SEB — Annual Report 2017

Apr 27, 2018

AB SEB bankas Independent auditor's report Annual report and Financial statements for the year ended 31 December 2017

12 March 2018

TABLE OF CONTENTS

	PAGES
INDEPENDENT AUDITOR'S REPORT	3 - 9
CONSOLIDATED ANNUAL REPORT	10-25
FINANCIAL STATEMENTS
INCOME STATEMENT	26
STATEMENT OF COMPREHENSIVE INCOME	27
STATEMENT OF FINANCIAL POSITION	28
STATEMENT OF CHANGES IN EQUITY	29-30
STATEMENT OF CASH FLOWS	31-32
NOTES TO THE FINANCIAL STATEMENTS	33-104

Translation note

Financial statements have been prepared in Lithuanian and English languages. In all matters of interpretation of information, views or opinions, the Lithuanian language version of the financial statements takes precedence over the English language version.

Overall Bank and Group materiality	EUR 5,400 thousand (2016 - EUR 3,600 thousand). The same materiality was applied to both the Bank and the Group.
How we determined it	5% of profit before tax.
Rationale for the materiality benchmark applied	We chose profit before tax as the base benchmark because, in our view, it is the benchmark against which the performance of the Bank and the Group is most commonly measured by users, and it is a generally accepted benchmark. There were no significant non-recurring nature items that affected profit before tax as compared to 2016 when such items existed and we used adjusted profit before tax in our prior year materiality assessment. We chose 5%, which is within the range of acceptable quantitative materiality thresholds for this benchmark.

Key audit matter	How our audit addressed the key audit matter
Impairment of loans and receivables
Refer to Notes 3, 6 and 20-21 to the financial statements on pages 45, 51-53, 60-62 and 72- 79 respectively.	We assessed and tested the design and operating effectiveness of the controls over impairment data and calculations.
We focused on this area because the management makes complex and subjective judgements over both the timing of recognition and the estimation of impairment.	Where impairment was calculated for non-retail exposures, the controls included those over a timely identification of watch list or impaired loans and receivables, a timely review and update of collateral values, the correctness of calculation
For non-retail loans and receivables, a $\alpha$ is $\beta$ and nearesting of the total impointment.	of potential loss amounts, the accuracy of

CONSOLIDATED ANNUAL REPORT OF AB SEB BANKAS GROUP FOR THE YEAR ENDED 31 DECEMBER 2017

1. Reporting period covered by the Consolidated Annual Report

This Consolidated Annual Report (hereinafter the Report) has been prepared for the year ended 31 December 2017. All numbers presented are as of 31 December 2017 or for the year then ended, unless specified otherwise. The Consolidated Annual Report covers consolidated information on AB SEB Bankas (the Bank) and it's subsidiaries UAB "SEB Investicijų valdymas" and UAB "SEB Venture Capital" (as of 31 December 2017 this company was in the process of liquidation, more information is provided in the Note 23 to the Financial Statements) – together referred as the Group.

2. Information on branches and representative offices

As of 31 December 2017, the Bank had 3 branches: AB SEB bankas Eastern Region Branch (address: Europos sq. 1 A, LT-09308 Vilnius), AB SEB bankas Middle Region Branch (address: Laisvės ave. 82/ Maironio str. 17, LT-44250 Kaunas), and AB SEB bankas Western Region Branch (address: Taikos ave. 32, LT-91246 Klaipėda).

The branches consisted of a network of 32 customer service units (5 financial service centers and 27 client service points) all over Lithuania.

3. Objective overview of the Group's status, activities and development

In 2017, AB SEB bankas Group in Lithuania offered a full range of banking services to private individuals and corporate customers as well as financial institutions.

AB SEB bankas Group in Lithuania consisted of AB SEB bankas and two subsidiaries (UAB "SEB investicijų valdymas" and UAB "SEB Venture Capital"). UAB "SEB Venture Capital" was in process of liquidation as of 31 December 2017. Also, there are other SEB Group companies operating in Lithuania, namely: life insurance company UAB "SEB gyvybės draudimas", real estate management company UAB "Litectus", Group's shared service centre in Vilnius ("Skandinaviska Enskilda Banken AB", Vilnius branch), which provides business support services (transactions, IT, human resources administration and accounting) to the SEB Group — its subsidiary companies and subdivisions in twenty countries worldwide.

In 2017, AB SEB bankas Group's assets, income and net profit (if extraordinary items and one-off items are excluded) grew, as well as credit and deposit portfolio.

In 2017, net profit earned by AB SEB bankas was EUR 93.7 million, and that earned by AB SEB bankas Group was EUR 93.0 million. In 2016, net profit earned by AB SEB bankas was EUR 94.5 million, and that earned by AB SEB bankas Group was EUR 93.1 million. If extraordinary gain in 2016 and extraordinary items in 2017 are excluded, net profit of AB SEB bankas Group would increase by 34 per cent.

Equity of AB SEB bankas Group as of 31 December 2017 amounted to EUR 768 million (as of 31 December 2016 – EUR 796 million), i.e. a decrease by 4 per cent resulting from payment of dividend to "Skandinaviska Enskilda Banken AB" in the beginning of the year.

Assets of AB SEB bankas Group as of 31 December 2017 totalled EUR 7.7 billion (as of 31 December 2016 – EUR 7.5 billion), i.e. increased by 3 per cent.

In 2017, AB SEB bankas and AB SEB bankas Group liquidity requirements were met.

Income of the SEB bankas Group in the year 2017, made up EUR 177.9 million, and in the year 2016 – EUR 181.5 million. If extraordinary gain from sales of shares of VISA Europe Limited is excluded, the year 2016 income would make EUR 160.1 million. If the above-mentioned one-off gain is excluded, income of the SEB bankas Group of the year 2017, as compared with the year 2016, increased by 11 per cent.

As of 31 December 2017, net worth of AB SEB bankas Group's credit and lease portfolio totalled EUR 5.7 billion (as of 31 December 2016 – EUR 5.3 billion), i.e. grew by 7 per cent. The mortgage and consumer loans granted by the bank grew by 8 per cent (EUR 408 million), the total new loans issued by AB SEB bankas to individuals and corporate customers per year amounted to EUR 2.19 billion, or more by 15 per cent, as compared with the previous year (EUR 1.90 billion), and the value of loans granted to enterprises increased by 17 per cent (up to EUR 1.73 billion).

AB SEB bankas' deposit portfolio as of 31 December 2017, amounted to EUR 5.4 billion (as of 31 December 2016 – EUR 5.2 billion), i.e. increased by 5 per cent.

Customer behavior was changing and competition in digital banking market was increasing, therefore, in 2017 the Bank remained highly focused on the development of remote services and self-services as well as on digital solutions. During the year, a number of new and improved digital services was offered – an updated mobile application (app) that currently is used by more than 120 thousand customers, possibility to login to the Internet Bank using mobile app Smart ID, issuance of contactless cards, which simplify the payment process.

Taking into account that people prefer to have access to daily banking services by remote means without having to visit a branch (i.e. via the Internet or by phone), AB SEB bankas paid a lot of attention to business processes and services simplification. Private customers can have free of charge video online consultations regarding financial questions at home or at their work places, they can also fill out a Questionnaire for Private Individuals online, while corporate customers have a possibility to sign factoring and lease agreements online with a mobile esignature.

As at the end of the year 2017, AB SEB bankas had 32 customer service units in Lithuania, half of them (16) were financial advisory branches where cash transactions are performed in self-service zones.

As at the end of the year 2017, the number of active users of the SEB Internet Bank reached 456 thousand, i.e. increased by 8 thousand, as compared with the data of the previous year. In the year 2017, 648 thousand of customers at least once logged into SEB Internet Bank, and it shows an increase of 11 thousand, as compared with the year 2016.

Number of card payments by SEB clients was growing – the share of card payments in the year 2017, as compared with the year 2016, increased by nearly 3 per cent.

Customers of AB SEB bankas may use the largest ATM network in Lithuania connecting the ATMs of SEB and Luminor (the former DNB), i.e. 519 ATMs and more than 1,200 shopping centres, where our customers have a possibility to withdraw cash free of charge when making payments for goods by card.

At the end of the year 2017, AB SEB bankas Group had 1,603 employees (at the end of the year 2016 – 1,588).

In 2017, AB SEB bankas Group renewed SEB's Baltic Corporate Sustainability strategy, which sets four main areas of activities and responsibility: promoting innovation and entrepreneurship, clean and transparent banking, sustainable offerings to clients and direct environmental impact. All of this lead to sustainable growth of Baltic economy and society wellbeing.

In 2017, AB SEB bankas Group continued seeking to provide its customers with valuable information that can serve as a support for them in creating added value. A presentation of the Lithuanian Macroeconomic Review publications was arranged to customers, they were informed on financial markets, macroeconomic situation, etc. – there were more than 20 macro comments published publicly and issued 4 Nordic Outlook publications, made by SEB Group analysts. At its website www.seb.lt, AB SEB bankas continued developing news and information portal Infobankas, periodically providing relevant information on finance management issues for private individuals and companies.

In 2017 AB SEB bankas for the fourth time presented its Retirement Readiness Index, Car Affordability Index as well as the results of surveys on the population's financial security and borrowing and saving behaviors.

With the aim to advise young people on finance management issues AB SEB bankas gave them a lot of attention by arranging relevant surveys and presenting the results, reviewing their expectations in terms of saving, finance management. Employees of the Bank visited schools inviting the upper-secondary pupils to interactive discussions on personal finance issues.

AB SEB bankas continued to aim at encouraging people to think about their future pension and about the importance of saving for retirement, therefore the functionality of SEB Internet Bank was increased further. Now at SEB Internet Bank one can easily manage one's pension savings – change pension funds internally in the company, be advised on the most appropriate pension fund, view detailed annual reports and other contractual data, monitor the company's performance with one's investment.

AB SEB bankas continued to focus also on being advisory to businesses, offering recommendations to start-ups and existing companies seeking to develop their business. For the ones dreaming to have or taking their first steps towards creating their own business, in 2017 AB SEB bankas presented its entrepreneurship promotion platform www.eakademija.seb.lt for start-ups where they are offered access to a wide range of relevant interactive information.

In 2017 AB SEB bankas arranged its fourth event Innovations LAB for small and medium enterprises where businesses could find answers as to how to achieve growth, launch innovations, also they had a possibility to try special innovations methodologies.

In 2017 AB SEB bankas carried out its survey among small and medium enterprises Baltic Business Outlook 2017 and presented its results on the expectations of Lithuanian, Latvian and Estonian small and medium enterprises, planned investments and envisaged changes in the number of staff. AB SEB bankas also made its fifth presentation of its Baltic CFO Outlook which surveyed the insights of CFOs regarding potential changes in business environment within the nearest half-year, turnover forecasts and major challenges.

AB SEB bankas Group took part in the implementation of significant social and corporate sustainability projects – for the fifteenth time together with TV3 television it arranged and carried out the Dreams Come True Campaign. Aiming at entrepreneurship promotion and at enhancing financial literacy, AB SEB bankas signed a cooperation agreement with Junior Achievement in Lithuania and jointly organised entrepreneurship camps for 9-12 grade schoolchildren.

AB SEB bankas Group in 2017 won significant global and national awards: SEB was awarded with the title of the Best Bank in Lithuania (The Banker), the Best Private and additionally – Corporate / Institutional Digital Bank in Lithuania, also the Best Corporate / Institutional Digital Bank in Central and Eastern Europe (Global Finance), won the award for the Best Private Banking Services in Lithuania (Euromoney). Also Smart-ID, new personal identification solution for Internet Bank users, which was offered to SEB clients in March 2017, won "Service of the Year 2017". SEB also got the "Best Buy Award" for the best price and quality ratio in banking and finances market.

In 2017, SEB stayed as one of the most attractive employers in Lithuania – according to a survey carried out by daily Verslo Žinios and career portal cv.lt in The Most Attractive Employer election it was ranked number three within large corporates category. In a survey The Most Desirable Employer 2017 carried out by job search portal CV Market, respondents also recognised SEB as one of most desirable employers in Lithuania and gave the second place.

4. Analysis of the Group's financial and non-financial activity results

Volume and changes of the Group's activities are partially reflected by the below data of the balance sheet and profit and loss statements drafted in accordance with the International Financial Reporting Standards (IFRS):

AB SEB bankas group Net profit was stable if compare the year 2017 to the year 2016:

EUR million	2017	2016	Change
Income	178	182	-2%
Costs	(76)	(82)	-8%
Result before losses	102	100	3%
Credit losses	7	(1)	-
Operating result	109	99	10%
Profit tax	(16)	(6)	177%
Net profit	93	93	0%

Income decrease during the year 2017 was related with sale of VISA Europe Ltd share in 2016. Excluding this item income growth would be 11%: increasing lending volumes together with higher margins, lower Deposits guarantee fund (DGF) expenses and net commission income growth (reflecting increased customers' activity) were the main drivers.

The main financial ratios:

	2017	2016	Change
Net profit (EUR million)	93	93	0%
Cost / Income ratio	0.43	0.45	-2 b.p.
New loans (EUR billion)	2.2	1.9	15%
Loans & leasing, net value (EUR billion)	5.7	5.3	7%
Deposits (EUR billion)	5.4	5.2	5%

Lending portfolio increase was caused of increased demand both in private and in business segments.

Some ratios representing the Bank's and the Group 's result are presented in the table below:

	The Group		Ratio		The Bank
31-12-2015	31-12-2016	31-12-2017		31-12-2015	31-12-2016	31-12-2017
0.89 per cent	1.31 per cent	1.21 per cent	Return on Assets	0.94 per cent	1.32 per cent	1.22 per cent
7.55 per cent	12.12 per cent	12.54 per cent	Return on Equity	8.02 per cent	12.34 per cent	12.66 per cent

5. Major events since the end of financial year

At 7th February 2018 government securities (Lithuanian Government Eurobonds) available for sale in amount of EUR 15,902 thousand as of 31 December 2017 have matured. Bonds had fair value hedge relationship, where hedging instrument was interest rate swap. After maturity of bonds, the Bank and the Group does not have any hedging activities.

6. Group's activity plans and forecasts

The AB SEB bankas Group in Lithuania aims at long-term and mutually beneficial relations with all customers of the Group. For this purpose, the Bank implements its strategy to be the Home Bank for its customers, where their daily financial matters are managed. As a relationship bank, AB SEB bankas offers modern and universal banking services and provides them in a professional and convenient way with in-depth understanding of each customer's needs and expectations.

The Group, seeking to implement its said strategy, also, taking into account the objectives of the SEB Group, envisages the following key trends of activities:

• Customer relationship strengthening. To achieve this objective, the bank will further pursue its Home Bank strategy aimed for the bank to become the main bank, i.e. home bank, for its customers – a bank that offers sound solutions that answer the customers' financial needs. Our key focus is on holistic customer relationship by being advisory, valuing simplicity and showing respect. The bank implements this strategy by developing new and attractive services and attractive product offerings to its existing and potential customers based on the needs of relevant customer segments. The bank regularly measures satisfaction of its private individual and corporate customers – Net Promoter Score (NPS);

• Work culture and people. The bank, as before, will aim at creating an atmosphere of mutual trust and respect enabling its employees to improve and reveal their potential to a full extent. For measuring its employee satisfaction, the Bank applies Insight methodology used at the entire SEB group level – it allows assessing employee involvement in the activities of the organisation as well as the employee performance efficiency;
• Operational efficiency improvement. In order to remain an efficiently operating and competitive bank, the Bank plans to have its key focus on the following areas:
• o Income growth, by i) prospecting new income sources, ii) being more advisory, iii) optimising pricing of the Bank's services;
• o To ensure its profitability, the Bank has formed its transfer pricing, based on business capital concept; business capital are resources required for executing a transaction, and which are assessed taking into account the risk level of a relevant transaction. Business capital is attributed to each customer, at the same time to a relevant subdivision of the Bank;
• o Ensuring cost efficiency, by i) rational setting of priorities both for daily and project tasks, ii) undertaking regular stocktaking of the works in progress with the aim to eliminate overlapping of tasks (functions) thus contributing towards improvement of the internal processes of the organisation;
• Risk management improvement. Risk-taking is not a separate objective, rather it is aimed at creating added value to customers and an additional return to shareholders. The Bank's Group applies a reliable risk management system with long-term independent risk control functions since the date of its creation that are supplemented with several advanced internal models and a detailed decision-taking structure, excellent risk awareness among the staff, uniform definitions and principles, risktaking control without exceeding relevant set limits and high degree of transparency in disclosing external factors with key focus on:
• o Monitoring of the bank's Key Risk Indicators (KRIs);
• o Compliance with the requirements of supervisory institutions (e.g., Basel III requirements).

7. Information about the entity's research and development (R&D) activities

AB SEB bankas Group did not undertake any R&D activities.

8. Financial risk management objectives, hedge instruments in case of which hedge accounting is applied as well as the entity's price risk, liquidity risk and monetary risk scale

The Group manages its financial risk as described in section Financial risk management policy in Note 3 to the Year 2017 consolidated financial reporting. Said section includes also a description of financial risk management objectives, hedging transactions applied as well as the Group's credit risk and market risk level.

9. Data on the acquisition/assignment of own shares.

The Bank has none and during the year 2017 did not acquire its own shares. Also, the Bank's subsidiary companies have not acquired the Bank's shares. During the reporting period, the Bank and its subsidiary companies did not buy or sell their own shares.

10. Employees

As of 31 December 2017, the AB SEB bankas Group in Lithuania (AB SEB bankas , UAB "SEB investicijų valdymas" and "SEB Venture Capital") had 1,603 employees (working under labour contracts with and without a fixed term, including those on maternity/paternity leave), i.e. by 1.0 per cent more compared to the end of 2016, when the Group had 1,588 employees. As of 31 December 2017, the number of actually working employees (excluding those on maternity/paternity leave) was 1,411, i.e. 0.8 per cent more than at the end of 2016, when the actual number of the Group's employees was 1,400.

During the year 2017 the number of employees of the Bank alone (working under labour contracts with and without a fixed term, including those on maternity/paternity leave) increased by 0.9 per cent – from 1,578 to 1,592, and the number of the Bank's actually employed employees (excluding those on maternity/paternity leave) was 1,401, i.e. 0.9 per cent more than at the end of 2016, when their number was 1,389.

In the year 2017, the average actual number of the Bank's employees (excluding the number of employees on maternity/paternity leave) was 1,398 employees (in 2016, it was 1,440 employees).

		The Bank		The Group
	31-12-2015	31-12-2016	31-12-2017	31-12-2015	31-12-2016	31-12-2017
Regular employees (working under labour contracts with and without a fixed term, including those on maternity/paternity leave)	1,638	1,578	1,592	1,648	1,588	1,603
Actually number of employees (excluding those on maternity/paternity leave)	1,473	1,389	1,401	1,483	1,400	1,411

Tables below contain information on the Bank's employees' educational background and average monthly wages (before taxes). Labour contracts or collective bargaining agreements do not provide for any special rights or duties of the issuer's employees or of some of them.

The average monthly wages of the managerial staff increased by 5.7 per cent year-on-year (from 3 630 EUR up to 3 838 EUR) and the number of the Bank's managerial staff drop of a 2 per cent (from 152 down to 149).

The average monthly wages of the specialist staff increased by 5.9 per cent year-on-year (from 1 275 EUR up to 1 350 EUR) and the number of the said staff increase of a 1 per cent (from 1,237 up to 1,252).

	Number of employees				Average monthly wages (in EUR)
	31-12-2015	31-12-2016	31-12-2017	31-12-2015	31-12-2016	31-12-2017
Managerial staff	183	152	149	3,407	3,630	3,838
Specialists	1,290	1,237	1,252	1,220	1,275	1,350
In total	1,473	1,389	1,401	-	-	-

11. Arrangements between the bank and members of its bodies or employees

On 25 January 2016, the administration of the Bank and representatives of the Bank employees signed an updated collective bargaining agreement which will be valid until 1 January 2019. The present Agreement superseded the Bank's collective bargaining agreement that was effective since 27 January 2014. The collective bargaining agreement regulates labour relations as well as terms and conditions, defines mutual obligations of the employer and the employees, additional incentive measures for the employees as well as other labour relations terms and conditions on which the employees and the employer have mutually agreed, for instance, on a sum-total working hour's time, calculation of the employment record, additional vacations, etc. The collective bargaining agreement has been signed by and between the administration of SEB Bank and representatives of the labour council. The labour council of the Bank consists of 15 employees of the Bank elected by secret vote holding different positions at the Bank. The collective bargaining agreement includes the terms and conditions of work and the aspects on which it may be directly agreed with the employer.

Consultations with the Bank's administration is one of the main areas activities of the labour council. The labour council periodically meets with the president of the Bank or his delegated representatives of other units. At such meetings, implementation of the provisions of the collective bargaining agreement, future changes, also questions as well as observations from employees to members of the labour council are discussed.

There are no separate arrangements regarding severance pays executed with the Issuer's bodies, members of committees or employees, should they resign or be dismissed without a motivated reason.

12. Information on the Remuneration policy and its implementation

The information has been drawn up and announced implementing the requirements of Item 14 of Resolution of the Board of the Bank of Lithuania 'Regarding minimum requirements for policies of remuneration to credit institution and of financial brokerage companies employees' No. 03-82, dated 8 May 2015'.

The SEB Group has its approved remuneration policy, which aligned with the remuneration policy of the Bank's shareholder Skandinaviska Enskilda Banken AB (publ). Equally the remuneration policy implements legal acts of the Board of the Bank of Lithuania regulating the requirements for the remuneration policy.

The SEB Group's vision is to deliver world-class service to our customers. Implementation of this vision is important for the Group to attract, retain, and develop talented employees and to reward them. The goal of the Group's Remuneration Policy is to establish the main principles of pay for work, seeking to reward for a sustainable, long-term value-added creation that meets interests of shareholders and investors. The Policy shall promote sound and effective risk management as well as desired performance, conduct and behaviour. Further, the Policy shall prevent the risk that the remuneration models drive excessive risk-taking or conflicts of interest detriment to the best interest of SEBs clients. As well as, the Group aims that the remuneration to its employees is competitive in the markets and segments where the Group operates in order to motivate high performing employees.

Information concerning the decision-making process used for determining the remuneration policy, including information on the remuneration committee (composition and mandate)

The Group is guided by the remuneration policy that was approved by the Bank's supervisory council on 6 February 2017. All of the Group companies have implemented the remuneration policy requirements. When developing said remuneration policy, no services of external advisers were resorted to.

The Bank's Human Resources Department together with the Compliance and Risk control units, annually reviews the Group's remuneration policy and submits proposals on the policy changes. The remuneration policy is approved by the Bank's supervisory council, upon approval of the Group's remuneration committee. The management board of the Bank is responsible for the implementation of the remuneration policy.

Remuneration and Human Resources Committee (31 December 2017)

The Remuneration and Human Resources Committee ('Remuneration committee') provides assistance to the supervisory council regarding remuneration, leadership, business continuity and other issues related to the staff as well as proposes candidates to the vacant Bank's bodies and recommends to discuss them in the respective Bank's bodies. Remuneration committee also performs other functions provided for by the remuneration committee regulations and relevant legal acts.

Candidates to members of the remuneration committee are approved by the supervisory council of the Bank. Persons related to the Bank or its subsidiary companies by labour relations as well as members of the Bank's management board may not be elected chairman or members of the remuneration committee.

None of the members of the remuneration committee has shares in the Bank.

KNUT JONAS MARTIN JOHANSSON

Skandinaviska Enskilda Banken AB (publ) Head of Business Support Division.

RIHO UNT

Skandinaviska Enskilda Banken AB (publ) Head of Baltic Division.

MATS EMIL TORSTENDAHL

Skandinaviska Enskilda Banken AB (publ) Executive Vice President, Co-head of Corporate & Private Customers.

UAB "SEB Investicijų valdymas" has no remuneration committee, therefore, the functions of a Remuneration Committee provided for by legal acts are performed by the Supervisory Council of UAB "SEB Investicijų valdymas".

Information on the relation between the remuneration and performance results

SEB Group continuously follows up and secures that the variable remuneration models do not put the employees in conflict of interest with its customers, promote appropriate code of conduct behaviour and do not incentivise excessive risk taking. SEB's control functions shall support this follow up. The Remuneration Committee shall in consultation with the Risk and Capital Committee examine whether incentives provided by the remuneration systems appropriately take into consideration risk, capital, liquidity and the likelihood and timing of earnings.

Business performance results shall be established by combining the individual performance and balanced risk taking. Remuneration shall be established for encouraging both immediate results, as well as long term results, and for encouraging long-term strategic decisions to ensure a sustained business performance. Total remuneration paid for a specified period shall be established taking into consideration several year results and shall not jeopardize the ability for SEB to achieve a positive result of the Bank on the aggregated level during a business cycle.

Individual evaluation is used as a foundation for setting group employee's remuneration. Individual performance shall be evaluated based on the financial and non-financial indicators within the SEB's target areas derived from the applicable business plan and the ambition to deliver world-class service to our customers. Individual behaviour shall be evaluated based on the SEB's core values as a starting point.

The most important design characteristics of the remuneration system, including information on the criteria used for performance measurement and adjustment, deferral policy and vesting criteria

The Group employees' remuneration consist of the following three elements:

• base salary (or hourly rate);
• variable remuneration, which may be allocated according to the following programmes:
• o All Employee Programme SEB's profit allocation programme for all employees of the Group;
• o individual programme, which is participated by a targeted group of employees and includes variable salary, which may consist of two parts: salary in cash and salary in shares or in any other financial instruments paid out after a certain set period of time;
• additional benefits.

Base salary (or hourly rate) – it is the wages (base pay) established in an employee's labour contract.

Variable remuneration – it is a variable portion of remuneration, which may be paid to employees as an extra to the remuneration by position – in bonuses, rights to the Bank's shares, equity-linked financial instruments, other financial or non-cash instruments, and the amount of which depends on an individual employee's input to the performance of his/her subdivision or of the Group.

The special requirements for payment of variable remuneration is applied to the Group's Identified Staff are set in the Remuneration Policy.

SEB's All Employee Programme ('AEP') is a collective profit allocation programme meant for all SEB employees. The AEP outcome depends on factors indicated in the business plan of Skandinaviska Enskilda Banken AB (publ). 50 per cent of outcome is disbursed in cash, another 50 per cent share is held for a tree-year period and will be disbursed in cash calculating based on the total return of A class shares (TSR) of Skandinaviska Enskilda Banken AB (publ), i.e. based on a change in the price of a share as well as on the allocation of reinvested dividends for SEB shares.

Additional benefit – it includes additional health insurance, pension saving contribution, additional annual vacation, additional paid vacation to students and other possible benefits.

The remuneration policy establishes that principles for the determination and payment of variable remuneration to risk-takers must be in line with the Group's long-term continued activities interests, business strategy, objectives, values, and would encourage reliable and effective risk management, and employees would not be encouraged to take risk that is excessive and unacceptable to the Group.

Variable remuneration to the Group's employees whose professional activities and/or decisions taken may have a significant impact on the risks assumed by the Group is established according to the impact of their decisions on risk. An employee is considered to be able to take decisions that have a significant impact on the risk assumed by the Group (i.e. a' Identified staff'), if the employee meets at least one of the following criteria:

• employees with leading strategic positions in the Group;
• heads of key business subdivisions with the authority to take decisions that may have a material impact on the group's activity results;
• employees with risk control functions;
• risk-takers, i.e. employees with the right to conclude transactions or assume obligations and/or take decisions and able to have a significant impact on the risk assumed by the bank;
• chairmen of the Group's New Product/Service Approval Committees and members of the Committees;
• employees whose remuneration is equal or exceeds the remuneration of the Group's employees in leading strategic positions.

Variable remuneration for Identified staff is calculated based on the appraisal of a relevant employee's performance over no less than three to five years, and the actual variable remuneration is paid in portions – over a period that matches the Group's operation cycle and operational risk. No less than 50 per cent of the remuneration to such employees must consist of shares or any other financial instruments.

The deferred variable remuneration portion is allocated proportionately over the entire deferral period, and its payment is started no earlier than after one year since the end of a relevant employee's performance appraisal and shall be effected no more than once a year.

