report on corporate governance and ownership … · term contract will be signed for the management...

REPORT ON CORPORATE GOVERNANCE AND

OWNERSHIP STRUCTURES

Pursuant to Article 123-bis of the Consolidated Law on Finance (Traditional administration and control model)

FOR 2014

APPROVED BY THE BOARD OF DIRECTORS' MEETING ON 3 MARCH 2015

Website: http://www.creval.it/governance/cv_relazioniCorporate.html

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http://www.creval.it/governance/cv_relazioniCorporate.html

CONTENTS

GLOSSARY ....................................................................................... 4 1. ISSUER'S PROFILE ....................................................................... 5 2. INFORMATION ON THE OWNERSHIP STRUCTURES ..................... 12 3. COMPLIANCE ............................................................................. 16 4.0 BOARD OF DIRECTORS .......................................................... 18 4.1. Appointment and replacement ............................................ 18 4.2. Composition ...................................................................... 20 4.3. Role of the Board of Directors ............................................. 26 4.4. Delegated Bodies ............................................................... 32 4.5. Other Executive Directors ................................................... 36 4.6. Independent Directors ....................................................... 36 4.7. Lead Independent Director ................................................. 38 5. PROCESSING CORPORATE INFORMATION ................................... 39 6.0 INTERNAL BOARD COMMITTEES ........................................ 39 7.0 APPOINTMENT COMMITTEE ................................................... 40 8.0 REMUNERATION COMMITTEE ................................................ 42 9.0 DIRECTOR REMUNERATION ................................................... 45 10 CONTROL AND RISK COMMITTEE ........................................ 46 11. INTERNAL CONTROL SYSTEM ................................................ 50 11.1. Executive Director in charge of the internal control and risk management system ...................................................................... 56 11.2. Head of the Internal Audit Department ................................ 57 11.3. Organisational Model pursuant to Italian Legislative Decree 231/2001 ...................................................................................... 57 11.4. Audit company ................................................................... 58 11.5. Manager in charge of financial reporting and other company roles and functions ......................................................................... 59 11.6 COORDINATION BETWEEN PARTIES INVOLVED IN THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM ................... 60 12.0 DIRECTORS’ INTERESTS AND RELATED PARTY TRANSACTIONS ............................................................................. 62 13.0 APPOINTMENT OF STATUTORY AUDITORS........................... 64 14.0 COMPOSITION AND OPERATION OF THE BOARD OF STATUTORY AUDITORS . ................................................................ 66 15.0 INVESTOR RELATIONS ...................................................... 68

16.0 SHAREHOLDERS' MEETINGS ................................................... 69

17.0 ADDITIONAL CORPORATE GOVERNANCE PRACTICES ........... 71

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18. CHANGES SINCE THE END OF THE YEAR ................................... 73

TABLES ................................................................................................. 74

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GLOSSARY

Code/Corporate Governance Code: the Corporate Governance Code for Listed Companies approved in July 2014 by the Corporate Governance Committee and promoted by Borsa Italiana S.p.A., ABI, Ania, Assogestioni, Assonime and Confindustria. Italian Civil Code: the Italian Civil Code. Board: the Board of Directors of the Issuer. Issuer: the issuer of securities to which the Report refers. Financial Year: the financial year to which the Report refers. Consob Issuers' Regulation: the Regulation issued by Consob with resolution no. 11971 of 1999 (as amended) on issuers. Consob Market Regulation: the Regulation issued by Consob with resolution no. 16191 of 2007 (as amended) on markets. Consob Related Party Regulation: the Regulation issued by Consob with resolution no. 17221 of 12 March 2010 (as amended) on related party transactions. Report: the report on corporate governance and ownership structures that companies are required to prepare pursuant to Article 123-bis of the Consolidated Law on Finance.

Consolidated Law on Finance: Italian Legislative Decree no. 58 of 24 February 1998.

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1. ISSUER'S PROFILE

Foreword Credito Valtellinese, a cooperative bank established in 1908, with headquarters in Sondrio, is the Parent Company of the Banking Group of the same name. The Bank’s business is centred on principles of solidarity and its main objective is to guarantee the improvement of economic, cultural and social well-being in its territory. The company is listed on the MTA managed by Borsa Italiana S.p.A. Following the implementation – in 2011 - of the merger of Banca Cattolica and Credito del Lazio e di Carifano – Cassa di Risparmio di Fano S.p.A. into the investee Credito Artigiano and the concurrent contribution, with legal effect on 1 January 2012, of the “former Carifano” branch network located in the Marche and Umbria regions to the new “Carifano”, as well as the merger of Bancaperta, Credito Piemontese and Banca dell’Artigianato e dell’Industria into the Parent Credito Valtellinese, in execution of the updated Plan approved via Board resolution of 19 March 2012, in September 2012 the merger of Credito Artigiano into the Parent and a wilful public takeover and exchange bid on shares of the subsidiary Credito Siciliano S.p.A. which were not already owned by Credito Valtellinese were finalised. Also, in December 2012 Credito Valtellinese and Asset Management Holding S.p.A., a company that controls Anima SGR, an Italian leading independent operator in managed funds, finalised the operations set out in the agreement signed on 9 August 2012 for the development of a strategic alliance in the managed funds sector. Specifically, AMH purchased the entire share capital of Aperta SGR from Creval and all of Lussemburgo Gestioni S.A. from Creval, Credito Siciliano S.p.A., Banca Popolare di Cividale S.c. and Banca Cividale S.p.A. During 2013, the gradual implementation of the reorganisation plan of the company structure of the Group continued, established by the 2011-2014 Strategic Plan decided in February 2011 and subsequently updated. On 1 March 2013 an agreement was signed by and between Credito Valtellinese and Istifid Società Fiduciaria e di Revisione S.p.A., establishing the sale of Creval's entire investment in Aperta Fiduciaria S.r.l. to Istifid, effective on 1 July 2013. The merger into the Parent of Deltas Società consortile per Azioni, effective on 31 March 2013 was of significant importance. In the year in question, on 4 March 2014, the Board of Directors approved the update of the current Business Plan that, in full agreement and in line with the objectives and actions already carried out, further extended and defined the strategic lines of development for the period from 2014 to 2016. The Board intended to confirm and continue focusing on the banking core business, in an operating scenario characterised by the persistent weakness of the macroeconomic framework and pressure on income, margins and profitability, facing the weak performance of volumes, as well as increasingly restrictive regulatory constraints. The Plan specifically identified several strategic directives, such as: - Capital management: significant capital strengthening through a share capital increase for a maximum amount of EUR 400 million as well as RWA optimisation actions and credit risk mitigation. Fine-tuning of the AIRB internal rating models on the corporate and retail portfolios, as well as launching a pre-established process to validate AMA1 methods for measuring operational risk. Funding policies will be focused on significantly reducing exposure to the ECB for LTRO refinancing transactions by substituting ECB funding with sources from the wholesale and retail markets.

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- Corporate and organisational structures: further simplification of the corporate structure, also as a result of the sale of non-core activities and the creation of specific business partnerships. Merger by incorporation of Mediocreval into the Parent Credito Valtellinese, which will be responsible for its operations in the medium to long-term and for corporate finance, while part of the lease operations will be sold to a leading operator in the sector, concurrently signing commercial agreements. - Loans area: further strengthening of the offer of low interest loans, accelerating disbursement with third-party products, eligible guarantees for capital absorption and guaranteed funding. For the purpose of managing non-performing loans (NPL), transactions are planned to enhance the value of NPL portfolios, in relation to market conditions, as well as to optimise the current management and recovery model, including by developing partnerships with specialised operators. - Commercial and product policies: measures to rationalise the network, with particular focus on under-performing branches, as well as additional development and integration of the commercial offer through agreements with specialised operators. Strengthening of the offer of new instruments for business loans, farm loans and low interest rate loans, as well as support for the foreign sector. Considerable improvement in the performance of the affluent sector, as a result of new private banking structures to support regional areas. - Improvement in operating efficiency: additional cost saving actions, on both administrative expenses and personnel expenses, by making use of legislative-contractual tools in effect in order to ensure a reduction in the total workforce. On 5 March 2014 an industrial partnership between the Creval Group and the Fire Group in the credit recovery and tax collection sector was announced to the market. An agreement was signed for the sale of Creset S.p.A., a company in the Creval Group, to Fire Group. Through the operations that was finalised on 31 July 2014, Creset sold initially the business unit consisting of the various activities concerning the treasury and cash services, carried out on behalf of the banks of the Creval Group, to the Parent, which took over the related contractual relations and continues to carry out these treasury and cash activities directly on behalf of institutions. On 15 July 2014 the deed of merger into Credito Valtellinese S.c. of Mediocreval S.p.A. was signed, as envisaged in the Strategic Plan. The merger produced legal effects, as laid down in the deed of merger, pursuant to Article 2504-bis, paragraph two of the Italian Civil Code, on 1 August 2014. On 30 July 2014, Credito Valtellinese S.c. and Alba Leasing S.p.A. carried out the Framework Agreement, signed on 24 March 2014, aimed at the development of a strategic alliance in the leasing business. Specifically, on 30 July 2014 the contribution deed of the lease business unit of Creval was signed, effective as from 1 August 2014. Also on 30 July 2014, effective as of 1 August 2014, the sales agreements contemplated by the Framework Agreement covering the distribution of the lease products of Alba Leasing by the branch network of the Creval Group were also formalised. On 22 December 2014 Credito Valtellinese S.c. and Cerved Information Solutions S.p.A, a management holding company of the group that leads the Italian market of credit risk analysis, through the subsidiary Cerved Credit Management Group S.r.l., signed an agreement to develop a long-term industrial partnership to manage non-performing loans. Based on the agreement, a long-term contract will be signed for the management service by CCMG of the portfolio of NPLs of the Creval Group through Finanziaria San Giacomo S.p.A., a company which is entirely controlled by Creval, specialising in the management of NPLs of the Creval Group, and Finanziaria San Giacomo will be sold to CCMG. The transaction is indicatively planned to be finalised by the end of the first quarter of 2015.

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On the date of approval of this report, the Credito Valtellinese Group is present on the national territory with a network of 540 Branches, in eleven regions, through three territorial banks characterising the “Market Area”, each focused exclusively on the specific areas of origin. The Credito Valtellinese Banking Group currently consists of the territorial banks Credito Valtellinese, Carifano and Credito Siciliano, specialised finance companies and special purpose companies for the provision of specialised services to all Group companies, with a view to achieving synergies and economies of scale. The Organisational Model of the Group, defined a “company network” model, assigns the reference market share to the territorial banks and the required operating support to the specialised finance and special-purpose companies. Therefore, it is based on the full enhancement of the distinctive skills of each member, with the purpose of achieving the maximum efficiency and competitiveness, on their functional and operational correlation, on the adoption in the corporate process management of the same rules and methods. This allows to overcome size restrictions and to fully benefit from the advantage of proximity with regard to the areas of choice, combining effectively specialisation and flexibility, production and distribution functions.

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The overall business plan An essential feature of Credito Valtellinese Group is the overall business plan, formalised and circulated throughout the organisation, common to all of the various Group Companies, which are then responsible for executing the plan. The overall business plan is pursued and achieved by identifying:

- common strategic objectives and plans as well as those of individual Companies; - common operating plans as well as those of individual Companies; - common forecasting and control models as well as those of individual Companies; - annual budgeting of non-financial costs of the Group and of individual Companies; - Group organisational structure.

These components are approved by the appropriate bodies of the Parent and then by the appropriate bodies of the individual Companies, to the extent they are relevant. The Parent is in charge of management and control of strategic issues and sector policies of the Group. In particular, Credito Valtellinese, based on specific agreements, carries out the following services on a centralised basis:

- strategic and management planning and control; - developing strategies for commercial policies, communication and territorial initiatives; - the development and monitoring of the business model and the carrying out of projects for

the implementation of the strategic lines of the Group; - managing and training human resources; - administrative-accounting management and tax consultancy; - providing assistance and consultancy on legal matters and consultancy on corporate matters; - coordinating audit activities on operating processes; - monitoring risks assumed as part of banking activities; - guiding, coordinating and reporting on the definition of the Group compliance model; - quality systems;

whereas the Credito Valtellinese Loans Department is responsible for supervising the quality of the assets of the whole Group, by:

- defining the policies and criteria necessary to the assessment and management of credit risks;

- supporting the active management of these assets; - contributing to the creation of a Group-wide risk culture.

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Compliance with the overall business plan Compliance with the overall business plan, for which the essential elements are included, is ensured through an explicit regulation of the training, approval and modification of the elements, which are binding for Group Companies subject to the powers of management and coordination of the Parent, also according to the articles of association. It is also ensured through the use of control mechanisms on the conformity of decisions by individual Companies with the overall business plan. Therefore, the overall business plan is carried out through the decisions made, and the resulting activities: the Parent implements the definition, governance and control of the overall business plan, coordinates and guides the key stages of the administrative and management production processes and provides a single, centralised management for certain services inherent to these processes, based on specific agreements. The organisation of the Group is based, as regards the execution phase, on the following principles, divided into the following areas:

1. Market Area: consisting of the territorial banks; 2. Specialised Finance Area: consisting of Global Assicurazioni, Global Broker and Finanziaria

San Giacomo; 3. Production Area: consisting of Bankadati Servizi Informatici and Stelline Servizi Immobiliari.

The Group's organisation rests on a clear, formalised decision-making process, which ensures transparency, rationality and sharing of decisions, based on the participation of all Group's components in the decision-making process who possess the necessary requirements of professionalism and experience. The correct functioning of the decision-making process and related control is guaranteed, on one hand, by the complete and formalised organisation of the Group, and on the other, by a structured and coherent system for granting decision-making powers. This system is set up to:

- effectively follow the overall business plan; - allow the Parent to fully exercise its management, coordination and control activities; - faithfully pursue the economic, financial and equity stability and equilibrium of the various

Group components through risk containment. The decision-making process thus consists of the following guidelines:

- important decision regarding initiatives and activities not specific to the individual companies must be taken by the “specialised” departments within the Group;

- decisions regarding components of the subsidiaries' business plan, proposals to be submitted to the Shareholders' Meetings, and those of an extraordinary nature must be adopted only after receiving approval from the Parent;

- decisions regarding “commercial” activities of the Companies must comply with the guidelines defined at the Group level;

- delegated powers relating to lines of credit and current management must be standardised with those of the Parent in order to limit risk, while taking into account the characteristics of the activities and the organisation of the individual Companies.

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Control on business plan execution Control on the execution of Credito Valtellinese Group’s overall business plan is ensured through the following methodologies:

- control on accounts (periodic controls on accounting data of the Group and the individual Companies);

- control on performance of the Group and the individual Companies against forecasts (control on the simulation model of financial performance of the Group and the individual Companies, control on implementation of plans, budgets and major projects);

- control on the decision-making process; - control on the organisational development of Group Companies; - internal control systems at the Companies and Auditing controls related to the effectiveness

of internal controls and on anomalies; - risk control.

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Administration and control model Credito Valtellinese has put into operation a traditional administration and control model, through the following corporate bodies:

- Shareholders’ Meeting, sovereign body that is the apex of the structure with respect to supervision, management and control, in which the corporate body is represented and, thereby, the reference territories.

- Board of Directors, which is responsible for the ordinary and extraordinary administration of

the Bank and implementing the Group's business plan, including through the delegation of activities to the Executive Committee; within the Board, consultancy committees are formed to develop proposals to the Administrative Body (Strategic Committee, Risk Control Committee, Appointment Committee and Remuneration Committee and Related Party Committee).

- Board of Statutory Auditors, responsible for supervising the following, based on the provisions

of article 149 of Italian Legislative Decree no. 58 of 24 February 1998 (Consolidated Law on Finance): compliance with the law and the memorandum of association; compliance with the principles of correct administration; adequacy of the Bank’s organisational structure to the extent of their authority, of

the internal control system and the accounting administrative system and its reliability in correctly representing operating performance;

methods of implementing corporate governance regulations provided for in codes of conduct drafted by regulated market management companies or by similar associations, including the Bank, through public disclosure, affirming compliance;

the adequacy of the provisions provided by the Bank to the subsidiaries in accordance with Article 114 paragraph 2.

The traditional model chosen, which has always been used, seems to fully meet the need of ensuring the efficiency of the decision-making and management process. The soundness of the model has been tested throughout the century the Company has been in business, giving sufficient proof of safeguarding and highlighting the expectations and needs of the corporate base, as part of sound and prudent management and the total effectiveness of the control system.

*** This report was drafted in accordance with the provisions of the Consolidated Law on Finance – Article 123-bis – and is prepared in accordance with the “Format for corporate governance reports – IV edition”, published by Borsa Italiana S.p.A. in January 2015. The report also contains the information established in other provisions, with a special reference to Article 144-decies of the Issuers' Regulation.

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2. INFORMATION ON THE OWNERSHIP STRUCTURES (pursuant to art. 123 bis of the Consolidated Law on Finance) as at 31/12/2014

a) Share capital structure (pursuant to Article 123-bis, paragraph 1, letter a) of the Consolidated Law on Finance)

The share capital – comprising ordinary shares only (TABLE 1) – amounted to EUR 1,846,816,830.42 as at 31 December 2014, represented by 1,108,872,369 ordinary shares with no par value. On 28 April 2012, the extraordinary Shareholders’ Meeting amended the first paragraph of Article 7 of the Articles of Association, eliminating the indication of the par value of the shares. The shares carry equal rights, both as regards allocation of the profits and distribution of the remaining assets in the event the Bank goes into liquidation. Share dividends must be collected within five years of the payment date; amounts not collected will be transferred to the legal reserve, as provided for in Article 56 of the Articles of Association. The composition of the share capital (fully subscribed and paid in) is the result of the following: - in 2014, at the end of the period of extraordinary exercise (10 March - 11 April) of the “Creval 2014 Warrants on Ordinary Shares” resolved by the Board of Directors of Credito Valtellinese on 4 March 2014, 9,836,178 Warrants, accounting for 72.63% of the outstanding Warrants, were exercised. The shares of Credito Valtellinese deriving from this exercise totalled 9,836,178, for a total equivalent value of EUR 10,524,710.46. Following the issue of those shares, the share capital of Credito Valtellinese on 11 April 2014 amounted to EUR 1,532,967,617.34, divided into 480,800,964 ordinary shares with no par value. - the Extraordinary Shareholders' Meeting held on 12 April 2014 approved a paid share capital increase up to EUR 400 million, through the issue of ordinary shares to be offered under option to shareholders. Pursuant to Article 2443 of the Italian Civil Code, the Shareholders' Meeting granted the Company's Board of Directors the right to increase share capital against payment and divisible in one or more tranches, within a period of 24 months from the date of the resolution, for a total amount (including any share premium) of EUR 400,000,000.00, by issuing new ordinary shares with no par value to be offered under option to shareholders, pursuant to Article 2441, paragraph 1 of the Italian Civil Code. On conclusion of the share capital increase, 624,963,248 new ordinary shares were issued, for a equivalent value of EUR 399,976,478.72 (of which EUR 312,481,624.00 posted to share capital and EUR 87,494,854.72 posted to the share premium reserve). On conclusion of the period of exercise of the “Credito Valtellinese 2014 Warrants on Ordinary Shares”, 3,108,157 new shares were issued for a total equivalent value of EUR 2,735,178.16 (of which EUR 1,367,589.08 posted to share capital and EUR 1,367,589.08 posted to the share premium reserve). Thus, on conclusion of the above transactions, the share capital of Credito Valtellinese amounts to EUR 1,846,816,830.42 and is comprised of 1,108,872,369 ordinary shares with no par value. No share-based incentive plans which involve a share capital increase, even free-of-charge, are envisaged.

b) Restrictions on the transfer of shares (pursuant to Article 123-bis, paragraph 1, letter b) of the Consolidated Law on Finance)

The shares are personal, freely transferable and non-divisible. There are no limitations or restrictions on the free transfer of shares. The limits to the amounts of shares that can be held are established in a general manner by Law and the Articles of Association. Specifically, since Credito Valtellinese is a cooperative company, Article

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30, paragraph 2 of the Consolidated Banking Act – as amended by Italian Law Decree no. 179 of 18 October 2012, coordinated with the Italian conversion law no. 221 of 17 December 2012, setting out: "Additional urgent measures for growth of the country" - provides that no party may hold shares that account for more than 1.00% percent of the share capital. This prohibition does not apply to UCIs in securities where the limits provided by the relevant regulations will apply.

c) Significant investments in capital (pursuant to Article 123-bis, paragraph 1, letter c) of the Consolidated Law on Finance)

Pursuant to communications provided for in Article 120 of the Consolidated Law on Finance, as at 31 December 2014, only one party held more than 2% of the subscribed share capital directly or indirectly. (See table 1).

