Infrmatin n capital adequacy f Bank Plska Kasa Opieki S.A. Grup Warsaw. May 2009
The scpe and principles f publishing infrmatin specified in Reslutin N. 6/2007 f the Cmmissin fr Banking Supervisin (KNB) f 13 March 2007 n detailed principles related t the manner f publishing disclsures by banks with regard t qualitative and quantitative infrmatin regarding capital adequacy and the scpe f infrmatin subject t disclsure, defines the Infrmatin Plicy f Bank Peka S.A. f December 2007, published n the Bank s website. Infrmatin Plicy was implemented by the Reslutin f the Management Bard and apprved by the Supervisin Bard. The Bank annunces the infrmatin (see 3.4 f KNB Reslutin N. 6/2007) n the tp cuntry level f cnslidatin, i.e. based n the data fr Bank Peka S.A. Capital Grup. Quantitative disclsures are based n calculatins cnsistent with the rules valid n 31 December 2008. EQUITY OF THE CAPITAL GROUP Equity is cmprised f the capital and funds generated by the cmpanies f the Capital Grup in accrdance with the binding regulatins i.e. the apprpriate laws, statutes and agreements f cmpanies. Equity als includes prir perid prfit (lss). The items cmprising the equity f subrdinated entities ther than statutry capital are added t the apprpriate psitins f the parent entity s equity in prtins in which the parent entity wns the subsidiaries. The equity f the Capital Grup includes nly thse parts f the subsidiaries equity which were created after the date f purchase f shares r stcks by the parent entity. In particular this applies t the change in equity resulting frm prfit r lss r frm revaluatin. Capital fr calculatin f capital adequacy rati was established in cmpliance with Article 127 f the Banking Act taking int accunt adjustments resulting frm Reslutin N. 2/2007 f the Cmmissin fr Banking Supervisin f 13 March 2007. Cmpnents f the capital used t calculate the capital adequacy rati (CAR) as f the end f December 2008 are shwn in the Table belw: 2
Capital fr the CAR calculatin at the cnslidated level (in PLN thusand) Cre capital (Tier 1) 13 117 894 Principal funds: 11 297 328 Share capital 262 213 Surplus capital 9 409 524 Reserve capital 1 625 591 Additinal items f the cre capital: 3 004 331 General banking risk prvisin 1 237 850 Current perid net prfit reduced by the expected dividends 1 766 481 Deductins frm the cre capital (the negative value): -1 183 765 Intangible assets -745 661 Prir perid lsses -37 367 Unrealised lss n the available fr sale debt instruments -137 114 Capital expsure t financial entities -263 623 Supplementary funds (Tier 2) 0 Unrealised gains n the available fr sale instruments 41 960 Unrealised gains n the available fr sale debt instruments 40 219 Unrealised gains n the available fr sale capital instruments 1 741 Deductins frm the supplementary capital (the negative value): -41 960 Capital expsure t financial institutins -41 960 Additinal items f wn funds at the cnslidated level -23 661 Minrity capital 89 125 Freign exchange differences -112 786 Capital fr CAR calculatin 13 094 233 Belw, individual cmpnents f capital fr CAR calculatin are described: A) Principal funds Statutry capital relates nly t the capital f the Bank as the parent entity and is presented at nminal value specified in the Statute and in the entry in the Enterprises Registry. The ttal number f shares amunted t 262 212 629. All shares are rdinary bearer shares paid in full, with a par value f PLN 1 per share. Surplus capital is created frm apprpriatins f prfits and premiums arising n the issue f shares in accrdance with the Statutes f the cmpanies. Mrever the change f the value f the minrities sharehlding caused by the increase f the share f the parent cmpany in the share capital f the Bank was reflected as an increase f this item accrding t the accunting principles applied by Unicredit Grup. The ttal amunt f surplus capital PLN 9 409 524 ths. cmprises f a share premium (cming frm the sale f shares in excess f the nminal value f the shares) in the amunt f PLN 9 105 832 ths. and ther items f the surplus capital in the amunt f PLN 303 692 ths. 3