In case of financial instruments that constitute a portion of the variable remuneration, a no less than 12 months' deferral period is applied. Such period is reckoned since the time of granting the rights to the financial instruments. This provision applies both to the deferred variable remuneration portion and to the variable remuneration portion that is not subject to deferral.

The ratios between fixed and variable remuneration

Variable pay shall not exceed 50 per cent of annual base salary. Remuneration Human Resources Committee may decide on a different variable compensation and official proportions but variable pay shall not exceed 100 per cent of annual base salary.

Guaranteed remuneration is not paid in the Group.

Information on the performance criteria on which the entitlement to shares, options or variable components of remuneration is based

Group has right to suspend payment of variable pay, a portion or total variable pay if performance of a specific person, business unit or a Group generates loss, including not limited to remuneration in cash and in other financial instruments.

Variable pay, as well as the deferred portion, shall be disbursed and approved if the Group's financial standing is sustainable and shall be related to the performance results of the Group companies, business unit or employee. Variable pay in accordance with acts of law of the Republic of Lithuania shall be decreased and shall not be paid if the Group activity results do not meet the ratios established in the Group's business strategy, generates loss, the employee acted in bad faith or his activities resulted in losses for the Group.

All pay outs are subject to risk adjustment which might reduce the final pay-out of the deferred amount. SEB's implementation of the current regulations on risk adjustment of variable compensation stipulates that the deferred amount may be disbursed taking into account the following terms:

• sustainability of the Bank's and/or the Group's financial standing;
• implemented annual objectives of an employee, also, adherence to the requirements of the internal legal acts.

Prior to the disbursement of each deferred portion of the variable remuneration and in each case related to its disbursement the aboveindicated terms are assessed.

The employee shall not be allowed to use any individual security strategies or insurance against decrease in variable pay seeking to prevent risk effect established in the variable pay calculation models.

General quantitative information on remuneration 2017

Comments and definitions on tables below:

• All amounts are presented excluding employer's social costs
• Number of employees are defined at date December 31, 2017

1 table – General quantitative information on remuneration (fixed pay, variable pay, deferred, severance pay, etc.) to employees of AB SEB bankas, distributed by senior management and identified staff

The Bank (thousand EUR)	Management Board	Identified Staff	Other Employees	Total
Fixed remuneration 2017	736	1,916	23,717	26,369
Number of beneficiaries (31.12.2017)	5	29	1,367	1,401
Variable remuneration 2017	165	288	2,636	3,089
Non deferred cash based (included All Employee Programme)	11	70	1,315	1,396
Deferred Long -term equity based	154	218	1,321	1,693
% between fixed and variable remuneration	22%	15%	11%	12%
Number of beneficiaries (31.12.2017)	5	29	1,342	1,376
Amounts of new sign-on payments 2017	-	-	-	-
Number of beneficiaries (31.12.2017)	-	-	-	-
Severance pay 2017	-	60	484	544
Highest severance pay to single person		31
Number of beneficiaries (31.12.2017)	-	2	55	57
Variable deferred remuneration earned 2012 - 2016 and cash based paid out 2017 (included All
Employee Programme)	12	55	519	586
Amounts of outstanding deferred remuneration earned 2012 - 2016- vested amount 2017	441	365	82	888
Amounts of outstanding deferred remuneration earned 2012 - 2016 - unvested amount 2017	597	1,037	2,470	4,104

2 table – General quantitative information on remuneration (fixed pay, variable pay, deferred, severance pay, etc.) to employees of SEB Group (AB SEB bankas, UAB "SEB investicijų valdymas", UAB "SEB Venture Capital"), distributed by senior management and identified staff

The Group (thousand EUR)	Management Board	Identified Staff	Other Employees	Total
Fixed remuneration 2017	836	1,965	23,859	26,660
Number of beneficiaries (31.12.2017)	7	31	1,374	1,412
Variable remuneration 2017	176	298	2,646	3,120
Non deferred cash based (included All Employee Programme)	16	75	1,320	1,410
Deferred Long -term equity based	160	223	1,326	1,710
% between fixed and variable remuneration	21%	15%	11%	12%
Number of beneficiaries (31.12.2017)	7	31	1,347	1,385
Amounts of new sign-on payments 2017	-	-	-	-
Number of beneficiaries (31.12.2017)	-	-	-	-
Severance pay 2017	-	60	492	552
Highest severance pay to single person		31
Number of beneficiaries (31.12.2017)	-	2	56	58
Variable deferred remuneration earned 2012 - 2016 and cash based paid out 2017 (included All Employee Programme)	20	59	524	603
Amounts of outstanding deferred remuneration
earned 2012 – 2016 - vested amount 2017	441	365	82	888
Amounts of outstanding deferred remuneration earned 2012 - 2016 - unvested amount 2017	613	1,044	2,476	4,133

3 table – General quantitative information on remuneration of SEB Group (AB SEB bankas, UAB "SEB investicijų valdymas", UAB "SEB Venture Capital") by business area

The Group (thousand EUR)	Retail banking	Corporate banking	Wealth Management	Other	Total
Fixed remuneration 2017	11,316	3,411	271	11,662	26,660
Number of beneficiaries (31.12.2017)	770	134	11	497	1,412
Variable remuneration 2017	1,126	414	29	1,551	3,120
% between fixed and variable
remuneration	10%	12%	11%	13%	12%
Number of beneficiaries (31.12.2017)	761	130	9	485	1,385

13. Social responsibility report

For the purpose to disclose information required by social responsibility report the Group uses parent company Skandinaviska Enskilda Banken AB (publ) report, which covers SEB Group, i.e. parent company Skandinaviska Enskilda Banken AB (publ) and its subsidiaries (hereinafter – SEB or SEB Group). The report describes how the SEB Group works with sustainability, more specifically in the areas of human rights, labour rights and social relations, environment and anti-corruption. The most important impact is presented first, being it direct or indirect. Key aspects of Group's sustainability work, such as risk management, corporate governance and staff composition, remuneration and benefits, are included in other parts of Group's Annual Report. For a general description of SEB's sustainability work, please see SEB Sustainability Overview 2017.

ABOUT SEB'S BUSINESS

SEB is a leading Nordic financial services group, guided by a strong belief that entrepreneurial minds and innovative companies are key to creating a better world.

In the Baltic countries SEB offers financial advice and a wide range of financial services to corporates and private individuals. The bank strives to provide customers with services that are insightful, transparent and accessible on their terms.

Approach to sustainability

In the course of its business, SEB directly and indirectly impacts the markets and communities where it operates. SEB defines corporate sustainability as its delivery of long-term value in economic, ethical, social and environmental terms. Therefore, SEB integrates corporate sustainability in its activities by taking a broad business approach and targeting three areas – Responsible Business, People and Community, and Environment.

SEB believes that maintaining trust among relevant stakeholders is of paramount importance. Equally, SEB recognises the importance of further integrating sustainability aspects into its own business as well as in global development, and thereby of contributing, for example, to meeting the United Nations' Sustainable Development Goals. During 2017, sustainability aspects were further strengthened in SEB's business planning, risk and credit processes, and were increasingly included in product development.

The bank adheres to applicable laws and regulations and maintains high ethical standards. SEB's Corporate Sustainability Policy, the Code of Conduct as well as internal rules and procedures are in place, supported by a culture based on openness, business acumen and SEB's core values.

Policies and guidelines

SEB has adopted global initiatives and international codes of conduct which guide business decisions and the overall sustainability work. These include:

• The UN Global Compact;
• The UN Universal Declaration of Human Rights;
• The eight ILO Core Conventions on Labour Standards;
• The UN Guiding Principles on Business and Human Rights;
• The Children's Rights and Business Principles;
• The OECD Guidelines for Multinational Enterprises;
• The UN-supported Principles for Responsible Investments (PRI);
• The UN Environment Programme Finance Initiative (UNEPFI);
• The Equator Principles.

In the area of sustainability, SEB abides by the Corporate Sustainability Policy, the Environmental Policy, the Human Rights Policy, Code of Conduct, Code of Conduct for suppliers and the Tax Policy. SEB has three position statements (Child Labour, Climate Change and Fresh Water) and six sector polices (Arms and Defence, Forestry, Fossil Fuel, Mining and Metals, Renewable Energy and Shipping). These provide guidelines on best practice as well as on the international conventions and standards that the bank adheres to and encourages its customers to follow. SEB aims to work with clients and portfolio companies towards improved business practices.

The table below shows which SEB policies and position statements that are particularly applicable to each of the four sections in this report.

	Human rights	Labour rights and social relations	Anti-corruption	Environment
Corporate Sustainability Policy	✔	✔	✔	✔
Environmental Policy				✔
Human Rights Policy	✔	✔	✔
Tax Policy		✔
Code of Conduct	✔	✔	✔
Code of Conduct for Suppliers	✔	✔	✔	✔
Position statement on child labour	✔	✔
Position statement on fresh water				✔
Position statement on climate change				✔

The Corporate Sustainability Policy provides a description of the procedures to review the adherence of the sustainability principles in SEB to the Corporate Sustainability Policy and related policies and international commitments.

PRINCIPLES APPLICABLE FOR THE FOUR SECTIONS IN THIS REPORT

Asset management

SEB's investment management strategy is based on continuous engagement with the companies that SEB invests in. This means that SEB, through positive selection, includes companies that excel in environmental, social and governance aspects. In addition, SEB excludes companies that do not abide by SEB's sustainability criteria. All SEB mutual funds exclude companies involved in production or marketing of controversial weapons and the development or production of nuclear weapons programmes. Furthermore, the funds do not invest in companies that fail to respect international conventions and guidelines.

SEB engages directly in a dialogue with companies' managements and boards of directors regarding how to make improvements in issues related to human rights, labour rights and social relations, anti-corruption and environment. SEB also works in collaboration with each respective fund manager. As regards international companies, SEB collaborates with other investors as well as with partners like Hermes EOS, Institutional Investors Group on Climate Change (IIGCC), Carbon Disclosure Project (CDP) and PRI Clearinghouse.

Mutual funds from suppliers other than SEB (external funds) are evaluated by a special fund analyst team. All new external fund management companies are required to have signed the Principles for Responsible Investment (PRI) or to follow an equivalent sustainability framework internally, and to exclude controversial weapons.

Financing and credit granting

SEB takes great care to know its customers well and views responsible financing and credit granting as a cornerstone of its business. SEB includes risks and opportunities related to environmental, social and governance aspects in the credit review. The bank engages with clients on a regular basis on ethical and social aspects, including human rights, in order to understand the clients' challenges and opportunities so that SEB can be a better business partner and make the appropriate credit considerations.

During the year, the credit risk rating process was further strengthened to be more automated when it comes to data gathering, reports and data storage. In addition, sustainability factors, has been included in the system support for this process. For project financing, SEB has adhered to the Equator Principles since 2007, requiring the project owner to conduct due diligence in the appraisal phase of the project.

Suppliers

SEB has established and maintains procedures to evaluate and select major suppliers and contractors, based on human rights, environmental and social aspects, and to monitor their processes and performance where appropriate. Read more about SEB's process at sebgroup.com.

HUMAN RIGHTS

SEB's approach to human rights issues particularly influences how it manages employees, suppliers and relationships with clients and portfolio companies. It is an intrinsic part of SEB's commitment to ethical business. SEB's aim is to avoid causing, contributing to, or being complicit through direct linkage to adverse human rights impact. Respecting and promoting human rights supports SEB's business strategy and relationships with key stakeholders. SEB requires the same commitment to human rights from its business clients and works to identify potential human rights abuse within its own operations and in its business relationships. SEB's starting point is to use its leverage to prevent and mitigate potential risks.

In its business, SEB is guided by global initiatives, international standards, company policies and position statements, all listed on p.19.

INDIRECT IMPACT

Areas where SEB can potentially contribute or have linkage to indirect impact are categorised into asset management, financing and credit granting, and suppliers. SEB assesses these areas in order to detect possible violations against human rights. Based on prioritisation, proportionality and leverage, findings are acted upon to prevent, mitigate and remediate potential impact. SEB expects its clients and portfolio companies to follow the UN's Universal Declaration of Human Rights.

Asset management

In addition to SEB's general principles regarding asset management outlined above, specifically in the area of human rights, SEB funds do not invest in companies that fail to respect international conventions and guidelines, such as the Universal Declaration of Human Rights and the UN Global Compact.

In 2017, particular focus was on the human rights in the extractive sector and on access to medicine in developing countries.

Financing and credit granting

In addition to SEB's general principles regarding financing and credit granting outlined to the left, it shall be noted that human rights aspects are a crucial part. The bank engages with customers on a regular basis on aspects concerning human rights in order to understand their challenges and opportunities so that SEB can make the appropriate credit considerations and be a better business partner.

DIRECT IMPACT

Customers

The right to privacy is one of the UN's Universal Human Rights. The trust of SEB's customers is the foundation for the bank's activities and is based on respect for and protection of the customers' privacy. SEB is working actively to be compliant with the General Data Protection Regulation (GDPR), the reformed data protection legislation that will enter into force in all EU member countries in 2018. The GDPR will strengthen the individuals' rights in terms of how their data is managed by companies.

Employees

As an employer, SEB has a responsibility to ensure that all employees are treated equally and with respect. Everyone should be given the same opportunities for professional and personal development. SEB rejects all forms of discrimination and harassment, whether this is based on an individual's ethnic or national origin, gender, skin colour, faith, religion, citizenship, age, disability, civil status or sexual orientation. This is equally important in relation to customers and other stakeholders as well as in relation to colleagues.

SEB performs an employee survey each year where all employees get the opportunity to anonymously rate the company in various areas such as work environment, employee engagement, and internal collaboration.

KPI	2017	2016
SEB funds assessed with human rights criteria, as share of Fund Company AuM, per cent:	100	14

LABOUR RIGHTS AND SOCIAL RELATIONS

SEB works proactively to achieve a sound workplace. A healthy work environment is essential to the well-being of the bank's employees and thereby lays the groundwork for successful business results. Values and mindset as well as individual ability, development and potential are important long-term success factors for being part of SEB's team. The business shall be underpinned by strong ethics and good governance, long-term relationships and highly committed people who, based on the core values, work towards the corporate strategy.

In its business, SEB is guided by global initiatives, international standards, company policies and position statements, all listed on p. 19.

DIRECT IMPACT

Labour rights

All of SEB's employees are covered by collective or local agreements. A continuous dialogue is carried on with employees, employee representatives and with trade unions. SEB has had a European Works Council (EWC) since 2003. The representatives are elected in accordance with Swedish legislation and are in proportion to the number of employees employed in each EAA (European Economic Area) country where SEB is represented. The EWC gives the employee representatives the opportunity to consult with each other and develop a common transnational mindset and view. Employees are also represented on SEB's Board of Directors through two directors and two deputy directors. All organisational changes in Sweden are negotiated with employee representatives.

Health and safety

A safe and sound work environment combined with good health and work/life balance form the foundation for SEB's employees' performance and job satisfaction. In SEB, managers have overall responsibility to promote well established working conditions. In Sweden, SEB has strengthened its support for managers with employees on sick leave, related to stress and workload, by offering professional telephone support. All employees are responsible for contributing to a sound balance between work and leisure time in order to limit stress-related problems. An annual work environment inspection together with the manager is mandatory within all parts of SEB. SEB follows national health and safety legislation in the countries where SEB operates as well as the European Framework Directive on Safety and Health at Work.

Inclusion and diversity

Diversity and inclusion among employees are important factors to build relationships with an increasingly diverse customer base and to improve the capacity for innovation. SEB believes that different perspectives enhance creativity and problem-solving and contribute to good decisions. All employees shall be offered equal opportunities to develop individually, regardless of gender, ethnicity, age, sexual orientation or religion. SEB strives for gender balance at every level within the organisation and to increase the share of employees with an international background. The bank is working actively, both in terms of structures and processes and in specific initiatives, to increase the number of women in higher operative roles and in senior leader roles.

In 2017, SEB initiated a process to further focus on integration and diversity within the bank. The Board of Directors approved a strategy describing the way forward for strengthening inclusion and diversity in SEB. This will begin to be implemented during 2018.

Learning and development

Continuous learning is an important prerequisite for the ability to adapt to new circumstances. The bank has a wide range of programmes that are accessible through a digital platform that provides courses that are specific for SEB as well as courses offered by external suppliers. A total of 600 courses are offered in categories such as IT, project management, service design, languages, finance, sales, leadership, sustainability and communication. Identifying talents and promoting competence development are part of a manager's responsibilities. Employees also have individual responsibility for their development. This is monitored at least yearly in the personal Performance and Development Discussions (PDDs) that are conducted by individual employees and their managers.

INDIRECT IMPACT

Asset management

In addition to SEB's general principles regarding asset management outlined on page 20, specifically in the area of labour rights and social relations, the funds do not invest in companies that fail to respect international conventions and guidelines, such as the UN Global Compact and the eight ILO Core Conventions on Labour Standards.

Financing and credit granting

In addition to SEB's general principles regarding financing and credit granting outlined on p. 20, it shall be noted that the area of labour rights and social relations are a crucial part. The bank engages with customers on a regular basis on aspects concerning labour rights and social relations in order to understand their challenges and opportunities so that SEB can make the appropriate credit considerations and be a better business partner.

DIRECT AND INDIRECT IMPACT

Corporate citizenship

SEB sees the need for knowledge-sharing in societies where the bank operates. SEB can thereby empower people to make more informed financial decisions and contribute to better functioning societies. SEB supports local communities and shares both time and money, working with carefully chosen partners. Focus is on future generations through the areas of innovation and entrepreneurship, financial literacy and social inclusion.

KPI	2017	2016
Employees with collective or local ­bargaining agreement or covered by labour law, per cent	100	100
Gender by management type (male/female), per cent
All managers, per cent	53/47	54/46
Senior managers, per cent	69/31	69/31

ANTI-CORRUPTION

SEB's reputation is built on insightful customer relationships, where a strong risk culture based on business acumen and professional conduct is essential. SEB's Code of Conduct and core values, mandatory training, and dialogues on ethical and value-related dilemmas aim to strengthen awareness of the importance of conduct. SEB actively counteracts all forms of corruption, in line with rules and regulations. This includes external as well as internal incidents, processes and behaviours related to corruption.

In its business, SEB is guided by global initiatives, international standards, company policies and position statements, all listed on p. 19.

DIRECT IMPACT

SEB aims to detect and prevent financial crime such as fraud, money laundering and financing of terrorism as well as insider trading and market manipulation.

SEB is committed to continuously strengthen the capability to detect and prevent financial crime across the whole Group. The bank monitors official registers of individuals and organisations that could be linked to money laundering, fraud and terrorism. Sophisticated systems are used to monitor transactions for suspicious behaviour associated with money laundering, financing of terrorism and market abuse. Suspicious activities are reported to the relevant authorities.

SEB believes that a strong Know-Your-Customer (KYC) programme is the best method of preventing money laundering and financing of terrorism. The bank shall always ensure the identity of the customers and any person acting on behalf of a customer and understand the control and ownership structure of its customers. SEB monitors ongoing business relationships by verifying and documenting that transactions carried out match the customer's risk profile, business and source of funds. Enhanced due diligence is applied for customers, products and countries where there is a higher risk that the bank can be used for money laundering and financing of terrorism.

Bribery

SEB does not tolerate SEB becoming involved in or associated with bribery under any circumstances. No SEB employee, board member, independent contractor, consultant or other party associated with SEB may be involved directly or indirectly in offering, promising, giving, soliciting, or accepting a bribe. A bribe means any payment or other benefit that is intended or can reasonably be expected to influence a person's performance of their duty. In case employees encounter them, they should report them to their line manager and Group Compliance. SEB does not pay so-called facilitation payments (i.e., payments not stipulated in law or other regulations that are levied by public officials for the formal handling of cases at courts or other authorities).

Employee training

SEB's employees play a key role in the ability to discover suspicious behaviour and transactions, and thereby prevent these types of crimes. SEB offers various types of training for employees, including an education package with e-learning, films and working material. Four digital training sessions are mandatory for all employees – the Code of Conduct (including work against corruption), Anti-money laundering, Prevention of fraud and Cyber security. All new employees must complete these sessions within the first three months of employment. Existing employees are required to complete them every three years.

Whistleblowing process

SEB has a whistleblowing process for reporting irregularities. If an employee or other person should discover possible unethical or unlawful behaviour, the observations should be reported. The identity of the reporter will be kept confidential during the subsequent follow-up, enquiries and discussions relating to the matter, provided that the bank is not obliged by law to disclose it.

Notifications come from employees, but could also come from customers, suppliers and other stakeholders.

In 2017, SEB's whistleblowing process was strengthened and it is now also possible to report via the external digital service WhistleB. The service is entirely outside of SEB and meets the most stringent security requirements regarding encryption, data security and protection of the whistleblower's identity.

INDIRECT IMPACT

SEB engages directly with its customers and holdings on issues related to environmental, social and governance aspects, including anticorruption issues.

Asset management

In addition to SEB's general principles regarding asset management outlined on page 20, specifically in the anti-corruption area, the funds do not invest in companies that fail to respect international conventions and guidelines, such as the UN Global Compact and the OECD Guidelines for Multinational Enterprises.

Financing and credit granting

In addition to SEB's general principles regarding financing and credit granting outlined on p. 20, it shall be noted that the area of anticorruption is a crucial part. The bank engages with customers on a regular basis on ethical aspects, including anti-corruption, in order to understand their challenges and opportunities so that SEB can make the appropriate credit considerations and be a better business partner.

KPI	2017	2016
SEB employees that have completed the code of conduct training (including ­anti-corruption), per cent	91	63
Suspicious AML activity reports, number	504	489

ENVIRONMENT

Among environmental risks and opportunities, global climate change is the most serious challenge. SEB recognises the importance of limiting the average global temperature rise to well below the 2 °C target, which makes a transition to a low-carbon economy vital. SEB is working to reduce both its direct and indirect impact.

In its business, SEB is guided by global initiatives, international standards, company policies and position statements, all listed on p. 19.

INDIRECT IMPACT

Climate - and environment related issues are becoming increasingly important financial risk factors. Rightly managed, they can also be opportunities. Extreme weather, sea level rise and long-term climate change affect billions of people in rural areas as well as in cities. As a bank, SEB's largest environmental impact is indirect through its asset management business, and its financing and credit granting.

Asset management

In addition to SEB's general principles regarding asset management, outlined on p. 20, SEB's focus is on reducing carbon emissions in its investment management activities. SEB has put a cap on coal and does not invest in companies involved in thermal coal extraction, i.e., mining activities in which thermal coal accounts for more than 20 per cent of the company's or group's turnover. SEB is actively engaged with European energy companies, where coal as an energy source exceeds 10 per cent, to reduce carbon emissions by using other fuel alternatives. Since 2017 SEB is also engaged, together with Institutional Investors Group on Climate Change, (IIGC), targeting the world's 100 largest emitters in order to reduce emissions globally.

SEB is continuously developing its mutual fund offering. The sustainability funds exclude companies that extract coal, gas and oil and focus on positive selection in the portfolio management, i.e., inclusion of companies with effective waste management, low carbon emissions and good water usage.

Financing and credit granting

In addition to SEB's general principles regarding financing and credit granting outlined on p. 20, the bank engages with clients on a regular basis on environmental aspects (climate, waste, effluents, emissions, biodiversity and resource usage), in order to understand the clients' challenges and opportunities so that SEB can be a better business partner and make the appropriate credit considerations.

SEB has a strong focus on green financing solutions, such as green bonds. Per 2017, SEB is the third largest green bond underwriter in the world. In 2017 SEB issued its first own green bond of EUR 500 million. The capital is earmarked for loans for green initiatives and solutions and is offered to large companies and financial institutions, municipalities, county councils and housing associations. Major categories in SEB's green bond is hydropower, wind power, clean transportation and sustainable forestry. In 2018, SEB will report on the impact from the green bond to the investors.

SEB has established a green framework in order to have a clear definition of what is "green". This Green Bond Framework and Strategy, together with SEB's Environmental Policy and the accompanying sector policies, provide a robust basis for ensuring that SEB's Green Bonds promote low-carbon and climate change resilient investments.

SEB has decided to shift away from coal. Since 2015, SEB does not provide financing for new coal-fired power plants. Financing can only be considered for new coal-fired plants with committed use of technologies, such as "carbon capture", which substantially reduce greenhouse gas emissions. SEB can support legacy clients in making environmentally beneficial improvements in their transformation away from coal.

Transparency and reporting

SEB believes it is important that businesses understand and respond to climate risks as well as seize opportunities to contribute to building a more resilient and sustainable global economy. Regulators in the EU and Sweden increasingly take environmental risks into consideration in their monitoring. G20 Finance Ministers and Central Bank Governors have instructed the Financial Stability Board (FSB) to review how the financial sector can take climate-related issues into account. The FSB has established an industry-led task force: the Task Force on Climaterelated Financial Disclosures, to support informed investment, lending, and insurance underwriting decisions and improve understanding and analysis of climate-related risks and opportunities. SEB has followed this work closely. SEB intends to draw on the knowledge from the report and develop processes internally in order to transparently describe climate-related financial risks.

SEB has signed the Montreal Carbon Pledge international climate agreement and thereby commits to annually report on its carbon footprint. Since 2017, a majority, 92 per cent, of SEB's equity funds is measured annually and reported on SEB's website. As one of the first banks, SEB has started to report on the climate footprint of its mutual funds from all three central emission areas (scope 1–3) according to the Greenhouse Gas Protocol, which gives a more accurate picture. The calculations are based on the Fund Management Association's guidelines for fund companies operating in the Swedish market.

DIRECT IMPACT

Although SEB's major environmental impact is indirect, the bank recognises the importance of and works actively to also reduce its direct environmental impact. Between 2008 and 2015, the bank reduced its carbon emissions by 54 per cent. The target is a further 20 per cent reduction of emissions and electricity consumption for the period 2016 to 2020. Business travel is the most challenging source of carbon emissions. Even though there has been a reduction in emissions from company cars and paper use, the increase in travelling in 2017 resulted in a status quo when comparing the total SEB carbon emissions with 2016.