d) Securities with special rights (pursuant to Article 123-bis, paragraph 1, letter d) of the Consolidated Law on Finance)

No securities have been issued that grant special controlling rights.

e) Shareholdings of employees: voting rights mechanisms (pursuant to Article 123-bis, paragraph 1, letter e) of the Consolidated Law on Finance)

There are no employee shareholding systems in place.

f) Restrictions on voting rights (pursuant to Article 123-bis, paragraph 1, letter f) of the Consolidated Law on Finance)

There are no restrictions on the voting rights. Since Credito Valtellinese is a cooperative company, at the date of preparation of this Report, each shareholder who is in the Members’ Register only has the right to one vote, (“one head – one vote”) , regardless of the number of shares held.

g) Shareholder agreements (pursuant to Article 123-bis, paragraph 1, letter g) of the Consolidated Law on Finance)

The Board of Directors is not aware of the existence of shareholder agreements pursuant to Article 122 of the Consolidated Law on Finance.

h) Change of control clauses (pursuant to Article 123-bis, paragraph 1, letter h) of the Consolidated Law on Finance) and provisions of the Articles of Association concerning takeover bids (pursuant to Articles 104, paragraph 1-ter and 104-bis, paragraph 1)

The Board of Directors is not aware of any agreement that takes effect, changes or becomes cancelled in the event of a change of control of the company. There are no provisions of the Articles of Association concerning takeover bids.

i) Delegated powers for share capital increases and authorisation to purchase treasury shares (pursuant to Article 123-bis, paragraph 1, letter m) of the Consolidated Law on Finance)

On 15 April 2014, the Board of Directors resolved to fully exercise the powers delegated to it, pursuant to Article 2443 of the Italian Civil Code, by the Extraordinary Shareholders' Meeting held on 12 April 2014, to increase the share capital to a maximum of EUR 400 million, including share premium. On 22 May 2014 the Board of Directors set the final terms of the share capital increase, up to a maximum of EUR 400 million. Specifically, the Board of Directors resolved to issue up to 624,963,248 new Creval ordinary shares, with no par value, having the same characteristics of the outstanding Creval shares, including the same dividend entitlement, to offer under option to Creval shareholders

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at a subscription price of EUR 0.64, of which EUR 0.14 as share premium, at a ratio of 13 newly-issued Creval shares for each 10 shares held. At the date of preparation of this Report, there were no other powers delegated to the Board of Directors which could be exercised. With respect to treasury shares, the Shareholders’ Meeting of 12 April 2014 renewed the authorisation granted to the Board of Directors, in accordance with Article 12 of the Articles of Association, to perform purchase transactions of its treasury shares and to subsequently dispose of them in compliance with prevailing law and regulations, for a maximum of 20 million shares (out of a total of 470,964,786 outstanding shares) for a corresponding maximum value of EUR 30 million, by the date of the next Ordinary Shareholders' Meeting, with the objectives identified in the "Accepted Market Practices" adopted by CONSOB under Resolution 16839/09. This authorisation aims mainly at enhancing market liquidity of the financial instruments thereby favoring regular trading activity in compliance with the objectives identified by Accepted Market Practice no. 1, as well as the repurchase of treasury shares, in compliance with the purposes of Accepted Market Practice no. 2. In case of emergency, the Board of Directors may borrow shares required for the purposes set forth in the Accepted Market Practice no. 2, without prejudice to the obligation to concurrently start the purchase of the treasury shares to be returned to the lenders, in compliance with that set forth in said Accepted Market Practices. In any case, without prejudice to that provided in the third paragraph of Article 132 of Italian Legislative Decree 58/98, transactions on treasury shares must be carried out in such a way as to ensure equal treatment among stakeholders and, amongst other things: - transactions can take place, through a number of transactions performed in the period from the Shareholders’ Meeting (12 April 2014) to the next Shareholders' Meeting called to approve the financial statements for the year ending as at 31 December 2014; - the repurchase of treasury shares for the purposes of supporting liquidity will involve a maximum of 10,000,000 shares for a max of EUR 15 million, whilst, for the purposes of purchase, deposit and provision indicated in Accepted Market Practice no. 2, the purchase of treasury shares will involve a maximum amount of 10,000,000 shares for a maximum equivalent value of EUR 15 million. - in addition to the above, should the Board of Directors resort to loans on securities relating to treasury shares, such loans cannot regard a quantity exceeding 10,000,000 shares (out of the current total of 470,964,786 outstanding shares) for a total equivalent value of EUR 15,000,000.00; – transactions on treasury shares carried out must observe the operating conditions and the restrictions, with a special reference to daily quantity limits and price determination methods, provided in the relevant Accepted Market Practices, respectively; – the number of treasury shares held in the portfolio must not however exceed all in all 4% of the total shares making up the share capital; – upon purchase of treasury shares a special treasury shares reserve will be established pursuant to Article 2357-ter of the Italian Civil Code; The status report of the treasury shares repurchase program was announced to the market on a monthly basis, without prejudice to the reporting obligations specified by prevailing laws. On 4 March 2014 the Board of Directors of Credito Valtellinese renewed with Equita Sim SpA the agreement concerning the assignment as liquidity provider to support the liquidity of Credito Valtellinese ordinary shares in compliance with the Accepted Market Practice no. 1 set forth in CONSOB Resolution no. 16839 of 19 March 2009. The Ordinary Shareholders' Meeting on 12 April 2014 thus confirmed, pursuant to Article 12 of the Articles of Association, the authorisation to the Board of Directors to carry out operations of

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repurchase of treasury shares, in compliance with the prevailing laws and regulations. Moreover, on the same date, the support to the liquidity of Credito Valtellinese ordinary shares carried out by the Company through Equita SIM S.p.A. was interrupted, pending new applicable regulatory provisions. In the period from the Ordinary Shareholders' Meeting of Credito Valtellinese on 27 April 2013 to 11 April 2014, the last day of operations on treasury shares, in compliance with limits and conditions envisaged in the authorisation resolution, 2,787,764 treasury shares were purchased on the market, compared to a maximum of 5,000,000 shares contemplated in the delegated powers, for an equivalent value of EUR 3,303,593.70, compared to the maximum equivalent value of EUR 10,000,000 contemplated in the powers delegated by the shareholders' meeting. In the same period, 3,741,232 shares were sold for an equivalent value of EUR 4,465,119.31. As at 30 April 2014 there were 60,000 treasury shares in the portfolio owned by Credito Valtellinese, equal to 0.013% of total outstanding shares. l) Management and coordination activities (pursuant to Article 2497 et. seq. of the Italian Civil Code) The Bank is not subject to management or coordination in accordance with article 2497 et seq. of the Italian Civil Code. Specifically:

– information required by article 123-bis, first paragraph, letter i) (“agreements between the company and directors …") is included in the section on the Report related to directors’ remuneration (sec. 9);

– information required by Article 123-bis, first paragraph, letter l) (“applicable law for the appointment and replacement of directors (...) and for the amendment to the Articles of Association, if different from those laws and regulations additionally applicable”) is included in the section of the Report related to the Board of Directors (sec. 4.1).

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3. COMPLIANCE (pursuant to Article 123-bis, paragraph 2, letter a) of the Consolidated Law on Finance)

The Bank adopted the Corporate Governance Code for Listed Companies approved in December 2011 by the Corporate Governance Committee and promoted by Borsa Italiana S.p.A., subsequently amended in July 2014, available on the website http://www.borsaitaliana.it/comitato-corporate-governance/codice/2014clean.pdf. Since March 2000, the Bank has also adhered to the provisions of the Corporate Governance code for Listed Companies in the version recommended by Borsa Italiana S.p.A., and submitted a communication on the governance system adopted by the Bank and its adherence to the aforesaid Code to the Shareholders’ Meeting since 2001. This Code, as approved by the Corporate Governance Committee in March 2006, was amended in March 2010, by replacing article 7 (now article 6), and was updated in December 2011 and July 2014. In the board meeting held in January 2012, the changes introduced in the new Code were illustrated, as well as the amendments which issuers would have to implement by the deadline of the end of 2012, if they intended to adhere to the Code, informing the market thereof through the corporate governance report to be published during the following year. Specifically, the new code introduced updates on the following issues, among others: 1) As regards the composition of the Board of Directors, at least one-third of directors of companies on the FTSE Mib must be independent, while for smaller companies only two are required; 2) A lead independent director must be present also on request by the independent directors; 3) It is forbidden for directors to hold cross-positions on boards of various companies. 4) As regards the expiry of the directors' term, the option of staggering the expiry of the term of office of all or part of the board members was introduced; 5) Particular significance is attributed to the Control and Risks Committee, the Remuneration Committee and the Appointment Committee within Boards, also providing the option not to establish one or more committees based on the specific needs of the individual companies; 6) For listed companies, the Appointment Committee should also adopt a succession plan, to prepare for renewal of the top management. After a scrupulous review of the amended Code’s contents, in December 2012 the Board of Directors resolved that the Company would adhere to the provisions therein, with the following specifications: the principle providing for designation of the lead independent director does not apply since

the Chairman of the Board of Directors is not the main person in charge of managing the company;

application principle 7.C.1 (Remuneration of Directors) is not applied with reference to the executive directors in that it is only for members of General Management, whose financial package is linked to reaching budget objectives;

Lastly, on 14 July 2014 the Corporate Governance Committee approved additional amendments to the Code implementing several recommendations formulated by the European Commission on 9 April 2014, on the quality of corporate governance reporting and the "comply or explain" principle, and by CONSOB on disclosure to the public of termination benefits and other benefits provided to executive directors or general managers, in the event of termination of office. In the meeting held on 7 August 2014, the Board of Directors acknowledged the amendments to the Code.

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http://www.borsaitaliana.it/comitato-corporate-governance/codice/2014clean.pdf

http://www.borsaitaliana.it/comitato-corporate-governance/codice/2014clean.pdf

Neither the Company nor its subsidiaries are subject to provisions of non-Italian law which would influence the corporate governance structure.

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4.0 BOARD OF DIRECTORS

4.1. Appointment and replacement (pursuant to Article 123-bis, paragraph 1, letter l) of the Consolidated Law on Finance) Directors are appointed on the basis of lists containing a number of candidates equal to the number of Directors to be appointed, as indicated in the notice convening the Shareholders' Meeting. Candidates must be listed in progressive order. Each list must include at least two candidates who meet the independence requirements as established for statutory auditors pursuant to Article 148, paragraph three of Italian Legislative Decree no. 58 of 24 February 1998 and at least two must meet the independence requirements indicated by the Corporate Governance code of Listed Companies. These candidates must be expressly declared as “independent pursuant to Italian Legislative Decree no. 58 of 24 February 1998” and/or “independent pursuant to the Corporate Governance Code of Borsa Italiana”, without prejudice to the possibility that both requirements may be met by the same person. Each list must be compiled in such a way as to guarantee gender balance among candidates, and must therefore ensure that at least one-third of candidates on the list are of the less-represented gender. In compliance with current regulations, on first-time application of the regulations introduced by Italian Law no. 120 of 12 July 2011, the gender balance on the list must be ensured by including at least one-fifth of Directors of the less-represented gender. Without prejudice to the indication of a total number of members of the less-represented gender calculated on the basis of such ratios, the lists filed must specifically contain individuals of the less-represented gender: (i) under the sequential number one or two on the list; and (ii) under the last or next-to-last sequential number on the same list. The lists must be filed at the company headquarters at least thirteen days prior to the date set for the first call of the Shareholders' Meeting, or by a different deadline established by current regulations (twenty five days). Each list must be signed by one or more of the Shareholders that hold a total of not less than 0.3% of the share capital, or at least 400 Shareholders, regardless of the shareholding held. The signing Shareholders, at the time of filing the list, must have been enrolled in the Shareholder Register for at least ninety days and be entitled to participate and vote in the Shareholders' Meeting in accordance with regulations in force. Each Shareholder may participate in the presentation of one list only, and if this is not complied with, his or her endorsement will not be counted for any of the lists. Each candidate may be presented in one list only, under penalty of ineligibility. The signature of each Shareholder who files a list must have been duly authenticated in accordance with the law or by one or more managers or Company directors or by the Group company authorised by the Board of Directors. The curriculum vitae of each candidate, indicating their personal and professional characteristics, and the declaration by which each candidate accepts his or her candidature must be filed along with each list by the closing date for filing the list at the company headquarters under penalty of disqualification. Candidates must also declare, under their responsibility, that there are no reasons to exclude their eligibility, that there are no incompatibility issues, and that they comply with all the requirements under prevailing law and the Articles of Association to act as Director. They shall also state, if necessary, whether they are "independent pursuant to the Corporate Governance code of Borsa Italiana" and/or "independent pursuant to Italian Legislative Decree no. 58 of 24 February 1998." Any list that does not comply with the requirements or the timeframes set out in the Articles of Association or with prevailing law will not be admitted for voting. The inadmissibility of lists not filed in compliance with the procedures and timeframes set forth shall be decided by the Board of Directors, as a matter of urgency, subject to the opinion of the committee set up for appointment of directors in compliance with the provisions of the Corporate Governance code of Borsa Italiana. Each Shareholders may vote for one list only.

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After the number of members of the Board of Directors has been established by the Shareholders' Meeting, directors are elected as follows: a) if no lists are filed, the Directors shall be appointed by the Shareholders' Meeting by relative majority vote, in compliance with the requirements of Article 30, paragraphs 2, 3 and 4 and in accordance with the Shareholders' Meeting Rules, from the candidates that have been submitted by Shareholders' at least 7 days prior to the date set forth the first call of the Shareholders' Meeting, complying with the obligation to file the documentation provided for in paragraph five above; b) if there are at least two lists that obtained the votes of as many shareholders as those holding a total of not less than 0.15% of the share capital and/or the vote of at least 200 shareholders: - a number of directors equal to that determined by the Shareholders’ Meeting minus two will be taken from the list that obtained the majority of votes (the "First List") in the order in which they are listed; − the first two names indicated on the list that obtained the majority of votes in the remaining lists, and which is not associated, even indirectly, with the shareholders that submitted the First List (the “Second List”), shall be elected as directors; − in the event that two lists obtain the same number of votes in the Shareholders' Meeting, the candidate form the list submitted by Shareholders that represent a higher percentage of capital or, where the percentage held is the same, from the list that the greatest number of Shareholders has submitted shall be elected; c) if only one list obtained the votes of as many shareholders as those holding a total of not less than 0.15% of the share capital and/or the vote of at least 200 Shareholders, or if only one list is presented, or one list only is admitted, all directors shall be appointed from that list; d) if no list obtained the votes of as many shareholders as those holding a total of not less than 0.15% of the share capital and/or the vote of at least 200 Shareholders, all members of the Board of Directors shall be appointed from among the list that obtains the highest number of votes. If the number of candidates included on the lists submitted and admitted, whether majority or minority lists, that would be elected pursuant to the above, is less than the number of Directors to be elected as established by the Shareholders' Meeting, the remaining Directors shall be elected, in compliance with the provisions on the requirements of independence and gender balance, with resolution adopted by the Shareholders' Meeting with relative majority. In the event of equal votes between a number of candidates, a ballot shall be held between said candidates by further shareholder vote. If, even after following the criteria set forth above for election of Directors, the composition of the Board of Directors does not comply with the provisions on the requirements of independence and gender balance, the Director from the First List who would be elected under the aforesaid criteria, with the lowest progressive number who does not meet the necessary requirement(s) shall be replaced by the next candidate that meets the requirement(s) taken from the same list. If the composition of the Board of Directors still does not comply, the Director from the Second List who would be elected, with the lowest progressive number who does not meet the necessary requirement(s) shall be replaced by the next candidate that meets the requirement(s) taken from the same list. This mechanism shall be applied until full compliance with the necessary requirements for composition of the Board of Directors. The Directors will be replaced, on the part of the Board, by co-option in accordance with article 2386 of the Italian Civil Code and subsequent appointment at the Shareholders’ Meeting without the voting lists in accordance with the criteria established by Articles 31 and 32 of the Articles of Association. The Board of Directors appointed by the Shareholders' Meeting of 27 April 2013 – at the date of drawing up this Report - had not adopted a plan for the succession of the executive director (Principle 5.C.2 of the 2011 Code), as assessments are currently underway on the schemes for replacement of the management, intended to provide the Board with a detailed recommendation for the adoption of a plan for succession of the executive director.

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4.2. Composition (pursuant to Article 123-bis, paragraph 1, letter d) of the Consolidated Law on Finance) The information concerning the composition of the Board of Directors in office as at 31 December 2014 is listed in Table 2 in the appendix. The present Board was appointed by the ordinary Shareholders’ Meeting of 27 April 2013 for the three-year period 2013 – 2015 and the term will expire at the Shareholders’ Meeting called to approve the financial statements for the year ending as at 31 December 2015. The Board was appointed on the basis of one voting list presented by 824 Shareholders, representing a total of 4,094,798 shares, equal to 0.92% of the share capital. The Board of Directors was elected by majority vote, with 5,150 forms scrutinised, of which 4,774 were deemed valid votes. To provide recommendations to Shareholders for the purpose of suitably identifying candidates, on 27 February 2013 the document “Quantitative and Qualitative Composition of the Board of Directors of Credito Valtellinese” was published on the company's website at http://www.creval.it/governance/cv_assemblea2013.html in the Investor Relations sector. (Application Principle 1.C.1., letter h). The Shareholders' Meeting thus appointed the Directors Mario Anolli, Mariarosa Borroni, Isabella Bruno Tolomei Frigerio, Gabriele Cogliati, Michele Colombo, Giovanni De Censi, Paolo De Santis, Miro Fiordi, Aldo Fumagalli Romario, Gionni Gritti, Antonio Leonardi, Livia Martinelli, Francesco Naccarato, Alberto Ribolla and Paolo Scarallo. The Board of Directors' Meeting of 27 April 2013, at the end of the Shareholders' Meeting, appointed Giovanni De Censi as Chairman; Aldo Fumagalli Romario as Deputy Chairman and Miro Fiordi as Managing Director of the Company. Effective 20 January 2014, Prof. Mario Anolli submitted his resignation from the position of Director of Credito Valtellinese following his appointment as a member of the Management Board of another bank. Thus, the offices of Chairman of the Internal Control Committee and member of the Strategic Committee attributed to Director Anolli by the Board of Directors' Meeting of 14 May 2013 were also terminated. The Ordinary Shareholders' Meeting held on 12 April 2014 supplemented the composition of the board by appointing as Director - replacing Prof. Anolli - Prof. Paolo Stefano Giudici, who shall remain in office along with the other members of the Board until the Shareholders' Meeting to approve the financial statements for the year ending as at 31 December 2015. Prof. Giudici was classified as an independent director pursuant to Italian Legislative Decree no. 58 of 24 February 1998 and the Corporate Governance Code of Borsa Italiana. On 25 November 2014, Deputy Chairman Aldo Fumagalli Romario announced his intention to cease the office of Director, effective 1 January 2015, due to increases in his business commitments. Considering the resignation submitted by Deputy Chairman Aldo Fumagalli Romario, on a date subsequent to the end of the year, i.e. on 21 January 2015, the Board of Directors completed the Board by co-opting Valter Pasqua as Director pursuant to Article 2386 of the Italian Civil Code and - pursuant to Article 33 of the Articles of Association - Alberto Ribolla as Deputy Chairman of the Board of Directors.

