Maintaining an adequate level of capital is one of the main tasks of managing the balance sheet of a bank. The Management Board of mBank ensures consistency of the capital and risk management process by means of a system of strategies, policies, procedures and limits for the management of particular risks which constitute the ICAAP architecture. Furthermore, in line with the Capital Management Policy applicable at mBank, mBank maintains an optimum level and structure of own funds, guaranteeing maintenance of the capital adequacy ratio at a level higher than the statutory minimum, at the same time covering all significant risks identified in the Bank’s operations. mBank’s capital targets are being set based on the regulatory requirements and simulated capital needs to cover unfavourable changes in the external environment and within the Bank.
The Capital Management Policy at mBank is based on two main pillars:
The capital ratios of mBank Group in H1 2014 were driven by the following factors:
In H2 2014 the capital ratios of mBank Group were driven by the following factors:
Additionally, in the capital adequacy assessment process the following factors are taken into consideration:
In mBank, risk appetite covers all significant risks and key risk concentrations embedded in its business strategy by setting appropriate capital buffers for risk resulting from potential materialization of selected risk factors related to existing portfolios and planned business as well as addresses expected new regulatory requirements and potential negative macroeconomic changes.
The integrated stress tests are conducted assuming scenario of unfavourable economic conditions that may adversely affect the Bank's financial situation in at least a full 2 year time horizon (for liquidity risk in 1 year horizon). The risk scenario, ie. the most plausible (in at least a full 2 year time horizon) scenario of negative deviations from the base scenario, expressed in terms of macroeconomic and financial ratios is common for all risk types and is aligned with the corresponding scenario accepted at the consolidating entity group level.
Additionally, once a year, the Bank carries out supplementary stress tests using much more severe risk scenarios and/or events. The Group and the Bank carries out so called reverse stress tests, the goal of which is to identify events potentially leading to unviability of the Group and the Bank.
The Group and the Bank take part in regulatory stress tests conducted annually by the PFSA, in order to determine the impact of assumed macroeconomic stress scenarios on the Group’s balance sheet and P&L as well as on external supervisory norms.
Extended information on the rules of determining risk appetite taking into consideration capital buffers and stress tests is included in the IFRS Consolidated Financial Statements 2014 of mBank S.A. Group.