KPI	2017	2016
SEB equity funds where carbon emission is measured, per cent	92	N/A
SEB's total carbon emissions*, tonnes	20,537	20,437
Total carbon emissions*/employee, tonnes	1.37	1.34

The Group				The Bank
2017	2016		Note	2017	2016
119,523	116,872	Interest income		119,643	116,894
(20, 486)	(30, 126)	Interest expenses		(20, 486)	(30, 113)
99,037	86,746	Net interest income	5	99,157	86,781
4,937	7,939	Impairment (losses)/reversals	6	4,937	7,939
1,058	(3,867)	Impairment (losses)/reversals on lease portfolio (Provisions)/reversals of providions for guarantees and other off	6	1,058	(3,867)
981	(4,846)	balance sheet items	6	981	(4,846)
(94)	(17)	Other impairment (losses)		(94)	(17)
6,882	(791)	Total impairment (losses)/reversals		6,882	(791)
105,919	85,955	Net interest income after impairment losses		106,039	85,990
87,477	77,867	Fee and commission income	$\overline{7}$	83,591	73,482
(23,088)	(22, 405)	Fee and commission expenses	$\overline{7}$	(22, 566)	(21, 629)
64,389	55,462	Net fee and commission income		61,025	51,853
		Net gains on operations with debt securities
2,619	2,265	and derivative financial instruments	9	2,619	2,265
(1, 394)	22,078	Net gain (loss) on equity securities	3		21,449
$\overline{\phantom{a}}$	٠	Net gain (loss) on investment securities	23	(444)
$\overline{\phantom{a}}$	×	Dividend income from subsidiaries	8	1,680	3,893
11.982	11,885	Net foreign exchange gain	10	11,982	11,885
1,258	3,104	Other income		1,458	3,313
14,465	39,332	Net investment activities		17,295	42,805
(39, 808)	(41,992)	Staff costs	11	(39, 342)	$-(41,589)$
(35, 831)	(39, 802)	Other administrative expenses	12	(35, 393)	(39, 324)
109,134	98,955	Profit before income tax		109,624	99,735
(16,096)	(5,809)	Income tax expenses	13	(15,950)	(5,250)
93,038	93,146	Net profit for the year		93,674	94,485
		Attributable to:		93,674	94,485
93,038	93,146	Owners of the Bank
		Non controlling interest

The Group				The Bank
2017	2016		Note	2017	2016
93,038		93,146 Net profit for the year		93,674	94,485
		Items that may subsequently be reclassified to the income statement:
1,248		(15,851) Net gain (realised result) on available for sale assets	32	1,249	(15, 851)
		Amortisation of financial assets revaluation reserve
۰	19	of reclassified financial assets	32	٠	19
		Income tax relating to the components of other
(187)	2,375	comprehensive income	13	(187)	2,375
	۰	Items that will not be reclassified to the income statement:			÷
1,061		(13,457) Total other comprehensive income		1,062	(13, 457)
94,099		79,689 Total comprehensive income		94,736	81,028
		Attributable to:
94,099	79,689	Owners of the Bank		94,736	81,028
٠	×,	Non controlling interest		۰	٠

The Group				The Bank
2017	2016		Note	2017	2016
		Assets
118,828	117,812	Cash on hand		118,828	117,812
1,105,066	61,501	Balances with the Central Bank	14	1,105,066	61,501
214,052	1,391,552	Due from banks	15	214,052	1,391,552
15.902	16,663	Government securities available for sale	16	15,726	16,486
		Financial assets at fair value through	17	379,096	361.528
379,096 47,549	365,270 124,735	profit and loss Derivative financial instruments	18	47,549	124,735
6,994	7,550	Loans to creditinstitutions	19	6,994	7,550
5,136,397	4,864,006	Loans to customers	6,20	5,136,397	4,864,006
602,694	475,402	Finance lease receivables	6, 21	602,736	475,453
		Investment securities:		×
4,143	3,268	- available for sale	22	4,143	3.268
$\overline{\phantom{a}}$	×	Investments in subsidiaries	23	2,871	10,111
4,646	6,641	Intangible assets	24	4.646	6,641
7,953	7,615	Property and equipment	25	7,892	7,520
181	189	Non-current assets held for sale		181	189
2,015	3,205	Investment property	26	2,015	3,205
11,004	24,927	Deferred tax asset	13	10,996	24,787
61,121	47,603	Other assets	27	61,316	47,740
7,717,641	7,517,939	Total assets		7,720,504	7,524,084
		Liabilities
13	18	Due to the Central Bank		13	18
1,398,625	1,370,821	Due to credit institutions	28	1,398,625	1,370,821
45,249	122,031	Derivative financial instruments	18	45,249	122,031
5,411,527	5,152,334	Deposits from public	29	5,416,837	5,161,752
13,080	15,223	Accrued expenses	31	12,953	15,105
1,187	4,316	Income tax payable		1,147	4,292
	202	Deferred tax liabilities	13	$\sim$
526	8,048	Debt securities in issue	30	526	8,048
79,860	48,887	Other liabilities and provisions	31	79,750	48,765
6,950,067	6,721,880	Total liabilities		6,955,100	6,730,832
		Equity
		Equity attributable to owners of the Bank	32
299,564	299,564	Share capital		299,564	299,564
637	637	Reserve capital		637	637
1,097	36	Financial assets revaluation reserve		1,096	34
156,686	139,535	Legal reserve		156,400	138,868
3,266	3,504	General and other reserves		3,266	3,504
306,324	352,783	Retained earnings		304,441 765,404	350,645 793,252
767,574	796,059	Total equity
7,717,641	7,517,939	Total liabilities and equity		7,720,504	7,524,084

				Financial assets		General and
The Group	Note	capital Share	Reserve capital	reserve (deficit) Legal reserve revaluation		reserves other	earnings Retained	Total Equity
81 December 2015		299,564	637	13,493	121,280	3,176	366,220	804,370
Vet change in available for sale investments, net of deferred tax	32			(13, 476)				(13, 476)
Amortisation of financial assets revaluation reserve of reclassified financial assets Vet profit for the year	32			ቧ			93,146	93,146 ቧ
Total comprehensive income				(13, 457)			93,146	79,689
share-based compensation						328	472	800
Dividends to shareholders ransfers to reserves					18,255	ì	(88, 800) (18, 255)	(88, 800)
81 December 2016		299,564	637	36	139,535	3,504	352,783	796,059
Vet change in available for sale investments, net of deferred tax	32			1,061				1,061
Net profit for the year				ï			93,038	93,038
Total comprehensive income				1,061			93,038	94,099
Dividends							(123,146)	$(123,146)$ $562$
Share-based compensation						(238)	800
iquidation of subsidiary ransfers to reserves	23				(381) 17,532		(17,532) 381
31 December 2017		299,564	637	1,097	156,686	3,266	306,324	767,574

				Financial assets		General and
te Bank	Note	capital Share	Reserve capital	reserve (deficit) Legal reserve revaluation		reserves other	Retained earnings	Total Equity
December 2015		299,564	637	13,491	120,737	3,176	362,619	800,224
et change in available for sale investments, mortisation of financial assets revaluation et of deferred tax	32			(13, 476)				(13, 476)
eserve of reclassified financial assets	32			ቧ				94,485 Ξ
otal comprehensive income et profit for the year				(13, 457)		í	94,485 94,485	81,028
nare-based compensation					ī.	328	472	800
ividends to shareholders ransfers to reserves					18,131		(88, 800) (18, 131)	(88, 800)
December 2016		299,564	637	34	138,868	3,504	350,645	793,252
et change in available for sale investments, et of deferred tax	32			1,062				1,062
et profit for the year				ï			93,674	93,674
otal comprehensive income				1,062			93,674	94,736
nare-based compensation						(238)	800	562
ransfers to reserves					17,532		$(17,532)$ $(123,146)$
ividends					ı	ł		(123,146)
1December 2017		299,564	637	1,096	156,400	3,266	304,441	765,404

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

The Group				The Bank
2017	2016		Note	2017	2016
		Cash from operating activities
115,413	112,346	Interest income received		115,534	112,071
(22,814)	(32,386)	Interest expenses paid		(22,814)	(32,373)
11,133	10,549	Net foreign currency exchange gain		11,133	10,549
2,851	2,710	Net gain (loss) in securities trading and financial instruments		2,851	2,710
404	(2,112)	Net gain (loss) in derivatives trading		404	(2,112)
65,766	58,757	Net commission and service income		62,602	55,357
(39,030)	(39,880)	Staff costs		(38,564)	(39,497)
(21,213)	(28,371)	Other payments		(20,847)	(27,852)
112,509	81,613	Net cash from operating activities before		110,298	78,853
		change in operating assets and liabilities
		Changes in operating assets
(5,210)	11,064	Decrease (increase) in compulsory balances		(5,210)	11,064
		with the Central Bank
560	163,174	Decrease (increase) in due from banks and		560	163,174
		loans to credit institutions
(267,314)	(376,017)	(Increase) in loans to customers		(267,314)	(376,859)
(124,956)	(82,113)	(Increase) of finance lease receivable		(124,947)	(82,105)
(15,980)	(162)	(Increase) in other current assets		(15,822)	(2,149)
(412,900)	(284,054)	Net change in operating assets		(412,733)	(286,875)
		Changes in operating liabilities
259,735	386,089	Increase in deposits from public		255,627	387,644
		(Decrease) increase in accrued expenses,
34,425	(16,910)	deferred income and other liabilities		34,247	(16,966)
294,160	369,179	Net change in operating liabilities		289,874	370,678
(6,230)	166,738	Net cash from operating activities		(12,560)	162,656
		before income tax
(5,657)	(5,807)	Income tax paid		(5,492)	(5,465)
(11,887)	160,931	Net cash from operating activities after		(18,052)	157,191
		income tax

(Continued)

The accompanying notes on pages 33 to 104 are an integral part of these financial statements.

The Group				The Bank
2017	2016		Note	2017	2016
		Cash flow (used in)/from investing activities
(4,990)	(4,722)	Acquisition of tangible and intangible fixed		(4,990)	(4,720)
		assets, net
	(88)	Acquisition of Government securities
731	729	available for sale Sale of Government securities		728	728
		available for sale
		Cash flow on liquidation of subsidiary	23	6,796
		Dividends received from subsidiaries	8	1,680	3,893
(683, 379)	(610, 149)	Acquisition of investment in other		(683, 379)	(610, 027)
		securities
661,776	676,887	Sale of investment in other		659,468	676,523
	62,657	securities Cash (used in)/from investing activities		(19, 698)	66,397
(25, 863)
		Cash flow (used in)/from financing activities
(123, 146)	(88, 800)	Dividends paid to the shareholder	4	(123, 146) (5)	(88, 800) 1
(5)		1 Increase (decrease) in amounts owed to the Central Bank
30,236	280,047	Increase (decrease) in amounts owed to	4	30,236	280,047
		credit institutions
(6,866)	(8,226)	Repurchased own issued debt securities	4	(6,866)	(8,226)
(594)	(530)	Interest paid for own issued debt securities	$\overline{4}$	(594)	(530)
(100, 375)	182,492	Cash (used in)/from financing activities		(100, 375)	182,492
(138, 125)	406,080	Net (decrease)/increase in cash/cash equivalents		(138, 125)	406,080
1,512,143	1,106,063	Cash/cash equivalents 1 January		1,512,143	1,106,063
1,374,018	1,512,143	Cash/cash equivalents 31 December		1,374,018	1,512,143
		Specified as follows:
1,041,167	2,812	Balance available for withdrawal with the Central Bank	14	1,041,167	2,812
140,432	4,055	Overnight deposits	15	140,432	4,055
118,828	117,812	Cash on hand		118,828	117,812
73,591	1,387,464	Current accounts with other banks	15	73,591	1,387,464
1,374,018	1,512,143			1,374,018	1,512,143
					(Concluded)

(All amounts in EUR thousand unless otherwise stated)

NOTE 1 GENERAL INFORMATION

AB SEB bankas (hereinafter - the Bank) was registered as a public company in the Enterprise Register of the Republic of Lithuania on 2 March 1990. The Bank is licensed by the Bank of Lithuania to perform all banking operations provided for in the Law on Banks of the Republic of Lithuania and the Statutes of the Bank.

The Head Office of the Bank is located at Gedimino ave. 12, Vilnius. As of 31 December 2017 the Bank had 32 customer service branches (as of 31 December 2016 – 34).

As of 31 December 2017 AB SEB bankas had 2 subsidiaries (as of 31 December 2016 – 2): UAB "SEB Investicijų Valdymas" (Gedimino ave. 12, Vilnius) and UAB "SEB Venture Capital" (Gedimino ave. 12, Vilnius). Bank's subsidiary UAB "SEB Venture Capital" as of 31 December 2017 was in the process of liquidation. The Bank and its subsidiaries thereafter are referred to as the Group.

The Bank accepts deposits, issues loans, makes money transfers and documentary settlements, exchanges currencies for its clients, issues and processes debit and credit cards, is engaged in trade finance and leasing activities, is investing and trading in securities as well as performs other activities set in the Law on Banks (except for operations with precious metals). Activities of subsidiaries are explained in Note 23.

The Bank's shares or debt securities are not listed in the main or secondary listings of the NASDAQ OMX as of 31 December 2017 (as of 31 December 2016 - debt securities were listed in the secondary listing of the NASDAQ OMX Vilnius). As it is further disclosed in Note 32, the only shareholder and ultimate parent is Skandinaviska Enskilda Banken AB (publ), owning 100 percent of the Bank's shares.

These consolidated and separate financial statements have been approved by the Board of the Bank on 12 March 2018. Neither the Bank's shareholders nor others have the power to amend the financial statements after issue.

NOTE 2 ADOPTION OF NEW AND REVISED STANDARDS

a) The following new or revised standards and interpretations effective in 2017 that are applicable to the Bank and Group

There are certain new or revised standards or interpretations that are effective for the first time for the financial year beginning on or after 1 January 2017 that have an impact to the Bank and the Group.

Disclosure Initiative - Amendments to IAS 7 (effective for annual periods beginning on or after 1 January 2017). The amended IAS 7 require disclosure of a reconciliation of movements in liabilities arising from financing activities. Reconciliation of movement in liabilities arising from financing activities is presented in Note 4.

b) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Bank and the Group

Certain new or revised standards and interpretations have been issued that are mandatory for the Bank's and the Group's annual periods beginning on or after 1 January 2018 and which the Bank and the Group has not early adopted.

IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018). Key features of the new standard are:

• Financial assets are required to be classified into three measurement categories: those to be measured subsequently at amortised cost, those to be measured subsequently at fair value through other comprehensive income (FVOCI) and those to be measured subsequently at fair value through profit or loss (FVPL);
• Classification for debt instruments is driven by the entity's business model for managing the financial assets and whether the contractual cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried at amortised cost if it also meets the SPPI requirement. Debt instruments that meet the SPPI requirement that are held in a portfolio where an entity both holds to collect assets' cash flows and sells assets may be classified as FVOCI. Financial assets that do not contain cash flows that are SPPI must be measured at FVPL (for example, derivatives). Embedded derivatives are no longer separated from financial assets but will be included in assessing the SPPI condition;
• Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to present changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity instrument is held for trading, changes in fair value are presented in profit or loss;

(All amounts in EUR thousand unless otherwise stated)

NOTE 2 ADOPTION OF NEW AND REVISED STANDARDS (CONTINUED)

b) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Bank and the Group (continued)

• Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The key change is that an entity will be required to present the effects of changes in own credit risk of financial liabilities designated at fair value through profit or loss in other comprehensive income;
• IFRS 9 introduces a new model for the recognition of impairment losses the expected credit losses (ECL) model. There is a 'three stage' approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that entities will have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables;
• Hedge accounting requirements were amended to align accounting more closely with risk management. The standard provides entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all hedges because the standard currently does not address accounting for macro hedging.

As a result from applying IFRS 9 with regards to impairment, provisions will decrease by EUR 5,601 thousand net of income tax. The effect will lead to an increase in Retained earnings. The impairment requirements are based on an expected credit loss (ECL) model. The Group uses internally developed macro-economic forecasts as the basis for forward looking information incorporated in ECL measurement and at least three scenarios are used. The scenarios are benchmarked to external sources. The assessment whether there has been a significant change in credit risk is based on payments past due > 30 and < 90 and financial assets which have been classified as watch-list or with forbearance measures. Group applies a definition of default for accounting purposes that is consistent with how it is defined in the capital requirements regulation, which include financial assets past due more than 90 days.

As a result of change in classification and measurement, the Bank and the Group has changed classification of equity instruments and some debt instruments previously classified as available for sale under IAS 39 to measured at fair value through profit or loss category. The effect with regard to classification and measurement is that a positive market valuation net of income tax of EUR 1,096 thousand is removed from Bank's and EUR 1,097 thousand from Group's Financial assets revaluation reserve to Retained earnings. Change in classification of other financial instruments under requirements of IFRS 9 had no financial effect on Bank's and Group's financial instruments:

• loans and receivables were classified to measured at amortised cost category after evaluation of business model (business model is "hold to collect") and positive conclusion on SPPI tests;
• held for trading and designated at initial recognition at fair value through profit or loss debt instruments were classified to measured at fair value through profit or loss category;
• there were no changes in classification of financial liabilities.

The Bank and the Group has not adopted IFRS 9 in previous reporting periods. For transitional purposes the quantitative indicator used for assessing significant increase in credit risk for impairment purposes is based on risk class or equivalent. As permitted by the transitional provisions, the Bank and the Group will not restate comparative periods with regards to IFRS 9.

IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018). The new standard introduces the core principle that revenue must be recognised when the goods or services are transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognised if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalised and amortised over the period when the benefits of the contract are consumed.

The Group adopted IFRS 15 Revenue from Contracts with Customers with a date of transition 1 January 2018. The Group chose to apply the standard retrospectively to each prior reporting period presented. The transition effect should be recognised in retained earnings, as at 1 January 2017. The Group does not have an impact on transition to IFRS 15.

(All amounts in EUR thousand unless otherwise stated)

NOTE 2 ADOPTION OF NEW AND REVISED STANDARDS (CONTINUED)

b) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Bank and the Group (continued)

Amendments to IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018).The amendments do not change the underlying principles of the standard but clarify how those principles should be applied. The amendments clarify how to identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract; how to determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and how to determine whether the revenue from granting a licence should be recognised at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new standard. The Group has chosen to apply IFRS 15 retrospectively to each prior reporting period presented. The effect of transition should be recognised in retained earnings at 1 January 2017. According to the assessment of IFRS 15 impact, the Bank and the Group do not have any transition effect on annual financial statements.

IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019).The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

The accounting for lessors is in practice unchanged. The Bank and the Group does not intend to adopt the standard before its effective date. The standard will affect primarily the accounting for the Bank's and the Group's operating leases. As at 31 December 2017 the Bank and the Group has non-cancellable operating lease commitments of EUR 28,695 thousand (Note 39). The Bank and the Group currently are assesing the impact of new standard on their financial statements.

Annual Improvements to IFRSs 2015-2017 cycle (effective for annual periods beginning on or after 1 January 2019; not yet adopted by the EU). The narrow scope amendments impact four standards. IFRS 3 was clarified that an acquirer should remeasure its previously held interest in a joint operation when it obtains control of the business. Conversely, IFRS 11 now explicitly explains that the investor should not remeasure its previously held interest when it obtains joint control of a joint operation, similarly to the existing requirements when an associate becomes a joint venture and vice versa. The amended IAS 12 explains that an entity recognises all income tax consequences of dividends where it has recognised the transactions or events that generated the related distributable profits, eg in profit or loss or in other comprehensive income. It is now clear that this requirement applies in all circumstances as long as payments on financial instruments classified as equity are distributions of profits, and not only in cases when the tax consequences are a result of different tax rates for distributed and undistributed profits. The revised IAS 23 now includes explicit guidance that the borrowings obtained specifically for funding a specified asset are excluded from the pool of general borrowings costs eligible for capitalisation only until the specific asset is substantially complete. The Bank and the Group are currently assessing the impact of the amendments on their financial statements.

Classification and Measurement of Share-based Payment Transactions -Amendments to IFRS 2 (effective for annual periods beginning on or after 1 January 2018, not yet adopted by EU). The amendments mean that non-market performance vesting conditions will impact measurement of cash-settled share-based payment transactions in the same manner as equity-settled awards. The amendments also clarify classification of a transaction with a net settlement feature in which the entity withholds a specified portion of the equity instruments, that would otherwise be issued to the counterparty upon exercise (or vesting), in return for settling the counterparty's tax obligation that is associated with the share-based payment. Such arrangements will be classified as equity-settled in their entirety. Finally, the amendments also clarify accounting for cash-settled share based payments that are modified to become equity-settled, as follows (a) the share-based payment is measured by reference to the modification-date fair value of the equity instruments granted as a result of the modification; (b) the liability is derecognised upon the modification, (c) the equity-settled share-based payment is recognised to the extent that the services have been rendered up to the modification date, and (d) the difference between the carrying amount of the liability as at the modification date and the amount recognised in equity at the same date is recorded in profit or loss immediately. The Bank and the Group are currently assessing the impact of the amendments on their financial statements.

Transfers of Investment Property - Amendments to IAS 40 (effective for annual periods beginning on or after 1 January 2018, not yet adopted by the EU). The amendment clarified that to transfer to, or from, investment properties there must be a change in use. This change must be supported by evidence; a change in intention, in isolation, is not enough to support a transfer. The Bank and the Group are currently assessing the impact of the amendments on their financial statements.

(All amounts in EUR thousand unless otherwise stated)

NOTE 2 ADOPTION OF NEW AND REVISED STANDARDS (CONTINUED)

b) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Bank and the Group (continued)

IFRIC 22, Foreign Currency Transactions and Advance Consideration (effective for annual periods beginning on or after 1 January 2018, not yet adopted by the EU). The interpretation applies where an entity either pays or receives consideration in advance for foreign currencydenominated contracts. The interpretation clarifies that the date of transaction, i.e. the date when the exchange rate is determined, is the date on which the entity initially recognises the non-monetary asset or liability from advance consideration. However, the entity needs to apply judgement in determining whether the prepayment is monetary or non-monetary asset or liability based on guidance in IAS 21, IAS 32 and the Conceptual Framework. The Bank and the Group are currently assessing the impact of the amendments on their financial statements.

IFRIC 23, Uncertainty over Income Tax Treatments (effective for annual periods beginning on or after 1 January 2019, not yet adopted by the EU). IAS 12 specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. The interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. An entity should determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments based on which approach better predicts the resolution of the uncertainty. An entity should assume that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations. If an entity concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the effect of uncertainty will be reflected in determining the related taxable profit or loss, tax bases, unused tax losses, unused tax credits or tax rates, by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty. An entity will reflect the effect of a change in facts and circumstances or of new information that affects the judgments or estimates required by the interpretation as a change in accounting estimate. Examples of changes in facts and circumstances or new information that can result in the reassessment of a judgment or estimate include, but are not limited to, examinations or actions by a taxation authority, changes in rules established by a taxation authority or the expiry of a taxation authority's right to examine or re-examine a tax treatment. The absence of agreement or disagreement by a taxation authority with a tax treatment, in isolation, is unlikely to constitute a change in facts and circumstances or new information that affects the judgments and estimates required by the Interpretation. The Bank and the Group are currently assessing the impact of the amendments on their financial statements.

Prepayment Features with Negative Compensation - Amendments to IFRS 9 (effective for annual periods beginning on or after 1 January 2019, not yet adopted by the EU). The amendments enable measurement at amortised cost of certain loans and debt securities that can be prepaid at an amount below amortised cost, for example at fair value or at an amount that includes a reasonable compensation payable to the borrower equal to present value of an effect of increase in market interest rate over the remaining life of the instrument. In addition, the text added to the standard's basis for conclusion reconfirms existing guidance in IFRS 9 that modifications or exchanges of certain financial liabilities measured at amortised cost that do not result in the derecognition will result in an gain or loss in profit or loss. Reporting entities will thus in most cases not be able to revise effective interest rate for the remaining life of the loan in order to avoid an impact on profit or loss upon a loan modification. The Bank and the Group are currently assessing the impact of the amendments on their financial statements.

There are no other new or revised standards or interpretations that are not yet effective that would be expected to have a material impact on the Group.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES

a) Basis of Presentation

These financial statements are presented in Euro (EUR). Amounts are presented in thousand EUR, unless otherwise stated.

The books and records of the Group companies and the Bank are maintained in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union (EU). The financial statements are prepared under the historical cost convention as modified by the revaluation of available for sale financial assets, financial assets and liabilities designated at fair value, held for trading and all derivative contracts.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current event and actions, actual results ultimately may differ from those estimates. The key estimates and judgements are disclosed in section cc) below.

These financial statements combine the consolidated financial statements of the Group and the separate financial statements of the Bank. Such format of reporting was adopted to ensure consistency of presentation with the format prescribed by the Bank of Lithuania and applied for statutory reporting.

b) Basis of Accounting

The financial statements have been prepared in accordance with and comply with IFRS, adopted in the EU. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

c) Consolidated Subsidiaries and Associates

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Investments in subsidiaries in the Bank's standalone financial statements are accounted for using the cost method less impairment and are initially recognized at cost.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration transferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held immediately before the acquisition date. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Business combinations under common control is excluded from the acquisition accounting rules described above. SEB group applies the pooling of interest method (Predecessor accounting), in accounting for business combinations involving entities or businesses under common control. This implies that no assets or liabilities of the combining entities are restated at fair value - carrying amounts at the highest consolidated level are used. No new goodwill is created. The income statement reflects the results of the combining entities for the full year irrespective of when the combination took place.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred.

d) Foreign Currency Translation

Items included in the financial statements of each of the Group's and the Bank's entities are measured using the currency of the primary economic environment in which the entity operates. The consolidated financial statements are presented in EUR, which is the Bank's functional and presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

e) Income Recognition

Interest income and expense are recognised for all interest bearing instruments on an accrual basis using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.

Negative interest on financial liabilities is reported under Interest income line within Net Interest Income.

Commission and other income is recognised at the time of the related transaction. Commissions incurred in respect of long-term funding provided by financial institutions are deferred and recognised as an adjustment to the effective yield on the loan. All fees that are an integral part of the effective interest rate are amortised using effective interest rate.

Asset management fees related to investment funds are recognised as commissions, i.e. at the time of the related transaction or on pro-rata basis over the period the service is provided, depending on fees' substance. The pro-rata principle is applied for custody services that are continuously provided over an extended period of time.

f) Taxation

Income tax payable on profits, based on the applicable tax law in each jurisdiction, is recognised as an expense in the period in which profits arise. The tax effects of income tax losses available for carry forward are recognised as an asset when it is probable that future taxable profits will be available against which these losses can be utilised.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated and separate financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised where it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax related to fair value re-measurement of available for sale investments, which are charged to other comprehensive income, is also charged directly to other comprehensive income and is subsequently recognised in the income statement together with the deferred gain or loss.

Deferred tax assets and liabilities are offset only if the Bank and the Group has a legally enforceable right to set off current tax assets against current tax liabilities and only if the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.

g) Share-based Payments

Group company employees receive compensation through share-based incentive programmes. The compensation consists of employee stock options (equity instruments), entitling the holder to subscribe for shares in the parent company at a future date and at a predetermined price. The total value of issued stock options is amortised over the vesting period. The vesting period is comprised of the period from the date on which the options are issued until the stipulated vesting conditions are satisfied. The total value of issued stock options equals the fair value per option, multiplied by the number of options that are expected to become exercisable, taking the vesting conditions into consideration. The allocation of this amount implies that profit and loss are impacted at the same time as the corresponding increase in equity is recognised. At each balance sheet date an assessment is made to determine if the vesting conditions will be fulfilled and the extent to which they will be fulfilled. If the conclusion of this assessment is that a lower number of options are expected to be vested during the vesting period, then the previously expensed amounts are reversed through profit or loss. This implies that in cases in which the vesting conditions are not fulfilled, no costs will be reported in profit or loss, seen over the entire vesting period.

h) Dividend Income

Dividends are recognised in the income statement when the Group's and the Bank's right to receive payment is established.

i) Cash and cash equivalents

Cash, overnight deposits, correspondent accounts with the Central Banks and correspondent accounts with other banks, items which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value are accounted for as cash/cash equivalents in the statement of cash flows.

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

j) Financial Assets

The Group and the Bank classifies its financial assets in the following categories: financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Management determines the classification of its investments at initial recognition.

Financial assets at fair value through profit or loss represent two sub-categories: financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified as held for trading if it is acquired principally for selling or repurchasing in the near term. Derivatives are also categorised as held for trading unless they are designated as hedges. Financial assets are designated at fair value through profit or loss when certain investments, that are managed and evaluated on a fair value basis in accordance with a documented risk strategy management and reported to key management on that basis, are designated at fair value through profit or loss. Interest income on these financial assets is reflected in 'Interest income'.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group and the Bank provides money, goods or services directly to a debtor with no intention of trading the receivable.

Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's and the Bank's management has the positive intention and ability to hold to maturity. Were the Group and the Bank to sell other than an insignificant amount of held-to-maturity assets, the entire category would be tainted and reclassified as available for sale.

Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.

A regular way purchase or sale of financial assets is recognised using either trade date accounting or settlement date accounting. The method used is applied consistently for all purchases and sales of financial assets that belong to the same category of financial assets. When settlement date accounting is used for an asset that is subsequently measured at cost or amortised cost, the asset is recognised initially at its fair value on the settlement date.

Within the SEB Group trade date accounting is used for the categories fair value through profit or loss and available for sale and settlement date accounting is used for all other categories.

Available for sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held to maturity investments are carried at amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are included in the income statement in the period in which they arise. Gains and losses arising from changes in the fair value of available for sale financial assets are recognised in other comprehensive income, until the financial asset is derecognised or impaired at which time the cumulative gain or loss previously recognised in equity should be recognised in profit or loss. However, interest calculated using the effective interest method is recognised in the income statement. Dividends on available for sale equity instruments are recognised in the income statement when the entity's right to receive payment is established.

The fair values of quoted investments in active markets are based on current bid prices.