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The newly-appointed Director Valter Pasqua has been classified as a non-executive, independent director, and shall remain in office until the ordinary shareholders' meeting of 2015. Below is a summary of the personal and professional details of each director. Giovanni De Censi: born in Berbenno (SO) in 1938. He has a degree in political science. He has worked for Credito Valtellinese since 1957, where his management career proceeded up to covering the position of General Manager from 1981 to May 1996 and Managing Director from June 1996 to April 2003. He has been Chairman of the Board of Directors since 26 April 2003. He has also been Chairman of Istituto Centrale delle Banche Popolari since May 1995. Aldo Fumagalli Romario: in office up to 31 December 2014. He was born in Milan on 23 April 1958 and has a degree in chemical engineering from the Polytechnical University of Milan. He is the Chairman and Managing Director of the SOL Group, a multinational with an Italian base, listed on the Italian Stock Exchange since 1998 and operating in the production and distribution of industrial and medicinal gases and the home health care sector. He is a member of the Board of Directors of Buzzi Unicem SpA. He was Chairman of the Board of Directors of Credito Artigiano S.p.A. Appointed as Director of Credito Valtellinese on 17 April 2008, this position was confirmed on 17 April 2010, and he has been Deputy Chairman since 28 April 2012. Miro Fiordi, born in Sondrio in 1956, has considerable professional experience in Credito Valtellinese. General Manager since 1 May 2003, he was also appointed Managing Director on 17 April 2010. He is Deputy Chairman of the Italian Banking Association, Director of Istituto Centrale delle Banche Popolari Italiane and a member of the Executive Committee of Confedèration Internationale des Banques Populaires. Mariarosa Borroni, born in 1960 in Saronno (Va), has a degree in Economics and Business from Università Cattolica del Sacro Cuore of Milan. She is a confirmed Associate Professor of Economics of Financial Intermediaries at the Economics and Law faculty of the Piacenza campus of said university, where she also teaches as part of the first level master's degree in “Bank Management and Organisation”. She is a member of the Board of Professors of the Ph.D. in Economics of Financial Intermediaries and company systems as well as of the Steering and Promotion Committee of the Economics and Law faculty. She is a founding member of ADEIMF – Association of Professors of Economics of Intermediaries and Financial Markets. An author of numerous technical publications, she carries out planning and teaches as part of training projects at leading banks and financial institutions and insurance companies. Isabella Bruno Tolomei Frigerio, born in Rome in 1963, has a degree in Economics and Business from LUISS University in Rome. She obtained a post-graduate specialisation in Tax Law and one in Corporate Finance from the Business Management School of Bocconi University in Milan. She is enrolled in the Register of Professional Accountants and also worked as a professional accountant from 1988 to 1990. She is the Chairman of Condotte Immobiliari S.p.A., a member of the Supervisory Board of Società Italiana per Condotte d'Acqua S.p.A., a Director of Beni Stabili S.I.I.Q., and a member of the Management Board of Assoimmobiliare. She was appointed as a Director of Credito Valtellinese on 16 June 2012. Gabriele Cogliati: born in Cernusco Montevecchia (CO) in 1952, he has a diploma in industrial engineering. He owns companies that produce electronic components. Specifically, he is the founder and Chairman of the Board of Directors of Elemaster S.p.A. – Tecnologie Elettroniche. He serves as Chairman of Cogliati Holding Srl, Eleprint Srl, Elemaster US Inc. USA and Elesienna LLC South Carolina

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USA; Deputy Chairman of Eleonetech SA Tunisia, as well as Director of numerous high tech companies. He was appointed Director of Credito Valtellinese in 2006 and confirmed in 2010. Michele Colombo: born in Monza in 1963, he has a degree in business administration from the University of California, Los Angeles (U.C.L.A.), and is the founder and Chairman of the Board of Directors of Colombo Design S.p.A. Chairman of the Board of Directors of Gedy Spa. He was appointed Director of Credito Valtellinese in 2000. Paolo De Santis: born in Como in 1955, he has a degree in Economics and Social Sciences from Bocconi University of Milan. He is a businessman in the HORECA sector in the Como area. He is currently the Managing Director of Meta SpA, Chairman of the Como Chamber of Commerce, Chairman of Editoriale La Provincia Spa and of Sviluppo Como SpA. He was appointed Director of Credito Valtellinese in 2007. Prof. Paolo Stefano Giudici, in office since 12 April 2014. He was born in Sondrio in 1965, and has a degree in Political Science from Bocconi University of Milan and a Master's in Science in Statistics from the University of Minnesota in Minneapolis (USA). After masterclasses in Bristol, Cambridge (UK) and Toronto (CAN), he is now Full Professor of Statistics at the Department of Economics and Business Science of the University of Pavia. Coordinator of numerous research projects and author of publications, articles and monographs published internationally, he is a risk management and customer relationship management consultant. He was a Director of Credito Valtellinese from 2010 to 2013. Gionni Gritti, born in 1961 in Sondrio, a chartered surveyor and Sondrio-based businessman. A member of the Governing Council of the Sondrio Chamber of Commerce, he is the Chairman of Confartigianato Sondrio (the Sondrio Trades and Artisans Trade Association), a member of the Executive Committee of Artigianfidi Lombardia and Deputy Chairman of Arco Fidi of Sondrio. He is Technical Manager of the airport facility in Caiolo, and Deputy Chairman of Aviovaltellina SpA. Antonio Leonardi, born in Acireale (CT) on 2 August 1944. He is a lawyer, expert in labour, cooperation and corporate law. He practices as a legal consultant and defence attorney in legal proceedings. He was a member of the board of Credito Siciliano and has held numerous offices and functions, including National Chairman of the Italian National Board of Attorneys and Chairman of the National Bar Association. Livia Martinelli, born in Rovereto (TN) in 1958. She is a Professional Accountant and Auditor. She has a degree in Business and Economics from Università Cattolica del Sacro Cuore of Milan. Enrolled in the register of technical experts of the Court of Milan and Technical Consultant of the Milan Public Prosecutor's Office. Member of the Council of the Provincial Tax Court and freelance journalist in the tax section of the Italian newspaper Il Sole 24 Ore, she served as Standing Auditor and Chairperson of the Board of Statutory Auditors of Credito Artigiano SpA. Francesco Naccarato, born in 1967 in Cortina d’Ampezzo (BL). Professional Accountant and Auditor. Director and Statutory Auditor of numerous corporations. An expert in corporate restructuring, ordinary and extraordinary financing, M&A, debt and equity assessments, corporate financing techniques and business planning. He has provided advisory services and training on bank credit risk issues and on credit structure, organisation and processes for other financial intermediaries. He gained extensive experience as a manager for Banca Popolare di Verona e Novara and Banca Antonveneta and taught at the Università degli Studi of Padua, Ferrara, Modena and Reggio Emilia. He is an author of specialised publications.

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Alberto Ribolla: born in 1957, he has a degree in chemical engineering from the Politecnico University of Milan. He is the Managing Director of Sices 1958 S.p.A., a plant design company, parent company of the Group of the same name, which also operates, with its subsidiaries, in helicopter manufacturing. Director of Mecaer Italia Spa and Chairman of Mecaer America (Canada); Chairman of Fluitek Orsenigo Italian Valves Makers. Coordinator of Club dei 15 (Club of the 15), member of the board of directors of Confindustria and Chairman of Mediocreval. He was appointed Director of Credito Valtellinese in 2004. Paolo Scarallo: born in Naples on 17 August 1950. He has a degree in Law and has considerable professional experience working for the Bank of Italy, holding positions of prestige and increasing responsibility; he was Substitute Deputy Manager until February 2010 of the Rome offices of this Supervisory Body. He was appointed Director of Credito Valtellinese in 2010, and, within the Group, also holds the position of Chairman of Credito Siciliano. All the Directors have the professional requirements required for the position in accordance with the Supervisory Instructions for banks.

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Maximum amount of positions held in other companies In accordance with the Articles of Association and Supervisory provisions issued by Bank of Italy, the Board of Directors approved a “Rule limiting the number of offices held by Directors”, which was also approved by the administrative bodies of the other Group banks. (Application principle 1.C.3) This rule - which was updated via board resolution dated 11 December 2012 - limits the number of offices related to administration, management and control in companies not belonging to Credito Valtellinese Group or in which the Group does not hold a strategic investment, even indirectly. In particular, it determined limits that vary according to the office of: Chairman of the Board of Directors, Managing Director and Director, considering the positions held within the same group, for which there is a weighting system. The calculation considers any offices held in listed companies, banks, insurance companies and financial companies of a significant size, or their parent companies and subsidiaries. A lesser weight was attributed to offices held in companies belonging to the Group. The regulation provides for a formalised communication procedure to the Board of Directors in the event of appointment to a “relevant” company or if the limit on the number of offices is exceeded, which then grants the Board of Directors, supported by the Appointment Committee, the right to make the appropriate decisions, given the circumstances. The principles of the regulation were applied in the composition of the Board of Directors currently in Office. Article 1 of the most recent version of the regulation (Limits to the number of offices) introduces a reference to the prohibition set out in the aforementioned Article 36 of Italian Decree-Law 201/2011. Furthermore, in compliance with the provisions of the new Corporate Governance code, it was envisaged that "The Managing Director cannot take on the office of director of another listed company that is not part of the Credito Valtellinese Group in which the chief executive officer is a director of Credito Valtellinese". Article 2 (Procedure to follow in taking offices in other companies, where the limit to the number of offices is exceeded), paragraph three, relating to taking on a new office in a bank, insurance or financial company, was amended, providing that the director "shall, within 90 days from appointment, opt for the office he/she intends to keep or formally certify to the Board of Directors, under his/her responsibility, that the new office does not give rise to incompatibility pursuant to Article 36 of Italian Decree-Law no. 201/2011, referred to in Article 1 of the Regulation, specifying the reasons in detail. The Board of Directors thus makes its decisions on the application of the above regulations and, where the conditions apply, declares the director removed from office". The regulation is available at http://www.creval.it/governance/modelloGovernance.html (in Italian).

Induction Programme

Considering the importance of protecting the quality and professional standing of the top management and disseminating the culture of risk to all levels of the company, based on the management and coordination performed as the Parent pursuant to Article 2497 et. seq. of the Italian Civil Code, the Board of Directors, at the meeting of 16 July 2013, approved the “Guidelines for Board Induction”, aimed at implementing periodic updates and analyses of banking operations and, in particular, on the issues of risk and control. (Application Principle 2.C.2.) The Chairman of the Board of Directors ensures that all Directors participate, both following their appointment and during their term of office, in structured, high-profile training on specific issues with the goal of aligning their knowledge with the aspects deemed important for the Group and stimulate discussion and dialogue among the various professionals in the administrative and supervisory bodies,

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also to facilitate the identification of any points for improvement to be introduced into Group risk governance and control. Board induction is aimed at members of the Board of Directors, standing auditors on the Board of Statutory Auditors of the Group's territorial banks and the General Management of each Bank of the Group. Based on the issues covered, the targets of the training has been expanded to other Group companies, considering the corporate purpose of the entity, the extent of exposure to risk in relation to the Group's overall level and other specific aspects. Likewise, for limited cases and highly complex issues, it is possible to identify certain specific recipients, such as members of the Risk Control Committee of Credito Valtellinese. For the purposes of efficiently managing business in a manner not separate from cost containment, officers who hold several corporate offices within the Group are involved in only one session of training, should said session be repeated several times. For the same purpose, the development of individual plans is currently not envisaged. The company's Board of Directors also approved a solution - proposed by a specialised firm - involving a three-year training plant organised into four macro-areas: Corporate Governance; Risk Management and Monitoring; Control System and Regulatory Compliance; Credit Policy and Finance. For the Parent's administrative bodies, implementation of the first module began in 2013, while the completion of the plan, which consists of a total of eight sessions, is expected within the first half of 2015. For the subsidiary territorial banks, Credito Siciliano and Carifano, the training plan comprises six sessions, with the first module starting in 2014 and completion expected within the first half of 2015.

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4.3. Role of the Board of Directors (pursuant to Article 123-bis, paragraph 2, letter d) of the Consolidated Law on Finance)

Foreword Article 39 of the Articles of Association provides that ordinary meetings of the Board of Directors should be held once a month. 16 Board of Directors' meetings were held in 2014. The meetings lasted more than 5 hours, on average. (Application Principle 1.C.1., letter i). The Directors had good meeting attendance records: the average meeting attendance was higher than 95%. (Application Principle 1.C.1., letter i). 13 meetings are planned for the current year, of which 3 have already been held as at the date of approval of this Report. Reporting to the Board of Directors All Directors are placed in the best conditions to make knowledgeable decisions, by providing the documentation concerning the Board's agenda, which they may also access through on-line connection systems with suitable security measures to ensure confidentiality. Directors are also put in the best conditions to increase their awareness of company dynamics and Group strategic direction, also by participating in specific meetings which are extended to include representatives of the governance bodies of all the companies belonging to the Group. A wide set of information is constantly provided to the Directors concerning the laws and implementing provisions of the Supervisory Authorities, or relating to market analyses and sector studies. Complete documentation relating to the board agenda is made available on-line at least two days prior to the meeting of the Board of Directors; said term is regularly complied with. In the event of proposals involving the consultation of complex, voluminous documentation, the proposals formulated to the Board are accompanied by a document summarising the contents of the most significant issues, for the purpose of facilitating decision making. Moreover, there are certain limits to the possibility of viewing the documentation in advance: the following are not made available a) case documentation pertaining to the provision or review of loans; b) case documentation pertaining to Personnel, except that of a general nature; c) documentation for cases which - based on the provisions of the "C.V. Group Internal Procedure for the management of privileged information and its distribution to the market, and for the management and keeping of the register of persons who have access to privileged information and the issue of communications on internal dealing” - refers to, consists of or entail the disclosure of “potentially privileged information”. The Chairman may also order the blocking of prior disclosure, upon proposal by the Managing Director/General Manager, in the event of specific circumstances linked to the nature of the resolution to be passed or specific confidentiality requirements. (Application Principle 1.C.5.). Conversely, the disclosure contemplated in the point on the agenda “Communications” is made available as soon as it is finalised and, usually, at least four days prior to the date of the meeting. With regard to the greater period of time available for Directors and Statutory Auditors to consult said disclosure in advance, during the Board meeting, by virtue of the powers assigned to the Chairman concerning coordination of the work, the Chairman may briefly cover said information, without prejudice to the possibility for participants to intervene and request clarifications on specific points. All the documentation relating to meetings of the Board is available through the on-line procedure, with no time limits.

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In 2009 the Board of Directors approved the "Rules for the meetings of Administrative Boards of Companies in the Credito Valtellinese Banking Group”, in line with the supervisory provisions of the Bank of Italy. This document governs the timing for dissemination, type and content of documentation required for the adoption of resolution on the issues on the agenda, to be sent to individual members. It also defines the duties and responsibilities of the Chairman of the Board of Directors concerning: formation of the agenda; preliminary information to members of the board relating to issues on the agenda; documentation of and recording the decision-making process in minutes; ex post availability of said documentation; transmission of the resolutions to the Supervisory Authorities, when required by regulations. The Board of Directors then adopted the “Rules for reporting to corporate bodies of the Credito Valtellinese Banking Group”, also drawn up in line with the supervisory provisions. Said document identifies and governs the frequency and minimum required content of the reporting to the Board of Directors. The Rule took into consideration the following types of reports. 1) Reports resulting from the exercise of delegated powers Delegated power structure For all Group companies, all resolutions made by the Board regarding delegated powers are collected and ordered as a whole in a specific manual (“Delegated powers structure”), published on the Group Intranet, so that it can be easily referenced throughout the company. The manual is constantly updated based on resolutions made by the Board. Reporting from holders of delegated powers Those holding delegated powers must inform the Executive Committee (for the banks, if it exists) of any decisions made and, for global issues, the Board of Directors. The Board of Directors must be informed of all decisions made by the Executive Committee. The reports described above must be provided to the competent corporate body in the first meeting following the date on which the delegated power was exercised. Reporting on the exercise of delegated powers by the Managing Director and General Management The Managing Director and every member of the Bank’s General Management must provide a report on the decisions made in exercising his/her delegated powers at each Board of Directors meeting. Reports normally include decisions taken in the time period between Board of Directors meetings. Reporting on loan performance Using a specific application (W-PEF), the Bank’s Board of Directors is informed, at every meeting, on decisions made by individual and collective bodies in exercising their delegated powers related to loans. There is also a report to the Board of Directors regarding the 20 largest lines of credit and doubtful loans, through the same application (W-PEF) and with the same frequency. 2) Reports from control functions Group Control Coordination document The Group has a specific document “Group Control Coordination Document” that governs internal audit activities, risk management and compliance risks. Reports sent by the control function The Group Control Coordination Document governs in detail the reports sent to corporate bodies:

- from internal audit;

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- from the compliance department; - from the risk management department.

3) Accounting reporting Report timing and recipients During the first ten days of each month, the accounting reports for the prior month are prepared for each Group bank by the department responsible for administration and planning, through a specific application known as “Management Control”. The application also draws up a specific report, called “Board Summary”, which the General Management reports to the Board of Directors of the Bank, usually on a monthly basis. The report includes the main items of the individual and consolidated statements of financial position and income statements, compared to the same data from the budget, the results from the prior month and from the same period of the prior year. 4) Infragroup reports and contracts Infragroup contractual relationships envisage periodic reporting by the supplier company to the General Management of the user bank and may also include submitting the report to the Board of Directors, if expressly provided for in the Regulation. 5) Reporting to the Board of Directors Report on defendant claims The General Management of the Bank reports to the Board of Directors, at least every six months, on the status of legal claims in which the Company is the defendant. Report on non-performing loan management The General Management of the Bank reports to the Board of Directors, at least every six months, on the management of the Bank's non-performing loans. Reporting on liquidity and the securities portfolio Reporting on liquidity and the securities portfolio, after presentation to the ALCO Committee (Assets and Liabilities Committee), is prepared by the General Management for the Board of Directors, usually on a monthly basis. Other issues on the agenda of board meetings The Chairman and the General Management, in dealing with the specific issues concerning the Bank's operations included in the agenda of board meetings, periodically invites the managers in charge of the competent company functions to the meetings, to provide the Directors in-depth information and explanations. The Managing Director ensures that those managers remain available so that their participation in the board meetings ensures comprehensive disclosure and replies to questions posed by Directors concerning the Company's operations. (Application Principle 1.C.6.) Role and functions of the Board of Directors The Board of Directors plays a pivotal role in defining, governing and controlling the overall business plan, in that the Board has all the powers for ordinary and extraordinary administration of the Bank, except those which are exclusively reserved for the Shareholders' Meeting, according to provisions in the Italian Civil Code and the Articles of Association. The Directors relate to the Board of Statutory Auditors in Board of Directors meetings or the Executive Committee on the activities performed and the most significant transactions from an economic, financial and equity point of view carried out by the Bank or by subsidiaries. In particular, the Directors report on transactions in which they have an interest, on their own behalf or on behalf of third parties.

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Based on article 36 of the Articles of Association, in addition to powers that cannot be delegated by law, the Board of Directors are granted exclusive responsibility for decisions relating to:

- determining the general management guidelines and rules and the general organisational structure of the Group and verifying its implementation, approval of strategic transactions, business and financial plans, budgets, risk management policies and the Groups’ internal control system;

- appointing and determining the financial remuneration of the General Manager and other members of General Management;

- forming internal committees of corporate bodies; - appointing the Manager in charge of financial reporting, and the managers of the internal

audit, compliance and risk control functions; - acquiring and disposing of qualified equity investments, as defined by the supervisory

provisions of the Bank of Italy; - setting up, transferring and closing branches and offices; - determining the criteria for contributions to charities and cultural and social organisations to

a specially designated fund or additions through the allocation of a shares of annual net profits by the Shareholders' Meeting;

- defining the Group’s overall business plan, determining the criteria for coordination and management of Group Companies, as well as the criteria for implementing instructions from Bank of Italy;

- approving and amending key internal regulations; - adopting and changing the procedures with the aim of ensuring transparency and substantive

and procedural correctness in related party transactions, in accordance with the laws in force; - related party transactions of greatest importance, as identified pursuant to the internal

Company procedures adopted in compliance with the laws and regulations in force. The Board of Directors is also responsible for resolutions to adapt the Articles of Association to regulatory provisions, as well as resolutions regarding mergers in the cases envisaged in articles 2505 and 2505-bis of the Italian Civil Code. The Board of Directors examines and approves the strategic, business and financial plans of the Bank and the Group, monitoring their implementation, and defines the corporate governance structure of the Bank and the Credito Valtellinese Group. (Application Principle 1.C.1., letter a). Based on delegated powers and key company policies, the most significant transactions from a financial standpoint are submitted for the Board of Directors’ approval. The Board of Directors of the Bank constantly monitors the strategic development of the various business sectors, with special reference to the control of the risks assumed, as well as constant control of management in order to ensure the maintenance of balance with respect to the technical management aspects of income, assets and liquidity, and operating control to evaluate the various types of risk that the actual business is exposed to, which generally fall under the risk management area. (Application Principle 1.C.1., letter b). The Board of Directors evaluates the adequacy of the organisational, administrative and accounting structure of the bank and its subsidiaries. It periodically evaluates the functionality, efficiency and effectiveness of the internal control and risk management systems. In the event shortcomings or irregularities emerge, it will promptly adopt suitable corrective measures. (Application Principle 1.C.1., letter c). The Board of Directors set the frequency with which the delegated bodies must report to the Board on the authorisations exercised as monthly (Application Principle 1.C.1., letter d).

