.5 years. (d) Respects tax losses carried forward recorded for the years 2016 and 2020. (e) The amounts of current taxes assets and liabilities refer exclusively to income taxes on the Bank's income. 2023 REPORT & ACCOUNTS | 555 Special regime applicable to deferred tax assets The Extraordinary General Meeting of the Bank which took place on 15 October 2014 approved the Bank's accession to the Special Regime approved by Law No. 61/2014, of 26 August, applicable to deferred tax assets that resulted from not deduction of expenses and negative equity variations with impairment losses on credits and post-employment or long-term employee benefits. The special regime is applicable to those expenses and negative equity variations recorded in tax periods beginning on or after 1 January 2015, as well as to deferred tax assets recorded in the annual accounts for the last tax period prior to that date and to part of expenses and negative equity variations associated with them. Pursuant to Law No. 23/2016, of 19 August, this special regime is not applicable to expenses and negative equity variations with impairment losses on credits and with post-employment or long-term employee benefits recorded in the period's taxation commencing on or after 1 January 2016, nor to deferred tax assets to these associates. The special regime applicable to deferred tax assets provides for an optional framework and with the possibility of subsequent waiver, under which: - Expenses and negative equity variations with impairment losses on credits and with post-employment or long-term employee benefits covered by it are deducted, under the terms and conditions set out in the IRC Code and in relevant separate tax legislation, until the competition taxable profit for the tax period determined before these deductions. Expenses and negative equity variations not deducted as a result of applying this limit are deducted in subsequent tax periods, with the same limit. In the BCP, deferred tax assets associated with expenses and negative equity variations under these conditions amount to Euros 1,387,878,000 (31 December 2022: Euros 1,599,168,000),of which Euros 848,120,000 relate to impairment losses on credits (31 December 2022: Euros 967,679,000) and Euros 539,758,000 relate to post-employment or long-term employee benefits (31 December 2022: Euros 631,489,000). - In certain situations (those with negative net results in annual individual accounts or liquidation by voluntary dissolution, insolvency decreed by court or revocation of the respective authorization), deferred tax assets covered by the Special Regime are converted into tax credits, in part or in wholeness. In situations of negative net income, the conversion is made according to the proportion between the amount of the negative net income for the period and the total of equity capital, and a special reserve corresponding to 110% of the tax credit must be constituted and, simultaneously, conversion rights attributable to the State of equivalent value, rights that can be acquired by the shareholders upon payment to the State of the same value. Tax credits may be offset against tax debts of the beneficiaries (or an entity based in Portugal within the same prudential consolidation perimeter or included in the same group of entities for which are applied the Special Tax Regime for Groups of Companies) or reimbursed by the State. As the Bank did not record negative net results in the years 2015 to 2022, there was no conversion of deferred taxes assets into tax credits, under the terms provided for in the Special Regime. Pursuant to the regime described, the recovery of deferred tax assets covered by the optional regime approved by Law No. 61/2014, of 26 August, is not dependent on future profits. The above-mentioned legal framework was described by Ordinance no. 259/2016, of 4 October, about the control and use of tax credits, and by the Ordinance No. 293-A/2016, of 18 November, which establishes the conditions and procedures for the acquisition by the shareholders of the referred rights of the State. Law No. 98/2019, of 4 September, establishes a deadline for the acquisition of the referred rights of the State by the shareholders, after which the Management Board of the issuing bank is obliged to promote the record of the capital increase by the amount resulting from the exercise of the conversion rights. According to this legislation, among other aspects, these rights are subject to a right of acquisition by the shareholders on the date of creation of the rights of the State, exercisable in periods that will be established by the Board of Directors until 3 years after the confirmation date of the conversion of the deferred tax asset into tax credit by the Portuguese Tax and Customs Authority. The issuing entity shall deposit in favor of the State the amount of the price corresponding to all the rights issued, within 3 months beginning from the confirmation date of the conversion of the deferred tax asset into tax credit. Such deposit shall be redeemed when and to the extent that the rights of the State are acquired by the shareholders, or exercised by the State. Deferred taxes are calculated based on the tax rates expected to be in force when the temporary differences are reversed, which correspond to the approved rates or substantially approved at the balance sheet date. 2023 REPORT & ACCOUNTS 556 | The deferred tax rate is analysed as follows: Description 2023 2022 Income tax 21.0% 21.0% Municipal surtax rate (on taxable net income) 1.5% 1.5% State tax rate (on taxable net income) More than Euros 1,500,000 to Euros 7,500,000 3.0% 3.0% From more than Euros 7,500,000 to Euros 35,000,000 5.0% 5.0% More than Euros 35,000,000 9.0% 9.0% The tax applicable to deferred taxes related to tax losses is 21% (31 December 2022: 21%). The average deferred tax rate associated with temporary differences of the Bank is 31.3% (31 December 2022: 31.3%). Following the amendments provided for in Law No. 24-D/2022, of 30 December, within the scope of the State Budget for 2023, the time limit applicable to the carrying forward of tax losses in Portugal was eliminated. This amendment applies to tax losses calculated in tax periods beginning on or after 1 January 2023, as well as to tax losses calculated in tax periods prior to 1 January 2023 and whose deduction period is still in progress on that date. Thus, tax losses calculated in 2014 and subsequent years may be deducted from future taxable income. The deduction limit for tax losses increased from 70% to 65%, being increased by ten percentage points when the difference results from the deduction of tax losses calculated in the 2020 and 2021 tax periods, under the terms of the special regime provided for in Law n. 27-A/2020, of July 24th. Banco Comercial Português, S.A. applies the Special Tax Regime for Groups of Companies (RETGS) since 2016 for taxation purposes under IRC, in which it’s the dominant company. In 2023 and 2022, the application of the RETGS was maintained. The group's taxable profit is calculated by the algebraic sum of the individual taxable profits and tax losses of the companies that comprise it. Income tax is calculated and registered, on an individual basis, in each of the Companies that make up the RETGS as if the regime were not applicable. The effect of the offset between taxable income and tax losses in 2023 and 2022 was reflected in the companies that generated the losses. The balance of Deferred tax assets not depending on the future profits (covered by the regime approved by Law no. 61/2014, of 26 August) includes the amounts of Euros 210,686,000 and Euros 4,020,000 recorded in 2015 and 2016, respectively, related to expenses and negative equity variations with post-employment or long-term employee benefits and to impairment losses in loans accounted until 31 December 2014. The Law No. 98/2019, of 4 September, established the tax regime for credit impairments and provisions for guarantees for tax periods beginning on or after 1 January 2019, providing for approximation between the accounting and tax rules for the purposes of deductibility of expenses with the reinforcement of credit impairments. The rules in force until 2018 could continue to be applied until the end of the 2023 financial year, unless the option to apply the new regime was exercised in advance. In 2022, the Bank exercised the option to apply the new regime, under the terms of which the impairment losses for credit risk relating to exposures analysed on an individual or on a collective basis recognized in accordance with the applicable accounting standards and regulations are fully deductible for the purposes of determining taxable profit, with the exceptions provided for in the Corporate Income Tax Code. The exceptions apply to impairment losses relating to credits and other rights over natural or legal persons who hold, directly or indirectly, more than 10 % of the Bank's capital, over members of its corporate bodies, over companies in which the Bank holds, directly or indirectly, more than 10 % of the capital or over entities with which it is in a situation of special relations. The Impairment losses and other value corrections for specific credit risk recorded until 31 December 2021 and still not accepted for tax purposes are only deductible up to the amount that, in each tax period, corresponds to the application of the mandatory minimum limits set out in Notice of Bank of Portugal No. 3/95, as amended before its repeal by Notice of Bank of Portugal No. 5/2015, and, between other conditions, provided that they are not claims covered by real estate rights. 2023 REPORT & ACCOUNTS | 557 The Bank complies with the guidelines of IFRIC 23 - Uncertainty over Income Tax Treatments on the determination of taxable profit, tax bases, tax losses to be reported, tax credits to be used and tax rates in scenarios of uncertainty regarding the income tax treatment. Analysis of the recoverability of deferred tax assets In accordance with the accounting policy 1 X1, and with the requirements of IAS 12, the deferred tax assets were recognised based on the Bank's expectation of their recoverability. The recoverability of deferred taxes depends on the implementation of the strategy of the Bank's Board of Directors, namely the generation of estimated taxable income and its interpretation of tax legislation. Any changes in the assumptions used in estimating future profits or tax legislation may have material impacts on deferred tax assets. The assessment of the recoverability of deferred tax assets is based on the projected results for the period from 2024 to 2030, as longer projection periods have higher underlying factors of uncertainty. The projected pre-tax results for the years 2024, 2025 and 2026 are consistent with the budget approved by the Bank's Board of Directors in November 2023, which incorporates the priorities stemming from the 2021-2024 Strategic Plan, in a framework where the financial targets set therein for 2024 have been achieved or exceeded in 2023, adjusted for the impact of a new issue of additional Tier 1 securities in the amount of Euros 400 million, with an option for early repayment from the end of the 5th year and with an annual interest rate of 8.125%. In the earnings projection for the years 2027, 2028, 2029 and 2030, a standard nominal growth rate of 2% was considered. The projections incorporate the impact of the stabilization of interest rates at a lower level than the current one, preserving profitability levels in line with those targets and reflecting the commercial positioning and the desired capture of efficiency gains, enshrined in the 2021-2024 Strategic Plan approved by the governing bodies, highlighting: - after reflecting the impacts of the normalization of interest rates, the net interest income benefits from the recovery of volumes in deposits and loans to customers, where the Bank continues to privilege priority segments associated with the relationship and knowledge of its customers and transactionality; - increase in commission income based on an efficient and judicious management of commissions and price lists; - cost of risk still showing improvement, although gradually less significant, as this indicator converges to levels in line with the Bank's current activity, with a lower impact on the historical portfolios of NPEs, foreclosed assets and FRE (Corporate Restructuring Funds), after the reduction of these exposures achieved over the last years; - Preservation of high levels of efficiency based on continued cost discipline and increased use of technology. 2023 REPORT & ACCOUNTS 558 | To estimate taxable net income for the periods of 2024 to 2030, the following main assumptions were considered: - The rules of the new tax regime of credit impairment were applied. In the application of these rules, the following assumptions were considered, in general terms: a) the impairment losses for credit risk related to exposures analysed on an individual or collective basis, recognised in accordance with the applicable accounting and regulatory standards, were considered deductible for tax purposes; b) impairment reversals created up to 31 December 2021 not accepted for tax purposes were estimated based on the Non-Performing Assets Reduction Plan 2024-2025 submitted to the supervisory authority in March 2023, and also on the basis of the average percentage of reversal observed in the last years from 2016 to 2023; c) the referred average percentages were calculated separately, depending on whether or not there was a mortgage guarantee, the eligibility for purposes of the special regime applicable to deferred tax assets and according to the customers’ classification as Non-Performing Exposures (NPE). - The deductions related to impairment of financial assets were projected based on the destination (sale or settlement) and the estimated date of the respective operations; - Impairment reversals of non-financial assets not accepted for tax purposes were projected considering the expected periods of disinvestment in certain real estate assets. For the remaining assets without a forecasted term for disinvestment, the reversals were estimated based on the average percentage of reversal observed in the years from 2016 to 2023. Non-deductible expenses related to the reinforcement of impairment of non-financial assets were estimated on the based on the average percentage of amounts not deducted for tax purposes in the years from 2016 to 2023, compared to the amounts of reinforcements net of impairment recorded in those years; - The deductions related to employee benefits were projected based on their estimated payments or deduction plans, in accordance with information provided by the pension fund actuary; - The realization of changes in the fair value of real estate investment funds was projected based on the information available in the regulations of the funds in question in relation to the period foreseen for the respective liquidation. According to the estimate of future taxable income, the deferred taxes assets recorded as at 31 December 2023 and 31 December 2022 are adequate under the IAS 12 requirements. In accordance with these assessments, the amount of unrecognised deferred tax related to to temporary differences and to tax losses, is as follows: (Thousands of euros) 2023 2022 Temporary differences 40,976 54,015 Tax losses carried forward 2014 161,906 161,895 2016 282,473 286,414 2018 104,966 104,966 2019 () 23,915 23,915 2020 () — 1,670 2021 193,606 193,606 2022 6,590 3,794 Total 773,456 776,260 () Following the publication of the Circular n. 3/2024 issued by the Portuguese Tax Authorities on the Corporate Income tax treatment of leased assets under IFRS 16, the DTA related to 2019 and 2020 tax losses should increase by Euros 4,886 thousands and Euros 4,616 thousands, respectively. 2023 REPORT & ACCOUNTS | 559 The impact of income taxes in Net income and in other balances of Bank's equity is analysed as follows: (Thousands of euros) 2023 2022 Net income for the year Reserves Net income for the year Reserves Deferred taxes not depending on the future profits Impairment losses (120,204) — (712) — Employee benefits (89,567) (13,748) — — (209,771) (13,748) (712) — Deferred taxes depending on the future profits Intangible assets — — (49) — Other tangible assets 216 — 110 — Impairment losses (48,448) (1,791) (169,150) — Employee benefits (57,536) 103,929 (6,295) (125,386) Financial assets at fair value through other comprehensive income — (153,649) — 564,184 Tax losses carried forward (a) (5,450) 500 2,236 (2,236) Others (2,553) 3,638 (14,918) 20 (113,771) (47,373) (188,066) 436,582 (323,542) (61,121) (188,778) 436,582 Current taxes Actual year 7,566 — 1,578 — Correction of previous years (748) — 765 — 6,818 — 2,343 — (316,724) (61,121) (186,435) 436,582 (a) The amount recorded in reserves refers to the deferred tax on the part of tax loss arising from the deduction of negative equity variations recorded in reserves that contribute to the calculation of taxable income. The reconciliation between the nominal tax rate and the effective tax rate is analysed as follows: (Thousands of euros) 2023 2022 Net income / (loss) before income taxes 997,000 664,843 Current tax rate (%) 31.3% 31.3% Expected tax (312,061) (208,096) Elimination of double economic taxation of dividends received 22,517 47,080 Non deductible impairment (42,901) (9,213) Contribution to the banking sector (13,893) (13,517) Interest from other capital instruments (a) 11,581 11,581 Fiscal gains and losses (880) 6,777 Non-deductible expenses and other corrections (1,543) 1,574 Effect of tax rate difference and international double taxation (1,385) (10,401) Effect of recognition / derecognition net of deferred taxes (b) 21,705 (11,227) Correction of previous years 881 247 Autonomous tax (745) (1,240) Total (316,724) (186,435) Effective rate (%) 31.8% 28.0% (a) Relates to the impact of the deduction for taxable income purposes of interest paid in respect of perpetual bonds representing subordinated debt issued in 2019. (b) In 2023, essentially concerns the recognition of deferred tax assets relating to temporary differences associated with potential losses in specialized credit recovery funds, following the completion of sales operations of such funds in the years 2022 and 2023. 2023 REPORT & ACCOUNTS 560 | 28. Other assets This balance is analysed as follows: (Thousands of euros) 2023 2022 Debtors 142,197 188,011 Capital supplies 195,449 178,725 Capital supplementary contributions 165 165 Other financial investments 309 309 Gold and other precious metals 3,560 3,638 Deposit account applications 57,746 51,250 Debtors for futures and options transactions 118,472 191,290 Artistic patrimony 28,794 28,794 Amounts due for collection 81,610 80,018 Other recoverable tax 7,752 8,967 Subsidies receivables 8,347 10,764 Associated companies 985 566 Interest and other amounts receivable 42,712 39,276 Prepaid expenses 19,409 18,722 Amounts receivable on trading activity 10,736 3,234 Real estate and other assets arising from recovered loans (a) 104,744 — Amounts due from customers 76,047 51,229 Obligations with post-employment benefits (note 45) 379,899 581,412 Sundry assets 42,092 32,348 1,321,025 1,468,718 Impairment of other assets (215,433) (185,452) 1,105,592 1,283,266 (a) assets transferred from Non-current assets held for sale As referred in note 42, the balances Capital supplies include the amount of Euros 165,837,000 ( 31 December 2022: Euros 171,397,000) arising from the transfers of assets to Specialized recovery funds which have impairment in the same amount. As at 31 December 2023, the balance Deposit account applications includes the amount of Euros 30,638,000 (31 December 2022: Euros 25,506,000) relating to the collateral constituted in compliance with the assumption of irrevocable payment commitments to Single Resolution Fund, as referred in note 6. The Amounts receivable on trading activity includes amounts receivable within 3 business days of stock exchange operations. Considering the nature of these transactions and the age of the amounts of these items, the Bank's procedure is to periodically assess the collectability of these amounts and whenever impairment is identified, an impairment loss is recognised in the income statement. 2023 REPORT & ACCOUNTS | 561 The detail of the item Real estate and other assets arising from recovered loans is analysed as follows: (Thousands of euros) 2023 Gross value Impairment Net value Real estate Assets arising from recovered loans 90,697 (30,373) 60,324 Assets for own use (closed branches) 798 (414) 384 Equipment and others 1,214 (594) 620 Other assets () 12,035 — 12,035 104,744 (31,381) 73,363 () includes Price Deposit and Property Adjudication Proposals The changes occurred in Impairment of other assets, with the exception of impairment for Real estate and other assets arising from recovered loans are analysed as follows: (Thousands of euros) 2023 2022 Balance on 1 January 185,452 252,544 Transfers 4,187 513 Impairment for the year (note 12) 12,002 10,083 Write back for the year (note 12) (677) (175) Amounts charged-off (16,912) (77,513) Balance at the end of the year 184,052 185,452 The changes occurred in impairment for Real Estate and other assets arising from recovered loans, are analysed as follow: (Thousands of euros) 2023 2022 Balance on 1 January — — Transfer of Non-current assets held for sale (note 24) 11,989 — Other transfers 10,382 Charge for the year (note 12) 9,025 — Amounts charged-off (15) — Balance at the end of the year 31,381 — 2023 REPORT & ACCOUNTS 562 | 29. Resources from credit institutions This balance is analysed as follows: (Thousands of euros) 2023 2022 Non-interest bearing Interest bearing Total Non-interest bearing Interest bearing Total Resources and other financing from Central Banks Bank of Portugal — — — — 592,740 592,740 Central Banks abroad — 109,301 109,301 — 12,562 12,562 — 109,301 109,301 — 605,302 605,302 Resources from credit institutions in Portugal Repayable on demand 295,053 — 295,053 278,971 — 278,971 Term Deposits — 79,198 79,198 — 151,244 151,244 295,053 79,198 374,251 278,971 151,244 430,215 Resources from credit institutions abroad Repayable on demand 611,957 — 611,957 594,031 — 594,031 Term Deposits — 139,548 139,548 — 314,726 314,726 Loans obtained — 264,845 264,845 — 269,512 269,512 CIRS and IRS operations collateralised by deposits () — 18,650 18,650 — 26,810 26,810 Other resources — 4,393 4,393 — 4,188 4,188 611,957 427,436 1,039,393 594,031 615,236 1,209,267 907,010 615,935 1,522,945 873,002 1,371,782 2,244,784 () Under the scope of transactions involving derivative financial instruments (IRS and CIRS) with institutional counterparties, and in accordance with the terms of their respective agreements ("Cash collateral"). These deposits are held by the Bank and are reported as collateral for the referred operations (IRS and CIRS), whose revaluation is positive. This balance is analysed by remaining period, as follows: (Thousands of euros) 2023 2022 Up to 3 months 1,212,518 1,324,898 3 to 6 months 16,417 37,985 6 to 12 months 294,010 17,234 1 to 5 years — 864,667 1,522,945 2,244,784 As at 31 December 2022, the item Resources and others financing from Central Banks – Bank of Portugal included a total amount associated with the TLTRO III program of Euros 600,000,000, having been repaid early in January 2023. Considering the financing characteristics and the nature of the respective lender, the Bank accounted for the TLTRO III operation under IFRS9. The Bank considered that the operation constitutes a variable rate financing, indexed to the Deposit Facility Rate of the European Central Bank (ECB), having fulfilled the necessary criteria for it. Specifically for the period between 24 June 2020 and 23 June 2022, the Bank complied with the conditions required for the application, to each of the two tranches of the financing, of a maximum interest rate of -1%. Consequently, it recognised in the financial statements, for the referred interest counting period, the rate of -1%. For the period between 24 June and 31 December 2022, the rate resulting from the provisions of the regulation applied for the calculation in the different subperiods. 2023 REPORT & ACCOUNTS | 563 30. Resources from customers and other loans This balance is analysed as follows: (Thousands of euros) 2023 2022 Non-interest bearing Interest bearing Total Non-interest bearing Interest bearing Total Deposits from customers Repayable on demand 26,204,610 522,014 26,726,624 31,850,909 182,647 32,033,556 Term deposits — 13,832,902 13,832,902 — 10,674,875 10,674,875 Saving accounts — 4,387,534 4,387,534 — 6,301,697 6,301,697 Cheques and orders to pay 619,604 — 619,604 549,459 — 549,459 Other — 60,000 60,000 — 60,000 60,000 26,824,214 18,802,450 45,626,664 32,400,368 17,219,219 49,619,587 Corrections to the liabilities value subject to hedging operations 88,780 (1,846) Deferred costs/ (income) (621) (716) Interests to pay 71,945 8,783 45,786,768 49,625,808 In the terms of the Law, the Deposit Guarantee Fund was established to guarantee the reimbursement of funds deposited in Credit Institutions. The criteria to calculate the annual contributions to the referred fund are defined in the Regulation No. 11/94 of the Bank of Portugal. This balance is analysed by remaining period (maturity of the next renovation), as follows: (Thousands of euros) 2023 2022 Deposits repayable on demand 26,726,646 32,033,556 Term deposits and saving accounts Up to 3 months 8,112,821 8,611,315 3 to 6 months 6,141,281 5,563,162 6 to 12 months 3,938,536 2,774,755 1 to 5 years 186,775 33,199 18,379,413 16,982,431 Cheques and orders to pay Up to 3 months 619,604 549,459 Other Up to 3 months 1,105 362 Over 5 years 60,000 60,000 61,105 60,362 45,786,768 49,625,808 2023 REPORT & ACCOUNTS 564 | 31. Non subordinated debt securities issued This balance is analysed as follows: (Thousands of euros) 2023 2022 Debt securities at amortised cost Bonds — 2,000 MTNs 1,847,667 1,347,668 1,847,667 1,349,668 Corrections to the liabilities value subject to hedging operations (34,224) (66,860) Deferred costs/ (income) (2,173) (2,234) Accruals 23,940 16,977 1,835,210 1,297,551 The characteristics of the bonds issued by the Bank, as at 31 December 2023 are analysed as follows: (Thousands of euros) Issue Issue date Maturity date Interest rate Nominal value Book value Bcp 6NC5 Senior Preferred EUR 500MN NG - MTN 856 February, 2021 February, 2027 Fixed rate 1.125% year until Feb-26 /after Euribor 3M + Variable rate 1.55% 500,000 505,008 Bcp 1.75% Eur 500M 6.5Nc5.5 Social Senior Preferred Notes - Mtn 857 October, 2021 April, 2028 Fixed rate 1.75% year until Apr-27/after + Euribor 3M + 2% 500,000 459,867 BCP2022 MTN 859 BCP Senior Preferred Notes OCT 2025 October, 2022 October, 2025 Fixed rate 8.5% until October 2024; after 5.547% + Euribor 3M 350,000 347,534 BCP2023 MTN 861 BCP Senior Preferred Notes OCT 2026 October, 2023 October, 2026 Fixed rate 5.625% until October 2025; after 1.90% + Euribor 3M 500,000 498,561 BCP Fin.Bank - EUR 10 M () March, 2004 March, 2024 Fixed rate 5.01% 300 300 1,811,270 Accruals 23,940 1,835,210 () In the last quarter of 2023, the issuer was replaced by Banco Comercial Português This balance, as at 31 December 2023, is analysed by the remaining period, as follows: (Thousands of euros) 2023 Up to 3 months 3 months to 6 months 6 months to 1 year 1 year to 5 years Over 5 years Total Debt securities at amortised cost MTNs — 311 — 1,834,899 — 1,835,210 — 311 — 1,834,899 — 1,835,210 2023 REPORT & ACCOUNTS | 565 This balance, as at 31 December 2022, is analysed by the remaining period, as follows: (Thousands of euros) 2022 Up to 3 months 3 months to 6 months 6 months to 1 year 1 year to 5 years Over 5 years Total Debt securities at amortised cost Bonds 2,008 — — — — 2,008 MTNs — — — 852,395 443,148 1,295,543 2,008 — — 852,395 443,148 1,297,551 32. Subordinated debt This balance is analysed as follows: (Thousands of euros) 2023 2022 Bonds MTNs 1,050,000 1,050,000 Corrections to the liabilities value subject to hedging operations (41,831) (72,040) Deferred costs/ (income) (1,956) (2,436) Accruals 30,866 22,542 1,037,079 998,066 As at 31 December 2023, the subordinated debt issues are analysed as follows: (Thousands of euros) Issue Issue date Maturity date Interest rate Nominal value Book value Own funds value () Bcp Fix Rate Reset Sub Notes-EMTN 854 December, 2017 December, 2027 See ref. (i) 166,300 166,666 130,915 Bcp Subord Fix. Rate Note Proj. Tagus Mtn 855 September, 2019 March, 2030 See ref. (ii) 450,000 443,394 450,000 BCP Tier 2 Subordinated Callable Notes Due May 2032 - MTN 858 November, 2021 May, 2032 See ref. (iii) 300,000 285,050 300,000 BCP2022 Tier 2 Sub Callable Notes Due 2 June 2033 MTN 860 December, 2022 March, 2033 See ref. (iv) 133,700 141,969 133,700 1,037,079 1,014,615 () Amount of subordinated loans, eligible as Level 2 own funds, in accordance with Articles 62 a), 63 to 65, 66 a) and 67 of the CRR. References: Interest rates: (i) up to the 5th year fixed rate 4.5%; 6th year and following: mid-swap rate in force at the beginning of this period + 4.267%; (ii) Annual interest rate of 3.871% during the first 5.5 years (corresponding to a spread of 4.231% over the 5.5 year mid-swap rate, for the remaining 5 years, will be applied over the mid swaps rate in force at the beginning of that period); (iii) Interest rate of 4%, per annum, during the first 5 years and 6 months (corresponding to a spread of 4.065% over the average of the mid-swap rates of 5 and 6 years). At the end of the first 5 years and 6 months the interest rate will be reset to maturity based on the 5 year mid swaps rate prevailing at that time plus the Spread; (iv) Fixed annual interest rate of 8.75% during the first 5.25 years. The annual interest rate from year 5.25 onwards was set at the 5- year mid-swap rate plus a 6.051%. 2023 REPORT & ACCOUNTS 566 | As at 31 December 2022, the subordinated debt issues are analysed as follows: (Thousands of euros) Issue Issue date Maturity date Interest rate Nominal value Book value Own funds value () Bcp Fix Rate Reset Sub Notes-Emtn 854 December, 2017 December, 2027 See ref. (i) 166,300 164,044 164,175 Bcp Subord Fix Rate Note Projeto Tagus Mtn 855 September, 2019 March, 2030 See ref. (ii) 450,000 428,740 450,000 BCP Tier 2 Subordinated Callable Notes Due May 2032 Mtn 858 November, 2021 May, 2032 See ref. (iii) 300,000 274,350 300,000 BCP2022 Tier 2 Sub Callable Notes Due 2 June 2033 MTN 860 December, 2022 March, 2033 See ref. (iv) 133,700 130,932 133,700 998,066 1,047,875 () Amount of subordinated loans, eligible as Level 2 own funds, in accordance with Articles 62 a), 63 to 65, 66 a) and 67 of the CRR. References: Interest rates: (i) up to the 5th year fixed rate 4.5%; 6th year and following: mid-swap rate in force at the beginning of this period + 4.267%; (ii) Annual interest rate of 3.871% during the first 5.5 years (corresponding to a spread of 4.231% over the 5.5 year mid-swap rate, for the remaining 5 years, will be applied over the mid swaps rate in force at the beginning of that period). (iii) Interest rate of 4%, per annum, during the first 5 years and 6 months (corresponding to a spread of 4.065% over the average of the mid-swap rates of 5 and 6 years). At the end of the first 5 years and 6 months the interest rate will be reset to maturity based on the 5 year mid swaps rate prevailing at that time plus the Spread. (iv) Fixed annual interest rate of 8.75% during the first 5.25 years. The annual interest rate from year 5.25 onwards was set at the 5- year mid-swap rate plus a 6.051%. The analysis of the subordinated debt by remaining period, is as follows: (Thousands of euros) 2023 2022 1 year to 5 years 166,666 164,044 Over 5 years 870,413 834,022 1,037,079 998,066 2023 REPORT & ACCOUNTS | 567 33. Financial liabilities held for trading The balance is analysed as follows: (Thousands of euros) 2023 2022 Trading derivatives (note 21) Swaps 106,727 182,481 of which: Embedded derivatives — 8 Options 126 694 Forwards 562 4,263 107,415 187,438 Level 2 107,343 187,430 Level 3 72 8 As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 44. As at 31 December 2022, the balance Financial liabilities held for trading included the embedded derivatives valuation separated from the host contracts in accordance with the accounting policy presented in note 1.B5., in the amount of Euros 8,000. This note should be analysed together with note 21. 34. Financial liabilities designated at fair value through profit or loss This balance is analysed as follows: (Thousands of euros) 2023 2022 Deposits from customers () 2,314,798 476,671 Debt securities at fair value through profit and loss Medium term notes (MTN) 297,784 490,326 Certificates 989,703 850,682 3,602,285 1,817,679 () Deposits from customers whose remuneration is indexed to a set of shares and/or indices 2023 REPORT & ACCOUNTS 568 | As at 31 December 2023, the analysis of Debt securities at fair value through profit and loss, is as follows: (Thousands of euros) Issue Issue date Maturity date Interest rate Nominal value Book value Bcp Cabaz 3 Acoes Fevereiro 2024 - Smtn Sr 31 February, 2019 February, 2024 Indexed to 3 shares portfolio 71,904 71,170 Bcp Tit Div Mill Cabaz 3 Acoes 8Abr24 Smtn Sr35 April, 2019 April, 2024 Indexed to 3 shares portfolio 64,634 63,405 Bcp Tit Div Mill Cabaz 5 Ac 26Julho2024 Smtn42 July, 2019 July, 2024 Indexed to 5 shares portfolio 75,600 73,025 Bcp Tit Div Millennium Cabaz 5 Ac 6Dez24 Smtn 44 December, 2019 December, 2024 Indexed to 5 shares portfolio 94,602 90,184 297,784 As at 31 December 2023, the analysis of this balance, by remaining period, is as follows: (Thousands of euros) 2023 Up to 3 months 3 months to 6 months 6 months to 1 year 1 year to 5 years Over 5 years Total Deposits from customers 749,241 277,406 1,054,097 234,054 — 2,314,798 Debt securities at fair value through profit and loss MTNs 71,170 63,405 163,209 — — 297,784 Certificates — — — 32,088 957,615 989,703 820,411 340,811 1,217,306 266,142 957,615 3,602,285 As at 31 December 2022, the analysis of this balance, by remaining period, is as follows: (Thousands of euros) 2022 Up to 3 months 3 months to 6 months 6 months to 1 year 1 year to 5 years Over 5 years Total Deposits from customers — — 315,692 160,979 — 476,671 Debt securities at fair value through profit and loss MTNs — 80,858 116,899 292,569 — 490,326 Certificates — — — — 850,682 850,682 — 80,858 432,591 453,548 850,682 1,817,679 2023 REPORT & ACCOUNTS | 569 35. Provisions This balance is analysed as follows: (Thousands of euros) 2023 2022 Provision for guarantees and other commitments 109,616 100,480 Other provisions for liabilities and charges 356,345 263,219 465,961 363,699 Changes in Provision for guarantees and other commitments are analysed as follows: (Thousands of euros) 2023 2022 Balance on 1 January 100,480 99,591 Transfers (note 19) (1,990) (708) Charge for the year (note 13) 12,364 2,042 Reversals for the year (note 13) (1,236) (448) Exchange rate differences (2) 3 Balance at the end of the year 109,616 100,480 Changes in Other provisions for liabilities and charges are analysed as follows: (Thousands of euros) 2023 2022 Balance on 1 January 263,219 264,591 Transfers (1,613) (483) Charge of the year for restructuring costs (note 7) — 4,414 Charge for the year (note 13) 100,288 102,328 Reversals for the year (note 13) (7) (21) Amounts charged-off (5,542) (107,610) Balance at the end of the year 356,345 263,219 The Other provisions for liabilities and charges were based on the probability of occurrence of certain contingencies related to risks inherent to the Bank's activity, being reviewed at each reporting date in order to reflect the best estimate of the amount and respective probability of payment. This balance includes provisions for Real Estate Investment Funds in the amount of Euros 85,228,000 (31 December 2022: Euros 49,602,000) and for lawsuits, frauds and tax contingencies. The provisions constituted to cover tax contingencies totalled Euros 50,571,000 (31 December 2022: Euros 35,001,000). At the end of December 2022, the balance of Other provisions for liabilities and charges was reinforced in the amount of Euros 4,414,000, referring to agreements already concluded with some employees whose effective departures will occur during the first half of 2023. At 31 December 2023, the Bank has written-off the amount of Euros 3,113,000, relating to compensations for termination of functions (note 7). Additionally, there are provisions for liabilities and charges recorded for corporate restructuring funds and carved-out assets from the Crow project, completed in December 2022. 2023 REPORT & ACCOUNTS 570 | 36. Other liabilities This balance is analysed as follows: (Thousands of euros) 2023 2022 Creditors: Suppliers 52,860 31,848 From factoring operations 47,987 41,618 Deposit account applications and others applications 154,587 86,950 Associated companies 963 — For futures and options transactions 11,121 73,394 Liabilities not covered by the Group Pension Fund - amounts payable by the Bank 10,417 10,661 Rents to pay 158,173 121,042 Other creditors Residents 62,471 93,086 Non-residents 34,832 6,245 Public sector 39,255 34,753 Interests and other amounts payable 46,918 48,817 Deferred income 7,578 7,590 Holiday pay and subsidies 41,178 39,389 Transactions on securities to be settled 3,855 3,801 Operations to be settled - foreign, transfers and deposits 77,812 38,208 Other sundry liabilities 195,979 149,905 945,986 787,307 The balance Liabilities not covered by the Group Pension Fund - amounts payable by the Bank includes the amount of Euros 6,426,000 (31 December 2022: Euros 6,609,000) related to the actual value of benefits attributed associated with mortgage loans to employees, retirees and former employees. The balance Amounts payable on trading activity includes amounts payable within 3 business days of stock exchange operations. The Bank has several operating leases for properties, being registered in the item Rents to pay the amount of lease liabilities recognised under IFRS 16, according to the accounting policy 1 H. The analysis of this balance, by maturity, is as follows: (Thousands of euros) 2023 2022 Until 1 year 2,094 2,168 1 to 5 years 62,727 113,667 Over 5 years 131,871 13,361 196,692 129,196 Accrued costs recognised in Net interest income (38,519) (8,154) 158,173 121,042 2023 REPORT & ACCOUNTS | 571 37. Share capital and Other equity instruments As at 31 December 2023, the Bank's share capital amounts to Euros 3,000,000,000 and is represented by 15,113,989,952 nominative book-entry without nominal value, fully subscribed and paid up. As at 31 December 2023, the Share premium amounts to Euros 16,470,667.11, corresponding to the difference between the issue price (Euros 0.0834 per share) and the issue value (Euros 0.08 per share) determined under the scope of the Exchange Offer occurred in June 2015. As at 31 December 2023, the Other equity instruments, in the amount of Euros 400,000,000 corresponds to 2,000 subordinated perpetual bonds (Additional Tier 1), issued on 31 January 2019, with a nominal value of Euros 200,000 each. This issue was classified as an equity instrument in accordance with the specific rules of IAS 32 and accounting policy 1.D. This operation without fixed term has the option of early repayment by the Bank as from the end of the 5th year, and an annual interest rate of 9.25% during the first 5 years. As an instrument classified as AT1, the corresponding interest payment is decided by the Bank at its discretion and is still subject to compliance with a set of conditions, including compliance with the combined requirement of capital reserve and the existence of Distributable Funds in sufficient amount. The payment of interest may also be cancelled by imposition of the competent authorities. As at 31 December 2023, the shareholders who hold, individually or jointly, 5% or more of the Bank's capital, are the following: Shareholder Number of shares % share capital % voting rights Chiado (Luxembourg) S.à.r.l. (Fosun Group) 3,927,436,381 25.99% 25.99% Sonangol - Sociedade Nacional de Combustíveis de Angola, EP 2,946,353,914 19.49% 19.49% Total Qualified Shareholdings 6,873,790,295 45.48% 45.48% Chiado (Luxembourg) S.à.r.l. announced on 23 January 2024, that it held on to that date, 3,027,936,381 BCP shares, corresponding to 20.03% of the respective share capital and voting rights. 38. Legal and statutory reserves Under the Portuguese legislation, the Bank is required to annually set-up a legal reserve equal to a minimum of 10% of annual profits until the reserve equals the share capital, or until the sum of the free reserves constituted and the retained earnings, if higher. In accordance with the proposal for the appropriation of net income for the 2022 financial year approved at the General Shareholders' Meeting held on 24 May 2023, the Bank increased its legal reserves in the amount of Euros 47,841,000, thus, as at 31 December 2023 the Legal Reserves amount to Euros 316,375,000 (31 December 2022: Euros 268,534,000). 2023 REPORT & ACCOUNTS 572 | 39. Reserves and retained earnings This balance is analysed as follows: (Thousands of euros) 2023 2022 Fair value changes - Gross amount Financial assets at fair value through other comprehensive income (note 21) Debt instruments () 7,192 (58,768) Equity instruments (19,632) (39,113) Cash-flow hedge (1,268,434) (1,701,273) From financial liabilities designated at fair value through profit or loss related to changes in own credit risk (2,619) 182 (1,283,493) (1,798,972) Fair value changes - Tax Financial assets at fair value through other comprehensive income Debt instruments (2,251) 18,394 Equity instruments 6,132 5,449 Cash-flow hedge 397,020 532,498 From financial liabilities designated at fair value through profit or loss related to changes in own credit risk 820 (57) 401,721 556,284 (881,772) (1,242,688) Other reserves and retained earnings 2,596,566 2,345,343 1,714,794 1,102,655 Legal reserve (note 38) 316,375 268,534 2,031,169 1,371,189 () Includes the effects arising from the application of hedge accounting. The fair value changes correspond to the accumulated changes of the Financial assets at fair value through other comprehensive income and Cash flow hedge, in accordance with the accounting policy presented in note 1.B. The variation in the fair value of cash flow hedges reflects the economic impact on these hedges of the pronounced increase in market interest rates, an effect that is more than offset by the economic impact on the fair value of liabilities that are more sensitive to such an increase and that are accounted for at amortized cost. 2023 REPORT & ACCOUNTS | 573 During 2023, the changes occurred in Fair value changes - Gross amount, excluding the effect of hedge accounting and changes in own credit risk associated with financial liabilities at fair value through profit or loss, are analysed as follows: (Thousands of euros) 2023 Balance as at 1 January Fair value changes Fair value hedge adjustment Impairment in profit or loss Disposals Balance as at 31 December Financial assets at fair value through other comprehensive income (note 21) Debt instruments Portuguese public debt securities (53,474) 120,949 (98,847) 81 10,438 (20,853) Others (5,294) 77,409 (44,577) 1,017 (510) 28,045 (58,768) 198,358 (143,424) 1,098 9,928 7,192 Equity instruments (39,113) 4,164 — — 15,317 (19,632) (97,881) 202,522 (143,424) 1,098 25,245 (12,440) During 2022, the changes occurred in Fair value changes - Gross amount, excluding the effect of hedge accounting and changes in own credit risk associated with financial liabilities at fair value through profit or loss, are analysed as follows: (Thousands of euros) 2022 Balance as at 1 January Fair value changes Fair value hedge adjustment Impairment in profit or loss Disposals Balance as at 31 December Financial assets at fair value through other comprehensive income (note 21) Debt instruments Portuguese public debt securities 41,369 (277,405) 124,837 (2,890) 60,615 (53,474) Others 80,180 (174,366) 106,479 (2,383) (15,204) (5,294) 121,549 (451,771) 231,316 (5,273) 45,411 (58,768) Equity instruments (49,587) (13,261) — — 23,735 (39,113) 71,962 (465,032) 231,316 (5,273) 69,146 (97,881) 2023 REPORT & ACCOUNTS 574 | 40. Guarantees and other commitments This balance is analysed as follows: (Thousands of euros) 2023 2022 Guarantees granted Guarantees 3,443,472 3,378,214 Stand-by letter of credit 63,368 50,978 Open documentary credits 232,364 238,872 Bails and indemnities 135,256 135,718 Other liabilities — 10,000 3,874,460 3,813,782 Commitments to third parties Irrevocable commitments Term deposits contracts 850,000 750,000 Irrevocable credit lines 2,448,938 2,380,229 Securities subscription 22,145 41,285 Other irrevocable commitments 156,432 152,750 Revocable commitments Revocable credit lines 5,812,940 5,706,907 Bank overdraft facilities 863,585 943,963 Other revocable commitments 111,752 88,115 10,265,792 10,063,249 Guarantees received 24,146,938 25,595,747 Commitments from third parties 12,120,190 12,975,120 Securities and other items held for safekeeping 68,361,351 64,909,866 Securities and other items held under custody by the Securities Depository Authority 84,709,595 79,574,841 Other off balance sheet accounts 136,121,963 130,031,947 The guarantees granted by the Bank may be related to loans transactions, where the Bank grants a guarantee in connection with a loan granted to a client by a third entity. According to its specific characteristics it is expected that some of these guarantees expire without being executed and therefore these transactions do not necessarily represent a cash-outflow. The estimated liabilities are recorded under provisions (note 35). Stand-by letters and open documentary credits aim to ensure the payment to third parties from commercial deals with foreign entities and therefore financing the shipment of the goods. Therefore, the credit risk of these transactions is limited since they are collateralised by the shipped goods and are generally short term operations. Irrevocable commitments are non-used parts of credit facilities granted to corporate or retail customers. Many of these transactions have a fixed term and a variable interest rate and therefore the credit and interest rate risk is limited. The balance Irrevocable commitments includes - Other irrevocable commitments includes the amount of Euros 30,638,000 (31 December 2022: Euros 25,506,000) relating to the collateral constituted in compliance with the assumption of irrevocable payment commitments to Single Resolution Fund, as referred in note 6. This balance also includes the amount of Euros 94.390.000 (31 December 2022: Euros 94.390.000) corresponding to irrevocable commitments for cumulative payments assumed with the Deposit Guarantee Fund, as referred in note 6. 2023 REPORT & ACCOUNTS | 575 The financial instruments accounted as Guarantees and other commitments are subject to the same approval and control procedures applied to the credit portfolio, namely regarding the analysis of objective evidence of impairment, as described in the accounting policy in note 1.B. The maximum credit exposure is represented by the nominal value that could be lost related to guarantees and commitments undertaken by the Bank in the event of default by the respective counterparties, without considering potential recoveries or collaterals. The balance of Guarantees granted, Irrevocable credit lines and revocable commitments portfolio detailed by stage according with IFRS 9, is analysed as follows: (Thousands of euros) 2023 2022 Stage 1 Gross amount 11,567,418 11,062,622 Impairment (7,195) (5,987) 11,560,223 11,056,635 Stage 2 Gross amount 1,218,842 1,511,703 Impairment (10,773) (12,051) 1,208,069 1,499,652 Stage 3 Gross amount 325,415 358,671 Impairment (91,648) (82,442) 233,767 276,229 13,002,059 12,832,516 41. Assets under management and custody The Bank provides custody, trustee, corporate administration, investment management and advisory services to third parties, which involve the Bank making allocation and purchase and sale decisions in relation to a wide range of financial instruments. For certain services are set objectives and levels of return for assets under management and custody. There is no capital or profitability guaranteed by the Bank in these assets. Those assets held in a fiduciary capacity are not included in the financial statements. The total assets under management and custody are analysed as follows: (Thousands of euros) 2023 2022 Assets under deposit 62,315,197 60,758,931 Wealth management () 3,738,751 3,618,326 66,053,948 64,377,257 () Corresponds to the assets portfolio that are currently monitored and controlled by the business area as being managed by the Bank. 2023 REPORT & ACCOUNTS 576 | 42. Transfers of assets The Bank performed a set of transactions of sale of financial assets (namely loans and advances to customers) for Funds specialized in the recovery of loans. These funds take the responsibility for management of the borrower companies or assets received as collateral with the objective of ensuring a pro-active management through the implementation of plans to explore/increase the value of the companies/assets. The specialized funds in credit recovery that acquired the financial assets are closed funds, in which the holders of the participation units have no possibility to request the reimbursement of its participation units throughout the useful life of the Fund. These participation units are held by several banks, which are the sellers of the loans, in percentages that vary through the useful life of the Funds, ensuring however that, separately, none of the banks hold more than 50% of the capital of the Fund. The Funds have a specific management structure (General Partner), fully independent from the assignor banks and that is selected on the date of establishment of the Fund. The management structure of the Fund has as main responsibilities to: (i) determine the objective of the Fund and (ii) administrate and manage exclusively the Fund, determining the objectives and investment policy and the conduct in management and business of the Fund. The management structure is remunerated through management commissions charged to the Funds. These funds (in which the Bank holds minority positions) establish companies in order to acquire the loans to the banks, which are financed through the issuance of senior and junior securities. The value of the senior securities fully subscribed by the Funds that hold the share capital match the fair value of the asset sold, determined in accordance with a negotiation based on valuations performed by both parties. The value of the junior securities is equivalent to the difference between the fair value that was based on the valuation of the senior security and the value of the transferred receivables. These junior securities, being subscribed by the Bank, will entitle the Bank to a contingent positive value if the value of the assets transferred exceeds the amount of the senior tranches plus the remuneration on them. Thus, considering these junior assets reflect a difference between the valuations of the assets sold based on the appraisals performed by independent entities and the negotiation between the parties, the Bank performs the constitution of impairment losses for all of them. Therefore, as a result of the transfer of assets occurred operations, the Bank subscribed: – Senior securities (participation units) of the funds, for which the cash-flows arise mainly from a set of assets transferred from the participant banks. These securities are booked in Financial assets not held for trading mandatorily at fair value through profit or loss portfolio and are accounted for at fair value based on the last available Net assets value (NAV), as disclosed by the Management companies and audited at year end, still being analysed by the Bank; – Junior securities (with higher subordination degree) issued by the Portuguese law companies held by the funds and which are fully provided to reflect the best estimate of impairment of the financial assets transferred. Within this context, not withholding control but maintaining an exposure to certain risks and rewards, the Bank, in accordance with IFRS 9 3.2, performed an analysis of the exposure to the variability of risks and rewards in the assets transferred, before and after the transaction, having concluded that it does not hold substantially all the risks and rewards. Considering that it does not hold control and does not exercise significant influence on the funds or companies' management, the Bank performed, under the scope of IAS IFRS 9 3.2, the derecognition of the assets transferred and the recognition of the assets received. The results are calculated on the date of transfer of the assets. During 2023 and 2022, no credits were sold to corporate restructuring funds. 2023 REPORT & ACCOUNTS | 577 The amounts accumulated as at 31 December 2023, related to these operations, are analysed as follows:: (Thousands of euros) Assets transferred Net assets transferred Received value Net gains/ (losses) Fundo Recuperação FCR (a) 343,266 243,062 232,267 (10,795) Fundo Aquarius FCR (b) 132,635 124,723 132,635 7,912 Discovery Real Estate Fund (b) 211,388 152,155 138,187 (13,968) Fundo Vega FCR (c) 113,665 113,653 109,599 (4,054) 800,954 633,593 612,688 (20,905) The activity segments are as follows: a) Diversified; b) Real estate and tourism; and c) Property. The amounts accumulated as at 31 December 2022, related to these operations, are analysed as follows: (Thousands of euros) Assets transferred Net assets transferred Received value Net gains / (losses) Fundo Reestruturação Empresarial FCR (a) 84,112 82,566 83,212 646 Fundo Recuperação FCR (a) 343,266 243,062 232,267 (10,795) Fundo Aquarius FCR (b) 132,635 124,723 132,635 7,912 Discovery Real Estate Fund (b) 211,388 152,155 138,187 (13,968) Fundo Vega FCR (c) 113,665 113,653 109,599 (4,054) 885,066 716,159 695,900 (20,259) The activity segments are as follows: a) Diversified; b) Real estate and tourism; and c) Property. On 29 June 2023, all of the participation units held by BCP in the Fundo Reestruturação Empresarial FCR were sold, as a result, the Bank no longer held a position in that Fund. As at 31 December 2023, the assets received under the scope of these operations are comprised of: (Thousands of euros) 2023 Senior securities Junior securities Investment fund units (note 21) Capital supplies (note 28) Total Fundo Recuperação FCR Gross value 166,637 74,631 241,268 Impairment and other fair value adjustments (138,607) (74,631) (213,238) 28,030 — 28,030 Fundo Aquarius FCR Gross value 105,498 — 105,498 Impairment and other fair value adjustments (7,379) — (7,379) 98,119 — 98,119 Discovery Real Estate Fund Gross value 157,716 — 157,716 Impairment and other fair value adjustments 4,568 — 4,568 162,284 — 162,284 Fundo Vega FCR Gross value 46,233 91,206 137,439 Impairment and other fair value adjustments (10,091) (91,206) (101,297) 36,142 — 36,142 Total Gross value 476,084 165,837 641,921 Total impairment and other fair value adjustments (151,509) (165,837) (317,346) 324,575 — 324,575 2023 REPORT & ACCOUNTS 578 | As at 31 December 2023, the book value of these assets is accounted for in item Financial assets not held for trading mandatorily at fair value through profit or loss and considers the Fund's Global Net Asset Value (NAV) communicated by the Management Companies. The following aspects should also be mentioned: (i) these are Funds whose latest Limited Audit Reports available with reference to 30 June 2023, and Audit Reports available with reference to 31 December 2022, do not include reserves; (ii) the funds are subject to supervision by the competent authorities. As at 31 December 2022, the assets received under the scope of these operations are comprised of: (Thousands of euros) 2022 Senior securities Junior securities Investment fund units (note 21) Capital supplies (note 28) Total Fundo Reestruturação Empresarial FCR Gross value 60,963 — 60,963 Impairment and other fair value adjustments (37,966) — (37,966) 22,997 — 22,997 Fundo Recuperação FCR Gross value 169,033 85,018 254,051 Impairment and other fair value adjustments (134,767) (85,018) (219,785) 34,266 — 34,266 Fundo Aquarius FCR Gross value 119,631 — 119,631 Impairment and other fair value adjustments (11,527) — (11,527) 108,104 — 108,104 Discovery Real Estate Fund Gross value 157,716 — 157,716 Impairment and other fair value adjustments (1,801) — (1,801) 155,915 — 155,915 Fundo Vega FCR Gross value 48,762 86,379 135,141 Impairment and other fair value adjustments (9,899) (86,379) (96,278) 38,863 — 38,863 Total Gross value 556,105 171,397 727,502 Total impairment and other fair value adjustments (195,960) (171,397) (367,357) 360,145 — 360,145 As at 31 December 2022, the book value of these assets is accounted for in item Financial assets not held for trading mandatorily at fair value through profit or loss and considers the Fund's Global Net Asset Value (NAV) communicated by the Management Companies. The following aspects should also be mentioned: (i) these are Funds whose latest Limited Audit Reports available with reference to 30 June 2022 and Audit Reports available with reference to 31 December 2022 and 2021, do not include reserves; (ii) the funds are subject to supervision by the competent authorities. 2023 REPORT & ACCOUNTS | 579 The detail of the commitments of subscribed and unpaid capital for each of the corporate restructuring funds is analysed as follows: (Thousands of euros) 2023 2022 Funds Subscribed capital Capital realized Subscribed and unpaid capital Subscribed capital Capital realized Subscribed and unpaid capital Fundo Reestruturação Empresarial FCR — — — 51,212 46,486 4,726 Fundo Recuperação FCR 171,846 166,637 5,209 186,602 169,033 17,569 Fundo Aquarius FCR 118,350 105,497 12,853 134,205 119,631 14,574 Discovery Real Estate Fund 158,991 158,991 — 158,991 158,991 — Fundo Vega FCR 45,439 43,492 1,947 48,150 45,870 2,280 494,626 474,617 20,009 579,160 540,011 39,149 There are additional subscription commitments for the fund Discovery in the amount of Euros 1,107,000 (31 December 2022: Euros 1,107,000). Additionally, are booked in Loans and advances to customer’s portfolio and in balances Guarantees granted and Irrevocable credit lines, the following exposures and respective impairment: (Thousands of euros) Items 2023 2022 Loans and advances to customers 35,978 248,439 Guarantees granted and irrevocable credit lines 24,018 74,834 Gross exposure 59,996 323,273 Impairment (6,176) (15,183) Net exposure 53,820 308,090 Project Crow At the end of December 2022, the designated sale process for the Crow Project was completed, which included the sale to a related company of Davidson Kempner Capital Management LP (Purchaser) of 3 hotel assets belonging to the Fundo Recuperação and the sale of all shares/units of participation of the FLITPTREL and Fundo Recuperação Turismo funds, together with the assets directly and indirectly held by these two funds, with the exception of a set of assets that were transferred to the sellers and which, in the case of Banco Comercial Português, S.A. include the investment held in a Venture capital fund, in 2 real estate funds and in a company, as detailed in the table below. (Thousands of euros) 2023 2022 Financial assets not held for trading mandatorily at fair value through profit or loss (note 21) Fundo Turismo Algarve, FCR 40,758 50,426 Lusofundo - Fundo de Investimento Imobiliário Fechado 18,780 26,429 Fundo Especial de Investimento Imobiliário Fechado Eurofundo 8,467 12,091 68,005 88,946 Investments in subsidiaries and associated (note 23) Imoserit, S.A. — 22,241 — 22,241 Other assets (note 28) Imoserit, S.A. 14,805 — 14,805 — 82,810 111,187 As referred in note 35, there are provisions for liabilities and charges recorded for corporate restructuring funds and carved-out assets of the Project Crow, completed in December 2022. 2023 REPORT & ACCOUNTS 580 | 43. Relevant events occurred during 2023 Banco Comercial Português, S.A. informed about the upgrade of senior unsecured debt and deposits ratings by DBRS Morningstar Banco Comercial Português, S.A. (“BCP” or “Bank”) informed that DBRS Morningstar rating agency on 18 December 2023, upgraded the Bank's senior unsecured debt ratings from BBB (low) to BBB and deposits ratings from BBB to BBB (high), one notch above the Intrinsic Assessment, reflecting the legal framework in place in Portugal which has full depositor preference in bank insolvency and resolution proceedings. This upgrade of BCP's ratings by DBRS Morningstar reflects the improvement in profitability and the strengthening in capitalization levels while maintaining adequate asset quality. The stable trend reflects DBRS Morningstar expectations that the Bank will maintain adequate profitability levels and solid capital buffers. The stable trend also takes into consideration the Bank’s adequate funding structure coupled with solid liquidity buffers. Banco Comercial Português, S.A. informed about conversion of its existing covered bonds programme into a covered bonds programme compliant with the Legal Regime of Covered Bonds As at 5 December 2023, Banco Comercial Português, S.A. announced that, following the entry into force of Decree-Law no. 31/2022, of 6 May, approving the new legal regime of covered bonds and transposing Directive (EU) 2019/2162 (“Legal Regime of Covered Bonds”), the conversion of its existing covered bonds programme into a covered bonds programme compliant with the Legal Regime of Covered Bonds, in the total amount of Euros 12,500,000,000 (the “Programme”), was approved on the present date by the Portuguese Securities Commission (Comissão do Mercado de Valores Mobiliários) (“CMVM”). Accordingly, Banco Comercial Português, S.A. hereby informed that the covered bonds issues with the ISINs indicated below shall, as from the present date, be governed by the Legal Regime of Covered Bonds and by the terms of the adjusted programme. ISINs: (i) Euros 2.200.000.000 Floating Rate Covered Bonds due 2024 Series 5 (ISIN PTBIPGOE0061); (ii) Euros 2.000.000.000 Floating Rate Covered Bonds due 2025 Series 6 (ISIN PTBCSFOE0024); (iii) Euros 1.000.000.000 Floating Rate Covered Bonds due 2027 Series 7 (ISIN PTBCS3OE0028); and (iv) Euros 4.000.000.000 Floating Rate Covered Bonds due 2026 Series 8 (ISIN PTBCQLOE0036). Banco Comercial Português, S.A. informed about the upgrade of deposits and senior unsecured debt ratings by Moody’s Banco Comercial Português, S.A. (“BCP” or “Bank”) informed that Moody’s rating agency on 22 November 2023, upgraded the Bank's senior unsecured debt ratings from Baa3 to Baa2 and deposits ratings from Baa2 to A3, positioning the rating assigned to deposits at the same risk level to that assigned to the Portuguese Republic. This upgrade of BCP's ratings by Moody’s reflects the reduction in the stock of non-performing assets (NPA), the improvement in capitalization levels as well as the improvement in domestic recurrent profitability. The rating action on BCP also reflects the recent upward revision of the Portuguese Republic's debt rating, from Baa2 to A3. In the scope of the review carried out by Moody’s, it was simultaneously communicated, the upgrade of the Baseline Credit Assessment (BCA) and Adjusted BCA from Ba2 to Ba1, the junior senior debt rating to (P)Ba1, the dated subordinated debt to (P)Ba2 and the preference shares rating to B1(hyb). Additionally, Moody’s informed, on the same date that the rating of BCP's covered bonds program was upgraded from Aa2 to Aaa. The Outlook on the long-term deposit and senior unsecured debt ratings is currently stable, reflecting Moody's view of the expected performance of the Bank over the next 12 to 18 months. 2023 REPORT & ACCOUNTS | 581 Banco Comercial Português, S.A. informed about notification from Banco de Portugal on the implementation of a reserve in own funds for sectoral systemic risk As at 17 November 2023, Banco Comercial Português, S.A. (“Bank”) hereby informed that it was notified by the Banco de Portugal on the decision to implement a reserve for sectoral systemic risk, which aims to reinforce the resilience of the banking sector of a potential deterioration in economic conditions and/or unexpected significant correction in residential property prices. The reserve for sectoral systemic risk complements the current prudential recommendation and consists of a preventive measure to address the possible materialization of potential risks. The Banco de Portugal's decision translates into the requirement to comply with a reserve for sectoral systemic risk of 4% on the amount of risk exposures on the retail portfolio of loans to individuals collateralized by residential properties located in Portugal, calculated in pursuant to paragraph 3 of article 92 of Regulation (EU) 575/2013, from 1 October 2024, onwards, at the highest level of consolidation in Portugal, considering the applicable legal framework. Banco Comercial Português, S.A. informs that the decision to impose this measure, that aims to create a reserve for sectoral systemic risk, would translate on a pro forma basis into an estimated increase in own funds requirements of 26 basis points. BCP S.A. informed about the ECB's authorization to exercise the early redemption option of the currently outstanding Additional Tier 1 (“AT1”) instrument with an outstanding amount of Euros 400 million As at 13 November 2023, Banco Comercial Português, S.A. (“Bank”) informed that it has received permission from the ECB to reduce its Own Funds, through the exercise of the early redemption option of the currently outstanding Additional Tier 1 (“AT1”) instrument, considering that following the said reduction, BCP´s own funds and eligible liabilities, on a consolidated basis, are expected to exceed the requirements laid down in Regulation (EU) No 575/2013, Directive 2013/36/ EU of the European Parliament and of the Council and Directive2014/59/EU of the European Parliament and of the Council by a margin that the ECB considers necessary. Notice is further given that the decision on whether to exercise such option of early redemption of the AT1 issue (ISIN: PTBCPFOM0043) is still under evaluation by the Bank. Such decision will be communicated in due course under the terms set out in the instrument´s final terms and conditions. Banco Comercial Português, S.A. informed about issue of senior preferred debt securities eligible for MREL As at 25 September 2023, Banco Comercial Português, S.A. (“Bank”) informed that it has fixed the terms for a new issue of senior preferred debt securities eligible for MREL (Minimum Requirement for own funds and Eligible Liabilities), under its Euro Note Programme. The issue, in the amount of Euros 500 million, will have a tenor of 3 years, with the option of early redemption by the Bank at the end of year 2, an issue price of 99.825% and an annual interest rate of 5.625% during the first 2 years (corresponding to a spread of 1.90% over the 2-year mid-swap rate). The interest rate for the 3rd year was set at 3- month Euribor plus a 1.90% spread. Banco Comercial Português, S.A. informed about the upgrade to Investment Grade of senior debt ratings by Fitch Ratings As at 21 September 2023, Banco Comercial Português, S.A. (“BCP” or “Bank”) informed that Fitch Ratings upgraded BCP's long-term senior unsecured debt ratings to Investment Grade, from BB+ to BBB-, following the upgrade of the long-term Issuer Default Rating (IDR) from BB+ to BBB- and the Viability Rating (VR) from bb+ to bbb-. This upgrade reflects the Fitch Ratings’ view that BCP’ capital ratios have increased to levels considered adequate. This improvement has been supported by materially stronger profitability given higher interest rates, strong cost efficiency and a balance sheet with reduced credit risk. The upgrade also reflects reduced risks surrounding litigations costs coming from its Polish subsidiary in relation to legacy Swiss franc-denominated mortgage loans. The Outlook on the Long-Term IDR is Stable. Fitch Ratings also raised the ratings on BCP's Additional Tier 1 and Tier 2 instruments by one notch. 2023 REPORT & ACCOUNTS 582 | Banco Comercial Português, S.A. informed about the upgrade to Investment Grade of senior debt ratings by S&P Global As at 12 September 2023, Banco Comercial Português, S.A. (“BCP” or “Bank”) informed that S&P Global Ratings upgraded BCP's senior unsecured debt ratings to Investment Grade, from BB+/B to BBB-/A-3. This upgrade reflects the view that BCP creditworthiness has gradually improved in absolute terms and relative to peers due to a combination of extraordinary measures and solid internal capital generation driven by improving profitability, based on better-than- peer efficiency levels and the expectation that a possible asset quality deterioration will be manageable. The rating on BCP also incorporates potential downside risks arising from the group’s Polish operations and its impact on earnings in 2023 and 2024. The stable Outlook reflects the expectation that the Bank can defend its solid domestic retail franchise and financial profile over the next 18-24 months and the fact that possible further unpredictable government interventions in the Polish market would have a manageable effect on the bank's capitalization, which will remain adequate. S&P Global Ratings also raised the ratings on BCP's Additional Tier 1 and Tier 2 instruments by two notches. Banco Comercial Português, S.A. informed about 2023 EU-Wide Stress Test Results As at 28 July, Banco Comercial Português, S.A. was subject to the 2023 EU-wide stress test conducted by the European Banking Authority (EBA), in cooperation with the Banco de Portugal (BdP), the European Central Bank (ECB), and the European Systemic Risk Board (ESRB). The adverse stress test scenario was set by the ECB/ESRB and covers a three-year time horizon (2023-2025). The stress test has been carried out applying a static balance sheet assumption as of December 2022, and therefore does not take into account future business strategies and management actions. It is not a forecast of Banco Comercial Português, S.A. profits. Considering the results of Banco Comercial Português, S.A, in the stress test, it should be highlighted the following: • the application of the adverse scenario resulted in a reduction of 448 b.p. in the fully loaded CET1 capital ratio at the end of 2025 compared to December 2022, which compares with an average reduction of 459 b.p. in the universe of the 70 banks submitted to this exercise. • the application of the baseline scenario resulted in an increase of 256 b.p. in the fully loaded CET1 capital ratio at the end of 2025 compared to December 2022, which compares with an average increase of 136 b.p. MREL requirements As at 12 July 2023, Banco Comercial Português, S.A. ("BCP" or the "Bank") informed that it has been notified by Banco de Portugal, as the national resolution authority, about the update of its minimum requirement for own funds and eligible liabilities ("MREL" or "Minimum Requirement for own funds and Eligible Liabilities") as decided by the Single Resolution Board. The resolution strategy applied continues to be that of a multiple point of entry ("MPE"). The MREL requirements to be met by BCP Group of Resolution (consisting of BCP, S.A., Banco ActivoBank, S.A. and all the subsidiary companies of BCP apart from Bank Millennium S.A. and Banco Internacional de Moçambique and their respective subsidiaries), from 1 January 2024 is of: • 24.65% of the total risk exposure amount ("TREA") (to which adds further a combined buffer requirement ("CBR") of 3.5%, thus corresponding to total requirements of 28.15%); and • 6.71% of the leverage ratio exposure measure ("LRE"). The Bank is not subject to any subordination requirements. 2023 REPORT & ACCOUNTS | 583 In accordance with the regulations in force, MREL requirements could be annually updated by the competent authorities, and therefore these targets replace those previously set. BCP complies to the currently applicable MREL requirement, both as a percentage of the TREA (also including the applicable CBR) and as a percentage of the LRE. The MREL requirements, now communicated to the BCP resolution group described above, are in line with the 2021-24 Strategic Plan and are accommodated by the ongoing funding plan. Resolutions of the Annual General Meeting of Banco Comercial Português, S.A. Banco Comercial Português, S.A. concluded on 24 May 2023, through electronic means and, simultaneously, at the Bank's facilities, with 64.29% of the share capital represented, the Annual General Meeting of Shareholders, with the following resolutions: Item One – Approval of the individual and consolidated Annual Report, balance sheet and financial statements of 2022, and the Corporate Governance Report, that includes a chapter on the remuneration of the management and supervisory bodies and the Sustainability Report; Item Two – Approval of the proposal for the appropriation of profit concerning the 2022 financial year; Item Three – Approval of a vote of trust and praise addressed to the Board of Directors, including to the Executive Committee and to the Audit Committee and each one of their members, as well as to the Chartered Accountant and its representative; Item Four – Approval of the updating of the policy for the remuneration of Members of the Management and Supervisory Bodies and the repeal of the regulation of reform of the Executive Directors; Item Five – Approval of the update of the policy for selection and appointment of the Statutory Auditor or audit firm and the hiring of non-prohibited non-audit services, under the terms of the legislation in force; Item Six – Approval of the acquisition and sale of own shares and bonds. Approval of the application of article 352 (2) of the CRR On 24 March 2023, BCP was notified of the favourable decision of the supervisory authority on the request for the application of article 352 (2) of the CRR for the exclusion of the calculation of weighted assets for market risk of certain structural exchange positions for hedging of regulatory ratios against changes in exchange rates. The change has an estimated impact on the fully implemented CET1 ratio of around 50 basis points and of around 70 basis points in the total capital ratio. 2023 REPORT & ACCOUNTS 584 | 44. Fair value Fair value is based on market prices, whenever these are available. If market prices are not available, as occurs regarding many products sold to clients, fair value is estimated through internal models based on cash-flow discounting techniques. Cash-flows for the different instruments sold are calculated according to its financial characteristics and the discount rates used include both the market interest rate curve and the current conditions of the Bank's pricing policy. Thus, the fair value obtained is influenced by the parameters used in the evaluation model that have some degree of judgment and reflects exclusively the value attributed to different financial instruments. However, it does not consider prospective factors, as the future business evolution. Therefore, the values presented cannot be understood as an estimate of the economic value of the Bank. The main methods and assumptions used in estimating the fair value for the financial assets and financial liabilities are presented as follows: Cash and deposits at Central Banks and Loans and advances to credit institutions repayable on demand Considering the short term of these financial instruments, the amount in the balance sheet is a reasonable estimate of its fair value. Loans and advances to credit institutions, Deposits from credit institutions and Assets with repurchase agreements The fair value of these financial instruments is calculated discounting the expected principal and interest future cash flows for these instruments, considering that the payments of the instalments occur in the contractually defined dates. This update is made based on the prevailing market rate for the term of each cash flow plus the average spread of the production of the most recent 3 months of the same. For the elements with signs of impairment, the net impairment of these operations is considered as a reasonable estimate of their fair value, considering the economic valuation that is realized in the determination of this impairment. For resources from Central Banks, it was considered that the book value is a reasonable estimate of its fair value, given the nature of operations and the associated short-term. For the remaining loans and advances and deposits, the discount rate used reflects the current conditions applied by the Bank on identical instruments for each of the different residual maturities (rates from the monetary market or from the interest rate swap market). Loans and advances to customers without defined maturity date Considering the short maturity of these financial instruments, the conditions of the portfolio are similar to conditions used at the date of the report. Therefore, the amount in the balance sheet is a reasonable estimate of its fair value (this class incorporates among other, factoring operations, current account credit, credit cards and overdrafts in demand deposits). Loans and advances to customers with defined maturity date The fair value of these instruments is calculated by discounting the expected principal and interest future cash flows for these instruments, considering that the payments of the instalments occur in the contractually defined dates. For loans with signs of impairment (Stage 3 loans), the net impairment of these operations is considered as a reasonable estimate of their fair value, considering the economic valuation that is realized in the determination of this impairment. The discount rate used is the one that reflects the current rates of the Bank for each of the homogeneous classes of this type of instruments and with similar residual maturity. The discount rate includes the market rates for the residual maturity date (rates from the monetary market or from the interest rate swap market) and the spread used at the date of the report, which was calculated from the average production of the three most recent months compared to the reporting date. 2023 REPORT & ACCOUNTS | 585 Resources from customers and other loans The fair value of these financial instruments is calculated by discounting the expected principal and interest future cash flows for the referred instruments, considering that payments occur in the contractually defined dates. The discount rate used reflects the current conditions applied by the Bank in similar instruments with a similar maturity. The discount rate includes the market rates of the residual maturity date (rates of monetary market or the interest rate swap market, at the end of the period) and the actual spread of the Bank. This was calculated from the average production of the three most recent months compared to the reporting date. As in the case of credits without defined maturity, also for the resources from customers without defined maturity (demand deposits) it is considered that given the potential short term of the same, possibility of their liquidation at any time, the book value of these liabilities is a reasonable estimate of their fair value. The average discount rates for Loans and advances to credit institutions, Loans and advances to customers, Resources from credit institutions and Resources from customers are analysed as follows: Loans and advances to credit institutions Loans and advances to customers Resources from credit institutions Resources from customers 2023 2022 2023 2022 2023 2022 2023 2022 EUR 4.39% 2.47% 4.70% 5.10% 4.24% 3.41% 4.33% 2.76% AUD n.a. n.a. n.a. n.a. n.a. n.a. 4.86% 3.76% CAD n.a. n.a. n.a. n.a. n.a. n.a. 5.43% 5.11% CHF n.a. n.a. n.a. n.a. n.a. n.a. 2.11% 1.58% CNY n.a. n.a. 2.95% n.a. n.a. n.a. 2.66% 1.64% DKK n.a. n.a. n.a. n.a. n.a. n.a. 3.93% 2.77% GBP n.a. n.a. n.a. n.a. 5.69% 4.07% 5.54% 4.25% HKD n.a. n.a. 4.24% 4.73% n.a. n.a. 5.30% 3.89% JPY n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. MOP n.a. n.a. 3.66% 4.17% n.a. n.a. 5.11% 4.89% NOK n.a. n.a. n.a. 6.19% n.a. n.a. 5.09% 3.64% PLN n.a. n.a. 7.76% 9.26% n.a. n.a. 5.51% 7.20% SEK n.a. n.a. n.a. n.a. n.a. n.a. 4.37% 3.53% TRY n.a. n.a. n.a. n.a. n.a. n.a. 44.94% 0.00% USD 5.64% 5.35% 5.55% 5.67% 5.86% 5.44% 5.73% 5.27% ZAR n.a. n.a. n.a. n.a. n.a. n.a. 9.07% 8.88% Financial assets and liabilities measured at fair value through profit or loss (except derivatives), financial assets at fair value through other comprehensive income These financial instruments are accounted for at fair value. Fair value is based on market prices ("Bid-price"), whenever these are available. If market prices are not available, fair value is estimated through numerical models based on cash- flow discounting techniques, using the market interest rate curve adjusted for factors associated, predominantly credit risk and liquidity risk, determined in accordance with the market conditions and time frame. In this class of assets, the fair value corresponds to their book value. 2023 REPORT & ACCOUNTS 586 | Market interest rates are determined based on information released by the suppliers of financial content - Reuters and Bloomberg - more specifically because of prices of interest rate swaps. The values for the very short-term rates are obtained from similar sources but regarding interbank money market. The interest rate curve obtained is calibrated with the values of interest rate short-term futures. Interest rates for specific periods of the cash flows are determined by appropriate interpolation methods. The same interest rate curves are used in the projection of the non- deterministic cash flows such as indexes. When optionality is involved, the standard templates (Black-Scholes, Black, Ho and others) are used considering the volatility areas applicable. Whenever there are no references in the market of sufficient quality or that the available models do not fully apply to meet the characteristics of the financial instrument, specific quotations supplied by an external entity are applied, typically a counterparty of the business. Financial assets measured at amortised cost - Debt instruments These financial instruments are accounted at amortised cost net of impairment, as referred in the accounting policy described in note 1 C1.1.1. The fair value of this class of assets, is based on market prices, whenever these are available. If market prices are not available, fair value is estimated through numerical models based on cash-flow discounting techniques, using the market interest rate curve adjusted for factors associated, predominantly credit risk and liquidity risk, determined in accordance with the market conditions and time frame. Hedging and trading derivatives All derivatives are recorded at fair value. In case of derivative contracts that are quoted in organised markets their market prices are used. As for derivatives traded "Over-the-counter", it is applied methods based on numerical cash- flow discounting techniques and models for assessment of options considering variables of the market, particularly the interest rates on the instruments in question, and where necessary, their volatilities. Market interest rates are determined based on information released by the suppliers of financial content - Reuters and Bloomberg - more specifically because of prices of interest rate swaps. The values for the very short-term rates are obtained from similar sources but regarding interbank money market. The interest rate curve obtained is calibrated with the values of interest rate short-term futures. Interest rates for specific periods of the cash flows are determined by appropriate interpolation methods. The same interest rate curves are used in the projection of the non- deterministic cash flows such as indexes. Debt securities non subordinated issued and Subordinated debt For these financial instruments the fair value was calculated for components for which fair value is not yet reflected in the balance sheet. Fixed rate instruments remunerated for which the Group adopts "hedge-accounting", the fair value related to the interest rate risk is already recognised. For the fair value calculation, other components of risk were considered, in addition to the interest rate risk already recorded, when applicable. The fair value is based on market prices, whenever these are available. If market prices are not available, fair value is estimated through numerical models based on cash-flow discounting techniques, using the market interest rate curve adjusted by associated factors, predominantly credit risk and trading margin, the latter only in the case of issues placed on non-institutional customers of the Bank. As original reference, the Bank applies the curves resulting from the market interest rate swaps for each specific currency. The credit risk (credit spread) is represented by an excess from the curve of interest rate swaps established specifically for each term and class of instruments based on the market prices on equivalent instruments. For own issued debts placed among non institutional customers of the Bank, one more differential was added (commercial spread), which represents the margin between the financing cost in the institutional market and the cost obtained by distributing the respective instrument in the owned commercial network. 2023 REPORT & ACCOUNTS | 587 The average reference yield curve obtained from market prices in Euros and used in the calculation of the fair value of subordinated issues placed in the institutional market was 4.98% (31 December 2022: 9.33%). For senior and collateralised securities placed on the retail market, the average discount rate was 3.98% (31 December 2022: 3.37%). For debt securities, the fair value calculation focused on all the components of these instruments, as a result the difference determined is a positive amount of Euros 36,396,000 (31 December 2022: a positive amount of Euros 69,104,000). As at 31 December 2022, it also included a payable amount of Euros 8,000 which reflects the fair value of embedded derivatives and are recorded in financial assets and liabilities held for trading. The following table presents the interest rates used in the definition of the interest rate curves of main currencies, namely EUR, USD, GBP and PLN used to determine the fair value of the assets and liabilities of the Bank: 2023 2022 EUR USD GBP PLN EUR USD GBP PLN 1 day 3.93% 5.28% 5.20% 5.74% 2.00% 4.45% 3.55% 6.76% 7 days 3.93% 5.29% 5.22% 5.74% 2.00% 4.47% 3.58% 6.76% 1 month 3.96% 5.37% 5.25% 5.70% 2.04% 4.57% 3.67% 6.83% 2 months 3.98% 5.41% 5.29% 5.74% 2.13% 4.66% 3.80% 6.87% 3 months 3.97% 5.44% 5.32% 5.78% 2.25% 4.77% 3.91% 6.92% 6 months 3.86% 5.37% 5.34% 5.72% 2.73% 5.07% 4.32% 7.04% 9 months 3.75% 5.33% 5.29% 5.71% 3.11% 5.28% 4.65% 7.09% 1 year 3.45% 5.05% 5.25% 5.50% 3.26% 5.11% 4.87% 7.35% 2 years 2.81% 4.37% 4.28% 4.94% 3.39% 4.69% 4.69% 6.97% 3 years 2.56% 4.04% 3.94% 4.62% 3.31% 4.33% 4.56% 6.53% 5 years 2.43% 3.81% 3.63% 4.41% 3.23% 4.02% 4.33% 6.20% 7 years 2.44% 3.75% 3.53% 4.41% 3.19% 3.89% 4.14% 6.13% 10 years 2.50% 3.74% 3.54% 4.49% 3.21% 3.82% 3.99% 6.20% 15 years 2.56% 3.76% 3.63% 4.66% 3.14% 3.79% 3.91% 6.45% 20 years 2.51% 3.74% 3.66% 4.75% 2.93% 3.72% 3.84% 6.49% 30 years 2.33% 3.57% 3.61% 4.75% 2.54% 3.48% 3.70% 6.49% 2023 REPORT & ACCOUNTS 588 | The following table shows the fair value of financial assets and liabilities of the Bank, as at 31 December 2023: (Thousands of euros) 2023 Fair value through profit or loss Fair value through other comprehensive income Amortised cost Book value Fair value Assets Cash and deposits at Central Banks — — 1,709,232 1,709,232 1,709,232 Loans and advances to credit institutions repayable on demand — — 155,794 155,794 155,794 Financial assets at amortised cost Loans and advances to credit institutions — — 370,409 370,409 364,609 Loans and advances to customers (i) — — 35,310,145 35,310,145 34,714,638 Debt instruments — — 11,584,291 11,584,291 11,212,873 Financial assets at fair value through profit or loss Financial assets held for trading 685,971 — — 685,971 685,971 Financial assets not held for trading mandatorily at fair value through profit or loss 647,871 — — 647,871 647,871 Financial assets designated at fair value through profit or loss 32,004 — — 32,004 32,004 Financial assets at fair value through other comprehensive income — 4,714,386 — 4,714,386 4,714,386 Hedging derivatives (ii) 22,335 — — 22,335 22,335 1,388,181 4,714,386 49,129,871 55,232,438 54,259,713 Liabilities Financial liabilities at amortised cost Resources from credit institutions — — 1,522,945 1,522,945 1,514,768 Resources from customers (i) — — 45,786,768 45,786,768 45,726,481 Non subordinated debt securities issued (i) — — 1,835,210 1,835,210 1,871,606 Subordinated debt (i) — — 1,037,079 1,037,079 1,089,652 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 107,415 — — 107,415 107,415 Financial liabilities designated at fair value through profit or loss 3,602,285 — — 3,602,285 3,602,285 Hedging derivatives (ii) 22,536 — — 22,536 22,536 3,732,236 — 50,182,002 53,914,238 53,934,743 (i) - the book value includes the effect of the adjustments resulting from the application of hedge accounting; (ii) - includes a portion that is recognised in reserves in the application of accounting cash flow hedge. The Bank includes in the Book value column of the heading Financial assets at amortized cost - Debt securities the variation in the fair value of the hedged element attributable to the hedged risk (risk of interest rate) for securities to which the Bank is applying fair value hedge accounting. Until 31 December 2022, the Fair value column of the heading Financial assets at cost amortized - Debt securities corresponded to the fair value plus the variation in the fair value of the hedged element attributable to the hedged risk (interest rate risk) for the securities in which the Bank was applying fair value hedge accounting. Since 31 December 2022, the difference between the two columns presented (Book value and Fair value) corresponded to potential gains on debt securities recorded in accounting at amortized cost, not considering the effects of applying hedge accounting (alternatively compared to the initial acquisition cost). As of 30 June 2023, for these instruments, the Bank began to apply a strict definition of Fair value, no longer adding at fair value the change in the fair value of the hedged item attributable to the hedged risk. This way, as of that date, the differential between the two columns referred to above (Book value and Fair value) corresponds to potential gains on debt securities recorded in the accounting at amortized cost after considering the effects of applying hedge accounting. In order to ensure the consistency and comparability of the information disclosed, the information relating to 31 December 2022 was presented consistently with the applied with reference to 31 December 2023. 2023 REPORT & ACCOUNTS | 589 The following table shows the fair value of financial assets and liabilities of the Bank, as at 31 December 2022: (Thousands of euros) 2022 Fair value through profit or loss Fair value through other comprehensive income Amortised cost Book value Fair value Assets Cash and deposits at Central Banks — — 2,956,492 2,956,492 2,956,492 Loans and advances to credit institutions repayable on demand — — 131,400 131,400 131,400 Financial assets at amortised cost Loans and advances to credit institutions — — 384,164 384,164 373,535 Loans and advances to customers (i) — — 37,334,829 37,334,829 36,596,204 Debt instruments — — 10,255,688 10,255,688 9,581,952 Financial assets at fair value through profit or loss Financial assets held for trading 692,796 — — 692,796 692,796 Financial assets not held for trading mandatorily at fair value through profit or loss 789,153 — — 789,153 789,153 Financial assets at fair value through other comprehensive income — 2,914,514 — 2,914,514 2,914,514 Hedging derivatives (ii) 28,426 — — 28,426 28,426 1,510,375 2,914,514 51,062,573 55,487,462 54,064,472 Liabilities Financial liabilities at amortised cost Resources from credit institutions — — 2,244,784 2,244,784 2,228,829 Resources from customers (i) — — 49,625,808 49,625,808 49,466,020 Non subordinated debt securities issued (i) — — 1,297,551 1,297,551 1,366,655 Subordinated debt (i) — — 998,066 998,066 963,479 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 187,438 — — 187,438 187,438 Financial liabilities designated at fair value through profit or loss 1,817,679 — — 1,817,679 1,817,679 Hedging derivatives (ii) 59,548 — — 59,548 59,548 2,064,665 — 54,166,209 56,230,874 56,089,648 (i) - the book value includes the effect of the adjustments resulting from the application of hedge accounting; (ii) - includes a portion that is recognised in reserves in the application of accounting cash flow hedge. The Bank classified the financial instruments recorded in the balance sheet at fair value in accordance with the hierarchy established in IFRS 13. The fair value of financial instruments is determined using quotations recorded in active and liquid markets, considering that a market is active and liquid whenever its stakeholders conduct transactions on a regular basis giving liquidity to the instruments traded. When it is verified that there are no transactions that regularly provide liquidity to the traded instruments, valuation methods and techniques are used to determine the fair value of the financial instruments. 2023 REPORT & ACCOUNTS 590 | Level 1 - With quotation in active market In this category are included, in addition to financial instruments traded on a regulated market, bonds and units of investment funds valued based on the prices disclosed through trading systems. The classification of the fair value of level 1 is used when: i. there is a firm daily enforceable quotation for the financial instruments concerned, or; ii. there is a quotation available in market information systems that aggregate multiple prices of various stakeholders. Level 2 - Valuation methods and techniques based on market data Financial instruments, when there are no regular transactions in the active and liquid markets (level 1), are classified in level 2, according to the following rules: i. failure to comply with the rules defined for level 1, or; ii. they are valued based on valuation methods and techniques that use mostly observable market data (interest rate or exchange rate curves, credit curves, etc.). Level 2 includes over-the-counter derivative financial instruments contracted with counterparties with which the Bank maintains collateral agreements (ISDAs with Credit Support Annex (CSA)). In addition, derivative financial instruments traded in the over-the-counter market, which, despite not having CSA agreements, the non-observable market data component (e.g., internal ratings, default probabilities determined by internal models, etc.) incorporated in the estimation of CVA/DVA is not significant in the overall value of the derivative. In order to assess the significance of this component, the Bank defined a quantitative relevance criterion and performed a qualitative sensitivity analysis on the valuation component that includes unobservable market data. Level 3 - Valuation methods and techniques based on data not observable in the market If the level 1 or level 2 criteria are not met, financial instruments should be classified in level 3, as well as in situations where the fair value of financial instruments results from the use of information not observable in the market, such as: - financial instruments which are not classified as level 1 and which are valued using evaluation methods and techniques without being known or where there is consensus on the criteria to be used, namely: i. - those measured using comparative price analysis of financial instruments with risk and return profile, typology, seniority or other similar factors, observable in the active and liquid markets; ii. - those measured based on performance of impairment tests, using performance indicators of the underlying transactions (e.g., default probability rates of the underlying assets, delinquency rates, evolution of the ratings, etc.); iii. - those measured taking as reference the NAV (Net Asset Value) disclosed by the management entities of securities/ real estate/other investment funds not listed on a regulated market. Level 3 includes over-the-counter derivative financial instruments that have been contracted with counterparties with which the Bank does not maintain collateral exchange agreements, and whose unobservable market data component incorporated in the estimation of the value adjustment. 