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Own funds

Bankinter's own funds management, its business model and its prudent risk policy allow it to operate with high levels of capital, of high quality and with a ratio far above that the requirements of the regulatory authorities and supervisors. It has been credited in this way year after year, which reinforces the Bank's capital adequacy position and gives it the freedom to make decisions on dividend payments to shareholders and its variable remuneration policy.

Leader in capital

In 2017, Bankinter actively managed its own funds, in order to strengthen its leadership position in terms of capital adequacy in the Spanish banking sector and to ensure the highest quality of its capital. It strengthened its capital base and by the end of the financial year it had total capital of 4.475 billion euros, 15.6% more than the previous year. Common Equity Tier 1 (CET1 or highest quality capital) rose to 3.709 billion euros, an increase of 2.4% on 2016, and represented an 82.9% increase in own funds. The total capital ratio stood at 14.28%; and the CET1 ratio reached 11.83%. 

The main changes in Bankinter's capital ratio (capital:risk-weighted assets) during the year resulted from the following factors:

  • The organic generation of results, that improved for yet another year compared to the previous year and allowed the volume of capital to be raised.
  • The growth in credit risk-weighted assets, as a result of the positive performance of the ordinary business. Operational risk-weighted assets also increased due to the bank's increased activity. The increase in risk-weighted assets demands extra effort in capital generation, which must increase in the same proportion to maintain the capital ratio.
  • The issue of 500 million euros in subordinated debt which is recognised as tier 2 capital.

Awaiting MREL

Looking ahead to 2018, Bankinter is waiting for the European Single Resolution Board to determine the conditions for the minimum requirement for own funds and eligible liabilities (MREL), a buffer of instruments with loss-absorption capacity that can be used in case of difficulties. The MREL requirements (both its level and the characteristics of the liabilities considered as eligible) are specific for each bank and will in part depend on the entity's own funds policy and issue of other eligible instruments during the financial year. Likewise, the coming into force of the new IFRS 9 accounting standard, which came into force on 1 January, may affect Bankinter's capital ratio, though its impact will not be material.

Examination passed with flying colours

In late 2017 the Single Supervisory Mechanism, part of the European Central Bank, notified European banks of the outcome of the Supervisory Review and Evaluation Process (SREP), the examination carried out by the supervisory authority to determine the minimum capital requirements with which they must operate from January 2018. According to the results of the exercise, Bankinter must have a minimum CET 1 capital ratio in phased-in terms (that is, taking into account current regulatory requirements) of 7.125%. This ratio is made up of 4.5% of the capital required by the so-called Pillar 1 of the regulation (which sets the minimum threshold for all banks), 0.75% of Pillar 2 (the result of the specific supervisor judgement for each bank's risk profile) and a capital conservation buffer (CCB) of 1.875%. This final layer automatically increases 0.625 points with respect to the previous year's examination, as a result of the application of the phase-in timeline established in the Basel III agreements.

The ratio required from Bankinter is the smallest of Spanish banks and among the lowest in Europe, where the average is 10.6%, including systemic buffers. In addition, the company has one of the highest CET 1 levels of Spanish banks (11.83% at the end of 2017), so it amply complies (almost five points difference) with regulatory requirements. 

The ratio required from Bankinter is the smallest of Spanish banks and among the lowest in Europe.

If the comparison is made in terms of total capital, which in addition to CET1 includes lower quality capital, the conclusion is equally favourable. The supervisor's requirement for 2018 is 10.625% phased-in, while Bankinter recorded a ratio of 14.28% at the end of 2017. 

Freedom in dividend payments

Ample compliance with capital levels required by the supervisor allows Bankinter to consolidate its position in terms of capital adequacy and asset quality, which is higher than that of comparable Spanish and European banks. In addition, as a result, the Bank can freely decide on dividend payments, variable remuneration or hybrid instrument coupons such as Additional Tier 1 (AT1) issues. 

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