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Generally at every meeting the Board evaluates the operating results for the period, comparing the results achieved with the programmed results (Application principle 1.C.1., letter e). In accordance with the Articles of Association and the resolutions passed by the Board of Directors, the Board of Directors will be exclusively responsible for the examination and approval of operations that are significant from a strategic, economic, asset or financial point of view for the company. (Application Principle 1.C.1., letter f). On 21 January 2014 the Board of Directors renewed, for the third consecutive year, the assignment to draw up and execute the Board Assessment 2014 to SpencerStuart, a leading international independent consulting firm, with specific duties in terms of remuneration and compensation policies and models. (Application Principle 1.C.1., letter g). In the board meeting of 23 December 2014 thus confirmed the assignment to SpencerStuart for assistance in self-assessment of the functioning, composition and size of the Board of Directors for 2015. As in the previous years, direct, structured interviews will be conducted, based on a questionnaire accompanied by a comparison of operational practices with best practices. (Application Principle 1.C.1., letter g). Also in December 2014, the consulting firm SpencerStuart was granted a second assignment for consulting and assistance to the Remuneration Committee, in carrying out operations for 2015. The subject matter of the assignment relate to the audit of the current system of remuneration in consideration of the new provisions of the European and Italian Supervisory Authorities, the update of the assessments of the executive variable remuneration system, the update of the document "Remuneration Policies of the Credito Valtellinese Group”, support to the activities of the Remuneration Committee, also by participating in Committee meetings and drawing up supporting documents on points covered by the cooperation. The self-assessment of the functioning of the Board of Directors and its Committees for 2014, as well as on their size and composition, on the professional characteristics and experience, including managerial experience, gender and seniority of office of the respective members was carried out through individual interviews of the Directors, involving the three components of the self-assessment required by the Corporate Governance code of Borsa Italiana (size, composition, functioning), on the basis of an "Interviewing Guide" submitted beforehand. Subsequently, a qualitative interview was conducted with the members of the Board of Statutory Auditors and the Internal Audit Manager. (Application Principle 1.C.1., letter i). The self-assessment conducted on 2014 confirmed a positive situation. The percentage of replies fully or partially agreeing with the issues proposed amounted to 80%. The positive opinion of the methods of functioning of the Board of Directors was confirmed, which seem to have improved during its term. The methods of operating mechanisms favoured the creation of a positive, constructive climate in which the meetings are conducted. Positive aspects were the continuity and presence at meetings of all the Directors, the confidentiality with which information is handled, the quality of relationships with the management at board meetings, the fact that the Board knows the company managers due to their participation in the works for presenting pertinent issues. During the year, the Board operated effectively. Its current size – deemed suitable by most of the Directors – allows for debate and in-depth discussion of the issues examined.

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Unanimous consensus was provided concerning the functions of the Chairman, who performed his role in an effective, balanced and authoritative manner, maintaining a high level of debate and inviting Directors to express their opinions. The Managing Director was highly praised for his leadership, commitment and the clarity of the disclosure he provided. The Board deems that his steering of the company is sound and determined, specifically in such a complex market period. Considerable approval was expressed for the significant improvements in the accessibility of information via web on issues on the Board's agenda, even in sequential mode. Likewise, the Directors were completely satisfied with the high quality of the minutes of board meetings, which ensure complete coverage of events and a suitable level of precision. The work of the Board Committees was appreciated, with specific emphasis on the work carried out by the Risk Committee. The current breakdown of duties and responsibilities of the Committees was agreed with and approved, and it is unanimously considered that the Committees carry out their work in an autonomous, authoritative manner, effectively supporting the Board. This year, several considerations remained on the possibility of increasing the frequency of board meetings, given the number and complexity of the issues on the agenda, suggesting an additional rationalisation of the Agendas to focus the discussion on the key issues of the business. Suggestions were provided to organise meetings for Independent Directors, as well as several “Strategy Days” during the year, to discuss the future, scenarios, analyses of the current evolution and new business models. (Application Principle 1.C.1., letter i). On 4 March 2014 the Board of Directors, in compliance with that set forth in the Supervisory Provisions on organisation and corporate governance, published the “Theoretical Profile of Board Directors which the Shareholders' Meeting shall appoint to replace a terminated Director”, for the purpose of assisting Shareholders who intend to submit candidates for the appointment of a new Director replacing Director Anolli, who resigned. The document was made available on the Company's website, at http://www.creval.it/governance/cv_assemblea2014.html in due time so that the selection of the candidate could take account of the indications set out, such as the values and skills required. (Application Principle 1.C.1., letter h). The Shareholders’ Meeting is not expected to give any general or prior authorisation for an exception to the prohibition on competition provided under article 2390 of the Italian Civil Code (Application principle 1.C.4.).

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http://www.creval.it/governance/cv_assemblea2014.html

4.4. Delegated Bodies Managing Directors As regards the Managing Director, the Supervisory Provisions state that "The presence at the same time of an executive committee and a managing director, or several managing directors, is justified only in companies with particular operational and dimensional complexities and requires a clear subdivision of competences and responsibilities. The appointment of a managing director and general manager should be avoided in less complex banks. The presence of several general managers is possible in exceptional cases, due to particular breakdown requirements of the executive structure (in relation to size, cross-border activities, operational complexity), provided that their powers are defined, and the operational management is in any case guaranteed." In this regard, the Articles of Association of Credito Valtellinese established in Article 38 that "the Board can also appoint a Managing Director by determining his/her powers (…)". With regard to the General Management, Article 48 states the following “The General Management has the composition and powers determined by the Board of Directors. It consists of the General Manager, assisted, if appointed, by a Co-General Manager and by one or more Deputy General Managers.” The Parent is a complex company, as it is a listed company at the head of a multi-purpose banking group with a highly detailed organisational and corporate structure. The Articles of Association allow for the appointment, in addition to the Executive Committee, which has specific functions as regards current operations, as illustrated in detail in another part of this document, of a Managing Director and, at the same time, a General Manager, if necessary, accompanied by a Co-General Manager and one or more Deputy General Managers. The Board of Credito Valtellinese, after the renewal of the company officers approved by the Shareholders' Meeting on 27 April 2013, decided to keep in the corporate governance system of the Bank the position of Managing Director, introduced in 2010 in order to strengthen the top management of the Parent and as a consequence of the development in size and operations of the Group, confirming Miro Fiordi in this position. Mr. Fiordi has been assigned the following powers and duties:

- oversee the operations of the Bank and the Group; - oversee the strategic coordination, implementation of strategies and management control of

the Bank and of the Group; - oversee the development of the management control and planning system as well as the

capital management policies of the Group; - supervise the operational performance of the subsidiary Finanziaria San Giacomo; - see to the strategic coordination and management control of the Bank and of the Group;

give operational directions to the subsidiaries within the plans and guidelines established by the Board of Directors, with a view to safeguarding the management equilibrium of each company and in compliance with Supervisory Provisions on this matter;

- see to the implementation and effectiveness of the organisational and administrative-accounting structure approved by the Board of Directors;

- oversee the implementation of credit policies, in line with that set out in business plans and resolutions of the Board of Directors on the matter;

- in the framework of the guidelines defined by the Board of Directors (as the body exercising strategic supervision), bringing to the attention of said company body the results of the audits conducted, implement initiatives and actions necessary to ensure the consistency of the Group's internal control system with the strategic guidelines and the propensity to risk established, as well as to ensure - on an ongoing basis - the completeness, adequacy,

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functionality and reliability of the internal control system, guaranteeing an integrated risk management process. In that area, he is in charge of: • ensuring the implementation of the RAF and authorising the overrun of the risk appetite within the limit represented by the threshold of tolerance, and ensuring that immediate reporting is provided to the Board of Directors, identifying the management actions necessary to return the risk assumed to within the set target; • ensuring the implementation of the risk governance policies and the risk management process, as well as its consistency with the risk appetite and risk governance policies, also taking account of the development of the internal and external conditions the bank operates in; • ensuring that the interventions and solutions necessary to guarantee that the organisation and internal control system complies with the supervisory provisions; • ensuring the implementation of the process for approving investments in new products, the distribution of new products or services or the launch of new operations or the entry into new markets; • ensuring the implementation of company policy on outsourcing company functions; • ensuring the implementation of the processes and methods for assessing company operations; • ensuring the correct, timely and secure management of information for accounting, management and reporting purposes; • ensuring the full awareness of and governability of risk factors and the verification of compliance with the RAF by the corporate bodies and control functions, through the internal information flows established; • ensuring the implementation of the ICAAP process and the internal risk measurement systems to determine capital requirements; • setting up and implementing the necessary corrective or adjustment measures in the event that shortcomings or irregularities emerge or following the introduction of new products, activities, services or significant processes; • promptly report to the Risk Committee (or to the Board of Directors) on problems and critical issues arising in conducting his activities or which he became aware of, so that the Committee (or Board) can take suitable action;

- submitting to the Board of Directors, in agreement with the Chairman and, if appropriate, through the Board Committees, proposals for defining general management baselines and guidelines and the general organisation structure of the Group, approval of strategic operations, industrial and financial plans, budgets;

- in agreement with the Chairman and with the cooperation of the members of General Management, seeing to the study, preparation of deeds and sending non-binding letters relating to extraordinary operations or agreements, to be submitted to the Board of Directors;

- defining the guidelines of commercial and product policy of the Bank and of the Group; - defining guidelines and pricing policies, conditions and commissions of the Bank and of the

Group; - making proposals to the Board in respect of the Group's separate and consolidated financial

statements and dividend policy; - submitting to the Board of Directors, in agreement with the Chairman and, if appropriate,

through the Board Committees, proposals for appointing the members of the general management of subsidiaries as well as directors and auditors of associates;

- appointing - in agreement with the Chairman - the managers of the subsidiaries, proposing their financial package, annual or otherwise; vis-à-vis the said personnel propose: merit measures, transfers and secondment, retirement pensions;

- approving, without prejudice to the provisions of Article 36 of the Articles of Association, changes to internal regulations;

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- seeing to the performance of the main Subsidiaries with minority shares by the Bank and by the Group;

- seeing to the institutional relations with the Bank of Italy in coordination with the Chairman; - seeing to qualified relations with Authorities, Bodies and Associations, in addition to the most

important relations with the interlocutors of the Bank of the Group; - authorising, in agreement with the Chairman, the attendance to the meetings of the

subsidiaries and main associated companies; - seeing to the corporate communications to the market, relations with the financial community

and qualified relations with the press; - ensuring the implementation of the resolutions of the Board of Directors and Executive

Committee; - approving, in the event of urgency, repayment plans, transfers to losses, assignments of

receivables, settlements, arbitrations and other equivalent instruments that result in a loss for the bank not exceeding the amount of EUR 500,000;

- chairing the meetings of the Group Risk Governance Committee. In relation to the authorisations granted him by the Board, the Managing Director in office can be classified as the party with the primary responsibility for company management (chief executive officer). The Board of Directors verified that there were no situations of interlocking directorate for the Managing Director in office. (Application Principle 2.C.5.). Chairman of the Board of Directors The Chairman is not assigned operational authorisation in general or, in particular, with specific reference to the formation of company strategies (Application Principle 2.C.1.). In the event of absolute urgency upon proposal by the General Manager or Managing Director, the Chairman may take decisions on any matter or operation falling under the responsibility of the Board of Directors or the Executive Committee, on the condition that the Board of Directors is informed of the decisions taken at its next meeting (Principle 2.P.5.). In accordance with the Articles of Association, the Chairman oversees the Company’s performance, promotes the effective functioning of the corporate governance system, encourages internal communication and ensures the balance of powers. He/she calls the Board of Directors meetings, coordinating the work, setting the agenda, ensuring that suitable in-depth information is provided during the board sessions and undertaking to provide adequate information on the issues to be discussed on the agenda to all directors. Executive Committee (pursuant to Article 123-bis, paragraph 2, letter d) of the Consolidated Law on Finance) Article 38 of the Articles of Association envisages that the Executive Committee is comprised of not less than five members and not more than seven, annually appointed by the Board of Directors in its first meeting following the Ordinary Shareholders’ Meeting. The meetings are presided over by the Chairman of the Board of Directors, who is a permanent member, along with the Deputy Chairman and the Managing Director, if appointed. During the meeting of 15 April 2014, the Board of Directors appointed the Executive Committee for the financial year 2014, established that the Committee shall have 7 members. In addition to the Chairman, Giovanni De Censi, the Deputy Chairman Aldo Fumagalli Romario (who then resigned at 31 December 2014) and the Managing Director Miro Fiordi, the Directors Mariarosa

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Borroni, Gabriele Cogliati, Paolo De Santis and Alberto Ribolla were appointed as members of the Executive Committee for 2014. 11 Executive Committee meetings were held in 2014. The meetings lasted more than 2 hours, on average. (Application Principle 1.C.1., letter i). The Directors had good meeting attendance records: meeting attendance was approximately 90%. (Application Principle 1.C.1., letter i). 11 meetings are planned for the current year, of which 2 have already been held as at the date of this Report. As a result of the resignation tendered by Deputy Chairman Aldo Fumagalli Romario, effective 1 January 2015, on 21 January 2015 the composition of the Executive Committee was reconfigured: in addition to the Chairman Giovanni De Censi, the Deputy Chairman Alberto Ribolla and Managing Director Miro Fiordi, the following Directors are members of the Executive Committee: Mariarosa Borroni, Gabriele Cogliati, Paolo De Santis and Paolo Scarallo. The Executive Committee mainly deals with ongoing management issues and credit line matters. The Board of Directors also delegated the following powers to the Executive Committee:

− approving agreements with Companies, Associations or Bodies; − approving the participation in underwriting consortium and syndicates; − purchasing, selling and exchanging motor vehicles, machines, movable property, of any type

and intangible assets; − purchasing, selling or exchanging properties; − entering into public and private contracts for works; − approving repayment plans, transfers to losses, assignments of receivables, settlements,

arbitrations and other equivalent instruments that result in a loss for the bank not exceeding EUR 1,500,000;

− issuing a congruence opinion for credit line decisions of any amount taken by the other banks of the Group;

− entering into receivable and payable leaseholds; − acquiring, disposing of and all other actions concerning non-qualified equity investments, as

defined by the provisions of the Bank of Italy; − resolving on the Global Portfolio, the Model Portfolio, the Investment Strategies and any

interventions or changes thereto; − expressing opinions on matters pertaining to the Board of Directors.

Reporting to the Board Pursuant to paragraph 5 of Article 37 of the Articles of Association, the Board of Directors is kept informed of the decisions made by the Executive Committee at the following meeting, normally on a monthly basis.

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4.5. Other Executive Directors There are no other executive directors until the appointment of a Managing Director, identified as an executive director in accordance with the principles of the Code (Application principle 2.C.1).

4.6. Independent Directors The Board of Directors in office for the three-year period 2013 – 2015, appointed by the Ordinary Shareholders' Meeting of 27 April 2013, included a total of seven independent directors in 2014: Mario Anolli (who resigned on 20 January 2014), Mariarosa Borroni, Paolo de Santis, Paolo Stefano Giudici (in office since 12 April 2014), Gionni Gritti, Antonio Leonardi, Livia Martinelli and Francesco Naccarato (Application Principle 3.C.3.). On 14 May 2013 the Board of Directors ascertained and confirmed that the independence requirements pursuant to Article 148, paragraph 3 of Italian Legislative Decree no. 58 of 24 February 1998 and the Corporate Governance code of Listed Companies were met by the directors Livia Martinelli, Gionni Gritti, Mario Anolli (who subsequently resigned), Francesco Naccarato, Paolo De Santis and Mariarosa Borroni. The Board also ascertained that the independence requirements pursuant to Article 148, paragraph 3 of Italian Legislative Decree no. 58 of 24 February 1998 were met by director Antonio Leonardi. (Application Principle 3.C.4.). In the board meeting of 4 March 2014, during the annual self-assessment, the Board of Directors ascertained and confirmed that the independence requirements as set forth in Article 3 of the Corporate Governance code of Listed Companies, issued by Borsa Italiana, were met by all the above-mentioned Directors, with the exception of Director Anolli, who resigned. Lastly, at the meeting of 15 April 2014, the Board of Directors ascertained and confirmed that the independence requirements pursuant to Article 148, paragraph 3 of Italian Legislative Decree no. 58 of 24 February 1998 and the Corporate Governance code of Listed Companies were met by Director Prof. Paolo Stefano Giudici, appointed by the Ordinary Shareholders' Meeting of 12 April 2014. (Application Principle 3.C.4.) In its review, the Board of Directors also applied all the criteria provided under the Code (Application Principles 3.C.1. and 3.C.2.), giving precedence to substance over form in the situations provided therein. The Board of Statutory Auditors ensured that the criteria and procedures used to ascertain the independence of its members adopted by the Board of Directors was applied (Application principle 3.C.5.). The Report of the Board of Statutory Auditors to the Shareholders' Meeting held on 12 April 2014, published in the reporting package for the 2013 Annual Report, on page 460, in the chapter “Information and confirmation of the checks carried out” states “Evaluation of independence - The Board of Statutory Auditors ensured that the criteria to ascertain the independence of its members adopted by the Board of Directors was applied, and has no observations to make in this regard. With respect to independence, the Statutory Auditors confirmed their own independence." During 2014, the Independent Directors did not call any meetings without the presence of the other Directors: specific initiatives for 2015 are currently being planned (Application Principle 3.C.6.). The Director who, on the list for the appointment of the Board of Directors for the three-year period 2013 – 2015, indicated that they were suitable to be classified as independent did not expressly

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declare their commitment to remain independent during their term and, if necessary, resign. Therefore, paragraph 3 of Article 30 of the Articles of Association requires that at least two Directors meet the independence requirements established for statutory auditors by Article 148, paragraph three of Italian Legislative Decree no. 58 of 24 February 1998 and at least two Directors meet the independence requirements indicated by the Corporate Governance code of Listed Companies promoted by Borsa Italiana S.p.A., adopted by the Company. Should a Director no longer meet the independence requirements set out by said paragraph, said Director shall fall from office, unless said requirements are still met by the minimum number of Directors who must meet them, according to the Articles of Association, in compliance with regulations in force. (Art. 5 of the Corporate Governance code).

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4.7. Lead Independent Director Application principle 2.C.3. does not apply, as the Chairman of the Board of Directors is not the chief executive officer in charge of managing the Issuer and does not exercise control over the company.

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5. PROCESSING CORPORATE INFORMATION Upon proposal by the Managing Director, the Board of Directors approved the adoption of a specific “Internal procedure of the Credito Valtellinese Banking Group for the management of privileged information; the Register of Persons who have access to Privileged Information; Communications on Internal Dealing” – available on the website http://www.creval.it/governance/internalDealing.html in the Governance section, which governs – inter alia – the communication of privileged information outside the company, or information to be published in correspondence with important corporate events. The procedure provides that the contents of said information must be previously validated by top management and that press releases issued in accordance with the specific provisions of the Consolidated Law on Finance and CONSOB Regulation 11971/1999 are approved in advance by the Board of Directors as a matter of course, who authorise their distribution (Application principle 1.C.1. letter j).

6.0 INTERNAL BOARD COMMITTEES (pursuant to Article 123-bis, paragraph 2, letter d) of the Consolidated Law on Finance)

The Board of Directors has established three internal committees as envisaged by the Code, whose composition for 2014 is reported below.

COMMITTEE Role Risks Appointment Remuneration

Chairman Francesco Naccarato Paolo De Santis Mariarosa Borroni Member Livia Martinelli Mariarosa Borroni Gionni Gritti Member Paolo Stefano Giudici

(*) Antonio Leonardi Alberto Ribolla

(*) since the resignation of Director Anolli, the Committee was temporarily completed through the appointment of Prof. Mariarosa Borroni, qualified Director, replaced by Prof. Paolo Stefano Giudici on 15 April 2014. No Committees were set up which perform the functions of two or more of the committees envisaged by the Code (Application Principle 4.C.1. letter c). The functions attributed to the Committees were assigned in line with the provisions of the Corporate Governance code. In addition to the Executive Committee (previously described in Section 4.4) and those provided for by the Code, a Strategic Committee has been set up, with consultancy duties, which makes proposals to the Board of Directors in the decisions concerning:

- Group strategies, especially in reference to internal and external changes, both in defining or changing the Strategic Plan, as well as monitoring and defining any measures deemed necessary to carry out said Plan and projects implementing the Plan;

- key initiatives that may modify the competitive profile of the Group (e.g., acquisitions, disposals, alliances, joint ventures, significant long-term commitments, significant changes in the sales network).

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http://www.creval.it/governance/internalDealing.html

The Committee consists of the Chairman of the Board and the Managing Director (permanent members) and a number of Directors – not less than 3 and not more than 5 – appointed by the Board at the Chairman’s proposal. The Committee has a term of office of three financial years, and Directors who have ceased office can be re-elected. The Committee meets when called by the Chairman, each time the need arises, and, in any event, generally at least quarterly.

