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Notes to the consolidated financial statements

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47. Capital management

The Group’s capital adequacy is managed on the Bank level. It is aimed to ensure that the Bank'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 Bank.

Considering the above, the Bank regularly:

The Bank prepares the following cyclical reports to monitor its capital adequacy on an ongoing basis:

In 2016 the solvency ratio, Tier 1 and internal solvency ratio of the Bank were above the required regulatory minimum.

In order to ensure high standards of capital management, compliant with best banking practices, once a year the Bank reviews the applicable policies and procedures.

 

Equity and solvency ratio

For the purpose of equity calculation, the Group applies methods arising from CRR. The Group’s equity consists of Tier 1 (CET1) and Tier 2 funds recognized on a separate basis (based on CRR provisions, the Bank is exempt from the obligation to determine capital requirements on the consolidated level).

In 2016, Tier 1 funds in the Bank included:

and included adjustments due to:

In June 2016 the Bank issued subordinated P1 bonds with the par value of PLN 50,000 thousand and maturity date of 8 June 2026.  On 23 June 2016, the Bank obtained PFSA’s consent to classify the bonds as Tier 2 instruments (file no. DBK/DBK2/7100/5/4/2016/AN).    

At the same time, in July 2016 the Bank prematurely redeemed subordinate BP0721 series bonds with the par value of PLN 47,340 thousand, which, pursuant to PFSA’s decision of 4 October 2011 (file no. DNB/IV/7100/2/5/IL/11) have been classified as Tier 2 funds of the Bank.  On 23 June 2016 the Bank obtained PFSA’s consent to early redemption of the above bonds (file no. DBK/DBK2/7100/4/5/2016/AN).

As at 31 December 2016, Tier 2 funds in the Bank included cash obtained from a subordinate loan received in 2014 from Poczta Polska S.A. and two issues of subordinate bonds (carried out in 2012 and 2016, respectively).

The table below presents the equity, solvency ratio and Tier 1 capital as at 31 December 2016 and 31 December 2015.

 

* The adjustment regards elimination of a portion of the positive valuation due to unrealized gains in the transition period.

In these consolidated financial statements, the Group has changed presentation of exposure arising from contribution to the central counterparty fund for the case of default and of the exposure to credit risk with weight of 100% and 250% compared to the consolidated financial statements for the year ended 31 December 2015.  The changes involved:

The above changes did not affect the solvency ratio or Tier 1 compared to the consolidated financial statements for the year ended 31 December 2015.