Geographic concentration risk
In order to actively manage the risk of concentration by country, the Group:
Sector concentration risk
Monitoring exposures in sectors is carried out in individual subsidiaries of the Group, in accordance with internal regulations. At the end of each quarter, subsidiaries shall draw up a report on the involvement in various sectors. This report is then passed to the organizational unit in the mBank.
mBank, as a parent company of the Group, analyses the sector concentration risk in order to build mBank’s corporate portfolio in a safe and effective way. The analysis covers the standing of each customer of the Group vs. the rest of the sector. For this purpose, the Group uses a statistical database, in which each financial parameter of each of the Bank's customers is mapped onto a decile grid of the parameter for the whole industry. This enables the Bank to monitor its industry-related risk to its portfolio when the standing of the whole industry undergoes rapid changes under the influence of external factors.
Sector limits are set for sectors defined by the Bank in accordance with the internal Bank’s regulations, in quarterly reporting periods. Monitoring and analysis covers all the sectors in which the Bank’s exposure exceeds 5% of the total amount of exposures at the end of a given reporting period, and sectors additionally indicated by the Chief Risk Officer. Unless the Corporate and Investment Banking Risk Committee (KRK) decides otherwise, an exposure limit is set for the mBank in any sector on a level not higher than:
In the case of exceeding any sector limit or an expectation that such a limit may be exceeded in the next reporting period, activities preventing the exceeding of limits are implemented and any decision in this regard shall be taken by the KRK.
The table below presents the structure of concentration of mBank S.A. Group’s exposures in particular sectors.
The structure of concentration of carrying amounts of exposure of mBank S.A. Group
|No.||Sectors||Principal exposure (in PLN million)||%||Principal exposure (in PLN million)||%|
|1.||Household customers||41 560 477||53.71||38 307 915||54.27|
|2.||Real estate management||4 901 307||6.33||4 671 081||6.62|
|3.||Wholesale trade||2 977 441||3.85||2 380 927||3.37|
|4.||Construction||2 884 365||3.73||2 443 150||3.46|
|5.||Retail trade||2 430 956||3.14||1 738 372||2.46|
|6.||Transport and logistics||1 819 827||2.35||2 077 249||2.94|
|7.||Food sector||1 705 944||2.20||1 726 721||2.45|
|8.||Fuels and chemicals||1 628 617||2.10||1 601 544||2.27|
|9.||Public administration||1 574 513||2.03||1 781 251||2.52|
|10.||Power, power and heating distribution||1 422 625||1.84||1 520 261||2.15|
|11.||Forestry||1 286 566||1.66||1 057 731||1.50|
|12.||Metals||1 266 991||1.64||1 139 522||1.61|
|13.||Information and communication||1 197 133||1.55||965 072||1.37|
|14.||Scientific and technical activities||586 923||0.76||329 015||0.47|
|15.||Hotels and restaurants||455 059||0.59||433 275||0.61|
|16.||Services||453 169||0.59||112 793||0.16|
|17.||Motorization||452 873||0.59||379 357||0.54|
|18.||Arts, entertainment||439 693||0.57||438 596||0.62|
|19.||Financial activities||427 299||0.55||427 727||0.61|
|20.||Electronics and household equipment||408 000||0.53||463 705||0.66|
|21.||Industry||307 850||0.40||235 055||0.33|
|22.||Municipal services||299 883||0.39||220 436||0.31|
In 2014, the total exposure of the Group in the above sectors (excluding household customers) amounts to 37.39% of the credit portfolio (2013: 37.03%). The risk of investing in these sectors (in a 3-point scale, i.e., low, medium, high) as at the end of 2014 was estimated by the Group’s sector analysts. Due to changes in the structure of concentration of exposures in particular sector performed in the Bank, information presented in the consolidated financial statements for the year 2013 is not fully comparable with the data presented below and therefore has not been included.
|1.||Real estate management||medium|
|5.||Transport and logistics||medium|
|7.||Fuels and chemicals||medium|
|9.||Power, power and heating distribution||medium|
|12.||Information and communication||medium|
|13.||Scientific and technical activities||medium|
|14.||Hotels and restaurants||medium|
|19.||Electronics and household equipment||medium|
Large exposures concentration risk
The purpose of management of the large exposures concentration risk is an ongoing monitoring of the level of legal limits set by the external supervisors. In order to ensure safety against the risk of exceeding the regulatory limits in mBank:
These activities have a direct impact on the Bank’s decisions concerning new exposures and the increase of existing exposures to customers/groups of affiliated customers.
mBank pays particular attention to the correct identification of the scale of risk of significant high-risk credit exposures defined in the Bank’s internal regulations. In the case of exceeding specified amount of exposure/limit to a customer/group of affiliated customers identified as bulk risk, the financing requires additional decision of the Bank’s Management Board irrespective of the PD-rating and the decision-making level.
The Credit Committee of mBank Group, first started in November 2014, is responsible for the supervision over risk concentration and large exposures at the Group level.