7.0 APPOINTMENT COMMITTEE The Board of Directors has established ann internal Appointment Committee. (Principle 5.P.1.). Composition and operation of the Appointment Committee (pursuant to Article 123-bis, paragraph 2, letter d) of the Consolidated Law on Finance). The Committee is composed of three members (Application Principle 4.C.1., letter a), appointed from among the members of the Board of Directors upon proposal of the Chairman and mainly chosen from among the Independent Directors (Principle 5.P.1.). The Board of Directors appoints the Chairman of the Appointment Committee. During 2014, the Appointment Committee met once. The members of the Committee did not believe it necessary for other parties to attend that meeting (Application Criteria 4.C.1., letter f). The Directors all attended the meeting, which continued for forty-five minutes. During the meeting, the Appointment Committee formulated opinions to support the decision-making process of the Board concerning whether a new director could be co-opted as replacement of the outgoing Director Mario Anolli, and to verify that the profile of possible candidates matched the quali-quantitative composition deemed optimum. Correct minutes are kept of the meetings of the Appointment Committee (Application Principle 4.C.1., letter d). No meetings have yet been planned for the current year, while 2 have already been held as at the date of drawing up this report. Functions of the Appointment Committee The function of the Appointment Committee is to provide consultancy and formulate proposals to the Board of Directors. Specifically, on the new appointment of the company officers of the Bank and/or appointment of directors in the event of co-optation pursuant to Article 2386, paragraph 1 of the Italian Civil Code: it assists the Board of Directors in prior identification of the optimum quali - quantitative composition of the Board, according to the provisions of the current supervisory regulations on corporate governance of banks, formulating opinions in that regard concerning said composition and issuing recommendations on the professionals who it is deemed should be included on the Board. (Application Principle 5.C.1., letter a). If the Board presents candidates to the Shareholders Meeting, or non-independent directors are co-opted, it expresses its opinion on the suitability of said candidates. It also recommends candidates to the Board for the position of director, where it is necessary to replace independent directors, formulates opinions for the Board on the admissibility of the lists of candidates submitted by Shareholders, pursuant to the provisions of the Articles of Association and regulations on the matter, and carries out an initial assessment of whether the mandatory requirements to hold the office are met. (Application Principle 5.C.1., letter b). It assists the Board of Directors in the verification the

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Board is required to carry out following the appointment process, pursuant to the provisions of regulations on the matter and those of the Articles of Association. It formulates opinions on any amendments to regulations relating to the number of offices held by directors, as well as in the periodic self-assessments of said composition, and supports the Board in the verification of compliance with the Regulation adopted by the bank regarding the limit to the number of administration and control offices held by the directors in other companies, and formulates opinions on any amendments to said regulation. It supports the Board in the self-assessment process according to the provisions of the Bank of Italy, in defining succession plans for top executive positions, according to the provisions of the Bank of Italy and the Corporate Governance code. It exercises all other support functions related to the matters indicated above, in compliance with the regulations and in the cases where the opinion of the Committee is indicated. Minutes were taken at these meetings (Application principle 4.C.1., letter d). The Appointment Committee is able to access the information and company departments necessary to carry out its functions, and may use outside consultants (Application Principle 4.C.1., letter e). For the year in question, to carry out its functions, the Committee did not consider it necessary to budget financial resources.

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8.0 REMUNERATION COMMITTEE The Board of Directors has established an internal Remuneration Committee (Principle 6.P.3.). Composition and operation of the Remuneration Committee (pursuant to Article 123-bis, paragraph 2, letter d) of the Consolidated Law on Finance). The Committee is composed of three members (Application Principle 4.C.1., letter a), appointed from among the members of the Board of Directors upon proposal of the Chairman and chosen from among non-executive directors, with a majority of Independent Directors (Principle 6.P.3.). The Chairman of the Committee, chosen from among independent members, is named by the Board of Directors. As the first re-appointment of the Board of Directors following the end of the financial year which began in 2011 was carried out with the Shareholders' Meeting of 27 April 2013 Principle 6.P.3. of the Code was applicable: The board of Directors – at the time of appointment of the Committee – successfully ascertained the suitable knowledge and experience in financial matters and remuneration policies of the Chairperson of the Committee, Mariarosa Borroni. The Directors do not participate in the Committee meetings where the Board's proposals concerning their remuneration are formulated (Application Principle 6.C.6.). The Head of Human Resources usually participates in the meetings - which are coordinated by the Chairman of the Committee - on invitation by the Chairman of the Committee, on the basis of the meeting agenda. The Head of Risk Management may participate in the meetings to ensure that the incentive systems are suitably fair and take account of all the risks assumed by the company, using methods consistent with those adopted for risk management. In 2014, the Remuneration Committee met five times. The meetings lasted approximately one hour and a half. Members of the Committee had 100% attendance records at meetings. For the year under way, no set number of meetings has been planned. However, at the date of drawing up this report, the Remuneration Committee had already met once. Correct minutes are kept of the meetings of the Remuneration Committee (Application Principle 4.C.1., letter d). During several of the meetings, the Committee members decided to ask representatives of the consulting firm SpencerStuart to participate, in carrying out its assignments based on the mandate granted by the Board of Directors and on specific points on the agenda of the meetings. (Application Principle 4.C.1., letter f). Also availing of the consulting services of Spencer Stuart on compensation policies for the year in question, the Committee verified in advance that the consulting firm had no situations that could compromise its independence of judgment in carrying out its assignment. (Application Principle 6.C.7.). Neither the Chairman of the Board of Statutory Auditors nor another statutory auditor named by the Chairman participated in the meetings of the Remuneration Committee held during the year. (Comment on Article 6 of the Code).

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Functions of the Remuneration Committee The Committee periodically assesses the adequacy, overall consistency and concrete application of the remuneration policies for directors and key management personnel (Principle 6.P.4.). With the assistance of the pertinent company structures, it oversees the preparation of documentation on the issues under its responsibility, to be submitted to the Board of Directors for the related decisions, including the document to be submitted to the ordinary Shareholders' Meeting of the Bank annually, also in compliance with the supervisory provisions of the Bank of Italy. (Application Principle 6.C.5.). The Committee has consultancy duties, and makes proposals concerning the compensation of company officers (directors that carry out certain duties or who have been granted powers, general manager and those carrying out equivalent functions as those of a general manager) and the heads of internal control functions in the company (Principle 6.P.4.). It has consultancy duties pertaining to the determination of the criteria for remuneration of the most important personnel, identified based on the supervisory provisions of the Bank of Italy in force in each case. It directly supervises the correct application of the rules concerning the remuneration of managers that head company internal control functions, working closely with the control body. It works with the other internal Board committees, and specifically with the Risk Control Committee; ensures that the pertinent company functions are involved in drawing up and controlling the remuneration policies and practices; expresses its opinion, also using the information received from the pertinent company functions, on the achievement of the performance targets linked to the incentive plans and on the verification of the other conditions required for disbursement of the compensation (Application Principle 6.C.5.). The Committee has access to significant company information to achieve the above purposes, and may also use outside consultants, at the Company's expense, based on resolutions of the Board of Directors (Application Principle 4.C.1., letter e). On 18 February 2014 the Board of Directors acknowledged, based on a mandated granted by the Remuneration Committee, the granting to the independent consulting firm (Application Principle 6.C.7.) SpencerStuart of an assignment for consulting and assistance to the Remuneration Committee in carrying out operations for 2014, specifically regarding the following activities: 1. audit of the current system and redefinition of the structure and compensation levels of the top management of Group banks 2. update of the executive variable remuneration system, including top management, in compliance with the defined guidelines for action 3. update of the document "Remuneration Policies of the Credito Valtellinese Group” in light of the new regulatory provisions and internal assessments of suitability 4. support to the Remuneration Committee in the operational implementation of the resolutions passed by the Shareholders' Meeting of the Parent Credito Valtellinese of 27 April 2013 and assistance in drawing up any supporting documentation as well as, where requested, participating in the Committee meetings scheduled during the year, where invited. Likewise, on 9 December 2014 the Board of Directors approved the confirmation of SpencerStuart, also for 2015, of the assignment for consulting and assistance to the Remuneration Committee in carrying out operations, with specific regard to the following issues:

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1. audit of the current system in light of the new provisions of the European and Italian Supervisory Authorities; 2. update of the assessments of the variable remuneration system for executives, including top management, for 2015, in light of the evolution over the last few years and the provisions of the document "Remuneration Policies of the Credito Valtellinese Group”; 3. update of the document "Remuneration Policies of the Credito Valtellinese Group” in light of the new regulatory provisions and internal assessments of suitability; 4. support to the Remuneration Committee also by participating in the Committee meetings and drawing up supporting documents on points covered by the cooperation. An expense account was established to provide the Committee with the necessary financial resources to carry out its functions as part of the corporate budget assigned to the Human resources Department. The expense account was called: “Consulting for the Remuneration Committee” with an amount of EUR 110,000 plus VAT.

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9.0 DIRECTOR REMUNERATION For the information concerning this section, refer to the “Remuneration Report” available at http://www.creval.it/governance/politicheDiRemunerazioni.html on the Company's website. The document complies with the Provisions on remuneration and incentive policies and practices in banks and banking groups issued by the competent authorities. In this regard, over the years, the Bank of Italy has effected accurate regulatory actions and issued specific recommendations on the matter (Communications of 30 March 2011, 2 March 2012 and 13 March 2013). In December 2013, it decided to implement the new EU regulations set out in Directive 2013/36/EU (known as CRD 4), which updates prudential requirements for banks and also permits the coordination of provisions on remuneration and incentive systems with other related measures. As part of certain assessments, the other laws or regulations issued at supranational level by entities such as the EBA, CEBS and FSB were also considered. Lastly, the content of the approaches concerning remuneration policies and practices drawn up based on the guidelines defined at European level by the ESMA (European Securities and Markets Authority) and subject to joint issue by the Bank of Italy and CONSOB on 29 January 2014 were also carefully assessed.

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http://www.creval.it/governance/politicheDiRemunerazioni.html

10.0 CONTROL AND RISK COMMITTEE The Board of Directors created an internal Risk Committee. (Principle 7.P.3. letter a), no. (ii) 7.P.4.) Composition and operation of the committee (pursuant to Article 123-bis, paragraph 2, letter d) of the Consolidated Law on Finance). With reference to that set forth in Chapter 3. Compliance, the information provided refers to the Internal Control Committee, which was subsequently renamed. The Committee is composed of three non-executive directors, the majority of which are independent. (Application Principle 4.C.1., letter a). On 15 April 2014, on reforming the Committee, which was necessary due to the resignation of Director Anolli, the Board of Directors affirmed that the newly-elected Committee member Paolo Stefano Giudici has adequate experience in accounting and finance matters, and he was thus appointed Chairman of the Committee. In the period from the resignation of Director Anolli to the appointment of Director Giudici the Committee was completed by including Director Borroni. (Principle 7.P.4.). The Committee's works are coordinated by the Chairman, appointed by the Board of Directors. During the 2014 financial year, the Committee met thirteen times. Minutes were taken at these meetings (Application Principle 5.C.1., letter d). The Directors had 100% attendance records. The meetings lasted 4 hours, on average. 12 meetings were planned for the current year, of which 2 have already been held. The Chairman of the Board of Statutory Auditors, in some cases joined by another Statutory Auditor appointed by the Chairman, participated in the Committee's work (Application Principle 7.C.3.). At the meeting of 11 June 2013, the Board of Directors determined additional compensation to be paid to members of the Committee, considering the complexity of their work performed. Functions assigned to the Committee The Committee carries out support functions (with analysis, consulting and proposal duties) for the Board of Directors, as the body exercising strategic supervision, on risks and the internal control system. (Application Principle 7.C.1., part one). In that area, the Committee performs:

a) the activities useful and necessary so that the Board may correctly and effectively determine the risk appetite framework (RAF) and risk governance policies;

b) the consulting and proposal functions to the Board to contribute to ensuring the optimum execution by the board of its duties of guidance and assessment of the adequacy of the internal control and risk management systems; (Application Principle 7.C.2. letters b, d and f);

c) the task of supporting, through suitable assessment and assistance, the valuations and decisions of the Board of Directors concerning approval of periodic financial reports

The Committee performs the following tasks: • a) identifies and proposes, with the contribution of the Credito Valtellinese Appointment

Committee, the heads of the company control functions to be appointed;

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• b) preventatively examines and expresses an opinion on the plans of actions (including the audit plan) and the annual reports of the company control functions addressed to the Board of Directors, and preventatively examines the most important reports drawn up by the internal audit function (Application Principle 7.C.2., letter c);

• c) expresses assessments and formulates opinions to the Board of Directors on compliance with the principles that must underlie the internal control system and company organisation and the requirements that must be met by the company control functions, bringing to the Board's attention any weaknesses and the resulting corrective actions to be promoted. To that end, it assesses the proposals of the management body. In that area, specifically, it monitors the autonomy, adequacy, effectiveness and efficiency of the internal audit function and expresses and opinion on the suitable amount of resources necessary to fulfil the responsibilities of the internal audit function. (Application Principle 7.C.1., part two and Application Principle 7.C.2., letter d). It also provides the Board with a preventative opinion on the resolutions concerning the assessment of the adequacy of the internal control and risk management system in relation to the characteristics of the company and the risk profile assumed, as well as its effectiveness;

d) contributes, through assessments and opinions, to defining the company policy on the outsourcing of company control functions; e) verifies that the company control functions correctly follow the instructions and guidelines of the Board of Directors and assists the latter in drawing up the coordination document envisaged by Circular no. 263, Title V, Chap. 7; f) assesses the correct use of accounting standards for drawing up the separate and consolidated financial statements. To that end, it coordinates with the Manager in charge of financial reporting and the Board of Statutory Auditors, having consulted the independent auditors. Similarly, it assesses the homogeneity of the accounting standards for the purpose of drawing up the consolidated financial statements. (Application Principle 7.C.2., letter a). It also provides the Board with a preventative opinion on resolutions concerning the assessment of the results stated by the independent auditors in their letter of suggestions and in the report on the fundamental issues arising during the audit; g) examines the annual and interim financial reports; h) as part of the RAF, it conducts the necessary assessments and makes the necessary proposals so that the Board of Directors may define and approve the risk appetite and risk tolerance) (Application Principle 7.C.2., letter b); i) supports the Board of Directors in defining and approving the risk governance strategies and policies, as well as in verifying the correct implementation of risk governance strategies and policies and the RAF; j) supports the Board of Directors in defining the policies and practices for assessing the business operations which constitute the bank's assets, including verifying that the prices and conditions of transactions with customers are consistent with the business model and risk strategies; k) ascertains that the incentives underlying the remuneration and incentive system of the bank are consistent with the RAF, without prejudice to the responsibilities of the Remuneration Committee.

The Committee also provides the Board with a preventative opinion on resolutions concerning: a) the definition of the strategies for the internal control and risk management systems; b) approval of the parts of the corporate governance report concerning the description of the main characteristics of the internal control and risk management systems and the related assessment of adequacy.

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To better carry out its functions, the Committee may ask the internal audit function to conduct audits of specific operating areas, providing the Chairman of the Board of Statutory Auditors with suitable notification thereof (Application Principle 7.C.2., letter e). The Chairman of the Committee or another member appointed by the Chairman will update the Board of Directors on the activities carried out and on the adequacy of the internal control system, on a half-yearly basis, upon approval of the financial statements and the half-yearly report (Application Principle 7.C.2., letter f). The Committee also works with the Internal Control and Audit Committee envisaged by Article 19 of Italian Legislative Decree no. 39 of 20 January 2010, which, for “public interest entities including banks” that apply the traditional governance model is equivalent to the Board of Statutory Auditors, considering the commonality of the issues it is responsible for, in order to guarantee that the internal control system operates in the most effective manner. In carrying out its duties, the Committee works closely with the independent auditors, the Board of Statutory Auditors (Internal Control and Audit Committee), and the Managing Director in charge of the internal control system and the Deputy General Manager assigned to the "Risk and Control Area", with the Manager in charge of financial reporting and the company control functions. During 2014 the main control activities performed regarded the following areas: Risk Appetite Framework, internal capital adequacy assessment, identification of relevant risks, preventative opinion on the most significant transactions, credit risk management processes, credit performance monitoring, financial and market risk management processes, management processes for operational risk and other risks, internal validation, stress testing, risk disclosures, assessment of risk management processes and disclosure for the public, the market and the Supervisory Authorities. Extraordinary activities were also carried out, such as: comprehensive assessment, adjustment to the 25th update to Circular 263 of the Bank of Italy on prudential supervision, development of the financial and market risk management processes, management processes for operational risk and other risks and risk management procedures. The following were invited to participate in the Committee meetings on a consultancy basis: the Deputy General Manager, who was entrusted with the task of overseeing the activities and development of the internal control system, the Manager in charge of financial reporting and the heads of Auditing, Compliance and Risk Management, in relation to the discussion of issues that fall under their respective areas of responsibility. The Chairman of the Board of Statutory Auditors or another Statutory Auditor authorised by the Chairman of the Board of Statutory Auditors also participates in Committee work. However, the other statutory auditors have the right, which can be exercised at their discretion, to participate in meetings (Application Principle 7.C.3.). Minutes are regularly taken at Committee meetings (Application Principle 4.C.1., letter d). The Committee has the right to access the information and company departments necessary to carry out its functions within the terms set by the Board of Directors, as well as use outside consultants, at the expense of the company, based on the provisions of the annual budget (Application Principle 4.C.1., letter e).

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A specific expense account was established as part of the corporate budget assigned to the Compliance Department, called "Internal Control Committee Consultancy", with a limit of euro 10,000, plus VAT, to provide the Committee with the necessary financial resources to carry out its functions.

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11. INTERNAL CONTROL SYSTEM The Board defined the strategies for the internal control system, so that the main risks of the company and the Group are correctly identified, adequately measured, managed and monitored, determining the criteria of compatibility of those risks with sound, correct business management (Application Principle 1.C.1., letters a and b). The clear identification of risks to which the Company is potentially exposed constitutes the essential prerequisite for their knowledgeable assumption and effective management, also based on appropriate mitigation and transfer tools and techniques. The set of company risks is monitored by the Group according to a model that integrates control methods at various levels, all converging with the objectives of ensuring efficiency and effectiveness of operating processes, safeguarding integrity of corporate assets, protecting from losses, ensuring reliability and integrity of information and verifying proper execution of activities with respect to the internal and external regulations. In general, the Board of Directors considers that Group competitiveness, its medium and long-term stability with a view towards sound and prudent management, must include a solid and efficient Internal Control System, involving, with different roles, the Administrative Bodies, the Board of Statutory Auditors, the management and all the personnel, and must suitably consider the reference models and best practices existing in the national and international arenas. Therefore, the control system is an integral part of the daily activity of the Bank. During 2014 the internal control system of the bank and the Group was the subject of numerous, extensive initiatives to improve its structure and functioning. These development projects were also implemented in line with the provisions of the Bank of Italy of July 2013 on the Internal Control System, Information System and Business Continuity (Circular no. 263 of 27 December 2006, 15th update). The implementations and improvements in the internal control system entered into force partially during 2014 and partially at the beginning of February 2015. The initiatives mentioned involved the company bodies and the front-line participation of the Group's company control functions, as well as other company departments involved, through indirectly, by the reference regulations. Below, the essential elements of the internal control system of the Credito Valtellinese Group, which forms the framework for the internal control system of the Company, at the date of drawing up this report, are summarised (Application Principle 7.C.1., letter d). Essential elements of the internal control system (Application Principle 7.C.1. letter d.) The internal control system is a fundamental element of the overall governance system of the Credito Valtellinese Group, and ensures that company operations comply with company strategies and policies. It takes on a substantial role in the prevention, identification, management and minimisation of risks, also contributing to the effective oversight of company risks, protection from losses and the safeguarding of asset value. A good internal control system contributes to preserving correct, effective company operations and ensures compliance with rules and regulations, as well as the faithfulness, accuracy and reliability of company disclosure. Therefore, for the Credito Valtellinese Group, the adoption of the rules set out by law and regulations in every day company operations constitutes more than a compliance obligation the Group is required to follow in its management, coordination and control, but rather a strategic factor for realising an overall business plan based on the principles of sound and prudent management. Moreover, in order to implement that plan and comply with the Supervisory Provisions, the Parent is required to “ensure the Group has a unitary internal control system which enables it to actually control the strategic

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choices of the Group as a whole and the management equilibrium of each company”. In any event, “each Group company shall set up an internal control system that complies with Group strategy and policy on control, without prejudice to compliance with any regulations applicable on an individual basis”. In line with the current Supervisory Regulations, the Credito Valtellinese Group adopted the definition of an “internal control system” set out in the 15th update to Circular 263 of 2006 of the Bank of Italy "New regulations for the prudential supervision of banks”, Title V - Chapter 7 (Section I “Preliminary provisions and general principles”, par. 6 “General Principles”). Specifically: “the internal control system comprises a set of rules, functions, structures, resources, processes and procedures that aim to ensure, in compliance with sound and prudent management, the achievement of the following goals: verification of implementation of company strategies and policies; reduction of risk within the limits set out in the framework for determining the bank's risk

appetite (Risk Appetite Framework - “RAF”); safeguarding of the asset value and protection from losses; effectiveness and efficiency of corporate processes; reliability and security of company information and IT procedures; prevention of the risk that the bank could be involved, even involuntarily, in unlawful activities

(with specific regard to those relating to money laundering, usury and the financing of terrorism);

compliance of operations with the law, the supervisory regulations and internal policies, regulations and procedures.”