Offsetting financial instruments. Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

k) Derivative Financial Instruments and hedging activities

Derivative financial instruments including foreign exchange contracts, currency swaps and other derivative financial instruments are initially recognised in the statement of financial position at fair value. Any transaction costs are recognised in profit or loss immediately. Fair values are obtained from quoted market prices or discounted cash flow models as appropriate (except for pricing options). All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

k) Derivative Financial Instruments and hedging activities

The fair-value pricing of an OTC derivative depends on market variables (ie interest rates, exchange rates, etc) and the creditworthiness of both counterparties entering into the contract. In this context, a credit valuation adjustment (CVA) is typically defined as the difference between the value of a derivative assuming the counterparty is default-risk free and the value reflecting default risk of the counterparty. Similarly, a debit valuation adjustment (DVA) is typically defined as the difference between the value of the derivative assuming the bank is default-risk free and the value reflecting default risk of the bank. Changes in a bank's own credit risk therefore result in changes in the DVA component of the valuation of the bank's derivatives.

Changes in the fair value of derivatives held for trading are included in 'Net gains on operations with debt securities and derivative financial instruments'.

The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group and the Bank designates certain derivatives as hedges of the fair value of recognised assets (fair value hedge).

Hedge accounting is used for derivatives designated as hedging instrument provided certain criteria are met. The Group and the Bank documents, at the inception of the transaction, the relationship between hedged items and hedging instruments, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group and the Bank also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The Bank has fair value hedge relationship where hedging instrument is interest rate swap (see Note 18) and hedged item Lithuanian Government Eurobonds (accounted for as available for sale investments until 1 July 2008 and vast majority being reclassified to loans and receivables category starting from 1 July 2008 - matured in February 2016). Hedged risk is fixed interest risk on loans and receivables which could result in the change in fair value of the bonds classified as loans and receivables due to market interest rate volatility. After the reclassification of bonds to loans and receivables category fair value hedge relationships were continued. Hedged bonds matured in February 2018.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement within "Net gains on operations with debt securities and derivative financial instruments", together with any changes in the fair value of the hedged asset that are attributable to the hedged risk (see Note 9).

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to profit or loss over the period to maturity.

l) Impairment of Financial Assets

Assets carried at amortised cost: the Group and the Bank assesses at each financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The Group and the Bank first assess whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Group and the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on loans and receivables or held to maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

l) Impairment of Financial Assets (continued)

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors' ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the group of the assets and historical loss experience for assets with credit risk characteristics similar to those of the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.

When a loan is uncollectible, it is written off against the related provision for loan impairment. Subsequent recoveries of amounts previously written off decrease the amount of the provision for loan impairment in the income statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. The amount of the reversal is recognised in the income statement.

Provision rates for homogeneous credit groups are set not only by applying statistical methods based on historical data, but also using expert judgement adjustments. Probability of default (PD) and loss given default (LGD) parameters are set once per year. Expert judgement parameters can be updated more frequently depending on objective evidences of portfolio quality development and other particularities of credit portfolio, that are not taken into consideration by quantitative assessment of risk parameters based on historical data.

Assets carried at fair value: The Group and the Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the income statement.

m) Finance Lease Receivable

Where the Group and Bank is a lessor in a lease which transfers substantially all the risks and rewards incidental to ownership to the lessee, the assets leased out are presented as a finance lease receivable and carried at the present value of the future lease payments. Finance lease receivables are initially recognised at commencement (when the lease term begins) using a discount rate determined at inception (the earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease).

The difference between the gross receivable and the present value represents unearned finance income. This income is recognised over the term of the lease using the net investment method (before tax), which reflects a constant periodic rate of return. Incremental costs directly attributable to negotiating and arranging the lease are included in the initial measurement of the finance lease receivable and reduce the amount of income recognised over the lease term. Finance income from leases is recorded within interest income in the income statement.

n) Operating Lease – the Group/the Bank as a Lessor

Assets leased out under operating lease (classified as Investment property or Held for sale) are depreciated over their expected useful lives using straight-line method on the basis consistent with similar owned tangible fixed assets.

When the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

o) Operating Lease – the Group/the Bank as a Lessee

Where the Group and Bank is a lessee in a lease which does not transfer substantially all the risks and rewards incidental to ownership from the lessor to the Group, the total lease payments are charged to profit or loss for the year (rental expense) on a straight-line basis over the period of the lease.

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

p) Fixed Assets

In the balance sheet fixed assets are recorded at cost less accumulated depreciation and any accumulated impairment losses. Property, plant and equipment with a value less than the equivalent of EUR 1,000 except of computers where Bank applies EUR 250 limit and intangible fixed assets with a value less than the equivalent of EUR 1,500 are expensed.

Gains and losses on disposal of fixed assets are determined by reference to their carrying amount and are taken into account in determining result before income tax. Repairs are charged to the income statement when the expenditure is incurred.

Depreciation and amortisation is calculated using the straight-line method of depreciation based on the estimated useful life of the asset. All amortisation and depreciation charges for the year are included in other administrative expenses. Useful lives of assets and their residual values are reviewed at each balance sheet date.

The following amortisation and depreciation rates are applied in the Group and the Bank for the respective asset category:

Asset category	Depreciation/ amortisation period (years)
Software	3-8
Other intangible assets	3
Buildings	8-25
Vehicles	5
Computer hardware and cash counting equipment	3-10
Office equipment	5
Other property and equipment	5

q) Investment Property

Investments in properties held in order to receive rental income and/or for capital appreciation are reported as investment properties. Investment property is initially measured at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at historical cost less accumulated depreciation and impairment losses. If any indication exists that investment properties may be impaired, the Group and Bank estimates the recoverable amount as the higher of value in use and fair value less costs to sell. The carrying amount of an investment property is written down to its recoverable amount through a charge to profit or loss for the year. An impairment loss recognised in prior years is reversed if there has been a subsequent change in the estimates used to determine the asset's recoverable amount. Subsequent expenditure is capitalised only when it is probable that future economic benefits associated with will flow to the Group and Bank and the cost can be measured reliably.

All other repairs and maintenance costs are expensed when incurred. If an investment property becomes owner-occupied, it is reclassified to premises and equipment.

Expected useful lives of the investment property groups:

Asset category Depreciation period (years) Buildings 25-50

r) Non-Current Assets Held for Sale

The Group classifies a non-current asset (or disposal group) as held for sale when assets carrying amount will be recovered principally through a sale transaction, the management is committed to sell the asset and an active programme to locate a buyer have been initiated, the asset (or disposal group) is actively marketed for sale at a price that is reasonable in relation to its current fair value and it is expected to complete sale within one year from the date of classification. Assets that meet the criteria to be classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets is ceased.

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

s) Impairment of Non-Financial Assets

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

t) Borrowings

Borrowings are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. Subsequently borrowings are stated at amortised cost and any difference between net proceeds and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method.

Securities borrowing and lending transactions are entered into on a collateralised basis. Fair value of securities received or delivered is monitored on a daily basis to require or provide additional collateral. Cash collateral delivered is derecognised with a corresponding receivable and cash collateral received is recognized with a corresponding obligation to return it. Securities lent remain on the balance sheet and are reported as pledged assets. Borrowed securities are not recognised as assets. When borrowed securities are sold (short position), an amount corresponding to the fair value of the securities is entered as a liability.

u) Provisions

Provisions for disputes and legal claims and onerous contracts are recognised when: the Group and the Bank has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. The estimated amount in onerous contract case reflects the least net cost of the exiting from the contract, which is lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.

Provisions are measured at the present value of expenditures expected to be required to settle the obligation using pre-tax rate that reflects current market assessments of the time value of money and the risks specified to the obligation.

Provisions should be reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources will be required to settle the obligation, the provision is reversed.

v) Uncertain tax positions

The Group's and the Bank's uncertain tax positions are reassessed by management at the end of each reporting period. Liabilities are recorded for income tax positions that are determined by management as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the end of the reporting period, and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other than on income are recognised based on management's best estimate of the expenditure required to settle the obligations at the end of the reporting period.

w) Debt Securities in Issue

Issued debt securities are classified as financial liabilities, which are repurchased as one amount or in instalments under a certain repayment schedule. Issued debt securities are recognized initially at fair value, being their issue proceeds net of transaction costs incurred. They are measured at amortized cost using the effective interest rate approach.

Some hybrid instruments are measured at fair value through profit (loss) in order to reduce inconsistency that would otherwise arise from using different measurement basis.

Debt securities placed prior to specified issue date are accounted as other liabilities.

If the Group and the Bank purchases its own debt, it is removed from the balance sheet, and the difference between the carrying amount of a liability and the consideration paid is included in net trading income.

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

x) Employee Benefits

Termination benefits are payable whenever an employee's employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group and the Bank recognizes termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy.

Social security contributions are paid by the Group and the Bank to the state Social Security Fund (the Fund) on behalf of its employees based on the defined contribution plan in accordance with the local legal requirements. A defined contribution plan is a plan under which the Group and the Bank pays fixed contributions into the Fund and will have no legal obligations to pay further contributions if the Fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior period. The social security contributions are recognized as an expense on an accrual basis and are included within staff costs.

y) Fiduciary Activities

The Group and the Bank commonly acts as trustees and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Group.

z) Financial Guarantee Contracts

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and other bodies.

Financial guarantees are initially recognised in the financial statements at fair value on the date the guarantee was given. Subsequent to initial recognition, the Bank's and the Group's liabilities under such guarantees are measured at the higher of the initial measurement, less amortisation calculated to recognise in the income statement the fee income earned on a straight line basis over the life of the guarantee and the best estimate of the expenditure required to settle any financial obligation arising at the balance sheet date. These estimates are determined based on experience of similar transactions and history of past losses, supplemented by the judgment of Management.

Any increase in the liability relating to guarantees is taken to the income statement under 'provisions for guarantees'. Income from financial guarantees is recognised in income statement as fee and commission income.

aa) Single resolution fund

At the end of the year 2015 the Bank started contributions to the Single Resolution Fund (the Fund) under the Bank Recovery and Resolution Directive (BRRD) adopted by European Parliament in 2014.

The Fund will be built up during the first eight years (2016-2023) and shall reach at least 1% of covered deposits (as defined in the Deposit Guarantee Scheme Directive 2014/49/EU) that is approx. €55bn in 2024.

The level of contributions of an individual bank will be based on two factors:

• 1) A flat contribution calculated pro-rata based on the amount of each institution's liabilities, excluding own funds and covered deposits compared to the total liabilities, excluding own funds and covered deposits of all covered institutions; and
• 2) A risk-adjusted contribution based on criteria set out in the BRRD

National deposit guarantee schemes must still be financed, since, in case of a bank failure, the deposit guarantee schemes will still be liable up to the amount they would have been if a bank was wound down under normal insolvency proceedings.

Contribution to the Single Resolution fund for the year as well as instalments to the Deposit Insurance Fund paid by the Bank are accounted under the line 'Net interest income' in the Income statement.

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

bb) Critical Accounting Estimates and Judgements in Applying Accounting Policies

Impairment Losses on Loans and Receivables

The Bank and the Group review their loan portfolios to assess impairment at least on a quarterly basis. In determining whether an impairment loss should be recorded in the income statement, the Group and the Bank make judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. For individually impaired loans if the collateral value differs by +/-5% while other factors are unchanged, the provision for the Bank and the Group would be estimated higher or lower on an average by EUR 526 thousand (2016: EUR 1,798 thousand), If the net present value of estimated cash flows differs by +/-5% while other factors are unchanged the provision for the Bank would be estimated higher or lower by EUR 491 thousand (2016: EUR 443 thousand) of which EUR 97 thousand (2016: 88 EUR thousand) coming from loans and receivables assessed individually and EUR 394 thousand (2016: EUR 355 thousand) from loans and receivables assessed on a pool basis.

Fair Value of Derivatives

The fair values of financial derivatives that are not quoted in active markets are determined by using valuation techniques. All such not quoted derivative financial transactions are entered with third parties and mirror transactions are entered with SEB group. Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of the area that created them. All models are certified before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. For pricing of options Black-Scholes model is used, with only observable market data (e.g. historical volatility, market interest rates, market prices). Further details of major assumptions of fair values of derivatives provided under this note section Fair values.

Tax and deferred tax

The Tax Authorities may at any time during 5 successive years after the end of the reporting tax year carry out an inspection of the Bank's and Group's books and accounting records and impose additional taxes or fines.

The deferred tax assets recognised at 31 December 2017 have been based on future profitability assumptions of the Bank and the Group over a five year horizon following the business plan. The business plan is based on management expectations that are believed to be reasonable under the circumstances. If profitability assumptions (net interest income, net fee and commission income and impairment losses) would change by 5%, there will be no significant effect to the recognised deferred tax assets as at 31 December 2017 and 2016.

Available for sale investment – equity investments

On November 2, 2015, Visa Inc. announced its planned acquisition of Visa Europe (a membership-owned organisation) creating a single global Visa company. The Bank was a Principal member of Visa Europe on the announcement date. The transaction has been completed till the end of June 2016 and proceeds received by the Bank consisted of 1) cash portion amounting to EUR 16,964 thousand; 2) 6,141 preference shares in Visa Inc. amounting to EUR 3,023 thousand.; 3) deferred payment amounting to EUR 1,460 thousand (reported under the line Other assets). Total realised gain from this transaction was EUR 21,447 thousand accounted in 2016.

Further details of major assumptions of VISA Inc. preference shares are disclosed under this note section Fair values.

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Fair Values

The table below summarises the carrying amounts and fair values of those financial assets and liabilities presented on the Group's statement of financial position at amortized cost:

	2017		2016
	Book value	Fair value	Book value	Fair value
Balances with the Central Bank	1,105,066	1,105,077	61,501	61,501
Due from banks	214,052	214,018	1,391,552	1,389,834
Loans to credit institutions	6,994	6,993	7,550	7,557
Loans to customers	5,136,397	4,827,769	4,864,006	4,569,346
Finance lease receivable	602,694	598,676	475,402	471,963
Total financial assets valued at amortised cost	7,065,203	6,752,533	6,800,011	6,500,202
Due to the Central Bank	13	13	18	18
Due to credit institutions	1,398,625	1,402,083	1,370,821	1,377,469
Current and demand deposits	4,685,053	4,685,325	4,340,824	4,339,136
Term deposits from the public	726,474	726,309	811,510	810,938
Debt securities in issue	526	528	7,146	7,199
Total financial liabilities valued at amortised cost	6,810,691	6,814,258	6,530,319	6,534,760

The table below summarises the carrying amounts and fair values of those financial assets and liabilities presented on the Bank's statement of financial position at amortized cost:

	2017		2016
	Book value	Fair value	Book value	Fair value
Balances with the Central Bank Due from banks	1,105,066 214,052	1,105,077 214,018	61,501 1,391,552	61,501 1,389,834
Loans to credit institutions Loans to customers	6,994 5,136,397	6,993 4,827,769	7,550 4,864,006	7,557 4,569,346
Finance lease receivable	602,736	598,719	475,453	472,014
Total financial assets valued at amortised cost	7,065,245	6,752,576	6,800,062	6,500,252
Due to the Central Bank	13	13	18	18
Due to credit institutions	1,398,625	1,402,083	1,370,821	1,377,469
Current and demand deposits	4,690,361	4,690,636	4,350,242	4,348,554
Term deposits from the public	726,474	726,309	811,510	810,938
Debt securities in issue	526	528	7,146	7,199
Other financial liabilities	2	2	-	-
Total financial liabilities valued at amortised cost	6,816,001	6,819,571	6,539,737	6,544,178

Loans to credit and financial institutions, balances with the Central Bank and other due from banks. The fair value of floating rate placements and overnight deposits is their carrying amount. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and remaining maturity.

Loans to customers and finance lease receivable are net of provisions for impairment. The estimated fair value of loans and receivables represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted using interest rates for newly issued loans with the similar maturity date.

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Fair Values (continued)

Due to the Central Bank and credit institutions The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount repayable on demand.

Deposits from public The estimated fair value of fixed interest-bearing deposits and other borrowings not quoted in an active market is based on discounted cash flows using current market interest rates.

Debt securities in issue The discounted cash flow model is used using current market rates.

The objective of the fair value measurement is to arrive at the price at which an orderly transaction would take place between market participants at the measurement date under current market conditions. In order to arrive at the fair value of a financial instrument AB SEB bankas Group uses different methods; quoted prices in active markets, valuation techniques incorporating observable data and valuation techniques based on internal models. For disclosure purposes, financial instruments carried at fair value are classified in a fair value hierarchy according to the level of market observability of the inputs.

An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. The objective is to arrive at a price at which a transaction without modification or repacking would occur in the principal market for the instrument to which SEB has immediate access.

Fair value is generally measured for individual financial instruments, in addition adjustments are made to cover credit risk. To reflect counterparty risk in OTC derivatives, adjustments are made based on the net exposure towards each counterpart. These adjustments are calculated on a counterparty level based on estimates of exposure at default, probability of default and recovery rates. Probability of default and recovery rate information is generally sourced from the CDS markets. For counterparties where this information is not available, or considered unreliable due to the nature of the exposure, alternative approaches are taken where the probability of default is based on generic credit indices for specific industry and /or rating.

Instruments are valued on a daily basis. Valuations are performed using recent and reliable bid prices from at least one external market data provider where the relevance of a traded price is assessed in light of current market movements. Instruments that require models for valuation, are valued using industry standard pricing models with input parameters that are either based on observable market data or, if deemed more appropriate, set or validated by independent risk control function.

Level 1: Quoted market prices

Valuations in Level 1 are determined by reference to unadjusted quoted market prices for identical instruments in active markets where the quoted prices are readily available and the prices represent actual and regularly occurring market transactions on an arm's length basis. Examples of Level 1 financial instruments are listed equity securities, debts securities and exchange-traded derivatives.

Level 2: Valuation techniques with observable inputs

In level 2 valuation techniques, all significant inputs to the valuation models are observable either directly or indirectly. Level 2 valuation techniques include using discounted cash flows, option pricing models, recent transactions and the price of another instrument that is substantially the same.

Examples of observable inputs are foreign currency exchange rates, binding securities price quotations, market interest rates (Libor, etc.), volatilities implied from observable option prices for the same term and actual transactions with one or more external counterparts executed by SEB.

Examples of Level 2 financial instruments are most OTC derivatives such as options and interest rate swaps based on the Libor swap rate or foreign-denominated yield curve.

Level 3: Valuation techniques with significant unobservable inputs

Level 3 valuation techniques incorporate significant inputs that are unobservable. These techniques are generally based on extrapolating from observable inputs for similar instruments, analyzing historical data or other analytical techniques. Examples of Level 3 financial instruments are more complex OTC derivatives, long dated options for which the volatility is extrapolated or derivatives that depend on an unobservable correlation. Other examples are instruments for which there is currently no active market or binding quotes, such as unlisted equity instruments.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Fair Values (continued)

Transfers between levels may occur when there are indications that market conditions have changed, e.g. a change in liquidity. There have been no transfers between levels during the years 2017 and 2016.

Financial assets and liabilities presented on the Group's and the Bank's statement of financial position at amortized cost for the year 2017 and 2016 for which fair value is disclosed in the tables above are of level 3 within fair value hierarchy.

The table below summarises the hierarchy of fair value measurement of asset and liabilities presented on the Group's statement of financial position at fair value:

	Fair value measurement at the end of reporting period based on:
31 December 2017	Quoted price in active Valuation techniques using markets (Level 1) observable inputs (Level 2)		Valuation techniques using non-observable inputs (Level 3)
Government securities available for sale Financial assets at fair value through	15,902	-	-
profit and loss Derivative financial instruments (assets)	379,096 48	- 47,501	- -
Equity securities – available for sale	-	-	4,143
Derivative financial instruments (liabilities)	(48)	(45,201)	-
Debt securities in issue	-	-	-
Total	394,998	2, 300	4,143

	Fair value measurement at the end of reporting period based on:
31 December 2016	Quoted price in active markets (Level 1)	Valuation techniques using observable inputs (Level 2)	Valuation techniques using non-observable inputs (Level 3)
Government securities available
for sale Financial assets at fair value through	16,663	-	-
profit and loss	361,528	-	3,742
Derivative financial instruments
(assets)	36	124,699	-
Equity securities – available
for sale	-	-	3,268
Derivative financial instruments
(liabilities)	(23)	(122,008)	-
Debt securities in issue	-	(902)	-
Total	378,204	1, 789	7,010

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Fair Values (continued)

The table below summarises the hierarchy of fair value measurement of asset and liabilities presented on the Bank's statement of financial position at fair value:

	Fair value measurement at the end of reporting period based on:
31 December 2017	Quoted price in active markets (Level 1)	Valuation techniques using observable inputs (Level 2)	Valuation techniques using non-observable inputs (Level 3)
Government securities available for sale	15,726	-	-
Financial assets at fair value through profit and loss	379,096	-	-
Derivative financial instruments (assets) Equityt securities – available	48	47,501	-
for sale Derivative financial instruments (liabilities)	- (48)	- (45,201)	4,143 -
Debt securities in issue Total	- 394,822	- 2, 300	- 4,143

	Fair value measurement at the end of reporting period based on:
31 December 2016	Quoted price in active markets (Level 1)	Valuation techniques using observable inputs (Level 2)	Valuation techniques using non-observable inputs (Level 3)
Government securities available
for sale Financial assets at fair value through	16,486	-	-
profit and loss	361,528	-	-
Derivative financial instruments
(assets)	36	124,699	-
Equity securities – available
for sale	-	-	3,268
Derivative financial instruments
(liabilities)	(23)	(122,008)	-
Debt securities in issue	-	(902)	-
Total	378,027	1, 789	3,268

All instruments measured at fair value are subject to recurring valuation.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Fair Values (continued)

The table below represents the changes of the Group's and Bank's Level 3 instruments for the year ended 31 December 2017:

	Balance as of 31 December 2016	Purchases	Sales	Gain (loss) in Income statement	Change in revaluation reserve in equity	FX rates effect	Balance as of 31 December 2017
Financial assets at fair value through profit and loss Investment securities – available	3,742	-	2,348	(1,394)	-	-	-
for sale	3,268	-	-	-	1,286	(411)	4,143

The table below represents the changes of the Group's and Banks's Level 3 instruments for the year ended 31 December 2016:

	Balance as of 31 December 2015	Purchases	Sales	Gain (loss) in Income statement	Change in revaluation reserve in equity	FX rates effect	Balance as of 31 December 2016
Financial assets at fair value through profit and loss	3,356	121	364	629	-	-	3,742
Investment securities – available for sale	15,924	3,023	21,447	21,447	(15,864)	185	3,268

Level 3 Financial assets at fair value through profit and loss as of 31 December 2016 consist of investments held by the venture capital subsidiary of the Group. All financial assets within the Group's venture capital business were managed and their performance is evaluated on a fair value basis in accordance with documented risk management and investment strategies. Venture capital subsidiary of the Group UAB "SEB Venture capital" was in process of liquidation as of December 2017, more information is provided in Note 23.

The fair value of these financial assets as at 31 December 2016 has been established based on EBIDTA multipliers, as the market for these financial instrument is not active.

Level 3 Investment securities – available for sale: in November 2015 Visa Inc. announced buying out VISA Europe Limited shares from it's member banks. AB SEB bankas was a holder of one redeemable ordinary share of EUR 10 in Visa Europe Limited. The price offered for the shares have been calculated based on members' contribution to Visa Europe's business and consisted of cash part, preferred stock (series C shares) and 3 years deferred payment. The number of shares of class A common stock underlying each share of preferred stock is specified by the class A common equivalent number with respect to the applicable series of preferred stock. The equivalent number has been set on the issue date of preferred stock which occurred at the closing of the deal. The class A common equivalent number will be adjusted from time to time pursuant to the applicable governing documents with respect to such series.

Valuation of VISA Inc. preferred stock

Positions, that are classified as level 3 and for which a traded price nor a third party quote is available, are to be valued by benchmarking to another product with similar characteristics and for which a traded price or an independent third party quote is available. Information from traded indices and other sources shall also be used when available. The benchmarking exercise must be well documented and approved by the relevant Valuation Committee in order to allow for a review of the appropriateness of used prices.

The Bank, as an owner of the preferred share, has a stake in the company in proportion to the stocks held under the conversion estimate provided by Visa Inc. Valuation inputs to approximate the value of the preference shares have been used. The expected number of A class shares to be received on conversion shares has been estimated by management based on known terms and conditions. Following the exercise of the stock conversion, stock will be valued at the traded price for the Visa Inc. shares (NYSE:V). Given that preference shares are directly convertible to A Class shares, the use of market observable inputs has been maximized. The SEB valuation of the preferred shares has therefore been modelled on the traded closing price at month end for the Visa Inc. share on NYSE. In order to account for the fact that the SEB preferred shares are nontransferrable and subject to ownership restrictions, the listed A class share price is adjusted. The adjustment reflects that, when the transaction is closed, holders of preference shares do not have access to the primary market where Visa A class shares are traded. Preference shares may only be sold or transferred to other members in the transaction or other holders of B-class shares.

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Fair Values (continued)

The adjustment also reflects uncertainties around the conversion rate and the outcome of covered litigation, where the conversion rate will be reduced in the event that Visa Inc. suffers losses related to certain covered litigation, a haircut has been applied to the estimated number of shares to be allocated to the Bank. The embedded conversion feature, which reduces the number of Visa Inc. equity instruments a Principal Member receives on conversion of its preferred share, is dependent upon the uncertain outcome of litigation.

The total adjustment made by the Bank was 50 percent .

On a quarterly basis the Group reviews the classification of level 3 instruments and assesses if there is additional information indicating changes in their value.

If the net present value of estimated cash flows differs by +/-5% while other factors are unchanged the change in fair value of the level 3 instruments for the Group would be estimated higher or lower by EUR 215 thousand (2016: EUR 161 thousand) .

Financial Risk Management Policy

Definition of Risk

AB SEB bankas Group defines the risk as the possibility of a negative deviation from an expected financial outcome. One consequence of risktaking is the occurrence of losses, which can be broken into expected and unexpected losses. The "normal level" of losses (measured as expected losses) is considered as a cost of doing business from a risk point of view, and is covered through transaction pricing and risk reserves. The Group and the Bank shall make appropriate efforts to minimise expected losses through ensuring sound internal practices and good internal controls. The unusual, large and unexpected losses are not foreseen to be completely absorbed by day to day transaction profits. The primary protections against such losses are sound internal practices, good internal controls, insurance policies and earnings. The last loss-absorbing resource for unexpected losses is the capital of the Bank.

Credit Risk

The Group and the Bank takes on exposure to credit risk which is the risk that a counterparty will be unable to pay amounts in full when due. The definition of credit risk also encompasses so called counterparty's country risk which arises due to the risk of settlements between parties according to trading operations.

The Group's and the Bank's credit policy is based on the principle that any lending transaction must be based on credit analysis. Various credit security instruments are applied depending on the complexity of a transaction and trustworthiness of a customer.

Credit Risk Classification

The Bank got the permission from the regulators to use an IRB (Internal Ratings Based Approach, according to Basel II methodology) models in credit risk assessment process and for the regulatory capital calculation starting from the beginning of 2008 to be applied for the main credit portfolio segments: Corporate (Non-retail), Financial Institutions (Non-retail), Small Corporate (Retail) and Private Individuals (Retail). The Group uses different risk classification systems applicable for particular portfolio segment. The same expert judgment based risk classification systems are used for credit risk assessment of Non-retail credit exposures in all parts of SEB Group. Credits that exceed 0.5 million EUR and/or entities's turnover exceed 10 million EUR are classified as Non-retail positions. The Bank uses the master scale of 16 risk classes classifying the credit risk of Non-Retail borrowers with 1 representing the lowest default probability and 16 representing the default. Risk classes 1-7 are considered investment grade. The borrowers falling into the range of risk class 1-10 are treated as normal business loans. The classification above is applied for loans to customers and finance lease receivables.

The borrowers of risk class 11 and 12 are defined as 'restricted business' and 'special observation' respectively, while the borrowers in risk classes 13-16 are classified as 'watch list'. Risk classes are used as important parameters in the credit policy, the credit approval process, credit risk measurement and management, monitoring and reporting of credit risk. The credit risk assessment is based on analysis of Non-retail borrower's ability to meet interest and principal amount repayment obligations, covering business and financial risk. Financial ratios and peer group comparison are used in the risk assessment. The credit risk of the Non-retail borrowers is reviewed on regular basis at least once per year depending on the risk class assigned to the borrower. High-risk exposures are subject to more frequent reviews. The objective is to identify at an early stage, credit exposures with increased risk for loss, and work together with the customer towards a constructive solution that enables the Group and the Bank to reduce or avoid credit losses as well as maintain long term relationship with the customer.