2023 REPORT & ACCOUNTS | 591 The following table shows, by valuation levels, the fair value of financial assets and liabilities of the Bank, as at 31 December 2023: (Thousands of euros) 2023 Level 1 Level 2 Level 3 Total Assets Cash and deposits at Central Banks 1,709,232 — — 1,709,232 Loans and advances to credit institutions repayable on demand 155,794 — — 155,794 Financial assets at amortised cost Loans and advances to credit institutions — — 364,609 364,609 Loans and advances to customers — — 34,714,638 34,714,638 Debt instruments 8,622,870 445,948 2,144,055 11,212,873 Financial assets at fair value through profit or loss Financial assets held for trading 380,107 66,181 239,683 685,971 Financial assets not held for trading mandatorily at fair value through profit or loss — — 647,871 647,871 Financial assets designated at fair value through profit or loss 32,004 — — 32,004 Financial assets at fair value through other comprehensive income 4,484,734 88,657 140,995 4,714,386 Hedging derivatives — 22,335 — 22,335 15,384,741 623,121 38,251,851 54,259,713 Liabilities Financial liabilities at amortised cost Resources from credit institutions — — 1,514,768 1,514,768 Resources from customers — — 45,726,481 45,726,481 Non subordinated debt securities issued — — 1,871,606 1,871,606 Subordinated debt — — 1,089,652 1,089,652 Financial liabilities at fair value through profit or loss Financial liabilities held for trading — 107,343 72 107,415 Financial liabilities designated at fair value through profit or loss 989,703 — 2,612,582 3,602,285 Hedging derivatives — 22,536 — 22,536 989,703 129,879 52,815,161 53,934,743 2023 REPORT & ACCOUNTS 592 | The following table shows, by valuation levels, the fair value of financial assets and liabilities of the Bank, as at 31 December 2022: (Thousands of euros) 2022 Level 1 Level 2 Level 3 Total Assets Cash and deposits at Central Banks 2,956,492 — — 2,956,492 Loans and advances to credit institutions repayable on demand 131,400 — — 131,400 Financial assets at amortised cost Loans and advances to credit institutions — — 373,535 373,535 Loans and advances to customers — — 36,596,204 36,596,204 Debt instruments 7,651,344 358,217 1,572,391 9,581,952 Financial assets at fair value through profit or loss Financial assets held for trading 384,759 63,052 244,985 692,796 Financial assets not held for trading mandatorily at fair value through profit or loss — — 789,153 789,153 Financial assets at fair value through other comprehensive income 2,525,539 234,052 154,923 2,914,514 Hedging derivatives — 28,426 — 28,426 13,649,534 683,747 39,731,191 54,064,472 Liabilities Financial liabilities at amortised cost Resources from credit institutions — — 2,228,829 2,228,829 Resources from customers — — 49,466,020 49,466,020 Non subordinated debt securities issued — — 1,366,655 1,366,655 Subordinated debt — — 963,479 963,479 Financial liabilities at fair value through profit or loss Financial liabilities held for trading — 187,430 8 187,438 Financial liabilities designated at fair value through profit or loss 850,682 — 966,997 1,817,679 Hedging derivatives — 59,548 — 59,548 850,682 246,978 54,991,988 56,089,648 2023 REPORT & ACCOUNTS | 593 For financial assets classified at level 3 recorded in the balance sheet at fair value, the movement occurred during the year 2023 is presented as follows: (Thousands of euros) 2023 Financial assets held for trading not held for trading mandatorily at fair value through profit or loss at fair value through other comprehensive income Financial liabilities held for trading Balance on 1 January 244,985 789,153 154,923 8 Gains / (losses) recognised in: Results on financial operations (7,826) (27,904) — — Net interest income 10 — 3,091 — Increase / (reduction) share capital (Investment fund units) — (5,000) — — Purchases / (Sales, repayments or amortisations) 2,506 (108,240) (18,870) 64 Gains / (losses) recognised in reserves — — 1,309 — Exchange rate differences — (138) (63) — Accruals of interest 8 — 605 — Balance as at 31 December 239,683 647,871 140,995 72 For financial assets classified at level 3 recorded in the balance sheet at fair value, the movement occurred during the year 2022 is presented as follows: (Thousands of euros) 2022 Financial assets held for trading not held for trading mandatorily at fair value through profit or loss at fair value through other comprehensive income Financial liabilities held for trading Balance on 1 January 259,162 1,188,309 186,564 145 Gains / (losses) recognised in: Results on financial operations (10,991) (101,594) — — Net interest income 34 — 2,598 — Transfers between levels (1,860) — — (145) Increase / (reduction) share capital (Investment fund units) — (7,300) — — Purchases / (Sales, repayments or amortisations) (1,367) (290,787) (21,207) 8 Gains / (losses) recognised in reserves — — (13,883) — Exchange rate differences — 525 608 — Accruals of interest 7 — 243 — Balance as at 31 December 244,985 789,153 154,923 8 2023 REPORT & ACCOUNTS 594 | 45. Post-employment benefits and other long-term benefits The Bank assumed the liability to pay to their employees pensions on retirement or disability and other obligations, in accordance with the accounting policy described in note 1.R. The number of participants of Bank in the Pension Fund of Banco Comercial Português covered by this pension plan and other benefits is analysed as follows: Number of participants 2023 2022 Pensioners 17,113 17,102 Former attendees acquired rights 3,323 3,368 Employees 6,097 6,144 26,533 26,614 In accordance with the accounting policy described in note 1.R., the Bank's retirement pension liabilities and other benefits and the respective coverage, based on the Projected Unit credit method are analysed as follows: (Thousands of euros) 2023 2022 Actual amount of the past services Pensioners 2,317,001 2,125,182 Former attendees acquired rights 180,109 158,948 Employees 562,946 489,629 3,060,056 2,773,759 Pension Fund Value (3,439,955) (3,355,171) Net (assets)/liabilities in balance sheet (note 28) (379,899) (581,412) Actuarial gains and losses and changing assumptions effect recognised in Other comprehensive income 3,365,741 3,145,258 In 2017, following the authorization of the Insurance and Pension Funds Supervisory Authority, the BCP group's pension fund agreement was amended. The main purpose of this process was to incorporate into the pension fund the changes made to the Group's Collective Labour Agreement (CLA) in terms of retirement benefits and to pass on to the pension fund the responsibilities that were directly in charge by the companies (extra-fund liabilities). The pension fund has a share exclusively related to the financing of these liabilities, which under the scope of the fund is called an Additional Complement, which as at 31 December 2023 amounts to Euros 195,420,000 (31 December 2022: Euros 197,486,000). The End of Career Premium also came to be borne by the pension fund under the basic pension plan. In 2023, negotiations continued with all the unions subscribing to the Bank's Collective Labour Agreements, for the conclusion of the full review of the respective clauses, negotiations which are still ongoing. At the same time, negotiations took place with all the unions that subscribed the Group's Collective Labour Agreements, for the review of the Salary Tables and remaining pecuniary clauses relating to the year 2023, having been agreed on 9 and 17 October with all the Unions subscribing to the Group's Collective Labour Agreements, the update of the Salary Tables in 2023 with differentiated increases by contractual level between 4.00% and 7.80%. An increase of 4.50% was agreed for the Bank's Contributions to SAMS and other pecuniary clauses, such as study subsidies, diuturnities, among others, and an increase of 21.43% was agreed for the lunch subsidy, whose daily value increased to Euros 12.75. The agreed updates took effect on January 1, 2023, with the exception of remuneration related to subsistence and travel allowances, which were updated after the agreed updates were operationalized. Regarding the unions SNQTB – Sindicato Nacional dos Quadros e Técnicos Bancários e SIB – Sindicato Independente da Banca, an agreement was also reached regarding the revision of the Salary Tables and other pecuniary clauses relating to the year 2022, as already agreed in 2022 with the remaining unions. 2023 REPORT & ACCOUNTS | 595 The change in the projected benefit obligations is analysed as follows: (Thousands of euros) 2023 2022 Balance as at 1 January 2,773,759 3,469,942 Service cost (9,376) (11,441) Interest cost / (income) 110,974 66,579 Actuarial losses / (gains) Not related to changes in actuarial assumptions 42,875 58,753 Arising from changes in actuarial assumptions 276,807 (683,269) Payments (149,509) (136,216) Early retirement programmes and terminations by mutual agreement (note 7) 7,043 2,223 Contributions of employees 6,927 6,686 Transfer from / (to) other plans (a) 556 502 Balance at the end of the year 3,060,056 2,773,759 (a) The amount included in the balance "Transfer from / (to) other plans" corresponds to the post-employment benefits related to the rotation of employees between the various Group companies for temporary assignment of the same. The pensions paid by the Fund, including the Additional Complement, amounts to Euros 149,509,000 (31 December 2022: Euros 136,216,000). The liabilities with health benefits are fully covered by the Pension Fund and correspond to Euros 257,151,000 (31 December 2022: Euros 239,947,000). Additionally, regarding the coverage of some benefit obligations related to pensions, the Bank contracted with Ocidental Vida the acquisition of perpetual annuities for which the total liability amounts to Euros 33,765,000 (31 December 2022 : Euros 39,093,000), in order to pay: (i) pensions of former Group's Board Members in accordance with the Bank's Board Members Retirement Regulation; (ii) pensions and complementary pension to pensioners in accordance with the Pension Fund of the BCP Group employees established in 28 December 1987, as also to pensioners, in accordance with other Pension Funds, that were incorporated after on the BCP Group Pension Fund and which were planed that the retirement benefits should be paid through the acquisition of insurance policies, in accordance with the Decree - Law no. 12/2006. Ocidental Vida is 100% owned by Ageas Group, and Ageas Group is 49% owned by the BCP Group. 2023 REPORT & ACCOUNTS 596 | The changes in the value of plan's assets is analysed as follows: (Thousands of euros) 2023 2022 Balance as at 1 January 3,355,171 3,669,024 Actuarial gains / (losses) 99,199 (257,193) Payments (149,509) (136,216) Expected return on plan assets 127,602 72,361 Employees' contributions 6,927 6,686 Transfer from / (to) other plans (a) 556 502 Amount transferred to the Fund resulting from acquired rights unassigned related to the Complementary Plan 9 7 Balance at the end of the year 3,439,955 3,355,171 (a) The amount included in the balance "Transfer from / (to) other plans" corresponds to the post-employment benefits related to the rotation of employees between the various Group companies for temporary assignment of the same. The elements that make up the share value of the Bank in the assets of the Pension Fund are analysed as follows: (Thousands of euros) 2023 2022 Asset class Assets with market price in active market Remaining Total Portfolio Assets with market price in active market Remaining Total Portfolio Shares 327,526 1,251 328,777 95,989 1,172 97,161 Bonds and other fixed income securities 1,978,347 — 1,978,347 1,110,551 — 1,110,551 Participations units in investment funds — 493,543 493,543 — 960,942 960,942 Participation units in real estate funds — 296,394 296,394 — 305,766 305,766 Properties — 262,686 262,686 — 273,137 273,137 Loans and advances to credit institutions and others — 80,208 80,208 — 607,614 607,614 2,305,873 1,134,082 3,439,955 1,206,540 2,148,631 3,355,171 The balance Properties includes buildings booked in the Fund's financial statements and used by the Group's companies which amounts to Euros 225,388,000 ( 31 December 2022: Euros 236,165,000). The securities issued by Group's companies accounted in the portfolio of the Fund are analysed as follows: (Thousands of euros) 2023 2022 Shares — 4,265 Bonds and other fixed income securities 1,796 2,781 Loans and advances to credit institutions and others 48,021 127,377 49,817 134,423 2023 REPORT & ACCOUNTS | 597 The evolution of net (assets) / liabilities in the balance sheet is analysed as follows: (Thousands of euros) 2023 2022 Balance as at 1 January (581,412) (199,082) Recognised in the income statement: Service cost (9,376) (11,441) Interest cost / (income) net of the balance liabilities coverage (16,628) (5,782) Cost with early retirement programs (note 7) 7,043 2,223 Amount transferred to the Fund resulting from acquired rights unassigned related to the Complementary Plan (9) (7) (18,970) (15,007) Recognised in the Statement of Comprehensive Income: Actuarial (gains) and losses Not related to changes in actuarial assumptions Difference between the estimated and the actual income of the fund (99,199) 257,193 Difference between expected and effective obligations 42,875 58,753 Arising from changes in actuarial assumptions 276,807 (683,269) 220,483 (367,323) Balance at the end of the year (379,899) (581,412) The estimated contributions to be made in 2024, by the employees, for the Defined Benefit Plan amount to Euros 6,948,000. In accordance with IAS 19, the Bank accounted cost/(income) with post-employment benefits, which is analysed as follows: (Thousands of euros) 2023 2022 Current service cost (9,376) (11,441) Net interest cost in the liability coverage balance (16,628) (5,782) Cost with early retirement programs (note 7) 7,043 2,223 Amount transferred to the Fund resulting from acquired rights unassigned related to the Complementary Plan (9) (7) (Income) / Cost of the year (18,970) (15,007) Within the framework of the three-party agreement between the Government, the Banking and the Trade Unions, the bank's employees in activity as at 31 December 2010 under the CAFEB/CLA regime were integrated into the General Social Security System (RGSS) with effect from 1 January 2011. The integration led to an effective decrease in the present value of the total benefits reported at the retirement age to be borne by the Pension Fund, and this effect is recorded on a straight-line basis over the average period of active life until the normal retirement age is reached. The calculation of the liability for pensions carried out periodically by the actuary considers this effect and is calculated considering the actuarial assumptions in force, ensuring that the liabilities calculated with reference to 31 December 2010, not considering the effect of the integration of bank employees into the General Social Security Scheme are fully covered and deducted from the amount of the effect recognised until the date. The component of this effect for the year is recognized under the heading "Current service costs". 2023 REPORT & ACCOUNTS 598 | Board of directors plan As the Board of Directors Retirement Regulation establish that the pensions are subjected to an annual update, and as it is not common in the insurance market the acquisition of perpetual annuities including variable updates in pensions, the Bank determined, the liability to be recognised on the financial statements related to that update, taking into consideration current actuarial assumptions. In accordance with the remuneration policy of the Board Members, the Bank has the responsibility of supporting the cost with: (i) the retirement pensions of former Group's Executive Board Members; and (ii) the Complementary Plan for these members in accordance with the applicable rules funded through the Pension Fund, Extra-fund and perpetual annuities. In order to cover liabilities with pensions to former members of the Executive Board of Directors, under the Bank's Board of Directors Retirement Regulation the Bank contracted with Ocidental Vida to purchase constant immediate life annuity insurance policies. Assumptions used in the assessment of responsibilities Considering the market indicators, particularly the inflation rate estimates and the long term interest rate for Euro Zone, as well as the demographic characteristics of its employees, the Bank considered the following actuarial assumptions for calculating the liabilities with pension obligations: 2023 2022 Salary growth rate (c) 2,65% in 2024; 1,9% in 2025 and 1,15% in the following years 3.75% in 2023; 2.25% in 2024 and 1% in the following years Pensions growth rate (c) 2,25% in 2024; 1,5% in 2025 and 0,75% in the following years 3.0% in 2023; 2.0% in 2024 and 0.75% in the following years Discount rate / Projected Fund's rate of return 3.53% 4.17% Mortality tables Men TV 88/90-1 year TV 88/90-1 year Women (a) TV 99/01-2 year TV 99/01-2 years Disability rate Non applicable Non applicable Turnover rate Non applicable Non applicable Normal retirement age (b) 66 years e 4 months 66 years and 7 months Total salary growth rate for Social Security purposes 1.75% 1.75% Revaluation rate of wages / pensions of Social Security 1.00% 1.00% a) The mortality table considered for women corresponds to TV 99/01 adjusted in less than 2 years (which implies an increase in hope life expectancy compared to that which would be considered in relation to their effective age). b) Retirement age is variable. The normal retirement age increases one month for each civil year and cannot be higher than the normal retirement age in force in the General Social Security Regime (RGSS). The normal retirement age in the RGSS is variable and depends on the evolution of the average life expectancy at 65 years of age. In 2022 the retirement age was 66 years and 7 months. For 2023 and 2024, the normal retirement age in the RGSS is 66 years and 4 months. The reduction in the retirement age was due to the evolution of the average life expectancy at 65 years in Portugal. For the projection of life expectancy’s increment it was considered an increase of one year in every 10 years, with the maximum retirement age being set at 67 years and 2 months. c) This rate refers to the growth for the years following the reporting year. The assumptions used on the calculation of the actuarial value of the liabilities are in accordance with the requirements of IAS 19, and are determined based on the references of the entities under common control. No disability decreases are considered in the calculation of the liabilities. 2023 REPORT & ACCOUNTS | 599 The discount rate used to update the Bank's pension fund liabilities, regarding the defined benefit pension plans of its employees and managers, was determined based on an analysis carried out on a set of available information, which includes, among other elements, the market references for this indicator published by internationally recognized specialized entities and which are based, as defined by IAS 19, on market yields of a universe of high quality bond issues (low risk), different maturities, called in Euros and relating to a diverse and representative range of issuers (non- sovereign). With reference to 31 December 2023, the Bank used a discount rate of 3.53% (31 December 2022: 4.17%). The Actuarial (gains)/losses are related to the difference between the actuarial assumptions used for the estimation of the liabilities and the values verified and the change in actuarial assumptions, are analysed as follows: (Thousands of euros) Actuarial (gains) / losses 2023 2022 Values effectively verified in % Amount of deviations Values effectively verified in % Amount of deviations Difference between expected and actual liabilities 42,875 58,753 Changes on the assumptions: Discount rate 223,222 (1,095,608) Salary and pensions growth rate 53,585 277,100 Mortality Table — 63,241 Other changes — 71,998 Difference between expected income and income from funds 7.07% (99,199) -5.07% 257,193 220,483 (367,323) In accordance with IAS 19, the sensitivity analysis to changes in assumptions, is as follows: (Thousands of euros) Impact resulting from changes in financial assumptions 2023 2022 -0.25% 0.25% -0.25% 0.25% Discount rate 98,133 (91,547) 87,010 (81,251) Pensions increase rate (103,353) 107,806 (97,644) 102,031 Increase in future compensation levels (24,437) 28,390 (20,084) 23,076 (Thousands of euros) Impact resulting from changes in demographic assumptions 2023 2022 - 1 year + 1 year - 1 year + 1 year Mortality Table () 99,690 (100,081) 82,667 (83,459) () The impact of the 1 year reduction in the mortality table implies an increase in the average life expectancy. Defined contribution plan According to what is described in accounting policy 1 R3, in the scope of the Defined Contribution Plan provided for the BCP Pension Fund of the BCP Group for employees who have been admitted until 1 July 2009, in 2023 was accounted for a cost of Euros 2,061,000 (2022: cost of 2,026,000) as an estimated contribution given that the Group estimates that the following requirements will be met, cumulatively: (i) the previous year BCP's ROE equals or exceeds the rate of government bonds of 10 years plus 5 percentage points, and (ii) distributable profits or reserves exist in the accounts of Banco Comercial Português. For employees who have been admitted after 1 July 2009, are made monthly contributions equal to 1.5% of the monthly remuneration received by employees in the current month, either by themselves or by the Bank and employees. This contribution has a mandatory character and is defined in the Collective Labour Agreement of the BCP Group and does not have a performance criterion. The Bank accounted as staff costs the amount of Euros 350,000 (31 December 2022: Euros 281,000) related to this contribution. 2023 REPORT & ACCOUNTS 600 | 46. Related parties As defined by IAS 24, are considered related parties of the Bank, the companies detailed in note 52 - List of subsidiary and associated companies of Banco Comercial Português S.A., the Pension Fund, the members of the Board of Directors and key management members. The key management members are the first line Directors. Beyond the members of the Board of Directors and key management members, are also considered related parties people who are close to them (family relationships) and entities controlled by them or in whose management they have significant influence. According to Portuguese law, namely under Article no. 109 of the General Law for Credit Institutions and Financial Companies and also in accordance with Article no. 33 of Notice 3/2020 of the Bank of Portugal, are considered related parties as well, the qualified shareholders of Banco Comercial Português, S.A. and the entities controlled by them or with which they are in a group relationship. The list of the qualified shareholders is detailed in note 37. A) Transactions with qualified shareholders The balances reflected in assets of individual balance sheet with qualified shareholders, are analysed as follows: (Thousands of euros) 2023 2022 Assets Financial assets at amortised cost Loans and advances to customers 110,525 97,740 Debt instruments 52,548 79,787 163,073 177,527 Liabilities Financial liabilities at amortised cost Resources from customers 48,099 96,159 Financial liabilities at fair value through profit or loss Financial liabilities held for trading 2,138 4,287 50,237 100,446 The amounts of Financial assets at amortised cost cost are net of impairment in the amount of Euros 1,481,000 (31 December 2022: Euros 914,000) to Loans and advances to customers and to Debt instruments the amount Euros 237,000 (31 December 2022: Euros 257,000). The transactions with qualified shareholders, reflected in the individual income statement items, are as follows: (Thousands of euros) 2023 2022 Income Interest and similar income 9,244 5,989 Commissions 476 752 9,720 6,741 Costs Interest and similar expenses 179 — Commissions 76 82 255 82 2023 REPORT & ACCOUNTS | 601 The balances with qualified shareholders, reflected in the guarantees granted and revocable and irrevocable credit lines, are as follows: (Thousands of euros) 2023 2022 Guarantees granted 2,896 2,070 Revocable credit lines 5,602 18,171 8,498 20,241 The Bank recorded impairment for Guarantees granted in the amount of Euros 8,000 (31 December 2022: Euros 1,000), for Revocable credit lines the amount of Euros 141,000 (31 December 2022: Euros 229,000). B) Balances and transactions with members of the Board of Directors and key management members The balances with related parties discriminated in the following table, included on the individual balance sheet, are analysed as follows: (Thousands of euros) Loans and advances to customers Resources from customers 2023 2022 2023 2022 Board of Directors Non-executive directors 8 10 8,900 8,180 Executive Committee () 27 46 2,918 2,716 Closely related people 18 13 2,651 2,629 Controlled entities — — 24 24 Key management members Key management members 5,396 6,559 10,934 10,180 Closely related people 1,917 2,451 4,433 4,497 Controlled entities 705 928 3,276 2,613 8,071 10,007 33,136 30,839 () The balance Loans and advances to customers corresponds to the mortgage credit granted previously to the respective election and to the amount used from private credit cards that is of mandatory liquidation on the maturity date. In accordance with Article 85, no. 9, of RGICSF, no credits were granted during 2023 and in 2022. The transactions with related parties discriminated in the following table, included in income items of the income statement, are as follows: (Thousands of euros) Interest and similar income Commissions income 2023 2022 2023 2022 Board of Directors Non-executive directors — — 27 29 Executive Committee 1 — 23 10 Closely related people — — 9 9 Key management members Key management members 174 41 62 62 Closely related people 88 22 39 43 Controlled entities 63 17 31 19 326 80 191 172 2023 REPORT & ACCOUNTS 602 | The transactions with related parties discriminated in the following table, included in cost items of the income statement, are as follows: (Thousands of euros) Interest and similar expense Commissions expense 2023 2022 2023 2022 Board of Directors Non-executive directors 128 19 — — Executive Committee 26 — — 1 Closely related people 33 9 — — Key management members Key management members 101 6 1 4 Closely related people 20 2 1 2 Controlled entities 21 — 2 2 329 36 4 9 The revocable credit lines granted by the Bank to the following related parties are as follows: (Thousands of euros) Guarantees granted Revocable credit lines 2023 2022 2023 2022 Board of Directors Non-executive directors — — 143 112 Executive Committee () — — 160 140 Closely related people — — 45 26 Key management members Key management members 5 5 712 701 Closely related people — — 118 127 Controlled entities — — 622 525 5 5 1,800 1,631 () Corresponds to the maximum authorized and unused limit of private credit cards and overdraft authorization in a salary account under the same regime as all the Bank's other employees. 2023 REPORT & ACCOUNTS | 603 The shareholder and bondholder position of members of the Board of Directors, Key management members and people closely related to the previous categories, as well as the movements occurred during 2023, are as follows: Number of securities Unit price Euros Shareholders/Bondholders Security 2023 2022 Acquisitions Disposals Date MEMBERS OF BOARD OF DIRECTORS Altina de Fátima Sebastián González Villamarin BCP Shares 0 0 Ana Paula Alcobia Gray BCP Shares 0 0 Cidália Maria da Mota Lopes BCP Shares 2,184 2,184 Fernando da Costa Lima BCP Shares 18,986 18,986 João Nuno Oliveira Jorge Palma BCP Shares 1,723,818 1,364,642 636,836 (a) 277,660 (b) 23/6/2023 0.2200 Jorge Manuel Baptista Magalhães Correia BCP Shares 388,500 388,298 202 20/1/2023 0.1900 Bonds (i) 1 1 Bonds (ii) 1 1 Bonds (iv) 1 0 1 25/9/2023 100,000 José Miguel Bensliman Schorcht da Silva Pessanha BCP Shares 1,504,495 1,177,152 582,460 (a) 255,117 (b) 23/6/2023 0.2200 José Pedro Rivera Ferreira Malaquias BCP Shares 9,808 9,808 Júlia Gu (Xiao Xu Gu) BCP Shares 0 0 Lingjiang Xu BCP Shares 0 0 Lingzi Yuan (Smilla Yuan) BCP Shares 0 0 Maria José Henriques Barreto de Matos de Campos BCP Shares 2,014,344 1,554,512 574,790 (a) 114,958 (b) 23/6/2023 0.2200 Miguel de Campos Pereira de Bragança BCP Shares 2,111,178 1,725,908 674,727 (a) 289,457 (b) 23/6/2023 0.2200 Miguel Maya Dias Pinheiro BCP Shares 2,501,557 2,018,854 839,483 (a) 356,780 (b) 23/6/2023 0.2200 Nuno Manuel da Silva Amado BCP Shares 2,525,388 1,525,388 1,000,000 3/1/2023 0.1567 Bonds (i) 2 2 Bonds (ii) 2 2 Bonds (iii) 3 1 2 8/8/2023 100,000 Bonds (iv) 1 0 1 27/9/2023 100,000 Rui Manuel da Silva Teixeira BCP Shares 1,207,858 571,501 (a) 250,317 (b) 23/6/2023 0.2200 1,152,359 376,663 1/8/2023 0.2500 Valter Rui Dias de Barros BCP Shares 0 0 KEY MANAGEMENT MEMBERS Albino António Carneiro de Andrade BCP Shares 133,881 128,684 5,197 (a) 23/6/2023 0.2200 Alexandre Manuel Casimiro de Almeida BCP Shares 169,519 111,400 58,119 (a) 23/6/2023 0.2200 Américo João Pinto Carola BCP Shares 140,747 104,945 63,588 (a) 27,786 (b) 23/6/2023 0.2200 Ana Maria Jordão F. Torres Marques Tavares BCP Shares 255,931 215,340 63,819 (a) 23,228 (b) 23/6/2023 0.2200 Ana Patrícia Moniz Macedo BCP Shares 35,864 0 63,588 (a) 27,724 (b) 23/6/2023 0.2200 António Augusto Amaral de Medeiros BCP Shares 178,245 143,063 62,599 (a) 27,417 (b) 23/6/2023 0.2200 António Ferreira Pinto Júnior BCP Shares 11,842 11,842 António José Lindeiro Cordeiro BCP Shares 93,898 64,134 49,854 (a) 20,090 (b) 23/6/2023 0.2200 António Luís Duarte Bandeira BCP Shares 321,903 285,425 64,906 (a) 28,428 (b) 23/6/2023 0.2200 António Ricardo Fery Salgueiro Antunes BCP Shares 120,117 61,361 58,756 (a) 23/6/2023 0.2200 António Vítor Martins Monteiro BCP Shares 3,872 3,872 (i) - Fixed Rate Reset Perpetual Temporary Write Down Additional Tier 1 Capital Notes (ii) - BCP Tier 2 Subordinated Callable Notes (iii) - BCP 1.75% EUR 500M 6.5NC5.5 Social Senior Preferred Notes (iv) - BCP/2023 - BCP Senior Preferred Fiexed FLT OCT 2026 (a) - identifies the increment of shares up to 31 December 2023 corresponding to variable compensation of 2022 and deferred from previous years. (b) - identifies the shares used in sell-cover up to 31 December 2023 related to the increment of shares of variable remuneration. 2023 REPORT & ACCOUNTS 604 | Number of securities Unit price Euros Shareholders/Bondholders Security 2023 2022 Acquisitions Disposals Date Artur Frederico Silva Luna Pais BCP Shares 517,197 459,405 57,792 (a) 23/6/2023 0.2200 Belmira Abreu Cabral BCP Shares 129,190 96,604 57,978 (a) 25,392 (b) 23/6/2023 0.2200 Bernardo Roquette de Aragão de Portugal Collaço BCP Shares 89,825 54,362 62,103 (a) 26,640 (b) 23/6/2023 0.2200 Carlos Manuel da Silva Teixeira BCP Shares 0 0 Chi Wai Leung (Timothy) BCP Shares 43,768 26,582 17,186 (a) 23/6/2023 0.2200 Constantino Alves Mousinho BCP Shares 108,170 72,352 35,818 (a) 23/6/2023 0.2200 Fernando Maria Cardoso Rodrigues Bicho BCP Shares 237 237 Filipe Maria de Sousa Ferreira Abecasis BCP Shares 174,218 135,398 68,947 (a) 30,127 (b) 23/6/2023 0.2200 Francisco António Caspa Monteiro BCP Shares 225,015 186,219 69,030 (a) 30,234 (b) 23/6/2023 0.2200 Gonçalo Nuno Belo de Almeida Pascoal BCP Shares 153,373 119,771 58,846 (a) 25,244 (b) 23/6/2023 0.2200 Hugo Miguel Martins Resende BCP Shares 178,524 139,589 69,030 (a) 30,095 (b) 23/6/2023 0.2200 João Adriano Azevedo Seixas Vale BCP Shares 43,222 43,222 João Brás Jorge BCP Shares 91,709 91,709 João Manuel Taveira Pinto Santos Paiva BCP Shares 259,116 190,677 68,439 (a) 23/6/2023 0.2200 Jorge Filipe Nogueira Freire Cortes Martins BCP Shares 107,720 48,257 59,463 (a) 23/6/2023 0.2200 Jorge Manuel Machado de Sousa Góis BCP Shares 190,352 134,204 56,148 (a) 23/6/2023 0.2200 Jorge Manuel Magalhães Oliveira Pereira BCP Shares 57,488 25,460 56,785 (a) 24,757 (b) 23/6/2023 0.2200 Jorge Manuel Nobre Carreteiro BCP Shares 55,988 55,776 (a) 23/6/2023 0.2200 41,000 5/9/2023 0.2630 80,764 10,000 4/12/2023 0.3270 Jorge Octávio Neto dos Santos BCP Shares 471,191 471,191 José Artur Gouveia Coelho Caetano BCP Shares 0 0 José Carlos Benito Garcia de Oliveira BCP Shares 37,941 37,941 José Gonçalo Prior Regalado BCP Shares 147,115 79,184 67,931 (a) 23/6/2023 0.2200 José Guilherme Potier Raposo Pulido Valente BCP Shares 315,008 280,081 62,144 (a) 27,217 (b) 23/6/2023 0.2200 José Maria Gonçalves Pereira Brandão de Brito BCP Shares 87,138 55,225 52,660 (a) 20,747 (b) 23/6/2023 0.2200 Liliana Marisa Catoja Costa Lemos BCP Shares 400 400 Luis Miguel Manso Correia dos Santos BCP Shares 285,820 216,790 69,030 (a) 23/6/2023 0.2200 Maria Constança C. Brandão Amado Fonseca G. Santos BCP Shares 800 800 Maria de Fátima Coelho Dias BCP Shares 0 0 Maria de Los Angeles Sanchez Sanchez BCP Shares 61,375 41,011 36,232 (a) 15,868 (b) 23/6/2023 0.2200 Maria Helena Soledade Nunes Henriques BCP Shares 268,800 232,863 63,943 (a) 28,006 (b) 23/6/2023 0.2200 Maria Manuela de Araújo Mesquita Reis BCP Shares 228,036 190,663 62,599 (a) 25,226 (b) 23/6/2023 0.2200 Mário António Pinho Gaspar Neves BCP Shares 142,301 108,172 60,616 (a) 26,487 (b) 23/6/2023 0.2200 Mário Madeira Robalo Fernandes BCP Shares 220,539 156,951 63,588 (a) 23/6/2023 0.2200 Nelson Luís Vieira Teixeira BCP Shares 108,936 7,200 16/2/2023 0.2100 22,200 24/2/2023 0.2250 118,570 68,356 (a) 29,322 (b) 23/6/2023 0.2200 Nuno Alexandre Ferreira Pereira Alves BCP Shares 251,695 183,959 67,736 (a) 23/6/2023 0.2200 Nuno Miguel Nobre Botelho BCP Shares 144,294 85,625 58,669 (a) 23/6/2023 0.2200 Pedro José Mora de Paiva Beija BCP Shares 138,202 50,673 17/1/2023 0.1934 69,030 (a) 23/6/2023 0.2200 173,559 17,000 21/12/2023 0.2710 Pedro Manuel Francisco da Silva Dias BCP Shares 152,178 111,149 68,493 (a) 27,464 (b) 23/6/2023 0.2200 Pedro Manuel Macedo Vilas Boas BCP Shares 146,870 66,368 (a) 23/6/2023 0.2200 70,000 143,238 5/12/2023 0.3310 Pedro Manuel Rendas Duarte Turras BCP Shares 146,367 105,371 68,439 (a) 27,443 (b) 23/6/2023 0.2200 (a) - identifies the increment of shares up to 31 December 2023 corresponding to variable compensation of 2022 and deferred from previous years. (b) - identifies the shares used in sell-cover up to 31 December 2023 related to the increment of shares of variable remuneration. 2023 REPORT & ACCOUNTS | 605 Number of securities Unit price Euros Shareholders/Bondholders Security 2023 2022 Acquisitions Disposals Date Ricardo Potes Valadares BCP Shares 100,121 68,014 55,354 (a) 23,247 (b) 23/6/2023 0.2200 Rosa Maria Ferreira Vaz Santa Bárbara BCP Shares 117,023 68,163 5/1/2023 0.1712 87,324 68,439 (a) 29,975 (b) 23/6/2023 0.2200 Bonds (i) 1 1 Rui Artur dos Santos Baptista BCP Shares 2,500 2,500 8/8/2023 0.2500 Rui Emanuel Agapito Silva BCP Shares 145,528 109,252 64,315 (a) 28,039 (b) 23/6/2023 0.2200 Rui Fernando da Silva Teixeira BCP Shares 221,892 186,154 63,588 (a) 27,850 (b) 23/6/2023 0.2200 Rui Manuel Pereira Pedro BCP Shares 408,353 339,819 68,534 (a) 23/6/2023 0.2200 Rui Miguel Alves Costa BCP Shares 348,163 279,133 69,030 (a) 23/6/2023 0.2200 Rui Nelson Moreira de Carvalho Maximino BCP Shares 146,835 110,273 64,823 (a) 28,261 (b) 23/6/2023 0.2200 Rui Pedro da Conceição Coimbra Fernandes BCP Shares 143,793 102,700 21/6/2023 0.2200 79,629 63,588 (a) 25,052 (b) 23/6/2023 0.2200 Tiago Alexandre Machado Ferreira Mateus BCP Shares 52,540 2,128 50,412 (a) 23/6/2023 0.2200 Vânia Alexandra Machado Marques Correia BCP Shares 160,146 115,226 56,148 (a) 11,228 (b) 23/6/2023 0.2200 PEOPLE CLOSELY RELATED TO THE PREVIOUS of: Cidália Maria da Mota Lopes Alexandre Miguel Martins Ventura BCP Shares 2,184 2,184 of: José Miguel Bensliman Schorcht da Silva Pessanha Herança de Anne Marie Bensliman Silva Pessanha BCP Shares 139 139 of: Maria José Henriques Barreto de Matos de Campos Ricardo Gil Monteiro Lopes de Campos BCP Shares (c) (c) of: Rui Manuel da Silva Teixeira Maria Helena Espassandim Catão BCP Shares 576 576 of: Américo João Pinto Carola Ana Isabel Salgueiro Antunes BCP Shares 29 29 of: Ana Maria Jordão F. Torres Marques Tavares Álvaro Manuel Coreia Marques Tavares BCP Shares 25,118 25,118 Francisco Jordão Torres Marques Tavares BCP Shares 1,016 1,016 of: António Luís Duarte Bandeira António da Silva Bandeira BCP Shares 0 20,000 20,000 20/2/2023 0.2110 Ana Margarida Rebelo A. M. Soares Bandeira BCP Shares 2,976 2,976 of: António Ferreira Pinto Júnior Paula Alexandre Cardoso de Miguel Pinto BCP Shares 33,187 33,187 of: António Vítor Martins Monteiro Isabel Maria Vaz Leite Pinto Martins Monteiro BCP Shares 3,104 3,104 of: Francisco António Caspa Monteiro Ricardo Miranda Monteiro BCP Shares 1,639 1,639 Rita Miranda Monteiro BCP Shares 1,639 1,639 of: Maria Helena Soledade Nunes Henriques João Paulo Rodrigues Taborda Gonçalves BCP Shares 130 130 of: Maria Manuela de Araújo Mesquita Reis Luís Filipe da Silva Reis BCP Shares 280,000 280,000 of: José Pedro Rivera Ferreira Malaquias Maria Joana de Oliveira Monteiro Ferreira Malaquias BCP Shares (d) (d) (i) - Fixed Rate Reset Perpetual Temporary Write Down Additional Tier 1 Capital Notes (a) - identifies the increment of shares up to 31 December 2023 corresponding to variable compensation of 2022 and deferred from previous years. (b) - identifies the shares used in sell-cover up to 31 December 2023 related to the increment of shares of variable remuneration. (c) - solidary ownership in both securities accounts, and Dr. Ricardo Campos is the first holder and Eng.ª Maria José Campos is the 2nd holder of the securities account. (d) - solidary ownership in both securities accounts, and Dr. José Pedro Ferreira Malaquias is the first holder and Maria Joana Ferreira Malaquias is the 2nd holder of the securities account. 2023 REPORT & ACCOUNTS 606 | C) Balances and transactions with subsidiaries and associated companies, detailed in note 52 As at 31 December 2023, the balances with subsidiary and associated companies included in Assets items of the balance sheet are as follows: (Thousands of euro) Loans and advances to credit institutions repayable on demand Financial assets at amortised cost Financial assets at fair value through profit or loss Loans and advances to credit institutions Loans and advances to customers held for trading not held for trading mandatorily at fair value through profit or loss Total Banco ActivoBank, S.A. — 33,000 — 20 — 33,020 BCP África, S.G.P.S., Lda. — — — 981 — 981 Banco Millennium Atlântico, S.A. 1,340 — — — — 1,340 Banque BCP, S.A.S. 8 203,793 621 — — 204,422 BIM - Banco Internacional de Moçambique, S.A. 187 5,581 — 201 — 5,969 Bank Millennium Group (Poland) 54 — — — — 54 Magellan Mortgages No. 3 PLC — — — 2,924 9,064 11,988 Millenniumbcp Ageas Grupo Segurador, S.G.P.S.,S.A.(Group) — — 1,895 — — 1,895 UNICRE - Instituição Financeira de Crédito, S.A. — 8,244 — — — 8,244 1,589 250,618 2,516 4,126 9,064 267,913 (Thousands of euro) Financial assets at fair value through other comprehensive income Investments in subsidiaries and associated companies () Non-current assets held for sale Other assets Total Banco ActivoBank, S.A. — — — 377 377 Banco Millennium Atlântico, S.A. — — — 802 802 BIM - Banco Internacional de Moçambique, S.A. — — — 3,193 3,193 Imoserit, S.A. () — — — 14,805 14,805 Fundial – Fundo de Investimento Imobiliário Fechado — — — 1 1 Fundipar – Fundo de Investimento Imobiliário Fechado — — — 1 1 Imorenda – Fundo de Investimento Imobiliário Fechado — — — 8 8 Imosotto acumulação – Fundo de Investimento Imobiliário Fechado — — — 35 35 Sand Capital - Fundo de Investimento Imobiliário Fechado — — — 3 3 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. — — — 55 55 Magellan Mortgages No. 3 PLC 39,654 — — — 39,654 Millenniumbcp Ageas Grupo Segurador, S.G.P.S.,S.A.(Group) — 257,250 — 10,578 267,828 Millennium bcp - Prestação de Serviços, A.C.E. — 18,000 — 735 18,735 Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. — 166,287 — — 166,287 Monumental Residence - Sociedade de Investimento Coletivo Imobiliária Fechada, S.A. — — — 1 1 Predicapital – Fundo de Investimento Imobiliário Fechado — — 44,502 2 44,504 UNICRE - Instituição Financeira de Crédito, S.A. 925 — — 217 1,142 Webspectator Corporation — — 17,432 — 17,432 40,579 441,537 61,934 30,813 574,863 () Regarding Supplementary Capital Payments and Additional Payments () Regarding Supplies 2023 REPORT & ACCOUNTS | 607 As at 31 December 2022, the balances with subsidiary and associated companies included in Assets items of the balance sheet are as follows: (Thousands of euro) Loans and advances to credit institutions repayable on demand Financial assets at amortised cost Financial assets at fair value through profit or loss Loans and advances to credit institutions Loans and advances to customers held for trading not held for trading mandatorily at fair value through profit or loss Total Banco ActivoBank, S.A. — 26,890 — — — 26,890 BCP África, S.G.P.S., Lda. — — — 1,395 — 1,395 Banco Millennium Atlântico, S.A. 1,077 — — — — 1,077 Banque BCP, S.A.S. 8 201,028 — — — 201,036 BIM - Banco Internacional de Moçambique, S.A. 188 — — 266 — 454 Bank Millennium Group (Poland) 87 — — — — 87 Magellan Mortgages No. 3 PLC — — — 3,396 9,476 12,872 Millenniumbcp Ageas Grupo Segurador, S.G.P.S.,S.A.(Group) — — 59,483 — — 59,483 UNICRE - Instituição Financeira de Crédito, S.A. — 5,049 — — — 5,049 1,360 232,967 59,483 5,057 9,476 308,343 (Thousands of euro) Financial assets at fair value through other comprehensive income Investments in subsidiaries and associated companies () Non-current assets held for sale Other assets Total Banco ActivoBank, S.A. — — — 345 345 BCP África, S.G.P.S., Lda. — — — 37 37 Banque BCP, S.A.S. — — — 15 15 BIM - Banco Internacional de Moçambique, S.A. — — — 3,498 3,498 Imoserit, S.A. — 22,241 — — 22,241 Fundial – Fundo de Investimento Imobiliário Fechado — — — 1 1 Fundipar – Fundo de Investimento Imobiliário Fechado — — — 2 2 Imorenda – Fundo de Investimento Imobiliário Fechado — — — 8 8 Imosotto acumulação – Fundo de Investimento Imobiliário Fechado — — — 7 7 Sand Capital - Fundo de Investimento Imobiliário Fechado — — — 3 3 Oceânico II – Fundo de Investimento Imobiliário Fechado — — — 3 3 Funsita - Fundo de Investimento Imobiliário Fechado — — — 1 1 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. — — — 43 43 Magellan Mortgages No. 3 PLC 46,023 — — — 46,023 Millenniumbcp Ageas Grupo Segurador, S.G.P.S.,S.A.(Group) — 257,250 — 11,352 268,602 Millennium bcp - Prestação de Serviços, A.C.E. — 18,000 — 726 18,726 Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. — 166,287 — — 166,287 Monumental Residence - Sociedade de Investimento Coletivo Imobiliária Fechada, S.A. — — — 1 1 Predicapital – Fundo de Investimento Imobiliário Fechado — — 44,502 2 44,504 UNICRE - Instituição Financeira de Crédito, S.A. 940 — — — 940 Webspectator Corporation — — 18,057 — 18,057 46,963 463,778 62,559 16,044 589,344 () Regarding Supplies, Supplementary Capital Payments and Additional Payments 2023 REPORT & ACCOUNTS 608 | As at 31 December 2023 , the balances with subsidiary and associated companies included in Liabilities items of the balance sheet are as follows: (Thousands of euros) Financial liabilities at amortised cost Financial liabilities at fair value through profit or loss Resources from credit Institutions Resources from customers held for trading Other liabilities Total Banco ActivoBank, S.A. 231,926 — 32,654 29,819 294,399 Banco Millennium Atlântico, S.A. 15,164 — — — 15,164 Banque BCP, S.A.S. 6,991 — — 352 7,343 BCP África, S.G.P.S., Lda. — 59,645 93 952 60,690 BCP Finance Bank Ltd 519,309 — — — 519,309 BCP International, B.V. — 4,631 — — 4,631 Bichorro–Empreendimentos Turísticos e Imobiliários,S.A. — 40 — — 40 BIM - Banco Internacional de Moçambique, S.A. 80,593 — — — 80,593 Fiparso- Sociedade Imobiliária S.A. — 90 — — 90 Finalgarve- Sociedade Promoção Imobiliária Turística, S.A. — 373 — — 373 Fundial – Fundo de Investimento Imobiliário Fechado — 2,125 — 1 2,126 Fundipar – Fundo de Investimento Imobiliário Fechado — 825 — — 825 Imorenda – Fundo de Investimento Imobiliário Fechado — 1,456 — — 1,456 Imosotto acumulação – Fundo de Investimento Imobiliário Fechado — 2,670 — — 2,670 Sand Capital - Fundo de Investimento Imobiliário Fechado — 72 — — 72 Bank Millennium Group (Poland) 485 — — — 485 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. — 6,612 — — 6,612 Millenniumbcp Ageas Grupo Segurador, S.G.P.S.,S.A.(Group) — 173,745 8,694 — 182,439 Millennium bcp - Prestação de Serviços, A.C.E. — 490 — — 490 Imoserit, S.A — 6 — — 6 Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. — 27,527 — — 27,527 Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. — 112 — — 112 Monumental Residence - Sociedade de Investimento Coletivo Imobiliária Fechada, S.A. — 1,071 — — 1,071 Predicapital – Fundo de Investimento Imobiliário Fechado — 749 — — 749 SIBS, S.G.P.S., S.A. — 14,772 — — 14,772 UNICRE - Instituição Financeira de Crédito, S.A. 210 415 — 2 627 854,678 297,426 41,441 31,126 1,224,671 2023 REPORT & ACCOUNTS | 609 As at 31 December 2022, the balances with subsidiary and associated companies included in Liabilities items of the balance sheet are as follows: (Thousands of euros) Financial liabilities at amortised cost Financial liabilities at fair value through profit or loss Resources from credit Institutions Resources from customers Non-subordinated debt securities issued held for trading Other liabilities Total Banco ActivoBank, S.A. 186,478 — — 28,177 29,833 244,488 Banco Millennium Atlântico, S.A. 29,879 — — — — 29,879 Banque BCP, S.A.S. 644 — — — — 644 BCP África, S.G.P.S., Lda. — 314,644 — — — 314,644 BCP Finance Bank Ltd 519,269 — — — — 519,269 BCP International, B.V. — 4,990 — — — 4,990 Bichorro–Empreendimentos Turísticos e Imobiliários,S.A. — 80 — — — 80 BIM - Banco Internacional de Moçambique, S.A. 228,729 — — — — 228,729 Fiparso- Sociedade Imobiliária S.A. — 13 — — — 13 Finalgarve- Sociedade Promoção Imobiliária Turística, S.A. — 531 — — — 531 Fundial – Fundo de Investimento Imobiliário Fechado — 1,428 — — — 1,428 Fundipar – Fundo de Investimento Imobiliário Fechado — 812 — — — 812 Imorenda – Fundo de Investimento Imobiliário Fechado — 3,532 — — — 3,532 Imosotto acumulação – Fundo de Investimento Imobiliário Fechado — 993 — — — 993 Sand Capital - Fundo de Investimento Imobiliário Fechado — 392 — — — 392 Oceânico II – Fundo de Investimento Imobiliário Fechado — 1,011 — — — 1,011 Funsita - Fundo de Investimento Imobiliário Fechado — 61 — — — 61 Bank Millennium Group (Poland) 549 — — 7 — 556 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. — 6,851 — — — 6,851 Millenniumbcp Ageas Grupo Segurador, S.G.P.S.,S.A.(Group) — 200,014 2,002 3,894 8 205,918 Millennium bcp - Prestação de Serviços, A.C.E. — 490 — — (497) (7) Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. — 29,957 — — — 29,957 Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. — 113 — — 2 115 Monumental Residence - Sociedade de Investimento Coletivo Imobiliária Fechada, S.A. — 1,324 — — — 1,324 Predicapital – Fundo de Investimento Imobiliário Fechado — 1,129 — — — 1,129 SIBS, S.G.P.S., S.A. — 6,851 — — — 6,851 UNICRE - Instituição Financeira de Crédito, S.A. 32,322 — — — — 32,322 997,870 575,216 2,002 32,078 29,346 1,636,512 2023 REPORT & ACCOUNTS 610 | As at 31 December 2023, the balances with subsidiary and associated companies included in Income items of the income statement, are as follows: (Thousands of euros) Interest and similar income Commissions income Other operating income Gains on financial operations Dividends Total Banco ActivoBank, S.A. 849 — — 14 — 863 Banco Millennium Atlântico, S.A. 114 511 103 — — 728 Banque BCP, S.A.S. 5,097 1 15 — 3,771 8,884 BCP África, S.G.P.S., Lda. — — — 2,019 57,926 59,945 BCP Finance Bank Ltd — 5 1 — — 6 BCP International, B.V. — 1 — — — 1 BIM - Banco Internacional de Moçambique, S.A. — 112 13,445 — — 13,557 Finalgarve- Sociedade de Promoção Imobiliária Turística, S.A. — 1 — — — 1 Fundial – Fundo de Investimento Imobiliário Fechado — 13 — — — 13 Fundipar – Fundo de Investimento Imobiliário Fechado — 18 — — — 18 Imorenda – Fundo de Investimento Imobiliário Fechado — 100 — — — 100 Imosotto acumulação – Fundo de Investimento Imobiliário Fechado — 87 — — — 87 Sand Capital - Fundo de Investimento Imobiliário Fechado — 33 — — — 33 Oceânico II - Fundo de Investimento Imobiliário Fechado — 59 — — — 59 Funsita - Fundo de Investimento Imobiliário Fechado — 11 — — — 11 Bank Millennium Group (Poland) 1 — — — — 1 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. — 252 19 — 1,876 2,147 Magellan Mortgages No. 1 PLC 565 7 — — — 572 Magellan Mortgages No. 3 PLC 4,337 238 — — — 4,575 Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Group) 4,738 49,892 751 2,513 — 57,894 Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. — — — — 11,406 11,406 Millennium bcp - Prestação de Serviços, A.C.E. — 139 4,745 — — 4,884 Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. — — — — 7 7 Monumental Residence - Sociedade de Investimento Coletivo Imobiliária Fechada, S.A. — 10 — — — 10 Predicapital – Fundo de Investimento Imobiliário Fechado — 18 — — — 18 SIBS, S.G.P.S., S.A. 38 10 — — — 48 UNICRE - Instituição Financeira de Crédito, S.A. 176 1,412 12 — 109 1,709 15,915 52,930 19,091 4,546 75,095 167,577 2023 REPORT & ACCOUNTS | 611 As at 31 December 2022, the balances with subsidiary and associated companies included in Income items of the income statement, are as follows: (Thousands of euros) Interest and similar income Commissions income Other operating income Gains on financial operations Dividends Total Banco Millennium Atlântico, S.A. 20 942 89 — — 1,051 Banque BCP, S.A.S. 1,028 6 225 — 3,884 5,143 BCP Capital - Sociedade de Capital de Risco, S.A. — 1 — — — 1 BCP Finance Bank Ltd — 2 — — — 2 BCP International, B.V. — 1 — — — 1 BIM - Banco Internacional de Moçambique, S.A. 1 97 13,518 — — 13,616 Exporsado - Comércio e Indústria de Produtos do Mar, S.A. 15 2 — — — 17 Finalgarve- Sociedade de Promoção Imobiliária Turística, S.A. 1 1 — — — 2 Fundial – Fundo de Investimento Imobiliário Fechado — 13 — — — 13 Fundipar – Fundo de Investimento Imobiliário Fechado — 19 — — — 19 Imorenda – Fundo de Investimento Imobiliário Fechado — 106 — — — 106 Imosotto acumulação – Fundo de Investimento Imobiliário Fechado — 93 — — — 93 Sand Capital - Fundo de Investimento Imobiliário Fechado — 34 — — — 34 Oceânico II - Fundo de Investimento Imobiliário Fechado — 74 — — — 74 Funsita - Fundo de Investimento Imobiliário Fechado — 12 — — — 12 Group Bank Millennium (Poland) — — — 9 — 9 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. — 287 30 — 2,500 2,817 Magellan Mortgages No. 3 PLC 1,957 275 — — — 2,232 Millennium bcp Bank & Trust — 1 — — — 1 Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Group) 2,887 55,452 697 1,020 132,251 192,307 Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. — — — — 10,353 10,353 Millennium bcp - Prestação de Serviços, A.C.E. — 139 4,541 — — 4,680 Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. — — — — 6 6 Millennium Fundo de Capitalização - Fundo de Capital de Risco — 60 — — — 60 Monumental Residence - Sociedade de Investimento Coletivo Imobiliária Fechada, S.A. — 11 — — — 11 MULTI24, Sociedade Especial de Investimento Imobiliário de Capital Fixo, SICAFI, S.A. 97 47 — — — 144 Predicapital – Fundo de Investimento Imobiliário Fechado — 18 — — — 18 SIBS, S.G.P.S., S.A. — 8 — — — 8 UNICRE - Instituição Financeira de Crédito, S.A. 177 1,275 7 — 96 1,555 6,183 58,976 19,107 1,029 149,090 234,385 2023 REPORT & ACCOUNTS 612 | As at 31 December 2023, the balances with subsidiary and associated companies included in Expenses items of the income statement, are as follows: (Thousands of euros) Interest expense and similar charges Commissions expense Other operating loss Other administrative costs Losses on financial operations Total Banco ActivoBank, S.A. 20,772 8,577 — 12 17,695 47,056 Banco Millennium Atlântico, S.A. 347 4 — — — 351 Banque BCP, S.A.S. 3,814 — — — — 3,814 BCP África, S.G.P.S., Lda. — — — — 101 101 BIM - Banco Internacional de Moçambique, S.A. 4,875 15 — — — 4,890 Fundial – Fundo de Investimento Imobiliário Fechado 11 11 Fundipar – Fundo de Investimento Imobiliário Fechado 4 4 Imorenda – Fundo de Investimento Imobiliário Fechado 1 — — — — 1 Imosotto acumulação – Fundo de Investimento Imobiliário Fechado 12 12 Bank Millennium Group (Poland) 610 22 12 — — 644 Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Group) 489 2 1 111 2,796 3,399 Millennium bcp - Prestação de Serviços, A.C.E. — — — 3,328 — 3,328 Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. — — — 18 — 18 Monumental Residence - Sociedade de Investimento Coletivo Imobiliária Fechada, S.A. 5 — — — — 5 Predicapital – Fundo de Investimento Imobiliário Fechado 2 — — — — 2 SIBS, S.G.P.S., S.A. 25 — — — — 25 UNICRE - Instituição Financeira de Crédito, S.A. — 1 — 24 — 25 30,967 8,621 13 3,493 20,592 63,686 2023 REPORT & ACCOUNTS | 613 As at 31 December 2022, the balances with subsidiary and associated companies included in Expenses items of the income statement, are as follows: (Thousands of euros) Interest expense and similar charges Commissions expense Other operating loss Other administrative costs Losses on financial operations Total Banco ActivoBank, S.A. 16,140 13,382 (30) 9 12,225 41,726 Banco Millennium Atlântico, S.A. 127 71 — — — 198 BCP Finance Bank Ltd 5,333 — — — — 5,333 BIM - Banco Internacional de Moçambique, S.A. 3,689 14 — — — 3,703 Bank Millennium Group (Poland) 215 32 — — — 247 Millennium bcp Bank & Trust 977 — — — — 977 Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Group) 498 2 — 151 — 651 Millennium bcp - Prestação de Serviços, A.C.E. — — — 3,405 — 3,405 Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. — — — 15 — 15 Millennium Fundo de Capitalização - Fundo de Capital de Risco 8 — — — — 8 MULTI24, Sociedade Especial de Investimento Imobiliário de Capital Fixo, SICAFI, S.A. — — — 10 — 10 UNICRE - Instituição Financeira de Crédito, S.A. 27 8 51 10 — 96 27,014 13,509 21 3,600 12,225 56,369 As at 31 December 2023, the Guarantees granted, Revocable and Irrevocable credit lines and Other revocable commitments to subsidiary and associated companies, are as follows: (Thousands of euros) Guarantees granted Revocable credit lines Irrevocable credit lines Other revocable commitments Total Banco ActivoBank, S.A. — — 850,000 — 850,000 Banco Millennium Atlântico, S.A. 4,074 — — — 4,074 BIM - Banco Internacional de Moçambique, S.A. 7,840 — — — 7,840 Finalgarve- Sociedade de Promoção Imobiliária Turística, S.A. 10,733 200 — — 10,933 Fundial – Fundo de Investimento Imobiliário Fechado 729 — — — 729 Bank Millennium Group (Poland) 5,874 — — 9,588 15,462 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. 12 — — — 12 Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Group) 85 70 — 16,284 16,439 SIBS, S.G.P.S., S.A. — 7,500 — — 7,500 UNICRE - Instituição Financeira de Crédito, S.A. — 1,758 — — 1,758 29,347 9,528 850,000 25,872 914,747 2023 REPORT & ACCOUNTS 614 | As at 31 December 2022, the Guarantees granted, Revocable and Irrevocable credit lines and Other revocable commitments to subsidiary and associated companies, are as follows: (Thousands of euros) Guarantees granted Revocable credit lines Irrevocable credit lines Other revocable commitments Total Banco ActivoBank, S.A. — — 750,000 — 750,000 Banco Millennium Atlântico, S.A. 7,200 — — — 7,200 BCP Finance Bank Ltd 10,000 — — — 10,000 BIM - Banco Internacional de Moçambique, S.A. 217 — — — 217 Finalgarve- Sociedade de Promoção Imobiliária Turística, S.A. 10,733 200 — — 10,933 Fundial – Fundo de Investimento Imobiliário Fechado 729 — — — 729 Oceânico II - Fundo de Investimento Imobiliário Fechado 7,558 — — — 7,558 Bank Millennium Group (Poland) 50 — — 9,584 9,634 Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. 12 — — — 12 Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (Group) 85 70 — — 155 SIBS, S.G.P.S., S.A. 50 262 — — 312 UNICRE - Instituição Financeira de Crédito, S.A. — 9,194 — — 9,194 36,634 9,726 750,000 9,584 805,944 Under the scope of the Bank's insurance mediation activities, the remunerations from services rendering are analysed as follows: (Thousands of euros) 2023 2022 Life insurance Saving products 24,114 27,917 Mortgage and consumer loans 19,943 20,268 Others 1 — 44,058 48,185 Non - Life insurance Accidents and health 23,559 21,240 Motor 4,000 3,895 Multi-Risk Housing 8,384 7,652 Others 1,813 1,636 37,756 34,423 81,814 82,608 The remuneration for insurance intermediation services were received through bank transfers and resulted from insurance intermediation with with Ocidental - Companhia Portuguesa de Seguros de Vida, S.A. and Ageas Portugal - Companhia de Seguros, S.A. (Millenniumbcp Ageas Group) The Bank does not collect insurance premiums on behalf of Insurance Companies, or performs any movement of funds related to insurance contracts. Thus, there is no other asset, liability, income or expense to be reported on the activity of insurance mediation exercised by the Bank, other than those already disclosed. 2023 REPORT & ACCOUNTS | 615 The receivable balances from insurance intermediation activity, by nature, are analysed as follows: (Thousands of euros) 2023 2022 Funds receivable for payment of life insurance commissions 10,409 11,352 Funds receivable for payment of non-life insurance commissions 9,534 8,688 19,943 20,040 The commissions received by the Bank result from the insurance mediation contracts and investment contracts, under the terms established in the contracts. The mediation commissions are calculated given the nature of the contracts subject to mediation, as follows: – insurance contracts – use of fixed rates on gross premiums issued; – investment contracts – use of fixed rates on the responsibilities assumed by the insurance company under the commercialization of these products. D) Transactions with the Pension Fund The balances with the Pension Fund included in items of the balance sheet are as follows: (Thousands of euros) 2023 2022 Assets Financial assets held for trading — 209 Liabilities Resources from customers 55,080 145,303 Non subordinated debt securities issued 9,075 13,199 Financial liabilities held for trading — 3,475 Other liabilities 231 — 64,386 161,977 During 2023 and 2022, there were no transactions related to other financial instruments between the Bank and the Pension Fund. The balances with the Pension Fund included in income and expense items of the separate income statement, are as follows: (Thousands of euros) 2023 2022 Income Commissions 1,073 2,167 Expenses Interest expense and similar charges 102 — Other administrative costs 57 57 159 57 The balance Other administrative costs corresponds to rents incurred under the scope of Fund's properties which the tenant is the Bank. As at 31 December 2023 and 2022, the guarantees granted by the Bank to the Pension Fund amount to Euros 5,000. 2023 REPORT & ACCOUNTS 616 | 47. Solvency The Bank’s own funds are determined according to the established regulation, in particular, according to Directive 2013/36/EU and Regulation (EU) 575/2013, approved by the European Parliament and the Council (CRD IV / CRR). Total capital includes tier 1 and tier 2. Tier 1 comprises common equity tier 1 (CET1) and additional tier 1. Common equity tier 1 includes: (i) paid-up capital, share premium, reserves and retained earnings deducted of anticipated dividends ; ii) and deductions related to own shares and loans to finance the acquisition of shares of the Bank, the shortfall of value adjustments and provisions to expected losses concerning risk‐weighted exposure amounts calculated according to the IRB approach, other intangible assets and the additional value adjustments necessary for the prudent valuation requirements applied to all assets at fair value, adjustments related to minimum commitment with collective investments undertakings, insufficient coverage for non-performing exposures and with the amount of securitisation positions, eligible for deduction as an alternative to a 1 250 % risk weight. Reserves and retained earnings are adjusted by the reversal of unrealised gains and losses on cash-flow hedge transactions and on financial liabilities valued at fair value through profits and losses, to the extent related to own credit risk. The non-controlling interests are only eligible up to the amount of the Group’s capital requirements attributable to the minorities. In addition, the deferred tax assets arising from unused tax losses carried forward are deducted, as well as the deferred tax assets arising from temporary differences relying on the future profitability and the interests held in financial institutions and insurers of at least 10%, in this case only in the amount that exceeds the thresholds of 10% and 15% of the common equity tier 1, when analysed on an individual and aggregated basis, respectively. The irrevocable payment commitments for the Single Resolution Fund, the fair value of the collateral for irrevocable commitments from the Deposits Guarantee Fund and the additional coverage for non-performing exposures, are also deducted, due to a SREP (Supervisory Review and Evaluation Process) recommendation. Additional tier 1 comprises preference shares, hybrid instruments and perpetual bonds representing subordinated debt, that are compliant with the issue conditions established in the Regulation. Tier 2 includes the subordinated debt that is compliant with the Regulation. Additionally, Tier 2 instruments held in financial institutions and insurers of at least 10% are deducted. The legislation stipulates a transitional period between the own funds calculated under national law until 31 December 2013, and own funds estimated according to communitarian law, in order to exclude some elements previously considered (phase-out) and include new elements (phase-in). The transitional period was extended to the end of 2017 for most of the elements, except for the deferred tax assets already recorded on the balance sheet of 1 January 2014, according to the new regulation, which period ends in 2023. With the IFRS 9 introduction the Bank has decided to gradually recognise the impacts, according to art.º 473º-A of CRR. According to the regulatory framework, financial institutions should report common equity tier 1, tier 1 and total capital ratios, including a conservation buffer, according to the following table: 2023 Minimum Capital Requirements BCP Solo Phased-in of which: Fully implemented of which: Pilar 1 Pilar 2 Buffers Pilar 1 Pilar 2 Buffers CET1 7.00% 4.50% 0.00% 2.50% 7.00% 4.50% 0.00% 2.50% T1 8.50% 6.00% 0.00% 2.50% 8.50% 6.00% 0.00% 2.50% Total 10.50% 8.00% 0.00% 2.50% 10.50% 8.00% 0.00% 2.50% The Bank meets all the requirements and other recommendations issued by the supervisor on this matter. The Bank has adopted the methodologies based on internal rating models (IRB) for the calculation of capital requirements for credit and counterparty risk, covering a substantial part of both its retail portfolio and its corporate portfolio. The Bank has adopted the advanced approach (internal model) for the coverage of trading portfolio’s general market risk and for exchange rate risks and the standard method was used for the purposes of operating risk coverage. 2023 REPORT & ACCOUNTS | 617 The own funds and the capital requirements determined according to the methodologies CRD IV / CRR (phased-in) previously referred , are the following: (Thousands of euros) 2023 2022 Common equity tier 1 (CET1) Share capital 3,000,000 3,000,000 Share Premium 16,471 16,471 Reserves and retained earnings 2,448,446 1,843,413 Regulatory adjustments to CET1 255,013 381,415 5,719,930 5,241,299 Tier 1 Capital Instruments 400,000 400,000 6,119,930 5,641,299 Tier 2 Subordinated debt 1,014,615 1,047,875 Others 15,241 56,596 1,029,856 1,104,471 Total own funds 7,149,786 6,745,770 RWA - Risk weighted assets Credit risk 24,812,492 25,965,458 Market risk 954,722 1,011,394 Operational risk 2,672,657 2,306,047 CVA 23,011 43,196 28,462,882 29,326,095 Capital ratios CET1 20.1% 17.9% Tier 1 21.5% 19.2% Tier 2 3.6% 3.8% Total 25.1% 23.0% The amounts include the accumulated net income. 2023 REPORT & ACCOUNTS 618 | 48. Risk management The Bank is subject to several risks during the course of its business. The Bank's risk-management policy is designed to permanently ensure an adequate relationship between its own funds and the business it develops, as well as the corresponding evaluation of the risk/return profile by business line. Under this scope, the monitoring and control of the main types of financial risks (e.g. credit, market, operational) or non- financial risks (e.g. legal and compliance, reputational) to which the Bank's business is subject to, including the impact of the ESG risk drivers (environmental, social and governance). The Bank implemented a regular process for identifying and assessing the risks to which its activity is exposed, which conclusions are presented to the management bodies and influence the update of the Group’s risk appetite and risk strategy. Internal organisation Banco Comercial Português Board of Directors is responsible for the definition of the risk strategy and policies, including the approval of the principles and rules of the highest level to be followed in risk management of the Bank, as well as the guidelines dictating the allocation of capital to the business lines. The Board of Directors, through the Audit Committee and the Committee for Risk Assessment, ensures the existence of adequate risk control and of risk-management systems at Bank level and for each entity. The Board of Directors also approves the risk-tolerance level acceptable to the Bank, proposed by its Executive Committee, earing the Risk Assessment Committee The Risk Committee is responsible for monitoring the overall levels of risk incurred, ensuring that these are compatible with the goals and strategies approved for the business. Other commissions regularly monitor specific risks, namely the Compliance and Operational Risks Commission, the Credit and Non-performing Assets Monitoring Commission, the Pension Funds Risk Monitoring Commission, the Operational Resilience Commission (with a focus on information technologies and cybernetics), the Sustainability Commission and the Corporate Risk Monitoring Commission. The Chief Risk Officer is responsible for the control of risks in all Group entities, for the identification of all risks to which the Bank activity is exposed and for the proposal of measures to improve risks control. The Chief Risk Officer also ensures that risks are monitored on an overall basis and that there is alignment of concepts, practices and goals in risk management. The activity of every entity included within the Banco Comercial Português consolidation perimeter is governed by the principles and decisions established centrally by the Board of Directors and the main subsidiaries are provided with Risk Office structures which are established in accordance with the risks inherent to their particular business. A Risk Control Commission has been set up at each relevant subsidiary, responsible for the control of risks at local level, in which the Chief Risk Officer takes part. As Head of the Compliance Office, the Compliance Officer is responsible to ensure that regulatory requirements are complied with, as well as the ethical values of the organization, fulfilling all the attributions that are legally conferred to it, ensuring the existence of an internal control culture, thus contributing to the mitigation of the risk of attributing sanctions or significant asset or reputational damages to the Group Entities, including the compliance with the regulatory framework on the prevention and combating money laundering and terrorism financing. Risk assessment Credit Risk Credit granting is based on a prior classification of the customers’ risk and on a thorough assessment of the level of protection provided by the underlying collateral. In order to do so, a single risk-notation system has been introduced, the Rating Master Scale, based on the expected probability of default, allowing greater discrimination in the assessment of the customers and better establishment of the hierarchies of the associated risk. The Rating Master Scale also identifies those customers that show a worsening credit capacity and, in particular, those classified as being in default. All rating and scoring models used by the Bank have been duly calibrated for the Rating Master Scale. The protection-level concept has been introduced as a crucial element of evaluation of the effectiveness of the collateral in credit-risk mitigation, leading to a more active collateralization of loans and to a better adequacy of pricing regarding the risk incurred. 2023 REPORT & ACCOUNTS | 619 The gross Bank’s exposure to credit risk (original exposure) is presented in the following table: (Thousands of euros) Risk items 2023 2022 Central Governments or Central Banks 13,015,646 12,558,484 Regional Governments or Local Authorities 1,141,756 957,058 Administrative and non-profit Organisations 730,672 305,693 Multilateral Development Banks — 117 Other Credit Institutions 2,238,005 2,616,671 Retail and Corporate customers 48,994,006 49,701,207 Other items () 9,456,327 10,208,161 75,576,412 76,347,391 Note: gross exposures of impairment and amortization. Includes securitization positions. () In addition to positions in equity, collective investment and securitization, the Other items contain other assets subject to credit risk in accordance with article 156 of the CRR. The evaluation of the risk associated to the loan portfolio and quantification of the respective losses expected considers the following methodological notes: a) Collaterals and Guarantees On the risk evaluation of an operation or of a group of operations, the mitigation elements of credit risk associated to those operations are considered in accordance with the rules and internal procedures that fulfil the requirements defined by the regulations in force, also reflecting the experience of the loans recovery areas and the Legal Department opinions with respect to the entailment of the various mitigation instruments. The collaterals and the relevant guarantees can be aggregated in the following categories: – financial collaterals, real estate collaterals or other collaterals; – receivables; – first demand guarantees, issued by banks or other entities with Risk Grade 7 or better on the Rating Master Scale; – personal guarantees, when the persons are classified with Risk Grade 7 or better; – credit derivatives. The financial collaterals accepted are those that are traded in a recognised stock exchange, i.e., on an organized secondary market, liquid and transparent, with public bid-ask prices, located in countries of the European Union, United Kingdom, United States, Japan, Canada, Hong Kong or Switzerland. In this context, it is important to refer that the Bank’s shares and subordinated bonds are not accepted as financial collaterals of new credit operations and are only accepted for the reinforcement of guarantees of existing credit operations, or in restructuring process associated to credit recoveries. Regarding guarantees and credit derivatives, it can be applied the substitution principle by replacing the Risk Grade of the client by the Risk Grade of the guarantor, (if the Risk of Grade Degree of the guarantor is better than the client’s), when the protection is formalized through: – State, Financial Institutions or Mutual Guarantee Societies guarantees exist; – personal guarantees (or, in the case of Leasing, there is a recovery agreement of the provider); – credit derivatives; – formalization of the clause of the contracting party in leasing contracts in which it is an entity that is in a relationship of dominion or group with the lessee. 2023 REPORT & ACCOUNTS 620 | An internal level of protection is attributed to all credit operations at the moment of the credit granting decision, considering the credit amount as well as the value and type of the collaterals involved. The protection level corresponds to the loss reduction in case of default that is linked to the various collateral types, considering their market value and the amount of the associated exposure. In the case of financial collaterals, adjustments are made to the protection value by the use of a set of haircuts, in order to reflect the price volatility of the financial instruments. In the case of real estate mortgages, the initial appraisal of the real estate value is done during the credit analysis and before decision process. Either the initial evaluations or the subsequent reviews carried out are performed by external expert valuers and the ratification process is centralized in the Appraisals Unit, which is independent of the clients’ areas. In any case, they are the subject to a written report, in a standardized digital format, based on a group of predefined methods that are aligned with the sector practices – income, replacement cost and/or market comparative - mentioning the obtained value, for both the market value and for purposes of the mortgage guarantee, depending on the type of the real estate. The evaluations have a declaration/certification of an expert valuer since 2008, as requested by Regulation (EU) 575/2013 and Law 153/2015 of 14 September and are ratified by the Appraisals Unit. Regarding residential real estate, after the initial valuation and in accordance with Notice n. 5/2006 of Bank of Portugal and e CRR 575/2013, the Bank monitors the respective values through market indexes. If the index is lower than 0.9, the Bank revaluates choosing one of the following two methods: i) - depreciation of the property by direct application of the index, if the amount owed does not exceed Euros 300,000; ii) - review of the property value by external valuators, depending on the value of the credit operation, and in accordance wit the established standards from ECB and Bank of Portugal. For all non-residential real estate, the Bank also monitors its values through market indexes and to the regular valuation reviews with the minimum periodicities in accordance with the Regulation (EU) 575/2013, in the case of offices, commercial spaces, warehouses and industrial premises. For all real estate (residential or non-residential) for which the monitoring result in significant devaluation of the real estate value (more than 10%), a valuation review is subsequently carried out by an expert valuer, preserving the referred i) above. For the remaining real estate (land or countryside buildings for example) there are no market indexes available for the monitoring of appraisal values, after the initial valuations. Therefore, for these cases and in accordance with the minimum periodicity established for the monitoring and reviewing of this type of real estate, valuation reviews are carried out by expert valuers. The indexes currently used are supplied to the Bank by an external specialized entity that, for more than a decade, has been collecting and processing the data upon which the indexes are built. In the case of financial collaterals, their market value is daily and automatically updated, through the IT connection between the collaterals management system and the relevant financial markets data. 2023 REPORT & ACCOUNTS | 621 b) Risk grades Credit granting is based on the previous risk assessment of clients and also on a rigorous assessment of the protection level provided by the underlying collaterals. For this purpose, a single risk grading system is used - the Rating Master Scale - based on Probability of Default (PD), allowing for a greater discriminating power in clients' assessment and for a better hierarchy of the associated risk. The Rating Master Scale also allows to identify clients that show signs of degradation in their credit capacity and, in particular, those that are classified in a default situation. All rating systems and models used by the Group were calibrated for the Rating Master Scale. Aiming at an adequate assessment of credit risk, the Group defined a set of macro segments and segments which are treated through different rating systems and models that relate the internal risk grades and the clients’ PD, ensuring a risk assessment that considers the clients’ specific features in terms of their respectively risk profiles. The assessment made by these rating systems and models result in the risk grades of the Master Scale, that has fifteen grades, where the last three correspond to relevant downgrades of the clients’ credit quality and are referred to by “procedural risk grades”: 13, 14 and 15, that correspond, in this order, to situations of increased severity in terms default, as risk grade 15 is a Default situation. The non-procedural risk grades are attributed by the rating systems through automatic decision models or by the Rating Division – a unit which is independent from the credit analysis and decision areas and bodies- and are reviewed/updated periodically or whenever this is justified by events. The models within the various rating systems are regularly subject to validation, made by the Models Validation and Monitoring Office, which is independent from the units that are responsible for the development and maintenance of the rating models. The conclusions of the validations by the Models Validation and Monitoring Office, as well the respective recommendations and proposal for changes and/or improvements, are analysed and ratified by a specific Validation Committee, composed in accordance to the type of model analysed. The proposals for models’ changes originated by the Validation Committee are submitted to the approval of the Risk Committee. The following table lists the equivalence between the internal rating levels (Rating Master Scale) and the external ratings of the international rating agencies: Internal risk grade External ratings Fitch S&P Moody's DBRS 1 AAA AAA Aaa AAA 1 AA+ AA+ Aa1 AA (high) 2 AA AA Aa2 AA 2 AA- AA- Aa3 AA (low) 3 A+ A+ A1 A (high) 3 A A A2 A 4 A- A- A3 A (low) 4 BBB+ BBB+ Baa1 BBB (high) 5 BBB BBB Baa2 BBB 6 BBB- BBB- Baa3 BBB (low) 7 BB+ BB+ Ba1 BB (high) 8 BB BB Ba2 BB 9 BB- BB- Ba3 BB (low) 10 B+ B+ B1 B (high) 11 B B B2 B 12 ≤ B- ≤ B- ≤ B3 ≤ B - 2023 REPORT & ACCOUNTS 622 | c) Impairment and Write-offs The credit impairment calculation as at 31 December 2023 and 2022 integrates the general principles defined in International Financial Reporting Standards (IFRS 9) and the guidelines issued by the Bank of Portugal through a Circular Letter "CC/2018/00000062", in order to align the calculation process used in the Bank with the best international practices in this area. As at 31 December 2023, the financial instruments subject to impairment requirements under IFRS 9 (do not include equity instruments according to accounting policy 1.B1.1.2.), analysed by stage, are detailed in the following tables: (Thousands of euros) Category 2023 Gross exposure Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 18) 370,569 — — — 370,569 Loans and advances to customers (note 19) 29,687,596 5,500,631 1,081,810 12,245 36,282,282 Debt instruments (note 20) 11,534,219 62,872 5,105 — 11,602,196 Debt instruments at fair value through other comprehensive income (note 21) () 4,678,371 — — — 4,678,371 Guarantees and other commitments (note 40) 11,567,418 1,218,842 322,855 2,560 13,111,675 Total 57,838,173 6,782,345 1,409,770 14,805 66,045,093 () For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1.B1.5.1.2. The gross exposure to guarantees and other commitments includes the balances of guarantees granted, irrevocable credit lines and revocable commitments, as detailed in note 40. (Thousands of euros) Category 2023 Impairment losses Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 18) 160 — — — 160 Loans and advances to customers (note 19) 164,574 207,636 599,927 — 972,137 Debt instruments (note 20) 15,583 797 1,525 — 17,905 Guarantees and other commitments (note 35) 7,195 10,773 91,648 — 109,616 Total 187,512 219,206 693,100 — 1,099,818 (Thousands of euros) Category 2023 Net exposure Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 18) 370,409 — — — 370,409 Loans and advances to customers (note 19) 29,523,022 5,292,995 481,883 12,245 35,310,145 Debt instruments (note 20) 11,518,636 62,075 3,580 — 11,584,291 Debt instruments at fair value through other comprehensive income (note 21) () 4,678,371 — — — 4,678,371 Guarantees and other commitments (notes 35 and 40) 11,560,223 1,208,069 231,207 2,560 13,002,059 Total 57,650,661 6,563,139 716,670 14,805 64,945,275 () For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1.B1.5.1.2. 2023 REPORT & ACCOUNTS | 623 As at 31 December 2022, the financial instruments subject to impairment requirements under IFRS 9 (does not include equity instruments according to accounting policy 1.B1.1.2.), analysed by stage, are detailed in the following tables: (Thousands of euros) Category 2022 Gross exposure Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 18) 384,966 — — — 384,966 Loans and advances to customers (note 19) 31,140,191 5,757,791 1,343,189 19,183 38,260,354 Debt instruments (note 20) 10,206,404 55,787 3,802 — 10,265,993 Debt instruments at fair value through other comprehensive income (note 21) () 2,872,391 — — — 2,872,391 Guarantees and other commitments (note 40) 11,062,622 1,511,703 358,671 — 12,932,996 Total 55,666,574 7,325,281 1,705,662 19,183 64,716,700 () For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1.B1.5.1.2. The gross exposure to guarantees and other commitments includes the balances of guarantees granted, irrevocable credit lines and revocable commitments, as detailed in note 40. (Thousands of euros) Category 2022 Impairment losses Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 18) 802 — — — 802 Loans and advances to customers (note 19) 132,051 204,176 589,298 — 925,525 Debt instruments (note 20) 9,475 720 110 — 10,305 Guarantees and other commitments (note 35) 5,987 12,051 82,442 — 100,480 Total 148,315 216,947 671,850 — 1,037,112 (Thousands of euros) Category 2022 Net exposure Stage 1 Stage 2 Stage 3 POCI Total Financial assets at amortised cost Loans and advances to credit institutions (note 18) 384,164 — — — 384,164 Loans and advances to customers (note 19) 31,008,140 5,553,615 753,891 19,183 37,334,829 Debt instruments (note 20) 10,196,929 55,067 3,692 — 10,255,688 Debt instruments at fair value through other comprehensive income (note 21) () 2,872,391 — — — 2,872,391 Guarantees and other commitments (notes 35 and 40) 11,056,635 1,499,652 276,229 — 12,832,516 Total 55,518,259 7,108,334 1,033,812 19,183 63,679,588 () For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1.B1.5.1.2. 2023 REPORT & ACCOUNTS 624 | The maximum exposure to credit risk of financial assets not subject to impairment requirements is analysed as follows: (Thousands of euros) 2023 2022 Financial assets held for trading (note 21) Debt instruments 332,999 337,037 Derivatives 319,884 318,856 Financial assets not held for trading mandatorily at fair value through profit or loss Debt instruments (note 21) 480,964 596,357 Hedging derivatives (note 22) 22,335 28,426 Total 1,188,186 1,280,676 Notes: – In the case of financial assets, excluding derivatives, it is considered that its credit risk exposure is equal to its book value; – In the case of derivatives, the maximum exposure to credit risk is its market value, plus its potential risk ("add-on"). During 2023 the changes occurred in Loans and advances to customers are as follows: (Thousands of euros) 2023 Financial assets at amortised cost - Loans and advances to customers Stage 1 Stage 2 Stage 3 POCI Total Gross amount as at 1 January 31,140,191 5,757,791 1,343,189 19,183 38,260,354 Changes in gross book value Transfer from Stage 1 to Stage 2 (1,498,609) 1,498,609 — — — Transfer from Stage 1 to Stage 3 (122,550) — 122,550 — — Transfer from Stage 2 to Stage 1 1,334,471 (1,334,471) — — — Transfer from Stage 2 to Stage 3 — (291,013) 291,013 — — Transfer from Stage 3 to Stage 1 15,564 — (15,564) — — Transfer from Stage 3 to Stage 2 — 219,522 (219,522) — — Write-offs (647) (1,097) (103,462) (275) (105,481) Net balance of new financial assets and derecognised financial assets and other changes (1,180,824) (348,710) (336,394) (6,663) (1,872,591) Gross amount as at 31 December 29,687,596 5,500,631 1,081,810 12,245 36,282,282 2023 REPORT & ACCOUNTS | 625 During 2023, the changes occurred in Loans and advances to customers - impairment losses are as follows: (Thousands of euros) 2023 Financial assets at amortised cost - Loans and advances to customers Stage 1 Stage 2 Stage 3 POCI Total Impairment losses as at 1 January 132,051 204,176 589,298 — 925,525 Change in impairment losses Transfer to Stage 1 33,596 (31,380) (2,216) — — Transfer to Stage 2 (6,404) 104,438 (98,034) — — Transfer to Stage 3 (1,347) (16,268) 17,615 — — Changes occurred due to changes in credit risk (5,266) (58,620) 267,645 — 203,759 Write-offs (647) (1,097) (103,462) (275) (105,481) Changes due to new financial assets and derecognised financial assets and other variations 12,591 6,387 (70,919) 275 (51,666) Impairment losses as at 31 December 164,574 207,636 599,927 — 972,137 During 2022, the changes occurred in Loans and advances to customers are as follows: (Thousands of euros) 2022 Financial assets at amortised cost - Loans and advances to customers Stage 1 Stage 2 Stage 3 POCI Total Gross amount as at 1 January 29,576,497 6,748,171 1,860,884 5,949 38,191,501 Changes in gross book value Transfer from Stage 1 to Stage 2 (1,279,594) 1,279,594 — — — Transfer from Stage 1 to Stage 3 (80,504) — 80,504 — — Transfer from Stage 2 to Stage 1 1,657,261 (1,657,261) — — — Transfer from Stage 2 to Stage 3 — (513,257) 513,257 — — Transfer from Stage 3 to Stage 1 15,576 — (15,576) — — Transfer from Stage 3 to Stage 2 — 131,301 (131,301) — — Write-offs (602) (1,144) (376,364) (169) (378,279) Net balance of new financial assets and derecognised financial assets and other changes 1,251,557 (229,613) (588,215) 13,403 447,132 Gross amount as at 31 December 31,140,191 5,757,791 1,343,189 19,183 38,260,354 2023 REPORT & ACCOUNTS 626 | During 2022, the changes occurred in Loans and advances to customers - impairment losses are as follows: (Thousands of euros) 2022 Financial assets at amortised cost - Loans and advances to customers Stage 1 Stage 2 Stage 3 POCI Total Impairment losses as at 1 January 129,993 230,922 913,449 — 1,274,364 Change in impairment losses Transfer to Stage 1 34,803 (33,225) (1,578) — — Transfer to Stage 2 (7,981) 27,767 (19,786) — — Transfer to Stage 3 (1,053) (37,644) 38,697 — — Changes occurred due to changes in credit risk (30,436) 5,356 118,974 — 93,894 Write-offs (602) (1,144) (376,364) (169) (378,279) Changes due to new financial assets and derecognised financial assets and other variations 7,327 12,144 (84,094) 169 (64,454) Impairment losses as at 31 December 132,051 204,176 589,298 — 925,525 Financial assets modified during the period that have not resulted in derecognition (with impairment losses based on expected lifetime losses) are analysed as follows: (Thousands of euros) Financial assets modified 2023 2022 Amortised cost before changes 331,370 210,651 Impairment losses before changes (36,292) (12,875) Net amortised cost before changes 295,078 197,776 Net gain / (loss ) arising on changes (4,846) (11,003) Net amortised cost after changes 290,232 186,773 The financial assets changed since the initial recognition at a time when the impairment loss was measured based on the expected credit losses lifetime, are analysed as follows: (Thousands of euros) Financial assets changed 2023 2022 Amortised cost of financial assets for which credit losses expected to go from "lifetime" to 12 months 94,672 50,012 2023 REPORT & ACCOUNTS | 627 As at 31 December 2023, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by segment and stage, are as follows: (Thousands of euros) 2023 Stage 2 Stage 3 Segment Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Individuals-Mortgage 16,430,187 1,849,517 159,725 66,338 2,075,580 164,251 72,257 236,508 4,349 18,746,624 Individuals-Other 3,497,834 439,110 31,733 11,956 482,799 44,770 64,809 109,579 2,643 4,092,855 Financial Companies 2,234,494 52,296 34 — 52,330 46,841 10 46,851 — 2,333,675 Non-financial comp.- Corporate 7,969,160 534,495 — — 534,495 158,238 24,534 182,772 2,209 8,688,636 Non-financial comp.- SME-Corporate 7,309,477 2,242,109 11,852 3,501 2,257,462 546,260 67,930 614,190 2,959 10,184,088 Non-financial comp.-SME-Retail 5,279,369 1,255,022 34,659 14,128 1,303,809 137,306 82,563 219,869 2,645 6,805,692 Non-financial comp.-Other 469,347 — — — — — — — — 469,347 Other loans 9,969,934 75,870 — — 75,870 1 — 1 — 10,045,805 Total 53,159,802 6,448,419 238,003 95,923 6,782,345 1,097,667 312,103 1,409,770 14,805 61,366,722 Impairment Individuals-Mortgage 6,032 11,875 2,228 2,087 16,190 25,104 10,665 35,769 — 57,991 Individuals-Other 9,281 16,115 3,573 2,903 22,591 18,953 30,831 49,784 — 81,656 Financial Companies 23,410 1,359 3 — 1,362 34,559 6 34,565 — 59,337 Non-financial comp.- Corporate 22,227 22,924 — — 22,924 80,617 18,829 99,446 — 144,597 Non-financial comp.- SME-Corporate 42,344 77,297 1,474 712 79,483 305,367 45,829 351,196 — 473,023 Non-financial comp.-SME-Retail 74,904 69,191 3,164 3,249 75,604 85,903 36,437 122,340 — 272,848 Non-financial comp.-Other 45 — — — — — — — — 45 Other loans 9,269 1,052 — — 1,052 — — — — 10,321 Total 187,512 199,813 10,442 8,951 219,206 550,503 142,597 693,100 — 1,099,818 Net exposure Individuals-Mortgage 16,424,155 1,837,642 157,497 64,251 2,059,390 139,147 61,592 200,739 4,349 18,688,633 Individuals-Other 3,488,553 422,995 28,160 9,053 460,208 25,817 33,978 59,795 2,643 4,011,199 Financial Companies 2,211,084 50,937 31 — 50,968 12,282 4 12,286 — 2,274,338 Non-financial comp.- Corporate 7,946,933 511,571 — — 511,571 77,621 5,705 83,326 2,209 8,544,039 Non-financial comp.- SME-Corporate 7,267,133 2,164,812 10,378 2,789 2,177,979 240,893 22,101 262,994 2,959 9,711,065 Non-financial comp.-SME-Retail 5,204,465 1,185,831 31,495 10,879 1,228,205 51,403 46,126 97,529 2,645 6,532,844 Non-financial comp.-Other 469,302 — — — — — — — — 469,302 Other loans 9,960,665 74,818 — — 74,818 1 — 1 — 10,035,484 Total 52,972,290 6,248,606 227,561 86,972 6,563,139 547,164 169,506 716,670 14,805 60,266,904 % of impairment coverage Individuals-Mortgage 0.04% 0.64% 1.39% 3.15% 0.78% 15.28% 14.76% 15.12% 0.00% 0.31% Individuals-Other 0.27% 3.67% 11.26% 24.28% 4.68% 42.33% 47.57% 45.43% 0.00% 2.00% Financial Companies 1.05% 2.60% 8.82% 0.00% 2.60% 73.78% 60.00% 73.78% 0.00% 2.54% Non-financial comp.- Corporate 0.28% 4.29% 0.00% 0.00% 4.29% 50.95% 76.75% 54.41% 0.00% 1.66% Non-financial comp.- SME-Corporate 0.58% 3.45% 12.44% 20.34% 3.52% 55.90% 67.47% 57.18% 0.00% 4.64% Non-financial comp.-SME-Retail 1.42% 5.51% 9.13% 23.00% 5.80% 62.56% 44.13% 55.64% 0.00% 4.01% Non-financial comp.-Other 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01% Other loans 0.09% 1.39% 0.00% 0.00% 1.39% 0.00% 0.00% 0.00% 0.00% 0.10% Total 0.35% 3.10% 4.39% 9.33% 3.23% 50.15% 45.69% 49.16% 0.00% 1.79% 2023 REPORT & ACCOUNTS 628 | As at 31 December 2022, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by segment and stage, are as follows: (Thousands of euros) 2022 Stage 2 Stage 3 Segment Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Individuals-Mortgage 16,841,704 1,819,356 97,333 42,503 1,959,192 150,062 73,143 223,205 2,850 19,026,951 Individuals-Other 3,443,326 454,571 28,058 8,886 491,515 65,326 56,152 121,478 2,752 4,059,071 Financial Companies 2,250,988 80,710 61 — 80,771 72,980 1,494 74,474 7,545 2,413,778 Non-financial comp.- Corporate 7,215,993 554,035 13 — 554,048 197,068 25,065 222,133 — 7,992,174 Non-financial comp.- SME-Corporate 7,761,174 2,516,852 4,713 2,401 2,523,966 705,603 66,732 772,335 2,583 11,060,058 Non-financial comp.-SME-Retail 5,397,743 1,577,778 26,023 11,370 1,615,171 215,745 76,262 292,007 3,453 7,308,374 Non-financial comp.-Other 468,137 — — — — — — — — 468,137 Other loans 9,415,118 100,618 — — 100,618 — 30 30 — 9,515,766 Total 52,794,183 7,103,920 156,201 65,160 7,325,281 1,406,784 298,878 1,705,662 19,183 61,844,309 Impairment Individuals-Mortgage 4,708 9,094 645 568 10,307 18,098 16,644 34,742 — 49,757 Individuals-Other 6,326 12,586 2,552 1,749 16,887 31,906 25,191 57,097 — 80,310 Financial Companies 8,421 1,700 4 — 1,704 36,543 1,245 37,788 — 47,913 Non-financial comp.- Corporate 15,519 16,260 1 — 16,261 83,994 7,067 91,061 — 122,841 Non-financial comp.- SME-Corporate 33,706 77,659 489 653 78,801 277,596 40,503 318,099 — 430,606 Non-financial comp.-SME-Retail 72,555 86,439 3,132 2,271 91,842 101,505 31,549 133,054 — 297,451 Non-financial comp.-Other 30 — — — — — — — — 30 Other loans 7,050 1,145 — — 1,145 — 9 9 — 8,204 Total 148,315 204,883 6,823 5,241 216,947 549,642 122,208 671,850 — 1,037,112 Net exposure Individuals-Mortgage 16,836,996 1,810,262 96,688 41,935 1,948,885 131,964 56,499 188,463 2,850 18,977,194 Individuals-Other 3,437,000 441,985 25,506 7,137 474,628 33,420 30,961 64,381 2,752 3,978,761 Financial Companies 2,242,567 79,010 57 — 79,067 36,437 249 36,686 7,545 2,365,865 Non-financial comp.- Corporate 7,200,474 537,775 12 — 537,787 113,074 17,998 131,072 — 7,869,333 Non-financial comp.- SME-Corporate 7,727,468 2,439,193 4,224 1,748 2,445,165 428,007 26,229 454,236 2,583 10,629,452 Non-financial comp.-SME-Retail 5,325,188 1,491,339 22,891 9,099 1,523,329 114,240 44,713 158,953 3,453 7,010,923 Non-financial comp.-Other 468,107 — — — — — — — — 468,107 Other loans 9,408,068 99,473 — — 99,473 — 21 21 — 9,507,562 Total 52,645,868 6,899,037 149,378 59,919 7,108,334 857,142 176,670 1,033,812 19,183 60,807,197 % of impairment coverage Individuals-Mortgage 0.03% 0.50% 0.66% 1.34% 0.53% 12.06% 22.76% 15.57% 0.00% 0.26% Individuals-Other 0.18% 2.77% 9.10% 19.68% 3.44% 48.84% 44.86% 47.00% 0.00% 1.98% Financial Companies 0.37% 2.11% 6.56% 0.00% 2.11% 50.07% 83.33% 50.74% 0.00% 1.98% Non-financial comp.- Corporate 0.22% 2.93% 7.69% 0.00% 2.93% 42.62% 28.19% 40.99% 0.00% 1.54% Non-financial comp.- SME-Corporate 0.43% 3.09% 10.38% 27.20% 3.12% 39.34% 60.70% 41.19% 0.00% 3.89% Non-financial comp.-SME-Retail 1.34% 5.48% 12.04% 19.97% 5.69% 47.05% 41.37% 45.57% 0.00% 4.07% Non-financial comp.-Other 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01% Other loans 0.07% 1.14% 0.00% 0.00% 1.14% 0.00% 30.00% 30.00% 0.00% 0.09% Total 0.28% 2.88% 4.37% 8.04% 2.96% 39.07% 40.89% 39.39% 0.00% 1.68% 2023 REPORT & ACCOUNTS | 629 As at 31 December 2023, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by sector of activity and stage, are as follows: (Thousands of euros) 2023 Stage 2 Stage 3 Sector of activity Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Loans to individuals 19,928,021 2,288,627 191,458 78,294 2,558,379 209,021 137,066 346,087 6,992 22,839,479 Non-financial comp.- Trade 3,356,020 629,130 7,075 2,830 639,035 67,456 24,717 92,173 604 4,087,832 Non-financial comp.- Construction 1,896,298 516,635 4,650 1,294 522,579 265,458 17,317 282,775 4,141 2,705,793 Non-finan. comp.- Manufacturing ind. 4,061,561 826,933 12,102 7,033 846,068 109,811 59,229 169,040 560 5,077,229 Non-financial comp.-Other activities 2,084,476 353,599 5,212 816 359,627 54,778 10,204 64,982 50 2,509,135 Non-financial comp.- Other services 9,628,998 1,705,329 17,473 5,656 1,728,458 344,301 63,560 407,861 2,458 11,767,775 Other Services /Other activities 12,204,428 128,166 33 — 128,199 46,842 10 46,852 — 12,379,479 Total 53,159,802 6,448,419 238,003 95,923 6,782,345 1,097,667 312,103 1,409,770 14,805 61,366,722 Impairment Loans to individuals 15,313 27,990 5,800 4,990 38,780 44,057 41,496 85,553 — 139,646 Non-financial comp.- Trade 19,758 23,513 585 864 24,962 35,350 11,910 47,260 — 91,980 Non-financial comp.- Construction 14,106 11,805 687 431 12,923 90,270 12,767 103,037 — 130,066 Non-finan. comp.- Manufacturing ind. 47,957 56,021 1,757 1,773 59,551 44,020 30,899 74,919 — 182,427 Non-financial comp.-Other activities 9,375 18,115 590 151 18,856 38,024 6,251 44,275 — 72,506 Non-financial comp.- Other services 48,324 59,957 1,020 742 61,719 264,222 39,268 303,490 — 413,533 Other Services /Other activities 32,679 2,412 3 — 2,415 34,560 6 34,566 — 69,660 Total 187,512 199,813 10,442 8,951 219,206 550,503 142,597 693,100 — 1,099,818 Net exposure Loans to individuals 19,912,708 2,260,637 185,658 73,304 2,519,599 164,964 95,570 260,534 6,992 22,699,833 Non-financial comp.- Trade 3,336,262 605,617 6,490 1,966 614,073 32,106 12,807 44,913 604 3,995,852 Non-financial comp.- Construction 1,882,192 504,830 3,963 863 509,656 175,188 4,550 179,738 4,141 2,575,727 Non-finan. comp.- Manufacturing ind. 4,013,604 770,912 10,345 5,260 786,517 65,791 28,330 94,121 560 4,894,802 Non-financial comp.-Other activities 2,075,101 335,484 4,622 665 340,771 16,754 3,953 20,707 50 2,436,629 Non-financial comp.- Other services 9,580,674 1,645,372 16,453 4,914 1,666,739 80,079 24,292 104,371 2,458 11,354,242 Other Services /Other activities 12,171,749 125,754 30 — 125,784 12,282 4 12,286 — 12,309,819 Total 52,972,290 6,248,606 227,561 86,972 6,563,139 547,164 169,506 716,670 14,805 60,266,904 % of impairment coverage Loans to individuals 0.08% 1.22% 3.03% 6.37% 1.52% 21.08% 30.27% 24.72% 0.00% 0.61% Non-financial comp.- Trade 0.59% 3.74% 8.27% 30.53% 3.91% 52.40% 48.19% 51.27% 0.00% 2.25% Non-financial comp.- Construction 0.74% 2.28% 14.77% 33.31% 2.47% 34.01% 73.73% 36.44% 0.00% 4.81% Non-finan. comp.- Manufacturing ind. 1.18% 6.77% 14.52% 25.21% 7.04% 40.09% 52.17% 44.32% 0.00% 3.59% Non-financial comp.-Other activities 0.45% 5.12% 11.32% 18.50% 5.24% 69.41% 61.26% 68.13% 0.00% 2.89% Non-financial comp.- Other services 0.50% 3.52% 5.84% 13.12% 3.57% 76.74% 61.78% 74.41% 0.00% 3.51% Other Services /Other activities 0.27% 1.88% 9.09% 0.00% 1.88% 73.78% 60.00% 73.78% 0.00% 0.56% Total 0.35% 3.10% 4.39% 9.33% 3.23% 50.15% 45.69% 49.16% 0.00% 1.79% 2023 REPORT & ACCOUNTS 630 | As at 31 December 2022, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments, analysed by sector of activity and stage, are as follows: (Thousands of euros) 2022 Stage 2 Stage 3 Sector of activity Stage 1 No delays Days past due <= 30 days Days past due > 30 days Total Days past due <= 90 days Days past due > 90 days Total POCI Total Gross Exposure Loans to individuals 20,285,029 2,273,927 125,391 51,389 2,450,707 215,388 129,293 344,681 5,602 23,086,019 Non-financial comp.- Trade 3,521,961 679,728 8,056 3,691 691,475 82,648 26,919 109,567 565 4,323,568 Non-financial comp.- Construction 1,619,366 706,388 2,021 500 708,909 358,206 17,083 375,289 1,851 2,705,415 Non-finan. comp.- Manufacturing ind. 4,417,409 845,020 8,104 4,541 857,665 140,840 52,633 193,473 928 5,469,475 Non-financial comp.-Other activities 1,841,105 361,380 3,545 940 365,865 95,346 12,483 107,829 44 2,314,843 Non-financial comp.- Other services 9,443,207 2,056,149 9,023 4,099 2,069,271 441,376 58,943 500,319 2,648 12,015,445 Other Services /Other activities 11,666,106 181,328 61 — 181,389 72,980 1,524 74,504 7,545 11,929,544 Total 52,794,183 7,103,920 156,201 65,160 7,325,281 1,406,784 298,878 1,705,662 19,183 61,844,309 Impairment Loans to individuals 11,035 21,680 3,197 2,317 27,194 50,004 41,835 91,839 — 130,068 Non-financial comp.- Trade 14,116 24,093 900 905 25,898 32,586 12,373 44,959 — 84,973 Non-financial comp.- Construction 9,051 14,295 326 94 14,715 153,026 12,078 165,104 — 188,870 Non-finan. comp.- Manufacturing ind. 47,556 52,210 1,210 1,143 54,563 55,889 24,694 80,583 — 182,702 Non-financial comp.-Other activities 6,478 15,110 518 136 15,764 41,689 6,571 48,260 — 70,502 Non-financial comp.- Other services 44,608 74,649 668 646 75,963 179,905 23,403 203,308 — 323,879 Other Services /Other activities 15,471 2,846 4 — 2,850 36,543 1,254 37,797 — 56,118 Total 148,315 204,883 6,823 5,241 216,947 549,642 122,208 671,850 — 1,037,112 Net exposure Loans to individuals 20,273,994 2,252,247 122,194 49,072 2,423,513 165,384 87,458 252,842 5,602 22,955,951 Non-financial comp.- Trade 3,507,845 655,635 7,156 2,786 665,577 50,062 14,546 64,608 565 4,238,595 Non-financial comp.- Construction 1,610,315 692,093 1,695 406 694,194 205,180 5,005 210,185 1,851 2,516,545 Non-finan. comp.- Manufacturing ind. 4,369,853 792,810 6,894 3,398 803,102 84,951 27,939 112,890 928 5,286,773 Non-financial comp.-Other activities 1,834,627 346,270 3,027 804 350,101 53,657 5,912 59,569 44 2,244,341 Non-financial comp.- Other services 9,398,599 1,981,500 8,355 3,453 1,993,308 261,471 35,540 297,011 2,648 11,691,566 Other Services /Other activities 11,650,635 178,482 57 — 178,539 36,437 270 36,707 7,545 11,873,426 Total 52,645,868 6,899,037 149,378 59,919 7,108,334 857,142 176,670 1,033,812 19,183 60,807,197 % of impairment coverage Loans to individuals 0.05% 0.95% 2.55% 4.51% 1.11% 23.22% 32.36% 26.64% 0.00% 0.56% Non-financial comp.- Trade 0.40% 3.54% 11.17% 24.52% 3.75% 39.43% 45.96% 41.03% 0.00% 1.97% Non-financial comp.- Construction 0.56% 2.02% 16.13% 18.80% 2.08% 42.72% 70.70% 43.99% 0.00% 6.98% Non-finan. comp.- Manufacturing ind. 1.08% 6.18% 14.93% 25.17% 6.36% 39.68% 46.92% 41.65% 0.00% 3.34% Non-financial comp.-Other activities 0.35% 4.18% 14.61% 14.47% 4.31% 43.72% 52.64% 44.76% 0.00% 3.05% Non-financial comp.- Other services 0.47% 3.63% 7.40% 15.76% 3.67% 40.76% 39.70% 40.64% 0.00% 2.70% Other Services /Other activities 0.13% 1.57% 6.56% 0.00% 1.57% 50.07% 82.28% 50.73% 0.00% 0.47% Total 0.28% 2.88% 4.37% 8.04% 2.96% 39.07% 40.89% 39.39% 0.00% 1.68% 2023 REPORT & ACCOUNTS | 631 As at 31 December 2023 , the exposure by type of financial instrument, internal rating and by stage, is analysed as follows: (Thousands of euros) 2023 Gross Exposure Higher quality (GR 1-6) Average quality (GR 7-9) Lower quality (GR 10-12) Procedural (GR 13/14/15) Not classified (without risk grade) Total Impairment losses Net exposure Financial assets at amortised cost stage 1 32,568,690 6,430,831 2,592,863 — — 41,592,384 180,317 41,412,067 stage 2 976,945 1,240,904 2,766,627 224,359 354,668 5,563,503 208,433 5,355,070 stage 3 — — — 1,086,915 — 1,086,915 601,452 485,463 POCI 1,789 2,307 1,131 6,903 115 12,245 — 12,245 33,547,424 7,674,042 5,360,621 1,318,177 354,783 48,255,047 990,202 47,264,845 Debt instruments at fair value through other comprehensive income () stage 1 4,500,984 66,280 — 50 111,057 4,678,371 — 4,678,371 4,500,984 66,280 — 50 111,057 4,678,371 — 4,678,371 Guarantees and other commitments stage 1 7,694,187 2,862,588 1,010,643 — — 11,567,418 7,195 11,560,223 stage 2 116,790 284,609 633,018 11,826 172,599 1,218,842 10,773 1,208,069 stage 3 — — — 322,855 — 322,855 91,648 231,207 7,810,977 3,147,197 1,643,661 334,681 172,599 13,109,115 109,616 12,999,499 Total 45,859,385 10,887,519 7,004,282 1,652,908 638,439 66,042,533 1,099,818 64,942,715 () For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1.B1.5.1.2. As at 31 December 2022, the exposure by type of financial instrument, internal rating and by stage, is analysed as follows: (Thousands of euros) 2022 Gross Exposure Higher quality (GR 1-6) Average quality (GR 7-9) Lower quality (GR 10-12) Procedural (GR 13/14/15) Not classified (without risk grade) Total Impairment losses Net exposure Financial assets at amortised cost stage 1 32,398,970 6,748,582 2,552,694 — 31,315 41,731,561 142,328 41,589,233 stage 2 1,050,155 1,214,722 2,884,430 223,151 441,120 5,813,578 204,896 5,608,682 stage 3 — — — 1,346,991 — 1,346,991 589,408 757,583 POCI 1,524 8,788 905 7,889 77 19,183 — 19,183 33,450,649 7,972,092 5,438,029 1,578,031 472,512 48,911,313 936,632 47,974,681 Debt instruments at fair value through other comprehensive income () stage 1 2,705,851 80,778 19,263 — 66,499 2,872,391 — 2,872,391 2,705,851 80,778 19,263 — 66,499 2,872,391 — 2,872,391 Guarantees and other commitments stage 1 7,202,577 2,735,663 1,118,717 — 5,665 11,062,622 5,987 11,056,635 stage 2 137,123 294,035 767,352 33,156 280,037 1,511,703 12,051 1,499,652 stage 3 — — — 358,671 — 358,671 82,442 276,229 7,339,700 3,029,698 1,886,069 391,827 285,702 12,932,996 100,480 12,832,516 Total 43,496,200 11,082,568 7,343,361 1,969,858 824,713 64,716,700 1,037,112 63,679,588 () For financial assets at fair value through other comprehensive income, impairment is recorded in accordance with the requirements indicated in the accounting policy 1.B1.5.1.2. The gross exposure includes the guarantees granted, irrevocable credit lines and revocable commitments, as detailed in note 40. 2023 REPORT & ACCOUNTS 632 | As at 31 December 2023, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments subject to individual and collective impairment, by segment and by sector of activity, are presented in the following tables: (Thousands of euros) 2023 Gross Exposure Impairment losses Segment Individual Collective Total Individual Collective Total Individuals-Mortgage 2,762 18,743,862 18,746,624 1,871 56,120 57,991 Individuals-Other 2,291 4,090,564 4,092,855 1,483 80,173 81,656 Financial Companies 46,370 2,287,305 2,333,675 34,439 24,898 59,337 Non-financial comp. - Corporate 168,924 8,519,712 8,688,636 94,789 49,808 144,597 Non-financial comp.