54. Capital adequacy management

Capital adequacy management is aimed to ensure the Group’s compliance with macro-prudential regulations defining capital requirements related to the risks incurred by the Group, quantified in the form of the capital ratio.

Since 1 January 2014, banks have been subject to principles applicable to calculation of capital ratios, following the implementation of Regulation No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on macro- prudential requirements for credit institutions and investment firms and amending Regulation No. 648/2012.

The capital ratios, capital requirements and equity have been calculated in accordance with the aforesaid Regulation with the use of national options.

On 8 August 2018, the Bank received a letter from the Polish Financial Supervision Authority with the information that the Commission conducted a review of the adequacy of the buffer ratio for another systemically important institution. As a result of the review, the Commission concluded that there are no reasons justifying the repeal or amendment of its previous decision of 4 October 2016, as amended by the Commission decision of 19 December 2017, concerning imposition of a buffer for another systemically important institution on the Bank (on a consolidated and separate basis) in the amount of 0.25% of the total risk exposure amount.

On July 9, 2019, the Bank received a letter from the Polish Financial Supervision Authority stating the expiry of the PFSA’s decision of 15 October 2018, on the basis of which PFSA recommended that the Bank should maintain its own funds to cover the additional capital requirement in order to hedge the risk arising from mortgage-secured foreign currency loans and loans to households at the level of 0.36 p.p. over the value of the total capital ratio, 0.27 p.p. over the value of Tier 1 capital ratio and 0.20 p.p. over the value of Common Equity Tier 1 capital ratio referred to in article 92 paragraph 1 of the Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms („Regulation No 575/2013”).

The level of Tier I capital ratio (Tier I) and the total capital ratio (TCR) were above the requirements applicable in 2019.

At the same time, the Bank meets the legal requirements under the Act of 5 August 2015 on macro-prudential supervision of the financial system and crisis management in the financial sector.

 

As at 31 December 2019 the levels of Tier I (Tier I) both on separate and consolidated levels were above the regulatory requirements.