The organisational structure of the Group meets the requirement of ensuring, based on the management and coordination activities pursuant to Article 2497 et. seq. of the Italian Civil Code and in line with the current provisions of supervisory regulations, the constant carrying out by the Parent Credito Valtellinese of a deep and incisive controlling action with regard to the members of Group, from a strategic, management, technical and operational viewpoint, and this as a result of a stringent institutional, operational and functional connection with the subsidiaries. The responsibility for overall Group performance thus lies with the Parent, which is organised into four Areas of Coordination, including the Risks and Controls Area, referable to the members of the General Management and into organisational structures that report directly to the Managing Director. In order to ensure an effective system of governance and control at the Group level, the Parent monitors the Group in three different ways: a strategic control on the development of the different business areas in which the Group

operates and of the risks related to the activities carried on; This is a control of both the performance of activities carried out by the companies belonging to the group and the policies of acquisition and disposal by group companies;

a management control aimed at ensuring maintenance of the conditions of economic and financial balance of the individual companies and of the Group as a whole;

technical and operational control aimed at evaluating the various risk profiles of individual subsidiaries and the overall risks of the Group.

A fundamental requirement for a comprehensive, functional internal control system is the existence of company organisation suitable to ensure the sound and prudent management of the banks and compliance with the applicable provisions. With regard to matters concerning the internal control system, primary importance is held by the role carried out by company bodies, understood as the set of bodies with the functions of strategic supervision, management and control. Considering that Credito Valtellinese is a complex company, as it is a listed company that heads a multi-function banking group, with an articulate organisational and corporate structure, as part of the internal control and risk management system, within the bank

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said functions have been concretely assigned to the company bodies or their members in line with statutory and supervisory regulations and considering the principle of proportionality. The clear, balanced allocation of duties among the various bodies is also carried out through the system of assigned powers and authorities to board/staff committees. Specifically, the Managing Director plays a central role on the Board of Directors of Credito Valtellinese in the specific management and coordination of the Parent and is an essential player in the internal control system of the bank and the Group. The Board has identified the Managing Director as the Executive in charge of the internal control and risk management system, assigning him powers in this regard. The Managing Director executes these duties with the support of the Deputy General Manager assigned to the "Risks and Controls” Area. Among the Board committees, significant importance for the matters analysed in this Chapter is assigned to the Risks Committee of Credito Valtellinese, set up in compliance with the “Supervisory Provisions for Banks”, as well as in line with the recommendations set out in the "Corporate Governance code” approved by the Corporate Governance Committee of Borsa Italiana S.p.A. This also carries out the activities useful and necessary so that the Board may correctly and effectively determine the risk appetite framework (RAF) and the risk governance policies, and carries out the consulting and proposal functions to the Board to contribute to ensuring the optimum execution by the board of its duties of guidance and assessment of the adequacy of the internal control and risk management systems. Moreover, the following interfunctional committees contribute to the control of specific risk profiles: - the Group Risk Governance Committee, which supports company bodies in proposing and overseeing the implementation of Group policies concerning risks and the internal control system, as well as the relevant plans and implementing projects; - The A.L.Co. – Asset & Liability Committee, which formulates indications concerning the overall positioning of the Group on the financial markets and draws up guidelines regarding the resulting management choices; - Group Credit Committee, to allow the Company, as the Parent, to supervise the activities of the individual subsidiary banks of the Group in the lending sector. In implementing the idea of pervasiveness of controls, the plan for the internal control system of the Group also involves three types of controls defined in line with the regulatory provisions of the Supervisory Body. Each of these features specific characteristics concerning its objective, purpose, method of execution and parties involved, as described below. First-level controls The first level controls (“line controls”), aimed at ensuring the correct performance of operations, are carried out directly by the operating structures, the back-office structures and through automation of the information systems at all members of the Group. Second and third-level controls – Company control functions In line with the supervisory provisions, in the banks and the Group, risk management and compliance controls aim to ensure, among others: a) the correct implementation of the risk management process; b) the compliance with the operating limits assigned to various functions; c) the compliance of business operations to regulations, including self-regulation. To that end, the Group has set up company control functions and, in particular, the risk management function, the validation function, the compliance function and the anti-money laundering function. Considering the importance of the activities carried out and the responsibilities assigned within the internal control system, those functions have been centralised within the Parent and identified through the following permanent, independent organisational units:

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the Risk Management Department, which carries out and is responsible for the activities related to the risk control and validation functions;

the Compliance Department, which carries out and is responsible for the activities related to compliance and anti-money laundering functions.

Specifically, the Risk Management Department cooperates in defining and implementing the risk appetite framework (RAF) and the related risk governance policies, through an adequate risk management process. Without prejudice to that set forth in the governance of internal systems for calculating capital requirements, the Department carries out and is responsible for developing, validating and maintaining the systems for risk measurement and control, both for Credito Valtellinese and for the other banks and companies in the Group. The prevailing company regulations also assign the head of the Risk Management Department of Credito Valtellinese the responsibility of coordinating the entire internal capital adequacy assessment process (ICAAP) and the activities necessary to produce reporting for the Bank of Italy. In this area, the Department is responsible for identifying, assessing/measuring company risks and determining Internal Capital as part of the ICAAP process. As the compliance function, the Compliance Department oversees, using a risk-based approach, the management of compliance risk with regard to all company operations, both of Credito Valtellinese and the other banks and companies of the Group, verifying that the internal procedures are suitable to prevent said risk. For the most important rules concerning compliance risk (such as those regarding the exercise of banking business and intermediation, the management of conflicts of interest, transparency in relation to customers and, more generally, regulations protecting consumers) and for those rules for which specialised controls have not been envisaged within the bank, the Compliance Department is directly responsible for managing compliance risk. Where specific types of specialised controls are envisaged within the Group, the Compliance Department is responsible, working with the assigned specialised functions, for defining the assessment methods for compliance risk and identifying the related procedures, and verifies the adequacy of said procedures to prevent compliance risk. As the anti-money laundering function, the Compliance Department is in charge of overseeing the effort to prevent and manage money laundering and terrorist financing risk, and is specifically assigned to prevent and combat the execution of those types of transactions. The Department constantly verifies that the company procedures align with the goal of preventing and combating the breach of heteroregulations (laws and regulations) and self-regulations concerning money laundering and the financing of terrorism. With regard to the organisational elements of the function, two units are set up within the Department, in charge of anti-money laundering and reporting suspicious transactions, respectively. In terms of third-level controls, in line with the supervisory provisions, internal auditing in the bank and the Group is aimed at identifying violations of procedures and regulations as well as evaluating on a regular basis the completeness, adequacy, functionality (in terms of efficiency and effectiveness) and reliability of the internal control system and the information system (ICT audit), on a fixed basis in relation to the nature and intensity of the risks. To that end, the Group has set up the internal audit department, centralised within the Parent. The activities of this function and related responsibilities are assigned to the organisational units that comprise the Auditing Department. Specifically, the supervision, coordination and exercise of internal auditing activities is the responsibility of the Auditing Department of Credito Valtellinese. In that area, on one hand, with a view to third-level controls, also through on-site inspections, it monitors the regular performance of operations and the evolution of risks and, on the other, assess the completeness, adequacy, functionality and reliability of the organisational structure and the other components of the internal control system, bringing possibly improvements to the attention of the company bodies, with specific

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regard to the RAF, the risk management process and the tools for risk management and control. Based on the results of its controls, it formulates recommendations to company bodies. In organisational terms, for the purpose of correctly exercising their independence, the Risk Management, Compliance and Auditing Departments are separate from each other and their managers, meeting the requirements of adequate professionalism, have a hierarchical - functional position that preserves their authority and autonomy of judgment, and ensures that no restrictions, intermediations or limits are posed to direct communications by the company control functions with the strategic supervision and control bodies. From a Group viewpoint, and to ensure the effectiveness and integration of controls, the control model adopted requires that the other banks and companies of the Group assign the performance of the company control functions mentioned above to the organisational units set up within the Parent, based on specific agreement and in line with Group regulations on outsourcing. Control functions The Group internal control system is completed by the "control functions", understood, in line with the concept defined in the Supervisory Provisions, as the “set of functions which, pursuant to provisions of law, regulations, articles of association or self-regulation, have control duties”. This area includes, for example, the Manager in charge of financial reporting of Credito Valtellinese who is responsible for setting up suitable administrative and accounting procedures for the formation of the separate and consolidated financial statements as well as all other financial communications. For the purpose of providing complete information, note that the internal control system includes additional bodies and departments with control duties. These include the creation of: - the supervisory body pursuant to Italian Legislative Decree no. 231/2001 (SB), on the matter of administrative liability of companies and entities. The SB performs oversight of the operation of and compliance with the organisational and management models adopted to prevent significant offences for the purposes of said Legislative Decree, as well as overseeing the updating to said models. - a specifically established Committee that ensures the transparency and substantive and procedural correctness of related party transactions. Lastly, in the cases defined by the Italian Civil Code and reference regulations, Group companies are subject to mandatory auditing.

* * * * * At least annually, the Board approves the audit plan drawn up by the head of the internal audit department, having obtained the opinion of the Board of Statutory Auditors and the Executive in charge of the internal control and risk management system (Application Principle 7.C.1., letter b). The Board currently also approves the planning of activities drawn up by the other company control functions and examines the annual reports on the work done by the Risks Control, Compliance and Internal Auditing functions. Main characteristics of the existing risk management and internal control system in relation to the financial reporting process pursuant to Article 123-bis, paragraph 2, letter b) of the Consolidated Law on Finance The risk management and internal control system relating to the financial reporting process of Credito Valtellinese is integrated within the larger internal control system described above. This system is in charge of:

managing and monitoring the administrative-accounting area for the purposes of Italian Law 262/05, including the definition and verification of the related governance process, the duties assigned to company functions (roles and responsibilities) and communications flows to company bodies;

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defining the protocols for communicating with the delegated administrative bodies and the Manager in charge of financial reporting;

defining information protocols with the company structures involves in governing the obligations required for the purposes of Italian Law 262/05;

overall governance of control mechanisms that support the process of issuing certifications by the delegated administrative bodies and the Manager in charge of financial reporting;

overall governance of control mechanisms that support the process of issuing certifications by the delegated administrative bodies and the Manager in charge of financial reporting;

developing the activities connected with the regulatory obligations required by Article 154-bis of the Consolidated Law on Finance, by coordinating with the "Interested Companies”.

The overall structure of this System is examined by the Board of Directors and, in any event, when significant changes occur involving the applicable regulatory framework, the organisational structure or any problems that could fail to guarantee the regular performance of activities using the operational and procedural methods and within the timeframes defined. Description of the main characteristics of the existing risk management and internal control system in relation to the financial reporting process The methodological approach adopted to guarantee suitable risk management and internal control systems for the financial reporting process is organised into three specific areas. These are as follows:

“Administrative-Accounting Model", relating to the management (identification, valuation, control and monitoring) of organisational processes (responsibilities, activities, risks and controls) which give rise to the significant/relevant profit and loss, asset and liability and financial figures in the separate financial statements and condensed interim report, as well as in the deeds and communications released to the market relating to annual and interim accounting disclosure;

“Company Level Controls”, for the purpose of management (identification, valuation, control and monitoring) of general and governance policies for Credito Valtellinese and the “Interested Companies", reflecting on the quality of financial reporting;

“IT General Controls”, aimed at the management (identification, valuation, control and monitoring) of the general rules for governance of technologies, application development and IT applications used in generating financial reporting.

This approach is based on activities of a primarily preventative and proactive nature, aimed at satisfying Credito Valtellinese's low risk appetite on the matter. For operational implementation, international best practices for the internal control and financial reporting system are used and, in particular, the following:

the COSO Framework, recommended by the Committee of Sponsoring Organization of the Treadway Commission (for the “Administrative-Accounting Model" and “Company Level Controls”);

the “Control Objectives for Information and Related Technologies” methodology, developed internationally by the Information Systems Audit and Control Association (for “IT General Controls”).

* * * * *

The periodic evaluations made by the Board of Directors during the year on the basis of the Reports prepared by the structures in charge of control, confirmed that the overall internal control system is adequate for the purpose of constantly and effectively monitoring the major risk areas. (Application Principle 7.C.1., letter b).

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11.1. Executive Director in charge of the internal control and risk management system The Board of Directors has identified the Managing Director, Miro Fiordi as the Executive in charge of overseeing the internal control and risk management system, assigning him powers in this regard. The Managing Director executes these duties with the support of the Deputy General Manager assigned to the "Risks and Controls” Area, Enzo Rocca. (Principle 7.P.3 letter a) no. (i)). On 17 June 2014, as part of the wider assessment of the level of adequacy of the bank's internal control system, the Board of Directors adopted a set of measures to ensure full compliance with supervisory provisions and carried out a detailed redefinition of the specific powers assigned to the Executive Director in charge of the internal control and risk management system, which involve: − in the framework of the guidelines defined by the Board of Directors (as the body exercising strategic supervision), bringing to the attention of said company body the results of the audits conducted, implement initiatives and actions necessary to ensure the consistency of the Group's internal control system with the strategic guidelines and the propensity to risk established, as well as to ensure - on an ongoing basis - the completeness, adequacy, functionality and reliability of the internal control system, guaranteeing an integrated risk management process. (Application Principle 7.C.4., letter b). In that area, he is in charge of: • ensuring the implementation of the RAF and authorising the overrun of the risk appetite within the limit represented by the threshold of tolerance, and ensuring that immediate reporting is provided to the Board of Directors, identifying the management actions necessary to return the risk assumed to within the set target; • ensuring the implementation of the risk governance policies and the risk management process, as well as its consistency with the risk appetite and risk governance policies, also taking account of the development of the internal and external conditions the bank operates in; (Application Principle 7.C.4. letter a); • ensuring that the interventions and solutions necessary to guarantee that the organisation and internal control system complies with the supervisory provisions; (Application Principle 7.C.4. letter c); • ensuring the implementation of the process for approving investments in new products, the distribution of new products or services or the launch of new operations or the entry into new markets; • ensuring the implementation of company policy on outsourcing company functions; • ensuring the implementation of the processes and methods for assessing company operations; • ensuring the correct, timely and secure management of information for accounting, management and reporting purposes; • ensuring the full awareness of and governability of risk factors and the verification of compliance with the RAF by the corporate bodies and control functions, through the internal information flows established; • ensuring the implementation of the ICAAP process and the internal risk measurement systems to determine capital requirements; • setting up and implementing the necessary corrective or adjustment measures in the event that shortcomings or irregularities emerge or following the introduction of new products, activities, services or significant processes; (Application Principle 7.C.4. letter d); • promptly report to the Risk Committee (or to the Board of Directors) on problems and critical issues arising in conducting his activities or which he became aware of, so that the Committee (or Board) can take suitable action; (Application Principle 7.C.4. letter e).

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11.2. Head of the Internal Audit Department As broken down in detail, the internal control system involves the interaction of business and Group functions and structures, in accordance with their respective competences and tasks. On recommendation by the Executive Director in charge of the internal control and risk management system, having obtained the favourable opinion of the Risks Committee and haring the opinion of the Board of Statutory Auditors, the Board of Directors identified the Head of the Auditing Department, Alberto Della Penna, as the party in charge of internal control, determining his remuneration and allocating suitable resources to him for the execution of his responsibilities. (Principle 7.P.3., letter b and Application Principle 7.C.1., part two). The Head of Internal Auditing constantly verifies the efficiency and effectiveness of the internal control and risk management system through an accurate audit plan approved periodically by the Board of Directors (Application Principle 7.C.5. letter a). The Head of the Group Auditing Department has no direct responsibility for the operational areas under his control, is not hierarchically subordinate to managers of those areas and has complete independence from any area (Application Principle 7.C.5. letter b). The Head of Internal Auditing has direct access to all the information required for carrying out the specific functions of the office (Application Principle 7.C.5 letter c). In drawing up the period reports, he covers the work carried out in line with the audit plans submitted to the Board, and issues assessments of the adequacy of the internal control and risk management system (Application Principle 7.C.5 letter d). Under the audit plan, he also verifies the reliability of the information systems, including the accounting systems (Application Principle 7.C.5., letter g). The reports drawn up are sent to the Chairman of the Board of Directors, the Board of Statutory Auditors and the Risks Control Committee, which normally meets on a monthly basis to coincide with the meetings of the Board of Directors, as well as to the Executive Director in charge of the internal control system (Application Principle 7.C.5 letter f). The internal audit function was not outsourced to a party external to the Issuer, either as a whole or by operational segment. (Application Principle 7.C.6.).

11.3. Organisational Model pursuant to Italian Legislative Decree 231/2001 The “Organisation, Management and Control Model pursuant to Italian Legislative Decree 231/2001” is understood as the set of operational rules and regulations of conduct adopted by the company to prevent the commission of the offenses set out in said Decree. It was approved and updated by the Board of Directors to adjust its contents to provisions of law which, in previous years, implemented the set of offenses that fall under the scope of application of Italian Legislative Decree 231/2001 (Article 7 of the Code). The most recent update of the Organisation Model pursuant to Italian Legislative Decree 231/01 drawn up for Group banks and companies, approved by the Board with resolution dated 10 December 2013, was implemented as a result of the new company organisational structures established and the changes to regulations set out by Law Italian 190/2012.

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The functions of Supervision and Control Body pursuant to Article 6 of said Italian Legislative Decree 231/2001 are assigned to a specific Supervision and Control Committee, composed of the Directors that are members of the Risks and Control Committee, the head of the Group Auditing Department and the head of the Group Compliance Department. The Chairman of the Board of Statutory Auditors or another Auditor authorised by the Chairman participates in the Committee work. The Board also has the power to increase the number of members of the Committee by appointing one or more external professionals, where this is appropriate due to specific needs, also in relation to significant changes in the reference framework. All the elements of the Model are integrated into internal regulations, accurately updated and compiled in a single document, which includes: - the list of offenses envisaged by Italian Legislative Decree 231/01 and the areas at risk of offense - the database of risks and controls pursuant to said decree - operating protocols - the Code of Conduct of the Credito Valtellinese Group - the Personnel Training Document and the Disciplinary Code - the clause integrating contracts with third parties - the Regulations of the Supervision and Control Committee - the Manual of tools for auditing pursuant to Italian Legislative Decree 231/01. The organisational model pursuant to Italian Legislative Decree 231/2001 can be viewed on the website http://www.creval.it/governance/organismoDiVigilanza.html, which also provides information on the composition of the Supervisory Body and the company Code of Conduct. A specific expense account was established as part of the corporate budget assigned to the Compliance Department, called "Supervisory Body 231 Consultancy", with a limit of EUR 15,000, plus VAT, to assign the Committee with the necessary financial resources to carry out its functions.

11.4. Audit company Based on a reasoned proposal by the Board of Statutory Auditors, the Ordinary Shareholders' Meeting of 28 April 2012 resolved to appoint KPMG S.p.A. to conduct the mandatory audit for nine consecutive years starting from 2012, pursuant to Article 159 of Italian Legislative Decree 58/1998.

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http://www.creval.it/governance/organismoDiVigilanza.html

11.5. Manager in charge of financial reporting and other company roles and functions Simona Orietti, Head of the Administration and Accounting Department of the Company, was appointed as Manager in charge of financial reporting by the Board of Directors' meeting of 16 April 2011. Simona Orietti, who holds a degree in Business Economics from Luigi Bocconi University of Milan, and has worked for the Credito Valtellinese Group since 1998, has gained significant professional and management experience in the accounting and administration area of the Group. Pursuant to the Articles of Association, the Manager in charge of financial reporting is appointed by the Board of Directors, obtaining the mandatory opinion of the Board of Statutory Auditors, must have at least five years' professional management experience in the sectors of accounting and administration in the company or its Group, or in other listed companies or companies resorting to the equity market, which operate in the banking, finance or insurance sector or in auditing firms. The Manager in charge of financial reporting is assigned the powers and functions established by law. With regard to the other company roles and functions with specific internal control and risk management duties, the Company's Board of Directors approved - at the time, -the establishment of the Risks and Control Area, - which directly reports to the Deputy General Manager, Enzo Rocca, in charge of the "Risks and Control Area", and which is in charge of overseeing the operations and development of the Group's internal control and risk management system, also favouring the coordination and integration among company control functions in order to develop integrated oversight of the Group's risk management process. This Area also oversees the monitoring of Group legal issues, the preparation of periodic accounting statements and those for financial statement purposes, both for the Bank and for consolidated companies, the development of issues relating to corporate identity, quality and sustainability at Group level and, lastly, Creval Academy, overseeing development of training for the Group. The following report to the Risks and Control Area: - the Risk Management Department, which is headed by Francesco Mazza. This Department oversees the risk management process, i.e. identifying, measuring or assessing, monitoring, preventing or attenuating as well as notifying the suitable superiors of all risks assumed or which may be assumed in the various segments, at company and group portfolio level, applying integrated logic, also mutual inter-relations and the evolution of the external scenario. If verifies the correct execution of performance monitoring on individual exposures, specifically on impaired exposures, and assessment of the consistency of classifications, the reasonableness of provisions and the adequacy of the recovery process. It oversee the development, validation and maintenance of the risk measurement and control systems, ensuring that risks are subject to periodic backtesting. It oversees the internal capital adequacy assessment process (ICAAP) provided by the prudential supervisory regulations; It oversees the Group Risk Appetite Framework (RAF). It oversees stress testing. It favours the development and dissemination of attention to risk within the company organisation. - the Administration and Accounting Department, which is headed by Simona Orietti, and coordinates the management of issues linked to the functions involved in preparing the reporting for the (separate and consolidated) financial statements, the management of tax policies, the definition and application of correct accounting standards, and the preparation of disclosure required by the Supervisory Body. It also works with the structures of the other Group companies in defining related proposals and projects.

