Banking Industry in Indi by eqw18005

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      CONTENTS

      LETTER FROM CEO ...................................................................................................................2
      1. ABOUT THIS REPORT .........................................................................................................3
      2. DSK BANK ..........................................................................................................................5
      3. SUSTAINABILITY AND CHALLENGES FOR DSK BANK .......................................................7
      4. PRINCIPLES AND PRACTICES DETERMINING THE OPERATION OF THE BANK................10
      5. ECONOMIC PERFORMANCE..............................................................................................14
        5.1   Economic role of DSK Bank ..................................................................................14
        5.2   Products and services .............................................................................................14
      6. OUR CLIENTS....................................................................................................................19
      7. THE EFFECTS OF THE ECONOMIC CRISIS ON THE OPERATIONS OF DSK BANK............23
        7.1   Communication and trustworthy information assurance ...................................23
        7.2   Change in the operational structure .....................................................................24
        7.3   Alteration in the product portfolio ........................................................................24
        7.4   Our colleagues .........................................................................................................25
      8. OUR EMPLOYEES ..............................................................................................................26
      9. SOCIAL PARTICIPATION ...................................................................................................34
      10.   SECONDARY STAKEHOLDERS.......................................................................................38
        10.1 Suppliers ..................................................................................................................38
        10.2 Competitors .............................................................................................................38
        10.3 Government agencies ..............................................................................................39
        10.4 Media ........................................................................................................................40
      11.   ENVIRONMENTAL PERFORMANCE ...............................................................................41
      12.   OBJECTIVES FOR THE FUTURE.....................................................................................46
      13.   CORPORATE GOVERNANCE .........................................................................................48
      14.   GRI INDEX ....................................................................................................................52

3 million                                       379                                                3939
clients in Bulgaria                             branches, 90% of Bulgarian                         employees
                                                cities are reached
                                                                                                   More than 300
1st place                                       60                                                 tickets purchased for
in Accountability Rating                        branches were reconstructed                        employees to attend theatre
Bulgaria 2008 within the                        in 2008                                            performances
financial sector
                                                5-6
                                                films supported annually by                        180 520 BGN
17 300 BGN                                                                                         donated to employees for
awarded for pensioners as                       DSK Bank
                                                                                                   medical treatment and culture
prize of the bank lottery
                                                20 tons
                                                of paper collected sorted
                                                                                           2



LETTER FROM CEO

Dear Reader,


Corporations face more challenges in the field of corporate social responsibility (CSR)
than ever before. The global finance crisis has forced directors to axe expenses in order
to be able to maintain business operations, and in many cases, CSR falls victim to these
cuts. On the other hand, this is an opportunity to prove to sceptics that CSR is far
beyond donations and sponsorships; in fact, it should be a new management approach.
It is no secret that these are tough times for all members of the economy and the private
sector, and for the banking industry throughout the world. The crisis proves that long-
term success may not be reached without the highest standards of corporate
governance, control and strong background of values; I do believe that DSK Bank
operates in such a manner.
Bulgarian companies are at the beginning of the reporting process of CSR and I am
personally pleased that DSK Banks is among the first. Our own persuasion, past, market
share, and the owner’s commitment to sustainability have all driven us to publish this
report.
At DSK Bank, we are proud of those principles, which form the base of our business.
I suggest that every stotinka spent on CSR programs related to the core business pays
off; lower energy consumption, less use of paper, higher rate of loyalty within employees
are just examples how we can do better while taking shareholders’ and local society’s
interest into account.
Let me state that this report is the first visible step of the structured CSR activity within
DSK Bank. We have also composed and agreed on the CSR strategy and we are
committed to proceed through it. I am certain that the strategic focused CSR activity will
help DSK Bank to remain the leader in trust amidst the users of banking and financial
services in Bulgaria.
Any questions or comments are welcomed and help us fulfilling our mission to enhance
business and create value for all stakeholders and be number one in sustainability in
Bulgaria.


Violina Marinova
Chairwoman of the Management Board and Chief Executive Officer
                                                                                           3



1.    ABOUT THIS REPORT

The first corporate social responsibility report of DSK Bank EAD aims to present the
economic, social and environmental performance of the organization. This report is the
first strategic step towards a structural social responsibility activity and good corporate
citizenship. In parallel with the report we have also prepared a sustainability strategy and
a program plan for 2009 determining the direction of development. All the corporate
social responsibility activities of DSK Bank are in line with the activities and aims of our
parent company’s, OTP Bank Plc’s.
We plan to publish a CSR report on an annual basis, simultaneously with the Annual
Report. The corporate social responsibility report is in accordance with the GRI (Global
Reporting Initiative) G3 guidelines, the world’s most widely used sustainability reporting
framework, ensuring credibility.
In the course of defining the report’s content:
  -   we assessed the main economic, social and environmental impacts of the
      organization, focusing on our core activities. In order to present our performance in
      its wider, sustainability context, we have applied the principles of materiality and
      completeness.
  -   we strived to determine the primary users of the report, and the impacts of our
      operation, which is considered the most material by our stakeholders. Our
      assessment was based on:
      o   size of the stakeholder group;
      o   extent to which they are affected;
      o   capacity of stakeholders to represent their own interests – we also take into
          consideration the rightful interests of groups with weaker lobbying powers;
      o   nature of the impact itself – direct or indirect, positive or negative, reversible,
          irreversible or recoverable, permanent or temporary.
  -   the first CSR report of DSK Bank focuses on 2008 – ensuring timeliness – but to
      demonstrate our commitment we have presented some exemplary practices
      beyond the scope of the reporting period.
  -   principles and performance indicator protocols of GRI Guidelines determine the
      way and depth of presenting the information and providing credibility.
  -   methodology of preparing the report and the newly introduced CSR data gathering
      tool ensure data reliability. GRI Guidelines served as a basis for data measurement
      techniques and calculations, methodologies applied are explained at the location of
      the specific data.
  -   for the sake of balance we present the challenges for the future and the directions
      of improvement beside our achievements. Objective evaluation and comparability
      are supported by numeric data.
  -   we intend the report to be read by as many of our stakeholders as possible, thus
      contributing to the development of a CSR culture. One of the main challenges of
      reporting was the clarity and comprehensibility, ensuring at the same time
                                                                                                                                                                4


     professionally sound terminology and complying stakeholders different requirement
     for information.
The CSR report could primarily be of interest to:
-    employees,
-    owner(s),
-    clients,
-    organizations that receive support,
-    the media,
-    competitors,
-    NGOs and the general public,
-    state and regulatory bodies and
-    suppliers.
We have structured the report to ensure maximum comprehensibility, along the lines of
the logical and coherent relationships between the various elements; thus the
importance of the individual issues is primarily reflected in the depth of exploration.
We have defined the boundary of the report as extending to DSK Bank. The report
does not cover the subsidiaries as material information is not available to present their
performance.
We will not have our report assured this year; however we are going to consider
external assurance later on.

                  Determining the report application level according to GRI G3 guidelines
Application level /
                              C             C+                                  B          B+                                 A                    A+
     criteria
Profile               1.1; 2.1-2.10;                                   All criteria                                  All criteria
Disclosures           3.1-3.8; 3.10-
                      3.12; 4.1-
                      4.4;4.14-4.15
Management            Not required
                                           Report Externally Assured




                                                                                         Report Externally Assured




                                                                                                                                    Report Externally Assured


Approach                                                               For each                                      For each
Disclosures                                                            Indicator                                     Indicator
                                                                       Category                                      Category

                      Report on a                                      Report on a
Performance           minimum of 10                                    minimum of 20
Indicators                                                             indicators, at                                Each core G3
                      indicators,                                                                                    and Sector
                      including at least                               least one from
                                                                       each of:                                      Supplement
                      one from each of:                                                                              indicator
                      social, economic                                 economic,
                      and environment.                                 environment,
                                                                       human rights,
                                                                       labour society,
                                                                       product
                                                                       responsibility
                                                                                             5


2.   DSK BANK

Who are we?
DSK Bank EAD – established in 1951 as the State Savings Bank – was transformed
from a retail bank to joint-stock company. Since October 2003 OTP Group has owned
100% of DSK Bank’s share capital.
DSK Bank provides full-scale financial services as a universal commercial bank. The
Bank’s portfolio primarily consists of traditional banking services and products, offered
through traditional and electronic channels. DSK Bank is one of the leading financial
institutions in Bulgaria, first in retail banking and strengthening its position in corporate
banking as well. The clients’ confidence in the Bank’s long-standing traditions combined
with innovation and flexibility have helped in achieving excellent results.
With largest branch network in the country, DSK Bank reaches 85% of the population of
Bulgaria. The Bank is present in all 9 regions of the country with 379 branches, in almost
90% of the Bulgarian cities, providing work for nearly 4000 employees.

 DSK Bank is the best bank, Violina Marinova is the Banker of the year in
 Bulgaria
 The British „Finance Central Europe” magazine awarded DSK Bank „The Best Bank
 in Bulgaria 2008” and Ms. Violina Marinova, CEO of DSK Bank „Banker of the Year in
 Bulgaria 2008” for the third year in a row. The two prizes awarded are yet another
 recognition not only of the Bank’s efficiency and its ability to set and maintain banking
 standards, but also of the personal contribution of its head, Violina Marinova to the
 successful development of the institution.
                                                                                          6




DSK Bank offers various services through its subsidiaries and associated companies.
POK DSK-Rodina offers pension insurance, DSK Tours provides complex tourist
services, DSK Trans Security proposes services for secure transportation. Other
affiliates are DSK Leasing, DSK Asset Management and DSK Bul-Project. The latter has
an important role in the utilization of the European funds by providing consultancy
services for companies and municipalities.

What are our aims?
We aim to preserve the leading position in retail banking by providing complete, efficient
and distinctive financial services for our clients, who are always at the centre of our
activities. Our employees’ loyalty and expertise combined with our clients’ trust can help
us maintain our position in the market.
We are committed to work with the highest standards in our business and to perform in
compliance with the laws of the Republic of Bulgaria, and the regulations and rules of
banking. We focus on maximizing our shareholders value in a socially responsible
manner. As responsible employers we are socially committed to our employees’ needs,
providing adequate working conditions and opportunities for training and career growth.
More detailed information regarding our values and mission is available on our website.
 Success at Accountability Rating Bulgaria
 DSK Bank was rated in first place within the financial sector in the Accountability
 Rating Bulgaria 2008. Our Bank received 26 points, thus achieving third place of the
 overall rating.
 In the Accountability Rating Bulgaria 2008, the 45 largest companies were rated
 according to international methodology. The Rating is a tool for measuring the extent
 to which companies have built responsible practices into their business.
                                                                                           7




3.   SUSTAINABILITY AND CHALLENGES FOR DSK BANK

Corporate social responsibility has evolved rapidly since the 1990s, after a series of
high-profile scandals. Operating in a responsible manner serves the long-term interests
of corporations by raising the legitimacy and trust of stakeholders and reducing risks.
Corporate social responsibility is not a supplementary tool of the core activity, but a way
of corporate governance.
Among the various definitions of CSR one of the most concise and most commonly
approved can be found in the European Council’s Green Paper of 2001: “Corporate
social responsibility is a concept whereby companies integrate social and environmental
concerns in their business operations and in their interaction with their stakeholders on a
voluntary basis.”
Economic sustainability points beyond the profitability of the organization and also takes
into account the organization’s impact on local, national and global economies; it raises
the question: how the organization contributes to the sustainability of the economic
system at a higher level.
The threefold approach to social responsibility – economic, social and environmental –
reflects the components of the concept of sustainability.
According to another approach, there are four areas a responsible company should
focus on. Economic responsibility is about profitability and effective operation, which can
only be accomplished within the constraints of the legal framework and which is
represented by legal compliance. Philanthropic responsibility focuses on charitable
giving, while ethical responsibility implies the conduct of activities and practices expected
by the society.
A responsible company is required to integrate into its operations the interests and
values of all its main stakeholders, such as shareholders, consumers, employees and
suppliers, and in a broader sense the government, competitors, local organizations,
natural environment and future generations.