- SME-Corporate 455,196 9,728,892 10,184,088 306,907 166,116 473,023 Non-financial comp. -SME-Retail 82,480 6,723,212 6,805,692 76,847 196,001 272,848 Non-financial comp.-Other — 469,347 469,347 — 45 45 Other loans — 10,045,805 10,045,805 — 10,321 10,321 Total 758,023 60,608,699 61,366,722 516,336 583,482 1,099,818 (Thousands of euros) 2023 Gross Exposure Impairment losses Sector of activity Individual Collective Total Individual Collective Total Loans to individuals 5,052 22,834,427 22,839,479 3,354 136,292 139,646 Non-financial comp.- Trade 36,612 4,051,220 4,087,832 28,083 63,897 91,980 Non-financial comp.- Construction 206,074 2,499,719 2,705,793 87,074 42,992 130,066 Non finan. comp.- Manufacturing indust. 85,501 4,991,728 5,077,229 47,567 134,860 182,427 Non-financial comp.-Other activities 45,769 2,463,366 2,509,135 36,149 36,357 72,506 Non-financial comp.- Other services 332,644 11,435,131 11,767,775 279,670 133,863 413,533 Other Services/Other activities 46,371 12,333,108 12,379,479 34,439 35,221 69,660 Total 758,023 60,608,699 61,366,722 516,336 583,482 1,099,818 The balances Gross Exposure and Collective Impairment include the loans subject to individual analysis for which the Bank has concluded that there is no objective evidence of impairment. 2023 REPORT & ACCOUNTS | 633 As at 31 December 2022, financial assets at amortised cost, guarantees granted, irrevocable credit lines and revocable commitments subject to individual and collective impairment, by segment and by sector of activity, are presented in the following tables: (Thousands of euros) 2022 Gross Exposure Impairment losses Segment Individual Collective Total Individual Collective Total Individuals-Mortgage 2,192 19,024,759 19,026,951 1,753 48,004 49,757 Individuals-Other 20,263 4,038,808 4,059,071 15,070 65,240 80,310 Financial Companies 73,944 2,339,834 2,413,778 37,613 10,300 47,913 Non-financial comp. - Corporate 211,998 7,780,176 7,992,174 87,918 34,923 122,841 Non-financial comp.- SME-Corporate 593,095 10,466,963 11,060,058 278,033 152,573 430,606 Non-financial comp. -SME-Retail 152,464 7,155,910 7,308,374 91,268 206,183 297,451 Non-financial comp.-Other — 468,137 468,137 — 30 30 Other loans — 9,515,766 9,515,766 — 8,204 8,204 Total 1,053,956 60,790,353 61,844,309 511,655 525,457 1,037,112 (Thousands of euros) 2022 Gross Exposure Impairment losses Sector of activity Individual Collective Total Individual Collective Total Loans to individuals 22,455 23,063,564 23,086,019 16,823 113,245 130,068 Non-financial comp.- Trade 47,928 4,275,640 4,323,568 25,592 59,381 84,973 Non-financial comp.- Construction 299,203 2,406,212 2,705,415 154,224 34,646 188,870 Non finan. comp.- Manufacturing indust. 99,403 5,370,072 5,469,475 53,313 129,389 182,702 Non-financial comp.-Other activities 88,328 2,226,515 2,314,843 41,235 29,267 70,502 Non-financial comp.- Other services 422,695 11,592,750 12,015,445 182,854 141,025 323,879 Other Services/Other activities 73,944 11,855,600 11,929,544 37,614 18,504 56,118 Total 1,053,956 60,790,353 61,844,309 511,655 525,457 1,037,112 The balances Gross Exposure and Collective Impairment include the loans subject to individual analysis for which the Bank has concluded that there is no objective evidence of impairment. 2023 REPORT & ACCOUNTS 634 | As at 31 December 2023, the following table includes the loans portfolio (including guarantees and commitments) by segment and by year of production (date of the beginning of the operations, in the portfolio at the date of balance sheet - it does not include restructured loans): 2023 Year of production Construction and Commercial Real Estate Companies - Other Activities Mortgage loans Individuals - Other Other loans Total 2013 and previous Number of operations 12,640 20,719 190,939 272,677 222 497,197 Value (Euros '000) 838,587 2,447,308 6,639,101 669,624 12,716 10,607,336 Impairment constituted (Euros '000) 72,109 47,008 22,626 5,855 13 147,611 2014 Number of operations 923 3,401 2,851 18,950 70 26,195 Value (Euros '000) 52,036 326,504 133,722 43,748 182,421 738,431 Impairment constituted (Euros '000) 6,702 3,457 476 313 131 11,079 2015 Number of operations 1,312 4,785 4,260 22,678 90 33,125 Value (Euros '000) 63,013 490,100 244,780 50,527 6,522 854,942 Impairment constituted (Euros '000) 1,588 20,001 339 499 8 22,435 2016 Number of operations 1,565 5,344 5,872 36,422 29 49,232 Value (Euros '000) 128,743 1,013,870 354,329 82,632 909 1,580,483 Impairment constituted (Euros '000) 1,915 10,587 678 940 1 14,121 2017 Number of operations 1,848 6,062 9,196 35,335 68 52,509 Value (Euros '000) 136,680 797,507 651,361 86,242 8,959 1,680,749 Impairment constituted (Euros '000) 10,019 14,075 915 1,509 11 26,529 2018 Number of operations 3,722 10,133 13,106 100,093 129 127,183 Value (Euros '000) 344,251 1,525,516 1,085,122 255,308 295,019 3,505,216 Impairment constituted (Euros '000) 4,631 26,974 1,451 4,073 24 37,153 2019 Number of operations 6,072 13,039 14,442 326,256 64 359,873 Value (Euros '000) 440,893 1,176,776 1,260,352 530,269 73,516 3,481,806 Impairment constituted (Euros '000) 6,365 30,577 1,289 8,905 23 47,159 2020 Number of operations 7,361 23,960 13,093 90,336 61 134,811 Value (Euros '000) 762,151 2,509,472 1,251,675 229,576 67,946 4,820,820 Impairment constituted (Euros '000) 8,676 70,502 935 4,672 47 84,832 2021 Number of operations 7,056 16,361 19,755 117,110 24 160,306 Value (Euros '000) 735,584 1,885,415 2,157,000 402,778 285,511 5,466,288 Impairment constituted (Euros '000) 9,760 32,583 1,268 8,891 970 53,472 2022 Number of operations 7,650 17,724 19,227 199,569 56 244,226 Value (Euros '000) 1,306,991 3,420,751 2,372,354 683,438 74,882 7,858,416 Impairment constituted (Euros '000) 13,850 41,518 1,744 16,988 110 74,210 2023 Number of operations 10,498 27,742 17,514 310,324 56 366,134 Value (Euros '000) 1,749,960 4,681,708 2,202,731 991,496 5,381 9,631,276 Impairment constituted (Euros '000) 14,170 201,116 1,564 14,774 6 231,630 Total Number of operations 60,647 149,270 310,255 1,529,750 869 2,050,791 Value (Euros '000) 6,558,889 20,274,927 18,352,527 4,025,638 1,013,782 50,225,763 Impairment constituted (Euros '000) 149,785 498,398 33,285 67,419 1,344 750,231 In the year of the current production, are included operations that, by their nature, are contractually subject to renewals. In these cases, the date of the last renewal is considered, namely for overdraft operations, secured current account and factoring operations. 2023 REPORT & ACCOUNTS | 635 As at 31 December 2022, the following table includes the loans portfolio (including guarantees and commitments) by segment and by year of production (date of the beginning of the operations, in the portfolio at the date of balance sheet - it does not include restructured loans): 2022 Year of production Construction and Commercial Real Estate Companies - Other Activities Mortgage loans Individuals - Other Other loans Total 2012 and previous Number of operations 14,564 19,447 204,762 326,122 227 565,122 Value (Euros '000) 892,731 2,364,052 7,358,264 743,146 10,996 11,369,189 Impairment constituted (Euros '000) 72,468 40,988 22,014 5,319 9 140,798 2013 Number of operations 873 1,829 4,568 27,627 8 34,905 Value (Euros '000) 53,362 326,188 180,930 52,719 1,599 614,798 Impairment constituted (Euros '000) 3,112 2,121 265 361 1 5,860 2014 Number of operations 884 2,623 3,184 33,998 69 40,758 Value (Euros '000) 58,432 360,107 156,352 60,856 181,657 817,404 Impairment constituted (Euros '000) 4,741 7,627 268 369 90 13,095 2015 Number of operations 1,211 3,311 4,812 41,091 90 50,515 Value (Euros '000) 82,588 562,711 289,945 82,504 6,075 1,023,823 Impairment constituted (Euros '000) 1,490 18,465 165 685 6 20,811 2016 Number of operations 1,427 4,411 6,612 45,471 31 57,952 Value (Euros '000) 141,118 1,081,879 422,129 106,145 1,240 1,752,511 Impairment constituted (Euros '000) 2,574 11,170 300 1,249 1 15,294 2017 Number of operations 1,845 5,654 10,413 44,818 65 62,795 Value (Euros '000) 176,681 1,011,883 789,486 118,439 9,771 2,106,260 Impairment constituted (Euros '000) 1,871 13,147 645 1,865 10 17,538 2018 Number of operations 4,194 11,074 14,797 118,888 146 149,099 Value (Euros '000) 450,828 1,779,954 1,300,071 310,637 300,817 4,142,307 Impairment constituted (Euros '000) 3,638 23,526 800 4,553 20 32,537 2019 Number of operations 7,111 16,064 16,140 353,000 61 392,376 Value (Euros '000) 586,877 1,482,172 1,487,840 634,825 101,016 4,292,730 Impairment constituted (Euros '000) 5,912 31,521 472 9,215 41 47,161 2020 Number of operations 8,308 27,025 14,398 104,036 67 153,834 Value (Euros '000) 1,053,239 3,900,253 1,453,309 297,678 119,775 6,824,254 Impairment constituted (Euros '000) 11,355 74,851 307 4,726 58 91,297 2021 Number of operations 7,976 18,781 22,016 136,042 42 184,857 Value (Euros '000) 1,053,520 2,480,110 2,565,728 517,201 309,437 6,925,996 Impairment constituted (Euros '000) 12,687 39,837 517 6,238 293 59,572 2022 Number of operations 10,723 29,284 20,800 272,138 61 333,006 Value (Euros '000) 1,873,465 5,896,215 2,684,769 1,002,789 128,917 11,586,155 Impairment constituted (Euros '000) 16,823 155,187 744 14,539 228 187,521 Total Number of operations 59,116 139,503 322,502 1,503,231 867 2,025,219 Value (Euros '000) 6,422,841 21,245,524 18,688,823 3,926,939 1,171,300 51,455,427 Impairment constituted (Euros '000) 136,671 418,440 26,497 49,119 757 631,484 In the year of the current production, are included operations that, by their nature, are contractually subject to renewals. In these cases, the date of the last renewal is considered, namely for overdraft operations, secured current account and factoring operations. 2023 REPORT & ACCOUNTS 636 | As at 31 December 2023, the following table includes the fair value of the collaterals (not limited by the value of the collateral) associated to the loans portfolio: 2023 Construction and Commercial Real Estate Companies - Other Activities Mortgage loans Fair Value Real Estate (*) Other real Collateral () Real Estate () Other real Collateral () Real Estate () Other real Collateral () < 0,5 M€ Number 7,257 2,431 7,851 8,646 238,380 235 Value (Euros '000) 927,938 118,553 1,156,717 425,814 36,433,823 13,759 >= 0,5 M€ and < 1 M€ Number 765 58 963 124 5,460 5 Value (Euros '000) 532,118 40,050 672,196 81,972 3,565,159 2,833 >= 1 M€ and < 5 M€ Number 721 40 867 70 1,088 1 Value (Euros '000) 1,493,665 70,934 1,738,214 138,371 1,720,485 1,121 >= 5 M€ and < 10 M€ Number 118 1.00 111 9 16 — Value (Euros '000) 824,216 5,424 780,968 70,311 102,113 — >= 10 M€ and < 20 M€ Number 49 — 58 9 2 — Value (Euros '000) 669,052 — 833,796 135,562 21,129 — >= 20 M€ and < 50 M€ Number 27 — 44 2 — — Value (Euros '000) 736,280 — 1,306,757 46,125 — — >= 50 M€ Number 4 — 12 4 — — Value (Euros '000) 263,193 — 917,618 855,609 — — Total Number 8,941 2,530 9,906 8,864 244,946 241 Value (Euros '000) 5,446,462 234,961 7,406,266 1,753,764 41,842,709 17,713 (*) The fair value of real estate collateral relates to the PVT included in valuations. () Includes, namely, securities, deposits and fixed assets pledges. 2023 REPORT & ACCOUNTS | 637 As at 31 December 2022, the following table includes the fair value of the collaterals (not limited by the value of the collateral) associated to the loans portfolio: 2022 Construction and Commercial Real Estate Companies - Other Activities Mortgage loans Fair Value Real Estate () Other real Collateral () Real Estate () Other real Collateral () Real Estate (*) Other real Collateral () < 0,5 M€ Number 6,657 1,532 7,716 4,934 247,132 288 Value (Euros '000) 853,434 83,468 1,134,384 222,106 36,846,894 16,458 >= 0,5 M€ and < 1 M€ Number 710 60 932 90 5,236 4 Value (Euros '000) 497,470 40,300 649,806 59,089 3,408,208 2,230 >= 1 M€ and < 5 M€ Number 599 38 821 74 988 1 Value (Euros '000) 1,230,121 65,075 1,652,141 147,250 1,539,285 1,267 >= 5 M€ and < 10 M€ Number 102 0 103 10 14 — Value (Euros '000) 688,699 — 752,201 70,485 86,476 — >= 10 M€ and < 20 M€ Number 46 — 53 10 1 — Value (Euros '000) 604,733 — 760,480 151,989 11,110 — >= 20 M€ and < 50 M€ Number 18 — 39 1 — — Value (Euros '000) 531,211 — 1,188,205 20,452 — — >= 50 M€ Number 6 — 11 2 — — Value (Euros '000) 455,600 — 1,031,327 523,630 — — Total Number 8,138 1,630 9,675 5,121 253,371 293 Value (Euros '000) 4,861,268 188,843 7,168,544 1,195,001 41,891,973 19,955 () The fair value of real estate collateral relates to the PVT included in valuations. () Includes, namely, securities, deposits and fixed assets pledges. 2023 REPORT & ACCOUNTS 638 | As at 31 December 2023, the following table includes the LTV (loan-to-value) ratio by segments Construction and Commercial Real Estate, Companies - Other Activities and Mortgage loans: (Thousands of euros) 2023 Segment/Ratio Number of properties Stage 1 Stage 2 Stage 3 Impairment Construction and Commercial Real Estate Without associated collateral n.a. 1,209,363 318,028 51,397 62,772 <60% 20,964 1,112,668 298,212 21,036 19,226 >=60% and <80% 2,832 316,024 121,112 9,285 12,236 >=80% and <100% 221 73,085 24,002 1,153 2,958 >=100% 720 71,495 52,854 46,946 29,966 Companies - Other Activities Without associated collateral n.a. 8,040,467 1,300,089 200,833 404,130 <60% 10,521 1,139,582 459,490 78,216 56,989 >=60% and <80% 2,644 478,269 229,981 58,371 32,423 >=80% and <100% 691 102,466 113,784 33,600 21,354 >=100% 1,767 301,711 153,179 252,776 204,568 Mortgage loans Without associated collateral n.a. 41,125 1,462 139 307 <60% 213,399 8,150,322 961,852 102,817 17,011 >=60% and <80% 85,799 5,995,891 745,990 83,490 15,519 >=80% and <100% 25,534 1,985,104 314,672 39,391 12,878 >=100% 3,617 112,522 45,893 12,352 6,467 As at 31 December 2022, the following table includes the LTV (loan-to-value) ratio by segments Construction and Commercial Real Estate, Companies - Other Activities and Mortgage loans: (Thousands of euros) Segment/Ratio 2022 Number of properties Stage 1 Stage 2 Stage 3 Impairment Construction and Commercial Real Estate Without associated collateral n.a. 1,359,116 419,475 68,225 64,639 <60% 20,534 921,459 248,287 34,541 26,606 >=60% and <80% 1,211 275,501 75,960 17,563 7,570 >=80% and <100% 388 80,149 43,592 52,828 46,024 >=100% 830 63,315 70,463 58,777 39,627 Companies - Other Activities Without associated collateral n.a. 8,898,514 1,534,014 251,378 362,545 <60% 10,477 905,254 425,423 102,266 47,165 >=60% and <80% 2,451 491,586 277,114 103,622 37,725 >=80% and <100% 905 166,189 127,684 58,836 36,278 >=100% 2,195 365,371 183,812 270,484 137,276 Mortgage loans Without associated collateral n.a. 31,966 1,342 546 599 <60% 217,305 8,089,987 898,109 100,914 14,409 >=60% and <80% 90,397 6,126,196 677,551 65,612 8,126 >=80% and <100% 29,655 2,232,416 318,043 38,413 9,125 >=100% 4,655 161,857 55,140 19,326 10,182 2023 REPORT & ACCOUNTS | 639 The following table includes the fair value and the net book value of the properties classified as Non-current assets held for sale (note 24) and as Other assets (note 28), by type of asset: (Thousands of euros) Assets arising from recovered loans 2023 2022 Asset Appraised value Book value Appraised value Book value Land Urban 80,524 49,778 126,593 84,970 Rural 4,622 2,188 5,318 2,996 Buildings in development Commercials 790 529 869 517 Mortgage loans 2,474 1,438 2,550 1,491 Constructed buildings Commercials 29,086 14,509 62,174 43,088 Mortgage loans 47,872 31,510 68,246 49,712 Others 756 522 667 544 166,124 100,474 266,417 183,318 Credit portfolio monitoring process The Bank has in place a credit portfolio management and monitoring processes, namely with regard to the assessment of the risk profile of the exposure in different portfolios/segments. These procedures have the purpose of identifying and closely monitoring the customers potentially more affected by the prevailing macroeconomic context, anticipating possible difficulties in complying the responsibilities and defining credit and performance strategies adjusted to the specificities of each customer/group of customers, with a view to both maintaining support to customers considered viable and mitigating credit risk in cases where there are risks of loss in the exposure value. The importance of this approach is reinforced by the uncertainty that has marked the activity in recent years, with special emphasis on the pandemic context that emerged at the beginning of 2020 and the effects resulting from multiple geopolitical conflicts, with impacts on various aspects such as a more modest level of economic growth, budgetary pressures to cope with the impacts felt by economic agents, the need to allocate budgetary amounts to areas such as Defence, limitations on the transportation of goods, pressure on energy costs, inflationary impacts, high levels of interest rates and rising unemployment rates. In the specific case of Portugal, the context described translated into lower demand for credit instruments from customers, especially in the corporate segment. The main guidelines of the credit portfolio monitoring approach can be characterized as presented below: - Global and transversal: Analysis of the entire credit portfolio of the Bank, being excluded from the monitoring process only customers with a better risk profile (in the case of retail) or with exposures of a lower size (in the case of retail and corporate). - Specialized: Monitoring by the “Comité de Acompanhamento de Risco de Empresas” (CARE), and Credit Division in coordination with the Rating Division for the corporate segment and by the Credit Division and Retail Recovery Division for individuals and small businesses. The cases monitored by the CARE committee, are related to clients covered by a set of criteria that combine exposure size and risk factors like the rating assigned, IFRS 9 staging and, for the corporate segment, the level of leverage and whether the sector in which it operates is considered highly vulnerable. - Segmented: Prioritization of approach/analysis recurrence based on risk signs, in order to gather additional information and agree on appropriate and sustainable financial restructuring solutions in a timely manner. - Prospective: Use of predictive models, in order to anticipate potential future defaults, avoiding a reactive approach. - Standardized: Both in terms of risk models and monitoring, and in terms of credit solutions for which it is possible to identify pre-defined alternatives (retail segments). 2023 REPORT & ACCOUNTS 640 | - Convenient and innovative: Making the restructuring journey simpler and more convenient both in terms of credit solutions and channels, extending the restructuring offer to the App for consumer credit and mortgages. Specifically in the corporate segment, the process of portfolio follow-up and monitoring can be generically characterized as described below, having as a fundamental component the attribution of credit strategies, among pre- defined options, with review periods differentiated according to the level of risk associated to the strategy attributed: 1. Client Assessment and presentation of Indicative Credit Strategy by the Rating Division (for customers with ratings assigned by corporate rating models); 2. Approval, by the competent credit decision levels, of a credit strategy for each customer, taking into consideration the Indicative Credit Strategy from the Rating Division, the information received from the area that follows the client and the inputs received as a result of the customer interaction process; 3. Decision, negotiation and formalisation of the operations that will ensure that the approved strategy is pursued and the approved credit limits are met (Credit Division, Areas that follow the client and Operations Division); 4. Monitoring the Credit Strategy and the evolution of the customer's activity (Credit Division, Areas that follow the client and Specialised Committees - CARE); 5. Monitoring of the credit portfolio and effectiveness of the portfolio monitoring process and credit strategy attribution (Risk Office), based on a set of KPIs, (e.g. percentage of the credit portfolio with valid risk strategy; evolution of credit exposure to customers with a reduction strategy; adequacy of the credit strategy to the customer's performance); 6. In the attribution of the customer's credit strategy, besides the intrinsic factors of the customer, more transversal factors are taken into consideration, such as the evaluation of the sectorial risk and ESG impacts (periodically reviewed with the support of the Economic, Sustainability and Criptoactives Studies Division) and taking into consideration the attribution of a ESG rating regarding the clients with most relevant exposures; 7. The occurrence of effective and/or potential risk events (signs of default/delinquency; breach of contractual covenants; severe alteration in sector risk; alteration in the corporate/shareholder structure), trigger an extraordinary/ anticipated revision of the strategy. Within the scope of this monitoring process and with an impact on other complementary procedures adopted by the Bank, namely for reporting purposes, the Bank defines a list of sectors considered as more vulnerable to the macroeconomic environment, which is reviewed periodically (at least annually), also involving the preparation of report presenting a detailed characterisation of its loan portfolio under a sectoral perspective. Additional measures with impact on the Impairment level i. Updating macroeconomic scenarios and the parameters of the collective impairment model Taking into account the changes and uncertainty of the context and the economic outlook essentially marked by a context conditioned by the maintenance of relatively high levels of inflation and interest rates, an update of the macroeconomic scenarios used in the collective impairment analysis model in Portugal was carried out in December 2023, based on three scenarios (Central Scenario, Optimistic and Pessimistic) prepared by the Bank's Economic Studies area. The referred scenarios, which are used in the Bank for several purposes other than the impairment calculation, took into consideration the existing projections of reputed entities. The tables below systematise the projections for 2023 and 2024 considered for Portugal concerning the central scenarios with regard to some of the critical variables used in the calculation of collective impairment. December 2022 Scenario December 2023 Scenario Difference Variable 2023 2024 2023 2024 2023 2024 Unemployment rate 5.88% 5.92% 6.53% 7.15% 0.65% 1.23% 3 months Euribor Rate 3.17% 3.10% 3.43% 3.18% 0.26% 0.08% Savings Rate 5.33% 6.00% 6.40% 8.40% 0.60% 2.40% Inflation Rate 5.83% 3.25% 5.34% 2.93% -0.49% -0.33% 2023 REPORT & ACCOUNTS | 641 The following tables describe the weightings assigned to the different macroeconomic scenarios considered at the end of 2022 and 2023, which can be considered as conservative: Weightings of the macroeconomic scenarios considered Scenario Weightings Dec 2022 Dec 2023 Central 60% 60% Upside 10% 10% Downside 30% 30% A simulation of an additional one percentage point worsening in the evolution of the key indicators for the collective impairment estimate was carried out, which translates into the impacts shown in the table below, based on the collective impairment of the portfolio in Portugal as at 31 December 2023, which amounted to Euros 480 million (this figure does not include the impairment amounts calculated by the overlays methodology described in point ii. of this section). Sensitivity analysis on the calculation of collective impairment (December 2023) Variable Estimated impact (% variation) 100 bp Unemployment Rate aggravation 4.74% 100 bp 3 months Euribor aggravation 6.81% 100 bp Savings Rate aggravation 0.54% 100 bp Inflation Rate aggravation 4.70% ii. Impairment overlays In order to incorporate an additional level of conservatism in the impairment values, the Bank defined and implemented a methodology of complementary of identification of significant increase in credit risk situations and potential signs of impairment. This approach adopts differentiated criteria in relation to the base methodologies in force, with distinct processes having been adopted for the calculation of overlays for the corporate and individual customers segments. The overlays currently in force seek in particular to address the context of uncertainty that continues to prevail, associated with a context of multiple geopolitical crisis, the constraints that still exist with regard to economic growth, inflationary pressures and the high level of interest rates, an environment that constitutes a disruption of the context that prevailed until the end of 2021, characterized by low levels of interest rates and inflation. This positioning is in line with the guidelines on this matter issued by the Supervisors in what regards the identification and measurement of credit risk in contexts of uncertainty, so that the release of overlays initially constituted in the context of the pandemic should be carried out with prudence and taking into account the possible need for new overlays to respond to the current context. The exercise carried out reflected, in terms of impairment value, in the calculation of the estimated impact arising from potential migrations of customers with higher risk to Stage 2 and Stage 3, based on the various factors considered in the analysis. It should be noted that the most significant impact occurred in the corporate segment. The methodology developed by the Bank was considered for the calculation and recording of impairment at the reference date of the accounts, without affecting the classification of credit exposures by stages in the Bank's loan portfolio. As a result of the implementation of this methodology, the Bank calculated an additional impairment to that resulting from the collective analysis model, therefore with characteristics of overlays, whose amount on 31 December 2023 was approximately Euros 98.6 million in Portugal (Euros 94.7 million in December 2022). 2023 REPORT & ACCOUNTS 642 | Government measures to mitigate the impacts on mortgage contracts Decree-Law 80-A/2022 Specifically with regard to Decree-Law 80-A/2022, a Portuguese Government act of 25 November 2022 that established measures to mitigate the effects of the increase in the reference indexing factors of credit contracts for the acquisition or construction of permanent house ownership, it is worth highlighting the fact that it introduced the obligation for Financial Institutions to approach individual customers with mortgage credit who potentially fit into the requirements set out in that act. In what concerns Millennium bcp, a contact was promoted with about 180 thousand customers, requesting information in order to calculate the respective effort rate. On 31 December 2023, date when the period to adhere to this measure expired, the number of clients that had shown interest in evaluating the support mechanisms provided for under Decree Law 80-A/2022 amounted to around 15 thousand. Decree-Law 20-B/2023 Decree-Law 20-B/2023, a Portuguese Government regulation of 22 March 2023, embodied the legislative package "Mais Habitação", providing extraordinary support to families, namely through the creation of support for borrowers of credit agreements for permanent own housing in the form of a temporary subsidy of the interest component, in situations where the index rate exceeds a certain threshold. On 13 February 2024, loans with subsidies already processed amounted to exposures of approximately Euros 520 million, with an average monthly subsidy of Euros 49. Decree-Law 91/2023 Also with regard to the promotion of support measures for borrowers of mortgage loan contracts, it is worth noting the publication of Decree-Law 91/2023, a Portuguese government decree of 11 October 2023, which allows to fix the instalment over a period of 24 months, taking into account an interest rate benchmark defined in the decree-law, and with an adherence period until 31 March 2024. By 31 January 2024, at the request of customers, the Bank had implemented this measure in around 1,800 contracts. Real state risk Real estate risk materializes through losses associated with changes in the value of assets held by the Bank or, indirectly, through funds and/or real estate companies. The Group detains a real estate portfolio, that comes from repossessed assets linked with recovery processes of non- performing exposures, that is subject to fluctuations and risks in the real estate market and the obligations arising from ownership of the properties. As a credit institution operating in the financial market, the Bank does not operate directly in the real estate sector, neither as a sales agent nor as an operator in the rental segment. In this context, the management of this portfolio is based on the following objectives: • Minimize the risks associated with the real estate portfolio; • Minimize management costs, maintenance and sale of properties; • Maximize the financial results from the sale of foreclosed assets; • Mitigate the portfolio's impact on the Bank's cost of capital and liquidity. Within this framework, the Bank should optimize the outflow of foreclosed assets from the real estate portfolio, developing appropriate commercial strategies and exploring the distribution channels that are expected to be most effective at any given time to sell the different types of properties held by the Bank. 2023 REPORT & ACCOUNTS | 643 By managing this portfolio, the following risks were identified and monitored by the Bank: • Price risk – Risk associated with the devaluation of the property due to unfavourable developments in the real estate market, whether due to a decrease in demand or strong pressure on property sales; • Liquidity risk - Inherent to the nature of real estate assets and the impact on the Bank's liquidity position and respective financial costs of holding the property; • Operational risk - associated with the processes of acquiring, maintaining and selling properties, which can result in costs or lost revenue (includes the risks of vandalization and deterioration of properties); • Compliance risk - compliance with legal standards from the property acquisition process, to the requirements to be observed in its sale, including the responsibility associated with your status as owner; • Fiscal risk – associated with possible tax contingencies relating to properties owned by the Bank and monitoring the administrative and judicial processes; • Reputational risk - related to the risks mentioned above, but also with the image projected by the Bank in the way it manages its operations in the real estate market. The risks associated above are mitigated by the Bank through the existence of a team specialized in the management of this type of assets; a set of internal policies and standards that regulate the asset management processes on the balance sheet; and an insurance policy. The portfolio of real estate assets has been progressively reduced by the Bank over the last few years. Market risk Market risks consist of the potential losses that may arise within a portfolio as a result of changes in interest or exchange rates, and/or in the prices of the different financial instruments within the portfolio, considering not only the correlations that exist between those instruments but also their volatilities. For the purpose of profitability analysis and market risks quantification and control, the following management areas are defined for each entity within the Group: - Trading: Management of positions aimed at achieving short-term gains through sale or revaluation. These positions are actively managed, tradable without restriction, and may be valued frequently and accurately. These positions include securities and derivatives resulting from sales activities; - Funding: Management of institutional funding (wholesale funding) and money market positions; – Investment: Management of all positions in securities to be held to maturity or for an extended period, or positions not tradable on liquid markets; - Commercial: Management of positions arising from commercial activities with Customers; - Structural: Management of balance sheet items or operations which, due to their nature, are not directly related to any of the management areas referred to above; and - ALM: Assets and Liabilities Management. 2023 REPORT & ACCOUNTS 644 | The definition of these areas allows for an effective management separation between trading and banking books, as well as a proper allocation of each operation to the most suitable management area, according to the respective context and strategy. To ensure that risk levels incurred in the different portfolios of the Group align with predefined tolerance risk levels, various market risks limits are established, typically on an annual basis, applying to all portfolios of the risk management areas where the risks are incident. These limits are monitored daily (or intra-daily, in the case of financial markets) by the Risk Office. Stop loss limits are also set for portfolios in the financial markets' areas – Trading and Funding – based on multiples of the risk limits defined for them, aiming to limit the maximum losses that may occur in these areas. If these limits are breached, a mandatory review of the underlying business strategy and assumptions regarding the management of the positions in question ensues. Market risks of the prudential trading book (1) For the daily measurement of generic market risk - including interest rate risk, exchange rate risk, equity risk and credit default swap price risk (indexes) - a Value-at-Risk (VaR) model is used, considering a time horizon of 10 business days and a 99% significance level. Additionally, the Bank uses an integrated market risk measure that monitors all relevant sub-types of risk. This measure integrates assessment of generic, specific, non-linear and commodity risks. Each sub-type of risk is measured individually using appropriate risk models, with the integrated measure calculated from individual measures for each, without considering any type of diversification between the sub-types (worst-case scenario approach). For non-linear risk, an internally developed methodology is applied, replicating the effect of main non-linear elements of options on P&L results of the different portfolios in which these are included, similarly to what is considered in the VaR methodology, using the same time horizon and significance level. Specific and commodity risks are measured using standard methodologies defined in the applicable regulations, with an appropriate change of the time horizon considered. The table below presents the amounts at risk for the Trading Book, and measured by the methodologies referred to above: (Thousands of euros) 2023 Max of global risk in the period Min of global risk in the period 2022 Generic Risk ( VaR ) 880 4,048 709 1,619 Interest Rate Risk 464 2,909 524 889 FX Risk 479 1,961 623 1,195 Equity Risk 500 597 79 585 Diversification effects (563) (1,419) (517) (1,050) Specific Risk 623 738 15 12 Global Risk 1,503 4,786 724 1,631 Validation of the internal VaR model’s appropriateness for the assessment of risks involved in the positions held, is conducted over time, with different scopes and frequency, including back testing, diversification effects estimation, and analysis of risk factor comprehensiveness. In addition to VaR assessment, the Bank continuously tests a broad range of stress scenarios analysing the respective results to identify risk concentrations not captured by the VaR model. (1) Trading Book - positions allocated to the Trading Management Area (and not, specifically, to the accounting trading Book) 2023 REPORT & ACCOUNTS | 645 Interest rate risk The evaluation of interest rate risk derived from Banking Book operations is assessed through a process of risk sensitivity analysis, undertaken every month, covering all the operations included in the Bank's consolidated Balance Sheet and discriminated by exposure currency. Variations of market interest rates influence the Bank's net interest income, both in the short term and medium/long term, affecting its economic value in a long term perspective. The main risk factors arise from the repricing mismatch of portfolio positions (repricing risk) and from the risk of variation in market interest rates (yield curve risk). Besides this, although with less impact, there is the risk of unequal variations in different reference rates with the same repricing period (basis risk). In order to identify the exposure of the Bank's banking book to these risks, the monitoring of the interest rate risk takes into consideration the financial characteristics of each of the relevant contracts, with the respective expected cash- flows (principal and interest, without the spread component but including costs for liquidity, capital, operational and other) being projected according to the repricing dates, thus calculating the impact on economic value resulting from alternative scenarios of change of market interest rate curves. The interest rate sensitivity of the balance sheet, by currency, is calculated as the difference between the present value of the interest rate mismatch discounted at market interest rates and the discounted value of the same cash flows simulating parallel shifts of the market interest rates. The following tables show the expected impact on the banking book economic value of parallel shifts of the yield curve by +/- 100 and +/- 200 basis points, for each of the main currencies in which the Bank holds material positions: (Thousands of euros) 2023 Currency -200 bp() - 100 bp () + 100 bp + 200 bp CHF (1,070) (520) 491 954 EUR (38,207) (17,866) 15,357 26,801 PLN 152 77 (78) (157) USD 4,002 1,985 (1,955) (3,879) (35,123) (16,324) 13,815 23,719 () Decrease in rates scenario, limited to non-negative rates (which implies effective variations of lesser amplitude than 100 b.p., especially in shorter periods). (Thousands of euros) 2022 Currency -200 bp() - 100 bp () + 100 bp + 200 bp CHF (1,366) (663) 625 1,214 EUR (44,410) (23,096) 24,170 48,858 PLN (316) (153) 144 281 USD (21,536) (10,437) 9,817 19,054 (67,628) (34,349) 34,756 69,407 () Decrease in rates scenario, limited to non-negative rates (which implies effective variations of lesser amplitude than 100 b.p., especially in shorter periods). Foreign exchange and equity risk in the banking book The foreign exchange risk of the banking book is transferred internally to the Trading Area, in accordance with the risk specialization model followed by the Bank for the management of the balance sheet foreign exchange risk. The structural foreign exchange exposures, included those resulting from financial holdings in subsidiaries, are not included in this transfer and may be covered by market operations, taking into consideration the defined strategy for managing structural foreign exchange risk, whose objective is to hedge against the volatility in the CET1 ratio that stems from changes in foreign currency exchange rates. On an individual basis hedge accounting is made for hedge investments on investments subsidiaries, by applying Fair Value Hedge. Regarding equity risk, the Bank maintains a set of small-scale, low-risk positions, primarily in the investment portfolio, mainly resulting from execution/payment processes. Management of these positions is conducted by a specialized area of the Bank, with risk controlled through defined metrics and limits for market risk control. 2023 REPORT & ACCOUNTS 646 | Liquidity risk The assessment of the Bank’s liquidity risk is carried out on a regular basis using indicators set by the supervisory authorities and other internal metrics for which exposure limits are also defined. The monitoring of the liquidity position of the Group's operations in short-term time horizons (up to 3 months) is based on two internally defined indicators (immediate liquidity and quarterly liquidity). These indicators are calculated on a daily basis, taking into account the impact in the liquidity buffers available to discount with the respective central banks at the reference date of future estimated cash flows for each of the respective time horizon (3 days or 3 months) considering the set of transactions intermediated by the market areas, including in this context transactions with clients of the Corporate and Private networks, which, due to their size, must be quoted by the Trading Room. The remaining buffer in each time bucket is then compared to the amount of customer deposits, being the indicators assessed against exposure limits defined in the Bank's regulations In parallel, the evolution of the Group’s liquidity position is calculated on a regular basis identifying all the factors that justify the variations that occur. This analysis is submitted to the Capital and Assets and Liabilities Committee (CALCO) for appraisal, to enable the decision making that leads to the maintenance of financing conditions adequate to the continuation of the business. In addition, the Risk Commission is responsible for controlling the liquidity risk. This control is reinforced through the monthly execution of stress tests, to characterize the Bank's risk profile and to ensure that the Group and each of its subsidiaries fulfil its obligations in the event of a liquidity crisis. These tests are also used to support the liquidity contingency plan and management decisions. In Portugal, following the significant migration of deposits to non-bank savings products that occurred mainly in the first quarter of 2023, the volume of customer funds showed a stable behavior throughout the 2nd half of the year, allowing the Bank to protect its market share. As a result, liquidity risk indicators continued to comply by a very comfortable margin with all the regulatory minimums and the strictest requirements imposed by the Bank's risk appetite framework. Accordingly, the liquidity buffer available for discount with the ECB stood at Euros 24,988,593,000 at the end of 2023, Euros 1,167,775,000 higher than a year earlier, to which contributed the cash flow from operations, the reduction in derivative margin accounts, the placement of the MTN issuance and the market price increase of assets integrated in the portfolio of assets discountable with the ECB, which offset the impacts in the opposite direction of the evolution of the commercial gap and the reversal of haircuts applicable to eligible assets at the values in force before the extraordinary measures taken by the ECB following the COVID-19 pandemic. At the end of 2023, the liquidity buffer comprised a long position of Euros 1,200,118,000 with the ECB, slightly lower than that observed a year earlier (Euros 1,823,892,000). The eligible pool of assets for funding operations in the European Central Bank, net of haircuts, is detailed as follows: (Thousands of euros) 2023 2022 European Central Bank 14,677,769 13,677,518 The evolution of the ECB’s Monetary Policy Pool, the net borrows at the ECB and liquidity buffer is analysed as follows: (Thousands of euros) 2023 2022 Collateral eligible for ECB, after haircuts: The pool of ECB monetary policy (i) 14,677,769 13,677,518 Outside the pool of ECB monetary policy 9,110,706 8,319,408 23,788,475 21,996,926 Net borrowing at the ECB (ii) (1,200,118) (1,823,892) Liquidity buffer (iii) 24,988,593 23,820,818 i) Corresponds to the amount reported in COLMS (Bank of Portugal application). ii)Includes as at 31 December 2023 the amount of deposits with the Bank of Portugal and other liquidity with the Eurosystem (Euros 1,200,118,000) in excess over the minimum cash reserves (Euros 499,338,000). iii) Collateral eligible for ECB, after haircuts, less net financing at the ECB. 2023 REPORT & ACCOUNTS | 647 The Bank counterbalancing capacity is defined by the ability to generate additional liquidity in the short term to deal with possible situations of financial stress. The measures for its reinforcement are described in the Recovery Plan which, as at 31 December 2023, had a total estimated value for Portugal of Euros 2,735,000,000, arising from the sale of corporate bonds and commercial paper, securitization of a portfolio of consumer credit and issuance of retained covered bonds to be mobilized for the ECB's monetary policy pool. The refinancing risk of medium and long-term instruments will remain at very low levels over the next three years, with annual refinancing needs with no material expression. Loans to Deposits ratio As at 31 December 2023, the loan-to-deposit ratio, according to Bank of Portugal Instruction No. 16/2004 (current version), reached 77%, while on 31 December 2022 this ratio stood at 78%. Hedging accounting The detailed information of the strategies, hedge transactions, hedged items and hedging instruments applied by the Group, is shown in a table below: Strategy Description of hedge transactions Hedged items Hedging instruments Cash flow volatility hedge of the flows generated by the portfolio of Euros floating rate mortgage loans (a) Bank hedges the risk of the volatility of interest payments from floating rate mortgages.The volatility of cash flows results from interest rate risk Floating rate mortgage loans IRS transactions Fair value hedge of fixed rate mortgage loans (a) Bank hedges changes in the fair value of cash flows of fixed rate mortgage loans due to changes in market interest rates Fixed rate mortgage loans IRS transactions Fair value hedge of fixed rate debt instruments (a) Bank hedges changes in the fair value of fixed rate bonds due to changes in market interest rates Fixed rate debt securities, classified as Financial assets at amortised cost IRS transactions Fair value hedge of fixed rate debt instruments in Euros (a) Bank hedges changes in the fair value of fixed rate bonds due to changes in market interest rates Fixed rate debt securities, classified as Financial assets at fair value through other comprehensive income IRS transactions Fair value hedge of fixed rate issued debt instruments in Euros (a) Bank hedges changes in the fair value of fixed rate bonds due to changes in market interest rates Fixed rate Issued debt IRS transactions Fair value hedge of fixed rate deposits in Euros (a) Bank hedges changes in the fair value of fixed rate deposits due to changes in market interest rates Term deposits IRS transactions Fair value hedge of fixed rate deposits in Euros (macro hedge) (b) Bank hedges changes in the fair value of fixed rate deposits due to changes in market interest rates Repayable demand deposits without maturity IRS transactions Fair value hedge of fixed rate debt instruments in USD (a) Bank hedges changes in the fair value of fixed rate bonds due to changes in market interest rates Fixed rate debt securities, classified as Financial assets at fair value through other comprehensive income or amortised cost CIRS transactions (a) - Strategy applied in 2023 and 2022. (b) - Strategy applied in 2023. 2023 REPORT & ACCOUNTS 648 | As at 31 December 2023, the table below includes the detail of the hedging instruments used in the Group's hedging strategies and accounted at the Balance sheet item - Hedging derivatives: (Thousands of euros) 2023 Hedging instruments Book value Change in fair value (A) Type of hedging Nocional Assets Liabilities Fair value hedge Interest rate risk Interest rate swaps 9,538,749 19,892 7,856 (52,976) Interest rate risk Currency and interest rate swap 348,464 2,279 6,272 856 9,887,213 22,171 14,128 (52,120) Cash flows hedging Interest rate risk Interest rate swaps 9,650,000 164 8,408 1,248,954 Total 19,537,213 22,335 22,536 1,196,834 (A) Changes in fair value used to calculate the ineffectiveness of the hedge As at 31 December 2022, the table below includes the detail of the hedging instruments used in the Group's hedging strategies and accounted at the Balance sheet item - Hedging derivatives: (Thousands of euros) 2022 Hedging instruments Book value Change in fair value (A) Type of hedging Nocional Assets Liabilities Fair value hedge Interest rate risk Interest rate swaps 8,582,150 25,427 7,030 296,330 Interest rate risk Currency and interest rate swap 431,257 2,999 18,432 (717) 9,013,407 28,426 25,462 295,613 Cash flows hedging Interest rate risk Interest rate swaps 13,475,000 — 34,086 (1,518,354) Total 22,488,407 28,426 59,548 (1,222,741) (A) Changes in fair value used to calculate the ineffectiveness of the hedge 2023 REPORT & ACCOUNTS | 649 As at 31 December 2023, the table below includes the detail of the hedged items: (Thousands of euros) 2023 Hedged items Type of hedging Balance sheet item Book value Cumulative value of the adjustments Change in fair value (A) Cash flow hedge reserve / Currency translation reserve Hedging relationships in effect Hedging relationships discontinued Assets Liabilities Assets Liabilities Fair value hedge Interest rate risk Interest rate swaps (B) 268,571 — (24,592) — (23,445) n.a. n.a. (H) 1,599,095 — (21,780) — 55,434 n.a. n.a. (C) 2,005,223 — (115,194) — 76,707 n.a. n.a. (D) — 10,000 — (221) 221 n.a. n.a. (E) — 1,462,350 — 88,729 (1,642) n.a. n.a. (F) — 1,329,345 — (34,224) (32,636) n.a. n.a. (G) — 1,037,079 — (41,831) (30,208) n.a. n.a. Foreign exchange risk Currency and interest rate swap — 348,464 — 51 (173) n.a. n.a. 3,872,889 4,187,238 (161,566) 12,504 44,258 n.a. n.a. Cash flows hedging Interest rate risk Interest rate swaps (B) 9,650,000 — — — (1,248,954) (459,963) (808,471) Total 13,522,889 4,187,238 (161,566) 12,504 (1,204,696) (459,963) (808,471) (A) Fair value changes used to calculate the ineffectiveness of the hedge (B) Financial assets at amortised cost - Loans and advances to customers (C) Financial assets at fair value through other comprehensive income (D) Financial liabilities at amortised cost - Resources from credit institutions (E) Financial liabilities at amortised cost - Resources from customers (F) Financial liabilities at amortised cost - Non subordinated debt securities issued (G) Financial liabilities at amortised cost - Subordinated debt (H) Debt securities held not associated with credit operations 2023 REPORT & ACCOUNTS 650 | As at 31 December 2022, the table below includes the detail of the hedged items: (Thousands of euros) 2022 Hedged items Type of hedging Balance sheet item Book value Cumulative value of the adjustments Change in fair value (A) Cash flow hedge reserve / Currency translation reserve Hedging relationships in effect Hedging relationships discontinued Assets Liabilities Assets Liabilities Fair value hedge Interest rate risk Interest rate swaps (B) 814,689 — (71,691) — (70,012) n.a. n.a. (H) 1,524,001 — (510,086) — (181,718) n.a. n.a. (C) 2,438,483 — (272,430) — (196,634) n.a. n.a. (D) — 10,000 — 517 580 n.a. n.a. (E) — 12,350 — (1,232) 718 n.a. n.a. (F) — 1,295,542 — (66,860) 65,881 n.a. n.a. (G) — 998,066 — (72,040) 67,509 n.a. n.a. Foreign exchange risk Currency and interest rate swap — 431,257 — (1,131) 1,079 n.a. n.a. 4,777,173 2,747,215 (854,207) (140,746) (312,597) n.a. n.a. Cash flows hedging Interest rate risk Interest rate swaps (B) 13,475,000 — — — 1,518,354 (1,708,917) 7,644 Total 18,252,173 2,747,215 (854,207) (140,746) 1,205,757 (1,708,917) 7,644 (A) Fair value changes used to calculate the ineffectiveness of the hedge (B) Financial assets at amortised cost - Loans and advances to customers (C) Financial assets at fair value through other comprehensive income (D) Financial liabilities at amortised cost - Resources from credit institutions (E) Financial liabilities at amortised cost - Resources from customers (F) Financial liabilities at amortised cost - Non subordinated debt securities issued (G) Financial liabilities at amortised cost - Subordinated debt (H) Debt securities held not associated with credit operations The reconciliation of each equity component and an analysis of other comprehensive income attributable to hedge accounting, is as follows: (Thousands of euros) Cash flow hedge reserve 2023 2022 Balance as at 1 January (1,701,273) (58,980) Amounts recognised in other comprehensive income: Hedging cash flows Changes in fair value of interest rate swaps 1,248,954 (1,518,355) Hedge breakage (816,115) (123,938) Balance at the end of the year (1,268,434) (1,701,273) 2023 REPORT & ACCOUNTS | 651 As at 31 December 2023, the table below includes information on the effectiveness of hedging relationships, as well as impacts on results and other comprehensive income: (Thousands of euros) 2023 Income statement item (A) Gains / (losses) recognised in Other comprehensive income Hedging ineffectiveness recognised in Income statement (A) Amounts reclassified from reserves to results for the following reasons: Income statement item (B) Cash flows that were being hedged (C) Hedged item with an impact on results Type of hedging Fair value hedge Interest rate risk Interest rate swaps (D) n.a. (8,545) n.a. n.a. Foreign exchange risk Currency and interest rate swap (D) n.a. 683 n.a. n.a. n.a. (7,862) n.a. n.a. Cash flows hedging Interest rate risk Interest rate swaps — — (E) (45,947) — — — (45,947) — Total — (7,862) (45,947) — (A) Income Statement item in which the ineffectiveness of the hedge was recognised (B) Income Statement item in which the reclassified amount was recognised (C) but which are no longer expected to occur (D) Net gains / (losses) from hedge accounting operations (E) Interest and similar income As at 31 December 2022, the table below includes information on the effectiveness of hedging relationships, as well as impacts on results and other comprehensive income: (Thousands of euros) 2022 Income statement item (A) Gains / (losses) recognised in Other comprehensive income Hedging ineffectiveness recognised in Income statement (A) Amounts reclassified from reserves to results for the following reasons: Income statement item (B) Cash flows that were being hedged (C) Hedged item with an impact on results Type of hedging Fair value hedge Interest rate risk Interest rate swaps (D) n.a. (17,346) n.a. n.a. Foreign exchange risk Currency and interest rate swap (D) n.a. 362 n.a. n.a. n.a. (16,984) n.a. n.a. Cash flows hedging Interest rate risk Interest rate swaps — — (E) 54,861 — — — 54,861 — Total — (16,984) 54,861 — (A) Income Statement item in which the ineffectiveness of the hedge was recognised (B) Income Statement item in which the reclassified amount was recognised (C) but which are no longer expected to occur (D) Net gains / (losses) from hedge accounting operations (E) Interest and similar income 2023 REPORT & ACCOUNTS 652 | As at 31 December 2023, the table below shows the detail of hedging instruments by maturity: (Thousands of euros) 2023 Remaining period Fair value Type of hedging Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities Fair value hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps Notional 7,750 508,735 9,022,264 9,538,749 19,892 7,856 Fixed interest rate (average) 3.56% 6.17% 1.77% 2.03% Fair value hedging derivatives related to currency risk changes: OTC Market: Currency and interest rate swap 140,291 208,173 — 348,464 2,279 6,272 Cash flow hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps — 1,600,000 8,050,000 9,650,000 164 8,408 Total derivatives traded by: OTC Market 148,041 2,316,908 17,072,264 19,537,213 22,335 22,536 As at 31 December 2022, the table below shows the detail of hedging instruments by maturity: (Thousands of euros) 2022 Remaining period Fair value Type of hedging Up to 3 months 3 months to 1 year Over 1 year Total Assets Liabilities Fair value hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps Notional 113,400 60,000 8,408,750 8,582,150 25,427 7,030 Fixed interest rate (average) 0.18% 0.13% 1.67% 1.64% Fair value hedging derivatives related to currency risk changes: OTC Market: Currency and interest rate swap 98,439 332,818 — 431,257 2,999 18,432 Cash flow hedging derivatives related to interest rate risk changes: OTC Market: Interest rate swaps — — 13,475,000 13,475,000 — 34,086 Total derivatives traded by: OTC Market 211,839 392,818 21,883,750 22,488,407 28,426 59,548 2023 REPORT & ACCOUNTS | 653 Operational Risk The operational risk management system is framed by the “3 Lines of Defence” Corporate Governance model and is based on an integrated structure of end-to-end processes, considering that a vision which is transversal to the functional units of the organisational structure is the most suitable approach for the perception of risks and to estimate the effects of the corrective measures introduced for their mitigation. Furthermore, these processes model also underlies other strategic initiatives related to the management of this risk such as the actions to improve operating efficiency and the management of business continuity. Hence, the most relevant Group subsidiaries have their own process's structure, which is periodically adjusted according to business evolution, in order to ensure suitable coverage of the business activities (or business support activities) developed, ensuring thus, the replication of the 3 Lines of Defence model in the management of operational risk. The responsibility for the day-to-day processes’ management lies with the 1st Line of Defence: the process owners (seconded by process managers), whose mission is to characterise the operational losses captured under their processes, to monitor the respective Key Risk Indicators (KRI), to perform the Risks Self-Assessment (RSA) exercises, as well as to identify and implement suitable actions to mitigate operational risk exposures, thus contributing to the strengthening of control mechanisms and the improvement of the internal control environment. The periodic revision of the main processes in each geography is ensured by local structure units. The Risk Management function (materialised in the Risk Office) and the Compliance function (materialised in the Compliance Office) represent the 2nd Line of Defence and are responsible for implementing the risk policy defined for the Group, proposing and developing approaches for managing this risk, supervising their implementation and challenging the 1st Line of Defence regarding the risk levels incurred. The Internal Audit function embodies the 3rd Line of Defence and supervises the appropriate fulfilment of the functions and activities of the remaining two lines of defence. In 2023, the usual operational risk management activities continued to be executed by the various players involved in the management of this risk, aiming at an efficient and systematic identification, evaluation, mitigation and control of exposures, as well as at the appropriate reporting tasks, either to the Group’s management bodies or within regulatory duties. The results of the RSA exercises evidence a robust control environment, demonstrating the Group's commitment to operational risk management through the continuous development of improvement actions that help mitigate exposures to this risk. Regarding the operational losses registered, it should be highlighted that their pattern was not different from what is usual and expected, with a higher frequency of losses of low amounts, without concentration in significant amounts. The monitoring of KRI has allowed to identify opportunities for improvement that, together with the RSA exercises and the process of identification and registration of losses, provide for an effective management of this risk. The Bank's mobilisation to reinvent the banking experience, based on the digitization and use of new technologies, entails relevant challenges in the management of operational risk, which include the reinforcement of the security of digital banking channels, the reinforcement of mechanisms for the prevention and detection of potential fraud, proper management of personal data and compliance with the information duties legally provided for in sales through digital Covenants The contractual terms of instruments of wholesale funding encompass obligations assumed by entities belonging to the Bank as debtors or issuers, concerning general duties of societary conduct, maintenance of banking activity and the inexistence of special guarantees constituted for the benefit of other creditors (“negative pledge”). These terms reflect essentially the standards internationally adopted for each type of instrument. The terms of the Bank’s intervention in rated securitization transactions involving its own assets are subject to changes in case the Bank triggers certain rating criteria. The criteria established in each transaction results mainly from the analysis performed at the moment that the transaction was structured, being usually applied by each rating agency in a standardised way to the securitization transactions involving the same type of assets. Regarding the Covered Bond Programs of Banco Comercial Português, there are no relevant covenants related to a possible downgrade. 2023 REPORT & ACCOUNTS 654 | Climate risks - Integration of ESG Factors in Risk Management In its risk classification, Millennium bcp recognises the ESG category which includes factors associated with the climate and environmental components, and also with social and governance aspects. These factors are not considered separately; in fact, they are seen as elements likely to affect positively or negatively the financial performance and solvency of the Bank's customer’s and counterparties. This way, the materialisation of their impacts occurs by means of the “traditional” categories: credit risk, market risk, operational & reputation risk, liquidity and financing risks. Within this context, and with the purpose of promoting the integration of ESG factors in risk management, the Bank implemented a set of processes and methodologies to identify, assess, manage and monitor the impact of the ESG category in overall risk, in accordance with the framework and policies already established for the remaining financial and non-financial risks. Governance Model The governance model for risks arising from ESG factors follows a structure based on three lines of defence which, under the leadership of the Board of Directors (and respective delegations on the Executive Committee), ensure its adequate assessment and management. The first-line functions comprise all the departments and business areas that interact with the Bank’s customers, counterparties and suppliers, collect the information and data that support the assessment of their risk profiles (and of their respective operations) and structure the commercial solutions with characteristics associated with the ESG or with the promotion of control of their impacts on the Bank's risk profile. The Sustainability Function fits in the first line of defence and its responsibilities include: • the overall management of the sustainability strategy and plans of Millennium bcp and of its financial group; • the development of policies, methodologies, analyses and reports that address ESG issues; • the management of commitments and external communications by the Bank and the Group in this area; and • the direct orientation and operational support to the first and second lines of defence in the performance of their main responsibilities in this scope. In the second line of defence, the responsibility for risk control, is assumed by the Risk Office and by the Compliance Office. These functions ensure the procedures for the design, implementation of the policies/methodologies/ risk management models, which are paramount in keeping the risk profile of the Group in appropriate levels. Among other, these responsibilities, include: • Integrate the ESG dimension in risk appetite (Risk Appetite Framework - RAF); • Syndicating with the Sustainability Function the proposal of ESG metrics to be included in the Risk Appetite Statement (RAS); • Carry out stress tests focused on climate and environmental risk factors; • Introduce the ESG dimension in capital and liquidity adequacy exercises. Specifically in terms of Compliance, we emphasise the following controls: • Reporting, disclosure and prudential obligations; • Design and approval of new products, especially in the cases of ESG product design and labelling; • Incorporation of ESG-related conditions and requirements into the forms and contracts; • Ensuring the timely application of the legal and regulatory dispositions related to ESG; • Potential for conflicting interest or litigation in the provision of ESG-related services and products. 2023 REPORT & ACCOUNTS | 655 Within the scope of the Committees of the Board of Directors, the Committee for Corporate Governance, Ethics and Sustainability is the body responsible for recommending the adoption by the Board of Directors of policies in line with ethical principles and social responsibility and best practices in matters of corporate governance and sustainability, but also for monitoring the evolution of the Sustainability Master Plan and the Corporate Social Responsibility Plan and issuing an opinion on the annual corporate governance and sustainability reports. The Committee for Risk Assessment, among its competences and attributions, is also responsible for monitoring ESG risks, including climate risks and advise the Board of Directors in terms of the identification, management and control of ESG risk factors, while monitoring the Group’s risk appetite and underlying performance, as well as supervising the adequacy of the ESG internal control system, with special focus on a) the effectiveness of the risk management system to deal with the ESG risk drivers; and b) dealing with any instance of reputational risk related to ESG to which the Group may be associated to (directly or indirectly). The third line of defence assumes responsibility for the independent review of all ESG aspects through the annual work plans of the Audit Division. Identification of ESG risks Climate changes and environmental degradation factors are elements that potentially affect economic activity, through factors related with issues such as climate changes (mitigation, and adaptation), sustainable use and protection of hybrid and marine resources, transition towards a circular economy, prevention and control of pollution, protection and restoration of biodiversity (cf. EU Taxonomy). The materialisation of these risks fundamentally stems from the exposure of Millennium bcp's banking portfolio to customers, counterparties and invested assets whose performance may be affected or contribute to the negative impacts of climate change and other environmental factors. These factors may generate negative financial impacts which are identified and assessed by means of two main dimensions: • Physical risk factors: arising from the physical effects of climate change and environmental degradation. They should be categorized as a) severe risks, if they arise from extreme weather events such as wildfires or floods; b) chronic risks, if they arise from progressive changes in weather and climate patterns or from a gradual loss of natural ecosystems; • Transition risk factors: are the risks of any negative financial impact arising from the effort, in progress or to happen in the future, of transition into a low-carbon and environmentally sustainable economy. These may result, for example, from technological changes, the impact of public policies or behavioural changes in terms of demand for goods or services (including banking services); • The biodiversity or nature-related risks: The depreciation of natural capital, which in this context encapsulates the environmental-driven risks, is another key component of a holistic approach to C&E concerns. Natural capital refers to the world’s stocks of natural assets which include geology, soil, air, water and all living things as well as the organization and distribution of ecosystems. The depreciation of natural capital undermines the ability of nature to provide ecosystem services (provisioning services, such as food, raw materials and fresh water; maintenance and regulating services, such as climate, water and air quality regulation, pollination, and pest and disease control; and cultural services, supporting recreation, mental and physical health, and spiritual and religious values) on which the Human society, economies and other species rely. Natural capital degradation can have chronic as well as acute economic effects. The materialisation of social risks is also assessed, considering the issues related with rights, well-being and interests of persons and communities and include factors such as (in)equality, health, diversity, inclusion, labour relations, workplace health and safety, human capital and communities. In addition, the governance risk factors are also identified by Millennium bcp, through issues relating to leadership, executive remuneration, shareholder rights, corruption and bribery, management and prevention of conflicts of interest, quality of internal control and independent reviews/auditing, transparency and good tax practices, for example. A methodology for assessing the materiality of ESG risks was developed in order to determine the potential impact of those risks on the Bank’s profile. 2023 REPORT & ACCOUNTS 656 | Management and monitoring principles ESG risks management and respective strategy follows a different logic compared to 'traditional' risks, which are based on short-term timeframes. In contrast, the materialization of ESG risks is expected to occur over extended timeframes, which is why the establishment of strategy and risk appetite follows different timeframes. For example, if the assessment of physical (severe) risks can determine an action strategy more focused on the short term (e.g., considering the establishment of additional mitigation measures, at the level of policies for granting credit and insurance policy), the transition risks justify a more structural approach, based on collecting information, evaluating customers and monitoring their performance over time. From this perspective, Millennium bcp's management of ESG impacts follows the following principles: • Establishment of a responsible corporate financing policy, which excludes or conditions the Group's operations in sectors and/or activities with greater environmental and social impact; • Integration of the strategy for managing risks arising from ESG factors into the Bank's global sustainability plan, which steers the integration of the ESG dimension into business processes, establishing goals, timelines and a model for controlling proper observance; • Communication Transparency: The Bank publicly discloses its sustainability objectives and key practices, as well as its management of ESG (Environmental, Social, and Governance) impact factors. This allows all stakeholders to assess the robustness of its approach, including its exposure to risks arising from ESG factors; • Regular Monitoring of Exposure to Risks Arising from ESG Factors: This is done through established management information routines for each risk category; • Internal Standardization of ESG References: This involves implementing a corporate taxonomy that enables the identification and classification of exposures demonstrating characteristics that actively support the transition of the Portuguese and European economies; • Focus on Credit Risk Management: This is achieved through models that facilitate the integration of the ESG dimension in the risk assessment of the bank's key companies/clients. This ensures that business decisions incorporate an evaluation of the primary impacts of ESG factors; • Collection and Structuring of Information: Utilizing public sources and information provided directly by clients, this approach aims to enhance understanding of clients' environmental performance and potential financial impacts associated with any limitations in that performance. The operationalization of these principles is facilitated through an internal policy for managing risks arising from ESG factors, which establishes the following key risk tools: • Regular assessment of the materiality of risks arising from ESG factors to confirm alignment with risk appetite and the need for implementing mitigation actions; • Methodologies for assessing risks arising from ESG factors integrated into credit risk assessment models. • Risk classification methodologies at the portfolio level, allowing the identification of sectors, companies, and exposures most susceptible to transition and/or physical risks and/or nature-related; • Models for quantifying financed greenhouse gas emissions, fostering strategic discussions regarding the management of these emissions and their alignment (in the long term) with the goals of the Paris Agreement; • Sensitivity analyses and stress tests focusing on climate risks. Climate risk stress tests The Bank uses sensitivity analysis methodologies and stress tests on the risks arising from ESG factors (with a focus on the climate risk component). Considering the horizons of materialization of ESG risks, this is an important risk management technique, which allows the assessment of the impacts of climate change (and respective scenarios) on the financial variables that affect the value of Millennium bcp's banking portfolio. Based on their results, new exposures at risk may be identified that require the Bank to take additional management measures to mitigate the impacts of climate risks. 2023 REPORT & ACCOUNTS | 657 49. Contingent liabilities and other commitments In accordance with accounting policy 1.U3, the main contingent liabilities and other commitments under IAS 37 are the following: 1. In 2012, the Portuguese Competition Authority ("PCA") initiated an administrative proceeding relating to competition restrictive practices (no. PRC 2012/9). On 6 March 2013, unannounced inspections were conducted in the premises of Banco Comercial Português, S.A. ("BCP" or "Bank") and other credit institutions, where documentation was seized to investigate allegations of a commercially sensitive information exchange between Portuguese banks. The administrative proceeding was subject to judicial secrecy by the PCA, as the publicity of the process would not be compatible with the interests of the investigation and with the rights of the investigated companies. On 2 June 2015, the Bank was notified of the PCA’s statement of objections (“SO”) in connection with the administrative offence no. 2012/9, by which the Bank is accused of participating in a commercially sensitive information exchange between other fourteen banks related to retail credit products, namely housing, consumer and small and medium enterprises credit products. The proceedings, including the deadline to submit a response to the SO, were suspended for several months between 2015 and 2017, following the appeals lodged by some defendants (including the Bank) before the Portuguese Competition, Regulation and Supervision Court (“Competition Court”) on procedural grounds (namely, on the right to have access to confidential documents which were not used as evidence by the Authority – for several months, the PCA denied the Defendant’ right to have access to confidential documents not used as evidence). In the end of June 2017, the suspension on the deadline to reply to the SO was lifted. On 27 September 2017, BCP submitted its reply to the statement of objections. A non-confidential version of the Bank’s defence was sent to the PCA, at the latter’s request, on 30 October 2017. The witnesses indicated by the Bank were interrogated by the PCA in December 2017 (although without the presence of BCP’s legal representatives). In May 2018, the PCA refused the BCP’s application for confidential treatment of some of the information in the Bank’s reply to the SO, having also imposed that the Bank protects the confidential information of the co-defendants (providing a summary of the information). On 1 June 2018, the Bank filed an appeal with the Competition Court, which, upholding the appeal, concluded that the PCA infringed on the right to a prior hearing. Complying with the judgment, in November 2018, the PCA notified the Bank of its intention to deny the application for confidential treatment of some of the information included in the Bank’s defence; subsequently, in January 2019, it requested BCP to provide summaries for the co-defendants’ confidential information. The Bank filed an appeal before the Competition Court, which ruled in favour of BCP, as it considered that the elaboration by the Bank of summaries for its co-defendants’ confidential information an illegitimate burden. In April 2019, at the PCA’s request, BCP declared to be in favour of the re-examination of its witnesses, requested in its defence and previously held. The witnesses were re-inquired on 16-17 April 2019 with the presence of the Bank’s legal representatives. The PCA denied the request of BCP to be allowed to conduct cross-examination of the witnesses appointed by its co- defendants. The Bank appealed to the Competition Court, which denied the appeal, through a decision which was latter upheld by the Lisbon Court of Appeal. BCP then lodged an appeal before the Portuguese Constitutional Court for breach of the constitutional right of defence. The Constitutional Court dismissed the appeal on 29 April 2021, on the grounds that the requested cross-examination was not required by the Portuguese Constitution, at that stage of the proceedings. On 12 August 2020, the Bank lodged a complaint before the European Court of Human Rights on this matter. On 2 July 2019, the Bank submitted its observations to the PCA’s report on complementary evidence measures. 2023 REPORT & ACCOUNTS 658 | On 3 June 2019, BCP was notified of the partial dismissal of the complementary evidence measures it had requested in its reply to the SO, which it judicially contested. By judgment of September 2019, the Competition Court declared the nullity of the PCA’s decision, for breach of the right of the parties to be heard on the PCA’s draft decision. The Bank appealed to the Lisbon Court of Appeal in what concerned the limitation by the Competition Court of the effects of the nullity declaration of the PCA’s decision. Although this appeal was ultimately admitted by the panel of judges of the Lisbon Court of Appeal, it ends up being denied. In order to give compliance to BCP’s right to be heard, the PCA notified the BCP of its intention to reject the above- mentioned complementary evidence measures. Following BCP’s observations in November 2019, the PCA adopted its final decision rejecting the measures, which was judicially contested by the BCP in December 2019. In March 2020, the Competition Court rejected the appeal. This judgment was upheld by the Lisbon Court of Appeal in October 2020. On 9 September 2019, the PCA adopted its final decision in this proceeding, fining the Bank in a Euros 60 million fine for its alleged participation in an information exchange system with its competitors in the housing, consumer and SME credit segments. The BCP considers that the Decision contains serious factual and legal errors, having, on 21 October 2019, filed an appeal before the Competition Court requesting the annulation of the Decision and the suspensory effect of the appeal. On 8 May 2020, BCP’s appeal was admitted. On 8 June 2020, the BCP submitted a request before the Court, claiming that the rule according to which appeals do not have, in principle, suspensory effect violates the Portuguese Constitution, submitting elements aimed at demonstrating considerable harm in the advance provisional payment of the fine, and offering a guarantee in lieu (indicating the respective percentage of the fine to be offered as a guarantee). On 14 December 2020, a hearing was held before the Competition Court, and a consensual solution was reached between the PCA and the defendant banks, including BCP, as to the dosimetry (i.e., 50% of the amount of the fine) and the forms of the guarantee to be provided, in order for the appeal of the PCA’s decision to have suspensory effect. On 21 December 2020, BCP submitted a bank guarantee issued by the BCP, which was accepted by the Competition Court. On 1 March 2021, the Competition Court notified BCP that the guarantee had been presented in a timely manner and in the agreed form, and, as a result, attributed suspensory effect to the appeal. By order of 20 March 2021, the Competition Court lifted the judicial secrecy and informed the appellants that the trial would, in principle, start in September 2021. On 9 July 2020, the BCP requested the Court to declare the nullity of the fining decision of the PCA for failure to assess the economic and legal context, as determined by the recent case-law of the Court of Justice of the European Union. The Competition Court clarified that this and other prior questions would not be assessed before the hearing phase. On 13 January 2021, BCP was notified of an application submitted by "Associação Ius Omnibus – Nova Associação de Consumidores" to the Competition Court asking it to have access to a non-confidential version of the file, based on the need to assert the “rights to indemnification of the consumers whose rights and interests it represents, and the possible exercise and proof of those rights in the context of an action for damages”. On the same date, BCP was notified by the Competition Court of its decision authorizing the news agency "Lusa" to access the file of the administrative phase of the case. BCP appeal of this decision to the Appeal Court of Lisbon, on 25 January 2021 and opposed to the request of "Ius Omnibus" on 2 February 2021. On 20 March 2021, the Competition Court determined: (i) the lifting of the judicial secrecy; (ii) the forwarding to the Public Prosecutor of the appeal of BCP against the decision of the Competition Court relating to "Lusa", for reply; (iii) the provisional start date of the judgement hearing on September 2021, having requested suggestions by the co- appellants for venues. By decision of 9 April 2021 of the Competition Court, a preparatory hearing took place on 30 April 2021 for discussion of issues precedent to the begging of the judgment hearings, in which the procedures relating to the treatment of confidential information of the co-appellants in the appeals was defined, as well as the conditions relating to access to file. The Competition Court also set forth preliminary dates for the judgement hearing and scheduled a preparatory hearing for 7 July 2021. On 28 June 2021, BCP was notified by the Competition Court to reply to the requests submitted by some of the co- appellants and confirm that all confidential information had been duly eliminated from non-confidential versions submitted by each co-appellant. The Competition Court also determined that the hearing of 7 July 2021 was cancelled and its object would be transferred to the next hearing date (6 September 2021). 2023 REPORT & ACCOUNTS | 659 On 8 July 2021, BCP presented its reply to the notification of 28 June 2021, having also requested confirmation in relation to the scheduling of the judgement hearing, namely confirmation of whether it was actually scheduled for 6 September 2021 the preparatory hearing and the start of the judgement hearing sessions. Several representatives of the banks raised the question of the possible unconstitutionality of the seizure proceedings of e-mail messages used as evidence in the PCA’s decision, which objection appeal will now take place. This issue was raised bearing in mind the recent Decision of the Constitutional Court no. 687/2021 on the administrative offence case no. 225/15.4YUSTR-W. A petition on this matter was filed with the Court on 10 October 2021, requesting the Court to take a position on the matter before the beginning of the trial. The Court issued an order rejecting the banks' request to rule on those nullities raised by them, having refused to prohibit the use during the judgment of electronic messages seized, allowing witnesses to be confronted with their content. The requesting banks lodged an appeal against this order, which was admitted by the Lisbon Court of Appeal. On 28 April 2022, TCRS ("Tribunal da Concorrência, Regulação e Supervisão") handed down a decision under the scope of Proc. 225/15.4YUSTR-W, regarding the appeal to challenge the decision of the Portuguese Competition Authority of September 2019 (PRC/2012/09), which imposed fines on a number of banking institutions for alleged violation of competition rules in virtue of participating in a process of exchanging information on mortgage loans, consumer credit and credit to SMEs. In this extensive decision, TCRS lists the facts given as proven, bearing in mind the testimonial evidence produced and the documents attached to the case file, both in the administrative phase and in the trial, however, at this stage, the TCRS does not yet conclude by the legal framework of the facts as proven, nor, consequently, by the imposition of fines, having the TCRS instead chosen to make the reference for a preliminary ruling to the Court of Justice of the European Union (CJEU) in order to answer two preliminary questions that it sets out, requesting that this reference follows further terms in the form of an accelerated procedure, taking into account the risk of prescription. It should be noted that it is not up to the CJEU to adjudicate on the case, but only to interpret the rules of community law by answering in abstract to the questions submitted to it by the referring court. CJEU rejected TCRS's request for an accelerated procedure and for priority to be given in the assessment of this case, hence CJEU's assessment must be given within the normal deadline for these prejudicial proceedings, after which the judgment of this Court will then be concluded. The Bank has been notified by the CJEU to, if it wishes, submit its written observations, and must do so by 2 September 2022. The Bank forwarded its observations to the CJEU on 1 September 2022. The Oral Hearing took place on 22 June 2023 at the CJEU, and the parties' lawyers made their respective presentations and answered the questions that the Judge and the Advocate General intended to raise. The reading of the Opinion by the Advocate General was scheduled to take place on 5 October 2023. If this judicial ruling so determines, the trial may be "reopened" for some additional evidence to be produced. This not being the case, the CRSC will deliver the corresponding sentence, which can also be appealed to the Lisbon Court of Appeal and the Constitutional Court. After receiving an answer from the CJEU, it is expected that the CRSC will be able to issue a Judgment, where it may cancel, confirm, reduce or increase the fine applied by the CA (Competition Authority) to the Bank. On the appeal submitted, and at the trial hearing, arguments of fact and law were presented, which we believe to be solid and sufficient to justify the acquittal of BCP from the conviction against it. However, given the complexity of the case, its several legal and extra-legal implications, and the position that the CRSC has already taken on the facts, it is not possible to anticipate the final decision of the case. The Bank does not anticipate that this lawsuit may result in any responsibility that could have impact on the respective financial statements. 2023 REPORT & ACCOUNTS 660 | The Advocate General's conclusions were made public on 5 October 2023: 1) Article 101 TFEU must be interpreted as meaning that it does not preclude the classification as a restriction of competition by object of an exchange between competitors of information concerning the commercial conditions applicable to transactions (in particular, current and future credit spreads and risk variables) and production figures for home loan offers, corporate lending offers and consumer credit offers in the banking sector, where such a practice has artificially increased transparency and reduced uncertainty as to the functioning of the market. 2) Article 101 TFEU does not preclude such classification where it has been impossible to identify or establish any gain in efficiency or any uncertain or positive effect on competition resulting from that exchange of information. The Advocate General's conclusions are not in the nature of a judgement by the CJEU, they are not binding on the Court of Justice, and it is therefore necessary to await the subsequent delivery of the CJEU judgement which in that case will set out the interpretation of Community law on the questions referred to it for a preliminary ruling by the TCRS in case no. 225/15.4YUSTR-W. On 11 March 2024, BCP, along with 8 banking institutions, was served in order to, once willing, contest a “popular declaratory action of condemnation in the form of a common process aimed at protecting competition, the rights of consumers, and diffuse and/or collective interests associated with the consumption of goods and services”, an action brought by the Ius Omnibus Association, under the terms n.º 2/24.1YQSRT at the TCRS, entirely based on the alleged infringement of competition in mortgage and consumer credit transactions declared in the AdC Decision of 9 September 2019 (PRC/2012/09), a decision that was subject to judicial opposition by BCP, an opposition that has not yet been definitively judged. The Bank is analysing that class action in order to present its response in a timely manner. 2. On 7 June 2022, the Bank was notified by the Court to contest a lawsuit brought by Fundação José Berardo and José Manuel Rodrigues Berardo against Banco Comercial Português, S.A., Caixa Geral de Depósitos, S.A., Novo Banco, S.A. and Banco Espírito Santo, S.A., in liquidation. In this lawsuit, the Plaintiffs allege that they incurred in a mistake regarding the endogenous situation of the defendant banks and the financial system, without which they would have sold the pledged shares and paid their loans. If this is not the case, the plaintiffs request the defendant banks to be ordered to pay compensation to Fundação José Berardo for damages caused by breach of contract, since the moment when they should have been sold in execution of the pledge due to failure to verify coverage ratios until the moment when they were sold, that is, the difference between the price at which the pledged shares would have been sold on the dates of coverage ratios default and the price at which they were actually sold, plus interest and all other loan charges since those dates, in any case the global amount of compensation not being less than Euros 800,000,000. In any case, the plaintiffs ask the defendant banks to be jointly condemned to pay José Manuel Rodrigues Berardo compensation for moral damages, in the already calculated amount of Euros 100,000,000 and also in the amount that is settled as soon as the full extent of the damages is known. In the meantime, through Order No. 8765/2022 of Mr. Secretary of State for the Presidency of the Council of Ministers, published in Republic Diary, Series 2, part C, of 19 July 2022, the Plaintiff of this lawsuit, Fundação José Berardo, was declared extinct. This decision was legally contested by the José Berardo Foundation, and in April 2023, the Administrative and Fiscal Court of Funchal cancel the decision that ordered its extinction. Dissatisfied, the Portuguese State appealed against this latter and is awaiting the outcome. The lawsuit was contested on 27 September 2022 and is awaiting subsequent terms. Nothing relevant to the judgment on the merit of the case happened. The lawsuit is suspended until the motions submitted by FJB in the execution filed by the Banks (8489/19.8T8LSB) have been definitively judged. The Bank does not anticipate that this lawsuit may result in any responsibility that could have impact on the respective financial statements. 2023 REPORT & ACCOUNTS | 661 3. On 3 January 2018, Bank Millennium received decision of the Chairman of the Office for Protection of Competition and Consumers (OPCC Chairman), in which the OPCC Chairman found infringement by Bank Millennium of the rights of consumers. In the opinion of the OPCC Chairman the essence of the violation is that Bank Millennium informed consumers (it regards 78 agreements) in responses to their complaints, that the court verdict stating the abusiveness of the provisions of the loan agreement regarding exchange rates does not apply to them. According to the position of the OPCC Chairman the abusiveness of contract’s clauses determined by the court in the course of abstract control is constitutive and effective for every contract from the beginning. As a result of the decision, Bank Millennium was obliged to: 1) send information on the UOKiK’s decision to the said 78 clients; 2) place the information on decision and the decision itself on the website and on Twitter; 3) to pay a fine amounting to PLN 20.7 million (Euros 4.8 million). Bank Millennium lodged an appeal within the statutory time limit. On 7 January 2020, the first instance court dismissed Bank Millennium's appeal in its entirety. Bank Millennium appealed against the judgment within the statutory deadline. The court presented the view that the judgment issued in the course of the control of a contractual template (in the course of an abstract control), recognizing the provisions of the template as abusive, determines the abusiveness of similar provisions in previously concluded contracts. Therefore, the information provided to consumers was incorrect and misleading. As regards the penalty imposed by OPCC, the court pointed out that the policy of imposing penalties by the Office had changed in the direction of tightening penalties and that the court agrees with this direction. In Bank Millennium's assessment, the Court should not assess Bank Millennium's behaviour in 2015 from the perspective of today's case-law views on the importance of abstract control (it was not until January 2016 that the Supreme Court's resolution supporting the view of the OPCC Chairman was published), the more penalties for these behaviours should not be imposed using current policy. The above constitutes a significant argument against the validity of the judgment and supports the appeal which Bank Millennium submitted to the Court of second instance. The second instance court, in its judgment of 24 February 2022, completely revoked the decision of the OPCC Chairman. On 31 August 2022, the OPCC Chairman lodged a cassation appeal to the Supreme Court. Bank Millennium believes that the prognosis regarding the litigation chances of winning the case before the Supreme Court is positive. Bank Millennium (along with other banks) is also a party to the dispute with OPCC, in which the OPCC Chairman recognized the practice of participating banks, including Bank Millennium, in an agreement aimed at jointly setting interchange fee rates charged on transactions made with Visa and Mastercard cards as restrictive of competition, and by decision of 29 December 2006 imposed a fine on Bank Millennium in the amount of PLN 12.2 million (Euros 2.8 million). Bank Millennium, along with other banks, appealed the decision. In connection with the judgment of the Supreme Court and the judgment of the Court of Appeal in Warsaw of 23 November 2020, the case is currently pending before the court of first instance - the Court of Competition and Consumer Protection. Bank Millennium has created a provision in the amount equal to the imposed penalty. 4. On 22 September 2020, Bank Millennium received decision of the Chairman of the Office for Protection of Competition and Consumers (OPCC Chairman) recognising clauses stipulating principles of currency exchange applied in the so-called anti-spread annex as abusive and prohibited the use thereof. Penalty was imposed upon Bank Millennium in the amount of PLN 10.5 million (Euros 2.4 million). Penalty amount takes account of two mitigating circumstances: cooperation with the Office for Protection of Competition and Consumers and discontinuation of the use of provisions in question. Bank Millennium was also requested, after the decision becomes final and binding, to inform consumers, by registered mail, to the effect that the said clauses were deemed to be abusive and therefore not binding upon them (without need to obtain court’s decision confirming this circumstance) and publish the decision of the case on Bank Millennium’s website. 2023 REPORT & ACCOUNTS 662 | In the decision justification delivered in writing the OPCC Chairman stated that FX rates determined by Bank Millennium were determined at Bank Millennium’s discretion (on the basis of a concept, not specified in any regulations, of average inter-bank market rate). Moreover, client had no precise knowledge on where to look for said rates since provision referred to Reuters, without precisely defining the relevant site. Provisions relating to FX rates in Bank Millennium’s tables were challenged since Bank Millennium failed to define when and how many times a day these tables were prepared and published. In justification of the decision, the OPCC Chairman also indicated that in the course of the proceeding, Bank Millennium presented various proposed solutions, which the OPCC Chairman deemed to be insufficient. Bank Millennium appealed against the said decision within statutory term. On 31 March 2022, the first instance court revoked the entire decision of the Chairman of the OPCC. On 23 May 2022, the Chairman of the OPCC filed an appeal. On 26 October 2022, the Court of Appeals changed the judgment of the court of first instance and shared the position of the Chairman of the OPCC as to the abusiveness of the provisions regarding the determination of exchange rates in the annexes concluded with foreign currency borrowers. On 21 November 2022, the Court of Appeal, at the request of Bank Millennium, suspended the execution of the judgment until the end of the cassation proceedings. On 30 January 2023, Bank Millennium filled a cassation appeal to the Supreme Court. 5. Bank Millennium is a defendant in court proceedings brought by PKN Orlen SA, in which the subject of the dispute is the amount of the interchange fee and the plaintiff demands payment of PLN 635.7 million (Euros 146.3 million). The plaintiff in this proceeding alleges that the banks acted under an agreement restricting competition on the acquiring services market by jointly setting the level of the national interchange fee in the years 2006-2014. In this case, Bank Millennium was sued jointly with another bank and card organizations. According to current estimates of the risk of losing a dispute in these matters, Bank Millennium did not create a provision. In addition, we point out that Bank Millennium participates as a side intervener in four other proceedings regarding the interchange fee. Other banks are the defendant. Plaintiffs in these cases also accuse banks of acting as part of an agreement restricting competition on the acquiring services market by jointly setting the level of the national interchange fee in the years 2008-2014. - A lawsuit brought up by shareholder of PCZ S.A. in bankruptcy (PHM, then the European Foundation for Polish-Belgian Cooperation - EFWP-B, currently called The European Foundation for Polish-Kenyan Cooperation) against Bank Millennium S.A., worth of the dispute PLN 521.9 million (Euros 120.2 million) with statutory interest from 5 April 2016 until the day of payment. The plaintiff filed the suit dated 23 October 2015 to the Regional Court in Warsaw; the suit was served to Bank Millennium on 4 April 2016. According to the plaintiff, the basis for the claim is damage to their assets, due to the actions taken by Bank Millennium and consisting in the wrong interpretation of the Agreement for working capital loan concluded between Bank Millennium and PCZ S.A., which resulted in placing the loan on demand. Bank Millennium is requesting complete dismissal of the suit, stating disagreement with the charges raised in the claim. Supporting the position of Bank Millennium, Bank Millennium’s attorney submitted a binding copy of final verdict of Appeal Court in Wrocław favourable to Bank Millennium, issued in the same legal state in the action brought by PCZ SA against Bank Millennium. On 10 May 2023, the Court of first instance announced a judgment dismissing the claim in its entirety. The verdict is not final, the plaintiff filed an appeal, the date of the appeal hearing has not yet been set. As at 31 December 2023, the total value of the subjects of the other litigations in which the Bank Millennium Group’s companies appeared as defendant, stood at PLN 5,547.3 million (Euros 1,277.1 million) (excluding the class actions described below and in note 57). In this group the most important category are cases related with FX loans mortgage portfolio. 