From the viewpoint of structural and market risks, 2020, like 2019, was characterised by low inflation in the main economies and by the actions of central banks, which provided plenty of liquidity and intervened in the public debt markets. In certain markets, systematic purchases public debt by central banks triggered a reduction in market depth.
Structural interest rate risk. The Bank's exposure to changes in market interest rates arising from the different timing structure of maturities and repricing of global balance sheet items. Bankinter actively manages this risk with the aim of safeguarding net interest income and preserving the Bank's economic value.
The exposure of net interest income to different scenarios of interest rate changes is analysed monthly using dynamic simulation measures. With a more long-term outlook, the Bank also analyses the sensitivity of its economic value to movements in interest rates.
The interest rate risk exposure of net interest income of parallel shifts of ±100 basis points in market interest rates is 14.2%/-3.2%, for a 12-month horizon.
The sensitivity of economic value to parallel shifts of ±100 basis points was +11.1%/- 5.8% of own funds at year-end 2020.
Management assumptions were used to calculate both measures, considering negative interest rates, except for items with a Euribor floor.
Structural liquidity risk. Risk associated with the Bank's ability to meet the payment obligations it acquires and to fund its investment lending business. The Bank actively monitors liquidity and liquidity forecasts, as well the actions to be taken in both business-as-usual situations and in exceptional circumstances arising due to internal causes or market behaviours.
The instruments used to control liquidity risk include monitoring changes in the liquidity gap or map, such as information and specific analysis of balances resulting from trade transactions, wholesale maturities, interbank assets and liabilities and other funding sources. These analyses are performed both under normal market conditions and simulating different scenarios of liquidity needs that could arise from different business conditions or changes in market conditions. Bankinter’s liquidity management includes monitoring of shortterm (the liquidity coverage ratio or LCR) and long-term (net stable funding ratio or NSFR) regulatory ratios.
During 2020, the entity's liquidity position improved significantly due to the positive performance of the commercial gap (the difference between investment and customer funds). For the first time in recent history, the figure for customer funds was above loans and receivables. Customer funds have grown sharply and have comfortably met the liquidity needs generated by the growth in lending.
This improvement led to a significant increase in available liquid assets, which made it possible to maintain LCR levels comfortably above both the regulatory threshold and the internal limits set in the Bank's Risk Appetite Framework. At the end of 2020, the LCR ratio stood at 198.1%, compared to 153.7% at the end of 2019, with an annual average of around 177%.
The liquidity ratio, the NSFR, which measures the proportion of long-term assets funded by stable funding, stood at 133.0%, up from 123.4% in 2019. The Bank's financing structure, with a significant and increasing weight of customer deposits and wholesale funding focused on the medium-long term, has driven a steady increase in this indicador.
In relation to wholesale funding, maturities were replaced with new issuances. Thus, dependence on wholesale markets continued at the same levels as in the previous year.
Market risk. The possibility of losses as a result of changes in the market prices of on- and off-balance sheet positions of the trading book. To measure it, Bankinter uses the historical value at risk (VaR) methodology with data for one year and a 95% confidence interval.
2020 VaR trading |
|
Millions of euros |
Último |
VaR – Interest rate |
1.23 |
VaR – Equities |
0.85 |
VaR – Exchange rate |
0.11 |
VaR – Volatility rate |
0.82 |
Total VaR |
2.09 |
An asset portfolio's VaR is the estimated maximum potential loss that could be incurred for a specific time horizon with a particular confidence interval. Given the instability experience in recent years, Bankinter kept limits unchanged from the previous year.
The following table sets out the VaR values of trading positions at the close of 2020.
Moreover, the VaR of the portfolio positions of Línea Directa Aseguradora are monitored monthly using the historical simulation methodology. The VaR of the Línea Directa portfolio at 31 December was 3.30 million euros. The risk that may be incurred by the subsidiary Bankinter Luxembourg is also monitored. Using this same method, the VaR for 2020 was estimated at 0.93 million euros.
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