DSK Bank and corporate social responsibility
DSK Bank forms an integral part of its own environment: the operations of the company
affect the economy, society and the natural environment. This impact is the direct and
indirect result of the Bank’s main activities, arising from the financial services provided
on the one hand, and from its physical operations on the other. The organization is also
affected by the external circumstances and tendencies. The company’s impacts on
sustainable development are meant to be considered with the tendencies and risks of
sustainability together.
DSK Bank, as a prominent financial institution of Bulgaria, takes an active part in solving
the challenges the society has to face. According to our code of conduct and our long-
term interests the Bank’s challenges and opportunities from the sustainability’s point are
the following:
                                                                                     8


-   ensuring an accountable and transparent operation and a responsible provision of
    financial services with respect to our customers’, business partners’ and
    shareholders’ interests;
-   providing comprehensive, high-quality services to our customers while informing
    them correctly on the possibilities and risks of our products;
-   providing equal opportunities to all our stakeholders – including our customers,
    potential customers and employees;
-   retaining a highly-qualified, loyal employee base by ensuring them appropriate
    working conditions, personalized career-planning and incentive packages;
-   anticipating the dangers and crimes threatening the financial institutions (fight
    against money laundering and financing terrorism);
-   developing financial literacy;
-   promoting the efforts of local communities and society by gaining a deeper
    understanding of vulnerable social groups and by supporting initiatives and events;
-   minimizing the direct and indirect environmental impact of our activities.
                                                                      SHAREHOLDERS
                                                        The conditions of our operations are determined by                                                       9
                                                        A részvényesek, a társaság tulajdonosaiként, a
                EMPLOYEES                               the owners of our corporation and our shareholders.
                                                        működés feltételeit teremtik meg. A Bankcsoport
                                                        In consequence one of the most important goals of
                                                        egyik legfontosabb célja ezért szükségszerűen a                              CLIENTS
The Bank has a significant impact on the life of its    our Bank is the value creation for our shareholders.
                                                        részvényesi értékteremtés.                                 The biggest challenge of our bank is the appropriate
employees; as an employer we strongly affect the life   The expectations of the owners determine the
and security of thousands of people and their           functioning of our Bank.                                   and responsible service of our client’s needs. It
families. We have a decisive influence on the work                                                                 includes informing the clients in an adequate way by
and life balance of our colleagues.                     One of the most important challenges for our               unfolding their real possibilities and needs and the
                                                        corporation is to fulfil the expectations of our                             CL E protection of our creditors
                                                                                                                   risk management forItheNTS
The creation of a career plan suiting each of our       shareholders while operating sustainably.                  and depositors. All our activities are determined by
employee’s personal ambitions and skills, allowance                                                                the code of conduct for businesses. Another
package reflecting their performance and adequate                                                                  challenge for us is to contribute only to those goals
                                                        A részvényesi érdekek our shareholders secures
                                                        Fulfilling the interests of kiszolgálása biztosítja a      which fulfil the social and environmental
working environment is the common interest of our
                                                        stabilitást. Az elvárások gyakran often aligned with
                                                        our stability. Their expectations are egybe esnek a        requirements.
Bank and our employees. Strengthening the loyalty
                                                        felelős,     fenntartható   működés
                                                        the criterias of responsible and kritériumaival:
                                                                                                    sustainable    The most important role of the Bank is to play an
of our employees is a crucial challenge for our
                                                        transzparens       működés      és    vállalatirányítás,
                                                        operation. Among these is the transparency in our          intermediary role among the different actors of
company.
                                                                        előírásoknak való megfelelés. A
                                                        jogszabályi and in our corporate governance or the
                                                        operations                                                 society, thus helping the development of the
In the current economical situation retaining our
                                                        functioning felelősségvállalás legal       jelentéstétel
                                                        társadalmi according to the és a requirements.             economy and society as well.
stability and preserving the workplaces is considered
                                                        Corporate social responsibility and reporting are
                                                        szintén fokozódó elvárás.                                  By offering loans, the Bank gives the opportunity to
an important responsibility of ours.
                                                        growing expectations as well.                              its customers to raise their living standards and for
                                                                                                                   the companies and local governments to reach
Our employees are the key agents of the Bank’s
                                                                                                                   economic development and more successful
success, their competences and their ability of
                                                                                                                   achievements of their tasks.
innovation are the premises of our effective

                                                                DSK BANK
                                                                                                                   The secure allocation of savings according to
operation.
                                                                                                                   individual needs is a tool of augmenting one’s assets
Regarding awareness raising we practice a mutual
                                                                                                                   and realizing one’s self-care. Moreover it can not be
impact with our employees. We aim to develop
                                                                                                                   neglected that the Bank takes active part in the
commitment to environmental and social issues
                                                                                                                   effective realization of the money transactions
among our colleagues. At the same time we are
                                                                                                                   between the citizens, the economic, state and non-
open to put into practice any initiative coming from                  CIVIL SOCIETY                                profit sector.
our co-workers concerning the improvement of our
company.                                                The relationship between the Bank and certain
                                                        groups of the society (e.g. local government, the          The biggest challenge of our bank is the appropriate
                                                        state, regulating authorities, non-profit organizations)   and responsible service of our client’s needs. This
                                                        can be seen at different levels. Society expects the       includes informing the clients in an adequate manner
                  SUPPLIERS                             Bank to fulfil the minimum legal requirements and          by unfolding their real possibilities and needs as well
                                                        possibly to realize further achievements as taking         as the risk management for the protection of our
The effective functioning of our Bank requires the      part in maintaining the institutes of the society (for     creditors and depositors. All our activities are
involvement of external organizations, by which we      example by paying taxes) or supporting noble               determined by the code of conduct for businesses.
indirectly contribute to the development of our         causes.                                                    Another challenge for us is to contribute only to those
economy and the creation of jobs. The impact made                                                                  goals which fulfil the social and environmental
on each of the suppliers depends on its size and the    The goals of certain groups of the society and their       requirements.
range of its subcontractors. We commit ourselves to     representatives vary, and areoften contrary. Fulfilling
certain values through our suppliers.                                                                              Our professional knowledge helps us give orientation
                                                        the legal requirements is obvious for us. The              to our customers in choosing the appropriate
                                                        decision of realizing further practices depends on the     products. This means developing a range of products
It is one of our challenges to co-operate with          requirements of our stakeholders.                          which fulfil the needs of our clients. Moreover it gives
suppliers who are in line with the Bank’s values and
                                                                                                                   us the opportunity to offer services which strengthen
ethical business conduct while offering adequate
                                                        We intend to develop a cooperative partner relation        the environmental consciousness and responsible
services. Moreover we aim to attain correct
                                                        with the state authorities and the local governments       behaviour of our clients. There are several
cooperation without taking advantage of our possible
                                                        with the aim of creating an effective regulating           possibilities to create a simple way of connection
superiority.
                                                        environment serving the interests of the society.          between our customers and the good cause.
The expectations towards our suppliers on the one       We reveal together with the representatives of the
hand helps the Bank’s sustainable development and       society the problems we can help to tackle. We
on the other hand fosters the propagate responsible     acknowledge the role of civil society organizations in
and sustainable business behaviour through the                                                                           IMPACT
                                                        our society; hence we support their efforts according
whole chain of creating values in the economy. We       to our possibilities. For the sake of transparency and
are trying to be a role model by showing commitment                                                                  CHALLENGES
                                                        efficiency we offer our support by a determined
to correct business practices.                          direction.                                                  OPPORTUNITIES
                                                                                        10



4.    PRINCIPLES AND PRACTICES DETERMINING THE OPERATION OF THE
      BANK

Responsibility and long-term sustainability require fair and ethical business conduct. The
organization’s values, conduct and operation are regulated by the following documents,
which apply to every organizational unit and which were determined in accordance with
international, and OTP Group standards:
  -   Code of Ethics;
  -   Organizational and Operational Regulations;
  -   Group Management Regulations;
  -   Collective Bargaining Agreement.


Code of Ethics
Our activity is performed by sticking to specific ethical values. DSK Bank applies the
unified ethical guidelines and system of Code of Ethics drawn up by the OTP Bank Plc.,
complemented with the Code of Conduct, containing internal regulations. The Code of
Ethics covers and regulates – among others – the topics of conflicts of interests, anti-
money laundering, terrorist financing, confidentiality, unauthorized and unethical use of
insider and internal information and corporate governance. DSK Bank declares to
condemn and refrain from all forms of negative discrimination and harassment.

 Anti-Money Laundering and Anti-Terrorist Financing
 DSK Bank complies with the 40 anti-money laundering recommendations and 9
 special recommendations on terrorist financing developed by FATF (Financial Action
 Task Force); all the rules and regulations of Bulgaria.

The Bank espouses, and sets out the manner in which an ethics process may be
initiated. The Bank reviews all reported ethical misconduct in the framework of a process
set out in the Code of Ethics and notifies those concerned of the result of the process. In
2008 there were no ethics processes. The Ethical Declaration is available on our
website.
The Code of Conduct – regulating the ethical behaviour of the employees – is obligatory
for all of our employees. Our employees were provided training on the Code of Ethics
and Code of Conduct and it is part of the introductory training of the new entrants; the
Code of Conduct is available on the Intranet.
Aiming to spread the ethical business conduct, our suppliers will be expected to comply
with the Ethical Declaration.


Compliance
The task of the independent Compliance Department is to monitor the legal environment
of the Bank’s operation and to help the Bank adapt to it. Our objective is to ensure that
the compliance function operates in a way that provides effective support for responsible
corporate governance, and to ensure the continued independence of the organizational
                                                                                                         11


unit. The interests of our clients and other stakeholders require us to give a broad
understanding for the meaning of compliance with the aim of maintaining the good
reputation of DSK Bank.
One of the main challenges is the consistent management of information flows within the
organization; we are expected to find appropriate solutions to manage the incoming
information and to provide information according to the expectations and requirements of
the different functions and stakeholders.
The tasks and operation of the compliance department is regulated by the unified
Compliance Constitution of OTP Group.

 Protecting our depositor and responsible lending
 The bank, playing the intermediary role among the different actors of society, is
 responsible for those depositing their funds (depositors) and towards the outsourcing
 (lending) as well.
 The bank is considered to be responsible towards those offering their funds in case it
 secures the repayment of their money. The security of the depositors requires that
 the bank exercise a strict and coherent review in the process of lending. The
 institution should offer credit only in the case of adequate collateral and appropriate
 solvency and willingness to do so.
 The conservative policy is true for the borrower and this additionally protects the
 client from getting overdebted which can even lead to personal tragedies and
 bankruptcy of companies. Responsibility does not end at the disbursement of the
 loan, but continues during the whole period of the repayment when following up the
 debtor’s solvency.
 Principles of responsible credit*:
   -   Responsible and affordable credit for all – without discrimination.
   -   Credit relations are transparent and easy to understand – comparability with
       competitors, adequate time for reflection, access to independent advice is
       provided.
   -   Lending is at all times cautious, responsible and fair – the credit is productive
       for the borrower, weakness, need or naivety of borrowers is not allowed to be
       exploited.
   -   Adaptation of credit conditions is preferred to credit cancellation and
       destruction.
   -   Protective legislation has to be effective.
   -   Overindebtedness is a public concern.
   -   Borrowers are provided with the adequate means to defend their rights and are
       free to voice their concerns.
 * The introduction of principles was conducted according to the “Rules of Responsible Credit” created by
 the European Coalition for Responsible Credit. Our Bank agrees and complies with the principles.
 Though we are not a member of the Coalition as only non-profit organizations are allowed to be part of it.
                                                                                       12


Security
One of the most determining characteristics of the bank is security.
It is considered essential both for DSK Bank and the OTP Group to maintain security
and manage risks; hence we are aiming to apply internationally leading practices.
Issues regarding security are handled in a complex manner by DSK Bank. The
traditional personal- and property protection and the defence of the information
technology are widened to other dimensions of security. Handling the security risks of
the activities of credit banks and commercial institutions; handling the HR risks, secret-
and data protection, defending business interests; preventing, impeding and retracing or
contributing in retracing crimes and illegal behaviours menacing the Bank; providing
appropriate security training for the employees; complex realization of security checks.
The detailed regulatory system together with the high level security by the absolute
adherence of the controls requires continuous attention and immediate reaction.
In the internal operations of the Bank the security and the risk management work in
strong cooperation. The establishment of the secure operation of the Bank is set by
unified principles and rules in the OTP Group. We set equally high requirements towards
our security suppliers.
Our security operations, working in an effective organizational framework, are
continuously facing challenges. In order to impede abuses, we are aiming to use new
prevention methods. Our company exercises zero tolerance towards abuses.
In the coming year we intend to involve our clients in security issues, by drawing their
attention for possible risks they face in certain cases, and providing them with
recommendations to avoid risks.
 Corrupted ATMs in DSK Bank network, 2008
 ATMs with skimming device      0
 Successful robberies           10
 Unsuccessful robberies         16
 ATM vandalism                  8


Risk management
DSK Bank considers risk management as its social duty, far beyond its economic
interest. The method of the risk management is strictly regulated, unified in the whole
Group.
The Bank established an independent risk management organization and operates risk
management committees. Credits and Limits Council, Credit Committee, Assets and
Liabilities Committee are in charge of assessing, guaranteeing and monitoring the
optimum balance of risk.
DSK Bank is Basel II compliant. In order to comply with the stipulation of the Basel II
Contract we set up an independent department on operational risk in 2008.
We require our customers to be transparent in their financial management and business
operations, we do not accept loan applications for purposes which: constitute breaches
of the law or criminal acts or contravene environmental protection regulations. Forbidden
areas of business are illicit arms trade, illicit gambling, narcotics trade, other illegal
activities (money laundering, black-marketeering, etc.) Customers whose activities can
                                                                                    13


be presumed to breach general moral standards or social values are also not eligible to
receive loans.
DSK Bank pursues a sound credit policy. We use a centralized risk assessment process.
In order to evaluate the solvency and paying willingness of our clients we use a
statistical based, automated scoring and rating system. The experiences on our clients’
repayment prove the correctness of our methodology.
                                                                                              14




5.     ECONOMIC PERFORMANCE

  5.1     Economic role of DSK Bank

The introduction of the economic performance makes it possible to present the
contribution of our Bank to the sustainability of the economic systems at local and
national levels. The display of our performance differs from the financial approach of the
Annual Report and emphasizes the money flow among the stakeholders.