Scoring models are used in credit risk assessment process of Retail exposures, i. e small enterprises and private individuals. The application scoring models are used for the assessment of counterparty risk (Probability of Default) and transaction risk (Loss Given Default) during customer credit application phase. Due to the fact that credit worthiness of the clients changes over time the Retail exposures are re-scored quarterly by using the behavioural scoring models. The Bank uses the scale from A to E for classification of Retail borrowers credit risk with A representing the lowest default probability and E representing the default.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Financial Risk Management Policy (continued)

The information on distribution of loans and leasing portfolio by risk class is presented in notes 20 and 21.

Impairment losses on Loans and Receivables

The Group, aiming at fair and timely assessment of credit impairment, performs regular credit revision: corporate loans within risk class 8 and better are revised no less than once a year; revisions of 9—10 risk class corporate loans are performed no less than once a half-year; corporate loans within risk class 11—16, no less than once a quarter; revisions within homogeneous groups (loans to small enterprises, mortgage loans, consumer loans, debts to credit institution) are performed automatically on quarterly basis. Revisions in case of corporate loans within the Bank's established increased risk economy sectors, irrespective of the established borrower risk class, are performed not less than once a quarter. After loan assessment at the established frequency, relevant loss events are identified and relevant loan impairment is assessed. When assessing whether a loss due to impairment must be included in the profit (loss) account, the Group assesses, whether before the determination of the loan impairment there exist any data in proof that it is possible to establish a decrease in forecasted future cash flows of a company within the credit portfolio. The following data is assessed: whether there has or has not been a material deterioration in the borrower's financial standing as well as information related to the assessment of business perspective. A borrower's cash flows are forecasted using a conservative approach, and loan security measures are taken into account – probable adverse change in the assets value, previously sustained losses as well as objective evidence of impairment of the loans within the portfolio.

Methodology and presumptions used in the forecast of future cash flows and time with the aim to reduce a mismatch between forecasted and actual losses are revised on regular basis.

The criteria that the Group and the Bank uses to determine that there is objective evidence of an impairment loss include:

• Downgrading to internal risk class 16;
• Proceeds of the loan without a prior consent of the bank are used for the purposes other than stipulated in the loan agreement and this event has a negative impact on the credit risk of the borrower;
• Breach of investment project covenants having a negative impact on the credit risk of the borrower;
• Related parties of the borrower are in default and this is having impact on the credit risk of the borrower;
• Deterioration of active market for debt securities due to financial distress;
• Deterioration in value of collateral, in cases where repayment conditions are directly related to the value of collateral and earnings method was applied for establishing such collateral value;
• Suspension or withdrawal of license for the borrowers that carry licensed activities (for example trade of oil products, utilities, etc.) and this event has a negative impact on the credit risk of the borrower;
• Declaration of bankruptcy;
• Counterparty is in default, i.e. more than 90 days past due*.

*- A financial asset is past due when any amount of principal, interest or fee has not been paid by a counterparty at the date it was contractually due.

The Credit Committee has to carry out an extraordinary credit revision, if the borrower is more than 14 days in delay to repay the loan or pay interest or in case at least one of the above-referred criteria indicating a possible decrease in the loan value is applicable to the borrower/loan. In case loan impairment is found, individual provisions must be formed for a potential credit loss. A loan is classified as an impaired loan, if there is objective evidence that one or more loss events have occurred, and if, as an effect of such events, there has been a change in the estimated future cash flows, for instance, the customer has significant financial problems, fails to pay interest or the principal when due. Loans are not classified as impaired loans, if the collateral value covers the loan and interest.

Provisions for portfolio corporate loans are formed for loans, in case of which no individual impairment has been found, however, a probability exists that impairment will occur, but no such fact has been found yet. Loans with similar risk characteristics are classified taking into account the main factors that have an impact on a borrower's – legal entity's – credit risk, and impairment provisions for them are formed taking into account the default probability within relevant classes.

The portfolio based assessment is applied to the following homogeneous credit groups having the similar risk characteristics: mortgage loans, consumer loans, credit cards, small corporate loans. The collective provisions for the homogeneous credit groups are formed by applying statistical methods based on historical data about the observed default frequencies of the borrowers (PD) and the suffered losses (LGD) within the corresponding homogeneous credit group and expert judgment adjustments considering historical experience of adequacy of provisioning levels, objective evidences of portfolio quality development, adequacy of security of particular portfolio and other particularities of credit portfolio, that are not taken into consideration by quantitative assessment.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Financial Risk Management Policy (continued)

An impairment loss is reported as a write off, if it is deemed impossible to collect the contractual amounts due that have not been paid and/or are expected to remain unpaid, or if it is deemed impossible to recover the carrying amount by selling any collateral provided. In other cases, a specific provision is recorded in an allowance account. As soon as the non-collectible amount can be determined and the asset is written off, the amount reported in the allowance account is dissolved. Similarly, the provision in the allowance account is reversed if the estimated recovery value exceeds the carrying amount.

Credit Risk Limits and Monitoring

The Group and the Bank structures the levels of credit portfolio risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and industry segments. The credit risk exposure to a single borrower or borrowers' groups and the industries are monitored on a regular basis. Credit concentration exposure limits are established by Assets and liability management committee (ALCO) and regularly monitored by risk control function. As of 31 December 2017, credit exposures are in compliance with limits set by ALCO.

The table below represents the development of credit exposures within particular industries.

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Financial Risk Management Policy (continued)

Maximum Exposure to Credit Risk Before Collateral Held or Other Credit Enhancements

The below table represents a worse case scenario of credit risk exposure to the Group and the Bank as of 31 December 2017 and 2016, without taking account of any collateral held or other credit enhancements attached. For on-balance-sheet assets, the exposures set out below are based on net carrying amounts as reported in the balance sheet.

The Group			The Bank
2017	2016		2017	2016
1,105,066	61,501	Balances with the Central Bank	1,105,066	61,501
214,052	1,391,552	Due from banks	214,052	1,391,552
15,902	16,663	Government securities available for sale	15,726	16,486
375,306	361,480	Financial assets at fair value through profit and loss	379,096	361,528
47,549	124,735	Derivative financial instruments	47,549	124,735
6,994	7,550	Loans to credit institutions	6,994	7,550
		Loans to customers
860,408	799,923	Property management	860,408	799,923
1,910,163	1,861,292	Other corporate	1,910,163	1,860,152
45,774	46,979	Public	45,774	46,979
2,149,464	1,979,768	Mortgage loans	2,149,464	1,979,768
170,588	177,184	Other private individuals	170,588	177,184
		Finance lease receivable
544,904	430,956	Corporate	544,904	430,956
54,056	40,841	Private individuals	54,056	40,841
3,734	3,605	Other	3,776	3,656
53,202	38,511	Other financial assets	54,091	39,338
		Credit risk exposures relating to off-balance
		sheet items
1,066,819	1,069,202	Agreements to grant loans	1,066,819	1,069,202
409,840	238,384	Guarantees issued	409,840	238,384
36,521	40,566	Letters of credit issued	36,521	40,566
22,003	15,084	Commitments related to leasing	22,003	15,084
-	11	Customs guarantees collateralised by deposits	-	11
9,092,345	8,705,787	Total as of 31 December	9,096,890	8,705,396

Loans and receivables category include Balances with Central Bank, Due from banks, Loans to credit institutions, Loans to customers, Finance lease receivables and Other financial assets.

Management is confident in its ability to continue to control and sustain minimal exposure of credit risk to the Group and the Bank resulting from both its loan and receivables portfolio and debt securities. For information on loan ratings see Credit risk management note information above. 100% of investments in Government securities compose of Government debt securities that have an investing rating.

Market Risk

Market risk is defined as the risk of a loss or reduction of future net income following changes in interest rates, credit spreads, foreign exchange and equity prices, including price risk in connection with the sale of assets or closing of positions.

According to the type of financial risk, market risk is classified into trading risk (Trading Book risk) and structural risk of a mismatch between assets and liabilities (Banking Book risk), which has an impact on the positions of the group's interest rate sensitive assets and liabilities as well as off-balance sheet items and is defined as the risk of a loss of the group's net interest income and a decrease in the market value of liabilities. The overall market risk exposure (trading and non-trading) is measured using Value-at-Risk (VaR) model based on historical simulation method that express the maximum potential loss that can arise at a chosen level of probability during a certain period of time. Trading risk is measured on daily basis using 99 percent probability level and 10 days time horizon. VaR exposure for non-trading positions is calculated on a daily basis using 1 day's assessment evaluation period and 99 percent probability level. Historical data are based on 250 days for estimation of volatility and correlation. Additionally the Bank uses the sensitivity measures applied for risk assessment of specific market risk type/portfolio/position: delta 1 p.p. is applied for interest rate sensitive portfolios/positions, etc. Value at Risk assessment results on the total portfolio positions are shown in Note 36.

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Financial Risk Management Policy (continued)

Currency Risk

Foreign Exchange Risk exposure is defined by two measures: single open currency position against EUR and aggregated general open currency - the bigger one of summarized long and short open currency positions. The foreign exchange risk measure contains the net exposure of spot and forward positions, plus other balance sheet items. The currency risk control is ensured by monitoring the risk exposure against the limits established for single open currency position.

The net positions of assets and liabilities denominated in foreign currencies as of 31 December 2017 and 2016 are presented in Note 35.

Interest Rate Risk

Interest rate risk is managed by forecasting the market interest rates and managing the mismatches between assets and liabilities by re-pricing maturities. The Bank applies the interest rate risk management methods allowing to measure the Group's sensitivity to interest rate changes by computing the impact to the net effect to the market value of shareholders equity (called delta 1%) in case of parallel shift by percentage point in the yield curve.

The interest rate risk management as of 31 December 2017 and 2016 is presented in Note 36.

Credit risk margin risk is defined as a risk that the value of debt securities will decrease as a result of a change in the issuer's credit risk. This type of risk is calculated using the VaR (Value-at-Risk) model. Risk is managed by setting limits for investments in debt securities.

The credit risk margin risk management as of 31 December 2017 and 2016 is presented in Note 36.

Liquidity Risk

Liquidity risk is the risk that the Group and the Bank may be unable to timely fulfil its payment obligations or to finance or realize its assets over the certain period at an acceptable price. The Group and the Bank adheres to a conservative liquidity risk management policy that ensures adequate fulfilment of current financial obligations, the level of obligatory reserves with the European Central Bank higher than established.

AB SEB bankas and the Group is following and managing liquidity risk from a number of perspectives of which the main perspectives can be characterized as structural liquidity risk (or funding risk according to European Banking Authority– EBA – terminology) and stressed survival horizon (or short-term liquidity risk according to EBA terminology).

Structural liquidity risk refers primarily to how long-term more illiquid assets (such as lending to the public) are funded by long-term stable funding (such as stable deposits).

The Core Gap Ratio is the Bank's internal structural liquidity risk metric. A ratio below 100% indicates that the bank is not funded with stable enough liabilities relative to illiquid assets.

Core GAP ratio was 107 percent as of 31 of December 2017 (113 percent as of 31 December 2016).

The Core Gap Ratio will eventually be accompanied by the regulatory metric of structural liquidity risk – Net Stable Funding Ratio which should come into force in 2019.

Stressed survival horizon (SSH) is about how sensitive the bank's balance sheet structure is to more short-term funding disturbances, e.g. when wholesale funding is difficult to prolong due to a bank-specific or general market stress or when deposits leave the bank in an even more stressed scenario. Survival horizon is the number of days accumulated cash flows stays positive.

Second metric is Liquidity Coverage Ratio (LCR), which is also a regulatory requirement and measures to what extent liquid assets are sufficient to cover short term cash outflows in a stressed scenario.

LCR for the Bank should be not less than 100%. During the year 2016 and 2017 the Bank and the Group was in compliance with this requirement. As at 31 December 2017 LCR for the Bank was 264.8% while for the Group it was 266.01%.

The table below presents the cash flows payable by the Group and the Bank under financial liabilities by remaining contractual maturities at the balance sheet date. In addition the Group and the Bank manages the inherent liquidity risk based on expected cash inflows.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Financial Risk Management Policy (continued)

Liquidity Risk (continued)

The Group's undiscounted non-derivative financial liability and expected cash inflows analysis as of 31 December 2017:

	Up to	3–6	6-12	1-3
Maturity	3 month	months	months	years	Over 3 years	Total
Cash	118,828	-	-	-	-	118,828
Balances with the Central Bank
(excluding compulsory reserve)	1,041,167	-	-	-	-	1,041,167
Government bonds	20,535	77,745	89	203,694	90,995	393,058
Total assets used for liquidity
management	1,180,530	77,745	89	203,694	90,995	1,553,053
Amounts owed to credit institutions	196,623	329,792	195,758	460,681	222,153	1,405,007
Deposits from public	5,059,773	133,875	191,116	19,939	6,838	5,411,541
Debt securities in issue	185	-	344	-	-	530
Other financial liabilities	54,431	3,827	1,426	1,736	7,801	69,221
Total undiscounted
non- derivative financial
liabilities	5,311,012	467,494	388,644	482,356	236,792	6,886,299
Commitments to grant loans	894,038	101,776	55,319	15,544	142	1,066,819
Guarantees	409,840	-	-	-	-	409,840
Letters of credit issued	27,458	5,094	3,969	-	-	36,521
Commitments related to leasing	20,846	1,157	-	-	-	22,003

The Group's undiscounted non-derivative financial liability and expected cash inflows analysis as of 31 December 2016:

Maturity	Up to 3 month	3–6 months	6-12 months	1-3 years	Over 3 years	Total
Cash	117,812	-	-	-	-	117,812
Balances with the Central Bank
(excluding compulsory reserve)	2,812	-	-	-	-	2,812
Government bonds	52,121	2,529	22,221	154,673	146,538	378,082
Total assets used for liquidity
management	172,745	2,529	22,221	154,673	146,538	498,706
Amounts owed to credit institutions	353,645	493,347	147,053	270,465	115,739	1,380,250
Deposits from public	4,736,569	166,279	221,362	26,298	1,917	5,152,425
Debt securities in issue	2,355	4,196	1,217	538	-	8,306
Other financial liabilities	27,995	3,836	1,768	1,100	5,552	40,250
Total undiscounted non- derivative financial
liabilities	5,120,564	667,659	371,400	298,400	123,209	6,581,231
Commitments to grant loans	865,378	110,177	72,118	21,267	273	1,069,213
Guarantees	238,384	-	-	-	-	238,384
Letters of credit issued	28,846	5,588	1,751	2,460	1,921	40,566
Commitments related to leasing	5,999	1,322	109	-	7,654	15,084

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Financial Risk Management Policy (continued)

Liquidity Risk (continued)

The Bank's undiscounted non-derivative financial liability and expected cash inflows analysis as of 31 December 2017:

Maturity	Up to 3 month	3–6 months	6-12 months	1-3 years	Over 3 years	Total
Cash	118,828	-	-	-	-	118,828
Balances with the Central Bank
(excluding compulsory reserve)	1,041,167	-	-	-	-	1,041,167
Government bonds	20,535	77,745	89	203,694	90,819	392,882
Total assets used for liquidity
management	1,180,530	77,745	89	203,694	90,819	1,552,877
Amounts owed to credit institutions	196,623	329,792	195,758	460,681	222,153	1,405,007
Deposits from public	5,065,083	133,875	191,116	19,939	6,838	5,416,851
Debt securities in issue	185	-	344	-	-	530
Other financial liabilities	54,431	3,827	1,426	1,736	7,801	69,221
Total undiscounted non- derivative financial liabilities	5,316,322	467,494	388,644	482,356	236,792	6,891,609
Commitments to grant loans	894,038	101,776	55,319	15,544	142	1,066,819
Guarantees	409,840	-	-	-	-	409,840
Letters of credit issued	27,458	5,094	3,969	-	-	36,521
Commitments related to leasing	20,846	1,157	-	-	-	22,003

The Bank's undiscounted non-derivative financial liability and expected cash inflows analysis as of 31 December 2016:

Maturity	Up to 3 month	3–6 months	6-12 months	1-3 years	Over 3 years	Total
Cash	117,812	-	-	-	-	117,812
Balances with the Central Bank
(excluding compulsory reserve)	2,812	-	-	-	-	2,812
Government bonds	52,121	2,529	22,221	154,673	146,361	377,905
Total assets used for liquidity
management	172,745	2,529	22,221	154,673	146,361	498,529
Amounts owed to creditinstitutions	353,645	493,347	147,053	270,465	115,739	1,380,250
Deposits from public	4,745,986	166,279	221,362	26,298	1,917	5,161,842
Debt securities in issue	2,355	4,196	1,217	538	-	8,306
Other financial liabilities	28,045	3,606	1,981	1,066	5,552	40,250
Total undiscounted non- derivative financial liabilities	5,130,031	667,429	371,613	298,366	123,209	6,590,648
Commitments to grant loans	865,378	110,177	72,118	21,267	273	1,069,213
Guarantees	238,384	-	-	-	-	238,384
Letters of credit issued	28,846	5,588	1,751	2,460	1,921	40,566
Commitments related to leasing	5,999	1,322	109	-	7,654	15,084

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Financial Risk Management Policy (continued)

Liquidity Risk (continued)

Undiscounted derivative instruments analysis for the Group and the Bank as of 31 December 2017:

	Up to	3–6	6-12	1-3
Maturity	3 month	months	months	years	Over 3 years	Total
Outflows:
IRS	26,874	1,221	26,357	786,345	7,961	848,758
FX forwards	366,431	13,224	4,978	147	-	384,780
FX swaps	368,812	9,130	2,914	-	-	380,856
Equity options	22	9	-	-	-	31
Currency options	-	-	-	-	-	-
Total outflows	762,139	23,584	34,249	786,492	7,961	1,614,425
Inflows:
IRS	26,510	1,187	26,770	787,489	7,961	849,917
FX forwards	365,530	13,429	4,983	152	-	384,094
FX swaps	370,006	9,005	2,918	-	-	381,929
Equity options	22	9	-	-	-	31
Currency options	-	-	-	-	-	-
Total inflows	762,068	23,630	34,671	787,641	7,961	1,615,971

Undiscounted derivative instruments analysis for the Group and the Bank as of 31 December 2016:

	Up to	3–6	6-12	1-3
Maturity	3 month	months	months	years	Over 3 years	Total
Outflows:
IRS	30,378	1,924	30,662	118,369	808,323	989,656
FX forwards	17,316	4,824	1,165	-	-	23,305
FX swaps	18,312	455	252	-	-	19,018
Equity options	36	180	26	7	-	248
Currency options	186	-	-	-	-	186
Total outflows	66,228	7,382	32,104	118,377	808,323	1,032,414
Inflows:
IRS	30,018	1,859	31,071	119,176	808,705	990,830
FX forwards	17,265	4,832	1,107	-	-	23,204
FX swaps	18,553	544	316	-	-	19,414
Equity options	36	180	26	7	-	248
Currency options	186	-	-	-	-	186
Total inflows	66,059	7,416	32,520	119,183	808,705	1,033,883

In the tables above net-settled derivatives are included in the analysis only if they have a negative fair value at the balance sheet date (if they are liabilities at that date). However all gross-settled derivatives are included in the analysis whether their fair value is negative or positive at balance sheet date. Pay leg of such derivatives is presented as outflow and receive leg as inflow.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES (CONTINUED)

Financial Risk Management Policy (continued)

Capital Adequacy

Capital adequacy is assessed by capital adequacy ratio – capital base compared to risk exposure amount.

General Regulations for the Internal Capital Adequacy Assessment Process (ICAAP) came into effect as from 1 January 2007. In accordance to these regulations, banks' should identify all risks, not only the ones assessed in capital adequacy calculation, to select risk assessment models, estimate it, choose tools for risks management, and to set a goal for limits. Accordingly, the Bank set a goal to ensure Bank's stand alone and Financial Group's capital adequacy ratios at least 1 percent higher than individual capital adequacy ratio set for AB SEB bankas including other requirements applied for the Bank by relevant institutions.

The Bank's and the Financial Group's capital adequacy ratios at the end of 2017 and 2016 were as follows:

	31 December 2016	31 December 2017
The Bank	19.43%	19.95%
The Financial Group	19.49%	19.98%

For further information see Note 34.

Maximum exposure per single borrower and Large exposure requirements

Maximum exposure per single borrower - the amount of loans to a single borrower, taking into account the impact of credit risk mitigation measures, shall not be above 25 per cent of the bank's eligible capital. When the client is an institution (bank or investment company) or when a group of connected clients includes one or several institutions, that value shall not be above 25 per cent of the institution's eligible capital, or EUR 150 million (taking into account which of the values is larger). The amount of loans granted by the bank to its parent undertaking, other subsidiaries of this parent undertaking is not limited if the whole financial group's supervision on a consolidated basis is carried out following the Capital Requirements Directive and Regulation (CRDIV/CRR) or analogous standards effective in a third country.

The Bank met these requirements at the end of the reporting period as well as during reporting period.

Stress Testing

Stress tests and scenario analysis are widely used to identify high-risk areas and relationships including concentration risks, its risk drivers and to evaluate the combined effect of shocks in the market. Stress tests provide an indication of the potential size of losses that could arise in extreme conditions. The stress tests carried out by Credits and Risk division and includes the risk factor stress testing, where stress movements are applied to each risk category: market, credit, liquidity and operational risk. The ultimate goal of the analysis is to estimate net effect of the stress scenarios to the capital of the Bank and the Group and prepare the action plan ensuring that the business operations shall be secured in case the worst case scenario occurs. The comprehensive scenario based stress testing covering all appropriate risk types is conducted at least annually and reported to the management board and Asset and Liability Committee (ALCO). The stress testing of the Group is part of Internal Capital Assessment Process (ICAAP).

Internal Control

Management of the Bank and heads of subsidiaries has a responsibility to ensure that the appropriate organisation, procedures and supporting systems are implemented to ensure sufficient system of internal controls. The following main elements of internal controls are implemented: data entered in the primary systems is reconciled with the data in the accounting ledgers; clear organisational structure and segregation of duties; daily bookkeeping and reporting, based on actual market data; , limits and limit follow-up; elements of internal controls in the business and business support units' processes; secondary control centralisation of the internal accounts helping to ensure a requirement of clear differentiation of function; other controls measures,

Limits shall be one way to manage risks where applicable and possible. A system for limiting and following up the amount of main risks (credit, market, liquidity and operational) to be taken is implemented. The Board of Directors of SEB sets the overall limits in terms of risk in SEB. SEB Group ALCO sets the overall limits to AB SEB bankas at the proposal of ALCO of AB SEB bankas. A decision on the limit mandate must be formalised in a written form. A three- level control system is functioning at the bank: relevant business units are responsible for management of the risks occurring in their activities, the compliance and risk control units ensure that instructions, rules and control mechanisms are effective, the internal audit unit inspects integrity and efficiency of the entire system of the bank.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 4 RECONSILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

The table below details changes in the Bank and the Group's liabilities arising from financing activities, including both cash and non-cash changes:

	31 December 2016	Financing cash flow	Non cash change Change in fair value	Other changes	31 December 2017
Amounts owed to the central bank	18	(5)	-	-	13
Amounts owed to credit institutions	1,370,821	30,236	-	(2,432)	1,398,625
Debt securities in issue	8,048	(7,460)	(115)	53	526

Other changes comprise changes in accrued interest.

NOTE 5 NET INTEREST INCOME

The Group			The Bank
2017	2016		2017	2016
119,523	116,872	Interest income:	119,643	116,894
-	3	on balances with Central Banks	-	3
3,144	890	on loans and advances to credit institutions	3,263	890
101,961	101,633	on loans and advances to customers	101,961	101,655
-	307	on government securities - loans and receivables	-	307
10,537	9,428	on finance leasing portfolio	10,539	9,428
631	633	on debt securities available for sale	630	633
3,250	3,978	on debt securities, designated at fair value	3,250	3,978
(20,486)	(30,126)	Interest expenses:	(20,486)	(30,113)
(11,463)	(15,384)	on amounts owed to credit institutions	(11,463)	(15,371)
(403)	(537)	on deposits from the public	(403)	(537)
(52)	(210)	on debt securities	(52)	(210)
(6,496)	(9,543)	deposits insurance expenses	(6,496)	(9,543)
(2,072)	(4,452)	Single resolution fund	(2,072)	(4,452)
99,037		86,746 Total net interest income	99,157	86,781

NOTE 6 IMPAIRMENT LOSSES ON LOANS, FINANCE LEASING RECEIVABLE AND OTHER ASSETS

The Group			The Bank
2017	2016		2017	2016
		Impairment losses (reversal) of impairment losses on loans to customers,
(725)	(6,324)	net	(725)	(6,324)
(4,212)	(1,615)	Recovered written off loans	(4,212)	(1,615)
(4,937)		(7,939) Impairment losses (reversal) on loans, net	(4,937)	(7,939)

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 6 IMPAIRMENT LOSSES ON LOANS, FINANCE LEASING RECEIVABLES AND OTHER ASSETS (CONTINUED)

Changes in impairment losses during the year 2017 and 2016 were as follows:

The Group			The Bank
2017	2016		2017	2016
		Impairment losses on loans as of 1 January
77,086	109,936	(Note 20)	77 086	109 936
		Impairment charged (credited) to income statement by
(1,150)	(7,288)	customer category, net:	(1 150)	(7 288)
349	842	Other corporate	349	842
(793)	(4,075)	Property management	( 793)	(4 075)
(900)	(3,667)	Mortgage	( 900)	(3 667)
194	(388)	Other private individuals	194	( 388)
(20,033)	(26,053)	Loans written off:	(20 033)	(26 053)
(6,586)	(13,158)	Other corporate	(6 586)	(13 158)
(4,068)	(6,663)	Property management	(4 068)	(6 663)
(9,379)	(6,232)	Private individuals	(9 379)	(6 232)
159	622	Charge of unwinding reserve	159	622
(47)	(131)	Effect of change in exchange rate	(47)	(131)
		Impairment losses on loans as of
56,015	77,086	31 December (Note 20)	56 015	77 086

Impairment losses (reversals) on loans reconcile with changes in impairment losses during the year 2017 and 2016 as follows:

	The Group		The Bank
2017	2016		2017	2016
		Impairment charged (credited) to income statement by
(1,150)	(7,288)	customer category, net	(1,150)	(7,288)
425	964	Charge of unwinding reserve recognized in impairment losses	425	964
		Impairment losses (reversal) of impairment losses on loans to customers,
(725)	(6,324)	net	(725)	(6,324)
(266)		(342) Charge of unwinding reserve recognized in interest income	(266)	(342)

Impairment losses on loans relate to loans to customers and are specified in Note 20.

As of 31 December 2017 the Bank had EUR 51,982 thousand of individually impaired loans, gross of impairment losses (2016: EUR 71,246 thousand). As of 31 December 2017 accrued interest on these loans amounted to EUR 1 thousand (2016: EUR 2 thousand). Deferred loan origination fee amounted to EUR 22 thousand for individually impaired loans to customers (2016: EUR 27 thousand).

Interest income on these loans for the year ended 31 December 2017 amounted to EUR 1,145 thousand (2016: EUR 1,215 thousand). Impaired loans referred to above are identified in accordance with the Bank's Credit Loss Instructions.

