28 Provisions and contingent liabilities

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in CHF thousands

Provisions for legal and litigation risks

Provisions for other business risks and restructuring

Total 2015

Total 2014

As at 1 January

31'702

1'628

33'330

37'950

Provisions applied

–3'423

–1'132

–4'555

–6'589

Increase in provisions recognised in the income statement

980

1'236

2'216

2'918

Release of provisions recognised in the income statement

–369

–414

–783

–949

Change from disposals to the scope of consolidation

–4'854

0

–4'854

0

As at 31 December

24'036

1'318

25'354

33'330

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in CHF thousands

31.12.2015

31.12.2014

+/– %

Short-term provisions

8'354

16'330

–48.8

Long-term provisions

17'000

17'000

0.0

Total

25'354

33'330

–23.9

The provisions for restructuring relate to the Focus2015 strategy announced by the LLB Group in March 2013 and the StepUp2020 strategy announced in October 2015. As per 31 December 2015, provisions amounting to CHF 1.0 million for restructuring, covering estimated rebuilding and restoration costs and expenses for social plans were allocated. No further significant provisions or restructuring costs are to be expected in connection with the announced strategies.

Within the scope of its normal business operations, the LLB Group is involved in various legal proceedings. It sets aside provisions for ongoing and threatened proceedings when, in the opinion of the competent specialists, payments or losses on the part of Group companies are likely and the amounts can be estimated.

As per 31 December 2015, the LLB Group was involved in various litigation and proceedings, which could have an impact on its financial reporting. The LLB Group endeavours to disclose the claims for damages, the scope of legal proceedings and other relevant information in order for the reader to be able to estimate the possible risk for the LLB Group.

The LLB Verwaltung (Switzerland) AG, formerly Liechtensteinische Landesbank (Switzerland) Ltd., is among the category 1 banks which must achieve an individual solution with the US authorities to resolve the US taxation dispute. LLB Verwaltung (Switzerland) AG, formerly Liechtensteinische Landesbank (Switzerland) Ltd., with its registered office in Zurich-Erlenbach, is responsible for the proceedings. LLB (Switzerland) Ltd. ceased its banking operations at the end of 2013 and since October 2014 is no longer subject to supervision by the Swiss Federal Financial Market Authority (FINMA). LLB Verwaltung (Switzerland) AG is cooperating closely with the US authorities and is working with them to achieve a final settlement of the issue, while complying with the prevailing legal regulations. As per 31 December 2012, in cooperation with our lawyers, on the basis of talks with the US authorities, and taking into consideration differing probabilities, various scenarios were discussed in relation to a possible outflow of resources. On the basis of these discussions, the management reached the conclusion that it is not unlikely that an outflow of resources will occur. Therefore, based on the simulated scenarios and a legal analysis as per 31 December 2012, a provision was set aside for a possible outflow of resources in connection with the investigation being carried out by the US authorities and the resulting possible payment or settlement to the latter. In the opinion of the management the legal risk of an outflow of resources in connection with the possibility that LLB Verwaltung (Switzerland) AG may not have complied with US law, especially US tax law, was still not unlikely as per 31 December 2015. Based on the calculation criteria applied in the non-prosecution agreement between LLB AG, Vaduz, and the US authorities, as well as the latest information and payments made by other banks, the provision for LLB Verwaltung (Switzerland) AG was reviewed as per 31 December 2015. The Management believes the provision set aside per 31 December 2015 is sufficient.

At the end of 2013, Bank Linth LLB AG decided to participate in the US taxation programme (“DOJ programme 2013”). In accordance with the principle of prudence and in line with statements made by the FINMA that an institution, which decides in favour of category 2, is acting responsibly, the management of Bank Linth decided to participate in the programme in category 2. The US taxation programme enables banks to regulate any possible infringements of US tax law directly with the US authorities, which is an expression of the readiness of the Swiss government and the US authorities to reach a binding resolution of the taxation dispute. In announcing the non-prosecution agreement on 19 June 2015, the US authorities confirmed there would be no criminal prosecution of Bank Linth. With the signing of this agreement, the investigation of Bank Linth was ended and no further legal action will be initiated against the bank. As a result of the solution reached, Bank Linth has definitely resolved the US taxation dispute. For its part, Bank Linth undertook to pay the US authorities an amount of USD 4.2 million (CHF 3.8 million). Based on the available information and estimates made by our US attorneys, the management set aside provisions, which have been employed for this specific purpose. The payment made to the US Department of Justice, which exceeded the amount of the allocated provisions, was booked as an expense, resulting in a net charge of CHF 1.8 million to the 2015 profit of the LLB Group.

A provision amounting to CHF 18.1 million was allocated as per 31 December 2015 for a possible outflow of resources in connection with further payments to the US authorities, as well as for lawyers’ fees, which may be incurred in this case for the provision of legal advice and support.

At the start of 2015, LLB Verwaltung (Switzerland) AG, formerly Liechtensteinische Landesbank (Switzerland) Ltd., received two legal claims in connection with an investment project. Several persons, who have no connection with LLB Verwaltung (Switzerland) AG, had endeavoured to persuade an investor to invest a sum in an investment project. The investment project did not exist and the persons acting fraudulently were able to embezzle a part of the investment sum. The claimants have lodged claims against LLB Verwaltung (Switzerland) AG for the payment of damages in respect of a part of the embezzled amount plus interest. LLB Verwaltung (Switzerland) AG denies that the actions of a former employee of LLB Verwaltung (Switzerland) AG led to the loss. Based on the facts of the case and on information from its external legal adviser, the management of LLB Verwaltung (Switzerland) AG currently believes that it can successfully defend itself against both claims. In line with the principle of prudence, LLB Verwaltung (Switzerland) AG has set aside provisions for all the costs that could be incurreing in defending itself against the claims. Management believes that the provisions allocated as per 31 December 2015 are sufficient for this purpose.

The LLB Group had no contingent liabilities, either per 31 December 2015 or per 31 December 2014.