6. On 3 December 2015 a class action was served on Bank Millennium. A group of Bank Millennium's debtors (454 borrowers party to 275 loan agreements) is represented by the Municipal Consumer Ombudsman in Olsztyn. The plaintiffs demanded payment of the amount of PLN 3.5 million (Euros 0.8 million), claiming that the clauses of the agreements, pertaining to the low down payment insurance, are unfair and thus not binding. Plaintiff extended the group in the court letter filed on 4 April 2018, therefore the claims increased from PLN 3.5 million (Euros 0.8 million) to over PLN 5 million (Euros 1.2 million). 2023 REPORT & ACCOUNTS | 663 Actual status: On 1 October 2018, the group's representative corrected the total amount of claims pursued in the proceedings and submitted a revised list of all group members, covering the total of 697 borrowers – 432 loan agreements. The value of the subject of the dispute, as updated by the claimant, is PLN 7,371,107.94 (Euros 1,696,986). By the resolution of 1 April 2020 the court established the composition of the group as per request of the plaintiff and decided to take witness evidence in writing. The hearing date was set for 18 October 2024. As at 31 December 2023, there were also 138 individual court cases regarding LTV (loans-to-value) insurance (cases in which only a claim for the reimbursement of the commission or LTV insurance fee is presented). 7. On 13 August 2020, Bank Millennium received lawsuit from the Financial Ombudsman. The Financial Ombudsman, in the lawsuit, demands that Bank Millennium and the Insurer (TU Europa) be ordered to discontinue performing unfair market practices involving, as follows: - presenting the offered loan repayment insurance as protecting interests of the insured in case when insurance structure indicates that it protects Bank Millennium’s interests; - use of clauses linking the value of insurance benefit with the amount of borrower’s debt; - use of clauses determining the amount of insurance premium without prior risk assessment (underwriting); - use of clauses excluding insurer’s liability for insurance accidents resulting from earlier causes. Furthermore, the Ombudsman requires Bank Millennium to be ordered to publish, on its website, information on use of unfair market practices. The lawsuit does not include any demand for payment, by Bank Millennium, of any specified amounts. Nonetheless, if the practice is deemed to be abusive it may constitute grounds for future claims to be filed by individual clients. The case is being examined by the court of first instance. 8. By 31 December 2023, Bank Millennium recorded the receipt of 63 lawsuits by borrowers of mortgage loans in PLN for reimbursement of benefits provided under the loan agreement. One final judgment was issued dismissing the borrowers' claim. The borrowers' allegations focus on the WIBOR ratio as an incomprehensible, unverifiable element affecting the consumer's liability, as well as the issue of insufficient information on the effects of variable interest rates provided to the consumer by the bank before the conclusion of the contract. Based on publicly available information, it can be assumed that there will be an increase in the number of lawsuits concerning mortgage loans in PLN. This phenomenon affects the entire sector of banking services. It is possible that a "new business model" will be created in the area of law firms, which consists in questioning mortgage contracts containing a variable interest rate clause based on the WIBOR reference index. On 29 June 2023, the Polish Financial Supervision Authority (KNF) announced that it had assessed the ability of the WIBOR interest rate reference index to measure the market and economic realities. The KNF stated that the WIBOR interest rate reference index is capable of measuring the market and economic realities for which it was established. According to the Commission's assessment, the WIBOR ratio responds appropriately to changes in liquidity conditions, changes in central bank rates and economic realities. On 26 July 2023, the Polish Financial Supervision Authority (KNF) presented its position on legal and economic issues related to mortgage loan agreements in Polish currency in which the WIBOR interest rate reference index is used. This position can be used in court proceedings and can then be treated as an 'amicus curiae' opinion. The Polish Financial Supervision Authority stated that the WIBOR reference index meets all legal requirements. In the opinion of the Polish Financial Supervision Authority, there are no grounds to question the credibility and legality of WIBOR, in particular in the context of the use of this indicator in mortgage loan agreements in the Polish currency. 2023 REPORT & ACCOUNTS 664 | 9. By 31 December 2023, Bank Millennium received 419 lawsuits in which the plaintiffs (both clients and companies purchasing claims), alleging violation of the information obligations provided in Art. 30 of the Consumer Credit Act, demand reimbursement of interest and other costs incurred in connection with taking out a loan (free loan sanction within the meaning of Article 45). As of 31 December 2023, 16 cases have been legally concluded, and in all these cases the Bank won the dispute. The Bank believes that the prognosis regarding the litigation chances of winning the remaining disputes are positive and therefore it has not created provisions in this respect. 10. On 22 December 2023, the Polish Financial Supervision Authority (KNF) started administrative proceedings against bank Millennium S.A. that might result in a penalty being imposed on the Bank under Article 176i(1)(4) of the Act on trading in financial instruments. At this stage of the proceedings, the amount of the potential penalty cannot be estimated. 11. On 1 October 2015, a set of entities connected to a group with debts in default to BCP amounting to Euros 170 million, resulting from a loan agreement signed in 2009 - debts already fully provisioned in the Bank's accounts -, filed against BCP, after receiving the Bank's notice for mandatory payment, a lawsuit requesting that: a) the court declares that two of the defendants are mere fiduciary owners of 340,265,616 BCP shares, since they acted pursuant to a request made by the Bank for the making of the respective purchases, and also that the court orders the cancellation of the registration of those shares in the name of those companies; b) the court declares the nullity of the financing agreement established between the plaintiffs and the Bank, due to relative simulation; c) the court sentences the Bank, in accordance with the legal regime of the mandate without representation, to become liable for the amounts due to the institution, abstaining from requesting those amounts to the plaintiffs and to refund them the cost they incurred while complying with that mandate, namely, Euros 90,483,816.83 regarding Banco Espírito Santo, S.A. (BES) and Euros 52,021,558.11 regarding Caixa Geral de Depósitos, S.A. (CGD), plus default interests; d) the amount of the lawsuit determined by the plaintiffs is Euros 317,200,644.90; e) the Bank opposed and presented a counter claim, wherein it requests the conviction, namely, of a plaintiff company in the amount of Euros 185,169,149.23 for the loans granted, plus default interests and stamp tax. The court issued a curative act and already ascertained the factual basis that are proven and that must be proven. The expertise was carried out and the expert report was submitted. There is a deadline for completing and concluding the expert report, in its final version, since the Bank presented a complaint about various aspects of the expert's report, in its first version. The expertise was carried out and the expert report submitted. In November 2022 the Bank complained about the Experts' Report: (i) they considered documents that the Court had ordered to be removed from the proceedings, which had not been done due to the Court's inertia, (ii) they considered written notes on documents, that may have been written by Mr. Gois Ferreira, and (iii) they did not consider much information that was contained in the statements, and (iv) they made errors in the calculation of interest and the amount of financing granted. In view of the experts' new reply, BCP claimed all the expertise, in March 2023. For the Court's final decision, BCP added, in June this year, thousands of documents supporting its position. 2023 REPORT & ACCOUNTS | 665 12. Resolution Fund Resolution measure of Banco Espírito Santo, S.A. On 3 August 2014, with the purpose of safeguarding the stability of the financial system, Banco de Portugal applied a resolution measure to Banco Espírito Santo, S.A. (BES) in accordance with the Article 145-C (1.b) of the Decree-law no. 298/92, of 31 December 1992, as amended (the “Banking Law”), which entailed, inter alia, the partial transfer of assets, liabilities, off-balance sheet items and assets under management into a transition bank, Novo Banco, S.A. (Novo Banco), incorporated on that date by a decision issued by Banco de Portugal. Within the scope of this process, the Resolution Fund made a capital contribution to Novo Banco amounting to Euros 4,900 million, becoming, on that date, the sole shareholder. Further, in accordance with information published on the Resolution Fund’s website, the Resolution Fund borrowed Euros 4,600 million, of which Euros 3,900 million were granted by the Portuguese State and Euros 700 million by a group of credit institutions, including the Bank. As announced on 29 December 2015, Banco de Portugal transferred to the Resolution Fund the liabilities emerging from the “eventual negative effects of future decisions regarding the resolution process that may result in liabilities or contingencies”. On 7 July 2016, the Resolution Fund declared that it would analyse and evaluate the diligences to be taken, following the publication of the report on the result of the independent evaluation, made to estimate the level of credit recovery for each category of creditors under a hypothetical scenario of a normal insolvency process of BES on 3 August 2014. In accordance with the applicable law, when the BES liquidation process is over, if it is verified that the creditors, whose credits were not transferred to Novo Banco, would take on a higher loss than the one they would hypothetically take if BES had gone into liquidation right before the application of the resolution measure, such creditors shall be entitled to receive the difference from the Resolution Fund. On 31 May 2019, the Liquidation Committee of BES presented a list of all the acknowledged and a list of the non- acknowledged creditors before the court and the subsequent terms of the proceedings. These lists detail that the total acknowledged credits, including capital, remunerative and default interest amounts to Euros 5,056,814,588, of which Euros 2,221,549,499 are common credits and Euros 2,835,265,089 are subordinated claims, and no guaranteed or privileged claims exist. Both the total number of acknowledged creditors and the total value of the acknowledged credits and their ranking will only be ultimately determined upon the definitive judicial judgment of the verification and ranking of credits to be given in the liquidation proceedings. According to the Resolution Fund's 2022 Annual Report, the Resolution Fund filed an appeal against the list of creditors with the Judicial Court of the District of Lisbon, requesting the recognition of its claims. The appeal was upheld, and the Liquidation Committee of BES filed an appeal. In 2023, the Lisbon Court of Appeal rejected the appeal filed by the Liquidation Committee of BES and, in favour of the position defended by the Resolution Fund, confirmed the decision of the Court of First Instance and the recognition, in the amount of Euros 1,242,568.9 thousand of the credits claimed by the Resolution Fund as privileged credits. In February 2023, the Liquidation Committee of BES filed a review appeal with the Supreme Court of Justice, which decision is expected during 2023. On 11 August 2023, the BES Liquidation Committee announced that this amount had been recognized and qualified as privileged by a judgment of the Supreme Court of 11 July 2023. On 10 August 2023, an order was issued in the BES liquidation proceedings, which reads as follows: "(...) On 11 July 2023, the Supreme Court of Justice dismissed the appeal filed by the Banco Espírito Santo, S.A. bankruptcy estate, recognizing that the Resolution Fund's claim is privileged in these proceedings. This means that only the Resolution Fund, as a creditor, will have its claim satisfied from the funds available to the Banco Espírito Santo, S.A. bankruptcy estate (...)". Following the resolution measure of BES, a significant number of lawsuits against the Resolution Fund was filed and is underway. According to note 20 of the Resolution Fund’s annual report of 2022, “Legal actions related to the application of resolution measures have no definitive legal precedents, which makes it impossible to use case law in its evaluation, as well as to obtain a reliable estimate of the associated contingent financial impact. (…) The Resolution Fund, supported by legal advice of the attorneys for these actions, and in light of the legal and procedural information available so far, considers that there is no evidence to cast doubt on their belief that the probability of success is higher than the probability of failure”. 2023 REPORT & ACCOUNTS 666 | According to note 22 of the Resolution Fund’s annual report of 2022, "In addition to the Portuguese courts, it is important to take into account the litigation of Novo Banco, S.A., in other jurisdictions, being noteworthy, for its materiality and respective procedural stage, the litigation in the Spanish jurisdiction. Regarding litigation in the Spanish jurisdiction, during the years 2018 to 2022, 12 (decisions) have become final and unappealable condemning Novo Banco, Spanish branch, as well as four sentences in relation to which due compensation has been requested from the Resolution Fund”. On 31 March 2017, Banco de Portugal communicated the sale of Novo Banco, where it states the following: "Banco de Portugal today selected Lone Star to complete the sale of Novo Banco. The Resolution Fund has consequently signed the contractual documents of the transaction. Under the terms of the agreement, Lone Star will inject a total of Euros 1,000 million in Novo Banco, of which Euros 750 million at completion and Euros 250 million within a period of up to 3 years. Through the capital injection, Lone Star will hold 75% of the share capital of Novo Banco and the Resolution Fund will maintain 25% of the share capital”. The terms agreed also included a Contingent Capital Agreement (CCA), under which the Resolution Fund, as a shareholder, undertakes to make capital injections if certain cumulative conditions are met related to the performance of a specific portfolio of assets and to the capital ratios of Novo Banco going forward. If these conditions are met, the Resolution Fund may be called upon to make a payment to Novo Banco for the lesser of the accumulated losses in the covered assets and the amount necessary to restore the capital ratios at the agreed levels. Any capital injections to be carried out pursuant to this contingent mechanism are limited to an absolute cap. The terms agreed also provide for mechanisms to safeguard the interests of the Resolution Fund, to align incentives as well as monitoring mechanisms, notwithstanding the limitations arising from State Aid rules. On 18 October 2017, following the resolution of the Council of Ministers no. 151-A/2017 of 2 October 2017, Banco de Portugal communicated the conclusion of the sale of Novo Banco to Lone Star, with an injection by the new shareholder of Euros 750 million, followed by a further capital increase of Euros 250 million by the end of 2017. Upon completion of the transaction, the status of Novo Banco as a bridge institution ceased, fully complying with the purposes of the resolution of BES. On 26 February 2018, the European Commission published the non-confidential version of its decision regarding the approval of State aid underlying Novo Banco’s sale process. This statement identifies the three support measures by the Resolution Fund and the Portuguese State that are part of the sale agreement associated with a total gross book value of around Euros [10-20] billion(1) that revealed significant uncertainties regarding adequacy in provisioning(2): (i) Contingent Capital Agreement (CCA) which allows Lone Star to reclaim, from the Resolution Fund, funding costs, realised losses and provisions related to an ex-ante agreed portfolio of existing loan stock, up to a maximum of Euros 3.89 billion, subject to a capital ratio trigger (CET1 below 8%-13%) as well as to some additional conditions(1)(2)(3); (ii) underwriting by the Resolution Fund of a Tier 2 instrument to be issued by Novo Banco up to the amount necessary (but no more than Euros 400 million). The amount that can be reclaimed by the Resolution Fund under the CCA is subject to the cap of Euros 3.89 billion(2); (iii) in case the Supervisory Review and Evaluation Process (“SREP”) total capital ratio of Novo Banco falls below the SREP total capital requirement, the Portuguese State will provide additional capital in certain conditions and through different instruments(2). According to the audit report on the management of Novo Banco conducted by the Court of Auditors and released on 12 July 2022, "the risk of triggering the additional capital mechanism (capital backstop), up to Euros 1.6 billion, provided for in the commitments made by the Portuguese State to ensure the viability of NB, exists”. According to an Investor Presentation dated January 2024, from Novo Banco’s, Novo Banco still has Euros 485 million under the MCC in addition to the Euros 209 million included in the capital call for 2021. The mechanism is in place until December 2025, date that can be extended, under certain conditions, by one additional year. (1) Exact value not disclosed by the European Commission for confidentiality reasons (2) As referred to in the respective European Commission Decision (3) According to 2018 Novo Banco’s earnings institutional presentation, the “minimum capital condition” is (i) CET1 or Tier 1 < CET1 or Tier 1 SREP requirement plus a buffer for the first three years (2017-2019); (ii) CET1 < 12% 2023 REPORT & ACCOUNTS | 667 According to a statement issued by the Resolution Fund on 13 February 2023, "the Ministry of Finance has disclosed that the European Commission intends to consider the restructuring process of Novo Banco as completed. The information disclosed today confirms the successful restructuring of Novo Banco, resulting from the combined execution of the restructuring plan agreed in 2017, under the sale transaction conducted by Banco de Portugal, and the sale agreements, namely the CCA, under which the Resolution Fund transferred to Novo Banco Euros 485 million, less than the maximum amount set in the contract (Euros 3,890 million). The completion of the restructuring of Novo Banco, is also another indicator that Novo Banco should not need to request any further payment to the Resolution Fund under the CCA, without prejudice to the ongoing litigation or that still may occur regarding the amounts already requested by Novo Banco in relation to past years and that the Resolution Fund considers that are not due. On the same day, Banco de Portugal issued the following statement "The conclusion of the Novo Banco restructuring process also results in the end of the backstop mechanism, which provided for the possibility, which was always considered remote, of the Portuguese State providing extraordinary support to Novo Banco in extreme scenarios. This mechanism protected Novo Banco and the national financial system from more adverse scenarios, which did not materialize. With the end of the backstop, the financial risk for the Portuguese State is eliminated". According to the 2018 Resolution Fund’s annual report, the Resolution Fund and Novo Banco have agreed that a Verification Agent - an independent entity which is essentially responsible for clarifying any differences that may exist between Novo Banco and the Resolution Fund regarding the set of calculations inherent to the CCA or regarding the practical application of the principles stipulated in the contract - is in charge of confirming that the perimeter of the mechanism is correct and that the balance sheet values of Novo Banco are being correctly reflected in the mechanism, as well as verifying the underlying set of calculations, namely by confirming the correct calculation of losses and the reference value of the assets. According to the 2022 Resolution Fund’s annual report, the Resolution Fund follows the work carried out by the Verification Agent, while specific analyses are being requested. The Resolution Fund disclosed on 17 June 2019 a set of clarifications related to the payment due in 2019 under the CCA with Novo Banco, namely: - For payments from the Resolution Fund to be made (limited to a maximum of Euros 3,890 million over the lifetime of the mechanism), losses on the assets under the contingent mechanism should be incurred and the capital ratios of Novo Banco should stand below the agreed reference thresholds; - The payment to be made by the Resolution Fund corresponds to the lower of the accumulated losses on the assets covered and the amount necessary to restore the capital ratios above the minimum reference threshold; - The reference capital ratios are, in 2017, 2018 and 2019, linked to the regulatory requirements applicable to Novo Banco (CET1 ratio of 11.25% and Tier 1 ratio of 12.75%), but, as from 2020, the reference ratio will correspond to a CET1 ratio of 12%; - The initial reference value of the portfolio comprising the CCA was, as of 30 June 2016, Euros 7,838 million (book value of the associated assets, net of impairments); In a statement dated 2 February 2024, the Resolution Fund clarifies that it has been informed of the Supreme Court's ruling on the appeal filed by Novo Banco, following the decision of the Lisbon Court of Appeal, which rejected the petition for annulment of the decision of the Court of Arbitration, issued in October 2021, relating to the first arbitration between the Resolution Fund and Novo Banco, which began in 2020. This ruling definitively confirms the validity and correctness of the position taken by the Resolution Fund in 2019, when it opposed being charged, through the CCM, for the impact of Novo Banco's intention to waive the transitional regime related to the implementation of IFRS 9. The Resolution Fund's action in this process resulted in a saving of its resources of Euros 169 million. Regarding the intervention of the Resolution Fund concerning the transitional regime of the implementation of the dynamic component of IFRS 9, Novo Banco estimates a positive impact on its own funds in the amount of Euros 171 million (which implies a reduction in the capital requirements that Novo Banco intended to pass on to the CCM in the amount of Euros 161.6 million). Accordingly, the Resolution Fund has an arbitration proceeding underway, also under the aegis of the International Chamber of Commerce, with a view to settling the difference between the parties. This process is in progress, and it is estimated that an award will be rendered in the first half of 2024. 2023 REPORT & ACCOUNTS 668 | According to a statement by the Resolution Fund on 3 September 2020, following the payment made in May 2019 by the Resolution Fund to Novo Banco in compliance with the CCA, a special audit determined by the Government was carried out. The information was presented by the independent entity that carried out the special audit, showed that Novo Banco has been operating with a strong influence of the vast legacy of non-productive assets, originated in BES, which resulted in impairment charges and provisions, but have also contributed to rendering Novo Banco’s internal procedures more robust. Regarding the exercise of the powers of the Resolution Fund under the CCA, the audit results reflect the adequacy of the principles and the adopted criteria. According to Resolution Fund’s annual report of 2022, Novo Banco submitted to the International Chamber of Commerce a request for arbitration to have recognized the right to receive an aggregate amount of Euros 165,441.9 thousand (divestment of Novo Banco's activity in Spain in the amount of Euros 147,441.9 thousand and valuation differences regarding a set of assets held by Novo Banco in the amount of Euros 18,000 thousand) which the Resolution Fund considered, and considers, not to merit the coverage of the CCM. On 3 May 2021, following the request of the Portuguese parliament in October 2020 to review the operations and management of Novo Banco that led to the need to transfer funds from the Resolution Fund to Novo Banco, the Resolution Fund announced that the audit report conducted by Tribunal de Contas (“Court of Auditors”) was released. The Court of Auditors concluded that the public financing of Novo Banco through the CCA contributed to the stability of the financial system, particularly as it avoided the bank’s liquidation and reduced systemic risk. According to the Resolution Fund, the audit does not identify any impediment to the fulfilment of commitments and contracts arising from BES’s resolution process, initiated in August 2014. On 9 September 2020, BCP informed that it has decided not to continue with the legal proceeding before the General Court of the European Union with a view to partially annul the European Commission’s decision regarding its approval of the CCA of Novo Banco. According to Novo Banco’s 2023 annual report (note 28), Novo Banco adhered to the Special Regime applicable to Deferred Tax Assets under Law No. 61/2014, of 26 August (REAID), according to which, the deferred tax assets recorded until 31 December 2015 can be converted into tax credits when the taxable entity reports an annual net loss, in accordance to the proportion of the amount of the said net loss to total equity at the individual company level, A special reserve was established with an amount identical to the tax credit approved, increased by 10%. The conversion rights are securities that entitle the State to require Novo Banco to increase its share capital by incorporating the amount of the special reserve and consequently issuing and delivering free of charge ordinary shares. The shareholders have the right to acquire the conversion rights attributed to the Portuguese State. According to the Resolution Fund’s 2022 annual report, under the terms of the sale of Novo Banco, the 75% of the share capital of Novo Banco held by Nani Holdings is not affected by the dilution associated with the REAID. On 17 December 2021, Novo Banco, carried out a capital increase in the amount of Euros 154,907.3 thousand, through the conversion of the rights that had been attributed to the State due to the conversion of the deferred tax assets of Novo Banco, into tax credits, with reference to the 2015 tax period, under the REAID. As of that date, the State became a shareholder of Novo Banco, having been attributed a participation corresponding to 1.56% of the share capital. Later, on 4 November 2022, Novo Banco made a further capital increase of Euros 249,753 thousand conferred the State an additional stake of 4.13% in Novo Banco. In April 2023, a capital increase of Euros 263,183 thousand was carried out in April 2023 through a rights conversion related to 2018 and 2019, which gave the State an additional stake of 6.27% in Novo Banco. With reference to the 2020 financial year, conversion rights representing 3.64% of the capital were issued which will only dilute, in accordance with the sale contract, the Resolution Fund's participation if the shareholders do not exercise their potestative right to acquire the conversion rights. According to Novo Banco's 2023 annual report, Lone Star owns 75% of Novo Banco, the Resolution Fund 13%, and the Portuguese State 12%. 2023 REPORT & ACCOUNTS | 669 Resolution measure of Banif – Banco Internacional do Funchal, S.A. On 19 December 2015, the Board of Directors of Banco de Portugal announced that Banif “was failing or likely to fail” and started an urgent resolution process of the institution through the partial or total sale of its activity, which was completed on 20 December 2015 through the sale to Banco Santander Totta S.A. (BST) of the rights and obligations of Banif, formed by the assets, liabilities, off-balance sheet items and assets under management. The largest portion of the assets that were not sold, were transferred to an asset management vehicle denominated Oitante, S.A. (Oitante) specifically created for that purpose, having the Resolution Fund as the sole shareholder. For that matter, Oitante issued bonds representing debt in the amount of Euros 746 million. The Resolution Fund provided a guarantee and the Portuguese State a counter-guarantee. The operation also involved State aid, of which Euros 489 million were provided by the Resolution Fund, which was funded by a loan granted by the State. On 4 July 2022, Oitante - 100% owned by the Resolution Fund - completed the process of repayment of the bonds issued in connection with the resolution of BANIF. Oitante's debt, which initially amounted to Euros 746 million, was thus fully repaid. With the repayment of the debt, the Resolution Fund's responsibility as guarantor also ceases, as well as the Portuguese State's responsibility as provider of a counter-guarantee. According to the Resolution Fund (press release dated 29 December 2023), Oitante has already paid a total of Euros 78.8 million to the Resolution Fund, of which Euros 63.8 million will be paid in 2023. The amounts received and to be received by the Resolution Fund, given its 100% participation in Oitante's capital, will contribute to reducing the losses of Euro 489 million incurred by this Fund in the resolution of BANIF and will be used to repay the debts of the Resolution Fund, namely to the State. On 16 January 2023, the Liquidation Committee of Banif announced a list of all the acknowledged and a list of the non- acknowledged creditors. According to the Resolution Fund’s 2022 annual report, the Resolution Fund holds a claim on Banif of Euros 489 million, which has a higher claim ranking provided for in article 166-A of the RGICSF. Under the judicial liquidation process of Banif, which was initiated following the resolution, the independent evaluator estimates that the level of recovery of the financial support made available by the Resolution Fund, as having a higher ranking at the end of the liquidation, is expected to be 7.6%. On 12 January 2021, Banco de Portugal was informed that the Administrative and Fiscal Court of Funchal dismissed a lawsuit involving several disputes associated to Banif’s resolution measures applied by Banco de Portugal. In its decision, the Court determined the legality and maintenance of Banco de Portugal’s measures. Liabilities and financing of the Resolution Fund Pursuant to the resolution measures applied to BES and Banif, the Resolution Fund incurred on loans and assumed other responsibilities and contingent liabilities resulting from: - The State loans, on 31 December 2021, included the amounts made available (i) in 2014 for the financing of the resolution measure applied to BES (Euros 3,900 million); (ii) to finance the absorption of Banif's losses (Euros 353 million); (iii) under the framework agreement concluded with the State in October 2017 for the financing of the measures under the CCA (Euros 430 million plus Euros 850 million of additional funding requested in 2019 and Euros 850 million made available in 2020); - Other funding granted: • in 2014 by the institutions participating in the Resolution Fund in the amount of Euros 700 million, in which the Bank participates, within the scope of BES resolution measure; • in 2021 by seven domestic credit institutions, including BCP, to finance payments due under the CCA up to a maximum of Euros 429 million; 2023 REPORT & ACCOUNTS 670 | - The underwriting by the Resolution Fund of a Tier 2 instrument to be issued by Novo Banco up to the amount of Euros 400 million did not take place as the instruments were placed with third party investors as disclosed by Novo Banco on 29 July 2018; - Effects of the application of the principle that no creditor of the credit institution under resolution may assume a loss greater than the one it would take if that institution did not go into liquidation; - Negative effects resulting from the resolution process that result in additional liabilities or contingencies for Novo Banco, which must be neutralized by the Resolution Fund; - Legal proceedings filed against the Resolution Fund; - Guarantee granted to secure the bonds issued by Oitante, totally reimbursed, as described above. - CCA allows Lone Star to claim, from the Resolution Fund, funding costs, realised losses and provisions related to the aforementioned ex-ante portfolio of existing loan stock agreed upon the sale process to Lone Star up to Euros 3.89 billion under the aforementioned conditions, among which a reduction of Novo Banco’s CET1 below 8%-13%; - In case the Supervisory Review and Evaluation Process (SREP) total capital ratio of Novo Banco falls below the SREP total capital requirement, the State will provide additional capital in certain conditions and through different instruments as referred to in the respective European Commission Decision. According to Resolution Fund’s annual report of 2022, contingent liabilities from the CCA are limited to a maximum aggregate amount of Euros 3,890 million and that the aggregate amount of this contingent liability, which corresponds to the difference between that maximum amount and the amounts already paid by the Resolution Fund, amounts to Euros 485 million. The expectation of the Resolution Fund is that, except for what may eventually result from the pending arbitration disputes with Novo Banco, no further payments will occur under the CCA. On the other hand, the value of payments already made may be compensated, under the terms of the contracts, by the eventual recovery of credits that may occur, to which the value of the shareholding of the Resolution Fund in Novo Banco must be added. According to note 22 of the Resolution Fund’s 2022 annual report, the Resolution Fund considers that, to date, there are no elements that allow a reliable estimate of the potential financial effect of these potential liabilities. By a public statement on 28 September 2016, the Resolution Fund and the Ministry of Finance communicated the agreement based on a review of the terms of the Euros 3,900 million loan originally granted by the State to the Resolution Fund in August 2014 to finance the resolution measure applied to BES. According to the Resolution Fund, the extension of the maturity of the loan was intended to ensure the ability of the Resolution Fund to meet its obligations through its regular revenues, regardless of the contingencies to which the Resolution Fund is exposed. On the same day, the Office of the Minister of Finance also announced that increases in the liabilities arising from the materialization of future contingencies will determine the maturity adjustment of State and bank loans to the Resolution Fund, required from to maintain the contributory effort required from the banking sector at prevailing levels at that time. According to the statement of the Resolution Fund of 21 March 2017: - “The conditions of the loans obtained from the Fund to finance the resolution measures applied to Banco Espírito Santo, S.A. and to Banif – Banco Internacional do Funchal, S.A. were changed. These loans amount to Euros 4,953 million, of which Euros 4,253 million were granted by the Portuguese State and Euros 700 million were granted by a group of banks"; - “Those loans are now due in December 2046, without prejudice to the possibility of early repayment based on the use of the Resolution Fund's revenues. The revision of the loan’s terms aimed to ensure the sustainability and financial balance of the Resolution Fund. The terms allow the Resolution Fund to fully meet its liabilities based on regular revenues and without the need for special contributions or any other type of extraordinary contributions". 2023 REPORT & ACCOUNTS | 671 According to the audit report on the management of Novo Banco conducted by the Court of Auditors and released on 12 July 2022, "the repayment of the Euros 2,130 million loans granted by the Portuguese State to the Resolution Fund will not end in 2046, as expected, rather in 2056 (without payments under the CCA after 2021) or in 2059 (with the use of the CCA cap). (...) In other, more pessimistic scenarios, these loans will still be being repaid in 2062”. On 2 October 2017, by Resolution no. 151-A/2017, of the Council of Ministers of the Portuguese State, as the ultimate guarantor of financial stability, was authorised to enter into a framework agreement with the Resolution Fund, to make available the necessary financial resources to the Resolution Fund, if and when the State deemed necessary, to satisfy any contractual obligations that may arise from the sale of the 75% stake in Novo Banco. The above-mentioned resolution further set out that the framework agreement should be subject to a time period that is consistent with the undertakings of the Resolution Fund and should preserve the Resolution Fund’s capacity to satisfy said obligations in due time. On 31 December 2022, the Resolution Fund's own resources had a negative equity of Euros 6,974.7 million, as opposed to Euros 7,207.6 million at the end of 2021, according to the latest 2022 annual report of the Resolution Fund. To repay the loans obtained and to meet other liabilities that it may take on, the Resolution Fund receives proceeds from the initial and regular contributions from the participating institutions (including the Bank) and from the contribution over the banking sector (created under Law no. 55-A/2010). It is also provided for the possibility of the member of the Government responsible for the area of Finance to determine, by ordinance that the participating institutions make special contributions, in the situations provided for in the applicable legislation, particularly if the Resolution Fund does not have resources to satisfy its obligations. Pursuant to Decree-Law no. 24/2013 of 19 February, which establishes the method for determining the initial, periodic and special contributions to the Resolution Fund, provided for in the Banking Law, the Bank has been paying, since 2013, its mandatory contributions set out in the aforementioned decree-law. On 3 November 2015, the Banco de Portugal issued Circular Letter no. 085/2015/DES, under which it is clarified that the periodic contribution to the Resolution Fund should be recognised as an expense at the time of the occurrence of the event which creates the obligation to pay the contribution, i.e. on the last day of April of each year, as stipulated in Article 9 of the referred Decree-Law no. 24/2013, of 19 February, thus the Bank is recognising as an expense the contribution to the Resolution Fund in the year in which it becomes due. Decree-Law no. 24/2013 of 19 February further sets out that Banco de Portugal has the authority to determine, by way of instruction (“instrução”), the applicable yearly rate based on objective incidence of periodic contributions. The instruction of Banco de Portugal no. 28/2023, published on 15 December 2023, set the base rate for 2024 for the determination of periodic contributions to the Resolution Fund at 0.032% (0.029% in 2023). The Resolution Fund issued, on 15 November 2015, a public statement declaring: "...it is further clarified that it is not expected that the Resolution Fund will propose the setting up of a special contribution to finance the resolution measure applied to BES. Therefore, the potential collection of a special contribution appears to be unlikely". In 2015, following the establishment of the Single Resolution Fund (SRF), the Group made an initial contribution in the amount of Euros 31,364 thousand. In accordance with the Intergovernmental Agreement on the Transfer and Mutualisation of Contributions to the SRF, this amount was not transferred to the SRF but was used instead to partially cover for the disbursements made by the RF in respect of resolution measures prior to the date of application of this Agreement. This amount will have to be reinstated over a period of 8 years (started in 2016) through the periodic contributions to the SRF. The Single Resolution Fund does not cover undergoing situations with the National Resolution Fund as at 31 December 2015. The total amount of the contribution attributable to the Bank of 2023 was Euros 22,811 thousand, of which the Bank delivered Euros 17,679 thousand and the remaining was constituted as irrevocable payment commitment. 2023 REPORT & ACCOUNTS 672 | In 2023, the Bank made regular contributions to the Portuguese Resolution Fund in the amount of Euros 9,402 thousand. The amount related to the contribution on the banking sector in Portugal registered in this period was Euros 44,387 thousand. These contributions were recognized as a cost in 2023, in accordance with IFRIC no. 21 – Levies. It is not possible, on this date, to assess the effects on the Resolution Fund due to: (i) the sale of the shareholding in Novo Banco in accordance with the communication of Banco de Portugal dated 18 October 2017 and the information provided by the European Commission on this subject under the terms described above, including the effects of the application of the Contingent Capital Agreement and the Special Regime applicable to Deferred Tax Assets; (ii) the application of the principle that no creditor of the credit institution under resolution may take on a loss greater than the one it would take if that institution did not go into liquidation; (iii) additional liabilities or contingencies for Novo Banco which need to be neutralized by the Resolution Fund; and, (iv) legal proceedings against the Resolution Fund. According to Article 5 (e) of the Regulation of the Resolution Fund, approved by the Ministerial Order no. 420/2012, of 21 December, the Resolution Fund may submit to the member of the Government responsible for finance a proposal with respect to the determination of amounts, time limits, payment methods, and any other terms related to the special contributions to be made by the institutions participating in the Resolution Fund. According to public communications from both the Resolution Fund and from the Government, there is no indication that any such special contributions are foreseen. According to the Resolution Fund’s 2022 annual report, under note 8, "the Resolution Fund is not obliged to present positive equity. In case of insufficient resources, the Resolution Fund may receive special contributions, as determined by the member of the Government responsible for finance, in accordance with article 153-I of the Banking Act, although no such contributions are expected. The Resolution Fund may also, exceptionally, obtain financial support from the State, namely through loans or guarantees, as set out in article 153-J of the same regime". To meet a payment from the Resolution Fund to Novo Banco, as per to Resolution no. 63-A/2021 of 27 May 2021 of the Council of Ministers and Order from the Minister of State and Finance, of 31 May 2021 - intended to provide the Resolution Fund with the financial resources necessary to meet any obligations arising from the Contingent Capitalization Agreement in the years 2021 and 2022 – rendering a new loan from the State to the Resolution Fund, a number of national financial institutions offered to finance the Resolution Fund, increasing up to Euros 475 million the direct financing of banks to the Resolution Fund and waiving a Portuguese State loan to the Resolution Fund. According to the Resolution Fund’s 2022 annual report from the maximum amount of Euros 475 million. The Resolution Fund used Euros 429 million, which corresponds to the payment made to Novo Banco in 2021. The loan matures in 2046 and bears interest at a rate corresponding to the sovereign cost of funding for the period between the contract date (31 May 2021) and 31 December 2026, plus a margin of 15 b.p. The interest rate will be reviewed on 31 December 2026 and, after that, every five-years. The payment obligations arising from this loan benefit from a pari passu treatment with the payment obligations of the loans entered into with the Portuguese State on 7 August 2014 and 31 December 2015 and with the Portuguese credit institutions on 28 August 2014. The funding costs of the Resolution Fund (from the State and from banks) will continue to be exclusively borne by periodic revenues, corresponding to the contributions paid by the banking sector. 13. Banco Comercial Português, S.A., Banco ActivoBank S.A. and Banco de Investimento Imobiliário, S.A. (company merged into Banco Comercial Português, S.A.) initiated an administrative proceeding to contest the resolution adopted by Bank of Portugal on 31 March 2017 to sell Novo Banco (NB), and also, as a precaution, the deliberation adopted by the Resolution Fund on the same date, as they foresee the sale of NB by resorting to a contingent capitalization agreement under which the Resolution Fund commits to inject capital in Novo Banco up to Euros 3,9 billion, under determined circumstances. In the proceedings, the claimants request the declaration of nullity or annulment of those acts. 2023 REPORT & ACCOUNTS | 673 The proceedings were filed based on the information contained in the Communication from Bank of Portugal dated 31 March 2017, of which the claimants were not notified. The proceedings were filed in court on 4 September 2017. Bank of Portugal and the Resolution Fund presented their arguments and, only very recently, Nani Holdings SGPS, S.A. did the same since, by delay of the court, this company was only very recently notified to act as a party in the proceedings. In addition to opposing to it, the defendants invoke three objections (i) the illegitimacy of the claimants, (ii) the argument that the act performed by Bank of Portugal cannot be challenged and (iii) the material incompetence of the court. The opponent party invoked the issue of passive illegitimacy since Novo Banco was not notified as an opponent party. The claimants replied to the arguments presented by the defendants and to the arguments presented by the opponent party. After the presentation of the arguments, Bank of Portugal attached to the proceedings what it called an evidence process (allegedly in compliance with the law) but most of the documents delivered were truncated in such a way that neither the court nor the claimants are able to obtain adequate knowledge thereof. That issue was already raised in the proceedings (requesting the court to order Bank of Portugal to deliver a true evidence process) but no decision thereon has been made yet. Currently, the proceedings are prepared for confirmation of the decision accepting the formalities of the right of action (with the making of a decision on the specific objections invoked). In case the judge considers that Novo Banco is an opponent party, the judge must start by issuing a pre-confirmation in order to request the claimants to identify it. Afterwards, that Bank will be notified to present its opposition arguments. The case was sent to the judge on 23 September 2019 and the Bank is awaiting a decision. BCP added legal opinions to the records (Professors Mário Aroso de Almeida and Manuel Fontaine de Campos). 14. Following the restructuring process agreed with the Directorate-General for Competition (DGComp) and the Portuguese State, Group Banco Comercial Português implemented in 2014 a salary adjustment process for employees, with a temporary effect. Additionally, it was agreed between the Bank and the Unions that, in the years after the State intervention and if there are distributable profits, the Board of Directors and the Executive Committee would submit for approval of the Shareholders’ General Meeting a proposal of distribution of profits to the employees, which allows the distribution of an accumulated total global amount at least equal to the total amount that was not received over the temporary term of the salary adjustment, as described in the clause no. 151-E of BCP’s Collective Labour Agreement, effective between 2014 and 2017. At the General Meeting held on 24 May 2023, the proposal submitted by the Board of Directors, the application of profits relating to the financial year of 2022 was approved, which included an extraordinary distribution to the employees to Euros 9,972,000, with the concrete determination of the amount to be attributed to each employee to be fixed by the Executive Committee to employees who, having not already been fully compensated with the results distributed in 2019 and 2020 and 2022, remain in office on the date of payment of the remuneration of June 2023. This extraordinary distribution of results, together with those of 2019, 2020 and 2022 allowed the distribution to the employees in office in June 2023 of an accumulated amount equal to the total amount not received during the period of temporary salary adjustment indicated in the previous paragraph. 15. The Bank was subject to tax inspections for the years up to 2019. As a result of the inspections in question, corrections were made by the tax authorities, arising from the different interpretation of some tax rules. The main impact of these corrections occurred regarding IRC, including in terms of the tax loss carry forwards and, in the case of indirect tax, in the calculation of the Value-Added Tax (VAT) deduction pro rata used for the purpose of determining the amount of deductible VAT and at the Stamp Duty level. Most of additional liquidations/corrections made by the tax administration were the object of contestation by administrative and/or judicial means. The Bank recorded provisions, current tax liabilities or deferred tax liabilities at the amount considered sufficient to offset the tax or tax loss carry forwards, as well as the contingencies related to the fiscal years not yet reviewed by the tax administration. 2023 REPORT & ACCOUNTS 674 | 50. Provisions for legal risk related to foreign currency-indexed mortgage loans in Bank Millennium (Poland) 1. Court claims and current provisions for legal risk On 31 December 2023, Bank Millennium had 20,914 loan agreements and additionally 1,780 loan agreements from former Euro Bank under individual ongoing litigations (excluding claims submitted by Bank Millennium against clients i.e. debt collection cases) concerning indexation clauses of FX mortgage loans submitted to the courts (64% loans agreements before the courts of first instance and 36% loans agreements before the courts of second instance) with the total value of claims filed by the plaintiffs amounting to PLN 4,130.6 million (Euros 950.9 million) and CHF 281.5 million (Euros 302.8 million) [(Bank Millennium portfolio: PLN 3,780.2 million (Euros 870.3 million) and CHF 272.6 million (Euros 293.2 million) and former Euro Bank portfolio: PLN 350.4 million (Euros 80.7 million) and CHF 8.8 million (Euros 9.5 million)]. Out of 20,914 Bank Millennium's loan agreements in ongoing individual cases 240 are also part of class action. From the total number of individual litigations against the Bank approximately 2,260 or 11% were submitted by borrowers that had already naturally or early fully repaid the loan or were converted to polish zloty at the moment of submission and had not a settlement agreement and approximately another 730 cases correspond to loans that were fully repaid since then (as court proceedings are lengthy). The claims formulated by the clients in individual proceedings primarily concern the declaration of invalidity of the contract and payment for reimbursement of paid principal and interest instalments as undue performance, due to the abusive nature of indexation clauses, or maintenance of the agreement in PLN with interest rate indexed to CHF Libor. In addition, Bank Millennium is a party to the group proceedings (class action) subject matter of which is to determine Bank Millennium's liability towards the group members based on unjust enrichment (undue benefit) ground in connection with the foreign currency mortgage loans concluded. It is not a payment dispute. The judgment in these proceedings will not directly grant any amounts to the group members. The number of credit agreements covered by these proceedings is 3,273. Out of 3,273 loan agreements in class action 240 are also part of ongoing individual cases, 858 concluded settlements and 7 received final verdicts (invalidation of loan agreement). On 24 May 2022 the court issued a judgment on the merits, dismissing the claim in full. On 13 December 2022 the claimant filed an appeal against the judgment of 24 May 2022. On 20 November 2023 the claimant requested granting interim measures to secure the claims against the Bank. In a decision of 27 December 2023, the request for granting interim measures was dismissed. The pushy advertising campaign observed in the public domain affects the number of court disputes. Until the end of 2019, 1,985 individual claims were filed against Bank Millennium (in addition, 236 against former Euro Bank), in 2020 the number increased by 3,005 (265), in 2021 the number increased by 6,159 (423), in 2022 the number increased by 5,755 (408), while in 2023 the number increased by 6,871 (647). Based on ZBP (the Polish Banking Association) data gathered from all banks having FX mortgage loans, vast majority of disputes were finally resolved against the banks. As far as Bank Millennium (including the former Euro Bank portfolio) is concerned, from 2015 until the end of 2023, 3,341 cases were finally resolved (3,263 in claims submitted by clients against Bank Millennium and 78 in claims submitted by Bank Millennium against clients i.e. debt collection cases) out of which 925 were settlements, 56 were remissions, 64 rulings were favourable for Bank Millennium and 2,296 were unfavourable including both invalidation of loan agreements as well as conversions into PLN+LIBOR. Bank Millennium files appeals against negative judgements of the courts of 1st instance declaring invalidation of loan agreements. Simultaneously Bank Millennium undertakes proper legal actions in order to secure repayment of initially disbursed capital of the loan. 2023 REPORT & ACCOUNTS | 675 The outstanding gross balance of the loan agreements under individual court cases and class action against Bank Millennium (including the former Euro Bank portfolio) on 31 December 2023 was PLN 6,264 million (Euros 1,442.1 million) [of which the outstanding amount of the loan agreements under the class action proceeding was PLN 763 million (Euros 175.7 million)]. If all Bank Millennium’s originated loan agreements currently under individual and class action court proceedings would be declared invalid without any compensation for the use of capital, the pre-tax cost could reach PLN 6,955 million (Euros 1,601.2 million), excluding potential amounts connected with interest. Overall losses would be higher or lower depending on the final court jurisprudence in this regard. In the 12 months of 2023, Bank Millennium created PLN 2,828.1 million (Euros 623 million) provisions for Bank Millennium originated portfolio and PLN 237.3 million (Euros 52.2 million) for former Euro Bank originated portfolio. The balance sheet value of provisions for Bank Millennium's portfolio at the end of December 2023 was at the level of PLN 7,268.8 million (Euros 1,673.4 million), and PLN 603 million (Euros 138.8 million) for former Euro Bank originated portfolio. The methodology developed by Bank Millennium of calculating provisions for legal risk involved with indexed loans is based on the following main parameters: (1) the number of ongoing cases (including class action agreements) and potential future lawsuits that will arise within the specified (three-year) time horizon. As regards the number of future court cases, Bank Millennium monitors customer behaviours, follows market trends and expert comments, which resulted in the adjustment of previous assumptions. As a result, in the methodology of calculating provisions for legal risk in the case of active loans (loans with an outstanding balance as at the date of filing the lawsuit), Bank Millennium increased the estimated percentage of customers covered by methodology in this group of clients to 83% of the total number of currently active loans compared to 77% at the end of 3rd quarter of 2023. Regarding loans already fully repaid or converted to polish zloty, Bank Millennium attributes a much lower probability of becoming the subject of a court case based on statistical analysis. In particular: a) Bank Millennium assesses the risk connected with the settlements reached with the clients in the past as negligible b) from the group of loans that have been repaid (naturally or early or converted into polish zloty loan) and were not subject of a settlement agreement, Bank Millennium assumes that circa 16% sued or will decide to sue the Bank in the future; (2) the currently estimated amount of Bank Millennium's potential loss in the event of a specific court judgment; (3) the probability of obtaining a specific court judgment calculated on the basis of statistics of judgments in cases where Bank Millennium is a party and legal opinions obtained; (4) Bank Millennium does not include in the methodology of calculating an element related to to the potential claim for remuneration for the client in connection with the repayments made by him or her; (5) estimates involved with amicable settlements with clients, concluded in court or out of court: a. Bank Millennium assumes 12% probability of success of reaching a settlement within negotiations made with clients during court proceedings; b. negotiations in court or out of court are conducted on a case-by-case basis and can be stopped at any time by Bank Millennium; c. due to significant negotiation efforts already made in the past, the probability of success in these negotiations in the future is decreasing, and at the same time most customers have already been contacted by or contacted the Bank regarding the possible conversion of loans into PLN, so at the moment the Bank adopts a conservative approach when taking into account the potential impact of this factor. 2023 REPORT & ACCOUNTS 676 | Bank Millennium is open to negotiate case by case favourable conditions for early repayment or conversion of loans to PLN. As a result of these negotiations, the number of active FX mortgage loans originated by Bank Millennium decreased by 21,428: 1,363 in 2020; 8,450 in 2021; 7,943 in 2022 and 3,672 in 2023. As of the end of 2023, the Bank had 32,425 active FX mortgage loans. Cost incurred in conjunctions with these negotiations totalled PLN 1,340.1 million (Euros 295.2 million): PLN 44.5 million (Euros 9.8 million) in 2020; PLN 364.6 million (Euros 80.3 million) in 2021; PLN 515.2 million (Euros 113.5 million) in 2022 and PLN 415.8 million (Euros 91.6 million) in 2023 and is presented mainly in ‘Result on exchange differences’ and also in ‘Result on modification’ in the profit and loss statement. Legal risk from former Euro Bank portfolio is fully covered by Indemnity Agreement with Société Générale. Bank Millennium analysed the sensitivity of the methodology for calculating provisions, for which a change in the parameters would affect the value of the estimated loss to the legal risk of litigation: Parameter Scenario Impact on the loss Change in the assumed number of court cases In addition to above assumed numbers, 1,000 new customers file a lawsuit against the Bank PLN 167 million (Euros 36.8 million) Change of estimated losses for each variant of judgment Change of losses for each judgment variant by 1 p.p PLN 75 million (Euros 16.5 million) Change in probability of success in negotiations with court client Change of probability by 1 p.p PLN 18 million (Euros 4 million) On 8 December 2020, Mr. Jacek Jastrzębski, the Chairman of the Polish Financial Supervision Authority (‘PFSA’) proposed a ‘sector’ solution to address the sector risks related to FX mortgages. The solution would consist in offering banks’ clients a voluntary possibility of concluding arrangements based on which a client would settle a CHF Mortgage Loan as if it was a PLN loan bearing interest at an appropriate WIBOR rate increased by the margin historically employed for such loans. The decision to generally implement this solution could imply the need of creating upfront provisions for the losses resulting from the conversion of CHF Mortgage Loans. Bank Millennium in practice has been using elements of the proposal of above system solution on many individual negotiations with FX mortgage borrowers, including in the course of court proceedings. Due to the circumstances stemming from the CJEU which excludes demanding by the Bank amounts exceeding the return of disbursed capital, the possibility of successful implementation of a general offer of KNF solution is low. Finally, it should also be mentioned that Bank Millennium, as at 31 December 2023, had to maintain additional own funds for the coverage of additional capital requirements related to FX mortgage portfolio risks (Pillar II FX buffer) in the amount of 1.47 p.p. (1.46 p.p. at the Group level), part of which is allocated to operational/legal risk. Taking into consideration the recent negative evolution in the court verdicts regarding FX mortgage loans, the Bank will have to regularly review and may need to continue to increase the balance of provisions allocated to court litigations. It can reasonably be assumed that the legal issues relating to foreign currency mortgage loans will be further examined by the polish courts within the framework of disputes considered which would possibly result in the emergence of further interpretations, which are relevant for the assessment of the risks associated with subject matter proceedings. This circumstance indicates the need for constant analysis of these matters. 2023 REPORT & ACCOUNTS | 677 The Court of Justice of the European Union and the Polish Supreme Court rulings relevant to risk assessment Jurisprudence of the Court of Justice of the European Union On 3 October 2019, the Court of Justice of the European Union (the CJEU) issued the judgment in Case C-260/18 in connection with the preliminary questions formulated by the District Court of Warsaw in the case against Raiffeisen Bank International AG. The judgment of the CJEU, as regards the interpretation of European Union law made therein, is binding on domestic courts. The judgment in question interpreted Article 6 of Directive 93/13. In the light of the subject matter judgment the said provision must be interpreted in such a way that: (i) the national court may invalidate a credit agreement if the removal of unfair terms detected in this agreement would alter the nature of the main subject-matter of the contract; (ii) the effects for the consumer’s situation resulting from the cancellation of the contract must be assessed in the light of the circumstances existing or foreseeable at the time when the dispute arose and the will of the consumer is decisive as to whether he wishes to maintain the contract; (iii) Article 6 of the Directive precludes the filling-in of gaps in the contract caused by the removal of unfair terms from the contract solely on the basis of national legislation of a general nature or established customs; (iv) Article 6 of the Directive precludes the maintenance of unfair terms in the contract if the consumer has not consented to the maintenance of such terms. It can be noticed the CJEU found doubtful the possibility of a credit agreement being performed further in PLN while keeping interest calculated according to LIBOR. The CJEU judgment concerns only the situation where the national court has previously found the contract term to be abusive. It is the exclusive competence of the national courts to assess, in the course of judicial proceedings, whether a particular contract term can be regarded as abusive in the circumstances of the case. On 29 April 2021, the CJEU issued the judgement in the case C-19/20 in connection with the preliminary questions formulated by the District Court in Gdańsk in the case against of ex-BPH S.A., the CJEU said that: (i) it is for the national court to find that a term in a contract is unfair, even if it has been contractually amended by those parties. Such a finding leads to the restoration of the situation that the consumer would have been in in the absence of the term found to be unfair, except where the consumer, by means of amendment of the unfair term, has waived such restoration by free and informed consent. However, it does not follow from Council Directive 93/13 that a finding that the original term is unfair would, in principle, lead to annulment of the contract, since the amendment of that term made it possible to restore the balance between the obligations and rights of those parties arising under the contract and to remove the defect which vitiated it; (ii) the national court may remove only the unfair element of a term in a contract concluded between a seller or supplier and a consumer where the deterrent objective pursued by Council Directive 93/13 is ensured by national legislative provisions governing the use of that term, provided that that element consists of a separate contractual obligation, capable of being subject to an individual examination of its unfair nature. At the same time, provisions of the Directive preclude the referring court from removing only the unfair element of a term in a contract concluded between a seller or supplier and a consumer where such removal would amount to revising the content of that term by altering its substance; (iii) the consequences of a judicial finding that a term if a contract concluded between a seller or supplier and a consumer is unfair are covered by national law and the question of continuity of the contract should be assessed by the national court of its own motion in accordance with an objective approach on the basis of those provisions; 2023 REPORT & ACCOUNTS 678 | (iv) the national court, finding that a term in a contract concluded between a seller or supplier and a consumer is unfair, shall inform the consumer, in the context of the national procedural rules after both parties have been heard, of the legal consequences entailed by annulment of the contract, irrespective of whether the consumer is represented by a professional representative. On 18 November 2021, the Court of Justice of the European Union (CJEU) issued a judgment in case C-212/20 in connection with questions submitted by the District Court for Warsaw Wola in Warsaw in the case against Raiffeisen Bank International AG. The CJEU stated that: (i) the content of the clause of the loan agreement concluded between the entrepreneur and the consumer fixing the purchase and sale price of the foreign currency to which the loan is indexed should, on the basis of clear and comprehensible criteria, enable the consumer who is reasonably well informed and sufficiently observant and rational to understand how the exchange rate of the foreign currency used to calculate the amount of the loan instalments is determined, so that the consumer is able to determine himself at any time the exchange rate used by the entrepreneur; (ii) a national court which has found that a term of the agreement concluded between an entrepreneur and a consumer is unfair cannot interpret that term in order to mitigate its unfairness, even if such an interpretation would correspond to the common will of the parties. On 10 June 2021, the Court of Justice of the European Union (CJEU) issued an order in case C-198/20 in connection with questions submitted by the District Court for Warsaw Wola in Warsaw in the case against Santander Bank Polska SA. The CJEU stated that the protection provided for in Council Directive 93/13/EEC is granted to all consumers, not just those who can be considered to be 'duly informed and reasonably observant and circumspect average consumer'. On 8 September 2022, the Court of Justice of the European Union (CJEU) issued a judgment in joined cases C-80/21, C-81/21, C-82/21 in connection with questions submitted by the District Court for Warsaw Śródmieście in Warsaw in cases against Deutsche Bank SA and mBank SA. The CJEU stated that: (i) a national court may find that the parts of a contractual term of the agreement concluded between a consumer and an entrepreneur which render it unfair are unfair, if such a deletion would not amount to a change in the content of that term that affects its substance, which is for the referring court to verify; (ii) a national court cannot, after annulling an unfair term contained in an agreement concluded between a consumer and an entrepreneur which does not render the agreement invalid in its entirety, replace that term with a supplementary provision of the national law; (iii) a national court may not, after having declared invalid an unfair term contained in an agreement concluded between a consumer and an entrepreneur which entails the invalidity of that agreement in its entirety, replace the contractual term which has been declared invalid either by interpretation of the parties' declaration of intent in order to avoid the cancellation of that agreement or by a provision of national law of a supplementary nature, even if the consumer has been informed of the effects of the invalidity of that agreement, and accepted them; (iv) the ten-year limitation period for a consumer's claim seeking reimbursement of sums unduly paid to the entrepreneur in performance of an unfair term of a loan agreement does not start to run on the date of each performance made by the consumer if the consumer was not able on that date to assess on his own the unfairness of the contractual term or if he had not become aware of the unfair nature of that term and without taking into account the circumstances that the agreement provided for a repayment period – in this case thirty years – well in excess of the ten-year statutory limitation period. 2023 REPORT & ACCOUNTS | 679 On 16 March 2023, the Court of Justice of the European Union issued a judgment in a case registered under case number C-6/22, following preliminary questions submitted by the District Court for Warsaw-Wola in a case against the former Getin Noble Bank S.A.. In the judgment, the CJEU ruled that: (i) in the event that a contract concluded between a consumer and a seller or supplier is declared invalid because one of its terms is unfair, it is for the Member States, by means of their national law, to make provision for the effects of that invalidation, in compliance with the protection granted to the consumer by that directive, in particular, by ensuring the restoration of the legal and factual situation that he or she would have been in if that unfair term had not existed. (ii) a national court is not allowed: a. to examine of its own motion, without any prerogative conferred on it by national law in that regard, the financial situation of a consumer who has sought the invalidation of the contract between him or her and a seller or supplier on account of the presence of an unfair term without which the contract cannot legally continue to exist, even if that invalidation is liable to expose the consumer to particularly unfavourable consequences and, b. to refuse to declare that invalidation where the consumer has expressly sought it, after being objectively and exhaustively informed of the legal consequences and the particularly unfavourable financial consequences which it may have for him or her. (iii) a national court is not allowed, after it has found that a term in a contract concluded between a seller or supplier and a consumer is unfair, to fill gaps resulting from the removal of the unfair term contained therein by the application of a provision of national law which cannot be characterised as a supplementary provision. However, it is for the national court, taking account of its domestic law as a whole, to take all the measures necessary to protect the consumer from the particularly unfavourable consequences which annulment of the contract might entail for him or her. On 8 June 2023, the Court of Justice of the European Union issued a judgment in a case registered under case number C-570/21, following preliminary questions submitted by the District Court in Warsaw in a case against the former Getin Noble Bank S.A. In the judgment, the CJEU ruled that: (i) provisions of Council Directive 93/13 must be interpreted as meaning that the concept of ‘consumer’, within the meaning of that provision, covers a person who has concluded a loan contract intended for a purpose in part within and in part outside his or her trade, business or profession, together with a joint-borrower who did not act within his or her trade, business or profession, where the trade, business or professional purpose is so limited as not to be predominant in the overall context of that contract. (ii) provisions of Directive 93/13 must be interpreted as meaning that in order to determine whether a person falls within the concept of ‘consumer’, within the meaning of that provision, and, specifically, whether the trade, business or professional purpose of a loan contract concluded by that person is so limited as not to be predominant in the overall context of that contract, the referring court is required to take into consideration all the relevant circumstances surrounding that contract, both quantitative and qualitative, such as, in particular, the distribution of the borrowed capital between, on the one hand, a trade, business or profession and, on the other hand, a non-professional activity and, where there are several borrowers, the fact that only one of them is pursuing a professional purpose or that the lender made the grant of credit intended for consumer purposes conditional on a partial allocation of the amount borrowed to the repayment of debts connected with a trade, business or profession. On 15 June 2023, the Court of Justice of the European Union issued a judgment in a case registered under case number C-287/22, following preliminary questions submitted by the District Court in Warsaw in a case against the former Getin Noble Bank S.A. In the judgment, the CJEU ruled that provisions of the Directive 93/13 must be interpreted as precluding national case-law according to which a national court may dismiss an application for the grant of interim measures lodged by a consumer seeking the suspension, pending a final decision on the invalidity of the loan agreement concluded by that consumer on the ground that that loan agreement contains unfair terms, of the payment of the monthly instalments due under that loan agreement, where the grant of those interim measures is necessary to ensure the full effectiveness of that decision. 2023 REPORT & ACCOUNTS 680 | On 15 June 2023, the CJEU issued a judgment in a case registered under case number C-520/21, following preliminary questions submitted by the District Court in Warsaw in a case against Bank Millennium, in which indicated that Directive 93/13 does not expressly regulate the consequences of invalidity of a contract concluded between a credit institution and a consumer after the removal of unfair terms contained therein. The CJEU stated that: (i) the provisions of the Directive do not preclude a judicial interpretation of national law, according to which the consumer has the right to demand compensation from the credit institution beyond the reimbursement of monthly instalments and costs paid for the performance of this contract and the payment of statutory default interest from the date of the request for payment provided that the objectives of Directive 93/13 and the principle of proportionality are respected. (ii) the provisions of Directive 93/13 preclude the judicial interpretation of national law, according to which a credit institution has the right to demand compensation from the consumer that goes beyond the return of the capital paid for the performance of this contract and beyond the payment of statutory default interest from the date of the request for payment. On 21 September 2023, the CJEU issued a judgement in a case registered under case number C-139/22, following preliminary questions submitted by the District Court in Warsaw in a case against mBank. The CJEU stated that: (i) provisions of the Directive 93/13 must be interpreted as not precluding a contractual term which has not been individually negotiated from being regarded as unfair by the national authorities concerned merely by virtue of the fact that its content is equivalent to that of a standard contract term entered in the national register of standard business terms held to be unlawful; (ii) the contractual term which, because of the circumstances for the performance of certain obligations of the consumer concerned provided for in that term, must be regarded as unfair, may not cease to be considered unfair on account of another term of that contract which provides for the possibility for that consumer to perform those obligations under different circumstances; (iii) a seller or supplier is obliged to inform the consumer concerned of the essential characteristics of the contract concluded with that seller or supplier and the risks associated with that contract, even though that consumer is its employee and has relevant knowledge in the field of the contract. On 7 December 2023, the CJEU issued the judgement in the case C-140/22 in connection with the preliminary questions formulated by the District Court in Warsaw in the case against of mBank S.A. The Court stated that provisions of the Directive 93/13 must be interpreted as meaning that, in the context of the cancellation, in its entirety, of a mortgage loan agreement concluded with a consumer by a banking institution on the ground that that agreement contains an unfair term without which it cannot continue in existence: (i) they preclude the judicial interpretation of national law according to which the exercise of the rights which that consumer draws from that directive is conditional on the lodging, by that consumer, before a court, of a declaration by which he or she states, first, not to consent to that unfair term remaining effective, secondly, to be aware of the fact that the nullity of that term entails the cancellation of that agreement and, moreover, of the consequences of that cancellation and, thirdly, to consent to the cancellation of that agreement; (ii) they preclude the compensation sought by the consumer concerned in respect of the restitution of the sums paid by him or her in the performance of the agreement at issue being reduced by the equivalent of the interest which that banking institution would have received if that agreement had remained in force. 2023 REPORT & ACCOUNTS | 681 The Court of Justice of European Union by an order of December 11, 2023, closed the case registered under case number C-756/22 initiated by the District Court in Warsaw in the case brought by Bank Millennium and ruled that the provisions of Directive 93/13 must be interpreted as meaning that, in the context of declaring a mortgage loan agreement concluded with a consumer by a banking institution to be invalid in its entirety on the grounds that, that the contract contains unfair terms without which it cannot be continued, they preclude a judicial interpretation of the law of a Member State according to which that institution is entitled to recover from that consumer amounts other than the capital paid in performance of that contract and statutory interest for delay from the time of the demand for payment. On December 14, 2023, the CJEU issued the judgement in the case C-28/22 in connection with the preliminary questions referred by the District Court in Warsaw in the case of ex-Getin Noble Bank S.A. The Court stated that: (i) provisions of Directive 93/13 read in the light of the principle of effectiveness must be interpreted as precluding a judicial interpretation of national law according to which, following the cancellation of a mortgage loan agreement concluded with a consumer by a seller or supplier, on account of unfair terms contained in that agreement, the limitation period for the claims of that seller or supplier stemming from the nullity of that agreement starts to run only as from the date on which the agreement becomes definitively unenforceable, whereas the limitation period for the claims of that consumer stemming from the nullity of that agreement begins to run as from the day on which the consumer became aware, or should reasonably have become aware, of the unfair nature of the term entailing such nullity; (ii) provisions of the Directive 93/13 must be interpreted as not precluding a judicial interpretation of national law according to which it is not for a seller or supplier who has concluded a mortgage loan agreement with a consumer to ascertain whether the consumer is aware of the consequences of the removal of the unfair terms contained in that agreement or of that agreement being no longer capable of continuing in existence if those terms were removed; (iii) provisions of the Directive 93/13, read in the light of the principle of effectiveness, must be interpreted as precluding a judicial interpretation of national law according to which, where a mortgage loan agreement concluded with a consumer by a seller or supplier is no longer capable of continuing in existence after the unfair terms in that agreement have been removed, that seller or supplier may rely on a right of retention which allows him or her to make the restitution of the sums which it has received from that consumer conditional on that consumer making an offer to repay the sums which he or she has himself or herself received from that seller or supplier or to provide a security for the repayment of those sums, where the exercise by that seller or supplier of that right of retention entails the loss, for that consumer, of the right to obtain default interest as from the expiry of the time limit set for performance by the seller or supplier concerned, following receipt by that seller or supplier of a request to repay the sums he or she had been paid in performance of that agreement. The Court of Justice of the European Union by an order of January 15, 2024, closed the case registered under case number C-488/23 following a question from the District Court of Warsaw, indicating that the right of a financial institution to demand the valorization of the disbursed capital after a loan agreement has been declared invalid was excluded in the judgment of June 15, 2023 issued in case C-520/21. On January 18, 2024, the CJEU issued the judgement in the case C-531/22 in connection with the preliminary questions referred by the District Court in Warsaw in the case of ex-Getin Noble Bank S.A. The Court stated that: (i) the provisions of Directive 93/13 preclude national legislation which provides that a national court may not examine of its own motion the potentially unfair nature of the terms contained in a contract and draw the consequences thereof, where it is supervising enforcement proceedings carried out on the basis of a final decision to issue an order for payment which is subject to res judicata: a. if the regulations do not provide for such an examination at the stage of issuing a payment order, or b. if such examination is provided for only at the stage of opposition to the order for payment in question, provided that there is a significant risk that the consumer in question will not file the required opposition either because the time limit specified for this purpose is very short, or because of the cost of the proceedings before the court in relation to the amount of the disputed debt, or because the national legislation does not provide for the obligation to provide that consumer with all the information necessary for him to establish the extent of his rights; 2023 REPORT & ACCOUNTS 682 | (ii) the provisions of Directive 93/13 do not preclude national case law according to which the entry of a term of a contract in a national register of prohibited clauses has the effect of declaring that term unfair in any proceedings involving a consumer, including against a trader other than the one against whom proceedings for the entry of the said term in that national register were pending, and where that term does not have the same wording as the term entered in the said register, but has the same meaning and has the same effect with respect to the consumer in question. Jurisprudence of the Polish Supreme Court On 7 May 2021, the Supreme Court composed of 7 judges of the Supreme Court, issued a resolution for which the meaning of legal principle has been granted, stating that: 1. An abusive contractual clause (art. 385(1) § 1 of the Polish Civil Code), by force of the law itself, is ineffective to the benefit of the consumer who may consequently give conscious and free consent to this clause and thus restore its effectiveness retroactively. 2. If without the ineffective clause the loan agreement cannot bind, the consumer and the lender shall be eligible for separate claims for return of monetary performances made in exercising this agreement (art. 410 § 1 in relation to art. 405 of the Polish Civil Code). The lender may demand return of the performance from the moment the loan agreement becomes permanently ineffective. On 28 April 2022 the Supreme Court issued a resolution (III CZP 40/22) in which it indicated that in disputes with consumers, the provision of Article 358(1) of the Polish Civil Code is a special provision to Article 353(1) of the Polish Civil Code, which means that if the prerequisites for the application of both provisions exist, the court should apply the special provision and declare the contractual provision permanently ineffective, rather than invalid. This decision of the Supreme Court should be perceived as significantly limiting the risk of Bank Millennium's claims for return of capital being time-barred. The effect of the Supreme Court's resolution of 7 May 2021 is that Bank Millennium is entitled to a refund of the cash benefit provided by Bank Millennium in performance of a permanently ineffective contract. Taking into account the uncertainty as to the starting point of the limitation period for the bank's claims, Bank Millennium, in order to protect its interests, files lawsuits for payment against borrowers in a court dispute with the bank. Bank Millennium's demand consists of a claim for return of the capital made available to the borrower under the contract. By 31 December 2023 the Bank filed about 8.1 thousand lawsuits against the borrowers. Due to the CJEU jurisprudence interpreting the causes and effects of invalidity of foreign currency mortgage loan agreements, the area of interpretation of regulations by Polish courts in this respect appears to be limited. However, further jurisprudential practice of the Polish courts will play an important role in fulfilling the content of the CJEU's guidance and, moreover, this practice will be of significant importance as regards issues that, given the scope of the CJEU's competence, are subject to national jurisprudence. 2. Events that may impact foreign currency-indexed mortgage loans legal risk and related provision The issues related to the statute of limitations for the Bank's and the customer's restitutionary claims following the invalidation of a loan agreement remain an area that may be subject to further analysis in the jurisprudence of Polish courts. Legal interpretations in this subject may be particularly significant for the Bank's claims as to the commencement of the running of the limitation period of its claims, by eliminating or confirming the risk of its claims being deemed time-barred in a given case. In addition, the extent of the consumer's and the bank's entitlement to statutory interest for delay on restitution claims may be an important legal issue. The issue that remains unresolved in the jurisprudence of common courts and the Supreme Court is also the issue of the admissibility of borrowers’ claims in the event of the invalidity of a loan agreement for payment of amounts beyond the reimbursement of monthly instalments and costs paid for the execution of that agreement and beyond the payment of statutory default interest from the date of the demand for payment, which, in light of the CJEU's judgment of 15 June 2023 in case C-520/21, remains not excluded. Due to the uncertainty of the direction of case law in this area, as of the date of publication of the Bank Millennium's report, it is difficult to reliably assess the impact of potential rulings. 2023 REPORT & ACCOUNTS | 683 51. Recently issued accounting standards 1 - Recently issued accounting standards and interpretations that came into force in the current financial year At the date of approval of these financial statements, the following accounting standards, interpretations, amendments and revisions were endorsed by the European Union (EU) with mandatory application for the financial year of the Bank started on 1 January 2023: IFRS 17 — Insurance contracts This standard establishes, for insurance contracts within its scope, the principles for their recognition, measurement, presentation and disclosure. This standard replaced IFRS 4 – Insurance contracts. There were no material impacts on the application of this standard in the Bank's financial statements. Amendment to IAS 8: Definition of accounting estimates This amendment emphasizes how companies should distinguish changes in accounting policies from changes in accounting estimates, which is relevant since changes in accounting estimates are applied prospectively, only to future transactions and other events, while changes in accounting policies are generally applied retrospectively to past transactions and other events. The definition of a change in accounting estimates is replaced with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”, used to achieve the objective(s) of an accounting policy. There were no material impacts on the application of this amendment in the Bank's financial statements. Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of accounting policies Amendments to IAS 1 require companies to disclose their material accounting policy information rather than their significant accounting policies, further explaining how an entity can identify a material accounting policy. On the other hand, Amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures. There were no material impacts on the application of this amendment in the Bank's financial statements. Amendment to IAS 12: Deferred tax related to assets and liabilities arising from a single transaction This amendment requires companies to recognise deferred tax on particular transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The proposed amendment will mostly apply to transactions such as leases and decommissioning obligations. There were no material impacts on the application of this amendment in the Bank's financial statements. Amendment to IFRS 17: Initial application of IFRS 17 and IFRS 9 — Comparative information This amendment is aimed at helping entities to avoid temporary accounting mismatches between financial assets and insurance contract liabilities by providing insurers with an option for the presentation of comparative information about financial assets, thus improving the usefulness of comparative information for users of financial statements. There were no material impacts on the application of this amendment in the Bank's financial statements. Amendments to IAS 12 Income taxes: International Tax Reform – Pilar Two Model Rules The amendments introduce a temporary exception to the recognition of disclosures of information on deferred tax assets and liabilities related to the application of the OECD Pillar 2 model rules and new additional disclosure requirements for affected entities (entities belonging to multinational groups with consolidated revenues of Euros 750 million in at least two of the last four years). The amendments are mandatory for annual reporting periods beginning on or after 1 January 2023. There were no material impacts on the application of this amendment in the Bank’s financial statements. 2023 REPORT & ACCOUNTS 684 | 2 - Standards, interpretations, amendments and revisions that will take effect in future financial years The following standards, interpretations, amendments and revisions, with mandatory application in future financial years, have been endorsed by the European Union until the date of approval of these financial statements: Amendment to IAS 1: Classification of liabilities as current or non-current and Classification of liabilities as current or non-current — Deferral of effective date (applicable for years beginning on or after 1 January 2024) On 23 January 2020, Amendment to IAS 1: Classification of liabilities as current or non-current was issued, which aims to clarify that the classification of liabilities as current or non-current should be made based on the existing rights at the end of the financial reporting period, not being affected by expectations related to the exercise of the right to defer the settlement of a liability and, additionally, that the settlement corresponds to the extinction of a liability by transferring cash, equity instruments, other assets or services to a counterparty. On 15 July 2020, it was decided to postpone by a year the effective date of the referred amendment. This amendment, although endorsed by the European Union, was not adopted by the Bank in 2023 as its application is not mandatory yet. Amendment to IFRS 16: Lease liability in a sale and leaseback (applicable for years beginning on or after 1 January 2024) This amendment was issued on 22 September 2022 and it provides changes that specify how a seller-lessee should apply the subsequent measurement requirements in IFRS 16 to the lease liability that arises in sale and leaseback operations. This amendment, although endorsed by the European Union, was not adopted by the Bank in 2023 as its application is not mandatory yet. 3 - Standards, interpretations, amendments and revisions not adopted by the European Union yet The following standards, interpretations, amendments and revisions, with mandatory application in future financial years, have not been endorsed by the European Union until the date of approval of these financial statements, and, therefore, have not been applied by the Bank: Amendment to IAS 7: Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements (applicable for years beginning on or after 1 January 2024) This amendment was issued on 25 May 2023 and it which address the disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on a company’s liabilities, cash flows and exposure to liquidity risk. Supplier finance arrangements are often referred to as supply chain finance, trade payables finance or reverse factoring arrangements. Amendment to IAS 21: The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (applicable for years beginning on or after 1 January 2025) This amendment was issued on 15 August 2023 and it provides changes in specify when a currency is exchangeable into another currency and when it is not, specify how an entity determines the exchange rate to apply when a currency is not exchangeable and require the disclosure of additional information when a currency is not exchangeable. 2023 REPORT & ACCOUNTS | 685 52. List of subsidiary and associated companies of Banco Comercial Português S.A. As at 31 December 2023, the Banco Comercial Português S.A. subsidiary companies are as follows: Subsidiary companies Head office Share capital Currency Activity % held Banco ActivoBank, S.A. Lisbon 127,600,000 EUR Banking 100% Bank Millennium, S.A. Warsaw 1,213,116,777 PLN Banking 50.1% BCP África, S.G.P.S., Lda. Funchal 214,223,800 EUR Holding company 100% BCP International B.V. Amsterdam 18,000 EUR Holding company 100% M Representações Ltda. São Paulo 77,780,760 BRL Financial Services 100% Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. Funchal 25,000 EUR Holding company 100% Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. Oeiras 1,500,000 EUR Real estate investment fund management 100% Monumental Residence - Sociedade de Investimento Coletivo Imobiliária Fechada, S.A. Oeiras 31,900,000 EUR Real-estate management 100% Millennium bcp - Prestação de Serviços, A.C.E. Lisbon 331,750 EUR Services 93.2% Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. Lisbon 50,004 EUR E-commerce 100% Imoserit, S.A. Oeiras 50,000 EUR Buying and selling real estate 100% As at 31 December 2023, the Banco Comercial Português, S.A. investment funds, are as follows: Investment funds Head office Share capital Currency Activity % held Imosotto acumulação – Fundo de Investimento Imobiliário Fechado Oeiras 102,385,157 EUR Real estate investment fund 100% Imorenda – Fundo de Investimento Imobiliário Fechado Oeiras 85,156,715 EUR Real estate investment fund 100% Sand Capital - Fundo de Investimento Imobiliário Fechado Oeiras 88,082,695 EUR Real estate investment fund 100% Fundial – Fundo de Investimento Imobiliário Fechado Oeiras 17,340,985 EUR Real estate investment fund 100% Fundipar – Fundo de Investimento Imobiliário Fechado Oeiras 11,345,348 EUR Real estate investment fund 100% Domus Capital – Fundo de Investimento Imobiliário Fechado Oeiras 3,799,969 EUR Real estate investment fund 95.8% Predicapital – Fundo de Investimento Imobiliário Fechado () Oeiras 88,951,500 EUR Real estate investment fund 60% () Company classified as non-current assets held for sale. During 2023, the Bank proceeded with the liquidation of the funds Oceânico II – Fundo de Investimento Imobiliário Fechado and Funsita - Fundo de Investimento Imobiliário Fechado. 2023 REPORT & ACCOUNTS 686 | As at 31 December 2023, the Special Purpose Entity of Banco Comercial Português S.A. is as follows: Special Purpose Entities Head office Share capital Currency Activity % held Magellan Mortgages No.3 Limited Dublin 40,000 EUR Special Purpose Entities 82.4% During the 3rd quarter of 2023, the Bank settled the Magellan Mortgages No.1 securitization operation. As at 31 December 2023, the Bank's associated insurance companies are as follows: Associated companies Head office Share capital Currency Activity % held Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. Oeiras 50,002,375 EUR Life reinsurance 49% As at 31 December 2023, the Bank's associated companies are as follows: Associated companies Head office Share capital Currency Activity % held Banque BCP, S.A.S. Paris 215,335,898 EUR Banking 19% Webspectator Corporation Delaware 950 USD Digital advertising services 25.1% 53. Subsequent events In addition to the aspects disclosed in the other notes and according to the accounting policy 1 Y, the events that occurred after the date of the financial statements and until the date of its approval, were as follows: S&P Global Ratings upgraded BCP's Outlook On 12 March 2024, S&P Global Ratings upgraded BCP's Outlook from Stable to Positive. EIB signed an agreement with Millennium bcp As at 11 January 2024, the EIB signed an agreement with Millennium bcp to provide 400 million euros in new loans to Portuguese companies. Banco Comercial Português, S.A. informed about the issuance of perpetual subordinated notes (Additional Tier 1) As at 11 January 2024, Banco Comercial Português, S.A. (“Millennium bcp”) informed it has set the conditions for a new issue of Additional Tier 1, in the amount of Euros 400 million, with the option of early repayment by Millennium bcp from the end of 5th year onwards with a coupon of 8.125% per year for the first 5.5 years, which will be refixed from that date every 5 years, with reference to the then prevailing 5-year mid-swap rate plus a spread of 5.78%. Banco Comercial Português, S.A. informed about the resignation of a member of the Board of Directors As at 5 January 2024, Banco Comercial Português, S.A. (“Bank”) informed, under the terms and for the purposes of article 6 of CMVM Regulation No. 1/2023, that the Non-Executive Director Xiaoxu Gu (also known as Julia Gu) presented today its resignation to the position of non-executive member of the Board of Directors, effective from February 29, 2024. The Bank informs that it will begin the process of identifying and selecting a new non-executive member to join its Board of Directors in accordance with the applicable Bank's regulations. The conclusion of this process will be announced in due course and will not affect the regular functioning of the Board of Directors. 