The Group and the Bank accounted for the following impairment losses for finance lease portfolio and other assets:

The Group			The Bank
2017	2016		2017	2016
12,456		15,359 Impairment losses on finance lease portfolio	12,456	15,359
-	289	Impairment losses on other assets	-	289
		Impairment losses on finance lease portfolio
12,456	15,648	and other assets as of 31 December	12,456	15,648

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 6 IMPAIRMENT LOSSES ON LOANS, FINANCE LEASING RECEIVABLES AND OTHER ASSETS (CONTINUED)

Changes in impairment losses for finance lease portfolio and other assets related to lease portfolio for the year ended 31 December 2017 and 2016 were as follows:

The Group			The Bank
2017	2016		2017	2016
(1,058)	3,867	Impairment (reversal) loss on finance lease portfoliocharged/ credited to income statement	(1,058)	3,867
		Impairment (reversal)/loss on finance lease portfolio and other assets
(1,058)	3,867	related to lease portfolio, net	(1,058)	3,867
The Group			The Bank
2017	2016		2017	2016
		Impairment losses on finance lease portfolio as of
15,359	14,768	1 January (Note 21)	15,359	14,768
		Impairment loss/(reversal) credited to income statement,
(1,058)	3,867	net:	(1,058)	3,867
(909)	3,801	Corporate	(909)	3,801
(149)	66	Private individuals	(149)	66
(1,240)	(3,380)	Finance leasing receivable written off	(1,240)	(3,380)
(1,240)	(3,380)	Corporate	(1,240)	(3,380)
(605)		104 Effect of change in exchange rate	(605)	104
12,456	15,359	Impairment losses on finance lease portfolio as of 31 December (Note 21)	12,456	15,359

Impairment losses on finance lease receivable are specified in Note 21.

Changes in impairment losses for guarantees and other off balance sheet items for the year ended 31 December 2017 and 2016 were as follows:

The Group			The Bank
2017	2016		2017	2016
		Provisions for the year for guarantees and other off balance sheet items
1,437	6,869	charged to income statement Reversals of provisions for the year for guarantees and other off balance	1,437	6,869
(2,418)	(2,023)	sheet items	(2,418)	(2,023)
(981)		4,846 Provisions for the year charged to income statement	(981)	4,846

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 7 NET FEE AND COMMISSION INCOME

The Group			The Bank
2017	2016		2017	2016
17,812	19,552	For money transfer operations	17,812	19,552
41,726	31,287	For payment cards and current account services	41,726	31,287
10,792	6,289	For operations with securities and mediation services	10,792	8,991
17,147	20,739	Other income on services and commissions	13,261	13,652
87,477		77,867 Income on services and commissions	83,591	73,482
(72)	(73)	For money transfer operations	(72)	(73)
(15,187)	(15,186)	For payment cards services	(15,187)	(15,186)
(2,198)	(1,664)	For operations with securities	(2,198)	(1,664)
(5,631)	(5,482)	Other expenses on services and commissions	(5,109)	(4,706)
(23,088)		(22,405) Expenses on services and commissions	(22,566)	(21,629)

NOTE 8 DIVIDEND INCOME FROM SUBSIDIARIES

The table below presents dividends received by the Bank from it's subsidiaries:

	2017	2016
UAB "SEB investicijų valdymas"	1,680	1,535
UAB "SEB Venture Capital"	-	2,358
Total dividend income	1,680	3,893

NOTE 9 NET GAIN (LOSS) ON OPERATIONS WITH DEBT SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

The Group			The Bank
2017	2016		2017	2016
		Realised result from operations with debt securities
680	692	in trading portfolio	680	692
		Unrealised result from operations with debt securities
18	28	in trading portfolio	18	28
		Result of available for sale portfolio designated for
(623)	(605)	fair value hedge	(623)	(605)
		Gain/Loss of Government securities - loans and receivables,
-	(204)	designated for fair value hedge	-	(204)
673	(1,273)	Result of Government securities at fair value through profit (loss)	673	(1,273)
		Unrealised result of interest rate swap designated as hedging
716	904	instrument	716	904
1,155	2,723	Result of other derivatives	1,155	2,723
		Net gains on financial assets and derivative
2,619	2,265	instruments accounted for at fair value	2,619	2,265

In 2017 AB SEB bankas refinanced the credit to it's client, which previously had exposure with Skandinaviska Enskilda Banken AB (publ.) and released the client from the swap agreement at the agreed settlement value of 0 (zero) euro. Mirroring swaps with Skandinaviska Enskilda Banken AB (publ.) were also cancelled at the same settlement value of 0 (zero) thus resulting in zero effect in the income statement line "Result of other derivatives", while positive and negative result from swap agreement was EUR 11,123 thousand.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 10 NET FOREIGN EXCHANGE GAIN

The Group			The Bank
2017	2016		2017	2016
9,797	10,548	Gain from foreign exchange trading	9,797	10,549
2,185	1,337	Unrealised translation gain	2,185	1,336
11,982		11,885 Net gain on foreign exchange	11,982	11,885

NOTE 11 STAFF COSTS

The Group			The Bank
2017	2016		2017	2016
29,333	31,236	Salaries and wages Social security expenses (defined contribution plan	28,980	30,931
10,475	10,756	cost)	10,362	10,658
39,808		41,992 Total staff costs	39,342	41,589

The following numbers of full-time personnel were employed by the Group's companies as of 31 December 2017 and 2016:

	2017	2016
AB SEB bankas	1,592	1,578
UAB "SEB investicijų valdymas"	11	9
UAB "SEB Venture Capital"	-	1
Total employees	1,603	1,588

Several employees of the Bank are also employed by subsidiary companies and vice versa.

NOTE 12 OTHER ADMINISTRATIVE EXPENSES

The Group			The Bank
2017	2016		2017	2016
4,663	12,454	Rent and maintenance of premises	4,627	12,417
2,512	2,348	Depreciation property and equipment	2,493	2,324
78	101	Depreciation of investment property	78	101
4,212	3,090	Audit and consulting expenses	4,192	3,053
7,324	7,798	Office equipment and software maintenance	7,324	7,798
1,791	1,677	Communication expenses	1,788	1,673
3,270	2,951	Payments for servicing organizations	3,211	2,874
945	1,028	Transport expenses	936	1,012
1,309	1,800	Advertising and promotion expenses	1,290	1,766
3,321	3,033	Amortisation of intangible assets	3,321	3,033
1,681	1,677	Other than income taxes	1,681	1,677
450	448	Employees training expenses	450	448
393	475	Insurance of banking operations	393	475
150	210	Charity and sponsorship	150	210
3,732	712	Other expenses	3,459	463
35,831		39,802 Total other administrative expenses	35,393	39,324

In 2016 the Bank has made a provision amounting to EUR 3,242 thousand for the onerous contract reported under the line Rent and maintenance of premises. During the year 2017 the Bank has continuously reviewed the provision amount and reversed EUR 3,201 thousand. Reversal of provision is related to the fact, that part of rent agreements terminate, part of premises started to be used again by the Bank, part of premises will be returned to the landlords. Reversal of the provision is reported under the same line in the table above.

(All amounts in EUR thousand unless otherwise stated)

NOTE 12 OTHER ADMINISTRATIVE EXPENSES (CONTINUED)

In 2014 the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania conducted a tax inspection of the Bank. A tax dispute regarding thin capitalization rule has been started. In 2014 the bank made a profit tax and deferred profit tax provisions as well as EUR 3,505 thousand for fines. The dispute has been closed at the end of 2016 in favour of the Bank. In 2016 the Bank reversed all the above mentioned provisions, reversal of the provision for the fines is reported under Other expenses line within Other Administrative Expenses.

During the year 2017 the Bank and the Group has acquired following services from it's auditor UAB PricewaterhouseCoopers:

The Group		The Bank
2017		2017
132	Audit services	110
4	Custody audit se rvices and other non-audit services	4
	136 Total services purchases	114

NOTE 13 INCOME TAX EXPENSE

The Group			The Bank
2017	2016		2017	2016
5,230	7,574	Current year tax charge	5,021	7,115
(2,668)	(7,987)	Previous years related tax charge	(2,675)	(7,843)
13,534	6,222	Change in deferred tax assset and liability balance	13,604	5,978
16,096		5,809 Total income tax charge	15,950	5,250

During the year 2017 the Bank's advance profit tax payment was EUR 3,875 thousand. In 2016 the tax charge related to previous year was higher due to reverse of profit tax provision made by the Bank in the year 2014 because of the tax dispute with the State Tax Inspectorate under the Ministry of Finance of The Republic of Lithuania.

The tax on the Group's and the Bank's profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows:

The Group			The Bank
2017	2016		2017	2016
109,134	98,955	Profit before tax	109,624	99,735
16,370	14,843	Tax calculated at a tax rate of 15%	16,444	14,960
(297)	(311)	Income not subject for tax	(548)	(897)
578	1,212	Expenses not deductible for tax purposes	577	1,212
2,113	-	Correction of used deferred tax	2,152	-
-	(1,948)	Recognition of preveously unrecognized deffered tax	-	(2,182)
(2,668)	(7,987)	Correction of previous period income tax	(2,675)	(7,843)
16,096		5,809 Total income tax charge	15,950	5,250

Standard income tax rate in Lithuania is 15 percent. In 2017 effective tax rate does not differ significantly from the nominal tax rate. In 2016 lower effective tax rate was due to EUR 7,669 thousand correction of previous period income tax.

(All amounts in EUR thousand unless otherwise stated)

NOTE 13 INCOME TAX EXPENSE (CONTINUED)

Deferred tax asset

The Group			The Bank
2017	2016		2017	2016
24,927	28,571	Assets at 1 January	24,787	28,390
(13,736)	(6,019)	Income statement charge	(13,604)	(5,978)
(187)	2,375	Other comprehensive income	(187)	2,375
11,004		24,927 Asset at 31 December	10,996	24,787

Deferred tax liability

The Group			The Bank
2017	2016		2017	2016
202	-	Liability at 1 January	-	-
(202)	202	Income statement charge	-	-
-		202 Liability at 31 December	-	-

As of 31 December 2017 and 2016 deferred income tax was calculated using 15 percent income tax rate.

The Group			The Bank
2017	2016		2017	2016
		Deferred tax assets
1	81	Revaluation of securities	1	81
265	501	Amortisation and depreciation	267	503
2,530	2,532	Accrued expense	2,520	2,389
1,432	1,041	Impairment losses	1,432	1,041
7,651	21,780	Tax loss carried forward	7,651	21,729
11,879		25,935 Total deferred tax assets	11,871	25,743
		Deferred tax liability
		Revaluation of available for sales securities through
193	6	equity	193	6
		Revaluatioin of available for sale and loans and receivables
9	103	securities designated for fair value hedge	9	103
207	217	Other accruals	207	217
-	254	Revaluation of securities accounted at fair value	-	-
466	630	Revaluation of derivatives	466	630
875		1,210 Total deferred tax liability	875	956

As of 31 December 2017 the deferred tax asset related to tax losses recognised by the Bank is EUR 7,651 thousand (EUR 21,729 thousand as of 31 December 2016) of which none is related to taxable losses from transactions with securities and derivatives. Tax losses can be offset with taxable profits for unlimited time. However not more than 70 per cent of yearly taxable profit could be offset with accumulated taxable loss.

In the Management opinion the Bank will utilize EUR 7,651 thousand of deferred tax asset within 12 month period from the date of these financial statements, respectively EUR 3,345 thousand after more than 12 months from the date of these financial statements. The amounts at the end 2016 were EUR 7,905 thousand and EUR 16,882 thousand respectively.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 13 INCOME TAX EXPENSE (CONTINUED)

The amount of unused tax losses carried forward for the Group and the Bank is as follows:

The Group		The Bank
2017 2016		2017	2016
	Unused tax losses
51,005 144,861	Tax loss carried forward, unlimited use	51,005	144,861
51,005	144,861 Total unused tax losses	51,005	144,861

As of 31 December 2017 and 2016 income tax effect relating to components of other comprehensive income was as follows:

The Group		The Bank
2017 2016		2017	2016
	Fair value gains on available for sale
1,248 (15,849)	investment securities before tax amount	1,249	(15,851)
(187) 2,375	Tax expenses	(187)	2,375
	Fair value gains on available for sale
1,061 (13,474)	investment securities, net of tax amount	1,062	(13,476)

NOTE 14 BALANCES WITH THE CENTRAL BANK

The Group			The Bank
2017	2016		2017	2016
63,899	58,689	Obligatory reserves	63,899	58,689
1,041,167	2,812	Balance available for withdrawal	1,041,167	2,812
1,105,066		61,501 Total balances with the Central Bank	1,105,066	61,501

Eurosystem's minimum reserve requirements comprise 1 percent (the same for the year 2016) of balance of current accounts, deposits with agreed maturity or period of notice up to 2 years, debt securities issued with maturity up to 2 years, calculated using data from the last day of previous month. ECB's remuneration rate for calculated reserve requirements amount is 0.0 percent, while deposit facility rate for the rest of amount on ECB account is -0.4 percent.

NOTE 15 DUE FROM BANKS

The Group			The Bank
2017	2016		2017	2016
73,591	1,387,464	Current accounts	73,591	1,387,464
140,432	4,055	Overnight deposits	140,432	4,055
29	33	Term deposits	29	33
214,052	1,391,552 Total		214,052	1,391,552

Amounts due from Banks at 31 December 2017 have been due from counterparties with the rating not lower than BBB- based on rating agency Standard & Poor's ratings except for EUR 5 million that are due from the counterparties which are not rated. There were no due amounts from counterparty's that are under non - investment grade.

Amounts due from Banks at 31 December 2016 have been due from counterparties with the rating not lower than BBB- based on rating agency Standard & Poor's ratings except for EUR 2,7 million that are due from the counterparties which are not rated and EUR 0.06 mln. from counterparty's that are under non - investment grade.

The balances above do not include any past due or impaired items.

(All amounts in EUR thousand unless otherwise stated)

NOTE 16 GOVERNMENT SECURITIES AVAILABLE FOR SALE

The Group	The Bank
17,263 As of 1 January 2016	17,173
88 Additions	-
(729) Disposals	(727)
634 Interest income	633
Result of available for sale portfolio designated for
(605) fair value hedge	(605)
12 Change in revaluation reserve in equity	12
16,663 As of 1 January 2017	16,486
- Additions
(731) Disposals	(730)
631 Interest income	630
Result of available for sale portfolio designated for
(623) fair value hedge	(623)
(38) Change in revaluation reserve in equity	(37)
15,902 As of 31 December 2017	15,726

Government securities are debt securities issued by the Government of the Republic of Lithuania that mature in 2018.

NOTE 17 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

The Group			The Bank
2017	2016		2017	2016
		Financial assets held for trading - securities of
26,069	19,666	Government of Republic of Lithuania	26,069	19,666
		Financial assets designated at fair value (at initial
353,027	345,604	recognition)	353,027	341,862
379,096		365,270 Total financial assets designated at fair value	379,096	361,528

As at 31 December 2017 the Group's and the Bank's financial assets designated at fair value (at initial recognition) represent investment in Lithuanian Government securities. As at 31 December 2016 the Group's financial assets designated at fair value (at initial recognition) comprised also investments in associates of Bank's subsidiary UAB "SEB Venture Capital" amounting to EUR 3,742 thousand. As described in Note 23, UAB "SEB Venture Capital" was in process of liquidation as of 31 December 2017.

Securities are designated at fair value through profit or loss upon initial recognition because these investments are managed and their performance is evaluated on a fair value basis in accordance with investment strategy. UAB "SEB Venture Capital" business was oriented to short and middle term profit from increase in fair value of investments.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 17 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)

The table below presents movement of financial assets designated at fair value.

The Group		The Bank
313,380	As of 1 January 2016	309,590
213,905	Additions	213,784
(181,708)	Disposals	(180,910)
27	Revaluation	(602)
345,604	As of 1 January 2017	341,862
118,339	Additions	118,339
(99,827)	Disposals	(97,519)
(11,089)	Revaluation	(9,655)
	353,027 As of 31 December 2017	353,027

The revaluation result on designated at fair value financial assets is accounted in income statement under Net gain (loss) on equity securities and Net gain (loss) on operations with debt securities and derivative financial instruments.

Maturity date of the Bank's and the Group's financial assets at fair value through profit or loss which book value as at 31 of December 2017 is EUR 296,453 thousand is more than twelve month after the reporting period (EUR 284,657 thousand at 31 of December 2016).

The table below presents an analysis of Bank's trading debt securities and financial assets designated at fair value (at initial recognition) by rating agency designation at 31 December 2017 and 2016, based on Standard & Poor's ratings or their equivalent:

Securities of Government of Republic of Lithuania
	2017	2016
A-	379,096	361,528
Total	379,096	361,528

NOTE 18 DERIVATIVE FINANCIAL INSTRUMENTS

The Bank and Group utilises the following derivative instruments for both hedging and non-hedging purposes. Hedging relationship is properly documented. The hedging practices and accounting treatment is described in note 3 (l).

As at 31 December 2017 receivable for interest rate and currency interest rate swaps amounting to EUR 7,078 thousand are due from the counterparties with internal risk classes that fall under the range from 4 till 13. Receivable for currency interest rate swaps amounting to EUR 40,440 thousand are due from the Parent company with internal risk class 2.

As at 31 December 2016 receivable for interest rate and currency interest rate swaps amounting to EUR 24,804 thousand are due from the counterparties with internal risk classes that fall under the range from 4 till 12. Receivable for currency interest rate swaps amounting to EUR 98,710 thousand are due from the Parent company with internal risk class 2.

As at 31 December 2017 derivative amounts to be recovered after more than twelve month after the reporting period are EUR 41,037 thousand (EUR 111,543 thousand at 31 of December 2016).

As at 31 December 2017 derivative amounts to be settled after more than twelve month after the reporting period are EUR 38,323 thousand (EUR 109,704 thousand at 31 of December 2016).

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 18 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

Bank's and Group's derivative financial instruments:

	Notional amount		Fair value
31 December 2017	Purchase	Sale	Assets	Liabilities
Foreign exchange derivatives
Currency forwards	388,263	388,949	701	1,330
Currency swaps	381,929	380,856	1,423	465
Put options	185	185	-	-
Call options	185	185	-	-
Interest rate derivatives
Futures	4,300	4,300	45	13
Interest rate swaps	971,040	971,040	7,554	6,750
Interest rate swaps for hedging purposes	15,000	15,000	-	741
Currency interest rate swaps	708,429	708,429	37,799	35,924
Interest rate options	2,592	2,592	-	-
Equity derivatives
Index linked debt securities option	285	285	27	26
Total derivatives assets/liabilities	2,472,209	2,471,822	47,549	45,249

	Notional amount		Fair value
31 December 2016	Purchase	Sale	Assets	Liabilities
Foreign exchange derivatives
Currency forwards	28,050	28,151	551	651
Currency swaps	19,414	19,018	404	73
Put options	185	185	2	2
Call options	185	185	1	1
Interest rate derivatives
Futures	200	200	6	5
Interest rate swaps	1,241,921	1,241,921	25,719	25,855
Interest rate swaps for hedging purposes	15,000	15,000		1,455
Currency interest rate swaps	763,708	763,708	97,795	93,739
Interest rate options	4,142	4,142	0	0
Equity derivatives
Index linked debt securities option	4,369	4,369	258	248
Total derivatives assets/liabilities	2,077,174	2,076,879	124,735	122,031

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 19 LOANS TO CREDIT INSTITUTIONS

The Group			The Bank
2017	2016		2017	2016
5,813	4,710	Lithuania	5,813	4,710
360	153	India	360	153
350	51	China	350	51
263	1	United Kingdom	263	1
179	168	Croatia	179	168
20	-	Colombia	20	-
9	-	Sweden	9	-
-	1,900	Russian Federation	-	1,900
-	500	Belarus	-	500
-	66	Singapore	-	66
-	1	France	-	1
6,994		7,550 Total loans to credit institutions	6,994	7,550
-	-	Less impairment losses on loans	-	-
6,994		7,550 Loans to credit institutions, net	6,994	7,550

The table below presents loans to credit institutions split by counterparty country.

Vast majority of loans to credit institutions are not secured by any collateral.

As of 31 December 2017 EUR 40 thousand were past due from 1 to 7 days. As of 31 December 2016 EUR 1 thousands were past due more than 60 days.

As at 31 December 2017 whole balance of loans to credit institutions to be recovered within 12 months after the reporting period. As at 31 December 2016 the balance of loans to credit institutions to be recovered after more than twelve month after the reporting period was EUR 4,709 thousand.

The table below presents an analysis of loans to credit institutions by rating agency designation at 31 December 2017 and 31 December 2016, based on Standard & Poor's ratings or their equivalent:

	2017	2016
A+	5,822	4,776
AAA	263	-
BBB-	262	-
A	190	1
Not available	162	285
BBB	160	-
BB	135	88
BB-	-	1,900
CCC	-	500
	6,994	7,550

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 20 LOANS TO CUSTOMERS

The Group employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of collateral for loans granted, which is common practice. The Group implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types for loans and receivables and their financial effect are presented below.

As of 31 December 2017 and 2016 the Bank's loans to customers against collateral type were as follows:

		Property			Other private
31 December 2017	Public	management	Other corporate	Mortgage loans	individuals	Total
Loans secured by mortgage, real property	-	643,184	594,348	2,038,368	90,269	3,366,169
Loans secured by deposits and securities	-	31,496	31,221	453	1,186	64,356
Loans secured by guarantees of government
and banks	-	6,701	219,291	-	-	225,992
Accounts receivable and debtors	-	1,249	117,072	149	140	118,610
Inventories and equipment	-	74	286,448	2	-	286,524
Other collateral	-	181,438	401,638	111,390	2,640	697,106
Total	-	864,142	1,650,018	2,150,362	94,235	4,758,757
Unsecured loans	45,774	4,416	282,652	18,226	82,587	433,655
Total loans to customers	45,774	868,558	1,932,670	2,168,588	176,822	5,192,412
31 December 2016
Loans secured by mortgage, real property	-	588,735	566,094	1,846,415	100,747	3,101,991
Loans secured by deposits and securities	-	37,791	32,756	769	2,022	73,338
Loans secured by guarantees of government
and banks	-	80	209,410	-	-	209,490
Accounts receivable and debtors	-	1,237	103,254	197	191	104,879
Inventories and equipment	288	162	277,945	2	-	278,397
Other collateral	-	170,429	367,388	128,982	3,611	670,410
Total	288	798,434	1,556,847	1,976,365	106,571	4,438,505
Unsecured loans	46,691	14,353	332,084	28,565	80,894	502,587
Total loans to customers	46,979	812,787	1,888,931	2,004,930	187,465	4,941,092

As of 31 December 2017 loans with floating interest rate made 79.35 percent of the Bank's total loan portfolio (2016: 73.86 percent).

As of 31 December 2016 included in the above amounts of loans secured by deposits and securities is reversed repo transactions equal to EUR 154 thousand with securities in amount of EUR 247 thousand. As of 31 December 2017 there was no repo transactions.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 20 LOANS TO CUSTOMERS (CONTINUED)

As of 31 December 2017 and 2016 the Bank's loans to customers by customer category were as follows:

	2017	2016
Neither past due nor impaired:
Property management	736,011	762,361
Other corporate	1,781,905	1,804,581
Public	45,528	46,074
Mortgage loans	2,079,051	1,904,959
Other private individuals	160,233	164,265
Total neither past due nor impaired	4,802,728	4,682,240
Past due but not impaired:
Property management	110,654	20,540
Other corporate	122,338	45,350
Public	246	905
Mortgage loans	89,263	99,590
Other private individuals	15,201	21,221
Total past due but not impaired	337,702	187,606
Impaired individually assesed loans:
Property management	21,893	29,886
Other corporate	28,427	39,000
Mortgage loans	274	381
Other private individuals	1,388	1,979
Total impaired individually assesed loans	51,982	71,246
Total loans by customer category:
Property management	868,558	812,787
Other corporate	1,932,670	1,888,931
Public	45,774	46,979
Mortgage loans	2,168,588	2,004,930
Other private individuals	176,822	187,465
Total loans by customer category	5,192,412	4,941,092
Less impairment losses on loans:
Property management	(8,150)	(12,864)
Other corporate	(22,507)	(28,779)
Mortgage loans	(19,124)	(25,162)
Other private individuals	(6,234)	(10,281)
Total impairment losses on loans	(56,015)	(77,086)
Loans to customers, net	5,136,397	4,864,006

NOTE 20 LOANS TO CUSTOMERS (CONTINUED)

The table below presents analysis of impaired individually assessed loans as of 31 December 2017 and 2016:

	2017	2016
Impaired individually assesed loans:
Property management	21,893	29,886
Other corporate	28,427	39,000
Mortgage loans	274	381
Other private individuals	1,388	1,979
Total impaired individually assesed loans	51,982	71,246
Less impairment losses on individually assesed loans:
Property management	(7,316)	(11,501)
Other corporate	(18,141)	(22,750)
Mortgage loans	(274)	(134)
Other private individuals	(910)	(1,045)
Total impairment losses on individually assesed loans	(26,641)	(35,430)

The credit quality of the portfolio of loans to customers that were neither past due nor impaired can be assessed by reference to the internal rating system adopted by the Group. The analysis of the Bank's loans to customers by classes is as follows:

		Property			Other private
	Public	management	Other corporate	Mortgage loans	individuals	Total
31 December 2017
1 – 7 risk classes	35,696	26,236	475,945	-	-	537,877
8 risk class	1,204	88,884	216,286	-	-	306,374
9 risk class	199	371,729	516,291	-	-	888,219
10 risk class	8,429	197,566	355,513	-	-	561,508
11 risk class	-	27,363	121,506	407	-	149,276
12 risk class	-	2,727	10,352	-	-	13,079
13 – 16 risk class	-	16,682	22,378	-	-	39,060
A	-	706	26,758	1,793,377	131,877	1,952,718
B	-	1,123	16,274	154,205	14,062	185,664
C	-	913	8,975	35,737	3,654	49,279
D	-	2,082	11,635	83,722	9,539	106,978
E	-	-	(9)	11,603	963	12,557
Not rated	-	-	1	-	138	139
Total neither past due nor
impaired	45,528	736,011	1,781,905	2,079,051	160,233	4,802,728
31 December 2016
1 – 7 risk classes	33,553	31,564	550,884	-	-	616,001
8 risk class	2,162	78,375	184,499	-	-	265,036
9 risk class	260	350,100	452,778	-	-	803,138
10 risk class	-	239,613	384,978	-	-	624,591
11 risk class	10,099	20,758	103,367	497	-	134,721
12 risk class	-	4,609	24,937	-	-	29,546
13 – 16 risk class	-	32,637	28,070	-	-	60,707
A	-	152	29,430	1,613,992	130,013	1,773,587
B	-	967	20,482	145,499	16,875	183,823
C	-	653	8,402	40,088	3,785	52,928
D	-	2,933	16,154	92,065	10,852	122,004
E	-	-	596	12,818	2,650	16,064
Not rated	-	-	4	-	90	94
Total neither past due nor
impaired	46,074	762,361	1,804,581	1,904,959	164,265	4,682,240

Non retail and retail clients rating methodology is described in Note 3, Financial Risk Management Policy, Credit Risk Classification.

(All amounts in EUR thousand unless otherwise stated)

NOTE 20 LOANS TO CUSTOMERS (CONTINUED)

There are the following homogeneous groups used by the Group: mortgage loans, consumer loans, small corporate loans and credit cards. Loans to private individuals (consumer and mortgage backed loans) and small corporate are assessed using scoring methods at the moment loan is granted. Afterwards they are monitored according to their overdue status. Therefore, for credit risk management purposes, loans to private individuals neither past due nor impaired are viewed as standard loans.

As of 31 December 2017 and 2016 loans to customers past due but not impaired and fair value of collateral were as follows:

	Public	Property	Other corporate	Mortgage loans	Other private	Total
31 December 2017		management			individuals
Loans past due but not impaired:
past due up to 7 days	246	102,064	82,138	23,972	2,940	211,360
past due 8-30 days	-	602	30,033	22,140	1,888	54,663
past due 31 - 60 days	-	-	1,626	8,555	898	11,079
past due over 60 days	-	7,988	8,541	34,596	9,475	60,600
Total past due but not impaired	246	110,654	122,338	89,263	15,201	337,702
Fair value of collateral pledged	-	110,311	85,413	84,498	10,127	290,349
31 December 2016
Loans past due but not impaired:
past due up to 7 days	905	2,134	5,992	16,978	2,299	28,308
past due 8-30 days	-	7,111	22,740	21,660	2,969	54,480
past due 31-60 days	-	3,124	244	12,160	1,263	16,791
past due over 60 days	-	8,171	16,374	48,792	14,690	88,027
Total past due but not impaired	905	20,540	45,350	99,590	21,221	187,606
Fair value of collateral pledged	-	20,714	20,957	91,584	12,104	145,359

The major part of loans past due up to 7 days are past due because of technical reasons and do not indicate difficulties to fulfil financial obligations to the Bank. Loans, that as at 31 December 2017 were past due up to 7 days and instalments were paid during January 2018, amount to EUR 202,256 thousand (2016: EUR 22,692 thousand), of which: public sector – EUR 246 thousand (2016: none), property management – EUR 100,265 thousand (the whole amount for year 2016), other corporate – EUR 77,705 thousand (2016: EUR 5,074 thousand), mortgage loans – EUR 21,435 thousand (2016: EUR 13,821 thousand), other private individuals – EUR 2,605 thousand (2016: EUR 1,663 thousand).