Direct economic value generated and distributed at DSK Bank, 2008
(based on the non-consolidated, IFRS profit and loss statement, million BGN)
I.   Generated direct economic value             =1                                   551,2
     Revenues                                    Net interest income + non-interest   551,2
1.                                               income (with net fees, adjusted)
II. Economic value distributed                    = 2+3+4+5                           199,7
2. Operating costs + payment to providers of Operating costs – Personnel expenses –    91,6
     capital                                     Depreciation – Taxes reducing the
                                                 corporate tax base
3. Employee wages and benefits                   Personnel expenses                   67,7
4.     Payments to government (gross taxes)   Total tax-payment liability             40,3
5.     Community investment (voluntary)       Charitable giving                        0,1
III.   Economic value retained                = 1-(2+3+4+5)                           351,6


DSK Bank fulfils its tax payment obligations as required by law. The amount of paid
taxes – highly influenced among others by the revenues and profit – is significant for
society. DSK Bank is a considerable tax payer at a local and national level as well.
Our constant goal is to avoid damaging the interests of our clients’ while complying with
the statutory regulations. We aim to reduce the number of prosecutions resulting in
exoneration of our Bank and the amount of penalties by preliminary reconciliations with
the concerned bodies and by raising our prudence. Nevertheless we acknowledge the
legitimate complaints and sentences fulfilling the imposed sanctions.
At the end of 2008, 95 court proceedings were ongoing against DSK Bank, the total
value of these claims was 1 351 541 BGN.


  5.2     Products and services

What makes a banking service or product responsible? What are the tasks of the bank in
economic processes? Who and in what proportion should undertake the risk? To which
extent can self-regulating and differing from the competitors be expected?
During the development of our products we often have to face these and several other
questions. However, it is much easier to raise a question than to answer it. We have to
fulfil the different needs of our owners, our depositors and loaners. Successful operation
demands different requirements than regulatory institutions do. The constant challenge
                                                                                        15


of our corporation and our employees is to create a balance to harmonize among all the
interests.
 -   Stability is one of the core values why our clients choose DSK Bank. In order to
     maintain stability we implement sound risk management policy.
 -   The development and sale of all of our products is done according to responsible
     and sustainable principles: we apply the rules of the Code of Ethics; we pay
     constant attention to the development and frames of the social and economic
     environment.
 -   We constantly deliver our services in a responsible manner. Beyond that some of
     our products are designed to fulfil the financial needs of a certain group in society.
We strive to fulfil the variety of the needs of our clients by widening the spectrum of our
services. Our products, packages of services and offers inspire:
 -   the development of the financial literacy and knowledge of our individual and
     corporate clients (creating access to the bank services for youth; packages for
     savings; securing the possibilities of self-care);
 -   a raising of environmental awareness (renovation loans helping energy efficiency,
     financing projects aiming at the use of renewable energies);
 -   the utilization of state and European Union funds.


Individual banking products
DSK Bank pays special attention to the generation of the future, the youth and to elderly
people. We are committed to enhance their financial knowledge, awareness and culture.
Our products promote savings for the future:
 -   Children’s Deposit offers a flexible but at the same time sound saving construction.
     Children’s Deposit provides more favourable financial conditions than the indefinite
     deposits.
 -   DSK FUTURE Children Saving Account serves long-term accumulation of funds,
     the use of funds starts when the beneficiary becomes eighteen and lasts until
     he/she becomes twenty-five.
DSK Bank provides the only youth card in Bulgaria. Three different packages are offered
for the youth according to their age. Bank cards and own bank accounts contribute to the
development of financial culture and to the responsible management of finances for
youth.
 -   DSK Start is intended for children between 7 and 14 years: parents or guardians
     are entitled to control the spending of the children as they are the account holders;
 -   DSK Teen is offered for teenagers between 14 and 18 years: teenagers are
     provided with more responsibility, they are able to perform real bank operations on
     their accounts;
 -   DSK Max is issued to you young people between 18 and 24 years and provides all
     the functions of a standard payment account and bank card at a considerably lower
     price.
                                                                                                       16


In 2008 we granted student loans in 64 cases, the current portfolio was 244 917 BGN by
the end of the year.
The introduction of DSK ISIC card required a joint effort from DSK Bank and ISTC1. DSK
ISIC card is a 3-in-1 card combination: it is a debit card, an ISIC student identification
card and a student discount card for Bulgarian railways.
DSK Bank is one of the few financial institutions providing services for pensioners. Our
program was launched two years ago when we set the goal of enhancing the use of
financial services for pensioners. Elderly people were provided information on the
advantages of bank cards on several channels. DSK Bank offers special discount, debit
cards free of charge for pensioners and at the beginning of 2008 we introduced a bank
lottery. Every week a prize of BGN 100 is drawn, and once a month the prize reaches
BGN 1000. All pensioners holding a DSK Bank card are participants of the lottery on
condition that a transaction has been made on the card account during the respective
period. We awarded a total of 17 300 BGN in 2008 as prize of the lottery. We are proud
of the successful campaign resulting in higher awareness, and more frequent use of
bank cards and ATMs by the elderly.
    Virtual Visa Card – security above all
    DSK Bank offers a unique bank card for paying online. Virtual Visa is not a real card,
    hence ensuring maximum security. Using DSK Direct, our clients are able to transfer
    the necessary amount to buy the desired goods and services on the internet, while
    the rest of the money remains under protection in the payment account.


DSK-Rodina offers voluntary and mandatory pension insurance as a supplement to the
state pension to secure income for older age. Pension funds are responsible possibilities
for self-care. An important advantage of voluntary pension insurance is the possibility of
withdrawing money at any time even before the insurance claim (old age, disability,
death) has occurred. DSK-Rodina enjoys a 9% market share within the insured persons
of the pension security market.


Corporate banking products
DSK Bank strives to satisfy their customers’ needs in the corporate sector as well. We
offer special packages and loans primarily for micro enterprises and for SME’s (e.g. for
dentists and doctors special loans are available). As for big companies tailor-made
services are provided and we have the possibility to determine the conditions in
accordance with the clients’ and corporation’s interests.
Most of our preferential products and packages are related to EU or national programs
targeting the development of corporations, agriculture and in many cases promoting
energy efficiency. We strive to exploit the cooperation possibilities with international and
national institutions. The European Union and the Government grant funds for innovative
goals and long-term return projects.




1
 The international Student Travel Confederation issues the International Student Identity Card (ISIC), the
only internationally accepted student ID card. With access to a global network ISIC provides 41,000
possibilies for discounts and benefits in 106 countries worldwide.
                                                                                                            17



Different types of investment loans are available:
 -        for pre-project   activities   and    preparation     for     tender        participation     (DSK
          EUROSTART);
 -        for expenditures of project realization, approved for financing by the European and
          the Government budget (DSK EUROBRIDGE, DSK EUROFINAL);
 -        for co-financing of expenditure payments, related to the execution of a project
          approved according to a program of the European Union (DSK EUROPROJECT);
The EBRD (European Bank for Reconstruction and Development) agreement – signed in
2004 – provided a facility line of 40 million BGN for project financing. The agreement
covered projects improving energy efficiency, construction of equipment and investment
projects for use of renewable energy resources (e.g. waterpower stations and wind
energy generators). Subsidized organizations were granted a determined proportion of
the loan after the appropriate implementation of the project. Funds of the facility line
were used by 2008 but further negotiations are proceeding.
In the framework of the EIB (European Investment Bank) agreement municipal projects
were also supported.
DSK Bank is in close cooperation with the Bulgarian Development Bank. For SME’s a
fund is available for guaranteeing loans, and in the beginning of 2009 another
agreement is to be signed for a facility line of 20 million BGN. The 10-year project is
meant to finance technical innovation and pre-export of Bulgarian companies.

                              Breakdown of Corporate Loans by Sector
                                                       Trade

                                                       Real estate operations

                 18%                                   Building and construction
      1%                                       26%     Food and beverages
     1%
                                                       Services
     1%
                                                       Tourism, accommodation and catering
     2%
                                                       Agriculture
  2%

  2%                                                   Energy production

     3%                                                Manufacturing machines, transport, other services

           5%                                          Culture, sports and entertainment and related
                                                 14%
                                                       Health and social activities
                6%
                                                       Other services
                       7%          12%                 Computer-related activities

                                                       All other less than 1% (R&D; post&communication;
                                                       transport; tourism; w aste management; education etc.)


DSK Bank is the significant partner of municipalities by serving the financial needs of
almost one third of the local governments. In 2008 we financed about 10 projects of
municipalities by succeeding in the public procurement process. Most of the projects
                                                                                       18


target the development of the infrastructure; one of the most important goals is the
construction of the water pipeline systems.
With the aim of facilitating the process of European fund’s resources absorption, DSK
Bank established DSK Bul-Project Ltd. The company offers highly qualified consultants
to the applicants for operative programs financing from preliminary research and
preparation of the project proposal right through to its final phase, including the entire
management of the activities approved in the project.
                                                                                          19



6.    OUR CLIENTS

The honoured trust of almost 3 million of our clients is one of the most important values
for us. DSK Bank is considered to be a safe and credible financial institute. It is our
responsibility to preserve our clients’ trust and confidence by the following means:
  -   Prior to offering and selling a banking product or a service, we explore the real
      aims of our clients. We have to ascertain that our client is thoroughly informed
      about their financial possibilities, that they are aware of the advantages and risks of
      the service and willing and also able to undertake these risks and obligations.
      Fulfilling this need requires extreme care and well organized background
      operations, since the honesty and openness of our clients depend highly on the
      first contact with our Bank and our offers.
  -   Our responsibility lasts even after the purchase of the product. Our aim is that our
      client relations are marked by ethical business conduct, reliable conditions and a
      partner relation with the client at all times.
We aim for constant and innovative development in order to provide responsible services
and meeting our clients’ needs. We measure the success of our initiatives with extensive
satisfaction surveys.
The clientele of our Bank come from all walks of life; hence we aim to offer personal
advices to satisfy the expectations of all our clients. We consider it a priority to provide
information which can be easily understood by all, including the exact explanation of the
risks. Providing information in an easy to understand way, including a precise
explanation of the risks is considered to be of great priority at DSK Bank.