2023 REPORT & ACCOUNTS | 687 Banco Comercial Português S.A. informed about decision to call the currently outstanding Additional Tier 1 instrument (“AT1”) in the amount of Euros 400 million As at 1 January 2024, Banco Comercial Português, S.A. informed that it has decided to exercise its option to early redeem all of its Additional Tier 1 notes “Fixed Rate Reset Perpetual Temporary Write Down Additional Tier 1 Capital Notes” (ISIN: PTBCPFOM0043), issued on 31 January 2019 (the “Notes”), in accordance with Condition 9.2 of the terms and conditions of the Notes. The early redemption of the Notes took place on their first call date according with its terms and conditions, 31 January 2024, at their outstanding principal amount together with accrued interest. 2023 REPORT & ACCOUNTS 688 | Declaration of Compliance 2023 REPORT & ACCOUNTS | 689 2023 REPORT & ACCOUNTS 690 | Annual Report of the Audit Committee 2023 REPORT & ACCOUNTS | 691 2023 REPORT & ACCOUNTS 692 | 2023 REPORT & ACCOUNTS | 693 2023 REPORT & ACCOUNTS 694 | 2023 REPORT & ACCOUNTS | 695 2023 REPORT & ACCOUNTS 696 | 2023 REPORT & ACCOUNTS | 697 2023 REPORT & ACCOUNTS 698 | 2023 REPORT & ACCOUNTS | 699 2023 REPORT & ACCOUNTS 700 | 2023 REPORT & ACCOUNTS | 701 Opinion of the Audit Committee on the Annual Report of 2023 2023 REPORT & ACCOUNTS 702 | 2023 REPORT & ACCOUNTS | 703 2023 REPORT & ACCOUNTS 704 | Summary of the Self-Assessment Report 2023 REPORT & ACCOUNTS | 705 2023 REPORT & ACCOUNTS 706 | 2023 REPORT & ACCOUNTS | 707 2023 REPORT & ACCOUNTS 708 | 2023 REPORT & ACCOUNTS | 709 External Auditors' Report 2023 REPORT & ACCOUNTS 710 | 2023 REPORT & ACCOUNTS | 711 2023 REPORT & ACCOUNTS 712 | 2023 REPORT & ACCOUNTS | 713 2023 REPORT & ACCOUNTS 714 | 2023 REPORT & ACCOUNTS | 715 2023 REPORT & ACCOUNTS 716 | 2023 REPORT & ACCOUNTS | 717 2023 REPORT & ACCOUNTS 718 | 2023 REPORT & ACCOUNTS | 719 2023 REPORT & ACCOUNTS 720 | 2023 REPORT & ACCOUNTS | 721 2023 REPORT & ACCOUNTS 722 | 2023 REPORT & ACCOUNTS | 723 2023 REPORT & ACCOUNTS 724 | 2023 REPORT & ACCOUNTS | 725 2023 REPORT & ACCOUNTS 726 | 2023 REPORT & ACCOUNTS | 727 2023 REPORT & ACCOUNTS 728 | 2023 REPORT & ACCOUNTS | 729 2023 REPORT & ACCOUNTS 730 | 2023 REPORT & ACCOUNTS | 731 2023 REPORT & ACCOUNTS 732 | 2023 REPORT & ACCOUNTS | 733 2023 REPORT & ACCOUNTS 734 | CORPORATE GOVERNANCE REPORT 2023 REPORT & ACCOUNTS | 735 INTRODUCTION 737 PART I 738 A. SHAREHOLDING STRUCTURE (Organization and Corporate Governance) 738 I. Capital Structure 738 II. Shares and Bonds Held 739 B. GOVERNING BODIES AND COMMITTEES 742 I. GENERAL MEETING 742 II. MANAGEMENT AND SUPERVISION 744 Board of Directors 753 Audit Committee 759 Executive Committee 763 Specialised Committees of the Board of Directors (BoD) 772 III. SUPERVISION 781 IV. STATUTORY AUDITOR (including the Policy for the Selection and Evaluation of External Auditors and of the Statutory Auditor (ROC) 783 V. EXTERNAL AUDITOR 785 C. INTERNAL ORGANISATION 789 I. Articles of Association 789 II. Communication of Irregularities 789 III. Internal control and risk management 792 A) Risk Office 793 B) Compliance Office 794 C) Audit Division 795 IV. Investor Support 801 V. Website 803 D. REMUNERATIONS 804 I. Competence for determination 804 II. Remuneration and Welfare Board 805 III. Structure of remunerations 806 IV. Disclosure of remunerations 819 V. Agreements with remunerative implications 836 VI. Plans for the attribution of shares or stock options 836 E. TRANSACTIONS WITH RELATED PARTIES 836 I. Control mechanisms and procedures 836 II. Data relative to business 838 PART II – EVALUATION OF THE COMPLIANCE WITH THE RECOMMENDATIONS AND SUB-RECOMMENDATIONS FROM THE CORPORATE GOVERNANCE CODE FROM IPCG. 839 ANNEX I 847 CURRICULA VITAE OF THE MEMBERS OF THE BOARD OF DIRECTORS OF BANCO COMERCIAL PORTUGUÊS, S.A. 847 Non-Executive Members of the Board of Directors 848 Executive Members of the Board of Directors 858 ANNEX II 866 CURRICULA VITAE OF THE MEMBERS OF THE REMUNERATION AND WELFARE BOARD OF BANCO COMERCIAL PORTUGUÊS, S.A. 866 ANNEX III 867 CURRICULA VITAE OF THE MEMBERS OF THE BOARD OF THE GENERAL MEETING OF BANCO COMERCIAL PORTUGUÊS, S.A. 867 2023 REPORT & ACCOUNTS 736 | Introduction Banco Comercial Português, S.A., (hereinafter referred to as “Company”, “Bank”, “BCP” or “Millennium bcp”) structured this Corporate Governance Report regarding the 2023 financial year (hereinafter referred to as “Report”), in compliance with the provisions of the annex to the CMVM Regulations no 4/2013 of 1 August 2013, of the Securities Code and of the Circular Letter 005/024 of February 20, as well as with the principles and recommendations of the Corporate Governance Code issued by Instituto Português de Corporate Governance (“IPCG”) of 2018, in the version revised in 2023. Were also considered, among other, the following regulations: the Legal Framework for Credit Institutions (LFCIFC), the Securities Code (SC), the Companies Code, the Notice 3/2020 of Banco de Portugal, the Law 62/2017 of 1 August, the CMVM Regulation 1/2023, the Directive 2023/36/EU and the Regulation 575/2013, both from the European Parliament and the Council of 26 June 2013, Regulation/EU) 596/2014 of April 16, 2014, the Execution Regulation (EU) 2016/523 of the Commission of March 10, 2016, the Delegated- Regulation (EU) 2021/923, of the Commission of 25 March, 2021, and the joint Guidelines of ESMA 35-36-2319 and EBA/GL/2021/05, of July 2, 2021. This Report only considers the individual BCP and is composed by two parts and three annexes, with the following structure: PART I – Items 1 to 92 containing information on the shareholding structure and corporate governance responding to the requirements of the Securities Code and of the CMVM Regulation 4/2013 of August 1, 2013, and the recommendations of the Corporate Governance Code of the Portuguese Institute of Corporate Governance (IPCG), as well as the Notice 3/2000 of Banco de Portugal (art. 316 of the Companies Code). PART II – Evaluation of the Compliance with the Recommendations and sub-recommendations from the Corporate Governance Code from IPCG. Annex I – CV of the members of the Board of Directors of the Bank Annex II – CV of the members of the Remunerations and Welfare Board Annex III – CV of the members of the Board of the General Meeting of Shareholders 2023 REPORT & ACCOUNTS | 737 Part I Bearing in mind that Banco Comercial Português, S.A. adopts a one-tier management and supervisory model, composed of a Board of Directors, which includes an Audit Committee made up solely of non-executive directors and an Executive Committee (the Bank's day-to-day management body) and the Statutory Auditor, the preparation of this report, in particular the chapters resulting from CMVM Regulation no. 4/2013, has taken into account the model adopted by the Bank. A. SHAREHOLDING STRUCTURE (Organization and Corporate Governance) I. Capital Structure 1. The capital structure (share capital, number of shares, distribution of capital by shareholders, etc.), including an indication of shares that are not admitted to trading, different classes of shares, rights and duties of same and the capital percentage that each class represents (Article 29-H (1) (a) of the Securities Code). At the date of approval of this Report (March 2024, as well as on 31 December 2023), the Bank's share capital is 3,000,000,000.00 euros, represented by 15.113.989.952 single-class, registered, book-entry shares with no nominal value, fully subscribed and paid up, all admitted to trading on regulated market (Euronext Lisbon). These shares represent 100% of the share capital, confer identical rights and are fungible between them. According to the information provided by Interbolsa, on 31 December 2023, the number of Shareholders of Banco Comercial Português totalled 129,765. On 31 December 2023, the Bank’s shareholding structure continued dispersed, with two shareholders owning more than 5% of the share capital. As a whole, the shareholders with stakes exceeding 5%, represented 45% of the share capital. On the same date, shareholders with more than 5 million shares and less than 5% of the share capital, totalled 141 and represented, on 31 December of 2023, 31.47% of the share capital and voting rights. In terms of geographic distribution, special mention should be made of the weight of the shareholders with Portuguese nationality or with registered office in Portugal, which accounted for 29.06% of the share capital and voting rights. Although pursuant to its articles of association, the Bank has the ability to issue shares with special rights, namely preferential with or without voting rights, redeemable with or without premium or not redeemable, it did not resort to this ability. The issue of this type of shares would depend on a specific resolution adopted by the Shareholders at a General Meeting of Shareholders by a majority of 2/3 of the votes cast. 2. Restrictions on the transfer of shares, such as clauses on consent for disposal, or limits on the ownership of shares (current article 29-H (1) (b) of the Securities Code) There are no clauses in the articles of association with these features. The shares representing the share capital of the Bank are freely transmissible and there are no limits on the ownership of shares. 3. Number of own shares, the percentage of share capital that it represents and corresponding percentage of voting rights that would correspond to own shares (current article 29-H, (1) (a) of the Securities Code) On December 31, 2023, the Bank did not hold its own shares recorded in its «own portfolio». 2023 REPORT & ACCOUNTS 738 | 4. Important agreements to which the company is a party and that come into effect, are amended or terminated in cases in case of a change in the control of the company after a takeover bid, and the respective effects, except where due to their nature, the disclosure thereof would be seriously detrimental to the company; this exception does not apply where the company is specifically required to disclose said information pursuant to other legal requirements. (art. 29-H, (1) (j) of the Securities Code) The Bank is not a party to significant agreements, namely agreements that enter into effect, are altered, or terminated in the event of change of control, following a public takeover bid, or change of composition of the governing bodies and which might hinder the financial interest in the free transferability of shares and the free appraisal by the shareholders of the performance of directors. Within the scope of its activity, the Bank has negotiated three bilateral funding contracts with the European Investment Bank (EIB) in the overall amount of around two hundred and sixty five million Euros, which include clauses that confer the counterparty, under certain verifiable circumstances and in line with what is usual in the type of operations in question, the right to trigger the early repayment of these values, in the event of a change to the Bank's shareholder control. None of these contracts harms the economic interest in the transfer of shares and the free appraisal by the shareholders of the Director’s performance. 5. A system that is subject to the renewal or withdrawal of countermeasures, particularly those that provide for a restriction on the number of votes capable of being held or exercised by only one shareholder individually or together with other shareholders. The Article 26 of the Bank’s Articles of Association establishes that votes cast by a single shareholder and its related entities, under the terms of number 1 of article 20 of the Securities Code, representing more than 30% of the votes of the total share capital, shall not be counted. On the date this report was approved, there were no shareholders reaching the above-mentioned limit of 30%. The amendment of this statutory provision requires the approval by 2/3 of the votes cast at the General Meeting. The Bank's Articles of Association do not foresee the periodic review of the statutory rule that establishes the limitation of votes. However, under the terms of article 13-C of the LFCIFC, these limits will automatically expire at the end of each five-year period if no resolution is adopted by the General Meeting of Shareholders to expressly maintain them. When this proposal for the maintenance or revocation of this limitation is made by the Board of Directors, its approval is not subject to any limits, to the holding or exercise of voting rights, nor to super quorum or majority requirements than the legally established ones. At the General Meeting of Shareholders held on 20 May 2021, The Board of Directors proposed the maintenance of the limitation of the counting of votes mentioned earlier and the proposal was approved by a majority of 82.26% of the votes cast and, therefore, the same, except if the General Meeting resolves otherwise, remains valid until 20 May 2026. 6. Shareholders’ agreements that the company is aware of and that may result in restrictions on the transfer of securities or voting rights (current Art. 29-H (1) (g) of the Securities Code). The Bank is not aware of the existence of any shareholders' agreement relative to the exercise of corporate rights or transferability of the Bank's shares. II. Shares and Bonds Held 7. Details of the natural or legal persons who, directly or indirectly, are holders of qualifying holdings (current Art. 29-H, (c and d) and Art.16 of the Securities Code), with details of the percentage of capital and votes attributed and the source and causes of the attribution. Under the terms of the Securities Code, the qualifying stakes in the Company’s share capital as at 31 December 2023, indicating the percentage of the share capital and imputable votes, and the source and reasons of imputation, are shown in the following table: 2023 REPORT & ACCOUNTS | 739 31 December 2023 Shareholder No. shares % of share capital % of voting rights Chiado (Luxembourg) S.a.r.l (Fosun Group) 3,927,436,381 25.99% 25.99% TOTAL FOR FOSUN GROUP 3,927,436,381 25.99% 25.99% Sonangol - Sociedade Nacional de Combustíveis de Angola, EP 2,946,353,914 19.49% 19.49% TOTAL FOR SONANGOL GROUP 2,946,353,914 19.49% 19.49% Total of Qualified Shareholdings 6,873,790,295 45.48% 45.48% After the reference date of this report, Chiado (Luxembourg) S.à r.l. informed the market that on 22 January 2024 it reduced its stake in the share capital, holding on that date 3,027,936,381 BCP shares, corresponding to 20.03% of its share capital and voting rights. 8. Indication of the number of shares and bonds held by members of the governing bodies, directors and persons closely related to these categories On this issue, please see the information provided in the Annual Report 2023, in Note 51 to the Consolidated Financial Statements. 9. Special powers of the Board of Directors, especially as regards resolutions on the capital increase (current Art.29-H (1) (i) of the Securities Code) with an indication as to the allocation date, time period within which said powers may be carried out, the maximum quantitative limit of the capital increase Under the terms of article 5 (1) of the Bank’s Articles of Association, the Board of Directors has powers to, when deemed convenient and after having obtained the favourable opinion of the Audit Committee, increase the share capital, once or more times, until the limit of the value of the existing share capital when the authorisation was granted or upon renewal of this authorisation, with shareholder’s preference right. In accordance with the requirements of article 456 of the Companies Code, the Board of Directors submitted to the appraisal of the General Meeting held on 20 May 2021 the renewal or the authorization to increase the capital, for a five-year term, the proposal having been approved by a 82,26% majority of the votes cast, this way renewing the authorization mentioned in article 5 (1) of the Bank’s Articles of Association. On the date the authorisation was granted, the share capital of the Bank was 4.725.000.000,00 euros. 10. Information on the existence of significant business relations between holders of qualifying stakes and the company and conditions for the respective contracting The conclusion of business between the Bank and holders of qualifying holdings or natural or legal persons related to them, as well as between the Bank and its other related parties, as provided for in the LFCIFC and Article 33 (3) of Notice No 3/2020 of Banco de Portugal, is object of a special approval procedure, according to which the transaction is approved by a two-thirds majority of the Board of Directors, following a proposal submitted by the Executive Committee, after the prior issuance of an opinion by the Audit Committee. The procedure also depends on the issuance of prior opinions (i) from the Compliance Office, regarding the compliance of the proposed operations with the internal rules and applicable legal and regulatory provisions, namely in terms of risk and compliance with normal market conditions, and (ii) the Risk Office, which assesses and issues an opinion on the risks inherent to the operation. There are, however, simplified procedures for transactions considered to be of lower risk, which were defined considering the legal framework in force, especially the Notice 3/2020 of Banco de Portugal. During the 2023 financial year, the Audit Committee issued a total of nineteen opinions related with the granting of credit to related parties, of which three on proposals connected with holders of qualifying stakes and entities related with them. The Audit Committee is responsible for analysing the operations within a perspective of prevention of conflicts of interest and guarantee that no special advantage is conferred to the 2023 REPORT & ACCOUNTS 740 | client, ensuring that these transactions are carried out under normal market conditions, considering the opinions submitted to it. In the financial year to which this Report relates to, the contracting of supplies and provision of services between the Bank and related parties was also analysed, with the Audit Committee issuing a total of nine opinions regarding proposals for contracting goods and services, of which two on proposals relating to holders of qualifying holdings and entities related to them. The operations carried out in 2023, and mentioned above, are also identified in item 90 of this Report. The Board of Directors, in accordance with the competences, conferred to it by its Regulations, reserves for itself, regarding matters connected with related parties, the following powers: • approve the internal policy foreseeing the definition, identification and update of the parties related with the Bank, following a proposal made by the Executive Committee, and after obtaining the opinion from the Audit Committee; • approve, complying with the legislation and with the internal regulations, transactions with related parties, following a proposal made by the Executive Committee and after obtaining the opinion from the Audit Committee; • Ensure that the Bank identifies, in a complete and quarterly updated list, its related parties, informing the Audit Committee and, making it available to the supervisory authority whenever requested; • approve the Policy for the Prevention and Management of Conflicts of Interest, upon proposal of the Executive Committee and after obtaining the opinion from the Audit Committee; In what regards credit transactions, the Service Order OS0016 sets forth that the Bank is not allowed to grant loans, directly or indirectly, in any form or of any kind (including acting as guarantor) to the members of its management and supervisory bodies or to companies or legal persons directly or indirectly controlled by them. We underline that this limitation does not apply to loans with social features or for social purposes or to loans resulting from staff management policies, as well as to loans granted due to the use of credit cards associated with the current account, under the conditions applicable to other Customers with a similar risk profile. Notwithstanding, these operations, in which the beneficiaries are members of the management and supervisory bodies of the Bank, or entities related with them, must obey to the following rules: • In credit cards, 100% monthly payment of the amount used. • In loans resulting from staff management policy, the conditions in force within the scope of this policy for the majority of Employees must be fully observed; Finally, and in accordance with the provisions of the Regulations of the Board of Directors, the members of the Board of Directors and/or of the Audit Committee may not access any privileged or sensitive documentation, as well as participate in the assessment and decision of any operation or contract with which they are in conflict. Transactions involving Related Parties depend on the prior opinions of the Compliance Office, Risk Office and Audit Committee, being finally approved by a two-thirds majority of its members who are not prevented under the terms of the previous paragraph. The Chairwoman of the Audit Committee, qualified as an independent member of the Board of Directors, communicates to the Board the content of the opinion issued by the Audit Committee on the operation, which will only afterwards be debated and voted. As a result of the governance model adopted by the Bank, the Chairwoman and the other members of the Audit Committee, as non-executive members of the Board of Directors, also vote on the proposal, so that any autonomous communication of the resolution adopted by the Board to the Audit Committee is not justified as redundant. Each quarter, the cases involving conflicts of interest are communicated by the Compliance Office to the Audit Committee and form an integral part of the Report on Conflicts of Interest. 2023 REPORT & ACCOUNTS | 741 B. GOVERNING BODIES AND COMMITTEES I. General Meeting a) Composition of the Board of the General Meeting 11. Identification and position of the members of the board of the general meeting and respective term of office (beginning and end) Under the terms of article 20, (1) of the Bank's Articles of Association, the Board of the General Meeting is composed of a Chairperson, a Vice-Chairperson, and the Company Secretary. The Chairperson and the Vice-Chairperson of the Board of the General Meeting were elected for a first term- of-office (2017/2019) on 10 May 2017, and were re-appointed for that position by the General Meeting of Shareholders held on 20 May 2020 for the four-year period 2020/2023. The Board of the General Meeting, ended its term of office on 31/12/2023, remains in office until the election of new members, which will occur at the General Meeting to be held in May 2024. The Board of the General Meeting is composed of: Chairman: Pedro Miguel Duarte Rebelo de Sousa (Independent) Vice-Chairman: Octávio Manuel de Castro Castelo Paulo (Independent) Secretary: Ana Patrícia Moniz Macedo b) Exercise of Voting Rights 12. Any restrictions on the right to vote, such as restrictions on voting rights subject to holding a number or percentage of shares, deadlines for exercising voting rights, or systems whereby the financial rights attaching to securities are separated from the holding of securities (Article 29-H (1) (f) of the Securities Code). Under the terms of the Bank’s Articles of Association, each share corresponds to one vote. Natural or legal persons that own shares which confer to them at least one vote at zero hours of the fifth trading day prior to the date of the General Meeting may participate therein, directly or through a representative. Considering the experience acquired in previous years, as well as the reliability of the systems which were implemented, the Bank continues to carry out General Meetings which enable the simultaneous participation of shareholders, in person or using electronic means. In this last case, voting in writing, by mail or internet is permitted, provided that the vote is received by the penultimate day prior to the date of the General Meeting. The shareholders have the possibility to, during the meeting, alter the vote previously cast provided that they do so until the closing of the voting of the item in question. The entire process for the carrying out of the General Meeting is audited every year by the Bank’s Audit Division. The Bank does not have in its articles of association a rule that allows the issuance of shares with a special right to plural voting. On these issues, please see items 5, 14 and 48. 13. Details of the maximum percentage of voting rights that may be exercised by a single shareholder or by shareholders that are in any relationship as set out in Article 20 (1) of the Securities Code. On this issue, please see item 5. 2023 REPORT & ACCOUNTS 742 | 14. Details of shareholders' resolutions that, imposed by the articles of association, may only be taken with a qualified majority, in addition to those legally provided, and details of said majority. The Bank's Articles of Association require the presence of shareholders owning more than one third of the share capital for the General Meeting to be held at first call. The Articles of Association also require a qualified majority of three quarters of the votes cast for approval of decisions on merger, demerger, transformation and a majority of three quarters of the fully paid-up share capital for resolutions on the dissolution of the company. The amendment of articles which establish limitations to voting rights or determine majorities different from those stipulated in the law requires a qualified majority of two thirds of the votes cast. The demand for a reinforced quorum is not intended to adopt mechanisms that will make it difficult for shareholders to adopt resolutions. On the contrary, it is aimed at protecting minorities and guaranteeing that no relevant matter is decided without the effective participation of a representative number of shareholders. On these issues, please see items 5, and 48. 2022 REPORT & ACCOUNTS | 743 II. Management and Supervision a) Composition 15. Identification of the endorsed governance model The Bank adopted, since 2012, a one-tier corporate structure, composed by a Board of Directors which includes an Executive Committee and an Audit Committee (supervisory body), the latter is elected by the General Meeting of Shareholders. It also has a Remuneration and Welfare Board, also elected by the General Meeting of Shareholders. 16. Articles of association rules on the procedural requirements governing the appointment and replacement of members of the Board of Directors and Audit Committee (current Article 29-H (1) (h) of the Securities Code). The members of the Board of Directors are elected at the General Meeting. Should the Board of Directors co-opt any Director to fill a vacant position which occurred between general meetings, such designation must be submitted to the first General Meeting of Shareholders taking place after the co- optation, for ratification. The co-opted member shall exercise functions until the end of the term of office underway. Elections are plural and conducted by lists, with indication by the proposing shareholders, and votes are cast based on these lists. The Bank considers and, until today, also its shareholders, that this is the way that better upholds the company’s interests for being the one that guarantees coherence and the necessary complementarity in the composition of the body. In accordance with the Bank’s articles of association, one of the Directors can be elected on its own according to article 392 (1 to 5) of the Companies Code. Under the terms of the law, and under penalty of destitution, each Annual General Meeting of Shareholders votes on a renewal of the vote of confidence in each of the members of the management and supervisory bodies and likewise in the body as a whole. Concerning the procedures to adopt regarding the candidates to the Board of Directors, including the members of the Audit Committee and remaining Board Committees, the Bank strictly observes the provisions of article 30 and following of the Legal Framework for Credit Institutions and Financial Companies (LFCIFC) and those of Item 6 of Chapter III of the Joint Guidelines from ESMA and from EBA - ESMA 35-36-2319 and EBA/GL/2021/06, of July 2 and of Group Code GR0043. In the assessment carried out in this context, the Bank takes into account the individual qualitative requirements of good repute, professional qualification, independence and accumulation of positions, as well as availability for the performance of the function, together with the collective requirements of professional qualification, availability and diversity, all in compliance with the provisions of articles 30 to 33 of the LFCIFC, as well as the ECB Guide to fit and proper assessments, of December 2021, and the aforementioned Joint ESMA and EBA Guidelines on assessing the suitability of members of management bodies. On 9 December 2021, the Board of Directors also approved the Succession Planning for the members of the Management and Supervisory Bodies and Key-Function Holders with the purpose of, previously and in abstract, setting the methodological framework and the procedures and criteria to adopt to ensure their adequate succession with the purpose of providing decision-makers with an instrument that details the procedures to be adopted and identifies potential candidates for the functions covered, also foreseeing the need to fill unforeseen vacancies. The above-mentioned Succession Planning is available on the Bank’s website, in the Portuguese and English languages, on the page with the following address: https://ind.millenniumbcp.pt/en/Institucional/governacao/Pages/normas_regulamentos.aspx In addition and to comply with the provisions of Notice of Banco de Portugal 3/2020 and the Guidelines of the European Banking Authority (EBA/GL/2021/05 e EBA/GL/2021/06), the Bank’s Board of Directors submitted to the appraisal of the General Meeting of Shareholders held on 04 May 2022 and this one approved it by a majority of 99.80% of the votes cast, the update of the internal policy for the Selection and Assessment of the Suitability of the Members of the Management and Supervisory Bodies and Key Function Holders, which is available on the Bank’s website in the Portuguese and English languages, on the page with the following address: 2022 REPORT & ACCOUNTS 744 | https://ind.millenniumbcp.pt/en/Institucional/governacao/Pages/normas_regulamentos.aspx In view of the relevance of the theme, the Bank, as the parent company of the BCP Group, has also approved regulations which are applicable to all the Group’s financial entities, defining the framework for assessing the individual suitability of persons appointed to become members of the management and supervisory bodies and other key function holders in the Group and for the collective assessment of a given composition of a management or supervisory body. It also addresses succession planning at the Group level. 17. Composition of the Board of Directors and the Audit Committee with details of the articles of association’s minimum and maximum number of members, duration of term of office, number of effective members, date when first appointed and end of the term of office of each member. In accordance with the Bank’s Articles of Association, the Board of Directors is composed of a minimum of fifteen and a maximum of nineteen members, elected by General Meeting of Shareholders for terms of office of four years, who may be re-elected one or more times. At the end of the financial year to which this report relates to, the Board of Directors was composed of 17 members, with 11 non- executive ones and 6 executive, having the following composition: 2022 REPORT & ACCOUNTS | 745 BOARD OF DIRECTORS (BoD): COMPOSITION, MANDATE (START AND END), POSITIONS AND QUALIFICATION OF THE MEMBERS Composition of the BoD (Non- Executive Members) Beginning of the term of office Term of Office End of the Term of Office Appointment method Body and Position Capacity Nuno Manuel da Silva Amado 04/05/2022 2022/2025 31/12/2025 Election Board of Directors - Chairman Independent (a) 30/05/2018 2018/2021 31/12/2021 0511/2015 2015/2017 31/12/2017 Board of Directors - Vice- Chairman and Executive Committee - Chairman 28/02/2012 2012/2014 31/12/2014 Jorge Manuel Baptista Magalhães Correia 04/05/2022 2022/2025 31/12/2025 Election Board of Directors - 1st Vice-Chairman Not Independent (b) 30/05/2018 2018/2021 31/12/2021 Valter Rui Dias de Barros 04/05/2022 2022/2025 31/12/2025 Election Board of Directors - 2nd Vice-Chairman Not Independent (b) 30/05/2018 2018/2021 31/12/2021 Board of Directors - Vice- Chairman Ana Paula Alcobia Gray 04/05/2022 2022/2025 31/12/2025 Election Board of Directors - Member Not Independent (b) 30/05/2018 2018/2021 31/12/2021 Cidália Maria da Mota Lopes 04/05/2022 2022/2025 31/12/2025 Election Board of Directors - Member Independent 30/05/2018 2018/2021 31/12/2021 11/05/2015 2015/2017 31/12/2017 Xiao Xu (Julia Gu) (c) 04/05/2022 2022/2025 31/12/2025 Election Board of Directors - Member Not Independent (b) 30/05/2018 2018/2021 31/12/2021 Lingjiang Xu 04/05/2022 2022/2025 31/12/2025 Election Board of Directors - Member Not Independent (b) 30/05/2018 2018/2021 31/12/2021 09/01/2017 2015/2017 31/12/2017 Co-option Fernando da Costa Lima 04/05/2022 2022/2025 31/12/2025 Election Board of Directors - Member Independent 23/04/2019 2018/2021 31/12/2021 Co-optation Lingzi Yuan (Smilla Yuan) 04/05/2022 2022/2025 31/12/2025 Election Board of Directors - Member Independent Altina de Fátima Sebastian Gonzalez Villamarin 11/10/2022 2022/2025 31/12/2025 Co-optation Board of Directors - Member Independent José Pedro Rivera Ferreira Malaquias 11/10/2022 2022/2025 31/12/2025 Co-optation Board of Directors - Member Independent (a) Since July 2023, the director concerned has been classified as independent by virtue of the expiry of the period of five years after the end of the financial year of the management functions (b) The director in question is connected to a shareholder with a qualifying stake. (c) The Director submitted a letter of resignation from office on 05.01.2024, effective as of February 29, 2024. 2022 REPORT & ACCOUNTS 746 | BOARD OF DIRECTORS (BoD): COMPOSITION, MANDATE (START AND END), POSITIONS AND QUALIFICATION OF THE MEMBERS Composition of the BoD (Executive Members) Beginning of the term of office Term of Office Term of Office - End Appointment method Body and Position Capacity Miguel Maya Dias Pinheiro 04/05/2022 2022/2025 31/12/2025 Election Executive Committee - Chairman Executive 30/05/2018 2018/2021 21/12/2021 11/05/2015 2015/2017 31/12/2017 Executive Committee - Vice- Chairman 28/02/2012 2012/2014 31/12/2014 18/04/2011 2011/2013 28/02/2012 11/11/2009 2008/2010 31/12/2010 In replacement Executive Board of Directors - Member Miguel de Campos Pereira de Bragança 04/05/2022 2022/2025 31/12/2025 Election Executive Committee - Vice- Chairman Executive 30/05/2018 2018/2021 31/12/2021 11/05/2015 2015/2017 31/12/2017 28/02/2012 2012/2014 31/12/2014 João Nuno de Oliveira Jorge Palma 04/05/2022 2022/2025 31/12/2025 Election Executive Committee - Vice- Chairman Executive 30/05/2018 2018/2021 31/12/2021 09/01/2017 2015/2017 31/12/2017 Co-optation José Miguel Bensliman Schorcht da Silva Pessanha 04/05/2022 2022/2025 31/12/2025 Election Executive Committee - Member Executive 30/05/2018 2018/2021 31/12/2021 11/05/2015 2015/2017 31/12/2017 Maria José Henriques Barreto Matos de Campos 04/05/2022 2022/2025 31/12/2025 Election Executive Committee - Member Executive 30/05/2018 2018/2021 31/12/2021 Rui Manuel da Silva Teixeira 04/05/2022 2022/2025 31/12/2025 Election Executive Committee - Member Executive 30/05/2018 2018/2021 31/12/2021 11/05/2015 2015/2017 31/12/2017 28/02/2012 2012/2014 31/12/2014 18/04/2011 2011/2013 28/02/2012 Executive Board of Directors - Member The Board of Directors in office includes 6 women, representing 35.29% of its members. The Chairperson of the Audit Committee, the Bank’s supervisory body composed by three members, is a woman. This way, the Bank complies, regarding the financial year this report relates to, with the legal criteria and requirements on gender balance regarding the members of the Board of Directors which, in the governance body adopted by the Bank, includes the supervisory body. The Bank instructs the proposals that submits to the elective General Meeting of Shareholders with documents that enable to assess the suitability of the profile, professional experience and availability of each candidate, namely the declaration of the candidate referred to in article 30 of the LFCIFC, containing relevant and necessary information for the assessment of his/her suitability, as well as the candidates' curriculum, with the Company keeping all the documentation available, for a period of ten 2022 REPORT & ACCOUNTS | 747 years, on the Bank's website, in the Portuguese and English languages, on the page with the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao 17.1 Description of the diversity policy applied in relation to the undertaking’s management and supervisory bodies with regard to aspects such as age, gender, or educational and professional backgrounds, the objectives of that diversity policy, how it has been implemented and the results in the reporting period (Art.º 29-H, (1), (q) SC) and Information on the policy of actions for gender equality and increase of the under-represented gender in first-rank managers The Board of Directors approved on December 9, 2021, a Plan for the Succession of the Members of the Management and Supervisory Bodies and Key-Function holders according to which the Chairperson of the Board of Directors, together with the Vice-Chairpersons and the Chairperson of the Committee for Nominations and Remunerations (CNR), are responsible for the preparation of the Matrix of Competences of the Board of Directors which must consider the Bank’s articles of association and internal rules of the Bank, namely the profile and number of members of the Board of Directors, the structure of the different committees and diversity objectives. The Plan for the Succession of the members of the management and supervisory bodies and key- function holders is available on the Bank’s website on the page with the following address: https://ind.millenniumbcp.pt/en/Institucional/governacao/Pages/normas_regulamentos.aspx In accordance with the Group Code GR0043, on the assessment of the suitability (Fit and Proper) and Succession Plan, all Group Entities shall promote diversity among the members of the management body. The objective is to ensure a wide range of qualities and skills in the recruitment of members of the management body, with a view to obtaining a diversity of perspectives and experiences and favouring independence of opinions, and a solid decision-making within the management body. The concern with diversity should, at the very least, refer to the following aspects: qualifications and professional background, gender, age and geographical origin, all of which are duly taken into account according to the curricular information provided in Annex I to this Corporate Governance Report. The Bank complies with the Portuguese legislation in force, namely the Law 62/2017, of August 1 that sets forth a balanced representation regime between men and women in the management and supervisory bodies of listed companies. In that sense, the Committee for Nominations and Remunerations considers that the policy was adequately applied in the period in question. The representativeness of each gender in the Management and Leading positions was as follows: 2022 2023 Board of Directors Women 6 (35%) 6 (35%) Men 11 (65%) 11 (65%) Leading positions Women 353 (30%) 360 (31%) Men 829 (70%) 794 (69%) Group BCP also has a “Policy for Diversity and Equal Opportunities”, published on the institutional website that, in its guiding principles and guidelines, institutes values and performance references that include an unequivocal orientation for: the right to equality in access to jobs and at work and the prohibition of any form, direct or indirect, of discrimination. 2022 REPORT & ACCOUNTS 748 | Since 2019, BCP in Portugal defines and publishes every year a Plan for Gender Equality that corresponds to the materialisation in specific, tangible and consequent actions of the guidelines defined by this Policy and by the reference framework the same establishes in what concerns processes and practices for the management of people. The Plan for Gender Equality made, besides making a diagnosis annually, defines a number of initiatives to be developed in six major lines of action: • Commitment of the top management with gender diversity and equality; • Regular monitoring of management indicators; • Public disclosure of information related with gender diversity; • Strict application of the remunerations and promotions policy; • Increased participation of the gender less represented in the programs for the development of leadership skills; • recruitment of new employees using diversity and wage equality criteria; • support to conciliation of professional life with family and personal life; • support and public disclosure of measures to accelerate gender diversity and inclusion. Globally, the number of employees of the Bank in Portugal per Gender evolved as follows: 2022 2023 Women 2,768 (44.3%) 2,809 (45.0%) Men 3,484 (55.7%) 3,433 (55.0%) The admission of new employees continues to respect the principle of gender equality and matches the Objectives of the Bank’s Strategic Plan for the period 2021 to 2024 regarding Diversity, enabling, in the same timeframe, the percentage of women in leading positions to increase to 35%. The admission of new employees evolved as follows: 2022 2023 Women 87 (48%) 132 (60%) Men 96 (52%) 89 (40%) With a view to achieving the objective defined in the Strategic Plan regarding the percentage of women in management positions, the Bank has made a global effort to reinforce women’s leadership skills and equal treatment in career promotion processes, which has allowed that in new promotions to management positions, women have a representation close to their global representation of the Bank’s workforce. Also, in compliance with this Policy and with the law, the current composition of the Board of Directors for the term-of-office 2022-2025 has 6 elements of the least represented gender, which corresponds to a 35.29% of the total number of members, placing the percentage in the supervisory body in 33%. The Policy for Diversity and Equal Opportunities is available on the Bank’s website, in the Portuguese and English languages, on the page with the following address: 2022 REPORT & ACCOUNTS | 749 https://ind.millenniumbcp.pt/en/Institucional/sustentabilidade/Pages/cod_internos.aspx 18. Distinction of the executive and non-executive members of the Board of Directors and, relating to the non-executive members, identification of the members who may be considered independent The Board of Directors is composed by 17 members, 6-executive and 11 non-executive. The Bank, based on the experience of the last mandates, considers appropriate, either the number of non-executive members of the Board of Directors, or the number of those that, amongst them are qualified as independent, as per tables of items 17 and 26. With this composition, the Bank follows the best national and community practices followed by equivalent companies, being appropriate to the size of the company and the complexity of the risks inherent to the activity it pursues, allowing it to ensure a clear organizational structure, with lines of responsibility that the Bank observes. All the directors were assessed by the Committee for Nominations and Remunerations for the purposes of their qualification as independent, having to that end considered the provisions of the Companies Code, the joint Guidelines of ESMA 35-36-2319 and EBA/GL/2021/06 and the “Guide to fit and proper assessments (December 2021)” of the European Central Bank, as well as the Corporate Governance Code of the IPCG. Considering the Bank's current corporate structure and in accordance with the IPCG Governance Code, according to which the independence criterion is only applicable to non-executives, 6 members of the Board of Directors, out of a total of 11, are independent, i.e., 54.54% of the non-executive directors are independent. In view of its governance structure, the size of the company and the complexity of the business, BCP considers that the proportion of independent non-executive directors in relation to the total number of directors, is adequate. The supervisory body, which is the Audit Committee, is composed by 3 non-executive directors, 2 of them qualified as independent, including its Chairperson. Having considered the content of Recommendations IV.2.2., IV.2.3, IV.2.4 and V.2, of the IPCG Code, Article 414 (5) (b) of the Companies Code, the provisions of Article 31-A of the LFCIFC, the European legislation, namely the joint Guidelines ESMA 35-36-2319 and EBA/GL/2021/06, of 2 July 2021, the Committee for Nominations and Remunerations considered that the composition of the Board of Directors as a whole guarantees a variety of opinions and experiences that facilitate, within the management body, the formulation of independent opinions and decision-making processes that are sound, valid and rigorous. The characteristics and competencies of the independent directors, who represent 45.45% of the total non-executive directors, demonstrate that their autonomy is ensured, and it should also be noted that the current Chairman of the Board of Directors, qualified as independent since July 2023, has implemented the practice of holding biannual meetings with the independent members of the Board of Directors to better listen to their concerns and promote improvements at the governance level and practices of the company. On this matter, please see the table presented in item 17. Within the scope of competences, the Committee for Nominations and Remunerations annually assesses the collective suitability of the Board of Directors, which it did in October 2023, having concluded that the composition, both in terms of experience and training, dedication, and independence of mind, is adequate, despite the fact that areas have been identified in which it is beneficial to reinforce training. In addition, the Board of Directors promotes, in coordination with the Audit Committee, as per the requirements of Notice of Banco de Portugal no. 3/2020, periodic and independent assessments to be carried out by an external entity on the conduct and values of the Bank, of the Board of Directors and its Committees, and Egon Zehnder was hired to carry out this assessment in 2023 and concluded with a positive assessment. 19. Professional qualifications and other relevant curricular elements of each of the members of the Board of Directors and the Audit Committee The professional qualifications and other curricular details of the profile of each member of the Board of Directors are presented in Annex I to this Corporate Governance Report. 2022 REPORT & ACCOUNTS 750 | These data are updated whenever justified and remain available at all times at the Bank's, website, in the Portuguese and English languages, with the following address: https://ind.millenniumbcp.pt/en/Institucional/governacao/ 20. Customary and meaningful family, professional or business relationships of members of the Board of Directors and the Audit Committee with shareholders that are assigned qualifying holdings that are greater than 5% of the voting rights. Except for those identified in the table below, there are no significant family, partner in a non-marital partnership or customary business relationships between members of the Board of Directors with shareholders owning more than 5% of the voting rights. As shown in the table presented in item 7 of this Report, the shareholders owning stakes above 5% are legal persons. Accordingly, and by nature, there are no family relations between the members of the Board of Directors and shareholders with a stake above 5%; furthermore, there are also no family relations between the members of the Bank's Board of Directors and the members of the Boards of Directors of shareholders with a stake above 5%. The Bank favoured the interaction between the independence of behaviour of each member and the principle of being independent in the face of conflicts of interest that create obstacles to the ability to perform their duties independently and objectively. For this purpose, the Board of Directors has confirmed in its Regulations that any member of the Board of Directors that accumulates with his/her office, any management functions in any company that pursues an activity which competes with that of the Bank, or with an entity of Group BCP or in a company in which the Bank holds a significant stake, is prevented from accessing any privileged or sensitive documentation related to the company in question or participate in the debate or resolve on any content related with that company. Moreover, and in accordance with article 6 (1) of the Regulations of the Board of Directors, the directors are not allowed to vote or take part in the debate on issues, regarding which there is a direct or indirect conflict of interests with the Bank, on their own behalf or on behalf of third parties. The Regulations of the Board of Directors, updated in November 2023, are available on the Bank's website, in the Portuguese and English languages, in the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Pages/normas regulamentos.aspx The members of the Board of Directors who have professional/business relations with shareholders to whom, on 31 December 2023, a qualifying stake above 5% of the voting rights is imputable are listed in the following table: Professional or business relationship of the members of the Board of Directors of the Bank with shareholders holding a qualified stake of more than 5% of voting rights Members of the Bank’s Board of Directors Professional or Business Relationship Shareholders holding a qualifying stake exceeding 5% of Voting Rights Jorge Manuel Baptista Magalhães Correia Chairman of the Board of Directors of Fidelidade Companhia de Seguros, S.A. and Chairman of the Board of Directors of Luz Saúde, S.A. Fosun Group Ana Paula Alcobia Gray Sonangol Group Lingjiang Xu Non-Executive Vice-Chairman of the Board of Directors of Fidelidade - Companhia de Seguros, SA Fosun Group Xiao Xu Gu (Júlia Gu) () Vice-Chairwoman of Group Fosun High Technology (Group) Co., Ltd. and Chairwoman of Fosun Financial Services Group Fosun Group Valter Rui Dias de Barros Chairman of the Board of Directors of Recredit - Gestão de Activos, S.A. (Angolan State) Sonangol Group () The Director submitted a letter of resignation from office on 05.01.2024, effective as of February 29, 2024. 2022 REPORT & ACCOUNTS | 751 21. Organisational charts or flowcharts concerning the allocation of powers between the various corporate boards, committees and/or departments within the company, including information on delegating powers, particularly as regards the delegation of the company's daily management Pursuant to the corporate governance model adopted by the Bank - one-tier model - the Board of Directors includes an Audit Committee elected by the General Meeting of Shareholders composed solely of non-executive members, mostly qualified as independent, and an Executive Committee to which the Board of Directors has delegated the Bank’s current management, as per the provisions of article 35 of the Articles of Association and articles 10 (7) and 12 (2) of its Regulations. The Board of Directors also appointed three other specialised committees - the Committee for Risk Assessment, the Committee for Nominations and Remunerations and the Committee for Corporate Governance, Ethics and Sustainability - whose essential function is to permanently monitor specific and/or highly complex matters. The powers and composition of the above- mentioned Committees are summarised below. There is also a Remuneration and Welfare Board appointed by the General Meeting and a Strategic Board of a non-permanent advising nature, which has as members due to their functions, the Chairperson and Vice-Chairpersons of the Board of Directors, as well as the Chairperson of the Executive Committee. The Board of Directors may, on a case-by-case basis, appoint up to five ad-hoc members, to choose from among representatives of shareholders with qualified holdings and other personalities of recognized merit linked to the themes that, at any given moment, are the object of analysis by the Strategic Board and whose functions will cease simultaneously with the end of the term-of-office of the Board of Directors. To advise it on daily management issues, the Executive Committee has also appointed different commissions and sub commissions of which, in addition to two or more Executive Directors, are also members several first-rank reporting Managers, permanently and with voting rights. The organisational structure of the Bank's Corporate Governance Model as at 31 December 2023 is shown in the next table: 2022 REPORT & ACCOUNTS 752 | Board of Directors The Board of Directors (BoD), as the Bank's governing body, has the broadest powers to manage and represent the Company, retaining the power to reclaim powers delegated to the Executive Committee or any of its other Specialised Committees, except for those powers attributed by law to the Committees, especially the Audit Committee, which is the Bank's supervisory body. The BoD has all the responsibilities detailed below, in particular those related to defining the Bank's organisation and its internal control system and the Bank's strategy, which defines the medium-term objectives in line with the interests of the company, its shareholders and other stakeholders. The Bank's strategy is disclosed on the Bank's website and details both the objectives to be achieved and the resulting structural contributions: https://ind.millenniumbcp.pt/pt/Institucional/quemsomos/Pages/estrategia.aspx. Reference is also made to the Annual Report on this matter. In the exercise of their functions, directors conduct their actions in compliance with the duties of care, loyalty and suitability, with the diligence of a judicious and orderly manager, in the interest of the Bank, devoting the necessary time and effort to the effective fulfilment of their obligations as directors. In the exercise of their competences, directors act in a responsible and prudent manner, based on high ethical standards, contributing to reinforce the levels of trust and reputation of the company, both internally and in the relations established with employees, customers, investors, supervisory authorities and other third parties. In the exercise of their competences, the directors are bound by the duty to work independently for the existence of an organisational culture that promotes a professional conduct abiding by the ethical values set forth in the Codes of Conduct and a culture of risk comprising all the bank’s activity areas and ensuring the identification, assessment, follow-up and control of the risks that the Bank is or may, predictability, be exposed to. Directors shall be bound to the secrecy duty under the terms of the law concerning information of which they become aware while exercising their functions, except where disclosure is imposed by legal provision or by decision of a competent administrative or judicial authority. The duty of secrecy will persist even after they leave office. Without damaging the provisions of the previous paragraph, the Chairperson of the Board of Directors, or the Chairperson of the Executive Committee, when they see the need of disclosing, internally or externally, resolutions or issues related with the Bank or the Group may do so, provided that in compliance with the general duty of professional secrecy, in accordance with the provisions of the Legal Framework for Credit Institutions and Financial Companies. According to the provisions of Article 12 (3) of the Board of Directors' Regulations in force on 31.12.2023, the powers of the BoD are structured into in eight areas of action: The General and non-delegated Competences are the following: • choose its Chairperson, Vice-Chairpersons when these were not appointed by the General Meeting of Shareholders; • appoint the members who are part of the Executive Committee and appoint its Chairperson and Vice- Chairpersons; • appoint the members who are part of the Committees for Risk Assessment; Nominations and Remunerations; and Corporate Governance, Ethics and Sustainability, appointing the corresponding Chairpersons; • appoint, for a period of time coincident with the term-of-office of the Board itself, the Company Secretary and his/her Alternate; • appoint directors to fill in eventual vacancies; • ask the Chairperson of the Board of the General Meeting of Shareholders to call the General Meeting of Shareholders; • approve the proposals to be submitted to the General Meeting that are the responsibility of the management body, namely, the proposal for the appropriation of profits; • resolve, in accordance with the law and the articles of association, on the issue of shares and other securities that imply or may imply a share capital increase by the Bank, establishing the conditions and carrying out, with them, all the operations permitted by law, abiding by any limits set by the General Meeting; 2022 REPORT & ACCOUNTS | 753 • approve the dislocation of the company’s registered office into another location inside the Portuguese territory; • approve, after listening to the Audit Committee, the company’s merger, demerger and transformation projects; • approve, after listening to the Audit Committee, the quarterly financial statements and the Half-Year and Annual Reports and Financial Statements; • approve, after listening to the Committee for Corporate Governance, Ethics and Sustainability, the Corporate Governance Report and the Sustainability Report; • approve the purchase, sale, and encumbrance of real estate provided that the operation implies a negative impact above 0.5% on the total regulatory consolidated equity; • define and resolve, after obtaining the opinion from the Audit Committee, on the eventual amendments to the Group's corporate structure, namely the opening and closing of establishments which represent a 10% positive or negative variation in the number of branches in Portugal at the end of the year prior to the decision making; • approve significant increases or reductions in the company's organization whenever these produce an impact above 5% on consolidated assets; • provide bonds and personal or real guarantees on behalf of the company, except for those included in the Bank's current activity; • approve or terminate non-commercial cooperation deemed to constitute lasting and relevant relationships. Internal Governance, Organizational Structure and Strategic Planning: • approve its own Regulations, as well as the Regulations of the EC, of the Committee for Risk Assessment, the Committee for Nominations and Remunerations and of the Committee for Corporate Governance, Ethics and Sustainability or other Committees that it decides to set up and take note of the Regulations of the Audit Committee; • review, at least once every two years, its own regulations and those of the other Committees it has set up; • appraise the activity reports of its Committees; • approve the Bank’s Strategic Plan; • approve, after obtaining the opinion from the Audit Committee, the annual and pluri-annual budgets of the Bank, considering the current macroeconomic prospects; • approve, after obtaining the opinion from the Committee for Risk Assessment, the Market Discipline Report; • ensure and submit to the approval of the General Meeting, after obtaining the prior opinion of the Committee for Nominations and Remunerations and the Audit Committee, the Policies of Selection and Evaluation and Succession for the Members of the Management and Supervisory Bodies, as well as those with control functions; • approve, based on a proposal from the Executive Committee or the Board Committees, the general policies of governance and organisation of the Bank and the Group, namely the Group Codes and the service orders regulating the internal control areas; • watch over the adequate implementation of the regulations mentioned in the paragraph above, delegating this competence to the Executive Committee; • ensure, pursuant to a proposal made by the Executive Committee, the approval of the Policy of Assessment and Succession for of Coordinating-Managers that are not included in the control functions, delegating this competence to the Committee for Nominations and Remunerations; • ensure the existence of specific policies on recruitment and selection of employees, performance assessment, promotion and careers management, remuneration, training, and development of competences, delegating this competence to the Executive Committee; • Approve and review, at least every two years, the internal organizational model and inherent competences and responsibilities of the different organic units, delegating its execution to the Executive Committee, which will ensure the respective day-to-day management; • ensure the operation and communication of the organisational structure, with the appropriate detail, on the members and those responsible for corporate governance functions and structures, delegating this competence to the Executive Committee; 2022 REPORT & ACCOUNTS 754 | • ensure the existence of adequate procedures to obtain, produce and process the information disclosed to the employees or to the public and of control mechanisms able of ensuring the reliability, integrity, consistency, completeness, validity, timeliness, accessibility, and granularity of all the information produced and its periodical independent assessment by an external entity, delegating this competence to the Executive Committee; • ensure the existence of procedures which are formal, transparent, relevant and adjusted to the Bank’s needs, able of guaranteeing an efficient, opportune, comprehensive and understandable communication, facilitate the decision-making process and promote the required information flows amongst all relevant parties of a process and amongst the management and supervisory bodies and the internal control functions, and the periodical independent assessment to be made by an external entity, of the information flows established at the Bank, delegating this competence to the Executive Committee; • ensure the internal disclosure of the Policy for the Selection and Appointment of the Statutory Auditor or Audit Firm and the Hiring of Non-Audit Services, approved by the Audit Committee and by the General Meeting of Shareholders, to all the employees, on the Bank’s website; • communicate to the Resolution Authority the decisions with a strategic nature which may have a relevant impact on the Group’s resolvability and that, having been object of a prior assessment from this perspective by the Organic Unit responsible for the Resolution planning, are approved by it, delegating this competence to the Executive Committee. Internal Control Risk Management system: • establish and maintain an internal control system, translated into a set of strategies, policies, processes, systems and procedures with the purpose of ensuring the sustainability of the institution in the medium and long run and the prudent exercise of its activity and guarantee that the same is applied in a consistent manner in all the subsidiaries and branches of the Bank, in Portugal or abroad, abiding by the applicable legislation, delegating its execution to the Executive Committee; • establish and maintain structures with internal control functions endowed with adequate status and authority to perform objectively and independently their responsibilities, namely, those set forth by articles 27, 28 and 32 of Notice 3/2020 of Banco de Portugal, or assigned to them in their respective service orders, following a proposal made by the Chairperson of the BoD and after obtaining the opinion of the Audit Committee, regarding Internal Audit, upon proposal of the Executive Committee and obtaining the opinion from the Audit Committee, regarding the Compliance Office, and of the Committee for Risk Assessment regarding the Risk Office, approve the correspondent service orders; • appoint, replace, or dismiss those responsible for the internal control functions, upon proposal of the Executive Committee and after obtaining the prior non-opposition opinions of the Audit Committee for the Internal Audit and Compliance Office, of the Committee for Risk Assessment for the Risk Office, from the Committee for Nominations and Remunerations, providing them with adequate material and technical resources for the effective performance of their responsibilities; • approve the activities plans to be executed by each one of the internal control functions, these entities keeping direct access to the Board of Directors, the respective specialized committees and to the Audit Committee, as well as to the offices providing support to these bodies, providing them with information systems suitable for the performance of their duties, and respective access to internal and external information necessary to fulfil their responsibilities with independence, as well as full access to all internal structures or activities carried out by the Bank, including outsourced activities; • approve, considering the opinion of the Audit Committee, an annual self-assessment report on the adequacy and efficiency of the Group's organisational culture and internal control systems, and an individual report on each of the entities subject to supervision on a consolidated or sub-consolidated basis that carry out credit institution activities; • assess the conclusions of the SREP exercise - Supervisory Review and Evaluation Process - and approve the plan to implement the obligations arising out of that exercise; • assess the conclusions of asset quality assessment exercises or stress tests, conducted by supervisory bodies, approving the necessary measures pursuant to the recommendations issued and which fall within the scope of its intervention; • ensure, under proposal of the Executive Committee, the existence of a risk management system formed by a number of strategies, policies, processes, systems and procedures for the identification, assessment, monitoring and control of all the risks that the Bank is or may be exposed to in the future, ensuring that such risks remain at the previously defined level and do not significantly affect the Bank’s financial situation; 2022 REPORT & ACCOUNTS | 755 • define, approve and review, at least every year, by means of a proposal made by the Executive Committee and after obtaining a prior opinion from the Committee for Risk Assessment, the overall risk policy of the Bank, able of establishing its overall objectives and the specific objectives for each structural unit, with respect to the risk profile and the risk tolerance level, in particular the RAF- Risk Appetite Framework and the RAS - Risk Appetite Statement; • ensure that the RAS - Risk Appetite Statement is disclosed to all the Divisions and all subsidiaries covered by it, delegating this competence to the Executive Committee; • approve the Report on the Prevention of Money Laundering and Financing of Terrorism, under proposal of the Executive Committee, and after obtaining the opinion from the Audit Committee on the internal control system, in the component regarding the prevention of money laundering and financing of terrorism; • approve the ICAAP – Internal Capital Adequacy Assessment Process and the ILAAP – Internal Liquidity Adequacy Assessment Process, under proposal of the Executive Committee, and after obtaining the opinion from the Committee for Risk Assessment; • approve the Funding and Capital Plan, following a proposal submitted by the Executive Committee; • approve the plan for the reduction of NPAs - Non-Performing Assets, under proposal of the Executive Committee and after obtaining the opinion from the Committee for Risk Assessment; • approve the Recovery Plan and its eventual activation, under proposal of the Executive Committee and after obtaining the opinion from the Committee for Risk Assessment; • monitor the application of pricing policies in the credit granting process; • analyse the Audit Committee’s Report on potential or actual deficiencies, or on improvement recommendations allowing the strengthening of the organizational culture and risk management, governance and internal control systems in relation to all matters covered by the Notice of Banco de Portugal 3/2020; • issue an opinion on the reports issued by the risk management function, mentioned in article 27 (1) (r and s) of Banco de Portugal Notice 3/2020, after obtaining the opinion from the Audit Committee and after listening to the Committee for Risk Assessment; • issue an opinion on the reports issued by compliance function, mentioned in article 28 (1) (o) and (p) of Banco de Portugal Notice 3/2020, after obtaining the opinion from the Audit Committee; • issue an opinion on the reports issued by internal audit function, mentioned in article 32 (1) (c and d) of Banco de Portugal Notice 3/2020, after obtaining the opinion from the Audit Committee; • appoint, after obtaining a favourable opinion from the Committee for Nominations and Remunerations, the Client Ombudsman, who will not have employment ties with the Bank; • after obtaining the favourable opinion of the Committee for Nominations and Remunerations, identify the Group's key function holders; • appoint, following a proposal made by the Executive Committee, the Managers reporting directly to the Board of Directors, who aren’t part of the internal control functions, delegating this competence to the Committee for Nominations and Remunerations; • ensure that the internal control functions have total, free and unconditional access to all the functions, activities, including outsourced functions, processes and activities, own premises or premises of the service providers, assets and employees, information, accounting records, systems, IT files and Bank’s data, delegating this competence to the Executive Committee; • ensure that all risk-taking structures make decisions considering the underlying risk and within the tolerance thresholds and adopt control mechanisms enabling the timely communication of the risks to the internal control functions, delegating this competence to the Executive Committee; • ensure, if the case may be and complying with the applicable legislation, the existence of reporting lines between the internal control functions of the subsidiary companies and the internal control functions of the Bank, delegating this competence to the Executive Committee; • monitor the activity of the risk management function, compliance, and the internal audit function, in coordination with the Audit Committee and the Committee for Risk Assessment in the case of the risk management function; • ensure, at the Group’s level and whenever such proves to be appropriate, the contracting for the provision of common services for the development of the responsibilities assigned to the risk management, compliance, and internal audit functions, delegating this competence to the Executive Committee. 2022 REPORT & ACCOUNTS 756 | Related Parties, Conflicts of Interests and Communication of Irregularities: • approve the internal policy foreseeing the definition, identification and update of the parties related with the Bank, following a proposal made by the Executive Committee, and after obtaining the opinion from the Audit Committee; • approve, complying with the legislation and with the internal regulations, transactions with related parties, following a proposal made by the Executive Committee and after obtaining the opinion from the Audit Committee; • ensure that the Bank identifies, in a complete and quarterly updated list, its related parties, making it available to the supervisory authority whenever requested; • approve the Policy for the Prevention and Management of Conflicts of Interest, upon proposal of the Executive Committee and after obtaining the opinion from the Audit Committee; • approve the Policy for the Communication of Irregularities. upon proposal of the Audit Committee; Human Resources and Remuneration Policies: • appraise the proposal made by the Committee for Nominations and Remunerations and by the Remunerations and Welfare Board, on the remuneration policy of the Members of the Management and Supervisory bodies to be submitted every year to the General Meeting of Shareholders; • approve and review, upon proposal of the Executive Committee and after obtaining the opinion from the Committee for Nominations and Remunerations, the employees remuneration policy, including the one of those in charge of the internal control functions; • Ensure that a report on the appraisal of the implementation of the remuneration policies is submitted, every year, to the General Meeting of Shareholders; • ensure that a report on the assessment and implementation of the remuneration practices of subsidiaries abroad in terms of risk, in particular capital and liquidity, is submitted, every year, to the General Meeting; • ensure that the process for the individual assessment of the employees' performance, used in the definition of the remuneration variable component, is appropriate and consistent and communicated to the employees at a moment prior to the beginning of the assessment period, delegating its execution to the Executive Committee which, for that purpose, must obtain an opinion from the Committee for Nominations and Remunerations. Conduct and Organizational Conduct: • approve and review, at least every two years, the Codes of Conduct, upon proposal of the Executive Committee and after obtaining the opinion from the Audit Committee and from the Committee for Corporate Governance, Ethics and Sustainability; • ensure, in what concerns all the members of the Board of Directors, that they are aware of the Codes of Conduct, prior to the moment they start exercising functions and promote the making of training sessions thereon; • promote the external and internal disclosure and the application of the Codes of Conduct and guarantee that each employee expressly states that he/she is aware of the same, delegating this competence to the Executive Committee; • ensure the discussion with senior managers on the conduct and organizational culture, delegating this competence to the Executive Committee; • promote an organizational environment which does not adopt or tolerate aggressive management practices, delegating this competence to the Executive Committee; • ensure the adoption of impartial, transparent, and auditable internal procedures, namely when involving services engagement, assets purchase and sale by the institution, delegating this competence to the Executive Committee; • Promote, at least in each mandate, independent assessments, to be carried out by an external entity, concerning the conduct and values of the Bank, of the Board of Directors and its Committees, which may be carried out in articulation with the Audit Committee, delegating this competence to the Committee for Corporate Governance, Ethics and Sustainability. 2022 REPORT & ACCOUNTS | 757 Outsourcing of Services: • approve the outsourcing of specific operational tasks of the risk management function, compliance and internal audit, delegating this competence to the Executive Committee which, for that purpose, must obtain a prior favourable opinion from the Audit Committee; • ensure the existence and update of a registry of all outsourced operational tasks of the internal control functions, delegating this competence to the Executive Committee; Monitoring of the Activity and Indicators: • monitor the BCP share performance; • monitor the performance of market shares and quality indicators; • make, every six months, the comparative analysis of the annual indicators/earnings of the main banks of the Portuguese financial system; • develop, every year, the IT/Digital Platform Transformation Plan; • monitor, every year, the results achieved by the Business Areas in Portugal and in the subsidiaries abroad, delegating, for that purpose, to the Executive Committee, the making of a summary-document; • ensure the monitoring of the events with a significant impact on the Bank’s activity or on the market where it operates and of the business policies which are consequently approved; The information supporting the Board of Directors meetings is made available, as a rule, at least 5 days before the meeting date, on a digital platform called Diligent Boards. In accordance with the Regulations of the Board of Directors in force on 31 December 2023, any member of the Board of Directors who accumulates with his/her office the management functions in a company owning a stake equal or above 5% in the Bank’s share capital or in any entity that is in a controlling or group relationship with it, is prevented from participating in the appraisal and decision-making of any operation or agreement, directly or through third parties, related with any of the above-mentioned entities. The operations and agreements mentioned in the previous paragraph need to be approved by a majority of at least two thirds of the remaining members of the management body, after obtaining the prior favourable opinion from the Audit Committee, being the latter opinion preceded by the opinions from the Risk Office and the Compliance Office, in accordance with the applicable internal regulations. The directors have the duty to avoid situations able of originating conflicts of interest, observing, namely in what concerns the acceptance of gifts, the provisions of the Code of Conduct. Whenever any member of the Board of Directors is the spouse or has a similar status or is relative-in-law in a straight or collateral line up to 2nd degree of an employee of the Group, he/she will not be able to participate in any decision-making involving, personally or professionally such employee, who cannot report to him/her hierarchically. The delegation of powers by the Board of Directors, to the specialised committees, including the Executive Committee, to which it delegates the daily management of the Bank, does not exclude the power of this corporate body to decide on the same matters, nor does it exempt, in accordance with the law, the liability of the other directors for damages that may be caused by acts or omissions arising from the exercise of duties delegated by them, to the extent that the members of the Board of Directors are ultimately responsible for the institution and its strategy and activities. The Bank produces, keeps permanently updated and makes available to each member of the Board of Directors, upon their election or appointment, several relevant information, namely the Regulations of the Board of Directors, of the Executive Committee, of the Audit Committee, and of the other Committees of the Board of Directors, organisational structure, areas of responsibility and main internal rules that guide the activity that it pursues, of which we highlight, Code of Conduct, Code of Good Conduct for the Prevention and Fight against Harassment and for the Promotion of Equality and Non-Discrimination, Compliance Policies, namely, Customer Acceptance, Prevention and Management of Conflicts and Communication of Irregularities, Policy on Related Parties, Policy relating to Sustainability and the Environment, management of claims and general principles of action, and the regulations of the Client's Ombudsman. This information is also disclosed, in the Portuguese and English version, on the internal website, on. The Regulations of the Board of Directors, as well as most of the aforementioned internal regulations, are available on the Bank's website, in Portuguese and English, on the following address: 2022 REPORT & ACCOUNTS 758 | https://ind.millenniumbcp.pt/en/Institucional/governacao/ Audit Committee The Audit Committee (AudC) is composed of a minimum of three and a maximum of five non-executive members, elected at the General Meeting of Shareholders, and the lists proposed to elect the Board of Directors must detail which individual members are to be part of the Audit Committee and indicate the respective Chairperson. The members of the Audit Committee, as is the case of all members of the Board of Directors, are appointed for terms-of-office lasting four years and may be re-elected. The Audit Committee was elected at the General Meeting held on May 04, 2022, for the 2022-2025 mandate. The majority of its members, including the Chairperson, are qualified as independent. Among others, they are assigned the powers laid down in Article 423-F of the Companies Code, in Banco de Portugal Notice no. 3/2020 of July 15 and in its own Regulations. The Regulations of the Audit Committee, in force on 31 December 2023, are available on the Bank's website, in both English and Portuguese, in the following address: https://ind.millenniumbcp.pt/en/Institucional/governacao/ As the Bank's supervisory body, the powers and responsibilities of the Audit Committee, in accordance with Article 5(2) of its Regulations, are structured in four areas of activity. General supervisory powers: • supervise the Bank’s management; • monitor the Group's management, which is understood as covering all the entities within the Bank's consolidation perimeter, notwithstanding the powers of the supervisory bodies of the entities with autonomous legal capacity; • call the General Meeting of Shareholders, whenever the Chairperson of the Board of the General Meeting fails to do so when he/she should; • issue an opinion, prior to approval by the Board of Directors, on the Bank’s Annual and Multi-Annual Budgets, with special focus on the fulfilment of the objectives set out in the Bank’s Strategic Plan and on the compliance with capital requirements; • issue an opinion, prior to approval by the Board of Directors, on share capital increases; • issue an opinion on the suspension of directors in accordance with the law and with the Bank’s articles of association; • issue an opinion, prior to approval by the Board of Directors, on possible changes to the corporate structure of the group, as referred to in the BoD's Regulations; • issue a preliminary opinion to the Board of Directors on mergers, demergers and transformation operations of the Company; • identify and assess needs in terms of its composition and organisation, which should be reassessed at least at the beginning of the mandate or whenever it deems appropriate; • issue an opinion, prior to approval by the Board of Directors, on the selection, evaluation, and succession policies for members of the management, supervisory bodies and the holders of the control functions, taking into account the assessment of the CNR; • issue a prior and binding opinion on matters of organisational structure, to be approved by the Board of Directors, insofar as they relate to its own organisation; • issue an opinion prior to approval by the Board of Directors on the Code of Conduct defining, in particular, the responsibilities of the control functions, the procedures for regular verification of compliance, the measures for the prevention, identification, management, and mitigation of conflicts of interest and the associated duties applicable to Directors, including members of the CAud, members of top management, key function holders and other employees of the Bank; 2022 REPORT & ACCOUNTS | 759 • promote, at the beginning of the first year and in the last year of the term-of-office, periodic independent evaluations, to be performed by an independent entity external to the Institution on the conduct and values of the body itself, in articulation with the Committee for Corporate Governance, Ethics and Sustainability; Powers related to financial reporting and accounting documents for legal reporting and to the Statutory Auditor and External Auditor: • verify if the accounting processes and valuation criteria adopted by the Bank lead to a correct valuation of assets and earnings; • supervise the process of preparation of the financial information and the key prudential indicators, and present recommendations or proposals to ensure its reliability and monitoring the process of its disclosure; • verify legal review of the individual and consolidated financial statements, and supervise their compliance with the applicable legal framework, considering any analyses or guidelines from the relevant supervisory entity; • holding regular meetings with the external auditors and statutory auditor and, mandatorily, at the time of the appraisal of the quarterly, half-year and annual financial statements of the Company; • issue an opinion prior to approval by the General Meeting on a policy for selecting and appointing the statutory auditor or audit firm and for contracting non-audit services not prohibited, under the terms of the applicable legislation, and to assess the need for its revision at least every two years; • ensure that the Executive Committee promotes adequate internal and external disclosure of the selection and appointment policy referred to in the preceding paragraph and guarantee its proper implementation; • It is also the responsibility of the Audit Committee to present to the General Meeting two proposals for the appointment of the external auditor and the election of the Statutory Auditor, and to express a preference for one, or the renewal of the respective mandates, taking into account their technical capacity and other conditions for carrying out these functions; • propose to the General Meeting, in compliance with the applicable legal provisions, the appointment of the Statutory Auditor and External Auditor or their reappointment, with a duly reasoned proposal, as well as their dismissal or termination of the contract for provision of their services, whenever there is just cause to do so; • issue an opinion on the remuneration of the Statutory Auditor and of the External Auditor, and ensuring that both have all the conditions to exercise their functions; • supervise and assess, on an annual basis, the independence and performance of the Statutory Auditor and the External Auditor, namely regarding the provision of non-audit services; • appraise the Budgetary Control and the Financial Statements, including the quarterly, half-yearly and annual Financial Statements, considering the conclusions of the Statutory Auditor and External Auditor, issuing an opinion, prior to its approval by the Board of Directors, on the accuracy of the financial statements; • issue an opinion on the financial statements and proposals presented by the board of directors, including the appropriation of profits, to be submitted to the General Meeting of Shareholders; • draw up an annual report on its supervisory activity, informing the Board of Directors of the results of the audit to the financial statements, explaining how the audit contributed to the integrity of the procedure for preparing and disclosing financial information, as well as describing the role the Committee played in that procedure, clearly stating its concurrence with the contents of the legal certification of accounts, when applicable; • approve the contracting of non-auditing services to the Bank's External Auditor or to companies belonging to the same network (for the Bank itself and for Group companies), as well as to companies in the network of external auditors of Group companies, safeguarding that such services do not jeopardise their independence, in accordance with European and national laws and regulations; • receive the additional report to the supervisory body, prepared by the Statutory Auditor in compliance with the provisions of Article 11 of Regulation (EU) No. 537/2014 of the European Parliament and of the Council of 16 April 2014; well as the Quality Assurance report. 2022 REPORT & ACCOUNTS 760 | Powers related to internal control: • analyse and monitor, on a regular basis, the main prudential indicators, the risk report prepared by the Risk Office, the activity of the Compliance Office, the activity of the Internal Audit, the handling of complaints and claims and the main correspondence exchanged with the Regulatory and Supervisory Authorities; • take cognisance of the various reports drawn up by the internal control functions, requesting any clarifications it deems necessary. • issue an opinion, prior to approval by the Board of Directors, on Group Codes within the scope of its competence and on the Service Orders concerning the organisational structure and mission of the Audit Division, Compliance Office and Risk Office; • ensure the existence and supervise the efficiency of the risk management, internal control system and internal audit and issue an opinion, prior to approval by the Board of Directors, on the respective design of the system. For this purpose, and as far as the risk management systems are concerned, the Committee for Risk Assessment should provide a prior evaluation; • issue an Issue an opinion, prior to approval by the Board of Directors, on the annual activity plans of the Risk Office and Compliance Office, and the annual and multi-annual activity plans of the Internal Audit, monitoring their execution, ensuring that the internal control functions are performed independently, without any constraints, and that the material and human resources necessary to carry out a comprehensive examination of the risks to which the Bank is or may be exposed are ensured; • in the specific case of the Risk Office and of the Compliance Office, the latter concerning only financial crime risk issues, the AudC should consider the prior assessment made by the Committee for Risk Assessment; • hire the services of experts, subject to budgetary allocation and in coordination with the Chairperson of the Board of Directors and observing the principles of OS0003 (Authorisation of Charges, Negotiation and Award of Purchases, Authorisation of Payments, and Processing of Invoices); • Participate in the process of assessing the performance of internal control functions and those responsible for them; • issue a binding reasoned opinion on decisions to appoint or replace those responsible for internal control functions, based on the assessments made by the Committee for Nominations and Remunerations, and also, in the case of the Risk Office, by the Committee for Risk Assessment; • in the specific area of overseeing the risk management function: ▪ assessing the rationale considered by the Risk Office whenever it excludes certain risk categories identified in the applicable legislation, regulations and guidelines, considering the risk taxonomy adopted by the Bank; ▪ issuing an opinion, prior to approval by the Board of Directors, on the policies and procedures prepared with the aim of supporting the risk management system and its effective application, taking into account the prior assessment of the Committee for Risk Assessment; ▪ monitoring the review process of the Risk Strategy on an annual basis; ▪ Issue an opinion prior to submission to the Board of Directors on the reports to be drawn up by the Risk Office, as provided for in Article 27(1) (r and (s) of Notice 3/2020, considering the assessment previously made by the Committee for Risk Assessment. • within the Specific scope of supervising the compliance function, issue an opinion prior to submission to the Board of Directors on the following reports to be drawn up by the Compliance Office, as provided for in Article 28 (1) (o and (p) of Notice 3/2020. • within the specific scope of supervising the audit function, issue an opinion prior to submission to the Board of Directors on the reports to be drawn up by the Audit Division, as provided for in Article 32 (1) (c and (d) of Notice 3/2020; • ensure, within the scope of its supervisory functions, the reliability, integrity, consistency, completeness, validity, timeliness, accessibility and granularity of all the information provided by the Bank, both the information to be used exclusively by the Bank and the information to be disclosed to the public, including the information contained in the reports to be made to the respective supervisory authorities; 2022 REPORT & ACCOUNTS | 761 • define a multi-annual action plan, under the terms of its legal and regulatory powers, which must be approved and updated on an annual basis; • issue prior consent for the outsourcing of operational tasks of the Internal Control Functions; • make an assessment report on the suitability and efficiency of the organizational culture in effect at the Bank and of its governance and internal control systems that include all the formalisms mentioned in article 56 of the Notice of Banco de Portugal 3/2020, which will be part of the annual self-assessment report mentioned by article 55 of said Notice, the timely preparation of which it must ensure, together with the Board of Directors; • prepare a summary of the self-assessment report for disclosure as an annex to the Bank's annual accounting documents, as provided for in article 60 of the Notice referred to in the previous paragraph; • assess the adequacy of the classification attributed to deficiencies classified as ‘high’ or ‘severe’ according to the methodology defined by the Bank and issue an express statement confirming its agreement with this classification; • assess in detail the adequacy and efficiency of the Group's internal control system, ensuring, among others, the control of risks associated with the activity of the subsidiaries; the processes and controls required to obtain relevant information for the consolidation process; the identification, evaluation and control of intra-group transactions, namely at the level of risk concentration; the consistency of the management information in the different entities of the group; and compliance, at all times, with the prudential ratios and limits on a consolidated basis, controlling the respective reporting; • assess the consistency between the internal control systems of the subsidiaries and the Bank’s internal control system; such assessment may be based on the evaluations prepared to this purpose by the supervisory bodies of each one of the subsidiary companies; • issue a reasoned opinion on the exclusion of subsidiaries from the self-assessment report; • prepare a quarterly report informing the Board of Directors of the work carried out and the findings obtained, and an annual report of its activity to be submitted to the Chairperson of the Board of Directors under the terms of Article 423-F of the Companies Code, notwithstanding the duty of reporting to it all situations the Committee finds and deems to be of high risk; • issue an opinion on the quality of the Bank’s internal control system as regards the prevention of money laundering and terrorist financing and inform in the report on the possible detection of high risk degree deficiencies in the said control. Powers related to reporting irregularities, managing conflicts of interest, transactions with related parties and Increased Risk Debtors: • receiving, handling, and recording the communications of irregularities (whistleblowing) related with the management, accounting organization and internal supervision and of serious signs of infractions of duties foreseen in the Legal Framework for Credit Institutions and Financial Companies and remaining Portuguese and European legislation in effect, presented by shareholders, Bank employees or other; • review the reports prepared by the internal control functions relating to situations of conflict of interest and the reporting of irregularities; • give its opinion, prior to approval by the Board of Directors, on the proposed policy for reporting irregularities; • issue an opinion, prior to the approval by the Board of Directors, on the internal policy of identification and approval of transactions with related parties. • be aware of the complete and updated list, on a quarterly basis, of related parties; • monitor the evolution of credit exposure to shareholders of qualifying stakes; • issue an opinion prior to approval by the Board of Directors, on the assessment of transactions with related parties under the terms of the Related Parties Policy in force, validating that these are carried out under market conditions and ensuring that there are no conflicts of interest; • take note of the credit operations to Increased-Risk Debtors. • approve its own Regulations and inform the BoD of them. During 2023, the Audit Committee was composed as follows: 2022 REPORT & ACCOUNTS 762 | Chairwoman: Cidália Maria da Mota Lopes Independent Members: Valter Rui Dias de Barros Not Independent Fernando da Costa Lima Independent Alternate: Altina de Fátima Sebastian Gonzalez Villamarin Independent In a universe of three members that make up the Audit Committee, two (67%) are classified as independent. All the members of the Audit Committee have levels of responsibility and understanding of the activities conducted by the company that match the functions assigned to them, allowing them to make an unbiased evaluation of the decisions made by the management body, and to efficiently supervise activities performed by the latter. All the members of this Committee have accounting and auditing knowledge, as well as skills and experience to fully understand and monitor the risk strategy within a framework of governance coherent and compatible with the Bank's risk management, internal control and information systems. The professional qualifications and other curricular details of each member of the Audit Committee are presented in Annex I of this Corporate Governance Report. These data are updated whenever justified and remain available at all times on the Bank's, website, in the Portuguese and English languages, with the following address: https://ind.millenniumbcp.pt/en/Institucional/governacao/ The Audit Committee has the logistical and technical support of the Board of Directors Support Office. During the financial year of 2023, the Audit Committee met 21 times, and the Head of the Supporting Office of the Board of Directors acted as the meeting’s secretary. The effective participation rate of each member of the of the Audit Committee is shown in the following graphic: Executive Committee On 5 of September 2022, and under the terms of article 407 of the Companies Code and article 35 of the Bank’s Articles of Association, the Board of Directors appointed an Executive Committee, composed of six of its members. The Board of Directors has established the functioning of the Executive Committee and delegated to it the powers of day-to-day management of the Bank. It is responsible for all the Bank's management functions which the Board of Directors has not reserved for itself. At the level of internal control and risk management, the hierarchical responsibility for the second lines of defence was attributed to one executive director, who is a member of the Board of Directors of the management and supervisory bodies of the main subsidiary companies operating abroad, this way extending the coordination and action scope of these Group’s defence lines. 