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Risk management

Healthy assets and moderate growth

In 2017, Bankinter further strengthened the high quality of its assets, which is one of its main hallmarks in relation to risks, and maintained its trend of moderate growth in loans against a favourable economic backdrop.

Risk management is one of the central cornerstones of Bankinter's competitive strategy. The Bank has a risk management model of proven effectiveness that is in line with regulatory standards and best international practices, in proportion to the scale and complexity of its business activities. 

The ultimate responsibility for risk management rests with the board of directors, which approves the risk strategy and, in particular, defines the risk appetite framework, which establishes: 

  • The type and levels of the different risks that the Group considers reasonable to take on in developing its business strategy.
  • A set of metrics and key indicators to monitor and manage risks. They cover variables such as risk levels and cost, return, liquidity and capital. A tolerance level and thresholds are established for each metric which, if reached, trigger the adoption of corrective measures. 

The risk strategy is divided into categories: 

  • Risk appetite statement. Bankinter carries out its business activities with a prudent risk profile, pursuing a stable balance sheet and a recurring and sound income statement, to maximise the bank's long-term value.
  • Risk management principles. The risk appetite and tolerance that the Group assumes are in line with, among others, the following principles:
  • Strategies, policies, organisation and management systems are prudent and adjusted to the size, environment and complexity of Bankinter’s activities, based on quality banking practices.
  • The Bank’s actions respect and are in line with established requirements, thresholds and regulatory restrictions, ensuring proper compliance with current legislation at all times.
  • Maintenance of a low or moderate exposure to credit risk, with a non-performing loan ratio in the lowest range of the Spanish financial system.
  • Appropriate hedging of problem assets.
  • Appropriate return on capital invested to ensure minimum return on the risk-free rate throughout the cycle.
  • Maintenance of a low level of market risk, so that losses incurred in stress scenarios have a limited impact on Bankinter’s income statement.
  • Growth in the priority strategic segments of medium-sized and large enterprises.
  • Balance of the loan book of individuals and legal entities.
  • Balanced growth in retail funds.
  • Diversification of wholesale funding sources, from the viewpoint of both instruments and markets, and the maintenance of a balanced maturity profile.
  • Optimisation of retail funding costs, maintaining a balance between the loan book yield and market interest rates.
  • Use of a risk diversification policy to avoid excessive concentration levels that might translate into difficulties for Bankinter.
  • Limitation on business activities in industries that may pose a risk to the Bank’s sustainability, such as industries related to property development or construction, or that may have a negative impact on its reputation and/or respectability.
  • Moderate appetite for interest rate risk.
  • Maintain a very small structural position in foreign currencies.
  • Strengthened control of the Bank's reputational position (for example, good corporate governance and systemic risks).
  • Desire to round out the level of service that Bankinter offers its customers, both in private banking and corporate banking, offering limited-risk investment banking services.
  • Optimisation of the cost-to-income ratio.
  • Maximisation of the creation of shareholder value across the economic cycle, through both dividends and increases in share price, built on a strong capital and liquidity base.
  • Maintenance of Common Equity Tier 1 (CET1) within the fluctuation band set by the Bank and higher than the regulatory minimums. Bankinter also has a corporate governance model that is in line with the most demanding supervisory standards. To stimulate and reaffirm its solid risk culture, it has a highly qualified team supported by advanced information systems.

Regulation and supervision

It was a very intense year for regulation and supervision, and required a major commitment of resources, as new regulations came into force, preparation was made for the introduction of others and major transversal supervision exercises were carried out. Among the projects undertaken, the following are of particular note: 

Adaptation to the new IFRS 9 accounting standard. This was the project in 2017 with the greatest scope and the one which required the greatest effort. It involved the updating of all provisions models, the development of new models and procedures for the determination of the significant increase in risk and the projection of expected losses over the lifetime horizon of the transactions under different macroeconomic scenarios. This also translated into the construction of new IT systems for the classification of exposures, calculation of coverage and its accounting recognition. The adaptation will be in full operation from 1 January 2018.

Review of internal models. An assessment was made during the year of the governance and management of Bankinter's internal models, within the framework of the ECB's TRIM (Targeted Review of Internal Models), the objective of which was to ensure compliance with the regulations and to harmonise their interpretation and the supervisory practices in relation to models. The results of the review were satisfactory and enabled lines of improvement to be identified and embarked upon, to a large extent linked to the standardised interpretation of the regulations. 

Compliance with data aggregation standards. Bankinter made a major effort to adapt its IT infrastructure in order to satisfy the principles of risk data aggregation (RDA), full compliance with which is required before the end of 2018. RDA is the standard approved by the BCBS to improve the capacity of banks in the treatment and reporting of risks, with the final aim of improving their decision-making and management. 

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