The development of the conditions of our services
We prioritize quality over quantity in our sales.
The role of our employees working in the call-center and customer care areas is crucial.
Besides the professional expertise of our co-workers, we lay emphasis on the
development of their communication skills with the aim of providing clear, relevant and
professional information to our clients as well as to establish their real needs.
The use of intranet and e-learning has significantly increased the possibilities of
trainings. With the help of these tools we are enabled to inform our colleagues
immediately on new possibilities.
We are continuously developing our incentive system designed for our employees in
order to provide services to our clients according to their real needs.
                                                                                        20

 MiFID
 The European Union directive of "Markets in Financial Instruments" (MiFID) aims to
 establish a common set of conditions and an order of processes in the field of
 investments among the member states, which help to defend the interests of the
 investors and the service of the clients’ needs. The MiFID is concerned with the
 investment service providers and the clients.
 The new law in effect as of 1st February 2008 ensures:
   -   detailed communication regarding the financial tools of the service providers
       and the offered services and products
   -   provides transparency regarding the operations of the investor companies and
       the implementation of the transactions, alleviating the orientation of the clients
       in the cobwebs;
   -   Furthermore the service providers have to proceed according to the needs of
       our clients fulfilling their assignments with the best possible conditions



 MiFID at DSK Bank
 Our company has always tried to attend to the clients’ needs by providing services
 with the best conditions, the directive of the MiFID assists in the thorough realization
 of this. With the aim of fulfilling the regulations in mind we have introduced the
 following changes:
   -   According to the regulations of the law we have adopted new categories in
       qualifying our clients, which determine the depth of the information we give our
       clients.
   -   Prior to starting the portfolio management of our clients, we find out their risk
       undertaking ability, financial knowledge and situation as well as their investment
       goals.
   -   We have elaborated an Implementation Policy, which contains the normative
       rules to be used while dealing with our customers in order to fulfill their
       assignments in the best possible way.
   Our goal is to be extended to all of the services of the Bank, and make use of the
   so-called Aptitude and Adequacy test with this overperforming the regulations.


Our Call Center plays an emerging role in serving and informing clients. Promoting our
call center and its availability on many different channels has resulted in increasing
popularity. Apart from immediate actions our Call Center is prepared to answer and
provide detailed information on all possible questions from our clients around the clock.
The Call Center offers an appropriate channel for informing clients and to enhance
financial literacy. According to our experiences our clients are willing to call the Call
Center and ask for a wide range of information.
In order to make our Call Center as client friendly as possible we record and analyze all
the incoming calls, the results of evaluation serve as a basis of improvement. The Call
Center is available in 24 hours a day, 7 days a week and it is charged at the price of a
city call.
                                                                                      21


Our clients’ feedback gives us reason to be proud of the Call Center.
The Call Center is of great importance for our colleagues as well by providing up-to-date
information on our products and services.
In addition to all the modern tools of communications personal contact plays a
determining role for our clients. With its 379 branches DSK Bank owns 14% of the
banking branch network in Bulgaria. DSK is available all over the country and we have
an ever growing branch network. Placing emphasis on equal opportunities we make our
branches accessible for disabled people. Branch reconstruction serves as a frame for
creating barrier-free environment. Renewal of our branch network is constant, 60
branches were reconstructed in 2008, and we intend to refurbish 40 in the coming year.
To improve comfort we are planning to offer free mineral water in bank branches in the
summer period.
To ease our clients’ choice at the customer orientation automatic machine one of our
staff – in most cases the security guard – is ready to give assistance in our bigger
braches.
In order to measure the quality of our services we conduct mystery shopping on a
regular basis. While pretending to be potential clients mystery shoppers examine and
evaluate a wide range of factors keeping their eyes open for everything:
 -   from the appearance of the branch – e.g. if the customer orientation system is clear
     enough; if the branch is tidy; if the leaflets and brochures are appropriately
     available;
 -   to the customer service – e.g. clarity and accuracy of information provided,
     exploration of customer needs and situation; management of clients.
The management is provided with the results of the mystery shopping on a regional
breakdown. From time to time we managed to improve and conclusions of the report
define the way of future development. One of the most important challenges we face –
and strive to solve – is to reduce customer’s waiting time.
Besides analyzing the quality of our services we conduct mystery shopping at our
competitors. In 2008 DSK Bank achieved outstanding results among Bulgarian banks
and among OTP Group affiliates as well. Among the OTP Group members we performed
best together with the OTP Bank, Hungary; and we have gained a 6% advantage
compared to our competitors in fierce competition.
We constantly monitor our corporate clients’ satisfaction. The personal and closer
relationship allows a deeper and more detailed exploration.
In order to become more familiar with our clients’ expectation and opinion we are
planning to introduce a customer satisfaction survey in 2009.
Although we are succeeding in achieving a low proportion of customers’ complaints
compared to our competitors, we place great emphasis on managing and reducing
customers’ complaints. We use a centralized system for managing customers’
complaints providing professional and quick solutions. We continuously work on the
development of our customer complaints management. The satisfaction of our
employees is a crucial part of our strategy.
                                                                                       22




Customer contacts and handling complaints, 2008
Number of customer contacts
(complaints, requests, inquires, suggestions)                    1301
Number of customer contacts regarding bank card
transactions (complaints, requests, inquires, suggestions)       3129
Reimbursed amount on justified complaints (BGN)                 15 584
Reimbursed amount for handling non-identified card
transactions (BGN)                                              51 115


Enhancing financial literacy
The ever developing financial products are becoming more and more complex and the
complication of the money markets keep growing. Despite this we are convinced that we
provide thorough information on our products and product groups, and fully
understanding them requires the often missing financial literacy.
DSK Bank promotes the development of the financial literacy of its clients and the wider
public. One of the main pillars of this has to be the financial education of the people.
The responsibility of the educational institutions in providing the basic financial
knowledge and culture is crucial. At the same time we can take part in providing a
solution with the use of our programs.
Our initiatives mainly focus on students and children and we work in close cooperation
with the Association of Bulgarian Banks. As a result of this joint effort a dictionary has
been prepared on the financial expressions. This dictionary is available on the
Association’s website.
Our educational program targets secondary schools: every year the colleagues of DSK
visit different schools all over the country and while introducing the youth cards they
explain the responsible financial management and provide essential information on
financial mechanisms. In cooperation with the secondary schools the best performing
students are granted a debit card as an reward for their academic results.
From 2009 on we are planning to widen the channels and tools for improving financial
literacy. We intend to make the explanation of financial expressions and main features of
types of products available on our website and in our branches available.
Several of our charity activities target the development of financial knowledge by
supporting students or schools. Further information on the projects can be found at the
Social Participation Chapter.

 World Savings Day
 DSK Bank has been engaged in the World Savings Day for many years.
   -    In 2008 we organized a joint campaign with an NGO: children collected stotinka
        for charity purposes, for medical operators for children clinics. The commitment
        and willingness to help of the children was exemplary all over the country, they
        were proud of counting the stotinka at the DSK branches where they were
        supposed to take the money. (The campaign was organized on International
        Children’s Day as well.)
   -    World Savings Day is traditionally the occasion for awarding the outstanding
        efforts and performances at the OTP Group. The prize was set up in 1984 by
        the OTP Bank in memory of András Fáy – the father of the savings movement
        in Hungary and the founder of OTP Bank’s historic predecessor. From year to
        year our colleagues are also awarded, in 2008 Ms. Detelina Nikolova, Chief
        Regional Manager received the award in recognition of her successful work in
        the North and Northwestern Region of Bulgaria.
                                                                                        23




7.    THE EFFECTS OF THE ECONOMIC CRISIS ON THE OPERATIONS OF DSK
      BANK

The financial and economic crisis – resulting from the crisis on the money markets –
deteriorated during the fall of 2008, and thus seriously affected the operations of the
OTP Group and DSK Bank as well. The strict risk management of the OTP Group gives
a stable background for maintaining the financial balance and the liquidity. At the same
time the crisis required, and continuously requires immediate reactions in many fields.
With the aim of maintaining our stability we:
  -     have changed our product portfolio;
  -     have applied stricter measures regarding our risk management;
  -     now provide a wider, more active communication towards our clients and investors;
  -     have reduced our investment costs to a minimum;
  -     aim to protect our depositors and
  -     aim to help our debtors and to prevent them from insolvency, credit defaults and
        bankruptcy.
Beyond our clients and investors, we are highly responsible to our employees.
Preservation of jobs has become one of the most important factors for our colleagues to
secure their livelihood.


  7.1     Communication and trustworthy information assurance

Leaders of DSK Bank are important and highly recognized actors in our society, in
several cases possessing the role of opinion shapers. Violina Marinova, the CEO and
chairperson of DSK Bank gives regular interviews to different media groups on various
financial issues and questions related to DSK Bank. Ms. Marinova has informed the
Bulgarian society on various channels regarding the financial crisis and the possibilities
open to our clients who found themselves in a difficult situation. We publish statements
of our opinion regarding important economical and financial plans, and we provide press
releases widely covered by the media.
Our clients are personally informed through our Call Center and the customer service
employees of our branches. In order to provide accurate and reliable information we
constantly inform and train our staff on the overall situation of the Bank and the possible
solutions for our clients in trouble. We prepare them to answer and attend our clients’
questions and needs efficiently. We have organized two seminars for our corporate
clients sharing with them our plans and expectations in business development for the
year 2009. We set a high value on establishing a dialogue with our partners and are
open to their feedback as well. Confirming the success of our efforts there was no mass
withdrawal of the deposits, in October 2008 our Bank was rated with the highest
confidence in client service. We maintained the safeguarding image of our Bank which
helps us to keep our main asset, the trust of our clients.
                                                                                       24




 7.2   Change in the operational structure

Although it was not necessary to make changes in our structure and in the principles of
our operations as a result of the crisis; the altering market and economical conditions
have made it essential to revise our operating system.

 The principles of the amendment of our operations aiming to maintain our stability:
   -   decreasing the risks:
   -   security;
   -   quick reaction;
   -   accurate situation analysis;
   -   reduction of expenditure.

Sudden and unexpected changes require the management to make frequent decisions
and to adopt a stricter control of the processes. Our decisions have become more
centralized and the personal responsibility of our leaders has become stronger, due to
our aim of making faster and even wiser decisions, placing high importance on our
security.
Increased precautions during the planning processes mean drafting various scenarios,
as well as making the internal control by frequent revisions stricter.
In the current situation maintaining our stability and security is more essential over the
growth of the Bank; hence the importance of the functions, supporting the core business,
playing a more significant role. The emphasis of the following areas has risen in
particular: risk management, compliance, controlling and security. Thanks to these
changes several risks and dangers have become more foreseeable and avoidable.
Therefore we are convinced that the development of the functions mentioned above, has
added long-term value, and will continue to do so even after the passing of the crisis.
It is obvious that in the unfavourable economic environment we aim to reduce the
operational costs. We are managing this by postponing all investments – real estate,
equipment, IT tools and software – which would add to the standards of our operations
and working environment, but currently are indispensible.


 7.3   Alteration in the product portfolio
Our product portfolio and sales activity is determined by our goal of aiming to increase
the deposits and savings.
Deposits
As a result of the scarce funds, we have to rely mainly on deposits, both in the field of
product development and in sales.
The unforeseen situations require us to widen the range of our low-risk products while
focusing on the different needs of our individual, corporate and local governmental
clients.
                                                                                        25


Protecting our debtors
The economic crisis renders it more difficult for our individual and corporate clients to
pay back their debts. We consider it as a high priority to offer our clients – overstepping
the legal requirements – personal negotiations, in order to support them to overcome the
payment difficulties. A wide range of possibilities are available such as restructuring the
loan, extension of the repayment period, temporarily suspending the redemption of the
debt or to change to foreign currency loans. We treat our clients individually by offering
tailor-made solutions to suit their exact needs. We strive to use all the possible channels
to make our clients pay attention to the solutions.
Unfortunately, according to our experience, our clients turn to our Bank only as a last
resort, when the arrears are already high. We actively encourage our clients to contact
us before accumulating their arrears, in order to find a solution convenient for all.


Loan products
Due to the increased risks, our Bank, as well as the depositors’ and the loaners’ interests
require us to apply stricter conditions for providing loans and for credit assessment. With
regards to the maintenance of the economic processes and the development, it is
essential to continue offering loans. Hence we constantly offer credit to all of our client
groups, except the areas with exceptionally high risks.
In the current economic situation funding has become even more difficult, thus the state
and European Union refinanced credits are of a higher significance. These credits
stimulate economic processes as they expand resources. DSK Bank aims to find and
draw in refinanced funds and to join state and European Union programs.