2022 REPORT & ACCOUNTS | 763 In accordance with the provisions of Article 2 (3) of the Regulations of the Executive Board, the executive directors perform their duties on an exclusive basis, without prejudice to the exercise of management or supervisory functions in companies of the Group and by appointment, or in the interest of the Bank. Anyway, and in accordance with the Regulations of the Executive Committee, in force on 31 December 2023, the acceptance or exercise of functions, namely of on corporate bodies of other legal persons by any member of the Executive Committee requires prior favourable approval from the Committee for Nominations and Remunerations and authorisation from Banco de Portugal and from the European Central Bank in the context of the suitability assessment process. In its internal organisation, the Executive Committee has distributed areas of special responsibility to each one of its members. As of 31 December 2023, the distribution of Area of Responsibility was as follows, and the areas of responsibility of the Chairman of the Board of Directors, who, although not an executive member, has allocated responsibilities, were also identified: BOARD OF DIRECTORS (Non-executive) Nuno Amado - Chairman Board of Directors' Support Office Company Secretary's Office Fundação Millennium bcp Hierarchical reporting functionally dependent on the Audit Committee Audit Division Client Ombudsman's Office Member of Supervisory Positions of Subsidiaries Bank Millennium (Poland) - (SB) Millennium BIM (Mozambique) - (Non-Executive of BoD) EXECUTIVE COMMITTEE (In absences of Directors responsible for the areas, the respective alternate Directors shall be occasionally appointed by the CEO) Miguel Maya - CEO (MM) CEO's Office Communication Division Human Resources Division Credit Division Economic Studies, Sustainability and Cryptoassets Division Miguel Braganca - VC/CFO (MB) Joao Nuno Palma - VC (JNP) Investor Relations Division International, Treasury & Markets Division Accounting and Consolidation Division Investment Banking Coordination Division Research, Planning and ALM Division Corporate, Business & Institutional Marketing Division Management Information Division Private Banking Division Legal and Litigation Advisory Division Asian Desk Tax Advisory Division Companies, Corporate and Large Corporate Division - North Means of Payment and Acquiring Division Companies, Corporate and Large Corporate Division - South Rui Manuel Teixeira (RMT) José Miguel Pessanha (JMP) Retail Banking Division - North Rating Division Retail Banking Division - Centre Office for Regulatory and Supervision Monitoring Retail Banking Division - South and Islands Office for the Validation and Monitoring of Models Marketing and Network Support Division Personal Data Protection Office Wealth Management Division Hierarchical reporting functionally dependent on the Committee for Risk Assessment Specialised Credit and Real Estate Division Risk Office Specialised Monitoring Division Hierarchical reporting functionally dependent on the Audit Committee Maria José Campos (MJC) Compliance Office Specialised Recovery Division Retail Recovery Division 2022 REPORT & ACCOUNTS 764 | Direct Banking Division Millennium Operations Division Information and Technology Division Procurement Logistics & Division Information Security Division Corporate Direct Banking Division Digital Transformation Office Customer Intelligence Division Subsidiaries Companies and Invested (Management and Supervisory Bodies) C. Board C. Board C. Sup VC Sup Board Member Board Member Board Member Sup Members Sup Members Sup Members Bank Millennium (Poland) NA MM MB JMP Millennium BIM (Mozambique) NA JMP JMP JNP MM ActivoBank MM MB JMP Interfundos RMT BMA (Angola) JMP JMP Millennium bcp Prest.Serviços MJC Millennium bcp Ageas JMP JMP RMT SIBS MB UNICRE MB * Director with special responsibility for monitoring the Subsidiary / Associated Company Within the scope of the competences attributed to him/her, the Chairperson of the Executive Committee represents this Committee and convenes and conducts the respective meetings, has the casting vote and, in addition to direct accountability for the respective areas of responsibility, has the following duties: • ensuring the correct execution of the EC's resolutions, assisted by the Director of the area for which he/ she is responsible; • deciding on all matters relating to the functioning of the Executive Committee; • ensuring, under the terms of the internal rules and regulations of each of the bodies that comprise the Bank's governance model, that the relevant information is provided to the other members of the Board of Directors concerning the activity and resolutions of the Executive Committee. • ensures compliance with the limits of the delegation of powers, the strategy approved for the Bank and the Group and the cooperation duties before the Board of Directors. The Regulations of the Executive Committee are available on the Bank’s website, in Portuguese and in English, at the following address: https://ind.millenniumbcp.pt/en/Institucional/governacao/ b) Functioning 22. Existence and address where the functioning regulations may be consulted of the Board of Directors and of the Audit Committee. The regulations of the Board of Directors, of the Executive Committee, of the Audit Committee and of the other Committees of the Board of Directors are available on the Bank’s site, at the following address: https://ind.millenniumbcp.pt/en/Institucional/governacao/ All these documents as well as others deemed necessary or appropriate for the exercise of the respective function, may be consulted by the Directors in the Bank’s internal portal and at the digital platform supporting the members of the corporate bodies, Diligent Boards. 2022 REPORT & ACCOUNTS | 765 23. Number of meetings held and attendance rate of each member of the Board of Directors and of the Audit Committee in the meetings held. During the 2023 financial year, the Board of Directors issued one unanimous written resolution and met seventeen times, with the Company Secretary acting as secretary for the meetings. The effective attendance rate of each executive and non-executive member of the Board of Directors is shown in the following table: () 1 participation made via power of attorney () Except for decisions that had impediments. During the 2023 financial year, the Executive Committee issued eight unanimous resolutions in writing and met forty-nine times. The Company Secretary acted as the meeting’s secretary and disclosed all the supporting documents to this Committee’s members. The Chairpersons of the Board of Directors, Executive Committee, Audit Committee and of the Committee for Risk Assessment have access, through the Diligent Boards platform, to the agendas and the minutes of meetings of the Executive Committee and also to the respective supporting documents. The effective participation rate of each member of the of Executive Committee is shown in the following graphic: 2022 REPORT & ACCOUNTS 766 | () All absences were justified for being at the Bank's service or on holiday. 24. Details of competent corporate bodies undertaking the performance evaluation of executive directors The Committee for Nominations and Remunerations is composed of three non-executive directors, identified in Item 27. b) and assumes responsibilities in matters of evaluation of the performance of the executive directors. Indeed, the attribution and payment of variable remuneration to executive directors depends on an assessment of the fulfilment of corporate objectives and individual objectives of each executive director. The individual objectives comprise quantitative objectives and qualitative objectives, and the assessment of the latter is the responsibility of the Committee for Nominations and Remunerations, after hearing the non- executive Chairman and Vice-Chairmen of the Board of Directors and the Chairman of the Executive Committee, who only gives his opinion on the other members of the Executive Committee. The annual weighted evaluation of the qualitative objectives will be able of being measured and estimated in accordance with a table/questionnaire approved by the Committee for Nominations and Remunerations, after listening to the Remuneration and Welfare Board, the Compliance Officer and the person in charge of Human Resources. The Remuneration Policy for the members of the management and supervisory bodies applicable in 2023 refers to the performance evaluation process of executive directors and is available on the Bank's website, in Portuguese and in English, on the page with the following address: https://ind.millenniumbcp.pt/en/Institucional/governacao/ 25. Pre-determined criteria for the assessment of the manner of appointment, profile, knowledge and performance of the executive directors and senior managers The Bank has an internal Policy for the Selection and Assessment of the Suitability of Members of the Management and Supervisory Bodies and Key Function Holders of the Bank, approved at the General Meeting, and aligned with the European Banking Authority (EBA) Guidelines on the internal governance of institutions (EBA/GL/2021/05, of 2 July) and on the assessment of the suitability of members of the management and supervisory bodies and key function holders (EBA/GL/2021/06, of 2 July), as well as with Banco de Portugal Notice no. 3/2020. º 3/2020. This policy identifies the methodology for the individual and collective assessment of the suitability of directors, taking into account the following criteria for individual suitability: (i) Commitment of sufficient time by the member of the management body; (ii) Adequate knowledge, skills and experience; (iii) Good repute, honesty and integrity; (iv)Assessment of independence of mind and conflicts of interest, additionally they give opinions on training, diversity, corrective measures and a succession plan. The Bank's Internal Policy for the Selection and Assessment of the Suitability of Members of the Management and Supervisory Bodies and Holders of Key Functions is available for consultation on the Bank's website, in Portuguese and English, on the page with the following address: 2022 REPORT & ACCOUNTS | 767 https://ind.millenniumbcp.pt/pt/Institucional/governacao/Documents/ The Bank also has a Group Code (GR0043) which defines the framework for the individual suitability assessment of persons appointed as members of the management bodies and other key function holders in the Bank and the Group and for the collective assessment of the respective management and supervisory bodies. The Bank also has a Succession Plan for the Board of Directors of the Bank, which is available on the Bank's site, in Portuguese and in English, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Documents/BCP-Plano-de-Sucessao-CA-e- RFCI.pdf In addition, the members of the management bodies have attended training courses provided by external entities, either on their own initiative or on the Bank's initiative, in order to maintain the necessary skills to carry out their duties, with a special focus on cybersecurity risk and ESG issues. 26. Availability of each member of the Board of Directors, with an indication of the positions held simultaneously in other companies, inside and outside the group, and other relevant activities carried out by the members of those bodies during the financial year Within the scope of the assessments carried out in relation to each of the members of the Board of Directors, the availability of each member for the performance of their functions is assessed, considering the importance of the matters to be dealt with, determined in light of their interest for the Bank, as well as the specific tasks that each one has been assigned. For this assessment, all the positions held and identified in the following tables were considered, and it was concluded that all the members were available and dedicated enough time to perform their functions. A - Non-Executive Members of the Board of Directors and of the Audit Committee Non-Executive Members of the Board of Directors of BCP Current Positions in BCP Positions in Companies of BCP Group Positions in companies outside the BCP Group Exercise of Other Relevant Activities Capacity Cumulation of Positions (Art. 33 of the LFCIFC) Nuno Manuel da Silva Amado Chairman of the Board of Directors Chairman of the Board of Curators of Fundação Millennium bcp Member of the Board of Auditors of Fundação Bial Independent Compliant Chairman of the Committee for Corporate Governance, Ethics and Sustainability Vice-Chairman of the Supervisory Board of Bank Millennium, S.A. (Poland) Chairman of the Senior Board of the Alumni Clube ISCTE Member of the Strategy Board Vice-Chairman of the Board of Directors of BIM - Banco Internacional de Moçambique, S.A. Member of the Advising Board of Fórum para a Competitividade Member of the Management of the Business Roundtable Portugal Member of the General Board of AESE- Associação de Estudos Superiores de Empresa (Business School) Member of the "School Board” of Instituto Superior Técnico 2022 REPORT & ACCOUNTS 768 | Jorge Manuel Baptista Magalhães Correia 1st Vice-Chairman of the Board of Directors Chairman of the Board of Directors of Luz Saúde, S.A. Not Independent (b) Compliant Member of the Remuneration and Welfare Board Member of the Board of Directors and member of the Committee for Corporate Governance of REN - Redes Eléctricas Nacionais, SGPS, Member of the Strategy Board Chairman of the Board of Directors of Fidelidade - Companhia de Seguros, S.A. Valter Rui Dias de Barros 2nd Vice-Chairman of the Board of Directors Chairman of the Board of Directors of Recredit - Gestão de Activos S.A. (Angola) Not Independent (b) Compliant Member of the Audit Committee Member of the Remuneration and Welfare Board Member of the Committee for Nominations and Remunerations Member of the Strategy Board Ana Paula Alcobia Gray Member of the Board of Directors Not Independent (b) Compliant Member of the Committee for Risk Assessment Cidália Maria da Mota Lopes Member of the Board of Directors Professor at Coimbra Business School - ISCAC on tax issues Member of the Scientific Board of the Portuguese Fiscal Association (AFP) Independent Compliant Chairwoman of the Audit Committee Invited Professor at the Law School- Universidade de Coimbra Member of the Scientific Board of the Coimbra Business School- ISCAC Fernando da Costa Lima Member of the Board of Directors Non-Executive Director of Euronext Lisbon Chairman of the Board of the General Meeting of OBEGEF - Obsevatório de Economia e Gestão de Fraude Independent Compliant Member of the Audit Committee Invited Professor at the School of Economics of Universidade do Porto Chairman of the Committee for Risk Assessment Julia Gu (c) Member of the Board of Directors Vice-Chairwoman of Group Fosun High Technology (Group) Co., Ltd. (internal functions under work agreement with Group Fosun) Not Independent (b) Compliant Non-Executive member Board of Directors - Mybank Non-executive member of Zhangxingbao (Shanghai) Network Technology Co., Ltd. Non-executive member of the Boaof Directors of Chongqing Rural Commercial Bank Co. Ltd. 2022 REPORT & ACCOUNTS | 769 Lingjiang Xu Member of the Board of Directors Member of the Supervisory Board of Bank Millennium, S.A. (Poland) Non-executive member of the Board of Directors of Fidelidade - Companhia de Seguros, S.A. Not Independent (b) Compliant Member of the Committee for Corporate Governance Ethics and Sustainability Non-Executive Chairman of the Board of Directors of Logrun Portugal, SGPS, S.A. Member of the Committee for Nominations and Remunerations Non-executive member of the Board of Directors of Luz Saúde, S.A. Lingzi Yuan (Smilla Yuan) Member of the Board of Directors Independent Compliant Chairwoman of the Committee for Nominations and Remunerations Altina de Fátima Sebastian Gonzalez Villamarin Member of the Board of Directors Independent Director and Member of the Audit Committee - San Jose Group Member of the World Portuguese Network - Council of the Portuguese Diaspora Independent Compliant Member of the Committee for Risk Assessment Member of the Advisory Board - Expansión y Actualidad Economica Alternate Member of the Audit Committee (d) Associate Professor - Financial Management and Accounting Division Invited Professor of Permanent Executive Programs for Members of the Board of Directors of Cooperative Banks - Instituto Español de Analistas Financeiros Invited Professor at Católica Lisbon Business & Economics, MBA programme, Advanced programme in Finance, Advanced programme in Banking Management José Pedro Rivera Ferreira Malaquias Member of the Board of Directors of BCP Partner at Abreu Advogados, Sociedade de Advogados Independent Compliant Member of the Committee for Corporate Governance, Ethics and Sustainability (a) the administrator concerned is, since July 2023, qualified as independent in the light of the Joint Guidelines of ESMA 35-36-2319 and EBA/GL/2021/06 of 2 July 2021, as the period of five years has elapsed after the exercise of management functions. (b) Related with a shareholder with a qualifying stake. (c) The Director submitted a letter of resignation from office on 05.01.2024, effective as of February 29, 2024. 2022 REPORT & ACCOUNTS 770 | A - Executive Members of the Board of Directors Executive Member of the Board of Directors Current Positions in BCP Positions in BCP Group companies Positions in companies outside BCP Group Exercise of other Relevant Activities Capacity Cumulation of Positions (art. 33 of the LFCIFC) Miguel Maya Dias Pinheiro 3rd Vice-Chairman of the Board of Directors Non-Executive Chairman of the Board of Directors of ActivoBank, S.A. Member of the Senior Board - Alumni Clube ISCTE Executive Compliant Chairman of the Executive Committee Member of the Supervisory Board of Bank Millennium, S.A. (Poland) Member of the Advisory Board of BCSD Portugal – Conselho Empresarial para o Desenvolvimento Sustentável, representing BCP S.A. Member of the Strategy Board Member of the Board of Directors of BIM - Banco Internacional de Moçambique, S.A. Member of the Advising Board of INDEG/ISCTE Executive Education Manager of the company BCP África, SGPS, Lda. Vice-Chairman of the Board of APB - Associação Portuguesa de Bancos (representing Banco Comercial Português, S.A.) Chairman of the Remunerations and Welfare Board of BIM - Banco Internacional de Moçambique, S.A. Vice-chairman of the Board of Curators of Fundação Millennium bcp Miguel de Campos Pereira de Bragança Member of the Board of Directors Manager of the company BCP África, SGPS, Lda. Non-Executive Director of UNICRE – Instituição Financeira de Crédito, S.A., (representing Banco Comercial Português, S.A.) Member of the General Board of AEM- Associação de Empresas Emitentes de Valores Cotados em Mercado; Executive Compliant Vice-Chairman of the Executive Committee Manager of the company Millennium bcp Participações, SGPS, Sociedade Unipessoal, Lda Non-executive member of the Board of Directors of SIBS, S.G.P.S., S.A. and of SIBS Forward Payment Solutions, S.A. Non-Executive Vice- Chairman of the Board of Directors of Banco ActivoBank, S.A. Member of the Supervisory Board of Bank Millennium, S.A. (Poland) João Nuno de Oliveira Jorge Palma Member of the Board of Directors Member of the Board of Directors of BIM - Banco Internacional de Moçambique, S.A. Member of the Board of BCSD-Conselho Empresarial para o Desenvolvimento Sustentável Executive Compliant Vice-Chairman of the Executive Committee Chairman of the Committee for Nominations and Remunerations end member of the Remunerations and Welfare Board of BIM - Banco Internacional de Moçambique Vice Chairman of the General Board of CIP- Confederação Empresarial de Portugal 2022 REPORT & ACCOUNTS | 771 José Miguel Bensliman Schorcht da Silva Pessanha Member of the Board of Directors Vice-Chairman of the Board of Directors and Chairman of the Audit Committee of Millennium bcp Ageas Grupo Segurador, SGPS, S.A. Executive Compliant Member of the Executive Committee Non-Executive Member of the Board of Directors of Banco ActivoBank, S.A. Vice-Chairman of the Board of Directors and Chairman of the Audit Committee of Ocidental - Companhia Portuguesa de Seguros de Vida, S.A. Vice-Chairman of the Board of Directors and Chairman of the Audit Committee of Ageas - Sociedade Gestora de Fundos de Pensões, S.A. Member of the Board of Directors and Chairman of the Audit Committee of BIM - Banco Internacional de Moçambique, S.A. Vice-Chairman of the Board of Directors and Chairman of the Audit Committee of Banco Millennium Atlântico, S.A. Member of the Supervisory Board and of the Audit Committee of Bank Millennium, S.A. (Poland) Maria José Henriques Barreto Matos de Campos Member of the Board of Directors Chairwoman of the Board of Directors of Millennium bcp - Prestação de Serviços, ACE Executive Compliant Member of the Executive Committee Rui Manuel da Silva Teixeira Member of the Board of Directors Member of the Board of Directors of Millenniumbcp Ageas - Grupo Segurador SGPS, S.A. Chairman of the Board of the General Meeting of the Associação Porto Business School in representation of Banco Comercial Português, SA Executive Compliant Member of the Executive Committee Member of the Board of Directors of Ocidental - Companhia Portuguesa de Seguros Vida, S.A. Member of the Board of Directors of Ageas - Sociedade Gestora de Fundos de Pensões, S.A. Chairman of the Board of Directors of Interfundos – Soc. Gestora de Organismos de Investimento Coletivo, S.A. Specialized Committees of the Board of Directors (BoD) 2022 REPORT & ACCOUNTS 772 | 27. Identification of the Committees created within the Board of Directors and the place where their operating regulations can be consulted. In addition to the Audit Committee and the Executive Committee, the Bank's Board of Directors, in order to ensure and contribute to the good and appropriate performance of the duties that are legally and statutorily entrusted to it, appointed three other specialised committees, exclusively composed by non-executive directors, which are responsible for monitoring specific matters, which are identified as follows: a) Committee for Risk Assessment The Committee for Risk Assessment, established in accordance the provisions of article 115-L of the LFCIFC is composed of three to five non-executive directors, appointed by the Board of Directors. During the 2023 financial year, the Committee for Risk Assessment was composed as follows: Chairman: Fernando da Costa Lima Independent Members: Ana Paula Alcobia Gray Non-Independent Altina de Fátima Sebastian Gonzalez Villamarin Independent Within a universe of three members that compose the Committee for Risk Assessment, two members (67%) are qualified as independent, including its Chairman. Under the terms of the Bank's Articles of Association, the Committee for Risk Assessment advises and assists the Board of Directors on the appetite for risk and on the general, current and future, risk strategy of the Bank and on the supervision of their respective execution, in accordance with the powers set out by the law and its Regulations. All the members of this committee have appropriate knowledge, competences, and experience to be able to understand, analyse and monitor the specific categories of risk faced by the company, risk appetite and the defined risk strategy, as confirmed by the respective curricula attached to the present Report. Within the scope of its activity, the Committee for Risk Assessment has the mission of assessing and allocating appropriate resources to manage the risks regulated by the LFCIFC, and other national and European legislation in force, to verify whether the products and services offered to customers take into consideration the Bank's business model and risk strategy, examine whether the incentives established in the Bank's remuneration policy take into consideration risk, capital, liquidity and expectations regarding results, and observe the public interest and prevent the management body decision-making from being dominated by any person or small group of people over the general interests of the Bank. With regard to the management of risks related to environmental sustainability, the Committee for Risk Assessment's powers and duties also include advising the Board of Directors on the identification, management and control of ESG risk factors[CL1] , while monitoring the Group's risk appetite and underlying performance, as well as supervising the adequacy of the ESG internal control system, with a particular focus on (a) the effectiveness of the risk management system in dealing with ESG risk drivers; and (b) dealing with any case of ESG-related reputational risk with which the Group may be directly or indirectly associated. In the collection and processing of data related to environmental and social sustainability, the Bank has processes in place to obtain data from its customers, either directly or through external information providers (data providers), integrated into a single platform for all ESG data and under a dedicated data policy. For more information on how the Bank addresses climate change in its organisation and how it factors climate risk analysis into its decision-making processes, please see the Sustainability Report. Among the competences of the Committee for Risk Assessment, in force on 31.12.2023, the following are highlighted: • advise the Board of Directors on the strategy and policy regarding the assumption, identification, control and reduction of the risks to which the Bank in its group dimension is, or may be, subject, and their respective implementation; 2022 REPORT & ACCOUNTS | 773 • assess if the main products and services offered to Customers, take into consideration the Bank's business model and risk strategy; • review, whenever justified, the principles underlying the Bank's pricing model, maintaining its consistency with the approved risk strategy; • assess if the incentives established in the remunerations policy take into consideration the risk, capital, liquidity and expectations concerning income; • monitor the process of managing the material risks to which the Bank is subject to, in particular the major risks, through appropriate indicators and metrics, including, among others, the new ESG risk factors; • support the Board of Directors in the assessment of the risk strategies of the main subsidiaries abroad; • assess the impact that eventual changes to the Group’s perimeter may have on the Bank’s risk profile and whether such changes are compatible with the approved risk appetite; • assess the effectiveness of policies, methodologies and models used to evaluate assets, monitoring the valuation results of the respective impairment; • monitor the Business Continuity Plan; • periodically monitor the report on the main risk indicators; • monitor the adequacy of the allocation of material and human resources to the management of the risks regulated in the Legal Framework for Credit Institutions and Financial Companies and with the remaining domestic and European legislation in effect; • engage the services of experts, under the terms of Article 10 (3) of the Regulations of the BoD; • issue an opinion, prior to approval by the Board of Directors, on the Group Codes and Service Orders within its area of responsibility; • ensure that the risk management activities are subject to periodical reviews; • issue an opinion, prior to approval by the Board of Directors, on the independence and adequacy of resources of the risk management function, to be performed by the Risk Office, considering the requirements established in article 27 of Notice 3/2020 of Banco de Portugal; • assess the Risk Office's activities plan for presentation to the Audit Committee and submission to the Board of Directors; • follow-up the Risk Office’s activity; • monitor the conclusion of the process of identification of risks and risk strategy, in the Bank and in the Group, issuing an opinion addressed to the Board of Directors on the proposal submitted; • issue an opinion, prior to approval by the Board of Directors, on the Market Discipline report; • issue an opinion, prior to approval by the Board of Directors, on the proposal for the revision of the Risk Appetite Framework (RAF) of the Group; • monitor the evolution of the indicators of the Risk Appetite Statement (RAS); • issue an opinion, prior to approval by the Board of Directors, on the capital planning processes (ICAAP) and on liquidity (ILAAP) and respective conclusions; • follow-up the ICAAP and ILAAP monitoring process; • approve the scenarios proposed in the internal stress tests, and analyse the respective results; • issue an opinion, prior to approval by the Board of Directors, on the process for the review of the Recovery Plan and its suitability; • monitor the evolution of the process of preparation and execution of the plan for the reduction of Non- Performing Exposures (NPEs), issuing an opinion addressed to the BoD on its suitability; • monitor the efficiency of the risk management systems; • assess the reports prepared by the Risk Office and the Compliance Office, pursuant to Article 27 (1) (r and (s) and Article 28 (1) (o and (p) of Notice of Banco de Portugal No. 3/2020, regarding the specific risks monitored by the CAvR, and send its assessment to the CAud; • issue a prior opinion on the decisions for the appointment or replacement of the Head of the risk function. 2022 REPORT & ACCOUNTS 774 | In the exercise of its functions, the Committee for Risk Assessment has as specific powers delegated by the Board of Directors, namely those identified in Item 21 - Board of Directors, in the paragraph regarding the internal control and risk management system, to which reference is made herein. To carry out its duties, the Committee for Risk Assessment has access to information on the Bank's risk situation and may determine the nature, quantity, format and frequency of information on risks which it should receive and implements internal communication procedures with the Board of Directors and other specialised Committees created by the BoD. The Committee will inform the Board of Directors of its activities by means of a detailed quarterly report, without prejudice to the duty of reporting to the Chairperson of the Board of Directors all situations the Committee identifies and deems to be of high risk. During the 2023 financial year, the Committee met fourteen times, in-person or by electronic means, with the logistic and technical support from the Board of Directors’ Support Office, whose head acted as the meeting’s secretary. The respective minutes of the meetings were drafted and approved. Participants in the meetings, who are not members of the Committee for Risk Assessment, gave their formal agreement to the wording of the items on which they intervened, the same being attached to the documents in the minutes of the meeting. The attendance level from each of its members in the Committee for Risk Assessment meetings is shown in the following graphic: The Regulations of the Committee for Risk Assessment, updated in December 2022, are available on the BThe Regulations of the Committee for Risk Assessment, updated on 27 November 2023, is available on the Bank’s website, in Portuguese and in English, on the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Documents/Reg_Comissao_Avaliacao_Riscos.pdf b) Committee for Nominations and Remunerations The Committee for Committee for Nominations and Remunerations, established in accordance with the provisions of article 115-B and H of the LFCIFC, is composed of three to five non-executive directors, appointed by the Board of Directors. The composition of the Committee for Nominations and Remunerations is in accordance with the provisions of the Committee’s Regulations since all its members are non-executive directors. During 2023, the Committee for Nominations and Remunerations was composed as follows: Chairwoman: Lingzi Yuan (Smilla Yuan) Independent Members: Lingjiang Xu Non-Independent Valter Rui Dias de Barros Non-Independent 2022 REPORT & ACCOUNTS | 775 Within a universe of three members that compose the Committee for Nominations and Remunerations, one member (33.33%) is qualified as independent, the latter being the Chairwoman of the Committee. The members of the Committee for Nominations and Remunerations have, collectively, specific professional qualification and experience for the exercise of their functions, namely, appropriate professional qualification and experience in matters of remuneration policies and practices. Among the powers set out in the Regulations of the Committee for Nominations and Remunerations, in force on 31.12.2023, in addition to those referred to in the previous item 24, to which reference is made herein, the following are of particular importance: Policies and remuneration practices: • define and review, at least annually, the Remuneration Policy concerning the members of the Management and Supervisory Bodies and the respective Autonomous Document and, together with the Remunerations and Welfare Board, submit the policy proposal for approval by the General Meeting; • issue an opinion, at least annually, on the Remuneration Policy for Employees and the respective Autonomous Document, including those responsible for internal control functions, as proposed by the Executive Committee; • approve, upon proposal made by the Executive Committee, decisions regarding the setting of corporate objectives, as well as decisions regarding the attribution of any type of remuneration to the Coordinating-Managers; • approve upon proposal made by the Executive Committee, the amount of the Bonus-Pool of employees; • Issue a prior opinion addressed to the Executive Committee, on the adequacy and consistency of the individual performance assessment process used to define the variable component of the remuneration; • verify the implementation and compliance with the remuneration policies and procedures adopted; • issue a prior opinion on the Remuneration Policies of all entities part of the Group; • assess, annually, and issue opinion on the consistency of the global remuneration policy of subsidiaries abroad, for reporting to the Board of Directors, with a view to incorporating it into the Group’s annual self-assessment report in accordance with the provisions of Notice nr. 3/2020; • assess the mechanisms and systems implemented to ensure that the remuneration system considers all types of risks and equity, and that the overall remuneration policy is coherent and promotes a sound and efficient risk management and is in line with the Bank’s strategic business plan, objectives, corporate culture and values, risk culture and long-term interests; • monitor the existence and implementation of specific policies on recruitment and selection, assessment of performance, promotion and management of careers, remuneration, training and development of competences, and promotion of gender equality and sustainability; • watch out for the adequacy of the information on the remuneration practices and policies provided to shareholders. Assessment of the suitability of powers and succession • issue an opinion, at least annually, on the Policies for the Selection, Evaluation and Succession for Members of the Management and Supervisory Bodies and holders of internal control functions; • prepare and communicate to the BoD recommendations on candidates for members of the management and supervisory bodies of the Bank; • ensuring and promoting the Fit & Proper process and approving the individual and collective final reports of candidates for members of the management and supervisory bodies and those responsible for internal control functions; • approve, pursuant to a proposal made by the Executive Committee, the Assessment and Succession Policy for key functions holders who do not perform internal control functions; • issue an opinion to the Board of Directors on the appointment, replacement or possible dismissal of those responsible for internal control functions, upon a proposal from the Executive Committee and after obtaining the binding opinion of the Audit Committee and, in the case of the person responsible for the risk management function, also obtaining the opinion of the Committee for Risk Assessment; 2022 REPORT & ACCOUNTS 776 | • appoint, under a proposal made by the Executive Committee, the Managers reporting directly to the Board of Directors, with exception of those performing functions in the internal control areas and the company secretary; • issue an opinion, for the Board of Directors, on the appointment of the Client Ombudsman; • resolve on the appointment of members to the corporate bodies in credit institutions and financial companies of the Group, or on the making of the lists for the corporate bodies of the most relevant subsidiary companies, before the same are submitted to the respective General Meeting and inform the Board of such appointments; • issue an opinion on the decision to appoint, replace or dismiss the persons responsible for the internal control functions of the Group's subsidiaries, after involving the corresponding persons responsible for the respective internal control functions of BCP and issuance of an opinion, taking into account the opinion of the by the Chief Risk Officer; The selection and election of members of the corporate bodies is the exclusive competence of the shareholders, which is preceded by an assessment of the candidates by the Committee for Nominations and Remunerations, which is made available in the preparatory documentation for the General Meeting. The performance of the duties of the members of the Bank's management and supervisory bodies is also subject to the authorisation of the European Central Bank, which also validates all the legal and regulatory requirements applicable to the level of skills required. The curricula of candidates for members of the management and supervisory bodies and other documentation that, according to the law are disclosed to shareholders, are available on the Bank site, in Portuguese and English, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Pages/modelo_organizacional.aspx Under the terms of Article 115-B, (2) (d) of the LFCIFC and the respective Regulations, it is also the Committee for Nominations and Remunerations's responsibility to annually assess the knowledge, skills and experience of each member of the management and supervisory bodies, as well as to carry out a collective assessment of these bodies, and to report the results to them. According to paragraph 3 of article 4 of the Regulations of the Committee for Nominations and Remunerations, for the proper performance of its duties, the Committee may hire the services of experts. Within the scope of its powers, the Committee for Nominations and Remunerations re-evaluated the individual Fit and Proper questionnaires of members of the Board of Directors, insofar as they communicated supervening changes subject to re-evaluation - accumulation of positions/availability. In general, the Committee exercises all the competences attributed to the Committees for Nominations and Remunerations in the LFCIFC and other national and European legislation in force. The Committee for Nominations and Remunerations, for the adequate performance of its competences, may contract the provision of services by experts, in accordance with article 10 (3) of the Regulations of the Board of Directors. Regarding the competences of the Committee for Nominations and Remunerations to carry out the assessment of the performance of the executive directors, please see the information provided in Item 24. During the 2023 financial year, the Committee adopted five unanimous resolutions in writing and met twelve times, in person or by electronic means. The Committee had the logistical and technical support of the Company's Secretary, who provided the members of the Committee with all the supporting documents, which were stored on a digital platform called Diligent Boards. The effective attendance level, in the taking of resolutions and meetings of the Committee for Nominations and Remunerations by each of its members is shown in the following table: 2022 REPORT & ACCOUNTS | 777 The Regulations of the Committee for Nominations and Remunerations is available on the Bank’s website, in Portuguese and in English, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Documents/Regimento_CNR.pdf c) Committee for Corporate Governance, Ethics and Sustainability The Committee for Corporate Governance, Ethics and Sustainability is composed of three to five non- executive members, appointed by the Board of Directors. During 2023, the Committee for Corporate Governance, Ethics and Professional Sustainability was composed as follows: Chairman: Nuno Manuel da Silva Amado Independent () Members: Lingjiang Xu Non-Independent José Pedro Rivera Ferreira Malaquias Independent () Since July 2023, the director concerned has been classified as independent by virtue of the expiry of the period of five years after the end of the financial year of the management functions In an universe of the three members that compose the Committee for Corporate Governance, Ethics and Sustainability, 66.66% is qualified as independent. All the members of the Committee for Corporate Governance, Ethics and Sustainability have professional qualifications acquired through academic qualification, professional experience or specialised training appropriate to the performance of their duties, as confirmed by the respective curricula attached to this report. Among the competences set forth in the Regulations of the Committee for Corporate Governance, Ethics and Sustainability, in force since 31.12.2023, the following stand out: Corporate Governance and Ethics Issues: • Recommending to the Board of Directors the adoption of policies in line with ethical and social responsibility principles and best practices in terms of corporate governance and sustainability principles; • supporting the Board of Directors in the evaluation of the systems that identify and solve conflicts of interests; • Issue an opinion, addressed to the Board of Directors, on the Annual Corporate Governance Report; • Assess, annually, the results of the monitoring of the compliance with the Corporate Governance Code; • assess, annually, the model relative to the assessment of compliance with the parameters set for the purposes of assessing corporate governance, to be included in the RAS - Risk Appetite Statement – Governance Risk; • monitor the implementation of supervisory authorities’ recommendations on internal governance matters; 2022 REPORT & ACCOUNTS 778 | • promote, with reference to the end of the first year and the last year of the term of office, the evaluation by an external entity independent of the Bank, of the conduct and values of the Bank, of the Board of Directors and of each one of its committees, to be submitted to the Board of Directors. Sustainability Issues: • issue an opinion addressed to the Board of Directors on the Annual Sustainability Report, concerning issues for which it is responsible; • issue an opinion addressed to the Board of Directors on the Sustainability Master Plan, assessing, and monitoring its degree of execution through appropriate indicators and metrics; assess the adequacy of the human and technical resources in sustainability matters; • assess the adequacy of the human and technical resources in sustainability matters; • evaluate the training plans on sustainability matters, especially those of the members of the Management and Supervisory Bodies; • monitor the implementation of supervisory authorities’ recommendations on sustainability. The committee has also other responsibilities, such as: • issue opinions on the Code of Conduct (GR0021), the Code of Good Conduct for the Prevention and fight against Harassment and for the Promotion of Equality and Non-Discrimination (GR0044), the Policy for the Prevention and Management of Conflicts of Interest (GR0038), Sustainability related Policies and Principles (GR0046), ESG management and control principles (GR0047), as well as other group codes that define principles of conduct and business sustainability; • make, every three months, a report on the activities developed, to be appraised by the Board of Directors. The Committee for Corporate Governance, Ethics and Sustainability, for the adequate performance of its competences, may contract the provision of services by experts, in accordance with article 10 (3) of the Regulations of the Board of Directors. In order to carry out the periodic assessment of the conduct and values of the Board of Directors and its committees under Article 3 of Notice 3/2020, the Board of Directors, on the recommendation of this Committee, hired an independent entity in 2023, the consultancy firm Egon Zehnder, under which each of the members of the Board of Directors participated in the work supporting the assessment, either through a self-assessment questionnaire or through interviews, to ascertain their opinion on the functioning of the bodies to which they belong, including their values and practices. On the basis of this work and the analysis of Board meetings and documentary support, and taking into account the applicable rules and best market practices, Egon Zehnder produced a report evaluating the conduct and values of the Board of Directors and its Committees, and concluded with a positive assessment, with practical recommendations that were considered by the Bank. In compliance with the internal rules established for the purpose, Egon Zehnder contractually agreed to provide independent services and undertook that until the Committee's mandate expires, it will not be hired to provide any other services to the Bank or to other companies with which it has a controlling or group relationship, without the prior authorization of the Bank's Committee. During the 2023 financial year, the Committee met eight times, in person or by electronic means. The Committee had the logistical and technical support of the Company's Secretary, who provided the members of the Committee with all the supporting documents, which were stored on a digital platform called Diligent Boards. Attendance of the Committee for Corporate Governance, Ethics and Professional Goals meetings by each of its members is shown in the following graphic: 2022 REPORT & ACCOUNTS | 779 The Regulations of the Committee for the Corporate Governance Ethics and Sustainability is available on the Bank’s website, in Portuguese and in English, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Documents/Regimento_CGSES_BCP.pdf Sustainability and ESG at the Bank: In view of the new challenges posed by the various parties with which the company interacts, it should be noted that the Board of Directors, in particular through the Committee for Corporate Governance, Ethics and Sustainability and the Executive Committee, is still pursuing a set of dynamic strategies that foster a culture of Corporate Social Responsibility, positively influencing the organisation's long-term value proposition, in balance with the well-being of the people, the company and the communities in which it operates and with the preservation of natural resources, the climate, biodiversity and the environment, focusing on three fundamental axes: • Environment - implementation of measures that promote a fair and inclusive transition to decarbonised economic development models, including the incorporation of the environmental aspect in the Bank's risk models and the supply of products and services; • Social - involvement with the external community and the internal community in establishing lasting relationships of proximity and co-operation and in creating shared value; • Corporate governance - integration of sustainability principles in the Bank's decision-making processes and in defining its value proposition. The Bank also undertakes a continuous dialogue with its stakeholders through the implementation of a set of corporate policies and principles, of which the following stand out: • Sustainability Policy; • Environmental Policy; • Social Impact Policy; • Human Rights Policy; • Diversity and Equal Opportunities Policy; • Occupational Health and Safety Policy; • Corporate Volunteering Policy; • Anti-Corruption and Anti-Bribery Policy; • Principles for a responsible financing, such as excluded and conditional projects. • Sustainability Guidelines for Suppliers. In addition, the Bank formalises its environmental and social commitments, objectives, targets and actions in its Sustainability Master Plan (SMP), which is the responsibility of the Executive Committee, advised by the 2022 REPORT & ACCOUNTS 780 | Sustainability Commission, and its approval is the responsibility of the Board of Directors, after consulting the Committee for Corporate Governance, Ethics and Sustainability. The structuring of the lines of action and the identification of the actions that make up the SMP are the result of extensive reflection on the management of relevant material issues, available resources and the regulatory, economic and market framework. The definition of the Plan's commitments, objectives, targets and measures, and the assessment, follow-up and monitoring of its implementation. Significant progress has also been made in implementing processes to collect and process data related to environmental and social sustainability, especially from Customers and stakeholders, and in analysing the associated risks, which are described in the Sustainability Report. We refer in this item to the information provided in the Sustainability Report, available at https:// ind.millenniumbcp.pt/pt/Institucional/sustentabilidade/Pages/relatorios_anuais.aspx 28. Composition of the executive Board and/or details of the board delegate/s, where applicable. The Bank’s Executive Committee, in the current financial year, had the following composition: Chairman: Miguel Maya Dias Pinheiro Vice-Chairmen: Miguel de Campos Pereira de Bragança João Nuno de Oliveira Jorge Palma Members: José Miguel Bensliman Schorcht da Silva Pessanha Maria José Henriques Barreto Matos de Campos Rui Manuel da Silva Teixeira 29. Description of the powers of each of the committees established and a summary of activities undertaken in exercising said powers The competences of each of the specialised committees created within the Board of Directors are as follows: • Audit Committee - On this matter, please see information presented in item 21. - Audit Committee • Executive Committee - On this matter, please see information presented in item 21. - Executive Committee • Committee for Risk Assessment - On this matter, please see information presented in item 27. a). • Committee for Nominations and Remunerations - On this matter, please see information presented in items 24, 25 and 27 b). • Committee for Corporate Governance, Ethics and Sustainability - On this matter, please see information provided in item 27. c). III. Supervision a) Composition 30. to 32. Identification, composition and qualification concerning the independence requirement of the body and supervision - the Audit Committee Please see the information presented in items 10, 17, 18, 21. – Audit Committee and 26. 33. Professional qualifications of the Audit Committee, and other relevant curricular elements, with the possibility of referring to the section of the report where this information is already included. The professional qualifications and other curricular details of each member of the Audit Committee are presented in Annex I of this Corporate Governance Report. These data are updated whenever justified and remain available at all times at the Bank’s site, in Portuguese and in English, at the following address: 2022 REPORT & ACCOUNTS | 781 https://ind.millenniumbcp.pt/en/Institucional/governacao/ b) Functioning 34. Existence and place where the operating regulations of the Audit Committee can be consulted, with the possibility of referring to the section of the report where this information is already included. On this matter, please see the information presented in item 21 - Audit Committee. 35. Number of meetings held and level of attendance at meetings by each member of the Audit Committee, with the possibility of referring to the section of the report where this information is already included. On this matter, please see the information presented in item 21 - Audit Committee. 36. Availability of each member of the Audit Committee, with an indication of the positions held simultaneously in other companies, inside and outside the group, and other relevant activities carried out by the members of those bodies during the financial year, with the possibility of referring to the section of the report where this information is already included. On this matter, please see the information presented in item 26. c) Competence and duties 37. A description of the procedures and criteria applicable to the supervisory body for the purposes of hiring additional services from the external auditor. The Bank follows best practices in terms of assured independence in the contracting of services rendered by the external auditors, namely, in international terms, Commission’s Recommendation 2005/162/EC of 15 February 2005, Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014, amending Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 (8th Directive), on statutory audits of annual financial statements and consolidated financial statements, Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and, at national level, the companies legislation, the recommendations and regulations of the Comissão do Mercado de Valores Mobiliários (CMVM), Law no. 248/2015 of 9 September, which approved the Legal Framework for the Supervision of Audit, and the stipulations, as specifically applicable, in the Statute of the OROC (Portuguese Chartered Accountants Association) approved by Law no. 140/2015 of 7 September, which partially transposes to the internal legal system the aforesaid Directive 2014/56/EU and assures the implementation of Regulation (EU) 537/2014. The Bank’s Articles of Association explicitly list, among the competences of the Audit Committee, that of “supervising the independence of the Statutory Auditor and External Auditor, in particular with respect to the provision of additional services”. In accordance with article 38 of Notice 3/2020 of Banco de Portugal, the Bank’s General Meeting is responsible for approving the policy for the selection and designation of the Statutory Auditor or Audit Company and for the contracting of non-prohibited non-audit services. Accordingly, the General Meeting held on 20 May 2021 approved the policy for the selection and designation of the Statutory Auditor or Statutory Audit Company and the hiring of non- prohibited non-audit services, under the terms of the legislation in force, and the same was updated at the General Meetings held on 04 May 2022 and on 24 May 2023. Additionally, the Audit Committee, within the scope of the competences set out in its Regulations, annually monitors and assesses the activity of the External Auditor in particular with regard to the following aspects: i) quality of the service provided; ii) resources allocated; iii) communication and interaction with the Bank; iv) and finally, independence, objectivity and professional scepticism. The Audit Committee, as the supervisory body of the Bank, promoted the adoption of rules, whose compliance it evaluates and oversees on an annual basis, that ensure the independence of the external auditors in relation to the several entities of the Group and, simultaneously, prevent situations of conflict of interests within the entities that provide auditing services to the Group entities creating preventive mechanisms of approval of additional services and fee's control. The Audit Committee is also responsible for proposing the contracting of external auditors or the renewal of its term-of-office by the Bank and by Group Banco Comercial Português, and for supervising the provision of 2022 REPORT & ACCOUNTS 782 | the services foreseen in the Group Code – GR0022 – Selection and Designation of Statutory Auditors/Audit Firms and Contracting of Non-Audit Services. Through the said Regulations that embody the principles described in the domestic and international regulations, complying with the requirements of Notice 3/2020 of Banco de Portugal, the Group adopts and systematises a set of standards relating to: • classification of the services rendered by the external auditors: • definition of the set of non-audit services which the external auditor is not allowed to provide to any entity of the Group; • definition of the number of non-audit services, which may be provided to the Group under specific stipulated circumstances; • subjection of those involved in the application of the aforementioned Group Code to regular training actions on the responsibilities granted to them; • approval by the Audit Committee of engagement of non-audit services to be provided by the external auditor, creating different rules for the authorizations according to the type of services in question and defined limits; • definition of a process for the selection and evaluation of proposals for the designation of the ROC/ SROC, ensuring their independence and describing an evaluation methodology for the ROC/SROC proposed and carried out by the Audit Committee; • provision to the Audit Committee of internal control information on the established principles and guidelines. The Audit Committee also supervises and permanently monitors the effectiveness of the internal control system, the risk management system, the process of preparing and disclosing financial information, and the activity of the internal Compliance and Audit functions, giving its opinion on the work plans and resources allocated to control functions. The Policy for the Prevention and Management of Conflicts of Interest (GR0038) is object of an annual review, for confirmation of its adequacy to the respective legal and regulatory framework, without damaging eventual further revisions when deemed justified. 38. Other duties of the supervisory body On this matter, please see the information presented in item 21 – Audit Committee and preceding item 37. IV. Statutory Auditor (including the Policy for the Selection and Evaluation of External Auditors and of the Statutory Auditor) The Policy for the Selection and Evaluation of the External Auditors and of the Statutory Auditor which is part of the Group Code GR0022 - that contains the following definitions: (i) The criteria concerning the technical and professional competence and experience in the financial sector and the process to select the statutory auditor; (ii) The methods used by the company to communicate with the statutory auditor; (iii) The supervisory procedures designed to ensure the independence and the absence of conflicts of interests with the Statutory Auditor; (iv) The non-audit services, which cannot be provided by the statutory auditor. The selection of the Statutory Auditor/Audit Firm is based on the criteria and requirements mentioned below which are taken into account by the Audit Committee in the evaluations it carries out, either within the scope of the selection of candidates to present to the General Meeting of Shareholders, or in the subsequent evaluations it makes, at least once a year, and in the situations when it intends to propose the reappointment of the Statutory Auditor. Thus, apart from the fees proposal, are also considered: 2022 REPORT & ACCOUNTS | 783 • Technical Expertise and Quality of Service • Resources allocated to the Audit • Communication and Interaction • Independence, Objectivity and Professional Scepticism 39. Identification of the statutory auditor and its representative partner statutory auditor. The current effective Statutory Auditor is Deloitte & Associados – Sociedade de Revisores Oficiais de Contas, S.A., registered in the OROC under no. 43 and in CMVM under no. 2016/ 1389, represented by João Carlos Henriques Gomes Ferreira, ROC no. 1129, who replaced, on 21.07.2022, Paulo Alexandre de Sá Fernandes, ROC, no. 1456, for having reached the limit for the exercise of functions, and alternatively by Jorge Carlos Batalha Duarte Catulo, ROC no. 992. 40. Indication of the number of years that the statutory auditor consecutively carries out duties with the company and/or group. The company Deloitte & Associados - Sociedade de Revisores Oficiais de Contas, S.A was elected for the first time on 21 April 2016 and re-appointed for the 2021/2023 three-year period at the General Meeting of Shareholders held on 20 May 2021; therefore, it performs functions consecutively for 8 years and is currently in its third term-of-office. The Statutory Auditor and the External Auditor will be elected at the General Meeting of Shareholders that will take place on 24 May 2024. 41. Description of other services rendered by the statutory auditor to the company On this matter, please see the information presented in item 46. 2022 REPORT & ACCOUNTS 784 | V. External Auditor The Policy for the Selection and Evaluation of External Auditors is detailed in the Group Code GR0022 already duly approached in Chapter IV and in item 37. 42. Identification of the External Auditor appointed for the purposes of article 8 and of the Statutory Auditor partner who represents him/her in the performance of these duties, as well as the respective CMVM registration number. The Bank’s External Auditor and the Statutory Auditor is Deloitte & Associados – Sociedade de Revisores Oficiais de Contas, S.A., registered in the OROC under no. 43 and in CMVM with no. 2016/ 1389 represented effectively by its partner João Carlos Henriques Gomes Ferreira, ROC nº 1129 and alternatively by Jorge Carlos Batalha Duarte Catulo, ROC n.º 992. 43. Indication of the number of years in which the External Auditor and the respective Statutory Auditor partner who represents him/her in the performance of these duties have exercised functions consecutively with the company and/or the group The company Deloitte & Associados– Sociedade de Revisores Oficiais de Contas, S.A. was elected for the first time on 21 April of 2016 and re-appointed for the 2021/2023 three-year period; therefore, it performs functions consecutively for 8 years and is currently in its third term of office. 44. Rotation policy and frequency of the External Auditor and the respective Statutory Auditor partner that represents him/her in carrying out such duties The Bank complies with the rotation rules laid down in Article 17 of Regulation (EU) no. 537/2014 of the European Parliament and the Council, of 16 April 2014 and Article 54 of Law no. 140/2015, of 7 of September, and, therefore, its External Auditor and the Statutory Auditor that represent it will not perform functions for a period, considering the initial term of office, that exceeds the maximum duration of ten and twenty-seven years, respectively. 45. Indication of the Body responsible for assessing the external auditor and the regular intervals when the said assessment is carried out The Audit Committee is the body responsible for annually assessing the quality of the services rendered by the external auditor and the respective Statutory Auditor partner, under the terms referred to in Items 21 and 37. This assessment is especially focused on the professionalism of the auditors, transparency, ethics, quality control and good performance. The Audit Committee permanently monitors the activity of the external auditor and respective partner Statutory Auditor, appraising in particular the conclusions of the audit to the annual financial statements, on an individual and consolidated basis and the limited review of the half-yearly interim financial statements, also analysing the conclusions of the desktop reviews to the 1st and 3rd quarter financial statements. The Audit Committee meets with the external auditor and with the Statutory Auditor on a very regular basis and whenever necessary. The procedures aimed at ensuring the independence of the external auditor are defined in the Policy for the Selection and Assessment of the External Auditors and in Group Code - GR0022, already approached in detail in Chapter IV and in Item 37. The Audit Committee is the main interlocutor of the external auditor and of the statutory auditor of the bank, with whom it meets at least every month to carry out a close monitoring of their activity, and also to analyse and debate the respective reports and conclusions therein stated. The Audit Committee is also responsible for recommending to the General Meeting of Shareholders the appointment of the external auditor and the election of the statutory auditor, or the renewal of their respective terms of office, taking into consideration the respective technical ability and remaining conditions for the exercise of those functions. The Audit Committee annually assesses the external auditors regarding the quality of the service provided, the resources and teams allocated, communication and interaction with the Bank, as well as the independence, objectivity and critical demands shown in the performance of their duties. To this end, the Audit Committee draws up and prepares its own assessment of the External Auditor and, at the same time, uses a questionnaire in which those with managing responsibilities at the Bank who have relevant contact with the external auditor take part, in order to assess the items mentioned above. On this matter, please see information presented in item 21 - Audit Committee. 2022 REPORT & ACCOUNTS | 785 46. Details of services, non-auditing, carried out by the external auditor for the company and/or companies in a control relationship and an indication of the internal procedures for approving the recruitment of such services and a statement on the reasons for said recruitment. Besides the Audit work, which includes legal review of accounts services and other reliability assurance services, the fees charged by the External Auditor also include the payment of the following services: In the year to which this Report refers, the following non-audit services were hired: • tax advisory services – tax advisory services to the Group in Portugal and abroad, in which the external auditor intervenes pursuant to a legal requirement; • services other than legal review of accounts, namely: (i) Reliability assurance services; and (ii) other services which are permitted in accordance with the defined rules of independence and subject to monitoring by the Audit Committee of BCP, which included a special audit into data quality. Regarding the approval of the engagement of these services and indication of the reasons for their engagement, the Bank maintains a very strict policy of independence in order to prevent any conflicts of interest in the use of the services of its external auditors. As auditor of Group BCP, the company Deloitte & Associados - Sociedade de Revisores Oficiais de Contas, S.A. (hereinafter referred to as “External Auditor”) complies with the rules on independence defined by the Group including Regulation (EU) no. 537/2014 of the European Parliament and of the Council of 16 April 2014, by Law 148/2015 of 9 September and by Law 140/2015, of 7 September (EOROC). To safeguard the independence of the External Auditors and the national and international good practices and standards, the Audit Committee of BCP approved a series of regulatory principles, as described below: • The External Auditor and the companies or legal persons belonging to the same network (“Network") cannot render to the Bank or to the Group the services that may be considered forbidden under the terms of the Statute of the OROC. Although it is generally considered that the independence of the External Auditor could be affected by the provision to the Group of services unrelated to legal review or audit, the Audit Committee identified a set of services that may be undertaken by the External Auditor without jeopardising its independence. These services are validated by the Group's Compliance Office and subject to approval or ratification, depending on the amount of the fees, by the Audit Committee; • the provision of services which are not discriminated in the above-mentioned set of services is object of specific approval by the Audit Committee prior to the signing of the contract in question. In relation to operations abroad, the Audit Committee only issues a non-opposition opinion. For that purpose, the proposals to be submitted to the appraisal of the Audit Committee of BCP must contain an opinion from the Compliance Officer of BCP, as set forth by the Group Code - GR0022 and a duly grounded decision recommendation. On this matter, please see the information presented in item 38. 2022 REPORT & ACCOUNTS 786 | 47. Details of the annual remuneration paid by the company and/or legal entities in a control or group relationship to the auditor and other natural or legal persons pertaining to the same network and the percentage breakdown relating to the following services (For the purposes of this information, the network concept results from the European Commission Recommendation No. C (2002) 1873 of 16 May) The amount of the annual remuneration paid in 2023 by the Company and/or legal persons in controlling or group relations, to the External Auditor (Deloitte) and other natural or legal persons belonging to the same network, detailed with their respective percentages, is reflected in the following table: 1) FEES PAID TO DELOITTE BETWEEN 1 JANUARY AND 31 DECEMBER 2023 (amounts in eur) 1) Fees paid to Deloitte for services rendered between 1 January to 31 December 2023 (amounts in Eur) Euros % Companies in Portugal Audit Reliability Assurance Services Tax Advisory Other Services Total Audit Reliability Assurance Services Tax Advisory Other Services Total Banco Comercial Português, S.A. 2,397,692 832,064 698,324 3,928,080 60.7% 21.7% 17.7% 100.0% Banco ActivoBank, S.A. 44,112 51,108 2,899 98,119 45.0% 52.1% 3.0% 100.0% Millennium BCP - Prestação Serviços, ACE 30,878 30,878 100.0% 100.0% Interfundos - Soc. Gestora de Organismos de Invest. Coletivo, S.A. 16,542 16,542 100.0% 100.0% Millennium BCP Participações Financeiras, SGPS, Soc. Unipessoal, Lda. 6,617 6,617 100.0% 100.0% BCP África, SGPS, Lda. (formerly BII Internacional, SGPS, Lda) 15,439 15,439 100.0% 100.0% Millennium bcp - Serviços de Comércio Electrónico, S.A. 2,757 2,757 100.0% 100.0% Magellan 3 21,502 21,502 100.0% Total 2,535,539 883,172 701,223 4,119,934 61.2% 21.9% 16.9% 100.0% 2) Fees paid to Deloitte for services rendered between 1 January to 31 December 2023 (amounts in Eur) Euros % Subsidiaries abroad Audit Committe e Services Guarantee of reliability Tax Advisory Other Services Total Audit Services Guarantee of reliability Tax Advisory Other Services Total Bank Millennium, S.A. (Poland) 704,371 230,845 935,216 75.3% 24.7% 100.0% Millennium BIM, S.A. (Mozambique) 60,842 36,450 97,292 62.5% 37.5% 100.0% BCP Finance Bank, Ltd. (Cayman) 5,000 5,000 BCP International B.V. (Netherlands) 9,925 9,925 100.0% 100.0% Magellan 3 (Ireland) 50,940 5,375 4,000 69,315 84.3% 9.0% 6.7% 100.1% Total 774,236 297,062 45,450 1,116,748 69.4% 26.9% 3.7% 100.0% 2022 REPORT & ACCOUNTS | 787 Fees paid to Deloitte for services rendered between 1 January to 31 December 2023 (amounts in Eur) Portugal % Abroad % Total % Legal review of accounts 2,535,539 774,236 3,309,775 Reliability Assurance Services 883,172 297,062 1,180,234 1. Total Audit Services 3,418,711 83.0% 1,071,298 95.9% 4,490,009 85.7% Tax Advisory Services 0 0 0 Services other than legal review of accounts 701,223 45,450 746,673 2. Total for Other Services 701,223 17.0% 45,450 4.1% 746,673 3.4% 4,119,934 100% 1,116,748 100% 5,236,682 100% 2022 REPORT & ACCOUNTS 788 | C. INTERNAL ORGANISATION I. Articles of Association 48. Rules governing amendment to the company's articles of association Article 24 of the Bank's Articles of Association establishes the requirement of a constitutive quorum, above the legal one, of over one third of the share capital for the General Meeting of Shareholders to be able to validly meet and resolve on first call. With regard to the quorum for resolutions, article 25 of the Articles of Association stipulates that resolutions are passed by a majority of the votes validly cast, unless a legal or statutory provision requires a qualified majority, which is the case with the amendment of the Articles of Association, which must be approved by two-thirds of the votes cast, whether the General Meeting meets on first or second call and regardless of the number of shareholders attending or represented at either meeting. In addition, the articles of association provide for a higher quorum than that required by law in the case of mergers, de-mergers and transformations of the company, which must be approved by three-quarters of the votes cast, and in relation to the dissolution of the company, for which a majority corresponding to three-quarters of the paid-up share capital is required under the terms of article 56 of the articles of association. The Bank and the shareholders that approved the Articles of Association in force consider that, since Banco Comercial Português is one of the companies with the largest free float in the Portuguese Stock Exchange, it is important to ensure that, in any circumstance and not only in the case specifically mentioned in the law, the shareholders, regardless of their respective representativeness, receive the guarantee that, on first call, the items submitted to the appraisal of the General Meeting can only be resolved on if the capital is minimally represented. Also regarding the deliberative quorum, the Bank and the shareholders that approved the articles of association in force, that determined structuring issues such as the merger, demerger or transformation of the company should not, for the sake of the shareholding stability and transparency in the decision-making process, such not be adopted at first call without achieving a broad consensus among the shareholders. II. Communication of Irregularities 49. Reporting means and policy on the reporting of irregularities in the company and prevention of conflicts of interest The Bank upholds a culture of responsibility and Compliance, preventing conflicts of interest and recognising the importance of an appropriate framework and processing of the communication of irregularities. For this purpose, BCP implements suitable means for receiving, treating and filing communications of irregularities allegedly committed by members of the corporate bodies and employees of the Bank and companies part of BCP Group. The policy for reporting irregularities is established in an internal service order (0S0131- Communication and Reporting of Irregularities), which is in accordance with Banco de Portugal Notice no. 3/2020, and is available on the Bank's website, in Portuguese and English, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Documents/RegComunicacaoIrregularidades.pdf According to the Bank’s policy for reporting irregularities, the following are considered irregularities: acts and omissions, wilful or negligent, completed, being executed or which, in light of the available information, may be reasonably expected to be executed, related to the administration, accounting organisation and internal supervision, serious evidence of breaches of duties provided for in the General Regime or in Regulation (EU) no. 575/2013 of the European Parliament and of the Council of July 26, 2013 or any other sphere of activity of the Bank which, in a serious manner, are liable in particular to: • violate the law, the articles of association, the regulations and other rules in force; • directly or indirectly cause any pecuniary damage to the Shareholders or the Bank; • cause reputational damage to BCP. 789 | The Bank implements the appropriate means for the reception, handling and archive of the communications of irregularities allegedly committed by members of the corporate bodies or by employees of the companies part of Group Banco Comercial Português or any other person within the scope of the provision of services to any of the companies part of Group Banco Comercial Português. For that purpose, the Bank observes, on an ongoing basis, the principles and requirements set forth in article 305-F of the Securities Code, in article 35 of the Notice of Banco de Portugal 3/2020, and in section 13 of the guidelines issued by EBA, on internal governance (EBA/GL/2021/05) of 2 July 2021. Hence, and in accordance with the Internal Regulations OSO131, the persons entitled to communicate irregularities, and also the subject of a communication of irregularities, are: • the employees, agents, commissioners or any other person that renders services, either permanently or occasionally, to the Bank or to any entity of the Group; • the shareholders; • any other persons. Employees have the duty to report to the Audit Committee any irregularity occurred that they are aware of, in particular, those who manage people or exercise functions in the areas of the three defence lines of the bank, internal audit, risk management or compliance. The communication of irregularities may, as an option, be made anonymously, or not, being addressed to the Audit Committee of BCP, and must be made in writing through the channels made available for that purpose, namely the site or through any other means of written communication, addressed to: Comissão de Auditoria – Av.ª Prof. Dr. Cavaco Silva (TagusPark), Edifício 1, 2744-256 Porto Salvo, or by the e-mail: [email protected]. or through the specific channel on the Bank's website (anonymous mode). Since 2022, and in accordance with the provisions of Notice no. 3/2020 of Banco de Portugal, the Bank has its own channel in its website, able to encrypt the personal data of the communicator - the functionality "Communicate Irregularity" with encrypted personal data, available in Corporate Services/Irregularities. In this new way of communicating irregularities anonymously, the author has the possibility of not identifying himself/herself and the anonymity of the author and his/her message is ensured. To make this possible, the Bank ensures that the logs of these communications are encrypted, so that the Audit Committee or any other entity of the Bank does not have access to any of the whistleblower's data (example: Employee identification number), except when otherwise determined by a court order. The Audit Committee is responsible for managing the system for reporting irregularities, ensuring the confidentiality of the reports, this Committee being supported by the Compliance Office and by the Audit Division, in the treatment of the irregularities reported. Once a communication is received, the Audit Committee shall undertake all efforts deemed necessary to assess if there are sufficient grounds to open an investigation and may establish a prior contact with the author of the communication, if known. In case the author of the communication so required, or whenever possible, the Audit Committee shall immediately communicate to him/her that the information has been received, within 7 days, at most, counting from the date the communication was received, except when the same is made anonymously. If there are sufficient grounds, the Audit Committee will develop all necessary investigations to become totally aware of all facts and it may request the support of the Audit Division, Risk Office, the Compliance Office or any other divisions or areas of the Bank. Once the investigation is over, the Audit Committee may make a report for the internal transmission of its conclusions so that the appropriate diligences may be adopted to correct the irregularity and sanction it, if need be. It must also report it to external entities whenever so is justified by the specific situation. If the communication is made in a non-anonymous manner, the response to the whistle-blower must be given up to three months after the sending of the delivery receipt the Bank is obliged to. The communications received, as well as the reports to which they have given rise, are mandatorily kept on paper or on another durable support that allows their complete and unaltered reproduction for a minimum period of five years, and the Bank has its own archive and database where all the communications are registered. The policy for the communication of irregularities ensures that when the identity of the whistle-blower is known, the communication cannot serve as grounds for the initiation of any disciplinary, civil or criminal proceedings, unless it is found to be fraudulently false, nor for the adoption of legally prohibited 2022 REPORT & ACCOUNTS | 790 discriminatory practices, as well as retaliatory measures, discrimination or any other type of unfair treatment. The Bank prepares and submits to Banco de Portugal an annual report, which is an integral part of the Self- Assessment report. Additionally, and periodically, a summary of the reported cases is produced and included in the quarterly report addressed to the Audit Committee. During 2023 (from December 2022 to November 2023), the Audit Committee received 16 reports of irregularities, 5 by letter, 4 of which anonymous, and 11 through the "Communicate Irregularity” e-mail inbox, 2 of which anonymous. From the total of the reports received, 8 were not considered as reports of irregularities under the provisions of the OS0131. The Bank also establishes the principle of reporting irregularities in its Code of Conduct and Code of Good Conduct to Prevent and Fight against Harassment and Promote Equality and Non-Discrimination, which are available on the Bank's website in Portuguese and English, on the following address: https://ind.millenniumbcp.pt/en/Institucional/governacao/Pages/normas_regulamentos.aspx The Bank’s Code of Conduct establishes the fundamental principles and rules to be observed in the exercise of the activity developed by the entities that form the Group and the principles underlying the conduct, good practices and observance of the institutional values by the universe of people that form the Group. In its Code of Conduct and in Code of Good Conduct for the Prevention and Fight against Harassment and for the Promotion of Equality and Non-Discrimination, the Bank regulates the behaviour of the members of the corporate bodies, of employees and of the service providers of Group Banco Comercial Português, establishing therein rules targeted at excellence in behaviour and the consolidation of a brand of reference and prestige that it intends to preserve and perfect. In the light of these rules, the Bank and its employees act according to principles of respect for people's rights, preservation of social and environmental sustainability and institutional culture and values, committing themselves to behave with integrity and honesty in all the relationships they establish with each other, their customers or any other person or entity with whom they establish a relationship. The Code of Conduct and the Code of Good Conduct for the Prevention and Fight against Harassment and for the Promotion of Equality and Non-Discrimination, also set forth the main rules concerning values, behaviour standards and corporate responsibility to be observed by all companies part of Group BCP and describe the measures aiming at preventing discriminating behaviours and harassment at work, which are better detailed in a specific document denominated Code of Conduct related with Equality, Harassment and Non- Discrimination, currently in effect. The awareness of the Code of Conduct and of the Code of Good Conduct for the Prevention and Fight against Harassment and for the Promotion of Equality and Non-Discrimination by all their recipients is insured by the internal means of communication, by their permanent publication in a prominent location at the bank’s internal communication system, via intranet, and by regular e-learning training sessions addressed to all their recipients. The Bank’s Audit Division, in its actions to supervise the Bank’s functioning, guarantees the identification of irregular situations and issues recommendations to remedy the same. The Code of Conduct of BCP Group states mandatorily that, the members of the management and supervisory bodies, as well as the employees, should avoid any situation that may give rise to conflicts of interest within the scope of their functions, so that they may act with full independence of mind, impartiality and exemption and that the members of the management and supervisory bodies cannot intervene in the appraisal and approval of operations, professional status of employees and procedures for the acquisition of goods and services in which there may be a risk of conflicts of interest. Additionally, the Bank also has a Policy for the Prevention and Management of Conflicts of Interest (Group Code GR0038), which defines the fundamental principles and processes adopted for the identification and management of conflicts of interest occurring within the Group. The said Policy implements, in the Bank and in BCP Group, namely, the guidelines issued by the European Banking Authority (EBA/GL/2021/05 of 2 July 2021), on internal governance, identifies the control procedure to enable an efficient and prudent management of situations of conflict of interests at an institutional or personal level, including the segregation of functions, the information barriers, in order to simultaneously defend and protect the interests of all stakeholders and the interests of the Bank and of the Group. The 791 | operations with the so-called "related parties" are subject to specific and complementary internal regulations, as described in item 10. The Policy for the Prevention and Management of Conflicts of Interest, also sets out the governance principles applicable within the scope of the provision of services and investment activities and ancillary services identified, respectively, in articles 290 and 291 of the Securities Code and sets the governance principles applicable internally, within the scope of the policy for the management of conflicts of interests. The Compliance Office is responsible for the development of the approaches and methods that allow the identification of real or potential conflicts of interest, in compliance with the Conflicts of Interest Policy. The Compliance Office, develops, at least one a year, a global analysis to identify and assess the materiality of the situations of conflict of interests at an institutional level and reports to the Executive Committee and to the Audit Committee the respective conclusions, identifying the measures required to correct the identified situations. The Group Code on the Prevention and Management of Conflicts of Interests is available on the Bank’s website, in English and Portuguese, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Documents/Politica-Prevencao-e-Gestao-de- Conflitos-de-Interesses.pdf In addition, the Regulations of the Board of Directors, in its article 9 (4), determines, if any of its members considers as being prevented from voting due to any incompatibility or conflict of interests, that he/she has the duty to previously inform the Chairperson of that impediment and dictate for the minutes of meeting a statement regarding such situation. III. Internal control and risk management 50. Individuals, bodies, or committees responsible for the internal audit and/or implementation of the internal control systems. The Group’s internal control is based upon a risk management system that identifies, evaluates, follows-up and controls the risks the Group and the Bank are exposed to. That system is supported by an efficient communication and information system and on an effective monitoring process which ensures the adequacy and efficiency of the internal control system. Within that context, the Bank, in accordance with the principles defined in Banco de Portugal’s Notice 3/2020, has specific areas to manage risk, compliance and internal audit - the Risk Office, the Compliance Office and the Audit Division. The coordinating-managers of these Divisions are those responsible, at Group level, for the conformity of the functions of the internal control system, through which the objectives outlined in Banco de Portugal’s Notice 3/2020 are achieved, namely: • the efficiency of the performance and of the activity, ensuring that the established strategies, policies, processes systems and procedures are appropriate, duly updated, correctly applied and effectively observed; • the identification, assessment, follow-up and control of risks which may influence the Group’s strategy and goals; • the achievement of the objectives established in the strategic planning, based on the efficient conduct of the operations, efficient use of the Group's resources and the safeguarding of its assets; • the appropriate identification, assessment, monitoring and control of the risks to which the Group is or may become exposed in the future; • the existence of complete, pertinent, reliable and timely financial and non-financial information; • the adoption of sound accounting procedures; 2022 REPORT & ACCOUNTS | 792 • compliance with the legislation, regulation and guidelines that are applicable to the Group’s activity, issued by the competent authorities, as well as the compliance with the internal rules, as well as with the professional and ethical regulations and practices, and with the conduct and customer relationship rules. The Internal control system covers the entire institution, including the responsibilities and functions of the management and supervisory bodies, all its activity segments, structural units, namely the internal control functions, outsourced activities and the product distribution channels. In addition, the Executive Committee sets up a Compliance and Operational Risks Commission. This Commission has, among others, the following powers in relation to the internal control system: • monitor the activity of the Bank and the other Group entities, coordinating and managing the policies and obligations of the Bank and its subsidiaries on a regular basis, so as to ensure compliance with legal and internal rules, guarantee the alignment of Group strategies and the definition of priorities in compliance matters; • monitor the operational risk management framework, which includes management of IT (Information Technologies) and Outsourcing (subcontracting) risks; • monitor exposures to operational risks, as well as the state of implementation and effectiveness of risk mitigation measures and measures to strengthen the internal control environment; • monitor the management and improvement of the Bank's processes, with a view to monitoring and reducing the levels of exposure to compliance and operational risks. The divisions that are part of the internal control system have the technical and human resources that match the Bank’s size and also the degree of complexity and significance of the risks inherent to the several business and business support activities. These Divisions are also equipped to operate within the framework of an extensive volume of external and internal regulations that guide the Bank's activity within the limits of prudence, security and control defined by the regulators and the Bank's Board of Directors. Thus, when allocating resources to the mentioned areas, the Bank adopts the principle of proportionality, matching the mobilised resources to the size and granularity of the risks and other constraints of its activities, for the sake of effectiveness, business sustainability and scrupulous compliance with the established rules. The number of employees placed in each one of the 3 areas specifically involved, under analysis, and whose functions are executed in accordance with the highest standards of independence, objectivity, impartiality, integrity and professional competence, reached, on 31 December 2023, to: • Risk Office: 82 • Compliance Office: 106 • Audit Division: 55 A) Risk Office The primary function of the Risk Office is to support the Executive Committee and the Board of Directors in the development and implementation of risk management and internal control policies, so that the Bank may achieve an overall view of all risks to which its activity is exposed to or may be exposed to in the future, as described in greater detail in the chapter on “Risk Management” of the Management Report 2023. The Risk Office is an integrated area of the second line of defence of the internal control system of the BCP Group, taking on the role of supervising the commercial and business support areas, preparing and implementing risk management policies and procedures, for example, by proposing the competent bodies limits to risk-taking, and monitoring their adequate execution and compliance in order to guarantee the alignment of the Bank's global objectives and the specific objectives of the organic units with the risk profile and appetite approved by the Board of Directors. The head of the Risk Office is appointed by the Board of Directors after obtaining the opinions from the Committee for Nominations and Remunerations, from the Committee for Risk Assessment and from the Audit Committee, being its suitability for the exercise of the functions subject to an assessment and prior authorisation, prior to his/her entrance into functions, by the competent supervisory authority. 793 | In the performance of his/her functions, the Risk Officer reports hierarchically to the Executive Committee, namely to the Chief Risk Officer, maintaining a functional report to the Committee for Risk Assessment to facilitate the monitoring of the risks to which the Bank is exposed and the framework of the risk management function by this Committee. Within the scope of functional reporting, the Compliance Officer regularly reports to the Executive Committee, the Audit Committee and the Board of Directors information regarding regulatory compliance, conduct and values, and the internal control system, including the prevention of money laundering, of the Bank and the Group. The Risk Officer has direct access to the Chairmen of the Board of Directors and the Audit and Risk Assessment Committees for the purpose of reporting any situations that he/she considers pertinent in terms of the Group's risk profile. There are no impediments to interaction between the Risk Officer and the non- executive directors, either on their own initiative or on the initiative of the former. The Audit and Risk Assessment Committees give their opinion on the annual work plan of the Risk Office, which is submitted for approval by the Board of Directors, and they are also responsible for reporting on its execution, as well as on the evolution of the resources allocated to the risk management function. Risk Officer: Luís Miguel Manso Correia dos Santos B) Compliance Office The Compliance Office ensures the compliance function assigned to the “second line of defence”, which includes control and regulatory compliance activities, analysing and advising the governing bodies and the Bank’s various divisions prior to taking decisions involving the assumption of specific risks under the monitoring of the compliance function in compliance with the responsibilities defined by Banco de Portugal’s Notice no. 3/2020. The Compliance Office is responsible for, in particular: • ensuring corresponding compliance by all the Group's Institutions with the relevant contractual commitments and the ethical values of the organisation, guaranteeing the existence of an internal control culture, so as to contribute towards mitigating the risk of those Institutions being subject to sanctions or suffering significant financial or reputational damage; • promoting the preparation, approval, application, verification of compliance and periodic updating of the Code of Conduct; • ensuring compliance with the regulatory framework on preventing and fighting money laundering and financing of terrorism (AML/CFT); • Participate in the definition of policies and procedures regarding Conflicts of Interest, transactions with Related Parties and gifts, following their implementation and effective application; • ensure the management and controls associated with the process of reporting irregularities; • provide support to the Group’s International Entities in the development of their activities, seeking to normalise their action principles, systems and processes, in respect of local regulatory specificities. In the exercise of the above-mentioned competences, the performance of the Compliance Office is based on a risk approach at the level of business, customers and transactions. Within the scope of functional reporting, the Compliance Officer regularly reports to the Executive Committee, the Audit Committee and the Board of Directors information regarding regulatory compliance, conduct and values, and the internal control system, including the prevention of money laundering, of the Bank and the Group. The Compliance Officer informs the Chairperson of the Board of Directors, within the maximum period of two business days of any failure reputed to be of high risk. The Compliance Office, in the exercise of its powers, adopts the necessary actions and/or makes reports to respond adequately and timely to unintended or expected, present or future non-compliances, namely through the following mechanisms and activities: • make decisions, with binding force for their recipients. These decisions issued by the Compliance Office, within the scope of the functions attributed by law or other normative source, are binding and may only 2022 REPORT & ACCOUNTS | 794 be exceeded upon authorization by the Audit Committee, with the exception of those referring to the duties of abstention, refusal and communication, provided for in Law no. 83/2017, of August 18, and all others that are shown to be legally binding and cannot be reversed; • issue determinations under the powers assigned to it by the corporate bodies, which are also considered binding, unless there is a decision to the contrary taken by the internal decision-making bodies empowered to do so and there is no binding legal provision relating thereto; • in the exercise of its functions and within the scope of its powers, the Compliance Office has the power to suspend any transaction or process that it considers to be contrary to the rules in force, whether external or internal. The Compliance Office is responsible for communicating to the management and supervisory bodies any situations of non-compliance detected in the exercise of its functions that may cause the Bank to incur in an administrative offence or other, or in significant damage to its assets or reputation. It also makes and sends to the Board of Directors, at least every six months, a report identifying the situations of non-compliance that occurred and the recommendations and rulings issued to correct the identified compliance issues or deficiencies. The Compliance Office promotes, intervenes and participates in the training of Employees, namely through compliance training sessions for the entire Group, maintaining a high level of knowledge of compliance issues, namely Anti-money laundering / countering Financing of terrorism (AML / CFT), and developing an internal control culture within the Group. The Compliance Officer is appointed by the Board of Directors, after opinion from the Committee for Nominations and Remunerations. As head of the Compliance Office, the Compliance Officer reports directly to the Executive Committee and functionally to the Audit Committee. The Compliance Officer is part of the Compliance Office organizational structure and does not have at any time any kind of direct or indirect functional or hierarchical responsibility in the business areas. The Audit Committee rules on the annual activity plan of the Compliance Office, and this Committee is also the recipient of the work carried out by the compliance function, among which are those related to regulatory compliance, internal control system, including anti-money laundering and countering financing of terrorism, management of conflicts of interest, anti-corruption and detection of irregularities. Compliance Officer: Pedro Manuel Francisco da Silva Dias C) Audit Division The Audit Division plays the role of the 3rd line of defence of the internal control system of Banco Comercial Português (Bank), whose main mission is to assess, as a whole, and report to its stakeholders - in particular, the Audit Committee and the Board of Directors - the suitability and effectiveness of the organizational culture, risk management process, internal control system and governance models of the Bank and Group. The internal audit function is permanent and independent, carrying out its mission through the adoption of the guidelines of the Institute of Internal Auditors (IIA), including the Definition of Internal Auditing, the Code of Ethics, the International Standards for the Professional Practice of Internal Auditing and the internal audit principles defined by the IIA, resulting in the issuance of recommendations focused on strengthening the internal control system and the achievement of the Group's strategic interests, and ensuring if: • risks are duly identified and managed, and the implemented controls are correct, suitable and proportional to their materiality; • methodologies for evaluating the Bank’s capital and liquidity positions are adjusted and make it possible to assess their adequacy regarding the levels of exposure to the risks; • operations are recorded correctly, and the operational and financial information is true, appropriate, material, rigorous, reliable and provided in due time; 795 | • the safeguarding and security of the interests and assets of the Bank and of the Group, or those entrusted to them, are duly ensured; • employees perform their functions in accordance with policies, group codes, including codes of conduct, internal standards and procedures, and applicable laws and regulations; • goods and services required for the Bank’s business are procured economically, used efficiently and protected appropriately; • legal and regulatory matters are recognised, clearly understood and duly approached and integrated in the Bank’s processes; • programmes, plans and objectives defined by the management in the Annual Budget and in the Strategic Plan are complied with; • the Bank’s different governing bodies interact in an adequate, efficient and effective manner. The activity of the Audit Division contributes to the pursuit of the objectives defined in Banco de Portugal Notice 3/2020, ensuring the compliance of the functions of the internal control system, guaranteeing the existence of the following: • an adequate internal control environment; • a suitable environment of culture, conduct and values for the management body itself and its committees; • a solid risk management system; • an efficient information and communication system; • an effective monitoring process. The head of the Audit Division regularly gives the Audit Committee, the Executive Committee and the Board of Directors information on the audits carried out, the main risks and recommendations to the Bank and the Group. The head of the Audit Division is appointed by the Board of Directors, after obtaining the opinion of the Committee for Nominations and Remunerations and the technical opinion of the Audit Committee, and his/ her suitability for the performance of his/her duties is assessed and authorised prior to his/her taking up his/ her duties by the competent supervisory authority, in line with the provisions of Notice no. 3/2020 of Banco de Portugal and the EBA guidelines on the assessment of the suitability of the members of management bodies and key function holders. The head of the Audit Division reports to the Board of Directors and functionally to the Audit Committee (Committee composed of non-executive directors, the majority of whom are independent). Within the scope of reporting to the Board of Directors, the Audit Division presents directly to the Board meetings, among other information, the conclusions of the audits carried out, as well as the execution level of the approved Audit Plan and the state of implementation of the recommendations issued. The performance evaluation of the first person in charge of the Audit Division is carried out by the Chairman of the Board of Directors, after hearing the Audit Committee, and is subsequently formally assessed and decided upon by the Committee for Nominations and Remunerations, which also decides on its remuneration conditions, both in terms of the fixed and variable components. The Strategic Plan and the Multi-Annual Activity Plan of the Audit Division are approved by the Board of Directors, after opinions from the Audit Committee and the Executive Committee. The Audit Division submits to the Executive Committee, the Audit Committee and the Board of Directors reports on the monitoring of its activity, according to the periodicity defined at each moment, containing, namely, information on the execution of the audit plan, an overall assessment on the main deficiencies identified and respective recommendations, as well as on the status of the recommendations to be implemented and the respective implementation plans, as well as information on the activity of the subsidiaries abroad. At least once a year, the monitoring report on the activity of the Audit Division also includes: an overall assessment of the adequacy and effectiveness of the Bank's organisational culture as a whole and of its governance and internal control systems, including the different components of both systems, and an overall assessment of the performance of the management and supervisory bodies and their supporting commissions in the aforementioned context, on which the Board of Directors must issue an opinion after hearing the opinion of the Audit Committee and the Executive Committee. 