Annual report 2019

53.4. Liquidity risk

Liquidity risk – risk management organization

The Bank’s comprehensive liquidity management system covers both immediate (intraday) and future (current, short-term as well as structural medium- and long-term) liquidity. Risk is managed by the Bank by building the statement of financial position and the financing structure reflected in the Bank’s financial statements including both balance and off-balance sheet items to ensure liquidity at any time, taking into consideration the profile of the Bank’s business, customer characteristics and behaviours as well as needs that may arise as a result of changes in the financial market. Additionally, the risk identification and measurement methods used by the Bank enable it to forecast future liquidity levels, also in stress conditions.

The Bank ensures separation and independence of its operations, risk management, control and reporting functions. In particular, transactions with contracting parties and customers are entered into by the business, confirmed and processed by Operations, immediate (intraday) and future liquidity is managed by ALM Treasury, daily supervision of the risk level and compliance with risk limits is the responsibility of the Risk Function, while supervisory liquidity measures are reported independently by the Finance Division.

The liquidity risk limits adopted by the Bank reduce its exposure to this type of risk. Risk is monitored and controlled based on documents adopted by resolutions of the Bank’s Management Board (risk measurement and monitoring policy and methodologies), developed in compliance with the guidelines formulated in Recommendation P of the Polish Financial Supervision Authority, the provisions of PFSA’s Resolution No. 386/2008 and Commission Delegated Regulation (EU) 2015/61. The Bank has an internal transfer pricing system in place, which reflects accurately the real financing cost for each asset and liability type, and the transfer pricing structure stimulates optimization of the statement of financial position, including diversification of the sources of funding, from the perspective of liquidity risk. LTD limits for each business line are an important additional component of that system, as they facilitate maintenance of a secure level of assets relative to liabilities, which is appropriate considering the characteristics of each line.

The level of liquidity risk appetite is determined by the Supervisory Board of the Bank and the risk management policy based on that appetite, including definition of general liquidity risk measures, is approved by the Management Board, whereas specific risk limits and their monitoring are the responsibility of ALCO. The Bank’s Management Board and Supervisory Board supervise the effectiveness of the liquidity risk management process based on periodic information and current reports.

In compliance with the requirements of PFSA’s Recommendation P, the Bank conducts numerous analyses verifying its ability to maintain liquidity in crisis situations. Stress tests cover comprehensive scenarios considering internal and system factors and combining different variants with possible interactions. Stress test results are taken into account in determining liquidity limits. The Bank has a comprehensive emergency plan in place. It comprises various scenarios along with action plans for liquidity crisis situations in the Bank and in the banking system as a whole. Stress test results are correlated with the emergency plan and reaching defined warning levels triggers the emergency plan.

On a quarterly basis, the Bank analyses liquidity risk at the consolidated level, taking into account individual subsidiaries whose balance sheet total exceeds 2% of the value of the Bank’s assets, and other subsidiaries, if their total balance sheet total exceeds 3% of the Bank’s assets.

Risk measures

The Bank uses external and internal risk measures. The internal measures include, among others: an analysis of trends and volatility of each source of funding relative to the loan portfolio (LTD), the contractual liquidity gap and the liquidity gap realigned based on behavioural factors along with mismatch structure limits defined on its basis, an analysis of surplus liquidity and the available sources of funding, an analysis of stability and concentration of the deposit base as well as a review of the structure of funds placed with the Bank by the major depositors by volume and maturity. Additionally, sales plans (covering loans and deposits) are monitored, broken down by each business line, and simulation analyses are performed. Furthermore, the Bank analyses the costs of the deposit base with a view to optimizing the liquidity buffer and the use of such tools as the liquidity margin or pricing policy.

The external measures include supervisory long-term liquidity ratios introduced by PFSA’s Resolution No. 386/2008 as well as LCR, as defined in Commission Delegated Regulation (EU) 2015/61 and NSFR determined in the Regulation No. 575/2013 of the European Parliament and of the Council and developed in line with the Commission Implementing Regulation (EU) No. 680/2014 and Basel III introducing the new stable funding ratio requirement.

The on-going supervision includes early warning tools, such as monthly reviews of additional liquidity requirements defined in the Commission Implementing Regulation (EU) No. 2016/313. In addition, the Bank conducts daily analyses of various liquidity indicators with warning levels defined in the Emergency Liquidity Plan. Theses allow, when warning levels are reached, to introduce remedial actions and restore the Bank’s safety in terms of liquidity.

Liquidity risk

In 2019, the Bank’s financial liquidity was maintained at a safe level. The Bank’s funds were sufficient for payment of all its liabilities upon maturity. The portfolio of the most liquid securities was maintained at a level, which was sufficient to offset a potential outflow of funds placed with the Bank by the major depositors in whole.