 7.4   Our colleagues

The economic crisis has had a serious impact on our employees as well. During work,
frequent changes and insecurity have caused an increase in burdens. The role of our
colleagues, working in customer care, is crucial, as they secure information and
communicate with our clients. However, providing always up-to-date information needs
constant preparation. The increased need of information, the more frequent questions on
the overall situation of the Bank and the economy all require broad knowledge. We
ensure the background information needed for client communications in time, and we
focus on the development of our employees’ competencies as well. We are aware that
our colleagues are working under more stressful conditions and we aim to reduce the
workload. The co-workers of our head offices are constantly working to find solutions to
be used for the changing economic and financial situation.
As a consequence of the crisis we have decided to postpone our traditional events such
as Christmas Party and DSK Bank Cup, the tennis tournament. We are convinced that
common events are an essential part of our work, thus we are committed to organize the
aforementioned events in 2009.
One of the most affected sectors hit by the economic crisis is the financial sector
specifically the banks; fortunately by the end of 2008 we were not forced to make any
redundancies. A future cutback of the headcount may become necessary due to the
decline of the market possibilities and the loss of demand. DSK Bank will continue to do
everything possible in order to secure its employees’ jobs.
                                                                                      26




8.   OUR EMPLOYEES

Our employees play a crucial role in the realization of our strategy, in achieving our
goals. One part of our HR policy is to express our appreciation of our colleagues and
their work.
DSK Bank, due to its extensive branch network, plays an important role as an employer
in the country. Besides strengthening the commitment of our co-workers and striving for
the enforcement of their skills and ability for innovation, we also have a responsibility
towards them. Our duty is to secure the stability of their workplaces, to provide healthy
working conditions, to maintain the work-life balance and to assure equal opportunities.
The size of our Bank requires the standardization of the HR processes as we have to
ensure a transparent operating structure. The opportunities – supposed to raise the
performance and commitment to our Bank – have to be available for all of our
colleagues. The means of possibilities include, among others: communication channels,
representation of interests, career management, etc.


Workforce headcount data
Employee headcount data
              st
per person, 31 December 2008
Full-time employees                 3 826
Part-time employees                  113
Total headcount                     3 939
Number of employees with a fixed-   3 402
term employment contract

Effective capacity management is an essential factor contributing to the Group’s
successful operation. Headcount is optimally matched with the human resource
requirements specified for the individual work processes.
Most of the staff are employed on a full-time basis. From the standpoint of labour law
and our benefits policy all the employees receive equal treatment, in accordance with
the statutory provisions.
                                                                                                                  27



                               Total headcount by region
                                      31st December 2008
                        6%
            8%
                                                                        Sofia

                                                                        Pleven Region
      6%
                                                                        Veliko Tarnovo Region

                                                         47%            Varna Region
    7%
                                                                        Burgas Region

                                                                        Stara Zagora Region
     10%                                                                Plovdiv Region

                                                                        Blagoevgrad Region
              8%
                           8%


In the regional distribution of employees Sofia is notably dominant among the regions,
with almost half of the employees working in the capital. The proportion of the other
regions is quite evenly balanced.


           Breakdown of employees per category according to gender
                                              31st December 2008

   2 500
                                                                                                 1 999
   2 000

   1 500

   1 000                                                                                                   674
                                                               600
                                                                        291
    500
            3       3        58       47      76        54                      75        59
      0
           Female




                             Female




                                               Female




                                                               Female




                                                                                 Female




                                                                                                  Female
                    Male




                                      Male




                                                        Male




                                                                         Male




                                                                                          Male




                                                                                                           Male




            Senior            Middle         Line manager While collar Administrative Blue collar
           manager           manager                         (not
                                                          manager)




The distribution by gender shows a predominance of women; the ratio of women within
the total workforce is 70%. Women are equally represented at management level as
well.
                                                                                        28



              Percentage of employees by age group
                         31st December 2008

                   11%        5%


                                                    <25 yrs
                                              26%   25-35 yrs
                                                    35-45 yrs
                                                    45-55 yrs
        32%                                         >55 yrs




                                   26%


The breakdown of employees by age reveals a broad distribution, with the average age
of the workforce being 41.
Although DSK Bank does not have a comprehensive policy and practice of giving
preference to local inhabitants when hiring people, the employees of the Bank are
predominantly locals. At the establishment of the new Head Office, new positions were
firstly offered to DSK employees as part of their career development, hence these
people transferred to Sofia from other parts of the country.
The history of DSK Bank dates back to the 1950’s thus we have a long-standing
relationship with our employees. Establishment and penetration of new banks in Bulgaria
resulted in some of DSK employees leaving the Bank. The most important factors of our
human resource practices are proven to be satisfying for our employees as many of the
former employees are rejoining DSK Bank.
The fluctuation tendencies are between 12 – 15%, the turnover in 2008 was 14.8%. The
level of turnover has decreased in the second half of the year. Our long-term objective is
to further decrease and stabilize turnover by strengthening our colleagues’ satisfaction
and loyalty. Our ability to retain our colleagues is influenced by a number of factors, and
the majority of our HR management activities are geared, either directly or indirectly,
towards ensuring the retention of employees.
We should concentrate on the branch network, as the turnover is significantly higher
than that of the head office’s. Employee turnover is greatly influenced by job
opportunities of the region, and this is also reflected in the demographic profiles of
outgoing employees. In Sofia and Plovdiv the turnover is significantly higher than in the
regions, the age group under 25 is proven to show the least loyalty among the
employees. Turnover of men was 15%, whereas the female was 17%.
                                                                                      29



                       Turnover of employees by region
                 compared to the headcount of the region, 31st December 2008


        20%                                     18%
                 17%
                                                                16%
        15%                             13%                             12%
                         12%                            11%
                                 9%
        10%

          5%

          0%




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                 Percentage of employee turnover by age group
                          compared to the headcount of the age group
                                     31st December 2008

          30%
                    24%
          25%
                                  21%
          20%
                                              15%
          15%                                                           11%
                                                           9%
          10%

            5%

            0%
                   <25 yrs     25-35 yrs    35-45 yrs    45-55 yrs     >55 yrs




Training and education
One of our main goals is to continuously develop the professional knowledge and
personal skills of our employees. Training is closely linked to everyday work, new
products and services, changing conditions need continuous education and information.
Currently we are proceeding with the introduction of the e-learning system, providing a
faster, more easily available and flexible way of education. E-learning creates the
possibility of mass training on the spot, suiting the time schedule of employees. In 2008
we conducted a mass education program jointly with a consultancy company. The
trainings aimed to develop the skills and competencies, and middle management was
provided leadership training. As a consequence of the economic crisis we have been
forced to cut back training costs on the short run.
We provide topic related trainings on special issues concerning all or most of the
employees. The introduction of the Code of Conduct (2006) and Code of Ethics (2007)
were followed by an education program, in which all DSK Bank staff participated.
                                                                                                30


A great emphasis is placed on the training of new entries. The introductory training
consists of three modules:
  -   general information on DSK Bank and on working conditions including the
      organizational structure, governance bodies, legal compliance, historical aspects,
      standards of behaviour, internal communication, performance evaluation;
  -   banking products and services training;
  -   software and IT knowledge training.
In 2009 we are planning to launch the talent management program. The purpose of the
system is to provide talented and motivated employees with clearly defined opportunities
for professional advancement and promotion within the Bank. The talent-nurturing
scheme aims to enhance professional and interpersonal skills of the participants. The
program is going to be based on the one used by OTP Bank, and the first step will be
the selection and retention of talented staff.

            Average hours of training per employee by employee
                               category, 2008

       68
       66
       64
                                                   5
       62                                                               Employees
                       10
       60                                                               Management
       58
       56                                          61
       54
                       56
       52
       50
      hours         In-house                    External


The ratio of in-house training to training provided by external companies is roughly half and half.
Training expenditure per employee amounts to an average of 242 BGN, with 24% spent
on in-house and 76% on external trainings.
DSK Bank provides internships to young expertise, trainees are provided with relevant
professional experience, and after fulfilling the program they may become a probable
candidate for the open positions.

Programs for skills management, lifelong learning and career
changes                                                                  Availability
In-house training courses                                                    yes
Financial support for external training or education                         yes
Provision of study leave, with guaranteed retention of position               no
Pre-retirement planning for those approaching retirement age                  no
Further training for those who would like to continue working for longer     yes
Severance packages                                                            no
Job search help for dismissed employees                                       no
Assistance with the transition to life without work
(e.g. training, counselling)                                                  no
                                                                                                                             31


Performance evaluation
Assessment and evaluation of personnel performance is an essential part of our human
resource management. We use both qualitative and quantitative indicators to measure
performance annually or twice a year. Qualitative evaluation and feedback is a part of
the manager’s job with all of the employees, and 72% of our staff receives an official
performance assessment and appraisal of their work.


Benefits policy
Our benefits policy is required to fulfil twofold aim: to provide a fair remuneration and to
motivate our employees to perform even better, to reward loyalty to the Bank and to
reflect the level of responsibility associated with their jobs.
DSK Bank is the most effective bank not only among the OTP Group, but among all
banks in Bulgaria regarding HR costs compared to economic results.
Salaries are determined in accordance with uniform principles, while the assessment of
performance and the related incentives are also regulated. Performance is measured on
the basis of business and financial indicators. Remuneration consists of three parts:
salary, bonuses – determined by the performance, and a social package – provided to
all employees equally. The social package is voted locally and contains additional
pension fund contributions, and other social support. Benefits in excess of salary make
25% of compensation.
The average earnings are more than double the national average earnings but lower
than that of the financial sector. The yearly increase rate of real earnings at DSK Bank
indicates our objective: to increase benefits and achieve the average for the whole
financial sector.

                                                          Employee Benefits 2008


                              1400
                                                                      1 230
                                                                                                                  1 184
                              1200
   BGN per person per month




                                                 1 060
                              1000

                              800

                              600
                                                                                             500
                              400

                              200

                                0
                                     Net average earnings Net average earnings Net average earnings Total compensation
                                      at the organisation  w ithin the financial   in the national   package, including
                                                                  sector              economy       salary and benefits in
                                                                                                            kind
                                                                                     32


 Real earnings at DSK Bank and national economy, 2008
 Change in real earnings at DSK Bank (compared to 2007)               17%
 Change in real earnings in the financial sector (compared to 2007)   15%
 Change in real earnings in the national economy (compared to 2007)   20%


To express our appreciation and acknowledgement our best performing colleagues are
rewarded on Bankers Day and World Savings Day. The awarding procedure is always
connected to a special event participated in by most of the employees and a celebration
of the common success of DSK Bank together.

Employee advocacy and deliverance
Providing appropriate advocacy to our employees and their involvement into all the
relevant decisions is taken for granted at DSK Bank. The Bank’s management conducts
negotiations and consultations with the Trade Union and the Workers’ Council prior to
making decisions or taking steps that affect larger groups of employees, in accordance
with the statutory regulations. DSK Bank cooperates with the trade union on a
continuous basis, and makes the necessary information and infrastructure available for
advocacy activities. Collective Bargaining Agreement applies to all employees
independent their trade union membership.
Employees are welcomed to provide suggestions and ideas to the management.
Working groups are managed by the responsible organizational units; recommendations
of the network on the everyday work are received by a dedicated mail box. Proposals
are reviewed on a monthly basis, and suggestions are provided for the management.
For the sake of exploring our colleagues’ opinion we conduct employee satisfaction
surveys. According to the results of the last survey – which took place in 2007 – work
safety and working environment; training and development opportunities; and internal
communication are the fields where DSK Bank’s performance is the best. In the coming
years we have to focus on compensation packages and maintaining work-life balance in
order to enhance the staff’s engagement.


Internal communication
A well organized and appropriate internal communication is one of the main factors of
efficient and successful operation. Electronic channels are becoming more and more
important. Intranet is one of the most important resources regarding professional and
organizational information, but the role of personal meetings cannot be stressed enough.
The most commonly used channels for providing news of general interest are Intranet
and the internal newspaper of DSK Bank published in every three months. We are
convinced that employees’ commitment is highly influenced by the atmosphere and
cohesion, and for this reason we inform our staff on a wide range of topics; interviews
with the best performing employees, donations, branch openings, events of the Bank are
only a few to mention here. We have also given a summary of CSR in our internal
newspaper.


