More loans and receivables and high asset quality
Once again, Bankinter grew in terms of loans and receivables above the sector average and at the same time, maintained the high quality of its assets, which is its main hallmarks, and its rates of return.
Risk management is one of the central cornerstones of Bankinter's competitive strategy. The Bank has a 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. This tool establishes the type of different risks that the Bank considers reasonable to take on in developing its business strategy. Furthermore, it defines a series of metrics and key indicators to be monitored and managed, covering variables such as risk levels and cost, returns, liquidity and capital, amongst other variables. A tolerance level and thresholds are established for each metric which, if reached, lead to the adoption of corrective measures.
The risk strategy rests on two pillars:
- 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 Bank assumes rest on 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 respect for and conformance to established requirements, limits and regulatory restrictions, in addition to proper compliance with current regulatory documents.
- Maintenance of a low or moderate exposure to credit risk with a nonperforming loan ratio in the lowest range of the Spanish financial system.
- Appropriate hedging of problematic assets.
- Appropriate return on invested capital, ensuring a minimum level of profitability over the risk-free rate throughout the cycle.
- Maintenance of a low level of market risk, so that losses incurred in stress scenarios have a reduced impact on the Bank’s earnings.
- Growth in the priority strategic segments of medium-sized and large enterprises.
- Balance of the lending portfolio of individuals and legal entities.
- Balanced growth in retail financing resources.
- Sources of wholesale funding are diversified from the viewpoint of both instruments and markets, and maintenance of a balanced maturity profile.
- Optimised retail financing costs, ensuring a balance between loan book returns and market interest rates.
- Use of a risk diversification policy to avoid excessive concentration levels that might translate into difficulties for the Bank.
- Limited activities in sensitive industries that might pose a risk to Bankinter’s sustainability, such as those associated with property development or construction, or that might have a negative impact on its reputation and/or respectability.
- Moderate appetite for interest rate risk.
- Very small structural position in foreign currencies.
- Strengthened control of the Bank's reputational position (Good Corporate Governance and systemic risks, etc.).
- Desire to round out the level of service that Bankinter offers its customers, both in Private Banking and Enterprise Banking, offering limitedrisk investment banking services.
- Optimisation of the efficiency ratio.
- Maximisation of the creation of value for shareholders throughout the cycles through both dividends and increases in share price, all on a strong base of capital and liquidity.
- Common Equity Tier 1 (CET1) kept within the fluctuation band set by Bankinter, above 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.
Adaptation to regulations
Once again, 2018 was a very intense year in terms of the processes for adapting to new supervision criteria and regulations, the development of which has compromised significant resources. Some of these processes began in previous years and require efforts that can extend for several years. Among the projects undertaken, the following are of particular note:
- Adaptation to the new IFRS 9 accounting standard.On 1 January 2018, the calculation of provisions adapted to IFRS 9 criteria was fully functional. Over the course of 2018, management, expected loss calculation and monitoring procedures were all consolidated.
- Internal models. As the Targeted Review of Internal Models (TRIM) project of the European Central Bank is at an advanced stage of development, the supervisor unified the criteria for standardising the interpretation of regulations. Furthermore, the technical standards and guidelines of the European Banking Authority (EBA) require significant work in terms of adaptation, which is recognised implicitly in the deadlines for their entry into force
- Data aggregates (RDA): Efforts to adapt to the risk data aggregation principles continued in 2019. Furthermore, over the course of the year, a new information infrastructure was rolled out, the objective of which is to construct a common environment that responds to global information needs for management, reporting and analysis, including Big Data techniques.
- Capital and liquidity self-assessment: The European Central Bank published new guidelines, in force since January 2019, for institutions to have a general overview of their capital and liquidity needs in order to cover all material, financial and non-financial risks. In turn, the EBA approved guidelines for the development of stress test exercises, which have also been in force since January 2019. These publications represent an essential element in the capital self-assessment process.
In addition the above, other specific developments must be added, including the quantification of interest rate risk based on the new regulatory guidelines or the revision of the general risk management and control framework, adapting to the criteria set out in the new guidelines issued by the EBA on internal governance.
Bankinter continues dedicating significant funds to compliance with these regulatory developments and their application in risk management.
More detailed information on these risks can be found in the Prudential Relevance Report, in the Group's Consolidated Legal Report and the Annual Corporate Governance Report.