2022 REPORT & ACCOUNTS | 796 Additionally, the Audit Division informs the Chairperson of the Board of Directors, the Chairperson of the Audit Committee and the Chairperson of the Executive Committee on urgent matters under its responsibility that are materially relevant to the mission accomplishment of those bodies. The Audit Division must also maintain and manage the Group’s disability database in order to ensure the timely availability of the information provided for in Article 31(13) of Banco de Portugal’s Notice no. 3/2020 and in Article 3(1) to (3) of Banco de Portugal’s Instruction no. 18/2020. Head: Rui Manuel Pereira Pedro. 51. Details, even including organisational structure, of hierarchical and/or functional dependency in relation to other boards or committees of the company The hierarchical and/or functional dependency of the Audit Division, the Compliance Office and the Risk Office in relation to other bodies or committees of the company, is shown in the following table: 52. Existence of other functional areas with competences in risk control In addition to the control areas that make up the risk management system - the Risk Office and the Compliance Office (as defined in Section III of Chapter IV of Banco de Portugal’s Notice no. 3/2020) - and the area responsible for assessing the adequacy and effectiveness of the organisational culture and governance and internal control systems - the Audit Division (as defined in Section V of Chapter IV of Banco de Portugal’s Notice no. 3/2020) - there is an information and communication system that supports decision-making and control processes, both internally and externally, within the competence of the Accounting and Consolidation, Tax Advising, Management Information, and Research, Planning and Assets and Liabilities Management Divisions; and the Economic Research, Sustainability and Cryptoassets Division, which guarantee the existence of substantive, current, coherent, timely and reliable information, enabling a global and comprehensive view of the financial situation, the activity development, the fulfilment of the strategy and objectives defined, the identification of the institution's risk profile and the behaviour and prospects for market evolution. The financial information and management process is assisted by the accounting and management support systems which record, classify, associate and archive, in a timely, systematic, reliable, complete and consistent manner, all the operations carried out by the institution and its subsidiaries, in accordance with the determinations and policies issued by the Executive Committee. 797 | Thus, these areas ensure the implementation of procedures and means to obtain all relevant information for the consolidation process and information at Group level - both of an accounting nature and to support management and the monitoring and control of risks - contemplating, namely: • the definition of the contents and format of the information to be reported by the entities included in the consolidation perimeter, in accordance with the accounting policies and guidelines defined by the Executive Committee, as well as the dates when the reporting is required; • the identification and control of the intra-Group operations; • assurance that the managerial information is consistent between the different entities, so that it is possible to measure and monitor the evolution and profitability of each business, verify compliance with the established objectives, as well as evaluate and control the risks incurred by each entity, both in absolute and relative terms. Still within the scope of the risks control environment, one must mention the role performed by several specialized offices which are first line structures directly reporting to the administration: • the Office for the Validation and Monitoring of Models is a second line of defence unit within the model risk management framework, functionally independent from the areas responsible for internal models (model owners and developers) and from the Internal Audit Division, thus ensuring an adequate functions segregation. Its mission is to monitor and validate the methodologies and internal models for risk assessment used in the Bank and the entities that integrate the Group in Portugal, as well as to ensure, in an independent manner, the assessment of the quality and adequacy of the risk management framework in terms of internal models, metrics and the completeness of the associated records. • the Office for Regulatory and Supervision Monitoring, whose mission is to monitor issues arising from the evolution of the regulatory framework and supervisory practice, namely prudential supervision; to coordinate or participate, in articulation with other Bank divisions, in reporting exercises and/or provision of information to the supervisory authorities; to disseminate information of a regulatory nature by the Bank's competent areas and to contribute to strategic reflection on the regulatory context. • the Personal Data Protection Office, whose primary head is the Bank's Data Protection Officer and whose mission is to monitor compliance of the Bank's policies and procedures with the General Data Protection Regulation and other EU or Member State data protection provisions - and with internal policies on the protection of personal data, including the allocation of responsibilities, awareness-raising and training of employees involved in personal data processing operations, in accordance with Regulation (EU) 2016/679 of 27 April 2016 (GDPR) and other EU or Member State data protection provisions. • the Credit Division, responsible for performing the functions of risk assessment and control, according to its main competences: (i) appraising and giving an opinion or decision on credit proposals submitted by the Bank's business areas, as well as credit restructuring proposals submitted by the Bank's recovery areas, in accordance with the powers defined in internal regulations; (ii) monitoring and following up on the credit portfolio of Customers managed in the commercial areas, anticipating possible default situations and promoting restructuring solutions when necessary and applicable; (iii) taking the initiative and/or participating in cross-cutting Bank projects aimed at improving credit and operational risk in the underlying internal processes/procedures, including opinions on products or services with credit risk; and (iv) developing, monitoring, adjusting or implementing algorithms and automatic processes to support credit decisions, fraud detection, default prevention, collection efficiency and recovery. • the Rating Division (RATD) that participates in the control of risks associated to loans, has as its primary responsibility the attribution of risk levels to Companies which are Bank Customers, assuring that they are permanently assessed in an appropriate way. In order to assure the sound pursuit of this responsibility, specialised competences in the assessment of particular segments were developed within the Rating Division, namely: Small, Mid and Large Corporate, Real Estate Development, Project Finance, State Business Sector and Funds segments The Rating Division carries out periodic analyses of the evolution of risk degrees in order to assess the suitability of the rating models used and to identify matters for their improvement, being the owner of the expert judgement models used by the Bank. The DRAT actively collaborates in monitoring the Bank's credit portfolio, particularly within the framework of the Corporate Risk Monitoring Commission (CARE). • With the objective of accompanying the new requirements around ESG - Environmental Social and Governance, the Economic Research, Sustainability and Crypto-assets Division (ERSCD), gathers different areas of expertise, which include the monitoring of the macroeconomic reality, environmental, sustainability and governance issues and the crypto-active ecosystem. In particular, the ERSCD's mission is to: (i) monitor developments in the Portuguese and global economy, as well as in international financial markets, with the aim of supporting the Bank’s management bodies and collaborating with the various business areas in promoting their respective activity; (ii) propose and execute global and 2022 REPORT & ACCOUNTS | 798 coherent policies of sustainability and corporate social responsibility, which promote the development of the business with the incorporation of environmental, social and governance principles and enhance the growth of the institution’s reputation and its capacity to add social and environmental value and respond to the needs and expectations of stakeholders and (iii) monitor the evolution of the market and regulation of cryptocurrencies, in particular regarding central bank digital currencies, in order to support the management bodies to assess the potential of this ecosystem. The adoption of Artificial Intelligence in various areas The adoption of AI continued to expand across the Bank, including at the decision making level, creating value through better costumer engagement and costumer experience, enabling to capture additional productivity and agility gains, while simultaneously contributing to mitigate risk. Examples of the most relevant use cases and developments include: • Advanced process automation and optimization, with more complex decisions use cases, beyond simpler rule-based contexts, being supported by AI models - the Bank enhanced its document classification, content extraction and automatic interpretation AI based capabilities, applying it to new document classes and workflows (e.g. customer information updates and more complex sales processes). As a result, the Bank was able to further increase straight through processing ratios. Smart pricing models that dynamically adapt to market conditions and demand, continued to be optimized enabling to achieve over 90% automated pricing decisions on most common mortgage loans typologies. • Customer targeting and engagement – over fifty-eight different AI models deployed, covering client activation, products acquisition, churn, as well as multiple segmentation strategies. In addition, the AI based next best offer recommendation engine proved an effective tool across all distribution channels and was further optimized with the integration of new sources of data on clients’ preferences and behaviours. On the companies front, the payments network model leveraging AI/ML, enables to gain actionable insights into costumers’ relationships. These are being progressively applied to drive more relevant targeting across different products and services. • Digital money management and personalised advisory solutions for retail clients – under its financial well-being program the Bank launched a set of AI powered digital tools. These offer clients customized insights on spending patterns, forecasted payments and balances, and deliver advisory nuggets and recommendations on products and solutions, contextually. Integration across the various digital customer journeys will scale during 2024. • AI-driven ´agenda´ for companies’ clients – this unique feature integrated in the new website for companies, leverages sophisticated AI-supported balance and transaction forecast models, to predict future payments and anticipate cash flows. It also gives personalized suggestions and actions (e.g. product cross-sell) designed to optimize client´s outcomes and build growing relevance for the Bank. • Augmented customer service and employee productivity - through the implementation of chatbots, AI streamlines both customer support interactions and internal processes, driving efficiency and improving user experience. On the external front, a client facing chatbot solution is supporting both servicing and transactional use-cases. On the internal front, a chatbot solution leverages a rich internal knowledge exchange platform to facilitate interactions flows between front-office and back-office, and as an entry- point for service requests. The Bank is exploring Generative AI, to boost the understanding and interpretating capabilities of existing Chatbots. • Payments real time fraud detection - leveraging new advanced AI algorithms, which incorporate both historical client behaviours and observed attack patterns and trends, the bank increased client’s protection against increasingly sophisticated fraud attempts and digital payments scams, improving detection levels and efficiency in preventing fraudulent transactions. • Cyber detection and defence solutions - the bank expanded the adoption of third-party solutions that leverage new AI based controls, to strengthen defence against targeted and dynamic attack patterns. Generative AI started to be used on this front. For instance, it was used to facilitate the design and implementation of rules to detect complex attack patterns. Given the expanding integration of AI into its operating and business models and anticipating its further acceleration, the Bank continued to prioritize a balanced investment in its enterprise AI platform and the underlying technology architecture, with a particular focus on security, expanded data access, and enhanced data governance. The platform combines top-tier technologies and capabilities, including a workspace for data scientists to explore and model, a processing and training platform for massive parallel processing, tools for managing the 799 | lifecycle of models, mechanisms for generating automated data services, and both online and offline feature storage capabilities. This architecture was designed to achieve two primary goals: • Increase productivity in AI model development and features re(use) through standardization, templating, and reusability, • Implement effective guardrails to ensure responsible AI practices and governance are upheld. By emphasising these objectives, the Bank aims to industrialize the adoption of AI while maintaining a strong focus on accountability and ethical practices. The emergence of generative AI with its unique capabilities around summarisation and content creation, coupled with the ability to process vast amounts of unstructured data, promises to sharpen the outcomes of our current AI applications, while unlocking a whole new range of data-driven use cases. Recognising its enormous potential but also associated emergent risks related to hallucination, data confidentiality, bias and cybersecurity, among others, the bank is advancing a dual strategy: Gain experience and seize low-hanging fruit Early experiments with gen AI focused on realising productivity and efficiency gains. These targeted contact centre opportunities but also more general patterns that could be reused across multiple processes, driving relevant employee toil reduction: • Call transcription, summarization, and classification, • Semantic search facilitating internal knowledge base retrieval, summarization, and entity recognition (e.g., addresses). Our experiments in these areas shown promising results. Call centre related use cases are now being scaled to production. In addition, Microsoft Co-Pilot was made available to a pilot group of employees to test and explore individual productivity augmentation opportunities across different routine tasks and domains. Build specialised AI platforms enforcing robust foundations to move across the adoption curve safely and effectively, from experimentation to full scale implementations: • Agent Lab: this platform equipped with robust safeguards, enables business areas to autonomously (independently from IT) create and manage intelligent agents specialized in particular tasks. By establishing an abstraction layer above proprietary technologies and models, the Agent Lab ensures seamless integration and interoperability, fostering efficiency and future ready adaptability • Sourcery: A dedicated platform designed to translate and generate code in more actual languages, based on existing legacy solutions. This may prove to be an effective acceleration engine to drive the Bank´s technology renewal strategy and its underlying programs. Sourcery streamlines the translation process, accelerating modernization efforts while enabling to maintain compatibility and reliability. It is being used today to migrate the Master Financial Database (golden source for risk and financial data), from a mainframe-based solution to the recently created cloud-based Enterprise Data Platform, with extremely positive first results. The Bank will continue to expand the application of both classical and more emergent AI forms, covering a wider range of domains and use cases, while increasing adoption rhythm. The specialized platforms built early on will keep proving their foundational role, enabling simultaneously the industrialization of adoption as well as effective management of related risks. Productivity targeted applications related to operations and risk are expected to dominate 2024 agenda. 53. Details and description of the major risks (economic, financial and legal) to which the company is exposed in pursuing its business activity. On this issue, please see the information provided in the Management Report 2023, in the Chapter under the heading “Risk Management”. 2022 REPORT & ACCOUNTS | 800 54. Description of the procedure for identification, assessment, monitoring, control and risk management On this issue, please see the information provided in the Annual Report 2023, in the chapter on "Risk Management". 55. Core details on the internal control and risk management systems implemented in the company regarding the procedure for reporting financial information Within the scope of its Internal Control System and, more specifically, the Bank's Risk Management System, the Board of Directors ensures the implementation and maintenance of the information and communication processes suited to the Bank's activity and risks, the definition of the accounting policies to be adopted by the Group through the establishment of guidelines and the definition of the options that, within the scope of these policies, must be taken in order to ensure the reliability of the financial report. The Board of Directors is responsible for approving the information produced for reporting or external disclosure. In addition, the Board of Directors ensures that there are adequate procedures for the timely circulation and disclosure of the necessary information to its corporate bodies, the company secretary and other stakeholders, either through the Regulations of the respective bodies or through internal regulations. Also in accordance with Banco de Portugal Notice 3/2020 and BoD Regulation 9/2020, the Bank's management and supervisory bodies are responsible for producing an annual Self-Assessment Report on the adequacy and effectiveness of the organisational culture, its governance and internal control systems, with reference to 30 November of each year, which contains, among other mandatory information, the following elements: • assessment of the supervisory body; • assessment of the management body; • reports from those responsible for the risk management, compliance and internal audit functions. It should be noted that, in this context, the supervisory body's assessment should contain a statement on the reliability of the processes for preparing information disclosed to the public by the Bank under applicable laws and regulations, including financial and prudential information. These Reports were issued and delivered in December 2023, with reference to 30 November 2023. The Board of Directors is also responsible for disclosing how the company integrates ESG - Environmental, Social and Governance factors into its various processes, internally through dedicated group codes, and externally through its Sustainability Report, Annual Report and Market Discipline Report. The integration of climate and environmental risk factors into financing and investment decision-making processes is materialised in the Principles of Responsible Financing, which exclude or condition the Group's operations in sectors and/or activities with a greater environmental and social impact. IV. Investor Support 56. Service responsible for investor support, composition, functions, the information made available by the said department and contact details Through the Investor Relations Division, the Bank establishes permanent dialogue with the financial world – Shareholders, Investors, Analysts and Rating Agencies, as well as with the financial markets in general and respective regulatory entities. a) Composition of the Investor Relations Division The Investor Relations Division is composed of a head and a staff of three employees who ensure the relation with the market. 801 | b) Duties of the Investor Relations Division The main duties of the Investor Relations Division are: • promoting comprehensive, rigorous, transparent, efficient and available relations with investors and analysts, as well as with the financial markets in general and respective regulatory entities, namely with respect to the disclosure of privileged information and mandatory information, including the coordination and preparation of the Bank’s report and accounts; • monitoring the update of the evolution of the shareholder structure; • representation of the Bank in conferences and other types of events targeting investors of debt or shares; • collaboration with the commercial areas in the provision of institutional information and disclosure of the Group’s activity; • management of the relations established with Rating Agencies, including the preparation and sending of relevant information on a regular basis or related to important events. c) Type of information provided by the Investor Relations Division During 2023, as in previous years, the Bank pursued broad activity related to communication with the market, adopting the recommendations of the CMVM (Portuguese stock market regulator) and the best international practices in terms of financial and institutional communication. For purposes of compliance with the legal and regulatory obligations in terms of reporting, the Bank discloses quarterly information on the Bank's results and activity, holding press conferences and conference calls with Analysts and Investors involving the participation of members of the Board of Directors. It also provides the Annual Report, Interim Half-year and Quarterly Reports, and publishes all the relevant and mandatory information through CMVM’s information disclosure system. In 2023, the Bank made more than 220 announcements to the market, of which around 30 related to insider information, took part in various events, having attended 5 conferences ( all in person) and 8 roadshows, 4 of which were held in person, through which it made institutional presentations and held one-to-one meetings with investors and held more than 130 meetings with more than 215 investors, which is indicative of investor interest in the Bank. In order to deepen its relations with its shareholder base, the Bank maintained a telephone line to support shareholders, free of charge and available from 09:00 to 19:00 on business days. The relationship with the Rating Agencies consisted, in 2023, in the holding of the following meetings: • annual meetings with Moody's (10 March), DBRS (5 May), S&P (26 May) and Fitch Ratings (19 July) and Scope Ratings (13 March), rating not requested; • 41 meetings with the aforementioned rating agencies to address issues related to the analysis of the results disclosed to the market, legal risk in Poland, capital, as well as other issues, namely ESG, Digitalisation, Cybersecurity and others related to clarification of announcements of privileged information and other materially relevant information; • meetings to revise the Credit Opinions, Press Releases and Rating Reports issued by the Rating Agencies in the course of the year. All the information of relevant institutional nature disclosed to the public is available on the Bank’s site, in Portuguese and English, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/investidores/Pages/Inv.aspx d) Investor Relations Division contact information Phone: + 351 21 113 10 84 Fax: + 351 21 113 69 82 Address: Av. Prof. Doutor Cavaco Silva, Edifício 1, no. 32 Piso 0 - Ala B, 2740-256 Porto Salvo, Portugal 2022 REPORT & ACCOUNTS | 802 e-mail: [email protected] The company's website: www.millenniumbcp.pt/en 57. Market Liaison Officer The Bank's representative for market relations is Bernardo Roquette de Aragão de Portugal Collaço. 58. Data on the extent and deadline for replying to the requests for information received throughout the year or pending from preceding years During 2023, the Bank received, essentially via e-mail and telephone, a variety of requests for information from shareholders and investors. These requests were all handled and replied to, mostly within two business days. By the end of 2023, there were no outstanding requests for information regarding previous years. V. Website 59. Address(es) The Bank’s website address is as follows: www.millenniumbcp.pt 60. Place where information on the company, registered office and other details referred to in Article 171 of the Commercial Companies Code is The above information is available on the Bank’ site, in Portuguese and in English, at the following address: https://ind.millenniumbcp.pt/pt/info/Pages/Inf_Legal.aspx 61. Place where the articles of association and regulations on the functioning of the boards and/or Committees are available The Bank's Articles of Association and the regulations of the governing bodies and specialised committees of the Board of Directors are available on the Bank’s website at the following address: https://www.millenniumbcp.pt//Institucional/governacao/ 62. Place where information on the identity of the corporate bodies’ members, the representative for relations with the market, the Investor Assistance Office or comparable structure, respective functions and contact details is available The information on the identity of the members of the governing bodies is available on the Bank’s site, in Portuguese and in English, at the following address: https://www.millenniumbcp.pt/Institucional/governacao/ The information on the identity of the representative for market relations, the Investor Relations Division, respective duties and contact details are available on the Bank’s site, in Portuguese and in English, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Pages/modelo_organizacional.aspx 63. Place where the financial statements are available, which should be accessible for at least five years, as well as the half-yearly calendar on company events, published at the beginning of each semester, including, inter alia, general meetings, disclosure of annual, half-yearly and where applicable, quarterly, financial statements The information on the financial statements, relative to each financial year and semester of the last ten years (according to the provisions of article 29-G no. 1 and 29-J no. 1 of the Securities Code) is available on the Bank’s site, in Portuguese and in English, at the following address: https://ind.millenniumbcp.pt/en/Institucional/investidores/ 803 | The calendar of corporate events is published at the end of every year, relative to the following year, and covers the planned dates of the General Meeting and presentation of quarterly results (to the press, analysts and investors). It is available on the Bank’ site, in Portuguese and in English, at the following address: https://ind.millenniumbcp.pt/en/Institucional/investidores/ 64. Place where the notice convening the general meeting and all the preparatory and subsequent information related thereto is disclosed. Whenever a General Meeting is convened and on the date of the respective call, a temporary page is created on the portal (www.millenniumbcp.pt) to support the General Meeting containing all the preparatory information and support information for participation in the Meeting, and an electronic mailbox is opened - [email protected] - to receive correspondence of shareholders, namely letters expressing the intention to participate and proxy letters. 65. Place where the historical archive on the resolutions passed at the company's General Meetings, share capital represented and voting results relating to the preceding 3 years is available The historical records, with reference to the preceding ten years, including the call notice, the share capital represented, the proposals submitted and the voting results, are available on the Bank’s site, in Portuguese and in English, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/investidores/Pages/AG.aspx D. REMUNERATIONS I. Competence for determination 66. Details of the powers for establishing the remuneration of corporate boards, members of the executive committee or chief executive and directors of the company The Remuneration and Welfare Board (RWB), pursuant to article 14 of the Bank’s Articles of Association and under its delegated competence, for the four-year period of 2022/2025, by the General Meeting, is the competent body to determine the remuneration of the corporate bodies, as well as the terms of the supplementary retirement pensions, due to old age or disability, of the directors. The Remuneration and Welfare Board, together with the Committee for Nominations and Remunerations, is also competent to submit, to the Bank’s General Meeting, the remuneration policy for the Bank’s management and supervisory bodies. It is the Bank's practice for the Chairperson of the Remuneration Board, as well as the other members, to be present at the Bank's general meeting in order to provide information or clarification to the shareholders. The Remunerations and Welfare Board is also competent to, in accordance with the provisions of its Regulations, analyse the Supplementary Autonomous Document of the remuneration policy of the members of the governing bodies which is sent, every year, by the Committee for Nominations and Remunerations and to regularly monitor the compliance evolution with the Regulation for the Execution of the Remuneration Policy of the members of the corporate bodies, informing the Board of Directors of its conclusions. The Board of Directors, pursuant to article 12, no. 3.5, paragraph b) of its Regulations and in accordance with the provisions of article 115-C no. 5 of the LFCIFC, is the competent body to approve and review employees' remuneration policies and practices, including that of the heads of the Bank's internal control functions. In this duty, it is assisted by the Committee for Nominations and Remunerations which formulates and issues informed and independent judgements on the remuneration policy and practices and on the incentives created for purposes of risk, capital and liquidity management. The Bank's Audit Division validated the correct implementation of the remuneration policy, which, according to the respective Service Order OS0075, is positioned at the highest level of the Bank's organisational structures and constitutes the third line of defence of the Bank's internal control, giving it the authority and independence necessary to carry out its mission objectively and impartially. In this context, the Audit Committee prepared a Report of factual conclusions issued within the scope of the validation of the remunerations established and received in 2023 by the members of the Bank’s corporate bodies and Coordinating Managers, and concluded for the accuracy and legal conformity of the data communicated to the Remuneration and Welfare Board, the Committee for Nominations and Remunerations 2022 REPORT & ACCOUNTS | 804 and the Audit Committee, as well as its conformity and adequacy to the resolutions taken by the corporate bodies with the power to do so. II. Remuneration and Welfare Board 67. Composition of the remuneration committee, including details of individuals or legal persons recruited to provide services to said committee and statement on the independence of each member and advisor The remunerations committee, mentioned by article 399 of the Companies Code, is elected by the General Meeting and adopts at BCP the denomination of Remunerations and Welfare Board, being composed by three to five members. Within the scope of its activity, the Remuneration and Welfare Board (RWB) has the mission to observe the long-term interests of shareholders, investors and other stakeholders in the institution, as well as the public interest. During 2023, the Remunerations Board was composed as follows: Chairman: José António Figueiredo Almaça Members: Jorge Manuel Baptista Magalhães Correia Valter Rui Dias de Barros In the 2023 financial year, the Remuneration and Welfare Board issued two unanimous written resolutions and met four times. The respective minutes of the meetings were drafted and approved. The Remunerations and Welfare Board had the logistical and technical support of the Company Secretary’s Office, being administered by the Company Secretary. Attendance of the Remuneration and Welfare Board meetings by each of its members is shown in the following chart: The Regulations of the Remuneration and Welfare Board are available on the Bank’s site, in English and Portuguese, at the following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Documents/Regimento_CRP_BCP.pdf Traditionally, both members of the Remunerations and Welfare Board and of the Committee for Nominations and Remunerations attend the Bank’s General Meetings. At the General Meeting, held on 24 May 2023, which took place in person and by electronic means, the members of the Remuneration and Welfare Board were physically present. 805 | All the members of the Remuneration and Welfare Board exercising functions are independent regarding the executive members of the administration body. The General Meeting held on 4 May 2022 at which the Chairman of the Remuneration and Welfare Board, José António Figueiredo Almaça, was elected, set the respective annual remuneration at 50,000.00 euros, an amount that was paid to him in 2023. The other members, who accumulate the position of members of this Board with that of directors of the Board of Directors, do not receive any remuneration in this capacity. 68. Knowledge and experience in remuneration policy issues by members of the Remuneration Committee The members of the Remunerations and Welfare Board exercised, in the past, top positions in banking and financial companies or large Company companies, a fact that gives them professional experience, knowledge and the adequate profile in what concerns the remunerations policy, as may be seen in the respective curricula, namely in Annex II. III. Structure of remunerations 69. Description of the remuneration policy for the management and supervisory bodies Remuneration Policy of the Members of the Management and Supervisory Bodies The Remuneration Policy transcribed below, applies to the members of the Board of Directors, including the Audit Committee and Executive Committee, and was submitted with a binding nature by the Remuneration and Welfare Board and by the Nominations and Remunerations Committee to the appraisal by the General Meeting held on May 24, 2023, having been approved by 99.27% of the votes cast, with shareholders owning 64.28% of the share capital being present or represented. "Base Principles This Remuneration Policy applies to the members of the management and supervisory bodies (MOAF) of Banco Comercial Português, S.A. (“BCP” or “Bank”) and was made in compliance with the provisions of the Group Regulation GR0042 on remuneration policies and is based on a number of principles that aim to ensure: a) a governance model that promotes the alignment of the interests of all stakeholders, namely in what concerns to compliance with the strategy defined for the Bank, the sustainability of short-, medium- and long-term results, together with a prudent risk management; b) a competitive fixed remuneration that attracts and retains competent professionals and a variable remuneration intended to stimulate individual and Group performance and to reward results achieved in line with the Bank's current and future risk profile and tolerance; c) the attribution of benefits, namely in what concerns the retirement complement, aligned with market practices; d) the compliance with the applicable regulations and guidelines in terms of procedures and remuneration policy. e) behaviours and commercial practices in line with the interests and needs of the Group’s Customers; f) alignment of the criteria used to assess the Bank’s performance and the calculation of the variable remuneration amounts of the different Bank’s Remunerations Policies. For that purpose, the Committee for Nominations and Remunerations (CNR) is responsible for the definition and annual revision of the principles defining the Remuneration Policy of the MOAF and for submitting that policy, jointly with the Remuneration and Welfare Board (CRP), for approval by the General Meeting of Shareholders of the Bank. It is the responsibility of the Committee for Risk Assessment (CAvR) to examine if the incentives established in the Bank’s Remuneration Policy of the MOAF take into consideration the risk, capital, liquidity, and expectations concerning income at any given time. Whenever the CNR does not have, at least, a member of the Committee for Risk Assessment in its composition, the latter must indicate a representative to participate in the meetings of the CNR having the remuneration issue in the Agenda. 2022 REPORT & ACCOUNTS | 806 For the making of the proposal on the Remuneration Policy and supervision of its implementation the CNR must obtain an opinion from the CRP and get contributions and support from BCP’s different management areas of which the following should be highlighted: a) Risk Office, which should be involved to ensure that limits are not exceeded in terms of risk, total equity, and liquidity of the institution, contributing for the definition of the measures for implementing the variable remuneration based on risk, namely ex ante and ex post measures and verify if the variable remuneration structure is in line with the Group’s risk profile and culture; b) Human Resources Division, which should contribute to the preparation and evaluation of the Policy for the Remuneration of Employees, namely regarding the structure and levels of remuneration and estimation of the amounts of AVR to attribute, taking into account strategic and budgetary goals, employee profile, retention strategies and market conditions. c) Compliance Office, which must analyse to what extent the principles and practices of the Remuneration Policy may affect the Group BCP’s capacity to comply with the legislation, regulations, rulings, internal requirements and the respect for the company’s culture, as well as the absence of conflicts of interest, reporting to the RWB and to the CNR any anomalous situation which may jeopardize or compromise that compliance; d) Internal Audit, which must develop independent annual mechanisms for the validation/revision of the design of the Remuneration Policy, its implementation, calculation and respective effects. In the independent analysis for the implementation of the Remuneration Policy, the CNR, with the support from the Internal Audit, will verify the implementation and compliance with the remuneration policies and procedures adopted and will communicate its conclusions to the CRP. While making the proposal for the Remuneration Policy, the CNR follows clear and transparent procedures, which are documented, the documents regarding the making of the proposal and decisions being kept by means of minutes of meetings, reports and other relevant documents. The CNR may hire independent and qualified experts and external consultants for support, to assist one or more of its members in the performance of its functions and that contribute and support the performance of its duties. It is considered essential that the fixed remuneration represents a sufficiently high portion of the total remuneration so as to ensure the adequate balance between the fixed and variable components of the total remuneration. The variable remuneration is in line with the strategy defined for the Bank and with the Bank’s objectives, values and long-term interests. This way, the Bank guarantees a sustainable performance, adjusted to its risk profile. In accordance with these principles, the attribution of a variable remuneration is linked with the performance and on the sustainable growth of the Bank's income and adequacy of its capital ratios, as well as on the market conditions and on the possible risks, able of affecting the business. This way, the Bank is able to guarantee a model that is financially sustainable and does not jeopardize the institution, its depositors, employees, shareholders and remaining stakeholders. The remuneration earned by the Director responsible for Risk and Compliance reflects the need to guarantee a greater independence versus the Bank’s performance. Therefore, the Bank must privilege qualitative indicators as well as quantitative ones related with the compliance with the behavioural and prudential rules in the calculation of the variable remuneration. The definition of deferral deadlines for the variable remuneration payment and the payment of a significant part of its value in Bank shares or other instruments is aimed at contributing to individual performance in line with the Bank’s long-term and sustainability objectives, adapted to its risk profile. Reduction (malus) and reversion (clawback) mechanisms are also foreseen, in the whole or only in a portion of the variable remuneration, to be able to comply with the legal and regulatory requirements and also observe the recommendations and guidelines issued by the competent entities. Article 1 (Object) 807 | This Policy establishes the rules for the attribution of the annual fixed remuneration, of the annual variable remuneration, long term variable remuneration and other benefits attributable to the members of the corporate bodies of the Company, including the Retirement Regime. Article 2 (Definitions) The following expressions and acronyms, when capitalised, shall have the following meaning: i) BCP, Bank or Company – Banco Comercial Português, S.A. ii) AudC – Audit Committee iii) CRA – Committee for Risk Assessment iv) CEO – Chairperson of the Executive Committee v) CNR – Committee for Nominations and Remunerations vi) CRO – Chief Risk Officer vii) RWB – Remuneration and Welfare Board viii) AVR Attribution Date – Corresponds to the date of the RWB meeting in which the AVR is fixed ix) AVR Payment Date – Corresponds to the date of payment of the fixed remuneration, in the month following the approval of the financial statements by the Annual General Meeting of Shareholders; x) LTVR Attribution Date – Corresponds to the date of the RWB meeting in which the LTVR is fixed; xi) LTVR Payment Date – Corresponds to the date of payment of the fixed remuneration, in the month following the approval of the financial statements by the Annual General Meeting of Shareholders. xii) Autonomous Document – Document stating, in the first part, the specific amounts of the remuneration of the different members of the corporate bodies approved by the RWB, and in the second part, the calculation formulas, indicators or indexes to be used for the purposes of the AVR and LTVR determination, being the latter part approved by the CNR and by the RWB. xiii) Group or Group BCP – includes the Company and all the companies in a control or group relationship with the Company and Millenniumbcp Prestação de Serviços ACE. xiv) AVR Evaluation Period - period of time from January 1 until 31 December 2023. xv) LTVR Evaluation Period - period of time from January 1, 2022, to December 31, 2025. xvi) AVR Attribution Price – corresponds to the average of the closing prices of the BCP shares or other instruments, as applicable, recorded in the previous 20 stock- exchange sessions preceding the AVR Attribution Date, or the closing price of the third business day prior to the AVR Payment Date, if lower than the average defined above; xvii) LTRV Attribution Price – corresponds to the average of the closing prices of the BCP shares or other instruments, as applicable, recorded in the 20 stock- exchange sessions preceding the LTVR Attribution Date, or the closing price of the third business day prior to the LTVR Attribution Date, if lower than the average defined above. xviii) PSI – Portuguese stock index – PSI Index, composed of the companies chosen, at each moment, by the competent bodies of Euronext Lisbon – Sociedade Gestora de Mercados Regulamentados, S.A. xix) Retirement Supplement - the Retirement Supplement regime due to old age or disability to be paid by the company, foreseen in article 12 of the Company’s Articles of Association. xx) AFR - annual fixed remuneration. xxi) AVR - annual variable remuneration. 2022 REPORT & ACCOUNTS | 808 xxii) Target AVR – annual variable remuneration corresponding to 100% compliance with the quantitative and qualitative objectives mentioned in the Autonomous Document. xxiii) LTVR – long-term variable remuneration. xxiv) LTVR Target - Long-term variable remuneration corresponding to 100% compliance with the objectives mentioned in the Autonomous Document. xxv) Stoxx Europe 600 Banks Index (SX7P) – Index of shares composed by large European Banks. xxvi) TSR – total shareholder return, estimated by means of the following equation, which data are obtained through an independent and recognized market information platform (ex: Bloomberg or Reuters): [(Average of the closing prices of the shares for the two months prior to the end of the evaluation period – Average of the closing prices of the shares for the two months prior to the beginning of the evaluation period) + Dividends per share paid to the shareholders in that period] / Average of the closing prices of the shares for the two months prior to the beginning of the evaluation period, adjusting stock prices to reflect the effects of share capital increases, incorporation of reserves or similar transactions. The dividends to consider are those that, in relation to the date of approval, have been more recently approved. Chapter I Members of the Company's Management and Supervisory Bodies Article 3 (Duration of the contracts and termination conditions) 1. The duration of the contracts of the members of the Management and Supervisory Bodies (MOAF) corresponds to the period of the mandate for which they have been elected by the General Meeting of Shareholders or, in the case of co-optation, to the remaining period of the mandate in progress. 2. If any of the Members of the Management and Supervisory Bodies intends to cease his/her functions, terminating his/her contract, this will only take effect by the end of the month following the communication of his/her intention. The Board of Directors may, with the favourable opinion of the AudC, dismiss this pre- notice, without any indemnity payment. 3. The Board of Directors or the AudC may decide to end the contract of any MMSB, without the need for prior notice, and the indemnity payment in the case of a contract ended without just cause corresponds, at least, to the remuneration due until the end of the mandate, but the MMSB may waive all or part of that indemnity. If the end of the contract is based on just cause, there will be no indemnity payment. Article 4 (Annual Fixed Remuneration, variable remuneration and benefits) 1. The establishment of the remunerations and benefits of the MOAF and of the Board of the General Meeting of Shareholders is made by the CRP and, although it is fixed for the term of office, in exceptional situations they may be reviewed by the CRP in the course of the same. 2. The members of the Executive Committee and the non-executive Directors exercising functions under an exclusive regime, are also entitled to the benefits foreseen in article 13. Chapter II Members of the Board of the General Meeting Article 5 (Annual Fixed Remuneration) 1. The members of the Board of the General Meeting of the Company are entitled to an annual fixed remuneration established by the CRP, paid in four quarterly payments and to corporate bodies health insurances subscribed by the bank and at each moment in effect. 2. The remuneration referred to in the previous number fixed at each moment is shown in the Autonomous Document. Chapter III Non-Executive Members of the Board of Directors 809 | Article 6 (Annual Fixed Remuneration) 1. The non-executive members of the Board of Directors of the Company are entitled to an annual fixed remuneration divided into 12 monthly payments and to the health insurance subscribed by the Bank at each moment for its Employees and Executive Directors. 2. The remuneration referred to in the previous number fixed at each moment is shown in the Autonomous Document. 3. The CRP may, at its own request, decide not to award remuneration to non-executive member(s) of the Board of Directors of the Company who are related to shareholders with qualifying holdings. Chapter IV Executive Members of the Board of Directors Article 7 (Annual fixed Remuneration) 1. The members of the Executive Committee are entitled to an annual fixed remuneration paid in 14 monthly instalments, described in the Autonomous Document. 2. The Retirement Supplement due to old age and disability mentioned in article 13 does not have a discretionary nature; therefore, it is a fixed remuneration. Article 8 (Variable Remuneration) 1. The members of the Executive Committee may also earn a variable remuneration resulting of a component attributed by the CRP by reference to the financial year to which it concerns (AVR) and of a long-term component (LTVR) attributed by reference to the entire term of office. 2. The attribution and determination of the AVR and LTVR is the responsibility of the CRP upon proposal by the CNR and after obtaining the opinion of the CAvR in matters within its competence for the purposes of the Base Principles above. 3. The calculation process of the AVR and of the LTVR, with the purpose of its subsequent approval, must be concluded by the end of March, and for this process, the amount of the Annual Variable Remuneration to be attributed to the Bank’s Employees must also be taken into account. 4. The variable remuneration, both the annual component and the long-term component, may not be attributed in exceptional cases, or may be paid on a conditional basis, namely if, after hearing the AudC and the CRA, one of the following situations arises: (i) there is no solid capital base; (ii) its attribution could unduly limit the Company's ability to strengthen its own capital or (iii) the attribution of the same does not observe the applicable legislation, regulations and guidelines. 5. The sum of the annual and pluri-annual variable remuneration parts of the executive committee members due in each year may not exceed, as a whole, the amount laid down in the Bank's articles of association. 6. The attribution of the variable remuneration is subject to the positive performance of own funds under a prudential perspective (value of capital for purposes of the estimation of the CET1 of the Group), and may, by decision of the RWB, after listening to the CNR and the CRA, not be considered extraordinary operations that, for their size and/or impact, affect the capital. 7. No guaranteed variable remuneration shall be granted, except when hiring a new executive committee member and, in that case, only in the first year of activity and it will only be granted by the RWB after consulting the AudC and the CRA, and having verified that the institution has a solid and strong capital base. 8. Only for purposes of estimating the attributable variable remuneration, the amounts corresponding to the Retirement Supplementary Regime are not considered AFR. 9. The variable component of the remuneration is associated with performance, so its total value may vary between zero, if the achievement degree of the objectives is below the minimum defined, and a maximum that may, each year and in compliance with the conditions set out in this document and in the law, reach 2022 REPORT & ACCOUNTS | 810 twice the AFR, except for the CRO whose variable component of the remuneration may not, in each year, exceed the fixed component. 10. The AVR will be paid 50% in cash and 50% in BCP shares or other instruments classified as additional Level 1 own funds or Level 2 own funds or other instruments which may be converted into Level 1 core own funds or which value may be reduced in order to adequately reflect the credit rating of the Bank and be adequate to be used as payment of the variable component of the remuneration, either in the deferred or the non- deferred component. If the sum of the AVR with the LTVR, if there is LTVR payment in the same year, equals or is lower than €50,000.00 and is lower than two thirds of the total annual remuneration of the Director, payment of AVR will be 100% in cash. 11. The part of the AVR that is not paid in cash would be preferably paid in BCP shares, except if duly justified considering the long-term interests of the Bank and upon the CRP’ s decision, after discussion with and issuance of a favourable opinion by the CNR. 12. Unless expressly requested by the beneficiary Director, the number of shares or other instruments to be delivered to comply with the provisions of the preceding paragraph will correspond to the amount payable in shares or other instruments gross of income tax (IRS). 13. Under no circumstances may each beneficiary be awarded a variable remuneration which, after conversion of the number of shares or other instruments (valued at the award price), totals a value higher than 200% of the corresponding AFR, either in years when there is only AVR, or in years when AVR and LTVR coexist (with the exception mentioned in paragraph 9 of this Article). To calculate the 200% limit, the share of the LTVR attributable to each financial year is considered, which for this purpose considers the amount that can be allocated in each of the years to which it refers, starting with the first year and progressively filling in the entire amount if necessary, until the last year to which it refers. 14. Whenever the variable remuneration, calculated in accordance with the previous number, exceeds the component of the value of the AFR, the amount exceeding the AFR shall only be due in the extent that it is inferior to 200% of the respective AFR and can only be paid after being approved by the General Meeting of Shareholders (under the terms provided for in article 15 of the Legal Framework for Credit Institutions and Financial Companies), pursuant a proposal made by the RWB, after listening to the CNR, the CRA, the Risk Officer and the Compliance Officer. 15. The definition of the individual quantitative indicators is made by the CNR, after consulting the CRA and is made based on the Bank’s strategic goals, being also considered as an integral component of the process for the definition of the key-risk indicators so as to ensure an alignment of the risk profile of the executive committee member with the level of risk tolerated by the Bank. 16. The variable remuneration of the CRO privileges qualitative and quantitative indicators related with the compliance with the prudential and behavioural rules, as well as the performance shown by the Bank’s risk profile. 17. As foreseen in no. 19 of article 115-E of the Legal Framework for Credit Institutions and Financial Companies, no relevant hedging mechanisms may be used with the purpose of attenuating the effects of alignment with the risk inherent to the types of remuneration, and no variable remuneration can be paid by means of special purpose vehicles or other methods with an equivalent effect. Article 9 (Annual Variable Remuneration) 1. The AVR attribution depends on the verification of a weighted average equal to or greater than the percentage referred in the Autonomous Document of the execution level of the Corporative KPI’s related to the Bank’s overall performance which are listed below and detailed in the Autonomous Document: i. Total Impairments and provisions, excluding CHF impairments – Group ii. Common Equity Tier 1 (CET1) capital ratio fully implemented – Group iii. Core Operating Profit Recurring – Group iv.Non-performing exposure annual decrease – Group v. Non-performing exposure ratio – Group vi. Recurrent Cost-to-income – Group vii.Return on Equity – Group 811 | viii. Digital Transformation (% active mobile customers on total active clients) – Group ix. Customer Satisfaction - BCP PT x. Sustainability Master Plan Execution Level – BCP PT 2. The overall value of the Annual Variable Remuneration to be attributed is subject to a maximum amount (Bonus-Pool), calculated under the terms defined in the Autonomous Document, and its overall value may not exceed 1.00% of the net profit for the year to which the AVR refers. Should the sum of the calculated individual annual variable remunerations be greater than the maximum calculated value (bonus pool), an adjustment factor will be applied to the calculated individual values so that their sum does not exceed the maximum calculated value. 3. The individual AVR shall take account of the following values (without prejudice to Article 8 (13) and (14): i) AVR Target - 42% of the respective total AFR (corresponding to 60% of the sum of the AVR Target and LTVR Target); ii) Maximum AVR attributable - 63% of the respective AFR. 4. The RWB, in cooperation with the CNR, after consulting the CRA and the AudC - upon written request for recording in the minutes – may adjust the individual RVA values resulting from the application of the percentages foreseen in the previous paragraph, as well as an adjustment factor for the global value of the annual variable remuneration provided for in number 2 (bonus pool), with a minimum of 25% and a maximum of +25%, namely to cover possible risks, current and future ones, cost of own funds and of liquidity required by the BCP Group, as well as to translate exceptional factors affecting the performance of the Bank, or to contribute to the cohesion of the Body. 5. When the adjustment factor implies a positive or negative variation equal to or greater than 12.5%, that is 50% of that indicated in paragraph 4 above, must be the subject of written explanation. 6. The computation of the AVR amount is based on the results of the performance evaluation throughout the AVR Evaluation Period in question and results from the sum of two autonomous and independent components: i) 80% of the amount is based on the evaluation of the achievement level of the individual quantitative objectives, except for the CRO whose percentage is 70% ii) 20% of the amount is based on the performance evaluation of each Director regarding the qualitative objectives, except for the CRO whose percentage is 30% 7. The corporate KPIs (used for the bonus pool definition) are established, each year, by the CNR, after listening to the RWB and the CRA, based on the Business Plan or Budget for the respective period, previously approved by the Board of Directors, which will be part of the Autonomous Document. 8. The KPIs mentioned in the preceding paragraph should be in line with the goals of the activity plan and take into account the risk appetite defined by the Bank and the capital and liquidity plans, being defined KPIs for the global performance of the Bank and differentiated KPIs for each director, adjusted to his/her areas of responsibility as per chapter Corporative KPIs of the Autonomous Document. 9. The values of the corporate KPIs, and respective weights, defined for each year will be mentioned in the Autonomous Document. 10. The calculation of the amounts of the AVR shall be made by the Human Resources shall be audited by the Audit Division and, pursuant to a resolution adopted by the CRP, those estimations may be validated by an external independent entity. 11. The attribution of the AVR depends on the performance recorded for each individual quantitative KPI, being calculated as follows [notwithstanding Article 8 (13) and (14)]: i) If the performance recorded falls under 80% of the established KPI, no AVR shall be attributed for that quantitative objective; ii) If the performance recorded is between 80% and 90% of the established KPI, the amount situated in the interval between 70% to 80% of the AVR target of that objective is due, as per the table contained in the Autonomous Document; 2022 REPORT & ACCOUNTS | 812 iii) If the performance recorded is between 90% and 110% of the established KPI, the amount situated in the interval between 80% to 120% of the AVR target of that objective is due, as per the table contained in the Autonomous Document; iv) If the performance recorded is between 110% and 150% of the established KPI, the amount situated in the interval between 120% to 150% of the AVR target of that objective is due, as per the table contained in the Autonomous Document; v) If the performance recorded attains 150% of the objective or more, the amount corresponding to 150% of the AVR target of that objective is due, as per the table contained in the Autonomous Document. 12. The AVR attributed to each Executive Committee member due to the individual quantitative KPIs results from the following equation: percentage of the Target AVR based on the performance in accordance with the provision of no. 6 i). 13. The qualitative evaluation of the members of the Executive Committee will pertain to the CNR, after listening to the non-executive Chairperson and Vice-Chairpersons of the Board of Directors and the Chairperson of the Executive Committee, who will only issue an opinion concerning the remaining members of the Executive Committee. 14. The annual weighted evaluation of the qualitative objectives will be able of being measured and estimated in accordance with a table/questionnaire approved by the CNR, after listening to the RWB, the Compliance Officer and the person in charge of Human Resources. 15. The global performance of the qualitative objectives of each director is a result of the weighted average of the objectives set forth in the Autonomous Document (rounded to the unit), with the weight mentioned in no. 6 ii) of this article and according to the following parameters: i) If the global performance recorded is lower than level 2 (“Somewhat Lower than Expected”), no excess regarding the AVR will be estimated, as such; ii) If the performance recorded is between level 2 (“Somewhat Lower than Expected”) and level 3 (“Meets the Expectations”), shall be attributed the amount placed in the interval 60% and 100% of the target AVR for that objective, as per the table contained in the Autonomous Document; iii) If the recorded global performance is between level 3 (“Meets the Expectations”) and level 4 (“Above Expectations”), shall be attributed the amount placed in the interval 100% and 130% of the Target AVR for that objective, as per the table contained in the Autonomous Document; 16. The AVR is paid on the payment date of the fixed remuneration in the month following the date of approval of accounts by the Annual General Meeting of Shareholders (“AVR Payment Date”). 17. Without prejudice to the provisions of Article 8 (13) (14), the AVR will be deferred by 50% over a period of 5 years, one fifth of which will be paid in each year, on the Payment Date of the AVR, with the payment to be made 50% in cash and 50% in shares of the Company or other instruments, either in the deferred or in the non- deferred component. If the AVR equals or exceeds two thirds of the AFR of each member, 60% of that amount must be paid in a deferred manner. If the sum of the AVR with the LTVR, if there is LTVR in the same year, equals or is lower than €50,000.00 and is lower than two thirds of the total annual remuneration of the Director, payment of AVR will not be deferred. 18. The number of shares of the Company to be attributed to each Executive Committee member results from the quotient between the value of the AVR and the AVR Attribution Price. In any case, the dividends related to the shares or income from other instruments, as applicable, attributed to a Director but not paid due to being part to the deferred component, are not due and will not be paid by the Company to the Director. 19. The shares of the Company or other instruments, attributed as AVR, in accordance with paragraphs 16 and 17 above, are subject to a retention policy for a period of one year starting on the AVR Payment Date; therefore, the Executive Committee member may not sell them during the 12 months following their delivery, except as provided in the following paragraph. 20. The Executive Committee member may sell or encumber the shares or other instruments, in an amount necessary to cover all taxes and contributions payable in connection with the allocation of the shares or other instruments. As an alternative, the Director will be able to choose the “sell-to-cover” regime, through which the number of shares or other instruments that will be delivered to him/ her will already be deducted 813 | from the number of shares or other instruments which must be sold in order to pay taxes and contributions corresponding to the total value of the shares attributed. 21. If the member of the Executive Committee is not elected for a new term-of-office, the unavailability regime foreseen in article 19 above will continue to be in effect. 22. In the event of the end-of-office of the member of the Executive Committee, for any reason, other than removal with just cause, after the end of the evaluation period but before the payment of the AVR, the AVR corresponding to that evaluation period will be paid in full, in compliance with the deferment periods and composition (cash, shares or other instruments). 23. The AVR payment corresponding to the evaluation period in which the member of the Executive Committee ceases functions will not be due, except if such cessation occurs by mutual agreement, retirement, death, disability or in any other case of termination of term-of-office for a reason not imputable or unrelated to the member of the Executive Committee, namely change of control of the Company, among others, following a takeover bid, in which cases there will be a proposal for the attribution of the AVR pro- rata temporis - after resolution by the RWB, after hearing the CNR - and the maximum amount of the compensation shall consider the AVR average of the last 3 years, or a lower number of years in case the Director has been in office for a period of less than 3 years. 24. If a new executive Director takes up his or her duties midway through his or her term of office, he or she shall be entitled to the pro-rata temporis of the AVR and the LTVR. Article 10 (Long-Term variable remuneration) 1. The long-term variable remuneration (LTVR) is exclusively paid with the attribution of shares of the Company or other instruments classified as additional Level 1 own funds or Level 2 own funds or other instruments which may be converted into Level 1 core own funds or which value may be reduced in order to adequately reflect the credit rating of the Bank and be adequate to be used as payment of the variable component of the remuneration, taking into consideration the following benchmark values (“Target”) and maximum limits (without prejudice to the provisions of article 8 (13)(14)): i) LTVR Target – 28% of the respective AFR of the LTVR evaluation period (corresponding to 40% of the sum of the AVR Target and LTVR Target); ii) Maximum value of LTVR – 42% of the respective AFR of the LTVR evaluation period. 2. The LTRV would be preferably paid in BCP shares, except if duly justified considering the long-term interests of the Bank and upon the RWB’s decision, after discussion with and issuance of a favourable opinion by the CNR. 3. The CNR, after consulting the RWB, the CRA and the AudC, may apply an adjustment factor to the individual LTVR amounts resulting from applying the percentages provided for in the preceding paragraph, as well as apply an adjustment factor to the global amount of the LTVR, with a minimum of -25% and a maximum of +25%, namely to cover possible risks, current or future ones, cost of own funds and liquidity required in the BCP Group, as well as to reflect exceptional performances of the Bank. 4. When the adjustment factor implies a positive or negative variation equal to or greater than 12.5%, that is 50% of that indicated in number 2 above, must be the subject of written explanation. 5. The estimation of the number of shares or other instruments corresponding to the LTVR to attribute is based on the results of the performance evaluation made during the LTVR Evaluation Period and is determined in accordance with the Autonomous Document. 6. The attribution of LTVR regarding the performance foreseen in the previous paragraph depends on the degree of compliance with the objectives as of 31 December 2025 set forth in the Autonomous Document. 7. The performance evaluation components are of a quantitative nature and are established by the CNR, after listening to the CRP and contained in the Autonomous Document. 8. In case there is an operation changing the perimeter of BCP with relevant impact and the Board of Directors approves the alteration of the objectives of the Strategic Plan, the evaluation components must be revised accordingly by the CNR, after hearing the CRP. 2022 REPORT & ACCOUNTS | 814 9. The LTVR should be paid in the date of payment of the fixed remuneration in the month following the date of approval of accounts by the General Meeting of Shareholders (“LTVR Payment Date”), by attributing the Company’s shares or other instruments in accordance with the terms and conditions foreseen in the Policy. 10. Without prejudice to Article 8 (13) (14), the LTVR shall be deferred by 50% over a period of 5 years and one fifth shall be paid in each year on the LTVR Payment Date. In the event that the LTVR is, regarding each member, equal to or greater than two-thirds of the AFRs due for the LTVR Assessment Period, the Deferred amount shall be 60%. If the sum of the LTVR with the AVR paid in the same year equals or is lower than €50,000.00 and is lower than two thirds of the total annual remuneration of the Director, the AVR payment will not be deferred. 11. The number of shares or other instruments to attribute to each executive Director results from the quotient between the value of the LTVR and the LTVR Attribution Price. In any case, the dividends or income related to the shares or other instruments, as applicable, attributed to an executive Director but not paid due to being part to the deferred component, are not due or will not be paid by the Company to the Director. 12. The payment of the LTVR requires the full exercise of the term-of-office for which the Executive Committee member was appointed, except in situations mutual agreement dismissal, retirement, death, disability or any other cause for an early cessation of the term of office due to a cause not imputable or alien to the member of the Executive Committee, namely a change in the control of the Company, among others, following a takeover bid, in which cases there will be a proposal to allocate the LTVR pro rata temporis, after resolution by the RWB, and after hearing the CNR, at the end of the period of the LTVR Evaluation Period. 13. If the member of the Executive Committee leaves office, for any reason other than removal with just cause, after the end of the evaluation period, but before payment of the LTVR, there will be payment in full, corresponding to that evaluation period, with respect to the limits and periods of deferral and composition (shares or other instruments) provided for in this Policy. 14. The shares of the Company or other instruments attributed as LTVR are subject to a retention policy for a one-year period starting from the LTVR Payment Date (mentioned in paragraph 9) so that during the 12 months following their delivery the Director is unable to sell them, except in the cases mentioned in the following paragraph. 15. The beneficiary may sell or encumber the shares in an amount necessary to cover all taxes and contributions payable arising from the allotment of the shares. As an alternative, the Director will be able to choose the sell-to-cover regime, through which the number of shares or other instruments that will be delivered to him/her will already be deducted from the number of shares or other instruments which must be sold in order to pay taxes and contributions corresponding to the total value of the shares attributed. 16. If the member of the Executive Committee is not elected for a new term-of-office, the unavailability regime foreseen in article 14 above will continue to be in effect. 17. Notwithstanding the provisions of this Article 11, the determination of the final amount of the LTVR shall consider the amount of the AVR and the limitations provided for in Article 8 (13) and (14). Article 11 (Termination of functions before the end of the term-of-office) 1. A Director who terminates functions before the end of the term-of-office without being based on resignation or dismissal with just cause, shall be entitled to compensation to be calculated by the CNR in accordance with article 3 above and the exact amount is to be approved by the RWB after hearing the CRA. 2. The compensation to be attributed in compliance with the provisions of the preceding number shall not qualify as fixed remuneration, and its payment shall be subject to the signing of a non-competition commitment, for a period corresponding to the term of office in progress at the date of the dismissal. 3. The amounts to be attributed in compliance with the provisions of number 1 above may not exceed the overall fixed remuneration that would be due until the end of the mandate, plus, in the case of Executive Committee members, an amount corresponding to the average of the AVRs allocated to them in the years in which they were in office during the mandate in which they ceased. Article 12 (Malus and clawback clauses) 815 | 1. The entire variable remuneration, regardless of the acquisition, or not, of vested rights, is subject to reduction or reversion mechanisms whenever it is proven that the Executive Committee member, with intent or gross negligence, participated in or was responsible for a performance that resulted into significant losses for the Group or ceased to comply with the suitability and good repute criteria until the date of the last payment of the variable remuneration in the case of the reduction mechanism and up to 3 years after payment of the deferred remuneration in the case of the reversion mechanism. 2. The ability to reduce (malus), totally or partially, the payment of deferred remuneration, the payment of which is not yet vested, and the return of variable remuneration paid, the payment of which constitutes vested rights (clawback), is limited to significant events, duly identified, in which the persons covered have had, with intent or gross negligence, an active participation. 3. The reduction or reversion of the variable remuneration should always be related with the performance or the risk and should respond to the effective results of risks or alterations in the continuing risks faced by the Group, the Bank or by the areas of the responsibility of the Executive Committee member in question and should not be based on the amount of dividends paid or on the price performance of shares or other instruments. 4. The application of the claw-back mechanism shall be supplementary to the reduction mechanism; that is, in the event of a significant event, the application of the reduction mechanism (malus) shall take priority and only when this is exhausted, is insufficient, or arises from the verification that the Director has significantly contributed to the negative financial performance of the Group or to the application of regulatory sanctions, or in the event of fraud or other serious misconduct or negligence that has caused significant losses, should recourse to the clawback mechanism be considered. 5. In any event and concerning the application of malus or claw mechanisms, the guidelines from EBA (European Banking Authority) that are in effect at the time, must always be observed and complied with. 6. The occurrence of the situations described in this article is supervised by the CNR and the application of those mechanisms shall be decided after hearing the CRP, the CAvR, the CAUD and the Chairperson of the Board of Directors. Article 13 (Benefits) The Executive Committee members and the non-executive directors exercising functions under an exclusive regime, are entitled to the following benefits: i. Health insurance, credit card and mobile phone, in line with what is attributed to the remaining bank employees. ii. Retirement Supplement Article 14 (Supplemental retirement pension for disability or old age) 1. The directors mentioned in the previous article shall benefit from the social security regime applicable in each case. 2. The directors mentioned in the previous article also have the right to a Retirement Supplement, constituted through capitalisation insurance contracts in which each director will be the beneficiary 3. Pursuant to an agreement established with each director, the capitalization insurance contract may be replaced by contributions to pension funds with a defined contribution. 4. The annual amount of the Bank’s contributions, within the scope of the two previous numbers, shall be established by the CRP, after hearing the CNR. 5. The Bank's annual contribution for the plan set forth in the previous paragraph is equal to at least the value, before applying any income tax deductions for individuals, corresponding to 20% of the annual gross fixed remuneration defined at any given time by the CRP. 6. The Bank shall not bear any additional expenses with the retirement and disability pensions after the termination of each director’s functions. 2022 REPORT & ACCOUNTS | 816 7. The right to the supplement shall only become effective if the beneficiary retires due to old age or disability, under the terms of the social security regime applicable to him/her. 8. At the time of the retirement, the beneficiary may choose to redeem the capital if and to the extent that the contract underlying the alternative chosen by him/her, so allows. 9. If on the retirement date the beneficiary still performs the position that led to the retirement supplement, the plan shall only be activated when the beneficiary ceases the function that entitled him to this benefit. 10. In case of death before retirement, the right to receive the accrued capital shall remain effective pursuant to the applicable provisions established by the contract or by law. Article 15 (Pension discretionary benefits) The attribution of pension discretionary benefits, based on the Bank’s performance or on the individual performance or on any other factors with a discretionary nature is not planned. However, the General Meeting of Shareholders may approve the attribution of an extraordinary contribution. Article 16 (Pre-retirement) The Bank’s staff who have exercised administration functions at BCP and who, on the date and within the scope of the termination of these functions, are older than as provided for in the Work Collective Agreement to be able to benefit from the pre-retirement status, may benefit from this status by earning, between the date of pre-retirement and the effective date of retirement, 80% of the average of the 5 higher remunerations of General-Managers of the Bank at the time, having as minimum their last remuneration as employee of the Bank, provided that they have exercised the function of executive director for a period equal to or greater than 10 years and that they sign with the Bank a pact of non-competition in the financial sector. Article 17 (Remuneration earned due to the performance of other functions related with BCP) 1. Considering that the remuneration of the executive members of the Board of Directors, as well as the one of the non-executive directors exercising functions under an exclusive regime is intended to directly compensate the activities they carry out directly at the Bank or with related companies (namely companies in a control or group relation with BCP) or in corporate bodies to which they have been appointed by indication or in representation of the Bank, the net value of the remunerations received annually for such duties by each executive member of the Board of Directors and each non-executive member exercising functions under an exclusive regime will be deducted from their respective AFR. 2. It is the obligation and responsibility of each member of the Board of Directors to inform the Bank of any additional compensation they may have received, for the purposes of complying with the procedure established above. Article 18 Insurance 1. The Members of the Management and Supervisory Bodies must subscribe an insurance bond in compliance with the article 396 of the Companies Code. 2. In addition, the Bank subscribes to a Directors & Officers insurance policy following market practices. Article 19 Entrance into force 1. This Policy shall enter into force on 1 January 2023. 2. With regard to the instruments used to pay the variable remuneration, the provisions of article 15.4, number 278 of the EBA/GL/2021/04 (EN) relating to Directive 36 of the European Union must be respected, on the date of its attribution, regardless of the year to be that concern. 817 | 70. Information on how remuneration is structured so as to enable the aligning of the interests of the members of the board of directors with the company's long-term interests and how it is based on the performance assessment and how it discourages excessive risk taking On this issue, see item 69. - articles no. 7 and 8. 71. Reference, where applicable, to there being a variable remuneration component and information on any potential impact of the performance evaluationl on this component. On this issue, see item 69. - articles no. 8 to 10. 72. The deferred payment of the remuneration’s variable component and specify the relevant deferral period. On this issue, see item 69. - article no. 9, no. 17. 73. The criteria whereon the allocation of variable remuneration on shares is based, and also on maintaining company shares that the executive directors have had access to, on the possible share contracts, including hedging or risk transfer contracts, the corresponding limit and its relation to the total annual remuneration value On this issue, see item 69. - article no.8, 9 and 10. 74. The criteria whereon the allocation of variable remuneration on options is based and details of the deferral period and the exercise price. During the financial year to which this report relates to, the Bank did not attribute a variable remuneration on options to the executive members of the Board of Directors. 75. The key factors and grounds for any annual bonus scheme and any additional non-financial benefits The remuneration conditions for directors are set out in items 69. and 77. - A and B, with only executive directors entitled to annual and long-term variable remuneration. With regard to non-pecuniary benefits, the Bank's directors have health insurance identical to that of all the Bank's employees, and executive directors or those with exclusive duties are also entitled to the use of a service car, credit card and mobile phone. Some directors with employment contracts with the bank have home loans granted prior to their respective election under the conditions established in the Collective Labour Agreement (ACT) - of the BCP Group, as referred to in note 51 to the consolidated financial statements, in which the plafonds and conditions of the respective private credit cards are also identified. 76. Key characteristics of the supplementary pensions or early retirement schemes for directors and state date when said schemes were approved at the general meeting, on an individual basis. The old age or disability pension regime for members of the Executive Committee is defined in article 17 of the articles of association, in force on 31 December 2023, and in article 14 of the Remuneration Policy for the Management and Supervisory Bodies, approved at the General Meeting of 24 May 2023. The expenses with retirement supplements paid the 2023 financial year are described in the following table: Chairperson and Executive Members of the Board of Directors Retirement IRS withheld from the Amount Transferred to the Supplement Retirement Supplement Pension Fund (€) (€) (€) Nuno Manuel da Silva Amado (Chairman of the Board of Directors) 143,520.00 64,078.00 79,442.00 Miguel Maya Dias Pinheiro (Vice-Chairman of the BoD and Chairman of the EC) 135,199.96 59,160.00 76,039.96 Miguel de Campos Pereira de Bragança (Vice-Chairman of the EC) 108,159.96 46,690.00 61,469.96 2022 REPORT & ACCOUNTS | 818 João Nuno de Oliveira Jorge Palma (Vice-Chairman of the EC) 108,159.96 47,724.00 60,435.96 Rui Manuel da Silva Teixeira (Member of the EC) 94,640.00 41,748.40 52,891.60 José Miguel Bensliman Schorcht da Silva Pessanha (Member of the EC) 94,640.00 41,656.40 52,983.60 Maria José Henriques Barreto Matos de Campos (Member of the EC) 94,640.00 18,944.40 75,695.60 Total 778,959.88 320,001.20 458,958.68 IV. Disclosure of remunerations 77. Indication of the annual amount of remuneration earned, on an aggregate and individual basis, by the members of the company's management bodies, originating from the company, including fixed and variable remuneration and, with regard to the latter, reference to the different components that gave rise to it, as well as quantitative information regarding the remuneration paid to the different categories of employees provided for in Article 115-C(2) of the Legal Framework for Credit Institutions and Financial Companies In the financial year of 2023, the amount of the fixed remuneration paid as a whole and individually to members of the Bank's Board of Directors (executive and non-executive) is shown in the following table: A - Annual Fixed Remuneration Annual Fixed Remuneration A B A + B Members of the Board of Directors (BoD) Directly paid by BCP Received through other Companies Remuneration of Corporate Bodies set by the RWB IRS withheld from the Fixed Remuneration (€) (€) (€) (€) Nuno Manuel da Silva Amado (Chairman of the BoD) 691,056.08 26,543.92 717,600.00 308,464.00 Jorge Manuel Baptista Magalhães Correia (Vice-Chairman of the BoD) 114,399.96 0.00 114,399.96 43,201.00 Ana Paula Alcobia Gray (Member of the BoD) 129,999.96 0.00 129,999.96 43,666.00 Julia Gu () (Member of the BoD) 104,000.04 0.00 104,000.04 25,996.00 Lingjiang Xu (Member of the BoD) 129,999.96 0.00 129,999.96 50,326.00 Smilla Lingzi Yuan (Member of the BoD) 132,450.00 0.00 132,450.00 33,110.00 Altina de Fátima Sebastian Gonzalez Villamarin (Member of the BoD) 129,999.96 0.00 129,999.96 50,395.00 José Pedro Rivera Ferreira Malaquias (Member of the BoD) 129,999.96 0.00 129,999.96 50,326.00 Sub-Total 1,561,905.92 26,543.92 1,588,449.84 605,484.00 Members of the Audit Committee (AudC) Cidália Maria da Mota Lopes (Chairwoman of the AudC) 167,800.02 0.00 167,800.02 66,514.00 Fernando da Costa Lima (Member of the AudC) 180,000.00 0.00 180,000.00 72,336.00 Valter Rui Dias de Barros (Member of the AudC) 147,150.00 0.00 147,150.00 36,782.00 Sub-Total 494,950.02 0.00 494,950.02 175,632.00 819 | Members of the Executive Committee (EC) Miguel Maya Dias Pinheiro (Vice-Chairman of the BoD and Chairman of the EC) 649,454.04 26,545.90 675,999.94 283,820.00 Miguel de Campos Pereira de Bragança (Vice-Chairman of the EC) 495,383.08 45,416.90 540,799.98 213,275.00 João Nuno de Oliveira Jorge Palma (Vice-Chairman of the EC) 540,799.98 0.00 540,799.98 238,367.00 Rui Manuel da Silva Teixeira (Member of the EC) 473,200.00 0.00 473,200.00 208,388.60 José Miguel Bensliman Schorcht da Silva Pessanha (Member of the EC) 432,190.68 41,009.32 473,200.00 189,678.60 Maria José Henriques Barreto Matos de Campos (Member of the EC) 473,200.00 0.00 473,200.00 94,620.60 Sub-Total 3,064,227.78 112,972.12 3,177,199.90 1,228,149.80 Total amounts of the Board of Directors of BCP 5,121,083.72 139,516.04 5,260,599.76 2,009,265.80 ()At the request of the Director, she has resumed the attribution of remuneration since the beginning of 2023. In the 2023 financial year, the amount of variable remuneration attributed to the executive members of the Board of Directors (Executive Committee) of the Bank is shown in the following table: B - Annual Variable Remuneration Annual Variable Remuneration (AVR) and Long-Term Variable Remuneration (LTVR) AVR attributed in 2023 (in respect of FY 2022) AVR Paid in 2023 (in respect of FY 2022) LTVR deferred in 2022 (in respect of FY 2018 to 2021) Members of the Executive Committee (EC) Value attributed in Cash (€) No. of shares (c) attributed (QTY) Total amount attributed (€) Payment made in Cash (€) No. of shares(a) made available (QTY) Payment made in shares(b) (€) No. of shares(c) made available (QTY) Payment made in shares(b) (€) Miguel Maya Dias Pinheiro (Vice-Chairman of the BoD and Chairman of the EC) 202,275.64 906,659 404,551.28 101,137.82 453,330 100,865.93 240,968 53,615.38 Miguel de Campos Pereira de Bragança (Vice-Chairman of the EC) 163,303.44 731,974 326,606.87 81,651.72 365,987 81,432.11 192,774 42,892.22 João Nuno Oliveira Jorge Palma (Vice-Chairman of the EC) 147,843.59 662,679 295,687.18 73,921.80 331,340 73,723.15 192,774 42,892.22 Rui Manuel da Silva Teixeira (Member of the EC) 134,811.36 604,264 269,622.71 67,405.68 302,132 67,224.37 168,677 37,530.63 José Miguel Bensliman Schorcht da Silva Pessanha (Member of the EC) 139,316.68 624,458 278,633.35 69,658.34 312,229 69,470.95 168,677 37,530.63 Maria José Henriques Barreto de Matos de Campos (Member of the EC) 135,311.36 606,505 270,622.71 67,655.68 303,253 67,473.79 168,677 37,530.63 922,862.05 4,136,539.00 1,845,724.10 461,431.03 2,068,271.00 460,190.30 1,132,547.00 251,991.71 2022 REPORT & ACCOUNTS | 820 Annual Variable Remuneration deferred from previous years and paid in 2023 Deferred AVR of 2022 (in respect of FY 2021) Deferred AVR of 2021 (in respect of FY 2020) Deferred AVR of 2020 (in respect of FY 2019) Payment made in Cash (€) No. of shares (c) made available (QTY) Payment made in shares(b) (€) Payment made in Cash (€) No. of shares (d) made available (QTY) Payment made in shares(b) (€) Payment made in Cash (€) No. of shares (e) made available (QTY) Payment made in shares(b) (€) Members of the Executive Committee (EC) Miguel Maya Dias Pinheiro (Vice-Chairman of the BoD and Chairman of the EC) 10,887.68 69,304.00 15,420.14 6,680.00 32,906.00 7,321.59 10,400.00 42,975 9,561.94 Miguel de Campos Pereira de Bragança (Vice-Chairman of the EC) 8,406.56 53,511 11,906.20 5,800.00 28,571 6,357.05 8,200.00 33,884 7,539.19 João Nuno Oliveira Jorge Palma (Vice-Chairman of the EC) 7,927.84 50,464 11,228.24 5,760.00 28,374 6,313.22 8,200.00 33,884 7,539.19 Rui Manuel da Silva Teixeira (Member of the EC) 7,269.36 46,272 10,295.52 4,840.00 23,842 5,304.85 7,400.00 30,578 6,803.61 José Miguel Bensliman Schorcht da Silva Pessanha (Member of the EC) 7,532.36 47,946 10,667.99 4,440.00 21,872 4,866.52 7,680.00 31,736 7,061.26 Maria José Henriques Barreto de Matos de Campos (Member of the EC) 7,269.36 46,272.00 10,295.52 5,280.00 26,010.00 5,787.23 7,400.00 30,578.00 6,803.61 49,293.16 313,769 69,813.61 32,800.00 161,575 35,950.46 49,280.00 203,635 45,308.80 (a) the lower of the average of the closing prices of BCP shares recorded in the 20 stock exchange sessions preceding 25th May 2023 and the price on the 3rd day preceding the respective payment: €0.2231 (b) closing price of BCP shares on 21-06-2023: €0.2225 (c) - average of closing prices of BCP shares recorded in the 20 stock-exchange sessions preceding 9 May 2022: €0.1571 (d) - average closing price from 1 November 2019 to 31 December 2019 of BCP shares: €0.2030 (e) - average closing price from 1 November 2018 to 31 December 2018 of BCP shares: €0.2040 During the financial year 2023, there were no remuneration reductions resulting from performance adjustments, bonuses qualified as guaranteed variable remuneration, or compensations for termination of duties awarded in previous periods. 78. Any amounts paid, for any reason whatsoever, by other companies in a control or group relationship, or are subject to a common control. Considering the provisions in the remuneration policy for members of the Board of Directors transcribed above in item 69, which establish that the net value of the remunerations earned annually by each Executive Director, on account of duties performed in companies or governing bodies to which they have been appointed through indication or in representation of the Bank, shall be deducted from the values of the respective annual fixed remuneration, see the table above of item 77-A which quantifies these deductions. 79. Remuneration paid in the form of profit sharing and/or bonus payments and the reasons for said bonuses or profit sharing being awarded. During the financial year to which this Report refers, no remuneration in the form of profit-sharing and/or bonuses was paid. 80. Compensation paid or owed to former executive directors concerning contract termination during the financial year. In the financial year to which this report relates, no member of the management or supervisory bodies left office, so no compensation was paid or owed to former directors in this respect. 821 | 81. Details of the annual remuneration paid, as a whole and individually, to the members of the company's supervisory board for the purposes of Law No. 28/2009 of 19 June Given that Law 28/2009 of 19 June was revoked by Law 50/2020 of 25 August, reference is made to the table presented in item 77.A - Fixed Annual Remuneration. 82. Details of remuneration paid to the members of the Board of the General Meeting in the reference year The Remuneration and Welfare Board, taking into consideration, for the term-of-office beginning in May 2020, market practices in relation to the main listed companies head-quartered in Portugal and of a similar size to BCP, determined the annual remuneration of the Chairperson of the Board of the General Meeting at 42,000 euros and of the Vice-Chairperson at 27,600 euros, these being the amounts paid in the 2023 financial year. 82.1 Quantitative information regarding the remuneration paid by the Bank to the different categories of employees provided for in article 115-C (2) of the Legal Framework for Credit Institutions and Financial Companies and other Employees pursuant to Article 47 of Banco de Portugal’s Notice 3/2020B) Aggregate quantitative data on remuneration, broken down by area of activity of the Bank and the amounts of deferred remuneration attributed in respect of prior performance periods, divided between the amount to be acquired during the financial year and the amount to be acquired in subsequent years, are described in the 2023 Annual Report, note 7 to the Accounts, under the Remuneration Chapter in Section b. i. Heads of risk-taking (11 employees) For the financial year 2023, the amount of remuneration paid by the Bank to those responsible for risk-taking is shown in the table below: Remunerations (Euros) Fixed Remuneration 1,793,221.40 Annual Variable Remuneration in cash 74,913.00 Annual Variable Remuneration in shares 76,644.83 Sub-total 1,944,779.23 Mandatory social security expenses Social Security 289,077.63 SAMS / Médis 17,532.29 Supplementary Pension Plan 2,104.48 Sub-total 308,714.40 Remuneration Costs + Mandatory Social Security Expenses 2,253,493.63 ii. Heads of control functions (28 employees) For the financial year 2023, the amount of remuneration paid by the Bank to those responsible for control functions is shown in the table below: 2022 REPORT & ACCOUNTS | 822 Remunerations (Euros) Fixed Remunerations 3,220,749.32 Annual Variable Remuneration in cash 209,371.50 Annual Variable Remuneration in shares 176,632.15 Sub-total 3,606,752.97 Mandatory social security expenses Social Security 643,029.06 SAMS / Médis 52,132.92 Supplementary Pension Plan 2,555.39 Sub-total 697,717.37 Remuneration Costs + Mandatory Social Security Expenses 4,304,470.34 iii. Top Management, composed of the first line managers not included in the previous items (48 Employees) For the financial year 2023, the amount of remuneration paid by the Bank to first-line managers not included in the categories indicated in i. and ii. is shown in the table below: Remunerations (Euros) Fixed Remuneration 8,154,836.76 Annual Variable Remuneration in cash 614,146.00 Annual Variable Remuneration in shares 610,012.44 Sub-total 9,378,995.20 Mandatory social security expenses Social Security 1,704,168.01 SAMS / Médis 90,208.19 Supplementary Pension Plan 10,042.72 Sub-total 1,804,418.92 Remuneration Costs + Mandatory Social Security Expenses 11,183,414.12 iv. Employees whose total remuneration places them in the same remuneration level as that envisaged for the management and supervisory bodies or any of the categories indicated in items i. to iii. above and whose professional activities have a material impact on the Bank's risk profile (2 Employee) In the financial year 2023, the amount of remuneration paid by the Bank to Employees with total remuneration in the same remuneration level as the Employees listed in items i. to iii. and whose professional activities have a material impact on the Bank's risk profile is shown in the table below: 823 | Remunerations (Euros) Fixed Remuneration 111,402.44 Annual Variable Remuneration in cash 9,348.00 Annual Variable Remuneration in shares 9,497.42 Sub-total 130,247.86 Mandatory Social Security Expenses Social Security 38.232,78 SAMS / Médis 3.061,35 Supplementary Pension Plan — Sub-total 41.294,13 Remuneration Costs + Mandatory Social Security Expenses 171.541,99 82.2 Remuneration policy of the employees and subsidiary companies operating in Portugal The employee remuneration policy for 2023 is available on the Bank's website, in following address: https://ind.millenniumbcp.pt/pt/Institucional/governacao/Pages/Politicas-de-Remuneracao.aspx For the subsidiaries operating in Portugal and abroad, the Bank's Board of Directors approved a revision of the group code GR0042 - Remuneration Policy Framework, on 29 July 2023, which defines the basis for uniformity of policies, and should be transposed to the different geographies, with attention to local legislative differences. 