Capital and Liquidity Management

The primary objective of capital management at the Bank is to ensure compliance with external regulatory capital requirements, maintain a high credit rating, and adhere to capital adequacy standards necessary for ongoing operations and maximizing shareholder value.

The Bank implements a comprehensive capital management approach aligned with current market conditions, long-term strategy, and the scale of the Bank’s operations. The capital management system is designed to provide effective monitoring and control over the adequacy of the Bank’s own capital.

Components of the capital management system include:

1. capital management policy;
2. capital funding plan;
3. procedures for monitoring and controlling capital adequacy;
4. management information system;
5. internal control mechanisms;
6. regular assessment of the capital management system’s effectiveness by the internal audit department.

For capital adequacy assessment purposes, the Bank has developed and implemented an Internal Capital Adequacy Assessment Process (ICAAP), approved by the Board of Directors.

Within the ICAAP framework, the Bank performs:

• identification, assessment, and control of material risks inherent to the Bank’s operations;
• strategic capital planning;
• stress testing of the Bank’s financial resilience;
• monitoring of compliance with capital adequacy regulatory requirements.

Procedures for analyzing capital adequacy based on the Bank’s current risk profile, future development plans, and results of stress testing for material risks include the following activities:

1. conducting regular stress testing of the Bank’s risks and assessing their combined impact on the Bank’s capital adequacy level;
2. calculating current and projected risk levels;
3. determining the need for capital increases when developing or adjusting the budget, development plan, or long-term strategy of the Bank;
4. approving the Bank’s budget, development plan, or long-term strategy by the Board of Directors, including the Bank’s intent to change capital levels in line with its risk appetite and strategic objectives.

To assess liquidity adequacy, the Bank has developed and implemented the Internal Liquidity Adequacy Assessment Process (ILAAP), which was approved by the Board of Directors. Within the ILAAP framework, the Bank ensures an effective process for identifying, assessing, monitoring, and controlling liquidity risk, which includes forecasting cash flows for assets and liabilities across various time intervals. The Bank assesses all on-balance and off-balance sheet items impacting liquidity risk, as well as market liquidity to meet potential funding needs in order to manage liquidity risk.

Liquidity assessment time horizons include:

• Intraday liquidity needs and funding capacity;
• Short- and medium-term liquidity and funding needs of up to one year;
• Long-term liquidity needs of over one year.

Procedures for analyzing liquidity adequacy include calculating current and projected risk levels, conducting regular stress testing of the Bank’s risks and evaluating their aggregate impact on the Bank’s liquidity level. These also include developing and implementing response measures to potential crisis situations, aimed at maintaining financial stability and ensuring compliance with long-term liquidity requirements.