Reserve capital reserve capital at the level f PLN 1 625 591 ths. cmprises f the fllwing items: - Other reserve capital: PLN 1 594 227 ths. (created frm apprpriatins f prfits; mrever, the ther reserve capital was reduced by the value f the minrity acquisitin with the ppsite (increase) entry in the surplus capital) - Bnds cnvertible int equity: PLN 31 363 ths. (bnds cnvertible int equity cver the equity fair value f financial instruments issued as part f transactins settled in equity instruments in accrdance with IFRS 2.) B) Additinal items f the cre capital General banking risk prvisin created in the Bank ut f net prfit after tax in accrdance with the terms f the Banking Act f 29 August 1997. Current perid net prfit reduced by the expected burdens and dividends in accrdance with Article 127 f the Banking Act, this item can be cntained in cre capital in amunts nt exceeding the prfit amunts verified by auditrs. The item cmprises f Bank Peka S.A. ttal net prfit f the first half f 2008: PLN 1 766 481 ths. On the day f this dcument publicatin, Bank Peka S.A. s 2008 net prfit cntained in the capital amunts t PLN 3 345 845. If n 31 December 2008, the capital had been augmented by the net prfit f the entire 2008, the capital adequacy rati wuld have reached 13.70%, and thus exceeded the published rati by 1.5 p.p. C) Deductins frm the cre funds Intangible assets intangible assets (PLN 745 661 ths.) are deducted frm the cre capital in the full amunt. Prir perid lsses cmprise prir perid uncvered lsses f the cmpanies cnslidated under the full methd. Unrealised lss n the available fr sale instruments - in cmpliance with Reslutin N. 2/2007 f the Cmmissin fr Banking Supervisin f March 13, 2007, unrealised lsses are deducted frm the cre capital in 100%. As f the end f December 2008, they amunted t PLN -137 114 ths. and in full they related t the instruments available fr sale. Capital expsure t financial cmpanies Ttal deductins frm the capital cncerning capital expsure t financial cmpanies (i.e. capital expsure t dmestic and freign banks, credit institutins and financial institutins, meeting requirements stipulated in 5, Sectin 1 f Reslutin N. 2/2007 f the Cmmissin fr Banking Supervisin) amunted t PLN 305 582 ths. and cvered items presented in the table belw: Capital expsure t financial cmpanies (in PLN thusand) 305 582 inclusive f: - shares r interests held 263 382 - amunts qualified as subrdinated liabilities 42 200 - ther capital expsures 0 4
By virtue f 2, Sectin 1, pint 1 and Sectin 2, and 4 f Reslutin N. 2/2007 f the Cmmissin fr Banking Supervisin, the capital expsure t financial cmpanies is included in 50% f their amunt in deductins frm the cre funds, and the remaining 50% in the supplementary funds. Hwever, if 50% f the capital expsure in financial cmpanies exceeds the supplementary funds, the difference shuld be deducted frm the cre capital. Thus, the cre capital deductins equalled t PLN 263 623 ths. D) Supplementary funds The nly item f the Grup s supplementary funds are unrealized gains n instruments classified as available fr sale. As f the end f December 2008, they amunted t PLN 69 933 ths., f which PLN 67 031 ths. was realized n debt instruments and PLN 2 902 ths n capital nes. In cmpliance with 3, Sectin 1 f Reslutin N. 2/2007 f the Cmmissin fr Banking Supervisin, unrealized gains n instruments available fr sale are presented in supplementary funds in 60% f their amunt, equalling t PLN 41 960 ths. E) Deductins frm supplementary funds Deductins frm supplementary funds include the capital expsure t financial cmpanies ttalling PLN 41 960 ths. (vide explanatins in pint C) Capital expsure t financial cmpanies). F) Additinal items f the capital at the cnslidated level Minrity interest equity is a share in the equity f the subsidiary entity cnslidated under the full methd and belnging t entities ther than thse cnstituting the Capital Grup. Exchange rate differences cver negative exchange rate differences arising frm recalculatin f the result f the freign branch at the weighted average exchange rate n the balance sheet date in relatin t the average NBP exchange rate, and exchange rate differences resulting frm valuatin f net assets in freign entities. G) Shrt-term capital The Bank des nt include the shrt-term capital (cnf. Article 128 f the Banking Act and 5, Sectin 1 f Reslutin N. 1/2007 f the Cmmissin fr Banking Supervisin) in its wn capital calculatin. Fllwing the prudential rules, the Bank assumes that the shrt term capital equals t 0. REGULATORY CAPITAL REQUIREMENTS Regulatry capital requirements calculatin as f 31.12.2008 is based n Reslutin N. 1/2007 f the Cmmissin fr Banking Supervisin f 13 March 2007. 5