As of 31 December 2017 and 2016 impaired loans to customers and fair value of collateral were as follows:

	Public	Property management	Other corporate	Mortgage loans	Other private individuals	Total
31 December 2017
Impaired individually assesed loans	-	21,893	28,427	274	1,388	51,982
Fair value of collateral pledged	-	15,358	10,305	-	480	26,143
31 December 2016
Impaired individually assesed loans	-	29,886	39,000	381	1,979	71,246
Fair value of collateral pledged	-	19,007	16,276	247	935	36,465

(All amounts in EUR thousand unless otherwise stated)

NOTE 20 LOANS TO CUSTOMERS (CONTINUED)

The Bank considers a loan in a homogeneous group to which impairment has been allocated on a collective basis as not being impaired for the purposes of IFRS 7 disclosures until the loss can be specifically identified with the loan.

As at 31 December 2017 the balance of loans to customers to be recovered after more than twelve month after the reporting period are EUR 3,880,106 thousand (EUR 3,593,828 thousand at 31 of December 2016).

NOTE 21 FINANCE LEASE RECEIVABLE

The Group			The Bank
2017	2016		2017	2016
		Gross finance lease receivable
210,624	202,153	-Falling due within one year	210,635	202,164
400,656	290,810	-Falling due from one to five years	400,687	290,850
21,079	12,186	-Falling due after five years	21,079	12,186
632,359	505,149	Total gross finance lease receivable	632,401	505,200
		Unearned finance income
(7,963)	(6,698)	-Falling due within one year	(7,963)	(6,698)
(9,216)	(7,545)	-Falling due from one to five years	(9,216)	(7,545)
(30)	(145)	-Falling due after five years	(30)	(145)
(17,209)	(14,388)	Total unearned finance income	(17,209)	(14,388)
(12,456)	(15,359)	Less impairment losses on finance lease receivable	(12,456)	(15,359)
602,694		475,402 Total finance lease receivable, net	602,736	475,453

As of 31 December 2017 finance lease contracts with floating interest rate reached 84.09 percent of leasing portfolio (2016: 84.77 percent).

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 21 FINANCE LEASE RECEIVABLE (CONTINUED)

As of 31 December 2017 and 2016 finance lease receivable by customer category were as follows:

The Group			The Bank
2017	2016		2017	2016
		Neither past due nor impaired:
532,583	407,798	Corporate	532,583	407,798
53,282	40,255	Private individuals	53,282	40,255
3,733	3,555	Other	3,775	3,606
589,598		451,608 Total neither past due nor impaired	589,640	451,659
		Past due but not impaired:
7,084	16,003	Corporate	7,084	16,003
1,235	1,182	Private individuals	1,235	1,182
1	50	Other	1	50
8,320		17,235 Total past due but not impaired	8,320	17,235
		Impaired finance lease receivable:
16,522	21,194	Corporate	16,522	21,194
710	724	Private individuals	710	724
17,232		21,918 Total impaired finance lease receivable	17,232	21,918
		Total finance lease receivable by customer category:
556,189	444,995	Corporate	556,189	444,995
55,227	42,161	Private individuals	55,227	42,161
3,734	3,605	Other	3,776	3,656
615,150		490,761 Total finance lease receivable by customer category	615,192	490,812
		Less impairment losses on finance lease receivable:
(11,285)	(14,039)	Corporate	(11,285)	(14,039)
(1,171)	(1,320)	Private individuals	(1,171)	(1,320)
-	-	Other	-	-
(12,456)		(15,359) Total impairment losses on finance lease receivable by	(12,456)	(15,359)
602,694	475,402	Finance lease receivable, net	602,736	475,453

The table below presents analysis of impaired individually assessed lease receivable as of 31 December 2017 and 2016:

	2017	2016
Impaired individually assesed lease receivable:
Corporate	16,522	21,194
Private individuals	710	724
Total impaired individually assesed lease receivable	17,232	21,918
Less impairment losses on individually assesed lease receivable:
Corporate	(10,269)	(12,077)
Private individuals	(710)	(724)
Total impairment losses on individually assesed lease receivable	(10,979)	(12,801)

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 21 FINANCE LEASE RECEIVABLE (CONTINUED)

The credit quality of the Bank's finance lease receivable portfolio that were neither past due nor impaired can be assessed by reference to the internal rating system adopted by the Group.

	Private
	Corporate	individuals	Other	Total
31 December 2017
1 – 7 risk classes	19,785	-	2,739	22,524
8 risk class	140,276	-	372	140,648
9 risk class	99,238	-	208	99,446
10 risk class	174,304	-	322	174,626
11 risk class	22,789	-	117	22,906
12 risk class	4,062	-	-	4,062
13-16 risk class	9,907	-	-	9,907
Homogeneous credits groups	62,222	53,282	17	115,521
Total neither past due nor impaired	532,583	53,282	3,775	589,640
31 December 2016
1 – 7 risk classes	15,226	-	892	16,118
8 risk class	85,931	-	1,582	87,513
9 risk class	71,778	-	654	72,432
10 risk class	142,710	-	324	143,034
11 risk class	18,741	-	99	18,840
12 risk class	2,077	-	-	2,077
13-16 risk class	14,390	-	-	14,390
Homogeneous credits groups	56,945	40,255	55	97,255
Total neither past due nor impaired	407,798	40,255	3,606	451,659

As of 31 December 2017 and 2016 finance lease receivable past due but not impaired and fair value of collateral were as follows:

	Corporate	Private	Other	Total
31 December 2017
Loans past due but not impaired:
past due up to 30 days	4,539	743	-	5,282
past due 31 - 60 days	933	37	-	970
past due over 60 days	1,612	455	1	2,068
Total past due but not impaired	7,084	1,235	1	8,320
Fair value of collateral pledged	5,942	1,228	-	7,170
31 December 2016
Loans past due but not impaired:
past due up to 30 days	8,825	597	49	9,471
past due 31 - 60 days	2,809	497	-	3,306
past due over 60 days	4,369	88	1	4,458
Total past due but not impaired	16,003	1,182	50	17,235
Fair value of collateral pledged	13,981	1,169	49	15,199

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 21 FINANCE LEASE RECEIVABLE (CONTINUED)

Impaired finance leases receivable amounts and fair value of collateral as of 31 December 2017 and 2016:

	Corporate	Private	Other	Total
31 December 2017
Impaired loans	16,522	710	-	17,232
Fair value of collateral pledged	3,525	-	-	3,525
31 December 2016
Impaired loans	21,194	724	-	21,918
Fair value of collateral pledged	5,222	-	-	5,222

As at 31 December 2017 the balance of Finance lease receivables to be recovered after more than twelve month after the reporting period are EUR 392,783 thousand (EUR 294,132 thousand at 31 of December 2016).

NOTE 22 INVESTMENT SECURITIES

Available for Sale and Loans and Receivables

The breakdown of the investment securities – available for sale - may be summarised as follows:

The Group			The Bank
2017	2016		2017	2016
		Securities available for sale:
58	58	AB Panevezio Energija	58	58
4,085	3,210	VISA Inc.	4,085	3,210
4,143		3,268 Total investment securities available for sale	4,143	3,268

AB Panevėžio energija is not rated. VISA Inc. rating is A+ based on Standard & Poor's ratings.

The changes in investment securities for the year 2017 and 2016 were as follows:

The Group				The Bank
Available-for sale	Loans and receivables		Available-for sale	Loans and receivables
15,924	53,985	January 1, 2016	15,924	53,985
185	-	Foreign exchange differences on monetary assets	185	-
3,023	-	Additions	3,023	-
(21,447)	(54,105)	Disposal	(21,447)	(54,105)
-	325	Interest income	-	325
21,447	(205)	Recognised result in income statement	21,447	(205)
(15,864)	-	Change in revaluation reserve in equity	(15,864)	-
3,268	-	January 1, 2017	3,268	-
(411)	-	Foreign exchange differences on monetary assets	(411)	-
1,286	-	Change in revaluation reserve in equity	1,286	-
4,143	-	December 31, 2017	4,143	-

Loans and Receivables Reclassification

On 31 October 2008, the management of the Bank, based on amendments of IAS 39 and IFRS 7, decided to reclassify fixed interest income securities from available-for-sale category and from trading securities into loans and receivables category. Carrying value of the securities as of 31 Dec 2015 amounted to EUR 53,985 thousand (matured in 2016), fair value is disclosed in table in Accounting policies part Fair values Note 3.

Available for sale investment in 2017 consists mainly of VISA Inc. shares. More information about VISA Inc. shares is provided in the Note 3, section bb) Critical Accounting Estimates and Judgements in Applying Accounting Policies and section Fair values.

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 23 INVESTMENTS IN SUBSIDIARIES

	The Group		The Bank
2017	2016		2017	2016
		Securities accounted for under cost method:
-	-	UAB "SEB Venture Capital"	-	7,240
-	-	UAB "SEB investicijų valdymas"	2,871	2,871
-	-	Total investments in subsidiaries	2,871	10,111

UAB "SEB investicijų valdymas" is a fully owned subsidiary of the Bank, engaged in provision of investments' management services.

UAB "SEB Venture Capital" is a fully owned subsidiary involved in venture capital activities. As at 31 July 2017 the Bank as sole shareholder of UAB "SEB Venture Capital" took decision to liquidate the company. After the decision the recoverable amount of investment in subsidiary was assessed and provision in the amount of EUR 402 thousand was formed (reported under the line "Net gain (loss) on investment securities"). Remaining funds of the subsidiary in the amount of EUR 6,796 thousand were transferred to the Bank in December 2017. Difference between funds transferred and carrying amount of investment amounting to EUR 42 thousand was accounted as loss on liquidation of subsidiary and reported under the line "Net gain (loss) on investment securities". As of 31 December 2017 UAB "SEB Venture Capital" was in process of liquidation.

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 24 INTANGIBLE ASSETS

As of 31 December 2017 and 2016 intangible assets of the Group and the Bank consisted of the following:

The Group		The Bank
Software and other		Software and other
intangible fixed assets		intangible fixed assets
	Cost
44,054	31 December 2015	44,002
1,606	Additions	1,606
(3,427)	Disposals and (or) write offs	(3,427)
42,233	31 December 2016	42,181
	Accumulated amortisation
	and impairment
35,173	31 December 2015	35,121
3,033	Charge for the year	3,033
(2,614)	Amorisation of disposals and (or) write offs	(2,614)
35,592	31 December 2016	35,540
	Costs
42,233	31 December 2016	42,181
1,885	Additions	1,885
(794)	Disposals and (or) write offs	(794)
43,324	31 December 2017	43,272
	Accumulated amortisation
	and impairment
35,592	31 December 2016	35,540
3,321	Charge for the year	3,321
(235) 38,678	Amorisation of disposals and (or) write offs 31 December 2017	(235) 38,626
	Net book value
6,641	31 December 2016	6,641
4,646	31 December 2017	4,646

The new core banking platform was introduced in 2010 at cost of EUR 63,612 thousand. Estimated amortisation period for the asset was 8 years. Annual impairment assessment held at the end of 2012 indicated that part of core banking system is unused due to the optimisation/replacement of some of it's parts. Therefore decision has been taken to write off not used part of core banking system amounting to net book value of EUR 16,954 thousand. Amortisation period has not been revised. This system's net book value at 31 December 2017 was EUR 2,385 thousand (EUR 4,353 thousand at 31 December 2016).

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 25 PROPERTY AND EQUIPMENT

As of 31 December 2017 and 2016 property and equipment of the Group consisted of the following:

	The Group
	Buildings and other real estate	Computer equipment	Office equipment	Total property and equipment
Cost
31 December 2015	46	22,485	16,622	39,153
Additions	-	2,232	707	2,939
Reclassifications	-	-	368	368
Disposals and (or) write offs	-	(5,061)	(4,471)	(9,532)
31 December 2016	46	19,656	13,226	32,928
Accumulated depreciation
31 December 2015	-	19,760	12,373	32,133
Charge for the year	-	1,202	1,146	2,348
Depreciation of reclassified items	-	-	(52)	(52)
Depreciation of disposals and (or) write offs	-	(5,059)	(4,057)	(9,116)
31 December 2016	-	15,903	9,410	25,313
Cost
31 December 2016	46	19,656	13,226	32,928
Additions	-	2,165	940	3,105
Reclassification from intangible assets	-	-	153	153
Reclassifications to/from lease	-	-	(146)	(146)
Disposals and (or) write offs 31 December 2017	- 46	(2,863) 18,958	(2,405) 11,768	(5,268) 30,772
Accumulated depreciation
31 December 2016 Charge for the year	- -	15,903 1,338	9,410 1,174	25,313 2,512
Depreciation of reclassified items	-	-	(77)	(77)
Depreciation of disposals and (or) write offs	-	(2,856)	(2,073)	(4,929)
31 December 2017	-	14,385	8,434	22,819
Net book value
31 December 2016	46	3,753	3,816	7,615
31 December 2017	46	4,573	3,334	7,953

NOTE 25 PROPERTY AND EQUIPMENT (CONTINUED)

As of 31 December 2017 and 2016 property and equipment of the Bank consisted of the following:

			The Bank
	Buildings and	Computer		Total property and
	other real estate	equipment	Office equipment	equipment
Cost
31 December 2015	46	22,474	16,458	38,978
Additions	-	2,229	707	2,936
Reclassifications	-	-	368	368
Disposals and (or) write offs	-	(5,059)	(4,469)	(9,528)
31 December 2016	46	19,644	13,064	32,754
Accumulated depreciation
31 December 2015	-	19,750	12,324	32,074
Charge for the year	-	1,199	1,125	2,324
Depreciation of reclassified items	-	(1)	(52)	(53)
Depreciation of disposals and (or) write offs	-	(5,056)	(4,056)	(9,112)
31 December 2016	-	15,893	9,341	25,234
Cost
31 December 2016	46	19,644	13,064	32,754
Additions	-	2,165	940	3,105
Reclassification from intangible assets	-	-	153	153
Reclassifications to/from lease	-	-	(146)	(146)
Disposals and (or) write offs	-	(2,862)	(2,370)	(5,232)
31 December 2017	46	18,947	11,641	30,634
Accumulated depreciation
31 December 2016	-	15,893	9,341	25,234
Charge for the year	-	1,338	1,155	2,493
Depreciation of reclassified items	-	-	(77)	(77)
Depreciation of of disposals and (or) write offs	-	(2,855)	(2,053)	(4,908)
31 December 2017	-	14,376	8,366	22,742
Net book value
31 December 2016	46	3,751	3,723	7,520
31 December 2017	46	4,571	3,275	7,892

NOTE 26 INVESTMENT PROPERTY

As of 31 December 2017 and 2016 investment property of the Group and the Bank consisted of the following:

The Group		The Bank
	Costs
4,750	31 December 2015	4,750
572	Taken over/Additions	572
(1,419)	Disposals	(1,419)
3,903	31 December 2016	3,903
	Accumulated depreciation
323	31 December 2015	323
101	Depreciation for the year	101
(42)	Disposals	(42)
382	31 December 2016	382
	Impairment loss
316	31 December 2015	316
316	31 December 2016	316
	Costs
3,903	31 December 2016	3,903
608	Taken over/Additions	608
(1,823)	Disposals	(1,823)
2,688	31 December 2017	2,688
	Accumulated depreciation
382	31 December 2016	382
78	Depreciation for the year	78
(103)	Disposals	(103)
357	31 December 2017	357
	Impairment loss
316	31 December 2016	316
316	31 December 2017	316
	Net book value
3,205	31 December 2016	3,205
2,015	31 December 2017	2,015

The fair value of investment property was established in compliance with the procedures adopted within the SEB group. The valuation of real estate was carried out by AB SEB bankas authorised employees, based on discounted cash flow model created by Corporate Customers and Industry Analysis Department (ICA) and approved within SEB. The fair value of investment property does not differ materially from its book value as at 31 December 2017 and 31 December 2016.

The major amount of investment property are foreclosed leased assets (land and buildings) taken over from the clients. The Bank is aiming to realise foreclosed assets.

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 27 OTHER ASSETS, NET

The Group			The Bank
2017	2016		2017	2016
		Financial other assets
6,221	880	Advances paid for assets to be leased	6,221	880
		Amounts of executed bank transfers not yet settled against
42,576	33,036	customers' accounts	42,576	33,036
77	30	Amounts outstanding for clearance	77	30
1,567	1,693	Accrued income	2,456	2,520
51	34	Current lease receivable	51	34
2,710	2,838	Other financial assets	2,710	2,838
53,202	38,511	Total other financial assets	54,091	39,338
		Non financial other assets
575	626	Assets not yet leased	575	626
4,843	5,915	Deferred expenses	4,835	5,907
-	35	Tax receivables	-	-
2,501	2,516	Other assets, net of impairment allowances	1,815	1,869
7,919	9,092	Total non financial other assets	7,225	8,402
61,121		47,603 Total other assets, net	61,316	47,740

As at 31 December 2017 the balance of other assets to be recovered after more than twelve month after the reporting period are EUR 5,387 thousand (EUR 1,255 thousand at 31 of December 2016).

Credit quality of other assets is high, there are no significant overdue amounts.

The carrying values of Other financial assets approximates their fair value.

NOTE 28 DUE TO CREDIT INSTITUTIONS

The Group			The Bank
2017	2016		2017	2016
721,354	991,925	Falling due within one year	721,354	991,925
677,271	378,896	Falling due after one year	677,271	378,896
1,398,625	1,370,821	Total amounts due to credit institutions	1,398,625	1,370,821

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 29 DEPOSITS FROM THE PUBLIC

The Group			The Bank
2017	2016		2017	2016
4,686,924	4,343,316	Current and demand deposits	4,692,234	4,352,734
697,829	780,956	Term deposits falling due within one year	697,829	780,956
26,774	28,062	Term deposits falling due after one year	26,774	28,062
5,411,527		5,152,334 Total deposits from the public	5,416,837	5,161,752
The Group			The Bank
2017	2016		2017	2016
1,978,101	1,939,471	Corporate customers' deposits and accounts	1,983,411	1,948,889
3,433,426	3,212,863	Individual customers' deposits and accounts	3,433,426	3,212,863
5,411,527		5,152,334 Total deposits from the public	5,416,837	5,161,752

According to current requirement of Deposit Insurance Fund all banks in Lithuania have to make annual deposit insurance fund payments. Starting from July 2015 payments calculation is formula based percentage of deposits nominated in all the currencies but not exceeding EUR 100 thousand equivalent.

NOTE 30 DEBT SECURITIES IN ISSUE

The Group			The Bank
2017	2016		2017	2016
		Debt securities in issue:
		Debt securities issued in 2011
-	1,164	index linked debt securities due 2017	-	1,164
		Debt securities issued in 2012
-	2,314	index linked debt securities due 2017	-	2,314
		Debt securities issued in 2013
-	741	index linked debt securities due 2017	-	741
		Debt securities issued in 2014
-	3,310	index linked debt securities due 2017	-	3,310
526	519	index linked debt securities due 2018	526	519
526		8,048 Total debt securities in issue	526	8,048

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 31 ACCRUED EXPENSES, OTHER LIABILITIES AND PROVISIONS

The Group			The Bank
2017	2016		2017	2016
		Other financial liabilities
15,445	7,624	Amounts outstanding for clearance	15,445	7,624
1,658	2,163	Not settled clients funds from trading with securities	1,658	2,163
1,002	875	Prepayments for finance lease	1,002	875
		Accounts payable for assets purchased under finance
3,137	2,153	lease	3,137	2,153
7,256	9,131	Provisions for off balance sheet items	7,256	9,131
5,707	5,634	Factoring payables	5,707	5,634
34,472	12,303	Other financial liabilities	34,472	12,303
68,677	39,883	Total other financial liabilities	68,677	39,883
		Non financial liabilities
1,875	103	Taxes	1,863	91
5,561	5,623	Vacation reserve accrual	5,531	5,597
2,686	2,482	Prepayments for operating lease	2,686	2,484
1,061	796	Other liabilities	993	710
11,183	9,004	Total other non financial liabilities	11,073	8,882
79,860		48,887 Total other liabilities and provisions	79,750	48,765

Increase of Other financial liabilities was due to delay in payment to merchants in cards business at the year end of 2017. The amount has been cleared during the next working day.

Provisions for off balance sheet items have been made in respect of costs arising from contingent liabilities and contractual commitments, including guarantees and credit commitments.

Change in the provisions for off balance sheet amounts are presented in the following table:

The Group			The Bank
2017	2016		2017	2016
9,131	3,710	Carrying amount at the beginning of the period	9,131	3,710
293	5,139	additional provisions made in the period	293	5,139
(1,274)	-	unused amounts reversed during the period	(1,274)	-
(894)	282	other movements	(894)	282
7,256		9,131 Carrying amount at the end of the period	7,256	9,131

The Group			The Bank
2017	2016		2017	2016
		Accrued financial liabilities
542	367	Accrued financial liabilities	542	367
		Non financial liabilities
79	168	Deffered income	79	168
41	3,242	Provisions for excess space	41	3,242
12,418	11,446	Other accrued expenses	12,291	11,328
13,080		15,223 Total accrued expenses	12,953	15,105

(All amounts in EUR thousand unless otherwise stated)

NOTE 31 ACCRUED EXPENSES, OTHER LIABILITIES AND PROVISIONS (CONTINUED)

In 2016 the Bank has made a provision amounting to EUR 3,242 thousand for the onerous contract reported under the Income statement line Rent and maintenance of premises as well as Balance sheet line Other accrued expenses. During the year 2017 the Bank has continuously reviewed the provision amount and reversed EUR 3,201 thousand. Reversal of provision is related to the fact, that part of rent agreements terminate, part of premises started to be used again by the Bank, part of premises will be returned to the landlords.

As at 31 December 2017 the balance of other liabilities and provisions to be settled after more than twelve month after the reporting period are EUR 13,329 thousand (EUR 10,161 thousand as at 31 December 2016).

NOTE 32 SHAREHOLDERS' EQUITY

As of 31 December 2017 and 2016 the share capital of the Bank consisted of 15,441,423 ordinary shares with par value EUR 19.4 each. All issued shares are fully paid. 100 percent of shares of the Bank is owned by company Skandinaviska Enskilda Banken AB (publ), registered in the Kingdom of Sweden.

Reserve capital, which as of 31 December 2017 amounted to EUR 637 thousand (2016: EUR 637 thousand) for the Bank and EUR 637 thousand (2016: EUR 637 thousand) for the Group, in accordance with the legislation for banks operating in Lithuania can only be offset with the future losses or used for the increase of share capital.

As of 31 December 2017 legal reserve was EUR 156,400 thousand (2016: EUR 138,868 thousand) for the Bank and EUR 156,686 thousand (2016: EUR 139,535 thousand) for the Group, in accordance with the legislation for banks operating in Lithuania can only be offset with the future losses.

Financial assets revaluation reserve (deficit) represents available for sale securities revaluation gain (loss). The financial assets reserve movement in 2017 and 2016 amount consists of the following:

The Group			The Bank
2017	2016		2017	2016
(38)	13	Government securities – change in revaluation	(37)	13
-	19	Government securities - amortization of revaluation	-	19
1,286	(15,864)	Recognised result in equity (Note 22)	1,286	(15,864)
(187)	2,375	Tax recognised in equity (note 13)	(187)	2,375
1,061	(13,457)	Net change in available for sale investments, net of deferred tax	1,062	(13,457)

As of 31 December 2017 general and other reserves represent general reserve for possible losses in amount of EUR 2,704 thousand (2016: EUR 2,704 thousand), that can only be offset with the current losses and share based compensation reserve in amount of EUR 562 thousand (2016: EUR 800 thousand), that will be paid in the share capital equivalent of Skandinaviska Enskilda Banken AB (publ) Class A shares to employees participating in the share based premium program.

SEB Group has developed long-term equity based programmes as part of remuneration system to build long-term commitment to SEB. The longterm equity based variable compensation at SEB shall be determined based on long-term equity based variable compensation programme principles developed by the SEB Group and has to be agreed specifically with the employee, towards whom it is applied. The programmes, referred to above, are the Share Deferral Program (SDP) and Share Matching Program (SMP).

The purpose of the programmes is to reward senior managers and key employees and to encourage all employees to become shareholders in SEB, thereby aligning employee interests with those of shareholders.

The costs of Share Savings Programme incurred by the Group during the year 2017 were EUR 562 thousand (2016: EUR 800 thousand) accounted in other administrative expenses in the income statement.

The above described share-based payments are treated as equity-settled because the Group has no obligation to settle the transactions related to the Share Savings Programme.

NOTE 32 SHAREHOLDER'S EQUITY (CONTINUED)

As of 31 December 2017 and 2016 the single shareholder is as follows:

Name of shareholder	Number of shares held	Percentage in total
Skandinaviska Enskilda Banken AB (publ)	15,441,423	100.00
Total	15,441,423	100.00

NOTE 33 ASSETS UNDER MANAGEMENT

The Group			The Bank
2017 2016			2017	2016
7,835	7,713 Customers funds		-	-
232,572	198,754	Financial instruments acquired at customer account	-	-
786,234	673,572	Customer assets managed on trust basis	-	-
1,026,641	880,039 Total assets under management		-	-

All assets management services are performed by UAB "SEB investicijų valdymas". For the year ended 31 December 2017 the management fee for funds management amounted to EUR 7,166 thousand (2016: EUR 6,449 thousand) and it is included in Net fee and commission income line in the income statement.

NOTE 34 CAPITAL ADEQUACY

The Group's regulatory capital as managed by its central Group Treasury is divided into two tiers:

• Tier 1 capital: share capital (net of any book values of the treasury shares), reserve capital, retained earnings;
• Tier 2 capital: qualifying subordinated loan capital, general and other reserves, qualifying current year profit;
• Deductible amounts: the book value of intangible assets; investments in credit and financial institutions above 10 percent of their equity; and IRB provision shortfall.

The risk-weighted assets are measured by using two methods – Standardized and Internal Ratings Based Approach (IRB). According to Standardized method assets are divided into 16 asset classes, IRB – 7. Considering the method used asset class, eligible collateral or guarantees, risk classes, scoring pools, country of the counterparty and other factors risk weight to every exposure is assigned.

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 34 CAPITAL ADEQUACY (CONTINUED)

The table below summarises the components of capital adequacy calculation and the ratios of the Group and the Bank for the years ended 31 December 2017:

	The Group	The Bank
Tier 1 capital (less intangible assets)	647,260	645,292
Tier 2 capital	9,675	9,675
of which IRB provision excess	9,456	9,456
Less deductible investments	-
Less IRB provision shortfall	-	-
Risk weighted assets	3,288,180	3,282,256
of which risk weighted assets due to transitional capital requirements	-	-
Capital adequacy ratio before adjustment of capital
requirements according to Basel II requirements
as of 31 December 2017	19.98%	19.95%
Capital adequacy ratio according to Basel II
requirements as of 31 December 2017	19.98%	19.95%

The table below summarises the components of capital adequacy calculation and the ratios of the Group and the Bank for the years ended 31 December 2016:

	The Group	The Bank
Tier 1 capital (less intangible assets)	657,385	655,514
Tier 2 capital	7,378	7,376
of which IRB provision excess	7,356	7,356
Less deductible investments	-
Less IRB provision shortfall	-	-
Risk weighted assets	3,411,093	3,411,762
of which risk weighted assets due to transitional capital requirements	-	-
Capital adequacy ratio before adjustment of capital requirements according to Basel II requirements
as of 31 December 2016	19.49%	19.43%
Capital adequacy ratio according to Basel II
requirements as of 31 December 2016	19.49%	19.43%

As at 31 December 2017 and 2016 the Bank and the Group were compliant with the capital adequacy requirements.