31.12.2019 31.12.2018
Cash at Central Bank (over the reserve requirement) (784,667) (2,327,327)
Cash at other banks up to 30 days 527 628
Highly-liquid securities 26,111,430 24,521,566
Surplus liquidity up to 30 days 25,327,290 22,194,867

The liquidity surplus increased compared to the end of 2018, mainly due to the higher accumulation of deposits from non-banking clients.

31.12.2019 31.12.2018
M3 6.88 8.54
M4 1.28 1.25
limit 1.00 1.00
31.12.2019 31.12.2018 limit
Liquidity Coverage Ratio 162% 152% 100%

In 2018, the Bank, after the acquisition of the organized part of Raiffeisen Bank Polska in the end of 2018, continued to optimize its financing sources, which aims to reduce unnecessary, and at the same time costly and unstable, excess funding. In 2019, the Bank maintained highly lowered level of medium- and long-term loans from the BNPP Group and its subsidiaries.

31.12.2019 31.12.2018
balance stable (%) balance stable (%)
long-term loans from the Group 1,882,064 100% 1,872,491 100%
other long-term loans 219,971 100% 623,207 100%
securitization liabilities 2,298,151 100% 2,298,151 100%
retail 50,449,843 90% 51,876,788 90%
corporate 35,972,682 81% 34,597,993 81.4%
financial entities 2,456,769 25% 1,195,474 25%
banks and other unstable sources 567,689 0.0% 48,864 0.0%
Total 93,847,169 84.8% 92,512,968 84%
Contractual liquidity gap Up to
1 month
3-12 months 1-5
5 years
Loans and advances to customers 15,870,759 2,020,209 9,038,362 24,224,886 20,476,488
Debt securities 29,015 1 149,709 9,058,649 14,884,030
Interbank deposits 468,878
Cash and balances at Central Bank 1,790,822 2,973,849
Fixed assets 1,214,434
Other assets 1,091,428 1 1,317,567
Off-balance sheet liabilities, including: 27,653,488 7,954,445 19,354,548 38,112,901 10,082,169
derivatives 11,464,813 7,954,445 19,354,548 38,112,901 9,982,169
Retail deposits 39,202,363 3,897,030 6,703,537 646,911 2
Corporate deposits 33,632,979 1,289,615 708,535 125,251 216,302
Interbank deposits 567,689
Loans from financial institutions 145,851 196,211 727,049 1,411,911 1,916,995
Equity and subordinated liabilities 11,189,814
Other equity and liabilities 3,031,040
Off-balance sheet liabilities, including: 42,953,453 7,962,496 19,340,793 38,205,091 9,983,303
derivatives 11,474,207 7,962,496 19,336,493 38,202,591 9,983,303
Total receivables 46,904,390 9,974,654 29,542,620 71,396,436 50,948,537
Total liabilities 119,533,375 13,345,352 27,479,914 40,389,164 23,306,416
Luka płynności (72,628,985) (3,370,698) 2,062,706 31,007,272 27,642,121
* Financial data have been rounded and presented in PLN ‘000, and therefore, in some cases, the totals may not correspond exactly to the total sum.
Contractual liquidity gap Up to
1 months
3-12 months 1-5
5 years
Loans and advances to customers 17,266,916 2,418,630 9,013,358 23,232,182 19,050,101
Dłużne papiery wartościowe 11,001 7,364,532 8,593,788 11,061,000
Interbank deposits 148,837 150,000 21,000
Cash and balances at Central Bank 2,255,969
Fixed assets 1,019,415
Other assets 3,337,222 916,997
Off-balance sheet liabilities, including: 21,440,457 3,125,218 6,524,568 7,757,000 42,092
derivatives 7,847,899 3,125,218 6,524,568 7,757,000 42,092
Retail deposits 39,122,276 4,994,791 6,726,616 1,302,292 2
Corporate deposits 32,641,164 1,431,801 979,267 194,351 166,836
Interbank deposits 34,112
Loans from financial institutions 127,114 199,652 1 067,866 1,464,291 59,154
Equity and subordinated liabilities 364,739 12,095,734
Other equity and liabilities 3,001,043
Off-balance sheet liabilities, including: 38,715,006 3,162,669 6,,587,521 7,803,947 43,031
derivatives 7,815,801 3,162,669 6,587,521 7,803,947 43,031
Total receivables 44460,401 5,693,847 22,923,459 39,582,970 32,089,605
Total liabilities 113,640,715 9,788,913 15,726,009 10,764,881 12,364,758
Liquidity gap (69,180,314) (4,095,066) 7,197,449 28,818,089 19,724,847
* Financial data have been rounded and presented in PLN ‘000, and therefore, in some cases, the totals may not correspond exactly to the total sum.

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