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- The Compliance Department, headed by Edoardo Marchesi, with the task of supporting the governance bodies in defining the Group Compliance Model, overseeing the implementation of the related obligations. It guarantees the effective management of compliance risk, defined as the risk of incurring legal or administrative sanctions, significant financial losses or damage to reputation as a consequence of violation of mandatory provisions (of law or regulations) or self-regulation (articles of association, codes of conduct, self-discipline codes). It exercises compliance risk control activities according to the provisions of the Group internal control system and the application of the Compliance Model “disseminated”, directly through its structures and the Contacts identified at Group companies, and indirectly through the Specialised Safeguards identified. The Department oversees the regulatory and organisational framework concerning anti-money laundering, also drawing up suitable training plans, maintains relations with the Supervisory Authorities, with Group governance bodies and with the anti-money laundering contacts at the Group Banks in relation to anti-money laundering issues, drawing up suitable disclosure. It manages Suspicious Transactions and transmits them to the Financial Information Unit, where suspicions are deemed founded, based on the information and elements obtains through a structured analysis of the reports from operators. It plays an important role in creating value for the company, by strengthening and preserving the Group's good name (reputational risk) and the public's trust in its correct operations and management. It promotes the dissemination of a culture of compliance and fairness of conduct, as an indispensible element for correct functioning of the company. It guarantees interaction with the other control functions and, more generally, coordination between all the functions and bodies with control duties, in order to ensure the correct operation of the internal control system based on fruitful interaction, avoiding overlaps and gaps. - The Legal Department, headed by Flavio Morassut, which ensures, also by coordinating the work of external lawyers, oversight of all legal aspects of the Group in terms of its strategic plan, providing legal consultancy, assistance and support to the central or local structures, both in performing their work and in protecting its interests and claims. (Principle 7.P.3, letter c).

11.6 COORDINATION BETWEEN PARTIES INVOLVED IN THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

The methods for coordination between the various parties involved in the internal control and risk management system (Board of Directors, Executive in charge of the internal control and risk management system, Control and Risks Committee, Head of Internal Auditing, Manager in charge of financial reporting and other company roles and functions with specific internal control and risk management duties, board of statutory auditors) are specified in the “Control Coordination Document” approved by the Board of Directors, which defines the guidelines and regulates the structure and operation of the internal control system of the Group and the bank - considering the principle of proportionality. This is the "general framework" for the company control system, which comprises specific company regulations that supplement and complete the description of the system. In line with the regulatory provisions of the 15th update to Circular 263/2006 of the Bank of Italy, the Document defines the following areas: the overall approach of the Group and bank internal control system, providing an organic illustration of the principles and rules that form the method for setting up, operating and, consequently, updating and assessing said system, along with the definition of the main duties and responsibilities of the functions and bodies with control duties; the information flows among the various functions/bodies and between these and the company bodies; the methods of cooperation and coordination between the various functions/bodies with control duties where, in the areas of control, this develops synergies or lead to areas of potential overlap.

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In consideration of the principle of functional specialisation that underlies the organisation of the Credito Valtellinese Group and the strong cohesion that characterises the links between its various units, the Document is valid for all components of the Group. (Principle 7.P.3.). Also with regard to coordination between the parties involved in the internal control and risk management system, the Board of Statutory Auditors shall be provided with extensive communication and cooperation from Internal Auditing, also through joint participation in the meetings of the Risks and Control Committee.

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12.0 DIRECTORS’ INTERESTS AND RELATED PARTY TRANSACTIONS The matter is mainly regulated by Article 2391-bis of the Italian Civil Code, whereby the governing bodies of companies resorting to the equity market adopt, according to general principles indicated by Consob, rules that assure “the transparency and substantial and procedural correctness of related party transactions” carried out directly or through subsidiaries. The supervisory authority is obliged to ensure compliance of the rules adopted and refers on this in the report to the shareholders' meeting. The Consob with resolution no. 17221 of 12 March 2010, implementing the delegation contained in Article 2391-bis Italian Civil Code, approved the “Related Party Transaction Regulation”, subsequently amended via resolution no. 17389 of 23 June 2010, that defined the general principles with which the companies resorting to the equity market must comply when fixing the rules for ensuring transparency and substantive and procedural correctness in related party transactions. Subsequently, with measure dated 12 December 2011, the Bank of Italy introduced a new Title V, Chapter 5, of Circular no. 263 of 27 December 2006 on “Risk Assets and Conflicts of Interest in relation to Associated Parties” which, for listed companies and issuers with widespread shareholdings, accompanies the aforementioned regulations on transactions with related parties adopted by Consob. In accordance with the Consob Regulation, on 9 November 2010 the Board of Directors of Credito Valtellinese, with the favourable opinion of a specifically established committee, consisting solely of Independent Directors, originally approved the “Procedures for related party transactions” (the “RTP Procedures”). Subsequently, implementing the Bank of Italy Regulations on Associated Parties, on 12 June 2012 the Board of Directors approved a new document, the “Procedures concerning Related Party Transactions and Associated Parties - June 2012”, which replaced the previous RPT Creval Procedures 2010 from 31 December 2012. The provisions are in force from 31 December 2012. The RPT Procedures establish in detail the procedural and disclosure obligations the Bank must meet within the management of related party transactions carried out directly or through subsidiaries. In particular, the RPT Procedures: a) identify the most significant transactions; b) identify the cases of partial or complete exclusion from the enforcement of the decision-making procedures (transactions involving small amounts, ordinary transactions completed at conditions equivalent to market or standard ones, transactions to which Article 136 of the Consolidated Law on Banking applies); c) exclude from the enforcement of the provisions of the RPT Consob Regulation the transactions carried out with or between subsidiaries, even jointly, and transactions with associates provided that there are no significant interests of other related parties. The RPT Procedures also require the identification of operational solutions suitable for adequate management of situations where a director holds an interest on his/her own behalf or on behalf of third parties. As regards intragroup transactions, relations between Group companies were established within a consolidated “network-company” organisational model - as widely illustrated in this Report - whereby each legal entity focuses solely on its own core business, in a business framework that enables effective and efficient management of overall Group resources.

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The Board of Directors is exclusively responsible for the definition of intragroup contractual agreements and approval and possible amendment of the related economic conditions. For the transactions of greatest importance, as defined in the aforesaid Regulation, carried out during the financial year, the reporting obligations specified by the RPT Procedures were applied. As mentioned above, on 12 December 2011, the Bank of Italy issued the ninth update to Circular 263 of 27 December 2006, which introduces new prudential supervisory provisions for banks contemplating – among other things - a new and specific legislation in relation to risk assets and conflicts of interest with Associated Parties. These regulations accompany the provisions set out by Consob, pursuant to Article 2391-bis of the Italian Civil Code, in the “Related Party Transaction Regulation” issued and subsequently amended, with resolution 17221 of 12 March 2010. Therefore, the Credito Valtellinese Banking Group adopted - in accordance with the combined provisions of the aforesaid regulations - the new “Procedures for Transactions with Related Parties and Associated Parties”, which regulate the safeguards and procedures adopted to carry out transactions with related and associated parties. These procedures, which entered into force on 31 December 2012, have been adopted by all the banks in the Group. According to the provisions of the specific regulations, the new version of the document was published at http://www.creval.it/governance/documentiSocietari.html, on the Bank's website. The Supervisory Authorities also required that Parents of Banking Groups draw up a document outlining the policies adopted by the Group regarding controls on risk assets and conflicts of interest in relation to Associated Parties. The document provides indications concerning: - the business segments and types of business relations in relation to which conflicts of interest may arise, - the risk appetites that will be established in managing banking operations, which are consistent with the strategic profile and organisational characteristics of the Banking Group, - the description of the organisational processes adopted to identify and register associated parties, - the control processes executed to guarantee the correct measurement and management of risks assumed in relation to associated parties. The document "Internal Policies regarding controls on risk assets and on conflicts of interest in relation to associated parties of the Credito Valtellinese Banking Group”, in line with the provisions of the Bank of Italy, was approved by the Board of Directors of the Parent on 11 December 2012, by acquiring the prior favourable opinion of the RPT Committee and the Board of Statutory Auditors. The policy was notified to the Shareholders' Meeting of 27 April 2013 and made available for any requests made by the Bank of Italy. In relation to the specific business, the provisions of Article 136 of the Consolidated Banking Act on obligations of banking representatives also apply to the bank.

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http://www.creval.it/governance/documentiSocietari.html

13.0 APPOINTMENT OF STATUTORY AUDITORS Pursuant to Article 44 of the Articles of Association, the Board of Statutory Auditors is appointed at the ordinary Shareholders' Meeting and comprises three Standing Auditors and two Substitute Auditors who have the requirements as prescribed by law. The Statutory Auditors remain in office for three years which expires on the date of the Shareholders' Meeting called to approve the financial statements for their third year of office. They can be re-elected. The entire Board of Statutory Auditors is appointed on the basis of lists containing not more than five candidates and not less than two, presented by the Shareholders, and where the candidates must be listed in progressive order. Each list will comprise two sections: one for the candidates for the position of Standing Auditor and one for the candidates for the position of Substitute Auditor. The lists must be filed at the company headquarters as required by the regulations. Each list must be signed by one or more of the Shareholders that hold a total of not less than 0.3% of the share capital, or at least 400 Shareholders, regardless of the shareholding held. If, as at the expiry date of said time limit only one list has been submitted, or lists have only been submitted by shareholders which, in accordance with the prevailing provisions, are affiliated to each other, lists may be submitted up to the third day after said date. The signing Shareholders, at the time of filing the list, must have been enrolled in the Shareholder Register for at least ninety days and be entitled to participate and vote in the Shareholders' Meeting in accordance with regulations in force. Each Shareholder may participate in the presentation of one list only, and if this is not complied with, his or her endorsement will not be counted for any of the lists. The signature of each Shareholder who files a list must have been duly authenticated in accordance with the law or by one or more managers or Company directors or by the Group company authorised by the Board of Directors. The composition of the lists must ensure compliance with the requirements set out in general regulations or provisions of the Articles of Association for individual members and for the entire Board of Statutory Auditors. Each list which contains more than two candidates must be compiled in such a way as to guarantee gender balance among candidates, and must therefore ensure that one candidate in the section of the list relating to standing auditor candidates is of the less-represented gender. In addition to that required by the provisions of prevailing law and regulations, the curriculum vitae of each candidate, indicating their personal and professional characteristics, and the declaration by which each candidate irrevocably accepts his or her candidature must be filed along with each list by the closing date for filing the list at the company headquarters under penalty of disqualification. They must also declare, under their responsibility, that there are no reasons to exclude their eligibility, that there are no incompatibility issues, and that they comply with all the requirements under prevailing law and the Articles of Association to act as Statutory Auditor. Any list that does not comply with the requirements or the timeframes set out in the Articles of Association or with prevailing law will not be admitted for voting. The inadmissibility of lists not filed in compliance with the procedures and timeframes set forth shall be decided by the Board of Directors, as a matter of urgency, subject to the opinion of the committee set up for appointment of directors in compliance with the provisions of the Corporate Governance code of Borsa Italiana. Each Shareholder may vote for one list only. Each candidate may be presented in one list only, under penalty of ineligibility. a) if no lists are presented or admitted – in compliance with the law, regulations or Articles of Association - the Board of Statutory Auditors and its Chairman will be appointed by the Shareholders’ Meeting in compliance with the principles set out in Article 44, paragraph 9, by majority vote in accordance with the Shareholders' Meeting Rules, from the candidates that are presented by the Shareholders at least 7 days prior to the date set for the first call of the Shareholders’ Meeting, and who comply with the obligation to file the documentation provided for; b) if two or more lists are presented:

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i) two Standing Auditors and one Substitute Auditor will be taken from the list that obtained the majority of votes in the order in which they are listed in the list sections; ii) the third Standing Auditor and the second Substitute auditor will be taken from the list that - among the remaining lists - obtained the majority of votes and is not connected, even indirectly, with the Shareholders who presented the list that obtained the majority of votes, in the order in which they are listed in the list sections; iii) if the list that obtained the highest number of votes does not have a sufficient number of candidates to ensure the number of Standing and/or Substitute Auditors to be elected in accordance with the above mechanism is reached, all the candidates of the aforesaid list shall be elected and the remaining Auditors shall be taken from the next list in terms of votes obtained, according to the progressive order in which they are listed in each section of the list. If the list that obtained the highest number of votes among the minority lists does not have a sufficient number of candidates to ensure the number of Auditors to be elected in accordance with the above mechanism is reached, the remaining Auditors shall be taken from the other minority lists that have obtained the most votes according to the progressive order in which the candidates are listed; iv) in the event that the lists obtain the same number of votes, the candidate from the list submitted by the Shareholders who represent a higher percentage of capital will be elected, or where the percentage held is the same, from the list that the greatest number of Shareholders has submitted; c) if only one list is presented or admitted - in compliance with the law, regulations or Articles of Association, the Shareholders' Meeting will vote on it and the candidates in the first and second section of the list shall be elected as Standing Auditors and Substitute Auditors, respectively. In that case, the Chairman of the Board of Statutory Auditors shall be the first candidate on the list. If the number of candidates included on the lists submitted and admitted, whether majority or minority lists, is less than the number of Statutory Auditors to be elected, the remaining Statutory Auditors shall be elected, in compliance with the requirements of gender balance, with resolution adopted by the Shareholders' Meeting with relative majority. In the event of equal votes between a number of candidates, a ballot shall be held between said candidates by further shareholder vote. If, even after following the criteria set forth above for the election of Statutory Auditors, the composition of the Board of Auditors does not comply with the requirements of gender balance, the Statutory Auditor from the list obtaining the most votes who would have been elected under the terms of the aforementioned criteria, indicated on the list with the lowest sequential number and not of the less represented gender, shall be replaced by the next candidate on the same list that does meet these requirements. If, despite application of that mechanism it is not possible to elect Statutory Auditors that meet the necessary requirements to complete the composition of the Board of Statutory Auditors as envisaged in these Articles of Association, or it is not possible to apply the mechanism, the Shareholders' Meeting shall resolve by relative majority vote on proposals from shareholders in attendance to replace one or more Statutory Auditors that would be elected under the terms of the aforementioned criteria, starting from the Statutory Auditor with the lowest sequential number on the list that received the least votes. The Chairman of the Board of Statutory Auditors will be the first candidate listed on the minority list that obtained the majority of votes from the remaining lists. If, on early termination of office of a Standing Auditor, until the next Shareholders' Meeting a replacement shall be elected from the same list, in the sequential order in which they appeared on that list, without prejudice to compliance with the principle of gender balance. If the Chairman terminates office early, the chairmanship shall be undertaken until the next Shareholders' Meeting by the first standing auditor or, failing this, the first substitute auditor, drawn from the list which included the Chairman leaving office. If it not possible to proceed according to the indications above, the Standing Auditor or Chairman leaving office shall be replaced in compliance with provisions of law until the next Shareholders' Meeting.

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At Shareholders' Meetings to appoint the Standing or Substitute Auditors required to integrate the Board of Statutory Auditors following the termination of office of individual Statutory Auditors, without prejudice to compliance with the principle of gender balance, instead of list voting, the following method is adopted: a) if it is necessary to replace Statutory Auditors drawn from a single list presented or from the list that received the most votes, or by voting without lists or in the event of integrating members in compliance with the principle of gender balance, the appointment of Statutory Auditors to be integrated and any appointment of a Chairman, if necessary, shall be by relative majority vote on individual candidates presented by Shareholders at least 7 days prior to the date set for the Shareholders' Meeting on first call; b) if it is necessary to replace a Statutory Auditor elected from a minority list, the appointment of the Statutory Auditor to be integrated and the appointment of the Chairman, if necessary, takes place by means of relative majority vote, choosing, where possible and according to the sequential order, from among the candidates that were indicated on the list that included the Statutory Auditor to be replaced or, where this is not possible, from among the candidates who were indicated in the next minority list in terms of votes obtained, provided that the candidates, at least 10 days prior to the date set for the first call of the Shareholders' Meeting, have confirmed their candidature and filed the declaration certifying the inexistence of causes of ineligibility or incompatibility and the possession of the requirements set forth for the office of Statutory Auditor, together with their CV indicating their personal and professional characteristics; c) if it is not possible to proceed as indicated in the previous point, appointment of Statutory Auditors to be integrated and the appointment of the Chairman, if necessary, shall be carried out through relative majority vote on individual candidates presented by Shareholders at least 7 days prior to the date set for the Shareholders' Meeting on first call, as well as in compliance with the principles set out in Consob regulations. The Articles of Association to not envisage the election of more than one minority Statutory Auditor.

14.0 COMPOSITION AND OPERATION OF THE BOARD OF STATUTORY AUDITORS (pursuant to Article 123-bis, paragraph 2, letter d) of the Consolidated Law on

Finance). The information concerning the composition of the Statutory Board of Auditors in office as at 31 December 2014 is listed in TABLE 3 in the appendix The Board was appointed by the ordinary Shareholders’ Meeting of 27 April 2013 for the 2013 – 2015 three-year period and the term will expire at the Shareholders’ Meeting called to approve the financial statements for the year ending as at 31 December 2015. The Board was appointed on the basis of one voting list and comprises:

− Angelo Garavaglia, Chairman of Board of Statutory Auditors; − Giuliana Pedranzini and Luca Valdameri, Standing Auditors; − Anna Valli and Edoardo Della Cagnoletta, Substitute Auditors.

The only list was presented by 803 Shareholders, representing a total of 4,031,054 shares, equal to 0.91% of share capital. All the members of the Board of Statutory Auditors have degrees in economics and commerce and are registered in the register of auditors. In addition, the members of the Board of Statutory Auditors hold the professional requirements provided for the parties that carry out control functions in banks by prevailing Supervisory Instructions.

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Below is a summary of the personal and professional details of each Auditor (pursuant to Article 144 – decies of the Consob Issuers' Regulation). Angelo Garavaglia, born in Rho in 1947, qualified as accountant in 1982 and enrolled in the Register of Auditors in 1992. He is an established professional with an accountant firm in Milan and, among other things, he held the position of Chairman of the Board of Directors of the former subsidiary Banca Popolare di Rho and Chairman of Board of Statutory Auditors of Credito Siciliano. He has been part of the control body of Credito Valtellinese since 2004. Giuliana Pedranzini, born in Bormio (SO) in 1956, qualified as an accountant in 1992 and enrolled in the Register of Auditors in 1995. She conducts her business from her office in Bormio and works with a leading firm in Milan, with functions of corporate, tax and company consulting in addition to holding the office of Statutory Auditor and auditor in businesses and associations operating in the Valtellina area. Luca Valdameri: born on 13 November 1968 in Milan, where he practices as an accountant at one of the leading international independent accounting firms, specialising in tax advisory and legal consultancy for corporations and multinational groups. He enrolled in the Register of Accountants of Milan in 1996 and in the Register of Auditors in 1999. He is a professor at the ’International Bureau of Fiscal Documentation in Amsterdam and gained significant experience in consulting and analysis of tax and welfare issues and share-based incentive plans for employees. He is a standing auditor and auditor for several leading companies. In 2014, there were 47 meetings held/reviews conducted by the Board of Statutory Auditors (of which 27 were Board meetings and 20 were reviews in collaboration with the Inspection Service, at which only one Auditor, mandated by the Board of Statutory Auditors, participates). All members of the Board attended 100% of the meetings. For the current year, the Board of Statutory Auditors has planned a minimum of 25 meetings, of which 7 have already been held. During 2104 no Statutory Auditors terminated their office and there have been no changes in the Board since the end of the year. The Board of Statutory Auditors formalised the evaluation of the independence of its members for the preparation of this Report in accordance with the evaluation criteria provided by Article 148, paragraph 3 of the Consolidated Law on Finance and the Code (Application Principle 8.C.1.). The Board of Statutory Auditors participates in the Board Induction training plan approved by the Board of Directors, aimed at implementing periodic updates and analyses of banking operations and, in particular, on the issues of risk and control. (Application Principle 2.C.2.) In line with that recommended in the Corporate Governance code for corporate governance of listed companies and with the provisions of the Consolidated Banking Law (Article 136), without prejudice to the other obligations established by the Italian Civil Code, the Statutory Auditors are obliged to inform in a timely and exhaustive manner the other Statutory Auditors and the Chairman of the Board about the nature, terms, origin and scope of their interest (Application Principle 8.C.3.). During the year, the Board of Statutory Auditors supervised the independence of the Auditing Firm, ensuring its compliance with prevailing laws and the nature and type of services other than auditing

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services provided to the Issuer and its subsidiaries by the Auditing Firm and the entities belonging to its network. In carrying out its activities, the Board of Statutory Auditors coordinated with the internal auditing and compliance departments as well as the Risks and Control Committee, through periodic meetings. (Application Principles 8.C.4. and 8.C.5.).

