Capital adequacy

Capital adequacy management is aimed to ensure that the Group’s equity level is not lower than the one required by internal and external regulations. The regulations link the required capital level with the scale of operations and risks assumed by the Group.

Considering the above, the Group regularly:

• identifies risks material for its business;
• manages material risks;
• determines internal capital to be maintained should the risk materialize;
• calculates and reports capital adequacy measures;
• allocates internal capital to individual business areas;
• performs stress tests;
• compares its capital needs with the level of equity held;
• integrates the capital adequacy assessment with development of the Bank’s Strategy, financial and sales plans.

Equity

The Group’s equity consists of Tier 1 and Tier 2 capital. In 2013, Tier 1 capital included:

• core capital: share capital, supplementary capital and reserve capital,
• general risk reserve,

and was reduced by:

• the carrying amount of intangible assets;
• loss on measurement of financial instruments classified as available for sale;
• other items, as specified in supervisory regulations.

Tier 2 capital of the Group in 2013 included:

• a portion of gains on measurement of debt instruments classified as available for sale, as determined by the applicable regulations;
• cash obtained from a subordinate loan received in 2011 from PocztaPolska and two issues of subordinate bonds (carried out in 2011 and 2012, respectively);
• other items, as specified in supervisory regulations.

Capital requirements (Pillar 1)

For the purpose of determining the total capital requirement, the Bank uses methods arising from Resolution 76/2010 of the Polish Financial Supervision Authority of 10 March 2010, including in particular:

• the standard method of calculating the capital requirement arising from the credit risk in accordance with Appendix 4 to the above resolution;
• the standard method of calculating the capital requirement arising from the credit risk in accordance with Appendix 17 to the above resolution;
• the standard method of calculating the capital requirement arising from operational risk in accordance with Appendix 14 to the above resolution (in 2012, there was a change from the previously used basic ratio method);
• the basic method of calculating the capital requirement arising from the currency risk in accordance with Appendix 6 to the above resolution;
• the maturity method to calculate the capital requirement arising from the general interest rate risk in accordance with Appendix 10 to the above resolution;
• the basic method of calculating the capital requirement arising from the specific debt instrument price risk in accordance with Appendix 9 to the above resolution;
• the method of calculating the capital risk arising from the exceeded exposure concentration limit compliant with Appendix 12 to the above resolution;
• the method of calculating the capital risk arising from the exceeded capital concentration limit compliant with Appendix 13 to the above resolution.

Since the trading scale was immaterial and the level of currency transactions performed was low, the capital requirement regarding market risks and currency risk for the Group was PLN 0.00.This meant that at the end of 2013 the Group had a capital requirement arising from credit risk and from operational risk.

In 2013 the supervisory solvency ratio of the Group was above the required regulatory minimum.

The Bank has worked on achieving compliance both on the Bank and the Group level with Regulation of the European Parliament and of the Council (EU) no. 575/2013 of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending the Regulation (EU) no. 648/2012.

Internal capital (Pillar 2)

When identifying key risks that occur in the Group’s operations, having included the scale and complexity of a given operation, additional risks are considered which, according to the management, are not fully covered by Pillar 1 risks. The identification is to optimally adjust the structure of internal capital to the actual capital needs that reflect the true risk exposure level.

For the additional risk purpose, the internal capital is calculated based on internal method accepted by the Management Board, which include the scale and specifics of the Group's operations in a given risk context.

Additionally, when determining the internal capital, the Group applies a conservative approach with regard to risk diversification among each risk type.
Please note that due to the specifics of liquidity risk and in light of market standards and practices, the Group does not determine an additional internal capital for this risk type.For this reason, special focus is placed on the process evaluation and management.

In 2013 the internal solvency ratio of the Group was above the required regulatory minimum.

Disclosures (Pillar 3)

Pursuant to Resolution no. 385/2008 of Polish Financial Supervision Authority of 17 December 2008, regarding detailed principles and a manner of publishing quality and quantity data regarding capital adequacy of banks and the scope of information subject to publication (with subsequent amendments) and to General Principles of Disclosing Information on Capital Adequacy in Bank Pocztowy S.A. accepted by the Supervisory Board of the Bank, the Group publishes its capital adequacy data in a separate document published on an annual basis, not later than 30 days of the approval of the annual financial statements by the General Meeting.

Capital adequacy of the Bank's Capital Group (in PLN million)

In 2013, the disclosures regarding capital adequacy were presented in accordance with deadlines arising from the provisions of the above Resolution.

The following tables present detailed calculation of base figures regarding regulatory capital and the solvency ratio as at 31 December 2012 and 31 December 2013.

Equity (PLN '000)

	31.12.2013	31.12.2012
I. Tier 1 capital	360,121	329,660
1. Core capital	267,220	224,776
a) Share capital	97,290	97,290
b) Supplementary capital	34,068	33,761
c) Reserve capital	135,862	93,725
2. Additional items of Tier 1 capital	142,372	140,294
a) General risk reserve	106,345	101,345
b) Net profit for the period	36,027	38,949
3. Items reducing Tier 1 capital, including:	(49,471)	(35,410)
a) Carrying amount of intangible assets	(30,215)	(27,339)
b) Prior year loss	(16,476)	(7,981)
c) Other	(2,780)	(90)
II. Tier 2 capital, including:	123,810	135,946
1. Subordinated liabilities classified as Tier 2 capital	123,140	131,740
2. Other	670	4,206
Equity	483,931	465,606

 

Capital requirements (PLN '000)

	31.12.2013	31.12.2012
Capital requirements for credit, counterparty credit, dilution and settlement risk, including for exposures	267,672	233,697
with 0% risk weight	0	0
with 20% risk weight	5,884	6,800
with 35% risk weight	45,440	42,305
with 50% risk weight	1,091	737
with 75% risk weight	145,771	121,279
with 100% risk weight	69,086	61,232
with 150% risk weight	400	1,344
other risk weights	0	0
Capital requirement for operational risk	35,390	33,179
Total capital requirement	303,062	266,876
Solvency ratio	12.8%	14.0%
Tier 1	9.5%	9.9%

 

In 2013 the Group’s activities ensured the maintaining of capital ratios on a save level, above the regulatory minimum.