82.3 Other information on Remuneration: 1. Remuneration Report mentioned by article 26-G of the Securities Code This Report was made in accordance and for the purposes of article 26-G of the Securities Code with the goal of providing the shareholders of Banco Comercial Português, S.A. (Bank, BCP) with a comprehensive view of the remunerations and benefits, regardless of their form, attributed to each one of the members of the Board of Directors, including the Audit Committee and the Executive Committee, in the 2023 financial year. a) Total remuneration broken down by the different components, including the proportion relating to the fixed and variable remuneration 2022 REPORT & ACCOUNTS | 824 Members of the Board of Directors (BoD) Annual Fixed Remuneration (€) Weight on total Remun. (%) Retirement Supplement (€) Weight on total Remun. (%) Variable remuneration attributed in 2022 (€) Weight on total Remun. (%) Annual Total Remuneration (€) Total IRS withheld (€) Deferred Variable Remuneratio n (€) Total Annual Remuneration paid net of IRS withheld (€) Nuno Manuel da Silva Amado (Chairman of the BoD) 717,600 83.3% 143,520 16.7% n.a. n.a. 861,120 372,542 n.a. 462,034 Jorge Manuel Baptista Magalhães Correia (Vice- Chairman of the BoD) 114,400 100.0% 0 —% n.a. n.a. 114,400 43,201 n.a. 71,199 Ana Paula Alcobia Gray (Member of the BoD) 130,000 100.0% 0 —% n.a. n.a. 130,000 43,666 n.a. 86,334 Julia Gu (Member of the BoD) 104,000 —% 0 —% n.a. n.a. 104,000 25,996 n.a. 78,004 Lingjiang Xu (Member of the BoD) 130,000 100.0% 0 —% n.a. n.a. 130,000 50,326 n.a. 79,674 Smilla Lingzi Yuan (Member of the BoD) 132,450 100.0% 0 —% n.a. n.a. 132,450 33,110 n.a. 99,340 Altina de Fátima Sebastian Gonzalez Villamarin (Member of the BoD) 130,000 100.0% 0 —% n.a. n.a. 130,000 50,395 n.a. 79,605 José Pedro Rivera Ferreira Malaquias Member of the BoD) 130,000 100.0% 0 —% n.a. n.a. 130,000 50,326 n.a. 79,674 Sub-total 1,588,450 91.7% 143,520 8.3% 1,731,970 669,562 1,035,864 Members of the Audit Committee (AudC) Cidália Maria Mota Lopes (Chairwoman of the AudC) 167,800 100.0% 0 —% n.a. n.a. 167,800 66,514 n.a. 101,286 Fernando da Costa Lima (Member of the AudC) 180,000 100.0% 0 0 n.a. n.a. 180,000 72,336 n.a. 107,664 Valter Rui Dias de Barros (Member of the AudC) 147,150 100.0% 0 —% n.a. n.a. 147,150 36,782 n.a. 110,368 Sub-total 494,950 100.0% —% 494,950 175,632 319,318 Members of the Executive Committee (EC) Miguel Maya Dias Pinheiro (Vice-Chairman of the BoD and Chairman of the EC) 676,000 55.6% 135,200 11.1% 404,551 33.3% 1,215,751 477,232 202,276 623,312 Miguel de Campos Pereira de Bragança (Vice- Chairman of the EC) 540,800 55.4% 108,160 11.1% 326,607 33.5% 975,567 369,010 163,303 488,718 João Nuno Oliveira Jorge Palma (Vice-Chairman of EC) 540,800 57.2% 108,160 11.4% 295,687 31.3% 944,647 389,643 147,844 496,823 Rui Manuel da SilvaTeixeira (Member of the EC) 473,200 56.5% 94,640 11.3% 269,623 32.2% 837,463 343,900 134,811 438,014 José Miguel Bensliman Schorcht da Silva Pessanha (Member of the EC) 473,200 55.9% 94,640 11.2% 278,633 32.9% 846,473 327,216 139,317 418,523 Maria José Henriques Barreto de Matos de Campos (Member of the EC) 473,200 56.4% 94,640 11.3% 270,623 32.3% 838,463 156,664 135,311 626,672 Sub-total 3,177,200 56.2% 635,440 11.2% 1,845,724 32.6% 5,658,364 2,063,665 922,862 3,092,062 Total Amounts Management and Supervisory Bodies 5,260,600 66.7% 778,960 9.9% 1,845,724 23.4% 7,885,284 2,908,859 922,862 4,447,244 b) The remunerations coming from companies belonging to the same group The Chairman of the Board of Directors, the Chairman of the Executive Committee and two members of the Executive Committee received fixed remuneration from the subsidiary Bank Millennium, S.A. (Poland) in the amount shown below, noting that this amount is included in the fixed remuneration amounts indicated in the 825 | table above, since, under the terms of Article 17 of the Remuneration Policy of Members of the Management and Supervisory Bodies , which is transcribed below, is deducted from the fixed remuneration paid to them annually by the Bank. Article 17 “1. Considering that the remuneration of the executive members of the Board of Directors, as well as the one of the non-executive directors exercising functions under an exclusive regime is intended to directly compensate the activities they carry out directly at BCP or in related companies (namely companies in a control or group relation with BCP) or in corporate bodies to which they have been appointed by indication or in representation of the Bank, the net value of the remunerations received annually for such duties by each executive member of the Board of Directors and each non-executive member exercising functions under an exclusive regime will be deducted from their respective AFR. 2. It is the obligation and responsibility of each member of the Board of Directors to inform the Bank of any additional compensation they may have received, for the purposes of complying with the procedure established above” Remunerations from 2023 in euros received from Bank Millennium (Poland) and, consequently, deducted from the remuneration paid by BCP. Members of the Board of Directors (BoD) Annual Fixed Remuneration (€) Nuno Manuel da Silva Amado (Chairman of the BoD) 26,543.92 Sub-total 26,543.92 Members of the Executive Committee (EC) Miguel Maya Dias Pinheiro (Vice-Chairman of the BoD and Chairman of the EC) 26,545.90 Miguel de Campos Pereira de Bragança (Vice-Chairman of the EC) 45,416.90 José Miguel Bensliman Schorcht da Silva Pessanha (Member of the EC) 41,009.32 Sub-total 112,972.12 Sub-total 139,516.04 c) Shares attributed in 2022 and the main conditions for the exercise of the rights, including the price and the date of that exercise and any alteration in those conditions In accordance with the Remuneration Policy for Members of the Management and Supervisory Bodies, approved at the General Meeting held on 24 May 2023, the annual variable remuneration attributed to members of the Executive Committee must be paid 50% in cash and 50% in BCP shares or other instruments classified as additional Tier 1 own funds or Tier 2 own funds or other instruments which may be converted into Tier 1 core own funds or which value may be reduced in order to adequately reflect the credit rating of the Bank and be adequate to be used as payment of the variable component of the remuneration, either in the deferred or the non-deferred component. With regard to Long-Term Variable Remuneration, this is paid 100% in Bank shares or in the aforementioned instruments. In any case, it is also stated that the component not paid in cash will preferably be paid in Bank shares, unless duly justified by the Bank's long-term interests and by decision of the Remuneration and Welfare Board, after discussion and favourable opinion of the Committee for Nominations and Remunerations. As provided for in the aforementioned Remuneration Policy, the number of shares attributed to each member of the Executive Committee in 2023 was calculated on 50% of the value of the annual variable remuneration attributed for the 2022 financial year, with the value of 0.2231 euros being adopted as the reference price for this purpose, corresponding to the lowest value of the average of the closing prices of BCP shares recorded in the 20 stock exchange sessions preceding 25 May 2023 and the price on the third day preceding the respective payment, i.e. 20 June 2023. In 2023, the annual variable remuneration for the 2022 financial year was attributed to the Executive Committee, under the following attribution conditions defined in the Remuneration Policy: • payment in June 2023, of 50% of the amount awarded, being 50% of that amount paid in cash and 50% in BCP shares, in a number corresponding to 50% of the number of shares attributed in 2023; 2022 REPORT & ACCOUNTS | 826 • payment deferred in the following 5 years of 50% of the amount attributed, that is, 10% of the amount attributed in each one of the following five years, in June. The annual deferred payments shall be made through the payment of 50% in cash and 50% in BCP shares, in a number corresponding to10% the number of shares attributed in 2023. After the delivery in each year, the shares are subject to a one-year unavailability period. The number of shares attributed in 2023 to each member of the Executive Committee regarding the annual variable remuneration of the 2022 financial year was the following: Members of the Executive Committee (EC) Variable remuneration attributed in 2023(€) Variable remuneration attributed in shares (€) No. of shares attributed (QTY) Miguel Maya Dias Pinheiro (Vice-Chairman of the BoD and Chairman of the EC) 404,551.28 202,275.64 906,659 Miguel de Campos Pereira de Bragança (Vice-Chairman of the EC) 326,606.87 163,303.44 731,974 João Nuno Oliveira Jorge Palma (Vice-Chairman of the EC) 295,687.18 147,843.59 662,679 Rui Manuel da Silva Teixeira (Member of the EC) 269,622.71 134,811.36 604,264 José Miguel Bensliman Schorcht da Silva Pessanha (Member of the EC) 278,633.35 139,316.68 624,458 Maria José Henriques Barreto de Matos de Campos (Member of the EC) 270,622.71 135,311.36 606,505 Total 1,845,724.10 922,862.05 4,136,539 In June 2023, BCP shares related to the deferred component of the annual variable remuneration awarded in 2019, 2020 and 2021, and long-term variable remuneration for the period from 1 January 2018 to 31 December 2021, were also delivered to the members of the Executive Committee. The total number of BCP shares delivered in 2023 to each Member of the Executive Committee, relative to the non-deferred components of the annual variable remuneration for 2022 , as well as to the deferred components of the variable remuneration of previous years and the long-term variable remuneration for the period from 1 January 2018 to 31 December 2021, already adjusted by the sell-to-cover regime adopted by all Members, were as follows: Members of the Executive Committee (EC) No of Shares () delivered in 2023 (quant.) Miguel Maya Dias Pinheiro (Vice-Chairman of the BoD and Chairman of the EC) 482,703 Miguel de Campos Pereira de Bragança (Vice-Chairman of the EC) 385,270 João Nuno Oliveira Jorge Palma (Vice-Chairman of the EC) 359,176 Rui Manuel da Silva Teixeira (Member of the EC) 321,184 José Miguel Bensliman Schorcht da Silva Pessanha (Member of the EC) 327,343 Maria José Henriques Barreto Matos de Campos (Member of the EC) 459,832 Total 2,335,508 (*) Regime foreseen in paragraph 20 of Article 9 of the Remuneration Policy for Members of the Group’s Management and Supervisory Bodies, whereby each director may opt for the sell-to-cover system, in which the number of shares to be delivered to him/her will already be 827 | deducted from the number of shares whose sale is necessary for the payment of taxes and contributions corresponding to the total value of the shares attributed. The conditions for the attribution of shares to the members of the Executive Committee comply with the approved Remunerations Policy. d) Variation during the last five years in remuneration, BCP performance and average remuneration of employees The table below shows the variation over the last five years (2019 to 2023) in the remuneration of the management and supervisory bodies, the average remuneration of the Bank's employees, excluding the members of the management and supervisory bodies, and the Bank's performance, as measured by the indicators, at a consolidated level: Var. 19'18 Var. 20'19 Var. 21'20 Var. 22'21 Var. 23'22 Performance Indicators Adjusted Consolidated Net Profit (1) 8.9% -21.2% 56.6% 45.5% 98.3% Consolidated Operating Profit (2) 0.8% 1.5% 2.7% 46.4% 46.1% Total Consolidated Assets 7.5% 5.1% 8.3% -3.3% 5.0% Net Income Activity in Portugal 25.4% -7.1% 28.5% 98.8% 111.0% Employees annual average remuneration 7.2% -2.3% -0.3% 4.2% 9.0% Remuneration of the Members of Management and Supervisory Bodies Executive Committee - Potential total remuneration -50.5% 5.9% -11.0% 42.4% -9.2% of which: potential variable remuneration (3) n.a. 14.8% -33.4% 50.3% 49.8% Board of Directors - Non-Executive members 55.4% 6.7% 0.3% -2.6% 13.1% Annual Total Remuneration -38.3% 6.1% -7.7% 28.2% -3.9% Recurring Total Annual Remuneration (4) 15.2% 6.1% 7.7% 7.3% 14.8% Notes to the figures submitted: (1) Net income excluding associated impacts in Swiss Francs at Bank Millennium (Poland) (2) Income before impairments and provisions (3) Annual Variable Remuneration for the previous year (4) Relating to the same year and without extraordinary remuneration The evolution of the total potential Remuneration of the Executive Committee in 2022 and 2023 was influenced the attribution in 2022 of the Long-Term Variable Remuneration related with the term-of-office 2018-2021, in the amount of 1.334,4 thousand euros. Without this effect, the evolution of the potential Total Remuneration of the Executive in 2022 would have been 11.9% and in 2023 of 15.5%, and the evolution of the Annual Total Remuneration of the members of the management and supervisory bodies would have been 7.3% in 2022 and 14.8% in 2023. The Executive Committee was awarded Annual Variable Remuneration in the years 2019, 2020, 2021, 2022 and 2023 for performance in the previous year, respectively, and Long-Term Variable Remuneration for the year 2022 for the period 2018-2021. The variation in the fixed remuneration of the Executive Committee between 2018 and 2019 was influenced by the attribution in 2018 of an Extraordinary Retirement Supplement, approved by the General Meeting of Shareholders. The fixed remuneration of the non-executive Members of the Board of Directors was influenced in 2018 and 2019 by the evolution recorded by the remuneration attributed to the Chairman of the Board of Directors who took office in June 2018, under an exclusivity regime. 2022 REPORT & ACCOUNTS | 828 e) Way the total remuneration complies with the adopted remuneration policy, the way it contributes to for the performance of the company in the long run, and information on how the performance criteria were applied The total remuneration attributed to the members of the management and supervisory bodies complies with the requirements of the Policy for the Remuneration of the members of the management and supervisory bodies in force, namely in the following principles: • adequacy of the fixed remuneration values to the level of involvement and exclusivity of each member's functions and to the values practised by other Portuguese companies of comparable complexity and size; • attribution of Retirement Supplements to the Chairman of the Board of Directors and to the executive members, given the regime of exclusivity of functions under which they exercise the same; • attribution of variable remuneration only to executive members; • the system for setting and paying Annual Variable Remuneration and Long-Term Variable Remuneration, designed with the purpose of safeguarding the company's long-term performance; • Maximum total Annual Variable Remuneration attributed to executive members according to BCP’s performance, measured by the degree of achievement of the objectives defined for a set of management indicators defined in the Remuneration Policy and net income obtained; • Individual Annual Variable Remuneration of each executive member calculated on the basis of an individual, qualitative and quantitative assessment, resulting in the individual quantitative assessment of the degree of achievement of the objectives defined for a set of management indicators, individualized for each member of the executive committee according to his/her areas of responsibility. The individual qualitative assessment is carried out independently by the Committee for Nominations and Remunerations, with the values of the individual Annual Variable Remuneration to be attributed to each member of the Executive Committee decided by the Remunerations and Welfare Board, under proposal submitted by the Committee for Nominations and Remunerations; • Long-Term Variable Remuneration attributed at the end of a 4-year period based on BCP’s performance, measured by the achievement degree of the objectives defined for a set of management indicators and the evolution of profitability for shareholders by comparison with a market benchmark, thus promoting the performance and appreciation of BCP in the long run; • Annual Variable Remuneration attributed in cash and in BCP shares, with a 5-year deferral period for attribution, and Long-Term Variable Remuneration attributed exclusively in BCP shares, with a 3-year deferral period for attribution, in order to promote the performance of BCP in the long run; • the entire variable remuneration, regardless of whether acquired rights have already been established or not, is subject to reduction or reversal mechanisms, in the cases provided for in the Remuneration Policy. The ability to totally or partially reduce the payment of a deferred remuneration, the payment of which is not yet an acquired right, as well as to, partially or totally retain the payment of a variable remuneration, the payment of which is an acquired right, (claw-back), is limited to extremely significant events, duly identified and wherein the individuals involved had a direct participation. f) Information on the application of the Remuneration Policy in 2023 In 2023, the provisions of the Remuneration Policy for the members of the Management and Supervisory Bodies in force were fully applied, namely in the definition and attribution of the Annual Variable Remuneration for the 2021 financial year and of the Long-Term Variable Remuneration for the financial tears of 2018 to 2021, with no derogation or non-application of the defined procedures. g) Possibility of requesting the refund of a variable remuneration In accordance with the Remuneration Policy in force, the return of the variable remuneration paid is limited to significant events in which the persons covered have had, with intent or gross negligence, an active participation. 829 | 2. Report on the Impact on BCP Group of the Remuneration Practices Implemented by the Subsidiaries Abroad (Article 53 of Notice of the BdP No. 3/2020) 2022 REPORT & ACCOUNTS | 830 831 | 2022 REPORT & ACCOUNTS | 832 3. Assessment of Compliance with Remuneration Policies and Procedures Adopted by the Bank (Article 44 of Notice of Banco de Portugal No. 3/2020) 833 | 2022 REPORT & ACCOUNTS | 834 835 | V. Agreements with remunerative implications 83. Foreseen contractual restraints for compensation payable for the unfair dismissal of directors and the relevance thereof to the remunerations’ variable component. We must point out the provisos of article 403 (5) of the Companies Code, herein transcribed: “If a dismissal is not grounded on a fair cause, the director will be entitled to a compensation for damages, in accordance with the agreement established with him/her or as generally permitted by law. That compensation cannot exceed the amount of remunerations he/she would presumably receive until the end of the period of time for which he/she was elected”. Similar to the provision above, article 10 of the Policy for the Remuneration of the Management and Supervisory Bodies, states that the Director who terminates functions before the end of the term-of-office for reasons other than due to renunciation or dismissal with just cause, will be entitled to a compensation to be estimated by the Committee for Nominations and Remunerations and resolved by the Remunerations and Welfare Board, after listening to the Committee for Risk Assessment. The compensation due for a removal from office without a just cause cannot be quantified as a fixed remuneration and its payment must be subject to the subscription of a non-competition commitment for a period of time corresponding to the end of the term-of-office underway on the date of the removal. Apart from those herein mentioned, no contractual conditions or limitations have been established for compensation payable for dismissal without fair cause. 84. Reference to the existence and description, with indication of the amounts involved, of agreements between the company and members of the management board and directors, in observance of current number 1 of article 29-R of the Securities Code, which establish compensation in the case of resignation, dismissal without fair grounds or termination of the work relationship following a change in the control of the company (article 29-H, (1) (k)) There are no agreements between the Company and members of the management board, directors, pursuant to number 1 of article 29-R of the Securities Code, or any other employee who reports directly to the management which establish indemnities in the event of resignation, dismissal without fair cause or termination of employment relations following a change in the control of the company, exception made those determined by the general applicable law and by article 11 of the Policy for the Remuneration of the Management and Supervisory Bodies. VI. Plans for the attribution of shares or stock options 85. to 88. There are no plans with these features; hence, this chapter VI does not apply to the Bank. E. TRANSACTIONS WITH RELATED PARTIES I. Control mechanisms and procedures 89. Mechanisms implemented by the Company for the purpose of controlling transactions with related parties In accordance with internal procedures and regulations, the Bank has customer databases and IT records that automatically identify and signal its related parties. The internal regulations relating to transactions with related parties provide for specific procedures for processing proposals relating to these entities, which ensure that such transactions are carried out under market conditions and subject to additional controls. As a matter of fact, the regular procedure for the approval of transactions with related parties consists in the approval of the transaction by a majority of two thirds of the Board of Directors, following a proposal submitted by the Executive Committee, after the prior issuance of an opinion by the Audit Committee and the opinions of the Compliance Office and the Risk Office regarding the compliance of the proposed operations with the internal regulations, legal and regulatory provisions and other constraints that may apply to them, namely in terms of risk. There are still simplified procedures for transactions considered to be of lower risk. 2022 REPORT & ACCOUNTS | 836 Proposals regarding this universe are submitted to the Audit Committee by the Executive Committee, which in turn may receive them from the Credit Commission or from the Costs and Investments Sub-Commission, depending on the nature of the transaction. The Board of Directors, in accordance with its competences, conferred to it by its Regulations, reserved for itself the necessary and sufficient powers for the following acts: • approve the internal policy foreseeing the definition, identification and update of the parties related with the Bank, following a proposal made by the Executive Committee, and after obtaining the opinion from the Audit Committee; • approve, complying with the legislation and with the internal regulations, transactions with related parties, following a proposal made by the Executive Committee and after obtaining the opinion from the Audit Committee and the previous opinions of the Compliance Office and the Risk Office; • ensure that the Bank identifies, in a complete and quarterly updated list, its related parties, making it available to the supervisory authority whenever requested; All the members of the Audit Committee are part of the Board of Directors and, as such, participate at the Meeting and in the adoption of the resolution. Therefore, this Committee takes cognizance in loco of the decision made by the Board of Directors, not being justified, for being redundant, any other communication to the Audit Committee. When an operation with a related party is being debated, the Chairwoman of the Audit Committee, qualified as independent member of the Board of Directors, or in her absence (which never occurred) a member appointed for that purpose, informs the Board with detail on the contents of the prior opinion of the Audit Committee. Lastly, and also in accordance with the provisions of the Regulations of the Board of Directors, the members of the Board of Directors may not access any privileged or sensitive documentation, or participate in the assessment and decision of operations or contracts related to the company that give rise to the conflict of interest, requiring in any of these situations the approval by a majority of at least two thirds of the remaining members of the management body and the prior favourable opinions of the Audit Committee, Compliance Office and Risk Office. On these issues, please see item 10. 90. Details of transactions that were subject to control in the referred year. In 2023, nineteen opinions on proposals for credit operations, including revisions or extensions of limits, and nine proposals for the procurement of goods or services related to related parties of the Bank, were subject to the opinion of the Audit Committee and approval by the Board of Directors. 91. A description of the procedures and criteria applicable to the supervisory body when same provides preliminary assessment of the business deals to be carried out between the company and the holders of qualifying holdings or entity-relationships with the former, as envisaged in Article 20 of the Securities Code. As mentioned in item 90, the business deals to be conducted between the Bank and related parties are subject to assessment and approval by the Management Body, supported by analyses and technical opinions issued by the Audit Committee, which in turn takes into consideration the assessments made by the Executive Committee, based on opinions issued by the Credit Division, in the case of credit operations, or by the Costs and Investments Sub-Commission and/or other areas involved in the contract, in the case of supply of goods and services contracts. The operations require a prior opinion from the Compliance Office as to their compliance with internal rules, legal and regulatory provisions and other constraints that may be applicable to them, and an opinion of the Risk Office with the assessment of the risks inherent to the operation. There are transactions of low material value or qualified as low risk that follow a simplified approval regime, as described in the Policy on Transactions with Related Parties available on the Bank's website. 837 | II. Elements relative to business 92. Details of the place where the financial statements including information on business dealings with related parties are available, in accordance with IAS 24, or alternatively a copy of said data On this issue, please see the information provided in the 2023 Annual Report in appraisal 51 of the Notes to the Consolidated Financial Statements. 2022 REPORT & ACCOUNTS | 838 Part II Assessment of the Compliance with the Recommendations and sub- recommendations from the Corporate Governance Code from IPCG (2023) The Bank assesses the compliance and justifies the non-compliance with the recommendations and sub- recommendations of the Corporate Governance Code from IPCG in the following table: ASSESSMENT OF THE COMPLIANCE WITH THE RECOMMENDATIONS AND SUB-RECOMMENDATIONS FROM THE CORPORATE GOVERNANCE CODE FROM IPCG (2023) Recommendations and sub-recommendations from the Corporate Governance Code from IPCG (2023) Index for Items of Part I of the Report Compliance I.1.(1) I.1.(2) I.1. The company explains how its strategy seeks to ensure the fulfilment of its long-term objectives and what the main contributions resulting from this are for society in general. Items: 21 - Board of Directors and Audit Committee and 27 a) Risk Committee and Annual Report - Business Model, Strategy, Risk and Outlook and non-financial information. Compliant I.2.(1) I.2.(2) I.2. The company identifies the main policies and measures adopted regarding the fulfilment of its environmental and social objectives. Item 27 c) - Committee for Corporate Governance, Ethics and Sustainability and Item 21 - Board of Directors Compliant II.1.1. II.1.1. The company must establish mechanisms to ensure, in an adequate and strict manner, the timely handling or disclosure of the information needed to its corporate bodies, company secretary, shareholders, investors, financial analysts, remaining stakeholders and to the market in general. Items: 21 - Board of Directors and 55 to 65 and Recommendations; II.3.1 and II.3.2 Compliant II.2.1. II.2.1. Companies establish, previously and in abstract, criteria and requirements relating to the profile of members of the corporate bodies suitable for the function to be performed, considering, in particular, individual attributes (such as competence, independence, integrity, availability and experience), and diversity requirements (with particular attention to equality between men and women), which may contribute to improving the performance of the body and balance in its composition. Items: 16,17,25, 26 and 36 Compliant II.2.2.(1) II.2.2.(2) II.2.2.(3) II.2.2.(4) II.2.2.(5) II.2.2.(6) II.2.2. The management and supervisory bodies and its internal committees must have internal regulations – namely on the exercise of the respective attributions, chairmanship, frequency of the meetings, functioning and duties of its members- fully disclosed on the website of the company, and minutes should be drawn from their meetings. Items: 20 to 23, 27, 34, 61 and 67 Compliant II.2.3.(1) II.2.3.(2) II.2.3. The composition and the number of each year meetings of the management, supervisory bodies and of its internal committees should be disclosed through the company's website. Items: 17, 21, 23, 27 and 67 Compliant II.2.4.(1) II.2.4.(2) II.2.4. The companies adopt a policy of whistleblowing that explains the main rules and procedures to be followed for each communication and an internal denunciation channel that includes access also by non- employees, under the terms foreseen in the applicable law. Item: 49 Compliant 839 | Recommendations and sub-recommendations from the Corporate Governance Code from IPCG (2023) Index for Items of Part I of the Report Compliance II.2.5. (1) II.2.5. (2) II.2.5 (3) II.2.5 (4) II.2.5. Companies shall have specialised committees in matters of corporate governance, remuneration, appointment of members of the company bodies and performance assessment, separately or cumulatively. If the committee for remunerations provided for in article 399 of the Companies Code has been created, this recommendation may be complied with by attributing to this committee, if not prohibited by law, competence in the said matters. Items: 22, 24, 27, 29 and 67 Compliant II.3.1. II.3.1. The articles of association or other equivalent methods adopted by the company must set up mechanisms to ensure that, within the boundaries of the applicable legislation, it is permanently ensured to the members of the management and supervisory bodies the access to all information needed to assess the performance, the standing and development prospects of the company, including, namely, the minutes of meetings, the documents supporting the decisions made, the call notices and the filing of the documents relating to the meetings of the executive management body, without damaging the access to any other documents or to people to whom explanations may be requested. Items: 21, 23,26 and Recommendation II.1.1 Compliant II.3.2. II.3.2. Each body and committee of the company shall ensure, in a timely and appropriate manner, the inter- organic flow of information necessary for the exercise of the legal and statutory powers of each of the other bodies and committees. Items: 21, 22 and 27 Compliant II.4.1. II.4.1. By internal regulations or equivalent, the members of the management and supervisory bodies and internal committees are obliged to inform the respective body or committee whenever there are facts that may constitute or give rise to a conflict between their interests and the company’s interest. Items: 10, 20 to 22, 27, 49, 89 to 91 Compliant II.4.2. II.4.2. The company adopts procedures to guarantee that the member in conflict does not interfere in the decision-making process, without harming the duty of providing information and clarifications that the body or committee or the respective members may eventually ask. Item: 20 Compliant II.5.1. II.5.1. The management body discloses in the governance report or by other publicly available means, the internal verification procedure of transactions with related parties. Items: 10, 37, 89 to 91 Compliant III.1.(1) III.1.(2) III.1. The company shall not set an excessively high number of shares necessary to give the right to one vote and shall inform in the governance report of its option whenever each share does not correspond to one vote. Items: 5, 12, 14 and 48 Not applicable Compliant III.2. III.2. The company that has issued shares with special plural voting rights shall identify, in its corporate governance report, the issues that, under the terms of the company's articles of association, are excluded from the scope of the plural voting rights. Item: 12 Not applicable III.3. III.3. The company should not adopt mechanisms that hinder the taking of deliberations by their shareholders, in particular establishing a deliberative quorum higher than that established by law. Items: 5, 12, 14, 48 Compliant 2022 REPORT & ACCOUNTS | 840 Recommendations and sub-recommendations from the Corporate Governance Code from IPCG (2023) Index for Items of Part I of the Report Compliance III.4. III.4. The company implements the appropriate means for the participation not in person of the shareholders at the general meeting by electronic means, under terms proportionate to their size. Item: 12 Compliant III.5. III.5. The company shall also implement appropriate means for the non-face-to-face exercise of the right to vote, including by correspondence and by electronic means. Item: 12 Compliant III.6. III.6. The articles of association of the company which foresee the limitation of the number of votes which may be held or exercised by a single shareholder, individually or in combination with other shareholders, must also establish that, at least every five years, the alteration or maintenance of this statutory provision will be subject to deliberation by the General Meeting – without requirement of a quorum larger than that legally established – and that, in this deliberation, all the votes cast will count, without the application of this limitation. Items: 5 and 13 Not-compliant but justified III.7. III.7. Defensive measures should not be adopted if they imply payments or the assumption of expenses by the company in the event of the transfer of control or change of the composition of the management body, and which might hinder the free transferability of shares and the free appraisal by the shareholders of the performance of members of the management body. Item: 4 Compliant IV.1.1.(1) IV.1.1.(2) IV.1.1.(3) IV.1.1. The management body should assure that the company acts in accordance with its objectives, and should not delegate its competence, namely, with respect to: i) definition of the strategy and general policies of the company; ii) organization and coordination of the entrepreneurial structure; iii) issues which should be considered strategic due to their amount, risk or special features. Item: 21 - Board of Directors Compliant IV.1.2. IV.1.2. The management body approves, through an internal regulation or an equivalent mean, the performance regime of the executive directors and their exercise of executive functions in entities outside the group. Item: 21 - Executive Committee and 26-B Compliant IV.2.1. IV.2.1. Without prejudice to the legal functions of the chairperson of the board of directors, if he/she is not independent, the independent directors - or, if there are not enough non-executive directors, the non- executive directors - shall appoint a coordinator from among themselves, namely: (i) act, whenever necessary, as interlocutor with the chairperson of the board of directors and with the remaining directors; (ii) endeavour that they all have the necessary conditions and means for the exercise of their functions; and (iii) coordinate them in the assessment of the performance by the administration body as foreseen in recommendation VI.1.1.; alternatively , the company may establish another equivalent mechanism to ensure such coordination. Item:18 Compliant IV.2.2. IV.2.2. The number of non-executive members of the management body shall be appropriate to the size of the company and the complexity of the risks inherent to its activity, but sufficient to ensure the efficient performance of the tasks entrusted to them and the formulation of this suitability judgement must be included in the governance report. Item: 18 and 21 Compliant 841 | Recommendations and sub-recommendations from the Corporate Governance Code from IPCG (2023) Index for Items of Part I of the Report Compliance IV.2.3. IV.2.3. The number of non-executive directors must exceed that of executive directors. Item: 18 Compliant IV.2.4. IV.2.4. The number of non-executive directors meeting the independence requirements shall be plural and shall not be less than one third of the total number of non- executive directors. For the purposes of this recommendation, a person is considered independent as long as he/she is not associated with any group of specific interests in the company, or is not in a position susceptible to affect his/her ability to make an impartial analysis or decision, in particular due to: Item: 18 Compliant i. To have held, continuously or intermittently, positions in any corporate body for more than twelve years, regardless of whether this period matches with the end of the mandate; (...) ii. Have been an employee of the company or of a company in a controlling or group position with it in the last three years; iii. To have provided services or established a significant commercial relationship with the company or a company in a control or group relationship with the company in the last three years, either directly or as a partner, director, manager or manager of a legal person; iv. To be the beneficiary of a remuneration paid by the Company or by a company that is in a control or group relationship with it, in addition to the remuneration arising from the exercise of the functions of director; v. Living in non-marital cohabitation or being the spouse, relative or relative-in-law in a straight line and until the 3rd degree, inclusively, in the collateral line, of directors of the company, of a legal person holder of a qualifying stake in the company or of natural persons directly or indirectly holding qualifying stakes; vi. To be the holder, directly or indirectly, of a qualifying stake or the representative of a shareholder with qualifying stake; IV.2.5. IV.2.5. The provisions of paragraph (i) of the previous recommendation shall not preclude the qualification of a new director as independent if, between the termination of his/her duties in any company body and his/her new designation, at least three years have elapsed (cooling-off period). Item: 18 Not applicable V.1.(1) V.1.(2) V.1. In compliance with the powers conferred upon it by law, the supervisory body is informed of the strategic guidelines and assesses and gives its opinion on the risk policy, prior to its final approval by the board of directors. Items 21 - Audit Committee, 27 a) and 37 Compliant 2022 REPORT & ACCOUNTS | 842 Recommendations and sub-recommendations from the Corporate Governance Code from IPCG (2023) Index for Items of Part I of the Report Compliance V.2.(1) V.2.(2) V.2. The number of members of the supervisory body and of the committee for financial matters shall be adequate for the size of the company and the complexity of the risks inherent to its activity, but sufficient to ensure the efficient performance of the tasks entrusted to them and the formulation of this value judgement must be included in the governance report. Items: 18 and 21 Not applicable Compliant VI.1.1.(1) VI.1.1.(2) VI.1.1.(3) VI.1.1. The management body - or committee with powers in the matter, composed of a majority of non- executive members - annually assesses its performance, as well as the performance of the executive committee, the executive directors and the company committees, taking into account compliance with the company's strategic plan and budget, risk management, its internal functioning and the contribution of each member to the effect, as well as the relationship between the bodies and committees of the company Items: 24 and 25 and 27- b) Compliant VI.2.1. VI.2.1. The company sets up a remunerations committee, the composition of which ensures its independence versus management. It may be a remunerations committee appointed in accordance with article 399 of the Companies Code. Items: 66 and 67 Compliant VI.2.2. VI.2.2. The setting up of the remunerations of the members of the administrative and supervisory bodies and of the company committees shall be the responsibility of the committee for remunerations or the general meeting, at the proposal of that committee. Items: 66 and 67 Compliant VI.2.3. VI.2.3. The company discloses in the corporate governance report, or in the remuneration report, the termination of office of members of the company bodies or committees, indicating the amounts of all the company charges related to the termination of office, for any reason, during the financial year in question. Items: 80 Compliant VI.2.4. VI.2.4. In order to provide information or clarification to shareholders, the chairman or another member of the committee for remunerations must be present at the annual general meeting and any other meetings if the respective agenda includes a matter related to the remuneration of members of the company's bodies and committees or if such presence has been requested by shareholders. Items: 66 and 67 Compliant VI.2.5. VI.2.5. Within the budgetary limitations of the company, the remuneration committee should be able to freely decide the engagement by the company of the advising services that are required or convenient for the exercise of its functions. Items: 25, 27-b) and 67 Compliant VI.2.6. VI.2.6. The committee for remunerations ensures that those services are provided independently. Items: 25, 27-b) and 67 Compliant VI.2.7. VI.2.7. The providers of such services shall not be engaged, by the company itself or by others with which it is in a controlling or group relationship, for the provision to the company of any other services related to the competencies of the committee for remunerations, without its express authorisation. Items: 27-b) and 67 Compliant VI.2.8. VI.2.8. Bearing in mind the alignment of interests between the company and the executive directors, a portion of their remuneration should be of a variable nature so as to reflect the sustained performance of the company and does not encourage excessive risk-taking. Items: 69, 71 and 73 Compliant 843 | Recommendations and sub-recommendations from the Corporate Governance Code from IPCG (2023) Index for Items of Part I of the Report Compliance VI.2.9. VI.2.9. A significant portion of the variable component is partially deferred in time, for a period of not less than three years, associating it, in terms defined in the company's remuneration policy, with the confirmation of the performance sustainability. Items: 69 and 72 Compliant VI.2.10. VI.2.10. When the variable remuneration comprehends the attribution of options or other instruments that are directly or indirectly dependent on the shares value, the beginning of the exercise period must be deferred for a period of time not inferior to three years Item: 85 Not applicable VI.2.11. VI.2.11. The remuneration of the non-executive members of the management body do not include any component whose value depends on the performance or value of the company. Items: 69 and 77 Compliant VI.3.1. VI.3.1. The company promotes, under such terms as it deems appropriate, but in a manner that can be demonstrated, that proposals for the election of members of the company bodies are accompanied by a justification on suitability of the profile, expertise and curriculum to the function of each candidate. Items: 17 and 25 Compliant VI.3.2. The committee for nominations of members of corporate bodies includes a majority of independent directors. Items: 17 and 27-b) Not-compliant VI.3.3. VI.3.3. Unless the size of the company does not justify it, the function of follow-up and support to the appointment of senior managers must be attributed to a committee for nominations. Item: 27-b) Compliant VI.3.4. VI.3.4. The committee for nominations of senior executives provides its terms of reference and promotes, to the extent of its competencies, the adoption of transparent selection processes that include effective mechanisms for identifying potential candidates, and that those who present the greatest merit, are best suited to the requirements of the function and promote, within the organisation, adequate diversity including gender equality. Items: 17 and 25 Compliant VII.1.(1) VII.1.(2) VII.1. The management body debates and approves the strategic plan and the risk policy of the company, which includes setting limits on risk-taking. Items: 21- Board of Directors, 27-a), 53 and 54 Compliant VII.2. VII.2. The company has a specialised committee or a commission composed of specialists in risk issues that regularly reports to the management body. Items: 21-a) Committee for Risk Assessment Compliant VII.3. VII.3. The supervisory body sets out its internal organization by implementing periodical control mechanisms and procedures aiming at ensuring that the risks effectively incurred by the company are consistent with the objectives established by the management body. Items: 21 - Audit Committee and 50 to 54. Compliant VII.4. VII.4. The internal control system, comprising the risk management function, compliance and internal audit, should be structured in terms that match the size of the company and the complexity of the risks inherent to its activity and the supervisory body must assess it, within the scope of its competence to supervise the effectiveness of this system, propose the required adjustments. Items: 50 to 54 Compliant 2022 REPORT & ACCOUNTS | 844 Recommendations and sub-recommendations from the Corporate Governance Code from IPCG (2023) Index for Items of Part I of the Report Compliance VII.5. VII.5. The company establishes supervision procedures, periodical assessment and of adjustment of the internal control system, including an annual assessment of the degree of internal compliance and the performance of that system, as well as the projections to change the previously defined risk framework. Items: 21 - Board of Directors, 27-a) Committee for Risk Assessment and 54. Compliant VII.6.(1) VII.6. (2) VII.6.(3) VII.6.(4) VII.6. Based on its risk policy, the company establish a risk management system, identifying (i) the main risks to which it is exposed in the development of its activity, (ii) the probability of their occurrence and their impact, (iii) the instruments and measures to be adopted with for the purpose of their mitigation (iv) monitoring procedures for their follow-up. Item: 54 Compliant VII.7. VII.7. The company establishes processes to collect and process data related to environmental and social sustainability, to alert the management body to risks that the company is incurring and to propose strategies for their mitigation. Items: 27-a), 27-c), 52 (DESC) and 21 - Board of Directors Compliant VII.8. VII.8. The company reports on how climate change is considered in the organisation and how it takes climate risk analysis into account in decision-making processes. Items: 27-a) and 27-c) Compliant VII.9. VII.9. The company informs, in the governance report, on the terms under which artificial intelligence mechanisms have been used as a decision-making tool by the corporate bodies. Item: 52 Compliant VII.10 VII.10. The supervisory body issues an opinion on the work plans and on the resources allocated to the services of the internal control system, including the risk management functions, compliance and internal audit and may propose the adjustments deemed necessary. Items: 21 - Audit Committee, 50 to 55 Compliant VII.11. VII.11. The supervisory body must be the recipient of the reports made by the internal control services, including the risk management functions, compliance and internal audit at least when concerning matters related to the presentation of accounts, the identification or resolution of conflicts of interests and the detection of potential irregularities. Items: 21 - Audit Committee, 50-a) to 55 Compliant VIII.1.1. VIII.1.1. The internal regulations of the supervisory body requires it to monitors the appropriateness of the process of preparation and disclosure of information by the management body, including the appropriateness of accounting policies, estimates, judgements, relevant disclosures and their consistent application from year to year, duly documented and reported. Items: 21 - Audit Committee, 37 and 55 Compliant VIII.2.1. VIII.2.1. Through an internal regulation, the supervisory body defines, in accordance with the applicable legal requirements, the supervision procedures aimed at ensuring the independence of the statutory auditor. Items: 21 - Audit Committee, IV. Statutory Auditor and 45 Compliant 845 | Recommendations and sub-recommendations from the Corporate Governance Code from IPCG (2023) Index for Items of Part I of the Report Compliance VIII.2.2.(1) VIII.2.2.(2) VIII.2.2. The supervisory body should be the main item of contact of the external auditor and the first receiver of the respective reports, being entrusted, in particular, with proposing the respective remuneration and ensure that the right conditions are in place within the company for the provision of services. Items: 21 - Audit Committee, 37, Title IV. Statutory Auditor and 45 Compliant VIII.2.3. VIII.2.3. Every year, the supervisory body assesses the work carried out by the statutory auditor, its independence and suitability to carry out its duties and proposes to the competent body that it be dismissed or that the contract for the provision of its services be terminated whenever there is just cause to do so. Items: 21 - Audit Committee, 37 and 45 Compliant 2022 REPORT & ACCOUNTS | 846 ANNEX I CURRICULA VITAE OF THE MEMBERS OF THE BOARD OF DIRECTORS OF BANCO COMERCIAL PORTUGUÊS, S.A. (Regarding the positions held simultaneously in other companies, in and outside the Group, and other relevant activities performed, please see table 26 of this Report) 847 | Non-Executive Members of the Board of Directors (Detailed curricula are available at the Bank’s website, on English and Portuguese, on the page with the following address:https://ind.millenniumbcp.pt/pt/Institucional/governacao/) Nuno Manuel da Silva Amado Personal Data • Date of Birth: 14 August 1957 • Nationality: Portuguese Positions held at the Bank • Chairman of the Board of Directors • Chairman of the Committee for Corporate Governance, Ethics and Sustainability • Member of the Strategic Board Direct Responsibilities • Board of Directors' Support Office • Company Secretary's Office • Audit Division • Fundação Millennium bcp • Client Ombudsman's Office Positions held in the Group • Vice-Chairman of the Board Of Directors of BIM - Banco Internacional de Moçambique, S.A. • Vice-Chairman of the Supervisory Board of Bank Millennium, S.A. (Poland) • Chairman of the Board of Curators of Fundação Millennium bcp Positions outside the Group • Member of the Board of Auditors of Fundação Bial • Chairman of the Senior Board of the Alumni Clube ISCTE • Member of the Board of the Business Roundtable Portugal Association • Member of the General Council of AESE - Associação de Estudos Superiores de Empresa (Business School) • Member of the Advisory Board of the Forum for Competitiveness • Member of the “School Board” of Instituto Superior Técnico Academic and Specialised Qualifications • Licentiate Degree in Corporate Organisation and Management from Instituto Superior das Ciências do Trabalho e da Empresa (ISCTE) • Advanced Management Programme from INSEAD, Fontainebleau Professional experience in the last 10 years relevant to the position (before taking office): • From 28 February 2012 to 30 May 2018 – Vice-Chairman of the Board of Directors and Chairman of the Executive Committee of Banco Comercial Português, S.A. • From 2012 to 13 April 2021- Member of the Supervisory Board of EDP – Energias de Portugal, S.A. • From 19 April 2013 to 14 February 2022 - Chairman of the Board of the General Meeting - Portuguese-Spanish Chamber of Commerce • From 27 March 2015 to 16 June 2018 - Vice-Chairman of the Management Board of APB - Associação Portuguesa de Bancos, representing Banco Comercial Português, S.A. 2022 REPORT & ACCOUNTS | 848 • From 4 April 2016 to 27 March 2019 - Effective member of the Plenary, of the Interdisciplinary Specialised Committee for Birthrate (CEPIN) and of the Specialised Standing Committee for Regional Development and Land Planning (CDROT) of the CES - Conselho Económico e Social • From 30 May 2018 to 5 September 2022 - Chairman of the Board of Directors of Banco Comercial Português, S.A. Other: • On November 9, 2018 - Presented with Order of Infante D. Henrique - Grand Cross of Merit (Grã-Cruz de Mérito) Jorge Manuel Baptista Magalhães Correia Personal Data • Date of Birth: 05 November 1957 • Nationality: Portuguese Positions held at the Bank • 1st Vice-Chairman of the Board of Directors • Chairman of the Remunerations and Welfare Board • Member of the Strategic Board Positions held outside the Group • Member of the Board of Directors and member of the Corporate Governance Committee of REN – Redes Elétricas Nacionais, SGPS, S.A. • Chairman of the Board of Directors of Luz Saúde, S.A. • Chairman of the Board of Directors of Fidelidade - Companhia de Seguros, S.A. Academic and Specialised Qualifications • Licentiate Degree in Law from the Lisbon Law School • Participation in multiple relevant professional training actions throughout the career in Portugal and abroad, namely with certification in “Enforcement Training Program 1994” da U.S. Securities and Exchange Commission (SEC), Washington, DC Professional Experience in the Last Ten Years Relevant to the Position (before taking office): • Since 1983 – Lawyer – Member of the Portuguese Lawyers Association • From January 2008 to May 2014 - Chairman of the Board of Directors of Companhia de Seguros Fidelidade - Mundial, S.A. • From April 2011 to January 2016 - Chairman of the Board of Directors of Universal Seguros, S.A. (Angola) • From October 2011 to March 2013 - Chairman of the Board of Directors of HPP – Hospitais Privados de Portugal, S.A. • From October 2011 to March 2013 - Vice-Chairman of the Boards of Directors of Caixa Seguros e Saúde, SGPS, S.A. • From May 2014 to March 2017 – Vice-Chairman of the Board of Directors and Chairman of the Executive Committee of Companhia de Seguros Fidelidade, S.A. • From May 2014 to March 2017 – Vice-Chairman of the Board of Directors and Chairman of the Executive Committee of Fidelidade Assistência Auto, S.A. • From May 2014 to March 2017 – Vice-Chairman of the Board of Directors and Chairman of the Executive Committee - Multicare - Seguros de Saúde, S.A. • From July 2014 to July 2018 - Chairman of the Board of Directors of Fidelidade Property International, S.A. • From March 2017 to June 2020 - Chairman of the Executive Committee of Fidelidade - Companhia de Seguros, S.A. 849 | • From 30 May 2018 to 4 May 2022 - Chairman of the Remunerations and Welfare Board of BCP • From 30 May 2018 to 5 September 2022 - 1st Vice-Chairman of the Board of Directors of BCP • From 5 September 2022 to 20 December 2022 - Member of the Committee for Corporate Governance, Ethics and Sustainability • From 22 October 2020 to 27 August 2023 - Non-Executive Member of the Board of Directors of Longrun, SGPS, S.A. Ana Paula Alcobia Gray Personal Data • Date of Birth: 16 March 1962 • Nationality: Portuguese / South- African Positions held at the Bank • Member of the Board of Directors • Member of the Committee for Risk Assessment Academic and Specialised Qualifications • Masters Degree in Business Management (MBA) from University of Witwatersrand • Chartered Accountant (South Africa) - registered in the Ordem dos Revisores Oficiais de Contas (South African Chartered Accountants Association). • Honours (post graduate) in Commerce from University of South Africa • Honours (post graduate) In Accounting Science from University of South Africa • Bachelor of Commerce from the University of South Africa Professional Experience in the Last Ten Years Relevant to the Position (before taking office): • From November 1996 to April 2017 – Group BAI (Lisbon, Portugal and Luanda, Angola) where he performed the functions of non-executive Vice-Chairwoman and executive director at the Group’s banks. • From 30 May 2018 to 4 May 2022 , Member of the Remunerations and Welfare Board of Banco Comercial Português, S.A. • From July 2018 to July 2022 , Member of the Board of Directors of Banco Comercial Português, S.A. • From 30 May 2018 to 5 September 2022, Member of the Board of Directors of Banco Comercial Português, S.A. • From 24 July 2018 to 5 September 2022 Member of the Committee for Risks Assessment of Banco Comercial Português, S.A. Xiaoxu Gu (Julia Gu) Personal Data • Date of Birth: 05 September 1970 • Nationality: Chinese Positions held at the Bank • Member of the Board of Directors Positions held outside the Group • Since 2011 Vice-Chairwoman of Group Fosun High Technology (Group) Co., Ltd. (Internal functions exercised under the work agreement with Group Fosun) • Since May 2015 – Non-executive Member of the Board of Directors – Mybank • Since February 2015 – Non-executive Director - Zhangxingbao (Network Technology Co., Ltd) 2022 REPORT & ACCOUNTS | 850 • Since December 2020 - Non-executive Director of Chongquing Rural Commercial Bank Co. Ltd. Ltd Academic and Specialised Qualifications • Master’s in Business Management - East China Normal University • Bachelor’s Degree in Transportation Management - University Tongji (former Shanghai Tiedao University) Professional Experience in the Last Ten Years Relevant to the Position (before taking office): • From 2015 to 15 May 2018 – Chairwoman of the Board of Directors - Great China Finance Leasing (Shanghai) Co., Ltd. (subsidiary of Zhangxingbao) • From 2015 to 18 May 2018 – Chairwoman of the Board of Directors - Shanghai Hongkou Guangxin Microcredit Co., Ltd. (subsidiary of Zhangxingbao) • From 2015 to 18 May 2018 – Chairwoman of the Board of Directors - Guangzhou Fosun-Yuntong Microcredit Co., Ltd (subsidiary of Zhangxingbao) • From 2015 to 18 May 2018 – Member of the Board of Directors – Zhejiang Zheshang International Financial Asset Exchange Co., Ltd. • From 2015 to 8 June 2018 – Chairwoman of the Board of Directors - Shanghai Xinglian Commercial Factoring Co., Ltd. • From 2015 to July 2018 - Member of the Board of Directors - Zhejiang Mybank Co., Ltd. • From 2015 to 28 July 2018 – Chairwoman of the Board of Directors - Minsheng E-Comerce Co., Ltd. • From 2015 to 28 July 2018 – Member of the Board of Directors - Shanghai Fosunling Asset Management Co., Ltd. (Subsidiary of Zhangxingbao) • From 2016 to 28 July 2018 – Chairwoman of the Board of Directors - - SUM Payment Services Co., Ltd. • From 30 May 2018 to 5 September 2022 - Member of the Board of Directors of Banco Comercial Português, S.A. Lingjiang Xu Personal Data • Date of Birth: 13 July 1971 • Nationality: Chinese Positions held at the Bank • Member of the Board of Directors • Member of the Committee for Corporate Governance, Ethics and Sustainability • Member of the Committee for Nominations and Remunerations Positions held at the Group • Member of the Supervisory Board of Bank Millennium, S.A. (Poland) Positions held outside the Group • Non-Executive member of the Board of Directors of Fidelidade - Companhia de Seguros, SA • Non-Executive Chairman of the Board of Directors of Longrun Portugal, SGPS, S.A. • Non-executive member of the Board of Directors - Luz Saúde, S.A. Academic and Specialised Qualifications • Bachelor’s Degree in German Language of the Foreign Studies University, Beijing, China • Master’s Degree in World Economics - Nan kai University, Tianjin, China • Master in Finance – London Business School, London 851 | Professional Experience in the Last Ten Years Relevant to the Position (before taking office): • From March 2012 to December 2013 - Partner to RH Regent Investment Management Co Ltd (Shanghai) • From February 2015 to February 2017 - Non-executive Member of the Board of Directors of Luz Saúde, S.A. • From September 2015 to February 2017 - Non-executive Member of the Board of Directors of Fidelidade Assistência - Companhia de Seguros, S.A. • From September 2015 to February 2017 - Non-executive Member of the Board of Directors of Multicare - Seguros de Saúde, S.A. • From October 2016 to March 2017 - Non-Executive Member of the Board of Directors of the company Chiado (Luxembourg), S.à.r.l. • On 9 January 2017 he was co-opted by the Board of Directors of the Bank to exercise the functions of non-executive Director, until the end of the triennial (2015/2017). • From 30 May 2018 to 5 September 2022 - Member of the Board of Directors of Banco Comercial Português, S.A. • From 24 July 2018 to 5 September 2022 - Chairman of the Committee for Corporate Governance, Ethics and Sustainability • From 24 July 2018 to 5 September 2022 - Member of the Committee for Nominations and Remunerations José Pedro Rivera Ferreira Malaquias Personal Data • Date of Birth: 24 May 1958 • Nationality: Portuguese Positions held at the Bank • Member of the Board of Directors • Member of the Committee for Corporate Governance, Ethics and Sustainability Positions held outside the Group • Partner - Abreu Advogados, Sociedade de Advogados Academic and Specialised Qualifications • Licentiate Degree in Law, Faculty of Law, University of Lisbon • Post Graduate Degree in EU Law Collége d'Europe - Bruges • 24th Senior Management Program - AESE- Business School Professional experience in the last 10 years relevant to the position (before taking office) • From 1988 to 2023 - Legal Adviser - Portuguese Banking Association Lingzi Yuan (Smilla Yuan) Personal Data • Date of Birth: 03 March 1975 • Nationality: Chinese Positions held at the Bank • Member of the Board of Directors • Chairwoman of the Committee for Nominations and Remunerations 2022 REPORT & ACCOUNTS | 852 Academic and Specialised Qualifications • AEMBA, China European International Business School • Bachelor’s degree, Department of Economics, Fudan University Professional Experience in the Last Ten Years Relevant to the Position (before taking office): • From January 2010 to July 2014 - Responsible for Talent and Benefits, Towers Watson • From June 2014 to March 2016 - CEO, China, Towers Watson • From March 2016 to January 2018 - CEO, China, Willis Towers Watson • From January 2018 to September 2020 - CEO, Greater China, Willis Towers Watson • From September 2020 to November 2021 - Head of Cabinet for CHRO; Head of Organization Development Department, ByteDance Global • From November 2021 to November 2022 - Deputy Manager in Lark Business at ByteDance Global 853 | Members of the Board of Directors (Members of the Audit Committee) Detailed curricula are available at the Bank’s website, on English and Portuguese, on the page with the following address https://ind.millenniumbcp.pt/pt/Institucional/governacao/) Cidália Maria da Mota Lopes Personal Data • Date of Birth: 24 October 1971 • Nationality: Portuguese Positions held at the Bank • Member of the Board of Directors • Chairwoman of the Audit Committee Positions held outside the Group • Professor at the Coimbra Business School – ISCAC on tax issues • Invited Professor at Faculty of Law/IDET– Universidade de Coimbra Coimbra • Member of the Scientific Board of the Portuguese Fiscal Association (AFP) • Member of the Scientific Board of the Coimbra Business School - ISCAC Academic and Specialised Qualifications • Doctorate degree in Management from the Faculty of Economics of the University of Coimbra • Master’s Degree in European Economics from the Faculty of Economics from the University of Coimbra • Licentiate Degree in Economics from the Faculty of Economics of the University of Coimbra • Post-graduation in Banking, Stock Exchange and Insurance Law from the Faculty of Law of the University of Coimbra. • Specialized short tax course on Tax Policy and Tax Administration at Economics Faculty in Bath University, United Kingdom • Participation in Advanced Programs for Non-Executive Directors promoted by Instituto Português de Corporate Governance (IPCG), by Instituto de Formação Bancária (IFB) and by AESE Business School and Millennium BCP Professional Experience in the last 10 Years Relevant to the Position (before taking office): • Since 1994 – Coordinating Professor at the Coimbra Business School – ISCAC on tax issues • Since 2009 – Invited Professor at the Faculty of Law from the University of Coimbra in the Post- graduate degree on Tax Law • 2009 – 2019 - Invited Professor at the Faculty of Economics from the University of Coimbra in the Master’s degree on Accounting and Finance • 2000 – 2020 - Trainer at the Portuguese Association of Certified Accountants (OCC) • 2010 – 2014 - Manager of the Business School - Escola de Negócios de Coimbra (Coimbra Business School) • Since 1999 - 2022 - Published books and articles on tax issues, namely: Intangíveis – perspetiva contabilística e fiscal (co-author), 2020, Almedina; Regime especial dos ativos por impostos diferidos em Portugal, in: Revista de Finanças Públicas e Direito Fiscal, Year 10, Volume I, pp. 57-85; Ensaios sobre Regimes de Simplificação Tributária (co-author), 2021, Almedina; A Fiscalidade das Sociedades Insolventes (co-author), 2017, Almedina; A Joana e os Impostos – uma história de educação fiscal na Universidade, 2017, Ordem dos Contabilistas Certificados; Fiscalidade – Outros Olhares (coordination), 2013, Vida Económica; Quanto Custa Pagar Impostos em Portugal?, 2008, Almedina; 25 anos da Introdução do IVA em Portugal (coordination), 2013, Cadernos de Ciência e Técnica Fiscal 213; A Fiscalidade das Pequenas e Médias Empresas, 1999, Vida Económica. • From May 2015 to 30 May 2018 – Member of the Audit Committee of BCP 2022 REPORT & ACCOUNTS | 854 • From May 2015 to 30 May 2018 – Member of the Board of Directors of BCP • From 30 May 2018 to 5 September 2022 - Member of the Board of Directors of BCP • From 22 May 2019 to 5 September 2022 - Chairwoman of the Audit Committee • From 6 September 2022 to 20 December 2022 - Member of the Committee for Risk Assessment Fernando da Costa Lima Personal Data • Date of Birth: 19 December 1956 • Nationality: Portuguese Positions held at the Bank • Member of the Board of Directors • Member of the Audit Committee • Chairman of the Committee for Risk Assessment Positions held outside the Group • Non-Executive Director of Euronext Lisbon • Invited Professor at the Faculty of Economics of Oporto University • Chairman of the General Meeting of Shareholders of OBEGEF - Observatory of Economics and Fraud Management Academic and Specialised Qualifications • Licentiate Degree in Economics, from the School of Economics of the University of Porto • Master in Business Administration from Universidade Nova de Lisboa Professional Experience in the Last Ten Years Relevant to the Position (before taking office): • From 2006 to 2017 – Central-Manager - Banco Português de Investimento S.A. • From 2009 to 2017 - Responsible for Coordinating the Investment Banking Area at Banco de Fomento de Angola • From 2012 to 2017 – Non-Executive Director of Banco Português de Investimento, S.A. • From 2018 to 31 December 2019 - Non-executive director of Netinvoice, S.A. • From 23 April 2019 to 5 September 2022 - Member of the Board of Directors of Banco Comercial Português, S.A. • From 05 December 2019 to 05 September 2022 - Member of the Audit Committee of Banco Comercial Português, S.A. Valter Rui Dias de Barros Personal Data • Date of Birth: 19 September 1963 • Nationality: Angolan Positions held at the Bank • 2nd Vice-Chairman of the Board of Directors • Member of the Audit Committee • Member of the Remunerations and Welfare Board • Member of the Committee for Nominations and Remunerations • Member of the Strategic Board 855 | Positions held outside the Group • Since November 2019 - Chairman of the Board of Directors of Recredit - Gestão de Activos, S.A. (Angola) Academic and Specialised Qualifications • Corporate Senior Management Programme - AESE and IESE, Luanda (Angola) • Master’s Degree in Electrotechnics Engineering and Computing from the Faculty of Engineering of the University of Porto • Licentiate degree in Mathematics Applied to Computer Science - Faculty of Sciences of the University of Porto Professional Experience in the Last 10 Years Relevant to the Position (before taking office): • From December 2006 to December 2016 – Executive Director of Banco de Desenvolvimento de Angola, Luanda (Angola) • From June 2017 to March 2018 - Advisor of the Minister of Finance - Ministry of Finance, Luanda (Angola) • From June 2018 to November 2019 - Chairman of the Board of Directors of Instituto de Gestão de Activos e Participações do Estado (IGAPE), Angola • From 30 May 2018 to 5 September 2022 - 2nd Vice-Chairman of the Board of Directors of Banco Comercial Português, S.A. • From 24 July 2018 to 5 September 2022 - Member of the Committee for Corporate Governance, Ethics and Sustainability of Banco Comercial Português, S.A. Altina de Fátima Sebastian Gonzalez Villamarin Personal Data: • Date of Birth: 13 July 1955 • Nationality: Portuguese Positions held at the Bank • Member of the Board of Directors • Member of the Committee for Risk Assessment • Alternate Member of the Audit Committee Positions held outside the Group • Since 2009 - Independent Board member and Member of the Audit Committee - San Jose Group, Company listed on the Madrid Stock Exchange. • Since 2012 - Member of the Advisory Board – Expansión y Actualidad Economica • Since 2013 - Member of the World Portuguese Network - Council of the Portuguese Diaspora • Since 1998 - Deputy Professor - Department of Financial Management and Accounting; Member of the Jury, Premio Joven de Economía, (April 2012); Manager of the Summer Course, UCM-Fundación Ramón Areces: “La reconfiguración del sector bancario español ante la nueva regulación financiera: alcance e impacto de la crisis” (julho 2012) – Complutense University • 2019 and 2022 - Invited Professor of Permanent Executive Programs for Members of the Board of Directors of Cooperative Banks – Instituto Español de Analistas Financeiros • Since 1992 Invited professor at the Catholic Lisbon Business & Economics, Program MBA, Advanced program in Finances, Advanced program in Banking Management, Professor of the Executive Master’s degree in Banking Management - Banco Espírito Santo, Professor and Manager of an "in-company for Caixa Geral de Depósitos, Professor of banking Programs in Luanda – Angola and 2022 REPORT & ACCOUNTS | 856 Professor of Banking Programs in Maputo- Mozambique - Universidade Católica Portuguesa (Portuguese Catholic University" Academic and Specialised Qualifications: • Bachelor's Degree in Business Management at Universidade Católica Portuguesa (Portuguese Catholic University) • Doctor in Business Management Recipient of a scholarship from Fundação Calouste Gulbenkian at IESE, University of Navarra • Post-Doctorate student Follows some MBA of the second year of Finances and Doctoral Seminars Develops and investigation on "Gap management and profitability at banks of different size”, supervised by the Professor Dwight Crane (Professor of Finances at HBS) at Harvard Business School. • Research Assistant to Professor Samuel L. Hayes III, Jacob H. Schiff Professor of Investment Banking at Harvard Business School • Summer Course on Management Research at Real Colégio Complutense Harvard • Complexities of Board Chairing in Modern Governance in Banking - INSEAD/ IFB Professional experience in the last 10 years relevant to the position (before taking office): • From April 2018 to December 2021 – Non-executive Director, Member of the Audit Committee and chairwoman of the Governance Committee - Caixa Geral de Depósitos • From 2015 to April 2018 - Independent Member of the sate-owned bank and Chairwoman of the Audit Committee – Instituição Financeira de Desenvolvimento • Since 2010 to 2017 - External adviser – Associação de Bancos Portugueses • Partner - Adviser for actuarial and financial matters – Diagnostico & Soluciones, S.L. • From 2012 to 2019 - Invited Professor, Professor of the Program "in company" - Banco de Gauyaquil, Professor of the “in company” Program - Banco Amazonas, Professor of the “in company” Program - Banco General Rumiñhaui, Professor of the “in company” Program - Group Banco del Pacífico and Invited Speaker at the conference: "The financial crisis and its impact on the international banking system”- Quito and Guayaquil – IDE Business School – Ecuador • From 1993 to 2014 - Associate Professor of the Finance Department and Professor of Financial Institutions of the Master’s degree in Financial Analysis – Universidade Carlos III • From 1992 to 2015 published several books: Analysis of Historical Returns of Stocks, Treasury-Bills, Government and Corporate Bonds in the Spanish Capital Markets” (1992), “Managing commercial banks: new challenges in a global environment”, 1st Edition, Madrid (1998), “The new banking strategies in the EMU” with prologue of Eugenio Domingo Solans member of the European Central Bank (1999), “Managing commercial banks: new challenges in a global environment”, 2nd Edition (2002), “The financial System of the XXI century”, included in the XXI Encyclopedia (2002), “Management of Financial Institutions”, on-line course of Finance Master (2003), “Trends in the Spanish financial system and opportunities for the credit cooperatives”, in the book Banca Cooperativa (2007), “Managing commercial banks: key factors in a competitive environment”, 3rd Edition (2008), “Economy and bank management”, 1st Edition, Madrid: Editorial Pirámide (2015) and “Economy and bank management”, 1st Edition, Lisbon: Universidade Católica Editora (2015). 857 | Executive Members of the Board of Directors (Detailed curricula are available at the Bank’s website, on the page with the following address: https:// ind.millenniumbcp.pt/en/Institucional/governacao/Pages/governacao.aspx) Miguel Maya Dias Pinheiro Personal Data • Date of Birth: 16 June 1964 • Nationality: Portuguese Positions held at the Bank • 3rd Vice-Chairman of the Board of Directors • Chairman of the Executive Committee • Member of the Strategy Board Direct Responsibilities • CEO's Office • Communication Division • Human Resources Division • Credit Division • Economic Studies, Sustainability and Crypto-assets Division Positions held in the Group • Non-executive Chairman of the Board of Directors of Banco ActivoBank, S.A. • Manager of the company BCP África, SGPS, Lda. • Member of the Board of Directors and Chairman of the Remunerations and Welfare Board of BIM - Banco Internacional de Moçambique, S.A. • Member of the Supervisory Board of Bank Millennium, S.A. (Poland) • Vice-Chairman of the Board of Curators of Fundação Millennium bcp. Positions held outside the Group • Member of the Senior Board of the Alumni Clube ISCTE • Member of the Advising Board of INDEG/ISCTE Executive Education • Member of the Advisory Board of BCSD Portugal – Conselho Empresarial para o Desenvolvimento Sustentável, representing Banco Comercial Português, S.A. • Vice-Chairman of the Management Board of APB - Associação Portuguesa de Bancos, representing Banco Comercial Português, S.A. Academic and Specialised Qualifications • Licentiate Degree in Corporate Organisation and Management from Instituto Superior das Ciências do Trabalho e da Empresa (ISCTE) • Corporate Senior Management Programme (PADE) - AESE • Senior Staff Training Advanced Programme - INSEAD • Corporate Governance Programme - AESE Professional Experience in the Last 10 years relevant to the position (before taking office): • From 28 February 2012 to 11 May 2015 - Member of the Board of Directors and Vice-Chairman of the Executive Committee of Banco Comercial Português, S.A. 2022 REPORT & ACCOUNTS | 858 • From March 2012 to March 2018 - Vice-Chairman of the Boards of Directors of BIM - Banco Internacional de Moçambique • From 23 April 2012 to 28 April 2016 – Chairman of the Board of Directors of Banco Millennium Angola, S.A. (Angola) . • From 15 June 2012 to 16 June 2015 - Member of the Supervisory Board of Portugal Capital Ventures - Sociedade de Capital de Risco S.A. (in representation of Banco Comercial Português, S.A.) • From 2 August 2012 to 14 October 2019 – Chairman of the Board of Directors of Interfundos – Gestão de Fundos de Investimento Imobiliário, S.A., (Later changed its corporate name to Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A.) • From May 2013 to May 2018 - Chairman of the Wage Committee of Seguradora Internacional de Moçambique • From 11 May 2015 to 30 May 2018 - Member of the Board of Directors and appointed Vice-Chairman of the Executive Committee (2015/2017 term-of-office) • From May 2015 to May 2018 - Chairman of the Wage Committee of BIM - Banco Internacional de Moçambiques, S.A. • From January to May 2018 - Member of the Restructuring Committee of PNCB – Plataforma de Negociação Integrada de Créditos Bancários, ACE • From 12 May 2015 to 30 October 2018 - Chairman of the Board of Directors of BCP Capital – Sociedade de Capital de Risco S.A. • From 28 April 2016 to 1 November 2022 - Vice-Chairman of the Board of Directors of Banco Millennium Atlântico, S.A • From 30 May 2018 to 5 September 2022 – 3rd Vice-Chairman of the Board of Directors and Chairman of the Executive Committee of Banco Comercial Português, S.A. • On 4 May 2022, elected 3rd Vice-Chairman of the Board of Directors and appointed Chairman of the Executive Committee of Banco Comercial Português, S.A., for the 2022/2025 term-of-office. Miguel de Campos Pereira de Bragança Personal Data • Date of Birth: 25 June 1966 • Nationality: Portuguese Positions held at the Bank • Member of the Board of Directors • Vice-Chairman of the Executive Committee Direct Responsibilities • Investor Relations Division • Accounting and Consolidation Division • Research, Planning and ALM Division • Management Information Division • Tax Advisory Division • Legal and Litigation Advisory Division • Means of Payment and Acquiring Division • Bank Millennium (Poland) • Banco ActivoBank, S.A. Positions held in the Group • Non-executive Vice-Chairman of the Board of Directors of Banco ActivoBank, S.A. 859 | • Manager of the company BCP África, SGPS, Lda. • Member of the Supervisory Board of Bank Millennium, S.A. (Poland) • Manager of the company Millennium bcp Participações, SGPS, Sociedade Unipessoal, Lda. Positions held outside the Group • Non-executive Director of the Board of Directors of SIBS, SGPS, S.A. and SIBS Forward Payment Solutions, S.A. • Non-Executive Director of UNICRE – Instituição Financeira de Crédito, S.A., (in representation of Banco Comercial Português, S.A.) • Member of the General Board of AEM- Associação de Empresas Emitentes de Valores Cotados em Mercado Academic and Specialised Qualifications • Licentiate Degree in Business Administration and Management from Universidade Católica Portuguesa Portuguesa (Portuguese Catholic University) • INSEAD, Fontainebleau, MBA Programme. Henry Ford II Award, attributed to the students with the highest final grade point average Professional Experience in the Last 10 years relevant to the position (before taking office): • From 28 February 2012 to 5 September 2022 – Member of the Board of Directors and Vice-Chairman of the Executive Committee of Banco Comercial Português, S.A. • From 2012 to 2022 - Member of the Supervisory Board of Bank Millennium (Poland) • From 26 June 2012 to 30 December 2019 - Chairman of the Board of Directors of Banco de Investimento Imobiliário, S.A. • From 13 February 2013 to 21 February 2020 - Member of the Board of Casa de Bragança. • From 2018 to March 2023 - Non-executive Director of UNICRE- Instituição Financeira de Crédito, S.A., representing Banco Comercial Português, S.A. • From 2018 to 2021 - Non-executive Director of SIBS Forward Payment Solutions, S.A. João Nuno de Oliveira Jorge Palma Personal Data • Date of Birth: 16 February 1966 • Nationality: Portuguese Positions held at the Bank • Member of the Board of Directors • Vice-Chairman of the Executive Committee Direct Responsibilities • International, Treasury & Markets Division • Companies and Corporate Division North • Companies and Corporate Division South • Large Corporates Division • Investment Banking Coordination Divisions • Business & Institutional Marketing Divisions • Private Banking Division • Asian Desk 2022 REPORT & ACCOUNTS | 860 • BIM - Banco Internacional de Moçambique, S.A.; Positions held in the Group • Member of the Board of Directors of BIM - Banco Internacional de Moçambique, S.A. • Chairman of the Committee for Nominations and Remunerations and Member of the Remunerations and Welfare Board of BIM - Banco Internacional de Moçambique, S.A. Positions held outside the Group • Member of the Management of BCSD - Conselho Empresarial para o Desenvolvimento Sustentável. • Vice-Chairman of the General Board of CIP- Confederação Empresarial de Portugal Academic and Specialised Qualifications • Licentiate Degree in Economics from the School of Economics of Universidade Nova de Lisboa (FEUNL). • Postgraduate studies in Business - PDE-VII Programa de Direção de Empresas (Companies Management Programme) from AESE Business School in collaboration with lESE - Instituto de Estudos Superiores de Empresa of the University of Navarra (PADE) - AESE. Professional Experience in the last 10 years relevant to the position (before taking office): • From January 2012 to July 2013 – Non-executive Chairman of the Board of Directors of Sogrupo IV – Gestão de Imóveis, ACE • From January 2012 to July 2013 - Non-Executive Chairman of the Board of Directors of Caixa Imobiliário, S.A. • From January 2012 to July 2013 - Non-Executive Chairman of the Board of Directors of Imocaixa, S.A. • From January 2012 to August 2016 - Member of the Executive Board of Directors (Chief Financial Officer) of CGD – Caixa Geral de Depósitos, S.A. • From April 2012 to November 2013 - Non-Executive Member of the Board of Directors of PT – Portugal Telecom, S.A • From April 2012 to November 2016 - Non-Executive Member of the Board of Directors of BCI – Banco Comercial de Moçambique, S.A. • From August 2013 to August 2016 - Non-Executive Chairman of the Boards of Directors of Caixa Seguros e Saúde, SGPS, S.A. • From September 2013 to August 2016 - Non-Executive Chairman of the Board of Directors of Banco Caixa Geral, S.A. (Spain) • From January 2014 to August 2016 - Non-Executive Chairman of the Board of Directors of Sogrupo Compras e Serviços Partilhados, SGPS, S.A. • From May 2014 to August 2016 - Non-Executive Vice-Chairman of the Board of Directors of Cares- Companhia de Seguros, S.A. • From May 2014 to August 2016 - Non-executive Vice-Chairman of the Board of Directors of Multicare - Seguros de Saúde, S.A. • From May 2014 to August 2016 - Non-executive Vice-Chairman of the Board of Directors of Fidelidade - Companhia de Seguros, S.A. • From May 2014 to August 2016 - Non-Executive Chairman of the Boards of Directors of Caixa Gestão de Activos, SGPS, S.A. • From June 2014 to August 2016 - Non-Executive Member of the Board of Directors of Parcaixa, S.A. • From November 2014 to August 2016 - Non-Executive 1st Vice-Chairman of the Board of Directors of Banco Caixa Geral Totta Angola, S.A. (Later changed its corporate name to Banco Caixa Geral Angola, S.A.) • From December 2014 to August 2016 - Non-Executive member of the Board of Directors of Partang, S.A. • From December 2014 to August 2016 - Non-Executive Vice-Chairman of the Board of Directors of Banco Caixa Geral Brasil, S.A. 861 | • On 9 January 2017 he was co-opted by the Board of Directors to exercise the functions of Member of the Board of Directors and Vice-Chairman of the Executive Committee until the end of the term-of- office (2015/2017). • From 17 July 2018 to 17 February 2020 - Chairman of the Audit Committee of BIM - Banco Internacional de Moçambique, S.A. • From 20 June 2017 to 2 November 2021 - Chairman of the Board of Directors of Banque Privée BCP (Suisse) S.A • On 30 May 2018, elected Member of the Board of Directors and appointed Vice-Chairman of the Executive Committee of Banco Comercial Português, S.A., for the 2018/2021 term-of-office • From 30 May 2018 to 5 September 2022 - Member of the Board of Directors of BCP • From 30 May 2018 to 5 September 2022 - Vice-Chairman of the Executive Committee of BCP José Miguel Bensliman Schorcht da Silva Pessanha Personal Data • Date of Birth: 30 July 1960 • Nationality: Portuguese Positions held at the Bank • Member of the Board of Directors • Member of the Executive Committee Direct Responsibilities • Risk Office • Compliance Office • Rating Division • Office for Regulatory and Supervision Monitoring • Office for the Validation and Monitoring of Models • Personal Data Protection Office • Banco Millennium Atlântico, S.A. (Angola) Positions held in the Group • Non-executive member of the Board of Directors of Bank ActivoBank, S.A. • Vice-Chairman of the Board of Directors and Chairman of the Audit Committee of Millennium bcp Ageas Grupo Segurador, SGPS, S.A. • Vice-Chairman of the Board of Directors and Chairman of the Audit Committee of Ocidental - Companhia Portuguesa de Seguros de Vida, S.A. • Vice-Chairman of the Board of Directors and Chairman of the Audit Committee of Ageas – Sociedade Gestora de Fundos de Pensões, S.A. • Member of the Board of Directors and Chairman of the Audit Committee of BIM - Banco Internacional de Moçambique, S.A. • Member of the Supervisory Board of Bank Millennium, S.A. (Poland) • Vice-Chairman of the Board of Directors and Chairman of the Audit Committee of BIM - Banco Internacional de Moçambique, S.A. Academic and Specialised Qualifications • 1982 – Licentiate Degree in Economics, Universidade Católica Portuguesa • 1984 – Master’s Degree in Operational Investigation (academic portion) from Instituto Superior Técnico (Lisbon) • 1986 - Master’s Degree in Economics from Université Catholique de Louvain (Belgium) 2022 REPORT & ACCOUNTS | 862 • PADE (Corporate Senior Management Programme) at Associação de Estudos Superiores de Empresa (AESE) • Eureko Program in INSEAD • Invotan scholarship (NATO) • He received a scholarship linked to the Award Joseph Bech, attributed by the Government of Luxembourg for commitment with the European Union Professional Experience in the last 10 years relevant to the position (before taking office): • From 2003 to 2015 - Group Risk Officer of Millennium BCP • 2014 – Professor responsible for "Banking in a Global Context" - Universidade Católica Portuguesa • On 11 May 2015, elected Member of the Board of Directors and appointed Member of the Executive Committee of Banco Comercial Português, S.A. (2015/2017 term-of-office). • From 26 April 2018 to 2 November 2021 - Member of the Board of Directors of Banque Privée BCP (Switzerland) • From 30 May 2018 to 05 September 2022 - Member of the Board of Directors of Banco Comercial Português, S.A. • From 30 May 2018 to 05 September 2022 - Member of the Executive Committee of Banco Comercial Português, S.A. Maria José Henriques Barreto de Matos de Campos Personal Data • Date of Birth: 21 August 1966 • Nationality: Portuguese Positions held at the Bank • Member of the Board of Directors • Member of the Executive Committee Direct Responsibilities • Specialised Recovery Division • Retail Recovery Division • Customer Intelligence Division • Direct Banking Division • Operations Division • IT and Technology Division • Procurement and Logistics Division • Information Security Division • Direct Banking Division Companies • Digital Transformation Office • Companies Banking Division • Millenniumbcp Prestação de Serviços, ACE Positions held in the Group • Chairwoman of the Board of Directors of Millennium bcp - Prestação de Serviços, ACE Academic and Specialised Qualifications • Licentiate Degree in Electronic Engineering and Telecommunications from Universidade de Aveiro 863 | Professional Experience in the last 10 years relevant to the position (before taking office): • From July 2011 to April 2018 - Member of the Board of Directors of Bank Millennium S.A., (Poland) • From 30 May 2018 to 5 September 2022 - Member of the Board of Directors of BCP • From 30 May 2018 to 5 September 2022 - Member of the Executive Committee of BCP Rui Manuel da Silva Teixeira Personal Data • Date of Birth: 04 September 1960 • Nationality: Portuguese Positions held at the Bank • Member of the Board of Directors • Member of the Executive Committee Direct Responsibilities • Retail Division • Marketing and Network Division • Wealth Management Division • Specialised Credit and Real Estate Division • Specialised Monitoring Division • Interfundos – Sociedade Gestora de Organismos de Investimento Coletivo, S.A. • Millenniumbcp Ageas Grupo Segurador, SGPS, S.A. Positions held in the Group • Member of the Board of Directors of Millenniumbcp Ageas Grupo Segurador, SGPS, S.A. • Member of the Board of Directors of Ocidental - Companhia Portuguesa de Seguros Vida, S.A. • Member of the Board of Directors of Ageas – Sociedade Gestora de Fundos de Pensões, S.A. • Chairman of the Board of Directors of Interfundos – Sociedade Gestora de Organismos de Investimento Coletivo, S.A. Positions held outside the Group • Chairman of the Board of the General Meeting of the Associação Porto Business School, representing Banco Comercial Português Academic and Specialised Qualifications • Licentiate Degree in Electronic Engineering from the School of Engineering of University of Oporto • Specialisation Course in Industrial Management from INEGI – Instituto de Engenharia Mecânica e Gestão Industrial Professional Experience in the Last Ten Years Relevant to the Position (before taking office): • From 21 January 2012 to 19 October 2017 - Member of the Board of Directors of UNICRE – Instituição Financeira de Crédito, S.A., (representing Banco Comercial Português, S.A.) • From 2012 to 2018 - Member of the Supervisory Board of Bank Millennium, S.A. (Poland) • From 18 April 2011 to 11 May 2015 - Member of the Board of Directors and of the Executive Board of Banco Comercial Português, S.A. • From 21 March 2012 to 26 April 2021 - Member of the Remunerations Committee of SIBS, SGPS, S.A. and SIBS Forward Payment Solutions, S.A., as representative of Banco Comercial Português, S.A. • From 20 of April 2012 to 26 March 2018 - Member of the Supervisory Board of Bank Millennium, S.A. 2022 REPORT & ACCOUNTS | 864 • From 19 December 2012 to 18 May 2015 - Chairman of the Board of Directors of Millennium bcp Gestão de Activos – Sociedade Gestora de Fundos de Investimento, S.A. • From 25 January 2013 to 20 July 2017 - Chairman of the Board of Directors of Banque Privée BCP (Suisse) S.A • From 11 May 2015 to 30 May 2018 - Member of the Board of Directors and the Executive Committee of Banco Comercial Português, S.A. • From 26 May 2015 to 31 December 2018 - Chairman of the Board of Directors of Banco ActivoBank, S.A. • From 30 May 2018 to 5 September 2022 - Member of the Executive Committee of BCP • From 17 October 2017 to 29 March 2023 - Member of the Remunerations Committee of Unicre - Instituição Financeira de Crédito, S.A., (representing Banco Comercial Português, S.A.) 865 | ANNEX II CURRICULA VITAE OF THE MEMBERS OF THE REMUNERATION AND WELFARE BOARD OF BANCO COMERCIAL PORTUGUÊS, S.A. (Detailed curricula are available at the Bank’s website, on the page with the following address: https:// ind.millenniumbcp.pt/en/Institucional/governacao/Pages/governacao.aspx) José António Figueiredo Almaça Personal Data • Date of Birth: 22 November 1952 • Nationality: Portuguese Positions held outside the Group • Chairman of the Remuneration and Welfare Board Academic and Specialised Qualifications • “Leading from the Chair”, INSEAD, Fontainenbleau, June 2017 • Specialisation course in "Strategic Management of Insurance Companies" by the Instituto de Ciencias del Seguro, Madrid • PhD in Economic and Business Sciences - Universidad Autónoma de Madrid • Licentiate Degree in Management - UL • Bachelor’s degree in Accounting and Administration - ISCAL Professional experience in the last 10 years relevant to the position (before taking office): • From 2009 to 2012 - Customer Ombudsman of CA-Seguros, Companhia Seguros de Ramos Reais, S.A. • From 2009 to 2012 - Member of the Board of Auditors of Victoria Internacional de Portugal, SGPS, S.A. and Victoria - Seguros, S.A.; Victoria - Seguros de Vida, S.A. • From 2012 to 2019 - Chairman of the Board of Directors of the Autoridade de Supervisão de Seguros e Fundos de Pensões (Insurance and Pension Funds Supervisory Authority); Effective member of the Supervisory Board of EIOPA - European Insurance and Occupational Pensions Authority and ESRB - European Systemic Risk Board • From 2020 to 2021 - Non-executive member of the Board of Directors of Millennium Private Bank, Geneve, Switzerland • In 2021 - Chairman of the Board of Auditors of CEU - Cooperativa de Ensino Universitário Jorge Manuel Baptista Magalhães Correia Please see Annex I - Curricula Vitae of the Members of the Board of Directors of Banco Comercial Português, S.A Valter Rui Dias de Barros Please see Annex I - Curricula Vitae of the Members of the Board of Directors of Banco Comercial Português, S.A. 2022 REPORT & ACCOUNTS | 866 ANNEX III CURRICULA VITAE OF THE MEMBERS OF THE BOARD OF THE GENERAL MEETING OF BANCO COMERCIAL PORTUGUÊS, S.A. (Detailed curricula are available at the Bank’s website, on the page with the following address: https:// ind.millenniumbcp.pt/en/Institucional/governacao/Pages/governacao.aspx) Pedro Miguel Duarte Rebelo de Sousa Position Held at the Bank • Chairman of the Board of the General Meeting (term-of-office: 2020/2023) Academic and Specialised Qualifications • Licentiate Degree in Law from the Faculty of Law of Universidade Clássica de Lisboa • Post-graduate degree in Commercial and Corporate Law - Universidade Pontifícia Católica, Brasil • Master’s degree in Companies Management, from Fundação Getúlio Vargas – Business Administration School, São Paulo, Brazil Management and Supervision positions held in other companies • Chairman of the of Board of Auditors of Federação dos Advogados de Língua Portuguesa • Chairman of the Board of Auditors of Associação dos Amigos do Hospital de Stª Maria Other Relevant Positions • Founder and senior partner of Sociedade Rebelo de Sousa & Advogados (SRS) • Member of the Sub-Committee for Latin America of the Atlantic Council, Washington DC • Chairman of the Board of the General Meeting of Grémio Literário • Chairman of the Board of the General Meeting of A. Santo, SGPS (Group Santo) • Chairman of Círculo Eça de Queiroz – an institution serving the public interest • Chairman of the Portuguese Institute of Corporate Governance • Member of the Remunerations Commission of Novabase S.A. • Director of the Portugal-Netherlands Chamber of Commerce • Chairman of the Board of the General Meeting of Sumolis Group Refrigor • Chairman of the Board of the General Meeting of CTT • Chairman of the Board of the General Meeting of COSEC • Chairman of the Board of the General Meeting of several Institutions and Associations Professional Experience in the last 10 years relevant to the position (before taking office): • From 1985 to 2017 – Curator of the Portuguese Chamber of Commerce, São Paulo, Brazil • From 2004 to 2006 – Chairman of the Board of the General Meeting of PT Internacional • From 2005 to 2006 - Chairman of the Board of the General Meeting of Galp, S.A. • From 2005 to 2011- Member of the Supervisory Board of Banif Investimento, S.A • From 2007 to 2012 – Director of the Portuguese Chamber of Commerce & Industry • From 2009 to 2013 – Chairman of the Supervisory Board of Banco Caixa Geral Brasil. S.A. • From 2011 to 2013 – Non-executive Director, Chairman of the Evaluation and Strategy Committee and Member of the Audit Committee of Caixa Geral de Depósitos, S.A. • From 2012 a 2018 – Non-executive member of the Board of Directors of Cimpor- Cimentos de Portugal, SGPS, S.A. 867 | • From 2017 to 2019 – Chairman of the Board of the General Meeting of Banco Comercial Português, S.A. Octávio Manuel de Castro Castelo Paulo Position Held at the Bank • Vice-Chairman of the Board of the General Meeting (term of office: 2020/2023) Academic and Specialised Qualifications • Licentiate Degree in Law from Universidade Lusíada de Lisboa Management and Supervision positions held in other companies • Chairman of the Board of Directors (non -executive) of the Standard Bank de Angola, being Chairman of the Risk, Governance, Credit and Nominations and Remunerations Commissions of said Bank. Other Relevant Positions • Partner of the law firm Rebelo de Sousa & Advogados (SRS), in charge of the Division of M&A, Corporate and Commercial, division that includes also the practice area of TMT (Telecommunications, Media and Technology) • Chairman of the Board of the General Meeting of several Portuguese and Angolan companies being also part of the Board of Auditors of several companies • Advisory services to companies for capital markets operations and in mergers and acquisitions Professional Experience in the last 10 years relevant to the position (before taking office): • Member of the Lawyers Association of Portugal since 1988 and of the Lawyers Association of Angola since 2010 • Member of ICC - International Chamber of Commerce • Coordinated operations for the privatization of state-owned companies, to be listed in the Stock Exchanges of Lisbon, London and New York • Advisory services to companies, open to public investment, or not, in Corporate Governance issues • Chairman of the Board of Auditors of several companies • Author and co-author of several works in the areas of Corporate Law and of Telecommunications Law. • Cooperates with Institutions in Angola, particularly on regulatory issues, namely those related with compliance and risk • He was Chairman of the Board of Auditors of several Portuguese and Angolan companies • From 2017 to 2019 - Vice-Chairman of the Board of the General Meeting of Banco Comercial Português, S.A. 2022 REPORT & ACCOUNTS | 868 2023 Annual Report & Accounts © Millennium bcp www.millenniumbcp.pt Banco Comercial Português, S.A. Registered Office: Praça D. João I, 28 4000-295 Porto Share Capital: Euros 3.000.000.000.00 Registered at the Commercial Registry Office of Oporto under the Single Registration and Tax Identification Number 501 525 882 Investor Relations Division Av. Professor Doutor Cavaco Silva Edifício 1 Piso 0 Ala B 2744-002 Porto Salvo Phone: (+351) 211 131 084 [email protected] Communication Division Av. Professor Doutor Cavaco Silva Edifício 3 Piso 1 Ala C 2744-002 Porto Salvo Phone: (+351) 211 131 243 [email protected] 869 |
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