Capital adequacy

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Capital ratios are the basic measure applied for the measurement of capital adequacy. Since January 1, 2014 banks are obliged to apply new rules to calculate capital ratios due to entering into force a Regulation of the European Parliament and of the Council (EU) No 575/2013 of June 26, 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.

Capital ratios, capital requirements and own funds have been calculated in accordance with the above mentioned Regulation using so-called national options used for COREP reporting. In particular, this applies to the risk weights for claims secured by mortgages, which are consistent with Resolution No. 76/2010 of the Polish Financial Supervision Authority of March 10, 2010 as amended.

The table below presents the basic data concerning the Group capital adequacy as at December 31, 2014 and December 31, 2013 according to the new rules of Basel III.

(in PLN thousand)

capital requirement

31.12.2014

31.12.2013

Credit risk

7,937,365

7,277,933

Exceeding large exposure limits

-

-

Market risk

192,563

127,683

Delivery and contractor risk

442,446

195,919

Exceeding exposure concentration limit

-

-

Operational risk

705,781

1,054,131

Total capital requirement

9,278,155

8,655,666

 

 

 

OWN FUNDS

 

 

Common Equity Tier 1 Capital

20,063,716

19,836,692

Own funds for total capital ratio

20,063,716

19,836,692

 

 

 

Common Equity Tier 1 Capital ratio (%)

17.3%

18.3%

Total capital ratio (%)

17.3%

18.3%

The minimum Total Capital Ratio required by law cannot be lower than 8% while according to recommendation of European Banking Authority and Polish Financial Supervision Authority (KNF) total capital ratio must be not lower than 12% and Tier 1 Capital ratio not lower than 9%. At the end of December 2014 the total capital ratio of the Group amounted to 17.3% and was more than twice the minimum value required by the law and significantly higher than the level recommended by the EBA and the KNF.

Total Capital Ratio at the end of December 2014 compared with December 2013 decreased by 1 pp. Total capital requirement increased during this period by 7.2% and own funds increased by 1.1%.

Total capital requirement increased as a result of increase of capital requirement for credit risk (due to the Bank's credit portfolio increase), counterparty and market risk, with simultaneous decrease of capital requirement related to operational risk due to Advanced Measurement Approach (AMA) model change.

The strengthening of the Group's capital base in 2014 is mainly an effect of Bank Pekao S.A. Annual General Meeting decision on the allocation of the PLN 185.8 million of net profit from 2013 to the Bank's equity and lower unrealised losses from available for sale securities portfolio.