NOTE 35 NET FOREIGN CURRENCY POSITION

The following table presents the equivalent amount in thousands of EUR of the net position of assets and liabilities denominated in currencies other than EUR as of 31 December 2017:

The Group				The Bank
	Percentage of				Percentage of
Position	capital	Currency	Rates	Position	capital
(4,061)	(0.62)	U.S. Dollars (USD)	1.1993	(4,061)	(0.62)
(9)	-	Canadian Dollars (CAD)	1.5039	(9)	-
16	-	Russian Rubles (RUB)	69.392	16	-
597	0.09	The remaining long positions	N/A	597	0.09
(180)	(0.03)	The remaining short positions	N/A	(180)	(0.03)
4,250		0.65 Open long position	N/A	4,250	0.65

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 35 NET FOREIGN CURRENCY POSITION (CONTINUED)

As of 31 December 2016:

The Group				The Bank
	Percentage of				Percentage of
Position	capital	Currency	Rates	Position	capital
(6,077)	(0.91)	U.S. Dollars (USD)	1.0453	(6,077)	(0.92)
20	0.00	Canadian Dollars (CAD)	1.4154	20	0.00
19	0.00	Russian Rubles (RUB)	63.2555	19	0.00
197	0.03	The remaining long positions	N/A	197	0.03
(42)		The remaining short positions	N/A	(42)	(0.01)
6,119		0.92 Open long position	N/A	6,119	0.92

Based on requirements of the Bank of Lithuania, starting from 1 December 2004 EUR currency position was not included when calculating foreign currency open position.

As of 31 December 2017 and 2016 the Group complied with the foreign currency open position requirements set forth by the Bank of Lithuania.

Foreign exchange risk has also been measured by using Value at Risk model, see note 36.

NOTE 36 INTEREST RATE RISK MANAGEMENT

The Group's interest rate sensitivity in case of parallel shift by 1 p.p. in the yield curve is presented in the table below:

Interest rate sensitivity	2017	2016
Effect to the market value of shareholders equity (delta 1%)	21,524	22,265
Off balance sheet credit commitments sensitivity to interest rate
changes (delta 1%) (the Bank)	559	528
Off balance sheet credit commitments sensitivity to interest rate
changes (delta 1%) (the Group)	559	528

Value at Risk assessment results on total portfolios positions:

The Group			The Bank
2017	2016		2017	2016
1,457	1,724	Interest rate risk (stand-alone)	1,457	1,724
38	285	Credit spread risk (stand-alone)	38	285
17	5	Foreign exchange risk (stand-alone)	17	5
299	386	Equity price risk (stand-alone)	299	386
(288)	(636)	Diversification effect	(288)	(636)
1,524		1,764 Total	1,524	1,764

VaR figures in table above include both banking and trading books.

NOTE 36 INTEREST RATE RISK MANAGEMENT (CONTINUED)

The table below provides the Group's interest rate gap analysis as of 31 December 2017:

Maturity	Up to 1 year	1 - 3 year	Over 3 years	Total
Assets
Net loans	4,261,992	208,917	672,678	5,143,587
Finance lease receivable, net	576,979	21,907	5,579	604,465
Debt securities	98,785	203,694	92,520	394,999
Interbank deposits and net loans	147,417	-	-	147,417
Off balance sheet assets	449,663	246,390	296,879	992,932
Total interest rate sensitive assets	5,534,836	680,908	1,067,656	7,283,400
Liabilities
Term deposits	697,735	19,891	6,749	724,375
Interbank deposits and loans	566,006	457,913	219,359	1,243,278
Other liabilities	499	-	-	499
Off balance sheet liabilities	702,113	73,483	217,336	992,932
Total interest rate sensitive liabilities	1,966,353	551,287	443,444	2,961,084
Gap	3,568,483	129,621	624,212	4,322,316
Assets, non sensitive to interest rate Liabilities and equity, non sensitive to				1,427,173
interest rate				5,749,489

The table below provides the Group's interest rate gap analysis as of 31 December 2016:

Maturity	Up to 1 year	1 - 3 year	Over 3 years	Total
Assets
Net loans	3,929,924	205,544	735,563	4,871,031
Finance lease receivable, net	449,010	21,638	6,707	477,355
Debt securities	76,871	154,783	146,537	378,191
Interbank deposits and net loans	11,602	4	-	11,606
Off balance sheet assets	789,170	141,168	330,925	1,261,263
Total interest rate sensitive assets	5,256,577	523,137	1,219,732	6,999,446
Liabilities
Term deposits	780,998	26,145	1,876	809,019
Interbank deposits and loans	701,637	266,627	112,268	1,080,532
Other liabilities	6,980	500	-	7,480
Off balance sheet liabilities	606,989	196,531	457,743	1,261,263
Total interest rate sensitive liabilities	2,096,604	489,803	571,887	3,158,294
Gap	3,159,973	33,334	647,845	3,841,152
Assets, non sensitive to interest rate Liabilities and equity, non sensitive to				1,779,756
interest rate				5,620,908

FOR THE YEAR ENDED 31 DECEMBER 2017 (All amounts in EUR thousand unless otherwise stated)

NOTE 36 INTEREST RATE RISK MANAGEMENT (CONTINUED)

The table below provides the Bank's interest rate gap analysis as of 31 December 2017:

Maturity	Up to 1 year	1 - 3 year	Over 3 years	Total
Assets
Net loans	4,261,992	208,917	672,678	5,143,587
Finance lease receivable, net	577,020	21,908	5,579	604,507
Debt securities	98,785	203,694	92,344	394,823
Interbank deposits and net loans	147,417	-	-	147,417
Off balance sheet assets	449,663	246,390	296,879	992,932
Total interest rate sensitive assets	5,534,877	680,909	1,067,480	7,283,266
Liabilities
Term deposits	697,735	19,891	6,749	724,375
Interbank deposits and loans	566,006	457,913	219,359	1,243,278
Other liabilities	499	-	-	499
Off balance sheet liabilities	702,113	73,483	217,336	992,932
Total interest rate sensitive liabilities	1,966,353	551,287	443,444	2,961,084
Gap	3,568,524	129,622	624,036	4,322,182
Assets, non sensitive to interest rate				1,430,170
Liabilities and equity, non sensitive to
interest rate				5,752,352

The table below provides the Bank's interest rate gap analysis as of 31 December 2016:

Maturity	Up to 1 year	1 - 3 year	Over 3 years	Total
Assets
Net loans	3,929,924	205,544	735,563	4,871,031
Finance lease receivable, net	449,041	21,657	6,707	477,405
Debt securities	76,871	154,783	146,360	378,014
Interbank deposits and net loans	11,602	4	-	11,606
Off balance sheet assets	789,170	141,168	330,925	1,261,263
Total interest rate sensitive assets	5,256,608	523,156	1,219,555	6,999,319
Liabilities
Term deposits	780,998	26,145	1,876	809,019
Interbank deposits and loans	701,637	266,627	112,268	1,080,532
Other liabilities	6,980	500	-	7,480
Off balance sheet liabilities	606,989	196,531	457,743	1,261,263
Total interest rate sensitive liabilities	2,096,604	489,803	571,887	3,158,294
Gap	3,160,004	33,353	647,668	3,841,025
Assets, non sensitive to interest rate Liabilities and equity, non sensitive to				1,786,028
interest rate				5,627,053

(All amounts in EUR thousand unless otherwise stated)

NOTE 37 COMPLIANCE WITH REGULATORY REQUIREMENTS

As of 31 December 2017 both the Group and the Bank were in compliance with the maximum lending to one customer, large exposure, related party lending, investment and open foreign currency position limits established by the Central Banks. During the year neither the Group nor the Bank received any sanctions from the Bank of Lithuania.

The local legislation require banks to prepare consolidated accounts for group entities engaged in financial services activities without consolidation of entities involved in other activities. To comply with this requirement the Bank consolidated all its subsidiaries except for UAB "SEB Venture Capital", venture capital company, and presents this information in this note.

Income Statement of the Group excluding UAB "SEB Venture Capital" entity for the year ended 31 December 2017

	2017	2016
Interest income	119,530	116,849
Interest expenses	(20,486)	(30,126)
Net interest income	99,044	86,723
Impairment reversals on loans	4,937	7,939
Impairment (loss)/reversals on lease portfolio	1,058	(3,867)
(Provisions)/reversals of provisions for guarantees and other off balance sheet items	981	(4,846)
Other impairment (losses)	(94)	(17)
Total impairment losses	6,882	(791)
Net interest income after provisions	105,926	85,932
Net service charges and other income	65,655	57,988
Net gain (loss) on equity investments	-	21,449
Net gain on operations with debt securities and financial instruments	2,619	2,265
Dividend income from subsidiaries	-	2,357
Net foreign exchange gain	11,982	11,885
Net gain (loss) in investment securities	(444)	-
Staff costs	(39,762)	(41,939)
Other administrative expenses	(35,811)	(39,773)
Profit before income tax	110,165	100,164
Income tax	(16,289)	(5,583)
Net profit for the year	93,876	94,581
Attributable to:
Owners of the Bank	93,876	94,581
Non controling interest	-	-

(All amounts in EUR thousand unless otherwise stated)

NOTE 37 COMPLIANCE WITH REGULATORY REQUIREMENTS (CONTINUED)

Statement of Comprehensive Income for the Group excluding UAB "SEB Venture Capital" entity for the year ended 31 December 2017

	2017	2016
Net profit for the year	93,876	94,581
Items that may subsequently be reclassified to the income statement
Net gain (realised result) on available for sale assets	1,248	(15,851)
Amortisation of financial assets revaluation reserve
of reclassified financial assets	-	19
Income tax relating to the components of other
comprehensive income	(187)	2,375
Items that will not be reclassified to the income statement	-	-
Total other comprehensive income	1,061	(13,457)
Total comprehensive income	94,937	81,124
Attributable to:
Owners of the Bank	94,937	81,124
Non controlling interest	-	-

NOTE 37 COMPLIANCE WITH REGULATORY REQUIREMENTS (CONTINUED)

Statement of Financial Position of the Group excluding UAB "SEB Venture Capital" entity as of 31 December 2017

	2017	2016
Assets
Cash in hand	118,828	117,812
Balances with the Central Banks	1,105,066	61,501
Due from banks, net	214,052	1,391,552
Government securities available for sale	15,902	16,663
Financial assets at fair value through
profit and loss	379,096	361,528
Derivative financial instruments	47,549	124,735
Loans to credit institutions	6,994	7,550
Loans to customers	5,136,397	4,864,006
Finance lease receivable	602,694	475,402
Investment securities:
– available for sale	4,143	3,268
Investments in subsidiaries	-	7,240
Intangible fixed assets	4,646	6,641
Property, plant and equipment	7,953	7,596
Non-current assets held for sale	181	189
Investment property	2,015	3,205
Deferred tax asset	11,004	24,927
Other assets, net	61,121	47,603
Total assets	7,717,641	7,521,418
Liabilities
Amounts owed to the Central Banks	13	18
Amounts owed to credit institutions	1,398,625	1,370,821
Derivative financial instruments	45,249	122,031
Deposits from the public	5,411,527	5,156,898
Accrued expenses and deferred income	13,080	15,209
Income tax payable	1,187	4,292
Debt securities in issue	526	8,048
Other liabilities and provisions	79,861	48,881
Total liabilities	6,950,068	6,726,198
Equity
Equity attributable to equity holder of the parent
Paid in capital	299,564	299,564
Reserve capital	637	637
Financial assets revaluation reserve	1,097	36
Legal reserves	156,686	139,154
General and other reserves	3,266	3,504
Net income for the period and retained earnings	306,323	352,325
Total equity	767,573	795,220
Total liabilities and equity	7,717,641	7,521,418

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 37 COMPLIANCE WITH REGULATORY REQUIREMENTS (CONTINUED)

	f ha f t he lu d "S Sta C in Eq ity Gr ing U A B E B Ve Ca ita tem t o ntu ng en es u o ou p ex c re p for he de d be De t 3 1 2 0 1 7 y ea r e n ce m r but b le t he f t he k Eq ity i Ba at tr o t u a ow ne rs o n					l " e ity nt
	S ha ita l re ca p	Re ser ve ita l ca p	ina ia l as F set nc s lua ion t rev a- ( de f ic it ) res erv e	l Leg a res erv e	l Ge ne ra d o he t an r res erv es	d Re ine ta ing ea rn s	l To ta
be 3 1 De 2 0 15 ce m r	2 9 9, 5 6 4	6 3 7	1 3, 4 9 3	1 21, 0 2 3	3, 17 6	3 6 4, 2 0 3	8 0 2, 0 9 6
han la b le for le Net in a i inv est nts g c e va sa me , f de f fer d t t o ne e ax		- -	( ) 1 3, 47 6	-	-	-	( ) 1 3, 47 6
f f l as lua Am isa ion ina ia ion ort t set t o nc s re va f re f f las i ie d ina ia l as set re ser ve o c s nc s for he d Net inc io t om e p er d d Ne inc ize ire	-	- - -	1 9 -	- -	- -	- 94 5 81 ,	1 9 94 5 81 ,
ly t ct om e r eco g n in ity eq u	-	-	( ) 1 3, 45 7	-	-	94 5 81 ,	81, 1 24
har bas d c S ion at e- e om p ens fer Tra to ns res erv es den ds har ho l der D iv i to s e s	- - -	- - -	- - -	- 1 8, 1 31 -	3 2 8 - -	47 2 ( ) 1 8, 1 31 ( 8 8, 8 0 0 )	8 0 0 - ( 8 8, 8 0 0 )
be 3 De 2 0 6 1 1 ce m r	2 9 9, 5 6 4	6 3 7	3 6	1 3 9, 15 4	3, 5 0 4	3 5 2, 3 25	7 9 5, 2 2 0
han la b le for le Net in a i inv est nts g c e va sa me , f de f fer d t t o ne e ax for he d Net inc io t om e p er d d ly Ne inc ize ire t ct om e r eco g n	-	- - -	1, 0 61 -	- -	- -	- 9 3, 87 6	1, 0 61 9 3, 87 6
in ity eq u	-	-	1, 0 61	-	-	9 3, 87 6	94 9 37 ,
den ds har ho l der D iv i to s e s S har bas d c ion at e- e om p ens fer Tra to ns res erv es	- - -	- - -	- - -	- - 17, 5 3 2	- ( ) 2 3 8 -	( 1 2 3, 14 6 ) 8 0 0 ( 17, 5 3 2 )	( 1 2 3, 14 6 ) 5 6 2 -
be 3 De 2 0 1 17 ce m r	2 9 9, 5 6 4	6 3 7	1, 0 9 7	15 6, 6 8 6	3, 2 6 6	3 0 6, 3 2 3	7 6 7, 5 7 3

FOR THE YEAR ENDED 31 DECEMBER 2017

(All amounts in EUR thousand unless otherwise stated)

NOTE 37 COMPLIANCE WITH REGULATORY REQUIREMENTS (CONTINUED)

Statement of Cash Flows of the Group excluding UAB "SEB Venture Capital" entity for the year ended 31 December 2017

	2017	2016
Cash from operating activities
Interest income received	115,420	112,025
Interest expenses paid	(22,814)	(32,386)
Net foreign currency exchange gain	11,133	10,549
Net gain (loss) in securities trading and financial instruments	2,851	2,710
Net (loss) gain in derivatives trading	404	(2,112)
Net commission and service income	65,774	58,179
Staff costs	(38,984)	(39,838)
Other payments	(21,252)	(28,352)
Net cash from operating activities before change in operating assets	112,531	80,775
Changes in operating assets
Decrease in compulsory balances with the Central Bank	(5,210)	11,064
Decrease (increase) in due from banks and loans to credit institutions	560	163,174
Increase in loans to customers	(267,314)	(376,858)
Increase of finance lease receivable	(124,956)	(82,113)
Increase in other current assets	(15,971)	(2,076)
Net change in operating assets	(412,891)	(286,809)
Changes in operating liabilities
Increase in deposits from public	255,171	387,583
Increase (deacrease) in accrued expenses, deferred income and other liabilities	34,437	(16,926)
Net change in operating liabilities	289,608	370,657
Net cash from operating activities before income tax	(10,751)	164,623
Income tax paid	(5,624)	(5,807)
Net cash from (to) operating activities after income tax	(16,375)	158,816
Cash flow from (used in) investing activities
Acquisition of tangible and intangible fixed assets, net	(4,990)	(4,722)
Acquisition of Government securities available for sale	-	(88)
Sale of Government securities available for sale	731	729
Result of liquidation of subsidiary	6,796	-
Dividends received from subsidiaries	-	2,357
Acquisition of other investment securities	(683,379)	(610,027)
Sale of other investment securities	659,468	676,523
Cash flow from investing activities	(21,375)	64,772
Cash flow from financing activities
Dividends paid to the shareholder	(123,146)	(88,800)
Increase in amounts owed to the Central Banks	(5)	1
(Decrease) increase in amounts owed to credit and financial institutions	30,236	280,047
Repurchased own issued debt securities	(6,866)	(8,226)
Interest paid for own issued debt securities	(594)	(530)
Cash received (used in) financing activities	(100,375)	182,492
Net increase (decrease) in cash/cash equivalents	(138,125)	406,080
Cash/cash equivalents 1 January	1,512,143	1,106,063
Cash/cash equivalents 31 December	1,374,018	1,512,143
Specified as follows:
Balance available for withdrawal with the Central Banks	1,041,167	2,812
Overnight deposits	140,432	4,055
Cash on hand	118,828	117,812
Current accounts with other banks	73,591	1,387,464
	1,374,018	1,512,143

NOTE 38 RELATED PARTIES

A number of banking transactions are entered into with related parties in the normal course of business. The transactions with the parent bank include loans, deposits and debt instrument transactions. Transactions within Skandinaviska Enskilda Banken AB (publ) group (excluding the parent bank) during the year can be specified as follows:

The Group				The Bank
2017	2016		Interest rate %	2017	2016
12,541	26,803	Outstanding loan amount	min-0.50 max3.50	12,541	26,803
45	6	Derivative financial instruments	-	45	6
209	320	Other assets at the year end	-	200	312
46,975	34,706	Outstanding deposit amount	min -0.05 max 5.49	46,975	34,706
131	109	Other liabilities at year end		85	67
5	5	Unused granted overdraft facilities	11	5	5
-	22	Guarantees received at the year end	-	-	22
109	86	Interest income	-	109	86
(12)	(33)	Interest expense	-	(12)	(33)
(2,391)	(831)	Other services received and cost	-	(2,212)	(345)

Transactions with parent bank during the year can be specified as follows:

		The Group		The Bank
2017	2016		Interest rate %	2017	2016
		Outstanding loan amount
150,104	1,344,863	at the year end	min-0.50 max3.50	150,104	1,344,863
		Derivative financial instruments	-
40,440	99,328	at the year ended		40,440	99,328
58	26	Other assets at the year end	-	58	26
		Outstanding deposit amount
1,246,901	1,255,138	at the year end	min -0.05 max 5.49	1,246,901	1,255,138
		28,722 Other liabilities at year end			28,722
5	5	Unused granted overdraft facilities	11	5	5
7,421	10,284	Guarantees issued at the year end	-	7,421	10,284
602,021	329,013	Guarantees received at the year end	-	602,021	329,013
3,114	723	Interest income	-	3,114	723
(11,249)	(14,996)	Interest expense	-	(11,249)	(14,996)
		Other services received and cost
1,856	889	incurred from SEB group, net	-	1,856	889

NOTE 38 RELATED PARTIES (CONTINUED)

Transactions between the Bank and its subsidiaries during the year can be specified as follows:

	Interest rate %	The Bank
		2017	2016
Outstanding loan amounts at year end:
UAB "SEB investicijų valdymas"	3.5	42	51
Outstanding deposit amounts at year end:
UAB "SEB Venture Capital"	-		4,564
UAB "SEB investicijų valdymas"	-	5,310	4,853
Other assets at year end	-	889	827
Interest income	- -	121	45
Dividend income	-	1,680	3,893
Other services received and cost incurred from subsidiaries, net	-	3,543	3,223

The loans issued to directors and other key management personnel (and close family members) are repayable on a regular basis over the period of loan. Transactions with key management (the Board members) during the year can be specified as follows:

The Group			The Bank
2017 2016		Interest rate %	2017	2016
402 -	Outstanding loan amount 536 at the year end Finance lease receivable	0.751-1.56 -	402	536 -
517	Outstanding deposit amount on current accounts 507 at the year end		517	507
56	Commitments to grant loans 32 at the year end	11.00-14.00	56	32
759	876 Payroll	-	759	876
246	Social security 267	-	246	267
6	Interest income 10	-	6	10
3	2 Other income, net	-	3	2

NOTE 39 CONTINGENCIES AND COMMITMENTS

The Group			The Bank
2017	2016		2017	2016
1,066,819	1,069,202	Agreements to grant loans	1,066,819	1,069,202
409,840	238,384	Financial guarantees issued	409,840	238,384
36,521	40,566	Letters of credit issued	36,521	40,566
22,003	15,084	Commitments to purchase assets	22,003	15,084
-	11	Customs finiancial guarantees collateralised by deposits	-	11

Legal proceedings

There were several proceedings outstanding against the Group and the Bank at 31 December 2017 and 2016. No provision has been made as professional advice indicates that it is unlikely that any significant loss will arise.

NOTE 39 CONTINGENCIES AND COMMITMENTS (CONTINUED)

Other commitments

The table below presents operating lease commitments for the years 2017 and 2016 when the Group and the Bank is lessee:

The Group			The Bank
2017	2016		2017	2016
		The total of future minimum operating lease commitments under non
28,695	31,611	cancellable operating leases:	28,695	31,611
7,570	7,676	up to 1 year	7,570	7,676
16,350	18,693	1-5 years	16,350	18,693
4,775	5,242	Over 5 years	4,775	5,242
		The total of future minimum sublease payments to be received under non
(4,746)	(4,656)	cancellable subleases	(4,812)	(4,755)
		Operating lease and sublease payments recognised in the income
		statement:
4,633	11,539	minimum operating lease payments	4,633	11,539
(1,944)	(1,168)	sublease payments	(1,973)	(1,198)

All non-cancellable commitments fall into the period within ten years.

The future operating lease payments receivable (sub-lease) under non-cancellable operating lease can be specified as follows:

The Group			The Bank
2017	2016		2017	2016
1,984	1,679	Short term deferred income (up to 1 year)	2,007	1,705
2,762	2,977	Long term deferred income (up to 5 years)	2,805	3,050
		Total future lease and rental payments receivable under
4,746	4,656	non-cancellable operating lease	4,812	4,755

(All amounts in EUR thousand unless otherwise stated)

NOTE 40OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The following financial assets and liabilities as at 31 December 2017 are subject to offsetting, enforceable master netting arrangements and similar agreements:

		for b le m ing d s im i lar En ast net t g ent g t ce a er ar ran em an ar ran em en
		f Gro nts ss am ou o
	f Gro nts ss am ou o	d f l ise ina ia og rec n nc	f f l Ne ina ia t a unt mo s o nc	late d a Re unt ot mo s n			he f l as Ot ina ia set r nc s
	d f l ise ina ia og rec n nc	l b l f f he ia i it ies in t t o se	ise d in t he ets g ass re co n	f f he ba lan in t set o ce	Cas h c l lat l o era		ise d in t he og rec n
As set s	ets ass	ba lan hee t ce s	ba lan hee t ce s	hee t s	d ive rec e	Ne t a unt mo	ba lan he et ce s	l To ta
De iva ive t set r as s	1, 62 8, 64 9	1, 58 0, 56 0	48 08 9 ,	40	( ) 34 7	47 70 2 ,	193	47 54 9 ,
O T T A L	1, 62 8, 64 9	1, 58 0, 56 0	48 08 9 ,	40	( ) 34 7	47 70 2 ,	193	47 54 9 ,

	f Gro nts ss am ou o	f Gro nts ss am ou o	f f Ne ina ia l t a unt mo s o nc	Re late d a unt ot mo s n			f Ot he ina ia l r nc
	d f l ise ina ia og rec n nc	d f l as ise ina ia set og rec n nc s	l b l d ia i it ies ise in cog re n	f f he ba lan in t set o ce	h c l lat l Cas o era	l	b l d ia i it ies ise in cog re n
b l L ia i it ies	l b l ia i it ies	f f he ba lan hee in t set t o ce s	he ba lan he t et ce s	hee t s	le dg d p e	Ne t a unt mo	he ba lan hee t t ce s	l To ta
De iva ive l ia b i l it ies t r	1, 62 6, 147	1, 58 0, 56 0	45 58 7 ,	40		45 54 7 ,	33 8	45 24 9 ,
T O T A L	1, 62 6, 147	1, 58 0, 56 0	45 58 7 ,	40	-	45 54 7 ,	33 8	45 24 9 ,

(All amounts in EUR thousand unless otherwise stated)

NOTE 40 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)

The following financial assets and liabilities as at 31 December 2016 are subject to offsetting, enforceable master netting arrangements and similar agreements:

	for b le m ing d s im i lar En ast net t g ent g t ce a er ar ran em an ar ran em en
		f Gro nts ss am ou o
	f Gro nts ss am ou o	d f l ise ina ia og rec n nc	f f l Ne ina ia t a unt mo s o nc	late d a Re unt ot mo s n			he f l as Ot ina ia set r nc s
	f d l ise ina ia og rec n nc	f f l b l he ia i it ies in t t o se	ise d in t he ets g ass re co n	f f he ba lan in t set o ce	Cas h c l lat l o era		ise d in t he og rec n
As set s	ets ass	ba lan hee t ce s	ba lan hee t ce s	hee t s	d ive rec e	Ne t a unt mo	ba lan he et ce s	l To ta
De iva ive t set r as s	1, 03 8, 60 9	912 56 9 ,	126 04 0 ,	25 5	-	125 78 5 ,	1, 30 5	124 73 5 ,
O T T A L	1, 03 8, 60 9	912 56 9 ,	126 04 0 ,	25 5	-	125 78 5 ,	1, 30 5	124 73 5 ,

	for b le m d s lar En ing im i ast net t ent t g g ce a er ar ran em an ar ran em en
	f Gro nts ss am ou o	f Gro nts ss am ou o	f f Ne ina ia l t a unt mo s o nc	Re late d a unt ot mo s n			f Ot he ina ia l r nc
	d f l ise ina ia og rec n nc	d f l as ise ina ia set og rec n nc s	l b l d ia i it ies ise in cog re n	f f he ba lan in t set o ce	h c l lat l Cas o era	l	b l d ia i it ies ise in cog re n
b l L ia i it ies	l b l ia i it ies	f f he ba lan hee in t set t o ce s	he ba lan he t et ce s	hee t s	le dg d p e	Ne t a unt mo	he ba lan hee t t ce s	l To ta
De iva ive l ia b i l it ies t r	1, 03 6, 45 8	912 56 9 ,	123 88 9 ,	25 5	-	123 634 ,	1, 85 8	122 03 1 ,
T O T A L	1, 03 6, 45 8	912 56 9 ,	123 88 9 ,	25 5	-	123 634 ,	1, 85 8	122 03 1 ,

The tables above show financial assets and liabilities that are presented net in the balance sheet or with potential rights to off-set associated with enforceable master netting arrangements or similar arrangements, together with related collateral. Financial assets and liabilities are presented net in the balance sheet when the Bank has legally enforceable rights to set-off, in the ordinary cause of business and in the case of bankruptcy, and intends to settle on a net basis or to realize the assets and settle the liabilities simultaneously.

Financial assets and liabilities subject to enforceable master netting arrangements or similar arrangements that are not presented net in the statement of financial position are arrangements that are usually enforceable in the case of bankruptcy or default but not in the ordinary course of business or arrangements where SEB does not have the intention to settle the instruments simultaneously.

(All amounts in EUR thousand unless otherwise stated)

NOTE 41 EVENTS AFTER THE REPORTING PERIOD

At 7th February 2018 government securities (Lithuanian Government Eurobonds) available for sale in amount of EUR 15,902 thousand as of 31 December 2017 have matured. Bonds had fair value hedge relationship, where hedging instrument was interest rate swap. After maturity of bonds, the Bank and the Group does not have any hedging activities.

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