Annual report 2019

Own funds and capital ratios

The total capital ratio of the Group as at 31 December 2019 amounted to 15.03% and increased as compared to December 2018 by 0.40 p.p.

The consolidated Common Equity Tier 1 ratio (CET I) and consolidated Tier 1 ratio (Tier I) of the Group as at 31 December 2019 were identical and amounted to 12.78% (increase compared to the end of 2018 by 0.40 p.p.).

Total own funds as at 31 December 2019 increased by PLN 372,334 thousand as compared to 31 December 2018, which resulted mainly from the inclusion in own funds of:

  • the consolidated net profit for the first quarter of 2019 in the amount of PLN 161,601 thousand (consent of the Polish Financial Supervision Authority of 10 June 2019),
  • the consolidated net profit for the second quarter of 2019 in the amount of PLN 217,059 thousand (consent of the Polish Financial Supervision Authority of 25 September 2019),

In accordance with the Resolution of the Ordinary General Shareholders’ Meeting of BNP Paribas Bank Polska S.A. of 27 June 2019, the Bank’s entire profit for 2018, in the amount of PLN 364,739 thousand, was allocated to reserve capital.

The total risk exposure amount as at 31 December 2019 amounted to PLN 83,762,992 and increased by PLN 311,711 thousand as compared to the end of 2018.

In accordance with the Act of 5 August 2015 on macroprudential supervision over the financial system and crisis management in the financial sector and Regulation of the Minister of Finance, since 1 January 2019 the capital requirements binding for Polish banks increased due to:

  • introduction of the systemic risk buffer at the level of 3%,
  • increase of the capital conservation buffer from 1.875% to 2.5%.
PLN’000 31.12.2019 31.12.2018 PLN’000 %
Tier I capital
share capital 147,419 147,419 0 0.0%
supplementary capital 7,259,316 7,259,316 0 0.0%
reserve capital 2,797,264 2,432,582 364,682 15.0%
funds for general banking risk 627,154 627,154 0 0.0%
intangible assets (519,504) (520,621) 1,117 (0.2%)
other components of equity included in Tier I capital 394,984 388,449 6,535 1.7%
Total Tier I capital 10,706,633 10,334,299 372,334 3.6%
Tier II Capital
subordinated liabilities classified as Tier II capital 1,879,895 1,872,490 7,405 0.4%
Total own funds 12,586,528 12,206,789 379,739 3.1%
Risk exposure due to:
credit risk 74,668,829 74,358,821 310,008 0.4%
market risk 876,152 844,070 32,082 3.8%
operational risk 7,941,509 7,908,064 33,445 0.4%
credit valuation adjustment 276,502 340,326 (63,824) (18.8%)
Total risk exposure 83,762,992 83,451,281 311,711 0.4%
Group’s capital ratios   change
Total Capital Ratio (TCR) 15.03% 14.63%   0.40 p.p.
Tier I Capital Ratio 12.78% 12.38%   0.40 p.p.

On 8 August 2018, the Bank received a letter from the Polish Financial Supervision Authority informing about the PFSA’s review of the adequacy of the buffer rate of other systemically important institution. As a result of the review, the PFSA concluded that there were no reasons to repeal or amend the PFSA’s Decision of 4 October 2016, as set out in the PFSA Decision of 19 December 2017 on the Bank (on a consolidated and separate levels) of the buffer of other systemically important institutions equivalent to 0.25% of the total risk exposure amount.

On 10 July 2019, the Bank received  a decision of the Polish Financial Supervision Authority, dated 9 July 2019, confirming the expiry of the PFSA decision of 15 October 2018, on the basis of which the PFSA recommended that the Bank should maintain own funds to cover an additional capital requirement of 0.36 p.p. in order to hedge the risk resulting from FX mortgage loans for households which should consist at least in 75% of Tier 1 capital (corresponding to 0.27 p.p.) and at least in 56% of Common Equity Tier 1 capital (which corresponds to 0.20 p.p.) as stated in art. 92 paragraph 1 of the EU Parliament and EU Council Regulation No 575/2013 of 26 June 2013 on prudential requirements for credit institutions and investment firms („Regulation No 575/2013”).

  • As a result of the above changes, the minimum levels of capital adequacy ratios resulting from legal regulations and administrative decisions issued by the Polish Financial Supervision Authority („PFSA”) as of 31 December 2019, are as follows:
  • Common Equity Tier 1 ratio (CET I) = 10.25%;
  • Tier I capital ratio = 11.75%;
  • Total Capital Ratio = 13.75%

On 12 December 2017, the European Parliament and the EU Council adopted Regulation No. 2017/2395 amending the Regulation (EU) No 575/2013 regarding transitional arrangements to mitigate the impact of the introduction of IFRS 9 on equity and on the treatment of large exposures to entities in the sector publicly denominated in the national currency of any Member State. This Regulation entered into force on the day following its publication in the Official Journal of the European Union and has been applicable since 1 January 2018. The European Parliament and the Council (EU) decided that the application of IFRS 9 could lead to a sudden increase in allowances for expected credit losses, and hence, the decrease in Tier 1 capital.

The Group, after analysing the requirements of Regulation No. 2017/2395, decided to apply the transitional provisions provided for in this Regulation, which means that the full impact of the implementation of IFRS 9 will not be taken into account for the assessment of capital adequacy of the Bank.  As a result of adjusting the calculation of regulatory capital requirements, it was estimated that taking into account the full impact of the implementation of IFRS 9 on the total capital ratio of the Bank would reduce its value by 70 basis points.

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