15.0 INVESTOR RELATIONS The Bank established an investor relations’ section (in English and Italian) on its website, at the address http://www.creval.it/investorRelations/Index.html, dedicated to shareholders, which is accessible, can be easily identified, and where all investor-related information is made available to shareholders, so that they can make informed decisions in exercising their rights (Application Principle 9.C.1.). The Investor and Media Relations Service is in charge of managing relations with shareholders, in accordance with instructions of the Managing Director and the General Management of the company. The Investor Relations Manager is the Head of the Investor and media relations Service, Tiziana Camozzi (Application Principle 9.C.1.). The Corporate Identity, Quality and Sustainability Service was also set up, for developing, among other things, the Group's Corporate Identity and undertaking every necessary initiative to promote a uniform and consistent representation of the Group's identity, in internal and external relations and, in particular, to create and oversee structured relations to engage stakeholders. (Application Principle 9.C.1.).

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16.0 SHAREHOLDERS' MEETINGS (pursuant to Article 123-bis, paragraph 2, letter c) of the Consolidated Law on Finance)

Duly constituted Shareholders’ Meetings represent all Shareholders and its resolutions, made in compliance with the law and Articles of Association, bind Shareholders even if they are absent or dissenting. Shareholders’ rights The Shareholder is entitled to participate in the Shareholders’ Meeting and exercise the right to vote if he/she is registered in the Shareholders’ Ledger for at least 90 days and the appropriate communication of the intermediary entrusted with the keeping of accounts on which the shares as registered pursuant to the regulations currently in force is received at the registered office of the Company, by the end of the third day of the open market before the date fixed for the Shareholders' Meeting in first call, or different deadline established by Consob, in agreement with the Bank of Italy, with regulation. If the notification is received by the Company after the deadline indicated in the paragraph above, the party will be considered legitimate for the purpose of speaking and voting in the meeting provided that the notification arrives by the beginning of the meeting works on first call. Based on the Consolidated Banking Act, in a cooperative bank, the Shareholder has only one vote, regardless of the number of shares held. In accordance with provisions in effect for companies listed on regulated markets, Shareholders can request to call a Shareholder’s Meeting, indicating the issues to be discussed. The Shareholder can only be represented by a proxy issued to another Shareholder, in accordance with the law. Each Shareholder cannot represent through proxy more than five Shareholders. A non-shareholder person cannot represent a shareholder, even if vested with a general power of attorney. The aforesaid restrictions do not apply in the case of legal representation. The Extraordinary Shareholders' Meeting of 28 April 2012 approved a proposed amendment to the Articles of Association, for the purpose of implementing recent legal provisions as well as facilitate the participation of Shareholders' in the life of the company. Specifically, shareholders can now participate in shareholders' meetings using remote communications methods, provided that said systems allow the shareholders to participate and vote and protect confidentiality, where necessary. The Extraordinary Shareholders' Meeting called for 27 April 2013 concurrent with the Shareholders' Meeting to approve the financial statements as at 31 December 2012 approved additional proposals for amendments to the Articles of Association pertaining to the right of shareholders' to ask for additions to the list of items on the agenda, further rules concerning representation in the shareholders' meeting, filing of lists for the appointment of the Board of Directors and the Board of Statutory Auditors, also through remote communications methods, in the timeframes and according to the procedures set out by prevailing regulations, as well as remote systems for participating in the Shareholders' Meeting, for communicating, intervening and voting, as well as the possibility of distributing dividends also through ordinary shares. Concurrent with the Ordinary Shareholders' Meeting called to approve the financial statements as at 31 December 2013, an Extraordinary Shareholders' Meeting was called, which resolved on a number of amendments to the Articles of Association relating to the need to adjust to regulations, to circumstances which result in the acquisition or loss of classification as a shareholder, to powers which cannot be delegated and are reserved to the exclusive responsibility of the Board of Directors, and to a amendment of a merely formal nature. Powers of the Shareholders' meeting

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In addition to discussing the subject matters provided by the law, the ordinary Shareholders' Meeting passes the following resolutions: - approves the pay policies and fee plans based on financial instruments to the Directors, employees and collaborators not bound to the Bank by contractual relationships; - authorises the carrying-out of related party transactions that the Board of Directors may subject to its examination pursuant to the Bank's internal procedures adopted in accordance with the legislation in force. - establishes, on proposal by the Board of Directors, as envisaged by Article 9, paragraph 2 of the Articles of Association, the minimum number of shares that must be held, when submitting an application, by those wishing to become a Shareholder. Quorums The Ordinary Shareholders’ Meeting is validly constituted in first call when at least one fourth of the Shareholders are present or represented, and in second call regardless of the number of Shareholders present or represented. The Extraordinary Shareholders’ Meeting is validly constituted in first call when at least one third of the Shareholders are present or represented and in second call when at least one eightieth of the Shareholders are present or represented. Deliberative quorums As regards the deliberative quorum, the Ordinary Shareholders’ Meeting resolves based on an absolute majority of the votes while the Extraordinary Shareholders’ Meeting resolves in first call with a favourable vote of at least one fourth of the Shareholders and in second call with a majority of two thirds of the votes. Resolutions of the Extraordinary Shareholders’ Meeting regarding the transformation or merger of the Company must have in second call the favourable vote of at least one tenth of the Shareholders with voting rights. In this regard, the extraordinary Shareholdings' Meeting called on 28 April 2012 to coincide with the Shareholders' Meeting called to approve the financial statements for the year ending as at 31 December 2011, approved a specific proposal to exclude the applicability of this quorum to mergers with other companies in the Group to which, as a result, the normal quorum of two-thirds of the votes expressed in second call, established for the resolutions of the Shareholders' Extraordinary Meeting, applies. In the event dissolution is resolved by the Shareholders’ Meeting, resolutions regarding the early dissolution of the company must have the favourable vote of at least one third of Shareholders with voting rights even in the second call. Shareholders’ Meeting Regulation The Shareholders’ Meeting Rules aim to ensure that the meetings progress in an orderly manner in an atmosphere of mutual respect, with a balance between the expectations for protecting the interests and rights of the Shareholders and the need to pass resolutions efficiently and effectively (Application principle 9.C.3.). The most recently updated version of these rules with the resolutions of the Shareholders' Meeting of 27 April 2013 is available to the investors, also on the Bank website at the address http://www.creval.it/investorRelations/cv corporateGovernance.html. The Ordinary Shareholders' Meeting of 27 April 2013 approved some amendments to the Shareholders' Meeting Regulation resulting from the need to adapt the regulations to the aforementioned amendments to the Articles of Association approved by the Extraordinary Shareholders' Meeting held on the same date.

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http://www.creval.it/investorRelations/cv

The Shareholders’ Meeting Regulation establishes that each Shareholder has the right to take the floor on each of the topics in discussion and make suggestions. The request to take the floor can be formalised only after the Chairman has read the agenda and before the discussion on the topic to which the request refers is declared closed. If the request to take the floor is done by computerised means, this and the methods used will be previously notified at the beginning of the meeting works. (Application Principle 9.C.3.). Usually all members of the Board of Directors and the Board of Statutory Auditors attend the company Shareholders' Meetings. The Board submits to Shareholders, in compliance with the timeframes and procedures set out in prevailing regulations, reports and information on the points on the agenda, accompanied by all useful information and analysis so that they may make knowledgeable decisions in the Shareholders' Meetings. (Application Principle 9.C.2.) The Chairman of the Remuneration Committee notified the Shareholders of the methods for exercising the functions of said Committee. (Comment to Article 6 of the Code). During the year, there were no changes in the market capitalisation of shares of the company or changes to the composition of the shareholder structure that led the Board of Directors to assess whether to propose to the Shareholders' Meeting amendments to the Articles of Association concerning the percentages set for exercising the actions and rights provided to protect minority shareholders (Application Principle 9.C.4.).

17.0 ADDITIONAL CORPORATE GOVERNANCE PRACTICES (pursuant to Article 123-bis, paragraph 2, letter a) of the Consolidated Law on Finance)

Within the Board of Directors, in addition to the mentioned Committees provided by the Corporate Governance code, the following were also established: a Strategic Committee with consultancy duties that makes proposals to the Board of Directors in the decisions concerning:

- Group strategies, especially in reference to internal and external changes, both in defining or changing the Strategic Plan, as well as monitoring and defining any measures deemed necessary to carry out said Plan and projects implementing the Plan;

- key initiatives that may modify the competitive profile of the Group (e.g., acquisitions, disposals, alliances, joint ventures, significant long-term commitments, significant changes in the sales network).

The Committee consists of the Chairman of the Board and Managing Director (permanent members) and a number of Directors – not less than 3 and not more than 5 – appointed by the Board at the Chairman’s proposal from Directors who are not members of the Executive Committee. As at 31 December 2014 the following were members of the Strategic Committee: Giovanni De Censi (Chairman), Aldo Fumagalli Romario (Deputy Chairman up to that date), Miro Fiordi (Managing Director), Michele Colombo, Alberto Ribolla and Paolo Scarallo. An RPT Committee (related party transactions) whose duties and functions are entrusted by the RPT Creval Procedures on related party transactions carried out by the Bank, also through its subsidiaries. The Committee, set up with resolution of the Board of Directors of the Bank, consists of three non-executive directors with independence requirements indicated in the Corporate Governance code for

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Listed Companies, approved by the Corporate Governance Committee and promoted by Borsa Italiana S.p.A., with which the Bank complies pursuant to Article 123-bis, paragraph 2, of the Consolidated Law on Finance. With the same resolution, the Board of Directors of the Bank identified the Chairman of the RPT Committee. As at 31 December 2014 Mariarosa Borroni (Chairman), Gionni Gritti and Francesco Naccarato were members of the RPT Committee.

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18. CHANGES SINCE THE END OF THE YEAR As a result of the resignation submitted by Deputy Chairman Aldo Fumagalli Romario, effective 1 January 2015 - on a date subsequent to the end of the year, i.e. on 21 January 2015, the Board of Directors of the Company completed the Board by co-opting Valter Pasqua as Director pursuant to Article 2386 of the Italian Civil Code and - pursuant to Article 33 of the Articles of Association - Alberto Ribolla as Deputy Chairman of the Board of Directors. Valter Pasqua, born in Rome on 9 January 1947, gained considerable professional and managerial experience with the ENI Group (1975-1995). He has lectured at the Faculty of Electrical Engineering of the University of Rome. He has been Single Director of the consulting firm AAM- Advisory Asset Management S.r.l. and has been Chairman of MAG - Mecaer Aviation Group S.p.A., a leading company in the sector of equipment and services for the aviation industry, since 2012. He is a Director of Consorzio Universitario Piceno and Director of Distretto Aerospaziale Lombardo. He was a Director of Credito Valtellinese S.C. from April 2006 to April 2013. The newly-appointed Director Valter Pasqua has been classified as a non-executive, independent director, and shall remain in office until the ordinary shareholders' meeting of 2015. Thus, starting from 21 January 2015, the composition of the Executive Committee was changed: in addition to the Chairman Giovanni De Censi, the Deputy Chairman Alberto Ribolla and Managing Director Miro Fiordi, the following Directors are members of the Executive Committee: Mariarosa Borroni, Gabriele Cogliati, Paolo De Santis and Paolo Scarallo. The Board of Directors' meeting of 11 February 2015, acknowledging the intention demonstrated by the newly-appointed Deputy Chairman Alberto Ribolla to resign as a member of the Remuneration Committee, resolved to appoint as a member of said Committee, to replace Alberto Ribolla, Valter Pasqua, who, pursuant to Article 31, paragraph 1 of the Articles of Association, meets both the independence requirements set out for statutory auditors pursuant to Article 148, paragraph three of Italian Legislative Decree no. 58 of 24 February 1998 and the independence requirements indicated in the Corporate Governance code of Borsa Italiana S.p.A.

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TABLES

TABLE 1: INFORMATION ON OWNERSHIP STRUCTURES

SHARE CAPITAL STRUCTURE

No. of shares % of share

capital Listed/ unlisted

Rights and obligations

Ordinary shares

1,108,872,369

100%

Electronic Stock Market

(MTA)

All ordinary shares have the same administrative and equity rights

Shares with multiple votes

Shares with limited

voting rights

- - - -

Shares without

voting rights

-

- - -

Other - - - -

OTHER FINANCIAL INSTRUMENTS

(with the right to subscribe to newly issued shares)

Listed / unlisted

No. of shares issued

Category of conversion

shares / exercise

No. of conversion shares / exercise

Convertible bonds

- - - -

Warrants

Electronic Stock Market (MTA)

-

Ordinary shares / 2014

3,108,157/2014

SIGNIFICANT INVESTMENTS IN CAPITAL

Declarer Direct shareholder % of ordinary capital % of voting capital

U.B.S. GROUP AG

26,145,201

2.36

0.39

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TABLE 2: STRUCTURE OF THE BOARD OF DIRECTORS AND COMMITTEES

Risks and Control

Committee

Remun. Committee

Appointment

Committee

Executive Committee

Off

ic e Members Year of

birth Date of

init. appoint

ment

In office since In office

until List

Exec

. Non exec.

Indep.

Code Inde

p. CLF

No. of other

offices ***

(*) (*) (**) (*) (**) (*) (*

*) (*) (**)

C Giovanni

De Censi 1938 2003 27/4/2013 31/12/2015

single

X 1 16/16

10/11 C

VC Aldo Fumagalli Romario

1958 2008 27/4/2013 31/12/2015 X 2 15/16

9/11 VC

MD • ()

Miro Fiordi 1956 2010 27/4/2013 31/12/2015 X 2 15/16

11/11 MD

D Mariarosa Borroni

1960 2013 27/4/2013 31/12/2015 X X X - 16/16

5/5 C 1/1

M 11/11 M

D Isabella Bruno Tolomei Frigerio

1963 2012 27/4/2013 31/12/2015 X 3 14/16

D Gabriele Cogliati

1952 2006 27/4/2013 31/12/2015 X 1 15/16

11/11 M

D Michele Colombo

1963 2000 27/4/2013 31/12/2015 X - 15/16

D Paolo De Santis

1955 2007 27/4/2013 31/12/2015 X X X - 15/16

1/1

C 10/11 M

D Paolo Stefano Giudici

1965 2010 12/4/2014 31/12/2015 X X X - 11/12

9/9 M

D Gionni Gritti

1961 2013 27/4/2013 31/12/2015 X X X - 16/16

5/5 M

D Antonio Leonardi

1944 2013 27/4/2013 31/12/2015 X X - 16/16

1/1

M

D Livia Martinelli

1958 2013 27/4/2013 31/12/2015 X X X 2 16/16

13/ 13

M

D Francesco Naccarato

1967 2013 27/4/2013 31/12/2015 X X X - 16/16

13/13

C

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D Alberto Ribolla

1957 2004 27/4/2013 31/12/2015 X 1 16/16

5/5 M 4/11 M

D Paolo Scarallo

1950 2010 27/4/2013 31/12/2015 X 1 16/16

DIRECTORS TERMINATING OFFICE DURING THE YEAR D Mario

Anolli 1963 2012 27/4/201

3 20/01/2014 X X X - 0/

16 X C

No. of meetings held during the year: 16 Risks and Control Committee: 13 Remun. Committee: 5 Appointment

Committee: 1 Executive Committee: 11

NOTES Enter the symbols below in the column “Office”: • This indicates the Executive Director in charge of the internal control and risk management system. () This indicates the chief executive officer in charge of managing the issuer (CEO). ° This indicates the Lead Independent Director (LID). * The date of initial appointment of each director is intended as the date on which the director was appointed for the first time (ever) to the issuer's Board of Directors. ** This column indicates the list from which each director was drawn (“M”: majority list; “m”: minority list; “BoD”: list presented by the Board of Directors). *** This column indicates the number of offices as director or statutory auditor held by the interested party in other companies listed on controlled markets - including foreign - in holding, banking, insurance or big-sized companies. The Report on Corporate Governance indicates these offices in full. (*). This column indicates the participation of directors in the meetings of the Board of Directors and the committees, respectively (enter the number of meetings the director participated in out of the total number of meetings he/she could have participated in; e.g. 6/8; 8/8). (**). This column indicates the director's position in the Committee: “C”: chairman; “M”: members

.

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TABLE 3: STRUCTURE OF THE BOARD OF STATUTORY AUDITORS

Board of Statutory Auditors

Office

Members

Year of

birth

Date of init. appointment

In office since

In office until

List

*

Indep. based

on Code Part. in

meetings of the Board ***

No. of other

offices ****

Chairman Angelo Garavaglia

1947 2004 27/04/2013 31/12/2015

single

X 27/27 11

Standing Auditor

Giuliana Pedranzini

1956 2013 27/04/2013 31/12/2015 X 27/27 1

Standing Auditor

Luca Valdameri 1968 2013 27/04/2013 31/12/2015 X 27/27 10

Substitute Auditor

Anna Valli 1973 2013 27/04/2013 31/12/2015 X --

Substitute Auditor

Edoardo Della Cagnoletta

1960 2013 27/04/2013 31/12/2015 X --

STATUTORY AUDITORS TERMINATING OFFICE DURING THE YEAR //

//

//

Quorum required to present lists at the time of the latest appointment: not less than 0.3% of the share capital, or at least 400 Shareholders Number of meetings held during the year: 27

NOTES * The date of initial appointment of each statutory auditor is intended as the date on which the statutory was appointed for the first time (ever) to the issuer's Board of Statutory Auditors. ** This column indicates the list from which each statutory auditor was drawn (“M”: majority list; “m”: minority list). ***This column indicates the participation of statutory auditors in the meetings of the Board of Statutory Auditors (enter the number of meetings the statutory auditor participated in out of the total number of meetings he/she could have participated in; e.g. 6/8; 8/8). **** This column indicates the number of positions as director or statutory auditor held by the interested party pursuant to Article 148-bis of the Consolidated Law on Finance and the related implementing provisions contained in the Consob Issuers' Regulation. The complete list of positions is published by Consob on its website pursuant to Article 144-quinquiesdecies of the Consob Issuers' Regulation.

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LIST OF OFFICES HELD BY THE MEMBERS OF THE BOARD OF DIRECTORS IN OTHER CREDITO VALTELLINESE GROUP COMPANIES AND IN LISTED COMPANIES IN REGULATED MARKETS, INCLUDING FOREIGN MARKETS, IN FINANCIAL, BANKING OR INSURANCE COMPANIES OR SIGNIFICANTLY SIZED COMPANIES

Director

Office

Company

Belongs to the banking

Group Credito Valtellinese

Giovanni De Censi

Chairman

I.C.B.P.I. S.p.A.

Aldo Fumagalli Romario

Chairman and MD

SOL S.p.A.

Director Buzzi Unicem S.p.A.

Miro Fiordi

Director Director

I.C.B.P.I. S.p.A. Cartasì S.p.A.

Isabella Bruno Tolomei Frigerio

Chairman Board of Directors Chairman Board of Directors Member Supervisory Board

Ferfina S.p.A. Holding Condotte Immobiliare S.p.A. Società Italiana per Condotte d’Acqua S.p.A.

Director Director

Beni Stabili S.I.I.Q. Fondo Italiano d'Investimento SGR S.p.A.,

Gabriele Cogliati

Director

Bankadati S.I. S.p.A.

X

Livia Martinelli

Statutory Auditor Substitute Auditor

SOL S.p.A. Cartasì S.p.A.

Alberto Ribolla

Chairman

Mediocreval S.p.A. (up to 31 July 2014)

X

Paolo Scarallo

Chairman

Credito Siciliano S.p.A.

X

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