Minimum capital requirements cncerning individual risk types are presented in the table belw: Regulatry capital requirements in PLN thusand Credit risk 6 928 573 Market risk including: 217 082 - Freign exchange risk 0 - Cmmdities risk 0 - Equity risk 4 - Specific risk f debt instruments 10 925 - General risk f interest rates 206 153 Settlement/delivery and cunterparty risk 301 510 Exceeding the expsure cncentratin limit and the large expsure limit 0 Exceeding the capital cncentratin threshld 0 Operatinal risk 1 122 350 Ttal capital requirement 8 569 515 Capital 13 094 233 Capital Adequacy Rati 12,22% Capital requirement fr peratinal risk, which cnstitutes 13% f the ttal capital requirement, was taken int accunt first time in 2008. Calculatin f peratinal risk capital requirement at the Bank is based n the standard apprach (Annex N. 14 t the Reslutin N. 1/2007 f the Cmmissin fr Banking Supervisin f 13 March 2007). Capital requirement fr credit risk, which is calculated n the basis f the standard methd (Annex N. 4 t Reslutin N. 1/2007 f the Cmmissin fr Banking Supervisin f 13 March 2007), cnstitutes 81 % f the ttal capital requirement. Credit risk capital requirement is cmpsed f: capital requirement fr balance sheet expsures in the amunt PLN 6 133 786 ths, capital requirement fr granted ff-balance-sheet cntingent liabilities and ff-balance-sheet transactins in the amunt PLN 794 787 ths. Credit risk capital requirement structure by expsure classes is shwn in the table belw: Credit risk capital requirement structure by expsure classes (balance sheet expsures and expsures resulting frm granted ff-balance-sheet cntingent liabilities and balance-sheet transactins). 6
Expsure class in PLN thusand Expsures r cntingent expsures t central gvernments and central banks 50 350 Expsures r cntingent expsures t lcal gvernments and lcal authrities 37 799 Expsures r cntingent expsures t administrative bdies and nncmmercial undertakings 19 176 Expsures r cntingent expsures t multilateral develpment banks 0 Expsures r cntingent expsures t internatinal rganisatins 0 Expsures r cntingent expsures t institutins 231 935 Expsures r cntingent expsures t crprates 3 882 243 Expsures r cntingent retail expsures 1 201 710 Expsures r cntingent expsures cllaterised by real estate 1 113 494 Past due expsures 158 399 Expsures belnging t regulatry high risk categries 916 Expsures in the frm f cvered bnds 0 Securitisatin psitins 0 Shrt term expsures t institutins and crprates 528 Expsures in the frm f cllective investments undertakings 0 Other expsures 232 023 Ttal 6 928 573 The bjective f capital adequacy assessment accrding t regulatry requirement is t meet requirements f external regulatins. These regulatins aim at ensuring that banks perate at minimum required capital levels calculated using simplified cmmn framewrk. INTERNAL CAPITAL ADEQUACY ASSESSMENT Fr the purpse f assessing internal capital adequacy (started since January 2008), the Bank has been using the methds develped internally, which shuld better reflect the real risk prfile f the Bank. While assessing the internal capital adequacy, the Bank takes int cnsideratin the fllwing risks, cnsidered material: credit risk (including cunterparty credit risk, cncentratin risk, cuntry risk and residual risk), market risk (including interest rate risk in trading bk, exchange rate risk, equity risk, cmmdity risk and vlatility risk), liquidity risk (including liquidity mismatch risk, liquidity cntingency risk, market liquidity risk, peratinal liquidity risk, funding risk and margin calls liquidity risk), interest rate risk in banking bk, real estate risk, peratinal risk, cmpliance risk, reputatin risk, business risk, 7
strategic risk, financial investments risk. Fr each risk deemed material, the Bank develps and applies assessment and measurement methdlgy. Tw appraches t risk assessment are applied by the Bank: qualitative, fr risks which are hard t measure r fr which capital cannt absrb lsses (cmpliance, liquidity, strategic and reputatin risks), quantitative, fr risks that can be measured by ecnmic capital (remaining risks). The targeted methdlgy f risk measurement and assessment f the resulting capital requirements, t be applied by the Bank, are Value at Risk mdels based n assumptins stemming frm risk appetite (99,97% cnfidence level and ne year time hrizn). The abve-mentined methds are cmpliant with the UCI Grup guidelines and cmplemented with stress-tests r scenari analyses. Fr risks, fr which this methdlgy has nt been develped and implemented yet, the Bank applies the interim methdlgy (standard apprach plus stress testing). Ecnmic capital figures fr cmpensating the risks that can be assessed quantitatively are aggregated int ne ecnmic capital figure inclusive f diversificatin effect. After the diversificatin effect between different risks is included, ttal aggregated ecnmic capital is nt greater (is equal r smaller) than the sum f ecnmic capital figures fr individual risks. Accrding t Plish regulatins, capital adequacy, frm bth: the regulatry capital requirements perspective (Pillar I) and the internal capital perspective (Pillar II), is referred t the regulatry wn funds. It shuld be stressed that regulatry capital shuld cver nt nly Pillar I risks but als all material risks which the Bank incurs (Pillar II). 8