Health
Healthy and safety working conditions are provided according to statutory legislation.
Most of our employees participate in a regular annual medical check-up. Expenditure of
                                                                                    33


the medical check-up has a determining role in our donation costs. Employees working
under special risk conditions are covered by life insurance. DSK Tours provides
discounts for our employees when buying its services.
We are convinced that prevention should be preferred to treatment, thus we are planning
to promote healthy life by supporting recreation and sports of our employees.
                                                                                          34



9.    SOCIAL PARTICIPATION

Being a determining company of Bulgaria we are committed to take an active part in the
realization of programs serving the needs and interests of the whole society beyond the
frame of our financial services. According to the Bulgarian Donors’ Forum DSK Bank is
one of the biggest donors among the Bulgarian financial institutes.
It is easy to stand up for a good cause. But it is challenging to subsidize effectively. How
can the funds be used in the most effective way? How can we be sure that the target set
will be realized with our help? What type of support should we use among all the various
ones available?
DSK Bank supports a wide range of initiatives and programs in order to express its
engagement towards the community the Bank is operating in and the solutions of social
challenges.
  -   Youth and children, the future generation and our employees are at the very centre
      of our charity activities. We consider familiarity and love of the arts and music to be
      of great importance besides education.
  -   We pay continuous attention to the health conditions of our colleagues and we
      support their participation in cultural events.
  -   We are willing to help local communities according to their current needs.
Though the decision-making process fully concerns the CEO of DSK Bank, regional
officers have the opportunity to recommend local initiatives worth supporting. As we are
not in a position to help everyone we do not support individuals in order to avoid being
discriminatory.
We are committed to ensure the best use of the given funds, thus we expect our
beneficiaries to comply with the strict regulations on the expenditures, and demand
detailed feedback on the results and impact of the programs.
For further improvement of our supporting activities we aim to reconstruct our donation
policy and to determine the principles and fields of charity more exactly.
Many of our beneficiaries are granted long-term backing (i.e. 2-3 years), but we also
support single events and initiatives. Chiefly we provide our subsidies with a donation
and the majority of financial contributions are in-kind donations.
In-kind contribution of DSK Bank is related to IT equipment:
  -   We provide hospitals, schools and different public institutions with used computers.
  -   In 2008 we updated six PC sets for the Union of Bulgarian Journalists (UBJ) in
      order to equip a computer room in the union.
From 2009 on we are placing more emphasis on in-kind donations by increasing the
diversity of support and by quantifying the financial amount of giving. We prefer to exploit
possibilities that are connected to our core business and currently used communication
channels.
We aim to get our colleagues more involved in charitable activities in the future. We are
planning several programs serving to improve their commitment and participation; one of
our objectives is to encourage the employees’ initiatives by establishing a channel for
                                                                                                                       35


their ideas. Our focus will be set on joint efforts: DSK Bank will actively contribute to the
colleagues’ donations. We intend to make our staff more acquainted with DSK Bank’s
social participation.

                       Amount of Donation and Sponsorship at the DSK Bank, 2008



     Sponsorship




       Donations



                   0       20000        40000       60000    80000     100000        120000       140000       160000 BGN


                         Education and related initiatives       Arts and culture
                         Medical care                            Public institutions and related initiatives

                         Employees (medical care and arts)




Education
We are committed to support the education at all possible levels from primary schools to
universities; from buying textbooks up to providing scholarships. In 2008 we donated for
the following causes:
 -   textbooks to a public school;
 -   publishing a folklore encyclopaedia for children;
 -   publishing a book on economics;
 -   publishing collected works with scientific researches at the University of National
     and World Economy in Sofia , to be later presented at an international conference;
 -   the Bulgarian University Students’ Union to organize and hold an European
     University Students’ Conference;
 -   the development of a concept for a specialized economic Internet gateway;
 -   an international children’s chess tournament “The Elephant’s Cup”. DSK Bank
     provides traditionally – for the third consecutive year– debit cards for the winners in
     the different age groups.
DSK Bank is an active member in the two significant foundations – the Buruv Foundation
and the Dr. Gavriiski Foundation – in Bulgaria supporting the development of financial
knowledge by providing scholarships to talented young people. DSK Bank is committed
to employing young experts granted support by the Foundations.
                                                                                           36



 The Foundation “Atanas Burov”
 The foundation is the first non-profit organization with ideal aims, working in the field of
 banking, finance and industry since 1992. The foundation:
  - annually provides scholarships to students,
     -    organizes the only countryside Summer Schools focusing on modern banking and
          corporate governance;
     -    initiates competitions on important topics of financial development;
     -    implements a joint initiative called "Investment Academy” to disseminate the
          opportunities for investment in the country;
     -    supports the participation of young experts in different educational programs.

Art and music
We are convinced that art and music are essential parts of life and represent a high
value. We are committed to contribute to the establishment of plays and performances
and we consider wide notoriety with the same importance. In most cases we support
cultural institutions that do not receive state subsidies. In 2008 we provided contributions
to:
 -       The National Opera and Ballet for the “We Go to the Opera” program. The aim of
         the sponsorship program was to introduce the youngest generation to the world of
         music by attending opera and ballet performances specially adapted for children.
 -       Purchasing of tickets for DSK Bank employees to attend a Drama performance and
         a Christmas concert at the National Palace of Culture.
 -       Pernik Municipal Drama Theatre for staging Ray Cooney’s comedy “Two Marriages
         and One Adultery”.
 -       The State Musical Theatre (Operetta) to install a stage-manager system.
 -       The State Touring Theatre, Sofia for performing the Bulgarian comedy “The
         Underground” in Cyprus, Nicosia.
 -       We regularly co-operate with the Cultural Institute of the Hungarian Embassy and
         in 2008 we supported the so-called “Hungarian Wave” program, a series of cultural
         events; where modern and classical Hungarian arts were introduced and presented
         including an art exhibition of Victor Vasarely.
 -       The “Nicothea” Producers Company for staging “America! America!” in Sofia.
 -       The Bulgarian Christian Union in order for them to become acquainted with
         Christian culture and relics in Istanbul.


Medical care
Our donations focus on the staff of DSK Bank. The long-term approach towards our
employees requires us to act in a responsible way regarding health. For the sake of
preventing illnesses and early treatment we provide our employees a regular medical
check-up on a yearly basis.
                                                                                      37


Some charity programs target children’s health. In 2008 we donated to the “Sveta
Marina” hospital, the clinic for children’s oncohaematology; and provided the
infrastructure and delivery for the campaign aiming at collecting stotinka. (The campaign
was mentioned earlier is this report.)


 Bulgarian Christmas
 DSK Bank is a traditional donor in the Bulgarian Christmas charity campaign; besides
 participating in the charity concert we support the organization of the concert.
 The main objective of the campaign is to provide proper education or medical treatment
 to orphans or children living in poor families who cannot afford this.

Public institutions
We are convinced that as being an integral part of the local communities we are
supposed to help them to reach their goals. DSK Bank happily contributes to local needs
and objectives. In 2008 we supported:
 -   the municipality of Momchilgrad for maintenance of small gardens and green areas
     around schools and kindergartens;
 -   the municipality of Karnobat for the town’s local holiday;
 -   the National Fire Brigade and Protection of the Civil Population.
 -   We sponsored the National Association of the Municipal Officers in Bulgaria to hold
     an international conference in Sofia on “The European City – City Planning and
     Architecture, Security and Finances”.
                                                                                          38




10.   SECONDARY STAKEHOLDERS
 10.1 Suppliers

While conducting business a wide range of suppliers support DSK Bank. In order to
boost efficiency and leverage economies of scale we make an effort to centralize
procurements wherever possible. In several cases – like with IT equipment –
centralization is implemented on the OTP Group level.
The selection of suppliers takes place through a tendering process, and bidders – on
condition that they comply with the technical competence – are chosen based on the
price and payment condition of their bid, and security for the provision of proper services
is also of great emphasis. The provision for proper services takes into account
environmental, security and ergonomic aspects as well. We demand that all our
suppliers comply with the legislative provisions. We conduct a deep examination into the
potential suppliers analyzing among others fields that help us to assess responsibility
and reliability of the prospective supplier, e.g. reputation, financial standing, ISO
qualifications. Endeavouring to ensure equal opportunity is taken for granted in the
course of selecting our suppliers.
Although the size and market weight of DSK Bank potentially gives it the power to dictate
terms to its suppliers, in all cases we strive to forge fair, long-term business partnerships
based on two-way communication. The Bank clearly states its expectations towards its
suppliers, and does everything in its power to fulfil its own commitments, and in the
event of any problems attempts to reach a mutually agreeable solution.
Our position enables us to shape the attitudes of our suppliers by setting a good
example, and we intend to make more effective use of this opportunity in the future. We
aim to ensure that our suppliers comply with our Code of Ethics, and from 2009 our
contracts will contain clauses to this effect.


 10.2 Competitors

DSK Bank faces ever fiercer competition, thus the success of the Bank’s business
operations, and the achievement of its market objectives, presupposes a knowledge and
analysis of competitors’ activities, a pro-active approach and an ability to respond
effectively to the actions of competing market operators. The Bank primarily uses indirect
means to obtain information regarding its competitors’ operations.
We strive for a fair and proper relationship with our competitors. We are convinced that
in many fields banks are not rivals and supportive cooperation can best serve the
interest of clients and other stakeholders. Experience exchange and common search for
solutions can provide an additional value for all participants. We are committed to launch
joint initiatives with our competitors targeting a more simple and unified communication
towards clients.
A direct relationship with participants in the banking sector is inevitable through interest
representation and industry associations. DSK Bank is an active member of the
Association of Banks in Bulgaria, and represented in many of the Association’s
                                                                                    39


committees. We are proud that the CEO of DSK Bank, Ms. Violina Marinova is the
Chairperson of the Association.


 10.3 Government agencies

DSK Bank endeavours to comply with all the legal provisions. Compliance requires the
maintenance of contacts with the competent supervisory bodies.
In many respects our cooperation with government agencies goes beyond the simple
fulfilment of our statutory obligations. The cooperation with the government agencies
indicates the high reputation of DSK Bank: our opinion is often requested on a
prospective new regulation or a change. DSK Bank uses its expertise to inspire national
legislation.
DSK Bank is hardly ever – five or six times on an annual basis – placed under
surveillance or supervision from the side of supervision bodies and committees for
protection of interests (e.g. Consumer Protection Agency, Committee for Personal Data
Protection). Additionally the majority of cases were closed in favour of DSK Bank.
Many former employees of DSK Bank occupy high positions in governmental or
professional bodies, or have been elected as mayors.

 Membership in associations
 In order to effectively maintain its market presence and to assert its interests, DSK
 Bank joins industry associations that complement its objectives and interests, and
 share its values. Membership, for the Bank, involves playing an active role in the
 operation of these organizations. DSK Bank is the member of:
   -   The Association of Banks in Bulgaria;
   -   The Bulgarian Stock Exchange;
   -   Bulgarian Chamber of Commerce;
   -   The Central Depository; Bulgarian Dealers’ Association;
   -   The Atanas Bourov Foundation;
   -   The Prof. Dr. Veleslav Gavriiski Foundation;
   -   The World Savings Banks Institute;
   -   The European Savings Banks Group;
   -   MasterCard;
   -   Visa Europe;
   -   S.W.I.F.T.;
   -   The Association for Control and Audit of Information Systems (in USA);
   -   Confederation of Employers and Industrialists in Bulgaria;
   -   Bulgarian - Hungarian Chamber of Commerce.
                                                                                        40


 10.4 Media

As DSK Bank aims to be an open company, we regard it as imperative to continuously
provide our customers, investors and the general public with comprehensive information
regarding our business results, development, products and services. Our strategy in
media communication has always been to maintain the reputation of the Bank and to
strengthen the bond of trust, but the current financial crisis has made this even more
relevant.
An important means of providing this information is regular, pro-active, credible and
consistent media communication. Attention is always paid to activities of DSK Bank. We
keep in touch with the representatives of the media on a daily basis and we also monitor
the media constantly. One of the most important channels for reaching the general
public is to publish press releases virtually on a weekly basis. The interviews of the CEO
of DSK Bank are another significant means of providing information. Interviews are
always welcomed by Violina Marinova. Topics that need special expertise – e.g. IT – are
discussed with the competent employees of the Bank. DSK Bank has a strict policy on
interviewing; the interviewee on behalf of the Bank is to be authorized by the CEO.
Special and significant events are followed by press conferences.
DSK Bank enjoys a close relationship with the local media as well; regional offices are
always willing to satisfy the information needs of the public.
As financial institutions are often objects of criticism we are proud that DSK Bank has not
been criticized in principles for more than a year.
                                                                                        41




11. ENVIRONMENTAL PERFORMANCE

What is the most important environmental impact of a financial company? To what extent
should environmental protection play a role in the corporate social responsibility of the
Bank? Our internal and external stakeholders are right to raise these questions.
The Bank’s commitment to environmental protection is clearly demonstrated in the
corporate social responsibility report as well.
The environmental impact of DSK Bank is as diverse as the social and economic effects
of its operation. Our effect on the environment is obviously of another character than the
impact of industrial companies. Thus we need to consider different aspects when
evaluating our performance and setting the direction of our development.
We identified three main areas while defining the environmental impact of DSK Bank:
 -   Resulting from its intermediary role in the economy, DSK Bank contributes and
     provides the possibility of investments and activities which may affect the
     environment in a positive or negative way;
 -   The maintenance of buildings and facilities of the wide branch network of the Bank
     as well as the necessary business trips have an inherent impact on the
     environment;
 -   The Bank is entitled to raise environmental awareness; the Bank’s economic
     multiplying effect can be exercised in the field of the environment as well due to the
     3 million clients and four thousand employees.


The environmental impact of financial services
Risk management and careful allocation of funds play a determining role in financial
services regarding prevention of environmental burdening operations beyond the legal
regulations. In addition our products may be specifically designed to finance
environmentally friendly investments as well as indirectly enhancing the spread of
environmentally sound practices. Detailed information can be found in the following
chapters: Principles and Practices Determining the Operation of the Bank, Banking
Products and Services.


Environmental impacts deriving from the operations of the Bank
The main effects on the environment resulting from the Bank’s operations stem from the
maintenance of the Head Office and branches, and also the business trips.


Real estate
DSK Bank’s operations have become more centralized since joining the OTP Group,
hence there has been an increase in the staff working at the head offices in Sofia. For
the sake of rationalization of real estate management and in order to make the
operations more efficient we are closing up the rented head office buildings and moving
                                                                                           42


into newly built offices. New and DSK owned buildings provide more space for
environmentally friendly solutions.
In compliance with the national law on energy efficiency two buildings of DSK Bank are
certified as energy efficient properties; the Kaloyan building is certified as a Class A, and
the Moskovska as a Class B building. Previous to the certification of the Kaloyan building
it was reconstructed by applying energy and water saving solutions. The almost one
hundred year-old historical building of the Moskovska head office is energy efficient in
many aspects by nature. Thick brick walls absorb the heat in wintertime while at the
same time keep the temperature low in the summer period. We pay high attention to
reasonable use of resources and the temperature of our buildings is adjusted to the
weather conditions and to the working hours.
While processing the constant renovation of our head offices and branches we use the
same standards assuring high efficiency. By the end of 2008 almost two-thirds of our
premises had been reconstructed and applied the same water saving taps, toilet flushes,
energy saving light bulbs etc.
A new head office of DSK Bank is currently under construction and planned to be
completed in 2010. The new building provides the possibility to set new goals and to
exceed current standards: we intend to use cutting-edge installation, which includes an
automatic building management system as well. We are investigating whether the
conditions are appropriate to involve renewable energy resources.
In 2009 we are planning to receive the energy efficiency classification for another of our
head offices, the Batenberg building.


Materials used
As a consequence of the office environment, the furniture and the equipment of the
branches and the IT facilities are the most frequently used materials. Paper, ink and
toner cartridges are the most significant materials we use.
 Data of DSK Bank’s materials usage, 2008
 Number of branch offices                      379
 Number of branches renovated in 2008           60
 Quantity of paper procured directly (t)       105
 Weight of ink and toner cartridges used (t)    12
 Weight of CDs and DVDs used (kg)               85


Procurement is centralized, thus the criteria of selection can be unified and easily
monitored. Maintenance and waste management of the IT equipment is also more
efficient in this way. In the course of selecting the products and service providers we
concentrate on the durable condition and aftercare as well, besides cost and quality
criteria. The new equipment is more environmentally friendly concerning its energy
consumption as well as its materials. At the same time we intend to find the optimum
balance in the frequency of change.
The technical prerequisites for the usage of environmentally friendly materials are not
always adequate. Although we have been forwarding our empty toner and ink cartridges
for refill for several years, we cannot use refilled toners as their quality does not meet our
requirements. We have the same problems regarding recycled paper for office use,
besides the issue of significantly higher costs as well. Nevertheless we are searching for
the possibilities of widening the use of recycled paper.
                                                                                        43



Energy and water consumption
Efficiency requires continuous monitoring on resource utilization, focusing on the
determining users. Environmentally friendly solutions and low energy consumption play
an important role during the reconstruction of buildings and branches, and the
establishment of the new head office.
For further improvement of the energy management of DSK Bank four of our colleagues
will be attending an energy efficiency seminar.
The most significant energy consumption results from our electricity usage – deriving
mainly from IT devices – and central heating – seeing as the most commonly used
heating at DSK Bank is central heating. In the new head office we are planning to use
electric heating to secure a higher reliability of supply. We foster our colleagues towards
environmentally conscious behaviour by logging off the computer upon leaving, or being
responsible in the use of water and electricity.
The Bank’s water consumption is not excessive; the water is mainly supplied from the
main public water system and is discharged into the public sewage system. One of our
premises at the sea side possesses its own water resource.
Consumption data is summarized centrally, hence we are not able to disclose exact
information on the consumption. We undergo a continuous improvement in the
estimation method as well as include more criteria in the measurement.


Waste management
Our waste management system is undergoing continuous development.
We prevent producing waste by only making a rational change in office furniture,
facilities and IT equipment, reducing the amount of our printouts, and in 2009 we are
planning to introduce electronic invoices as well.
Recycling and reuse has been realized in terms of selected waste collection.
A significant part of waste paper is derived from our archives. Disposal of confidential
information is strictly regulated thus we collect archives selected all around the country,
shred the paper and reuse it again. In 2008 we collected 20 tons of paper sorted. Toners
and ink cartridges have been delivered for recycling since the middle of 2008. Used
computers, printers and copy machines are offered either as donations to non-profit
organizations or institutes or for employees at a reasonable price. In 2009 we are
planning to conclude an agreement for the reuse of the metal parts of the computers in
2009 but we also intend to retain the previously mentioned system.
We strive to extend sorted waste collection in the coming years with the focus on
household waste (paper, PET bottles etc.).


Company vehicles, business trips
The motor vehicle fleet of DSK Bank requires continuous maintenance. DSK Bank uses
leased cars, the period of change depending on the driven kilometres but generally
vehicles are changed every three years. In the selection of vehicles the primary
considerations are quality and price in this field as well. Other important criteria are
                                                                                      44


security, consumption and the expected time of the reliable usage. Our new vehicles
fulfil high level environmental requirements. As a result our motor vehicle fleet is
gradually becoming more and more environmentally friendly. Our leaders enjoy a degree
of freedom when selecting their vehicles.
In order to reduce the number of business flights, we have extended the use of video
conferences. The last few years’ experience shows that regional operation requires
close personal contact, thus we do not foresee a considerable drop in the number of
trips.
To give a complete list we are required to report on the courier services we
subcontracted, however our Bank rarely makes use of these possibilities.
Bicycle usage among our employees depends on personal commitment. Some of our
branches provide bicycle parks; however showers, which could further enable our
colleagues to travel by bicycle, are rarely available.
Business travels at DSK Bank, 2008
Number of vehicles                             110 vehicles
Trips by air                             91 return journeys


Raising awareness
 -   With the aim of raising the environmental awareness of our clients, we promote the
     use of electronic channels.
     o   Among other possibilities, our clients can access their bank statements online.
     o   For clients requiring printed bank statements we intend to make use of empty
         space by placing CSR messages on it.
 -   We plan to use recycled paper for marketing purposes, for our publications, leaflets
     and brochures.
 -   We would like to enhance the responsible attitude of our employees with our
     programs, a few of which will be realized in 2009:
     o   We plan to provide CSR training, which will contain several ideas and
         recommendations on the practical adaptation of environmentally conscious
         behaviour.
     o   We are going to introduce a printing policy, promoting the reduction of paper
         and toner usage.
     o   We aim to launch a pilot project for promoting a “green office” by decreasing
         energy consumption, and having selective waste collection etc.
 -   Environmentally conscious operations can only be realized with the involvement
     and active participation of our employees, thus we feel it is essential that our
     colleagues consider us as partners and supporters in the realization of their
     initiatives e.g. to promote carpooling among employees, colleagues sharing cars
     will be rewarded.
 -   We strive to transmit environmental friendliness towards our partners as well while
     reducing our own emission by “green event management”. We are going to choose
     environmentally friendly locations, catering and materials, as well as CO2
     neutralization.
                                                                                 45


-   We are open to new ideas and suggestions from all of our stakeholders regarding
    the strengthening of environmental awareness. Our email address
    csr@dskbank.bg is live; moreover we are planning to establish boxes for ideas in
    our branch offices.


Promoting energy efficiency
DSK Bank jointly with three other Bulgarian banks created a TV commercial to promote
energy efficiency in 2006. The animated advertisement explained the meaning of
energy efficiency and provided recommendations on how to implement it in every day
life.
                                                                                                  46




12. OBJECTIVES FOR THE FUTURE

We have summarized our objectives and commitments for the future in the interests of
responsible and sustainable operations.

 DIRECTIONS OF OUR FUTURE DEVELOPMENT
 Strengthening the principles of CSR in our organization and among our suppliers
 We are going to consider auditing the report by external assurance from 2009 onwards.
 We aim to ensure that our suppliers comply with our Code of Ethics, and from 2009 our contracts
 will contain clauses to this effect.
 Security and risk management
 In the coming year we intend to involve our clients in security issues, by drawing their attention to
 possible risks they may face in certain cases, and providing them with recommendations on how
 to avoid these risks.
 Customer service
 In order to become more familiar with our clients’ expectations and opinions we are planning to
 introduce a customer satisfaction survey in 2009.
 We intend to refurbish 40 branches in the coming year.
 We are committed to launch joint initiatives with our competitors with more simple and unified
 form of communication towards clients.
 We are planning to offer free mineral water in bank branches in the summer period in order to
 improve the comfort of our clients.
 One of the most important challenges we face – and strive to solve – is to reduce customer
 waiting times.
 Development of financial literacy
 From 2009 on we are planning to widen the channels and tools for improving financial literacy.
 We intend to make the explanation of financial expressions, and main features of types of
 products, available on our website and in our branches.
 Products and services
 Further negotiations for future funding of the facility line are in process.
 For SME’s a fund is available for guaranteeing loans, and at the beginning of 2009 another
 agreement is to be signed for a facility line of 20 million BGN. The ten-year project is meant to
 finance technical innovation and the pre-export of Bulgarian companies.
 DSK Bank is aiming to find and draw in refinanced funds and to join state and European Union
 programs.
 Employees
 Currently we are proceeding with the introduction of the e-learning system.
 In 2009 we are planning to launch the talent management program.
 We are convinced that common events like the company Christmas Party and DSK Bank Cup
 are essential parts of our work, thus we are committed to continue organizing them in 2009.
 We are planning to promote healthy lifestyle by supporting recreation and sports for our
 employees, giving a preference to prevention over treatment.
 Social participation
 We are aiming to reconstruct our donation policy and to determine the principles and fields of
 charity more exactly.
 We aim to get our colleagues more involved in charity work in the future. We are planning
 several programs serving to improve their commitment and participation; one of our objectives is
 to encourage the employees’ initiatives by establishing a channel for their ideas. Our focus will
 be set on joint efforts: DSK Bank will actively contribute to the colleagues’ donations. We intend
 to make our staff more acquainted on DSK Bank’s social participation.
                                                                                                47


From 2009 on we are placing a higher emphasis on in-kind donations with an increase in the
diversity of support and by quantifying the financial amount of donations. We prefer to use
possibilities that are already connected to our core business and currently used communication
channels rather than new ones.
Environmental protection
In 2009 we are planning to receive the energy efficiency classification for one of our head offices,
the Batenberg building.
We continuously improve the method of our emission estimation as well as extending the
measured activities.
We are investigating whether the conditions are appropriate to utilize renewable energy
resources.
We are planning to conclude an agreement for the reuse of the metal parts of the computers in
2009.
We are intending an extension of sorted waste collection in the coming years with the focus on
household waste (paper, PET bottles etc.). We strive to make selective collection of used paper
complete.
We are going to prepare and implement a printing policy, promoting the reduction of paper and
toner use.
For clients requiring bank statements on paper we make use of the empty space by placing CSR
messages on it.
We are planning to use recycled paper for marketing purposes for our publications, leaflets and
brochures.
We aim to launch pilot project for promoting a “green office” by decreasing energy consumption,
offering selective waste collection etc.
In order to enhance the energy management of DSK Bank four of our colleagues will take part in
energy efficiency training.
We are planning to provide CSR training.
We promote carpooling among employees, with rewards for colleagues sharing cars.
We strive to transmit environmental friendliness towards our partners, while reducing our own
emission by “green event management”. We are going to choose environmentally friendly
locations, catering and materials, as well as CO2 neutralization.
                                                                                              48


13. CORPORATE GOVERNANCE

Governance structure of OTP Group
The OTP Group consists of the OTP Bank and its subsidiaries with which it has a close –
controlling or shareholding – relationship. The OTP Group operates in accordance with
the governance model best suited to the Group’s special characteristics, under a
country-responsibility central functional matrix system. The aim of the model is that the
organization is governed in conformity with a set of unified principles, but with
consideration paid to local factors, thereby optimizing business results at the group level.
We differentiate between three types of governance:
 -   Business governance describes the management of retail banking and sales, and
     corporate banking operations.
 -   Functional governance is applied by the central management and controlling
     functions, and the group level operation of the service areas.
 -   Owner governance is the exercising of ownership rights and obligations between
     the parent company and its subsidiaries, realized in a different way at each
     respective subsidiary.


Governance structure at DSK Bank
The different organizational units, their functional obligations and the collective
governance bodies and their functions are set according to governance rules.
DSK Bank has a two-tier system of management. The Bank is ruled by a Supervisory
Board consisting of three members elected by the General Meeting. The Supervisory
Board supervises the activities of the Bank and elects the six-member Management
Board, Chief Executive Officer, and Executive Directors to the members of the
Management Board. The Management Board is the governing and representative body
of DSK Bank. The Bank is represented jointly by two of the Executive Directors and
Procurators.
DSK Bank Supervisory Board

 Dr. Sándor Csányi (56)         László Wolf (49)              Dr. Frigyes Hárshegyi (63)
 Chairman of the                Deputy Chairman of the        Member of the
 Supervisory Board and          Supervisory Board and         Supervisory Board
 Chief Executive Officer of     Deputy Chief Executive
 OTP Bank                       Officer of OTP Bank


DSK Bank Management Board

 Violina Marinova (55)          Miroslav Vichev (44)          Diana Miteva (44)
 Chairperson of the             Member of the Management      Member of the Management
 Management Board and           Board and Executive           Board and Executive Director,
 Chief Executive Officer        Director, IT and Operations   Retail Banking
                                                                                              49


 Nikolay Borisov (41)           Dorothea Nikolova (38)        Lyubomir Zhelyazkov (40)
 Member of the                  Member of the                 Member of the Management
 Management Board and           Management                    Board and Executive Director,
 Executive Director,            Board and Executive           Credit Risk Management
 Corporate Banking              Director, Finance and
                                Planning




Performance management of the higher bodies
Requirements for the qualifications of the members of Higher Bodies are suitable
experience, expertise and education level. Senior Executive Managers have to be
certified by the Bulgarian National Bank. Positions for members of the committees are
appointed as positions in the Bank.
The objectives of performance assessment are determined based on financial targets.
There is no assessment system or regulation for defining criteria of performance. The
final assessment of the Bank is most visible by the financial indicators and awards
granted for the Bank.
Compensation of higher body members is directly linked to the company’s performance.

Permanent committees
Permanent committees are the Bank’s decision-preparation, decision-making and
negotiating forums. The participants of all the bodies mentioned below are members of
the management, and seeing as membership is linked to the positions no mandate is
defined for the committees.


Audit Committee
According to the Independent Financial Audit Law, all of the banks should have an Audit
Committee, to observe the independence of the internal financial audit. All three
members of the Audit Committee are independent and are not employees of the Bank.

Credit Committee
The mission of the Credit Committee is to monitor, assess, classify and set aside
provisions for the Bank’s risk exposures. This body is entitled to make the operative
decisions in relation to the application of the different regulations and the policies for
classification of exposures in compliance with the basic rules adopted by the
management board of the Bank. It is also responsible for covering the so-called
problematic loans.


Credits and Limits Council
The mission of this body is to guarantee the optimum balance of risk and reward
according to Bank strategy within the lending activities to larger corporate clients. In the
case of equal votes, the Head of the Credit Risk Management Division shall cast the
deciding vote.
                                                                                         50



Assets and Liabilities Committee
The main responsibility of this body is to manage the Bank’s assets and liabilities
structure so as to maximize the risk-adjusted return to stakeholders in the long run.


Investment Committee
The mission of the Committee is to manage the Bank’s investment program and large
expenses for maximum return on investments. This body determines the priorities of
capital investment projects and includes them in the annual investment program.


Ethical Committee
The mission of this body is the investigation and management of suspected ethical
offences. Any detected suspected ethical offence can be reported directly to the
Committee according to the Code of Ethics.

Corporate structure

Each organizational unit has a role to play in implementing corporate responsibility at
DSK Bank in order to ensure that sustainability is achieved primarily, in respect of the
company’s core activities. The following is a list of the organizational units that have the
most direct impact on social responsibility:
 - Chief Executive Officer
 - Communications and Coordination Department
 - Compliance Department
 - Human Resources and Legal Department
 - Security
 - Retail Banking Division, including Marketing and Sales Department
 - Corporate Banking Division, including Project and Structured Finances Department
   and Sales and Products Management Department
 - Finances and Planning Division, including Planning and Controlling Department,
   and the Bank and Market Risk Department
 - Credit and Operational Risk Management Division
 - IT and Operations Division
                                                                                                        51




                 Secretary of the                                              Internal Control and
                 Supervisory Board                                             Audit
                                                    Management Board




                                                 Chief Executive
                                                 Officer



       Communications            Compliance                        Human Resources           Security
       and Coordination                                            and Legal




Retail Banking         Corporate Banking          Finances and            Credit and                  IT and Operations
                                                  Planning                Operational Risk
                                                                          Management


Marketing and Sales       Project & Structured          Planning and
                          Finances                      Controlling




                          Sales and Product             Bank and Market
                          Management                    Risk
                                                                 52




14. GRI INDEX

No.    Description of indicator   Page      Comments
of
indi-
cator
Strategy and analysis
1.1                               2

1.2                               7-9;46-
                                  47
Organizational Profile
2.1                               56
2.2                               5-6;14-
                                  18;24-
                                  25;
2.3                               50-51
2.4                               56
2.5                               5
2.6                               56
2.7                               5-6;15-   Annual Report provides
                                  18        more information.
2.8                               5-6
2.9                               52        Annual Report provides
                                            more information
                                            regarding changes.
2.10                              5-6; 34
Report parameters
3.1                               3
3.2                               52        No previous report
3.3                               3
3.4                               56
3.5                               3-4
3.6                               4
3.7                               4;52      We have determined
                                            DSK Bank as scope of
                                            the report, while
                                            mentioning the
                                            subsidiaries as well.
3.8                               4


3.9                               3-4       At the location of the
                                            specific report as well.


3.10                              52        No previous report

3.11                              52        No previous report

3.12                              52-56     Use of the table means
                                            providing information
                                            as well.
3.13                              4
                                                                    53


Governance, Commitment and Engagement
4.1                                     48-50
4.2                                     48

4.3                                     53        Not relevant.


4.4                                     32; 48

4.5                                     49


4.6                                     53        The employees of the
                                                  Bank have to declare
                                                  their awareness of the
                                                  incompatibility
                                                  regulation of the Bank.
4.7                                     49



4.8                                     10


4.9                                     49-50




4.10                                    49


4.11                                    12-13;    Precaution in core
                                        53        operations.
4.12                                    53        No such charters or
                                                  principles.

4.13                                    39

4.14                                    4
4.15                                    3

4.16                                    19-22;
                                        23;25;
                                        32; 34;
                                        38-40
4.17                                    19-22;
                                        23;25;
                                        32; 34;
                                        38-40
                                                                                                         54


Economic Performance Indicators
Management approach:
Economic performance can be measured in different ways; as each stakeholder group has different
expectations towards the Bank. We are convinced that besides the financial results, other aspects of the
performance have to prevail as well. Our contribution to the economic development is obvious due to our role
as financial mediator. We are traditionally committed to secure the access to the state funded products as
well as to serve the needs of the vulnerable social/economic groups or organizations advocating a group of
the society.
Besides providing services we contribute to the sustainability of the economic system by cooperating with
suppliers as well as by employing workforce. We exercise equal rights and ethical business conduct while
dealing with the above-mentioned groups.
We consider it our responsibility to be active in social issues and to help community goals. We continuously
develop our support of social activities in order to be more effective supporters of local communities.
We take for granted the fulfilment of our state duties (paying taxes).
Economic Performance
EC1                                                                        14
EC4                                                                        54         No financial assistance
                                                                                      received
Market Presence
EC7                                                                      28; 48-
                                                                         49
Environmental performance indicators – these indicators are mainly created specifically to the characteristics
of producing companies, hence in the case of DSK Bank some of the definitions, requirements are not always
fitting.
Management approach:
DSK Bank recognizes environmental values and the priority of protection of the environment. The report
shows the actual results of the Bank regarding environmental performance which is explained in the
respective chapter. DSK Bank, as a company working in the financial sector, interprets the environment in a
wide sense, looking for those areas in its services, operations and raising awareness, where the biggest
impact can be made.
Materials
EN1                                                                      42
EN2                                                                      42
EN28                                                                     54         None


Labour practices and decent work indicators
Management approach:
Highly qualified and committed employees are indispensible in order to achieve the Bank’s goals. Our Human
Resources management works beyond the regulations of fair employment. We consider equal opportunities,
fair employment conditions and safety as granted. In order to retain our employees we lay a higher emphasis
on their education.
Employment
LA1                                                                        26-27

LA2                                                                        28-29

LA3                                                                        26

Labour/Management relations
LA4                                                                        32



Occupational health and safety
                                                                                                         55


LA10                                                                       30

Training and Education
LA11                                                                       30


LA12                                                                       31

Diversity and equal opportunity
LA13 Composition of governance bodies and breakdown of employees 48-49
        per category according to gender, age group, minority
        membership, and other indicators of diversity
LA14                                                             55                   There is no difference.
                                                                                      The salary of the
                                                                                      employees under
                                                                                      Collective Bargaining
                                                                                      Agreement is set
                                                                                      according to the
                                                                                      Collective Bargaining
                                                                                      Agreement.
                                                                                      The remuneration of
                                                                                      overtime is carried out
                                                                                      according to the
                                                                                      regulations of the law.
Human Rights Performance Indicators
Management approach:
DSK Bank fulfils the requirements of respecting the human rights of its stakeholders to the maximum extent.
Being a Central-Eastern European company, child and forced labour does not occur as a problem. There are
adequate regulations and practices in terms of assuring freedom of association, concluding and practicing
collective agreements. Our acquisitions and investments do not require human rights inspection due to the
regional practices. We require our partners to operate according to the regulations.
We continuously work on the development of our customer complaints management. The satisfaction of our
employees is a crucial part of our strategy.
The possible ethical complaints are treated according to the Code of Ethics, although in recent years we have
had no need to convoke the Ethical Committee.
Non-discrimination
HR4                                                                        55         There was no such
                                                                                      case.
HR6                                                                        55         The Bank does not use
                                                                                      forced labour or child
                                                                                      labour.
HR7                                                                        55


Society Performance Indicators
Management approach:
Our company is committed to compliance towards legal regulations, and the voluntary obligations regarding
responsible operation. To follow the changes of the legal environment and to support implementation of these
the independent Compliance and Legal Department play a prominent role. Their guidance and control covers
all the units of the company.
Our company recognized its role on society and we are striving to strengthen the positive effects. We gain the
information regarding our impact on the local community by receiving feedback from our stakeholders.
Our company is absolutely politics and party neutral.

Corruption
                                                                                                   56


SO2                                                                    56        No such analyses were
                                                                                 conducted
SO4                                                                    56        No corruption related
                                                                                 legal procedures was
                                                                                 known,       and     no
                                                                                 investigation was taken
                                                                                 place by the Ethical
                                                                                 Committee in 2008
Product Responsibility Performance Indicators
Management approach
During the overall process of the development, sales of our products and the delivery of our services we
proceed with maximum adherence to the Code of Ethics as well as to our legal and voluntary obligations.
Product and service labelling
PR5                                                                    21

Customer Privacy
PR8                                                                    56        No such complaint was
                                                                                 substantiated.
Sector supplement indicators – social performance
FS5                                                                    38; 44-
                                                                       45
FS15                                                                   14-15




Head office address:
DSK Bank Plc: 19, Moskovska Str., 1036 Sofia


We look forward to receiving your feedback!
For the sake of sustainable development of DSK Bank we need your opinions. Thank
you in advance for taking the time to give us your feedback!
csr@dskbank.bg
                                                                                    57




Publisher: DSK Bank Plc.
Personable editor: ….
Chief Editor: ….
Collaborator in the preparation of this publication: Personar Communications Consulting
Ltd.; RTG Corporate Responsibility Consulting Ltd.
Photography: ….
Graphic Design: ….
Production: …..

								
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