The inflation control strategy shaped 2023 in the financial markets. Central banks tightened their monetary policy, deciding on unprecedented increases in interest rates and implementing restrictive liquidity measures.
Bankinter actively manages its structural interest rate risk (defined as exposure to changes in market interest rates resulting from the different time structures of maturities and repricing of items on the global balance sheet) to protect the bank's net interest income and preserve its 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 economic value to movements in interest rates.
Net interest income exposure to interest rate changes of ±100 parallel basis points is +3.6% for rising rates and -4.3% for falling rates, both for a 12-month horizon. The sensitivity of economic value to a parallel shift of
+/-100 basis points was +1.4% and -1.7%, respectively, of own funds at year-end 2023.
Risk associated with the Bank's ability to meet the payment obligations it acquires and to fund its 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 behaviour.
The instruments used to control liquidity risk include monitoring changes in the liquidity gap or liquidity plane and looking at specific information and analysis of balances resulting from trading operations, wholesale maturities, interbank assets and liabilities, and other sources of funding. These analyses are performed under business as usual conditions or simulating different scenarios of liquidity needs based on varying business conditions or market changes. Bankinter’s liquidity management includes monitoring of short-term (the liquidity coverage ratio or LCR) and long-term (net stable funding ratio or NSFR) regulatory ratios.
During financial year 2023, customer funds increased by more than 5,700 million euros, a growth driven by all business units. As a result, the average of retail funds continued to be considerably higher than customer lending, with the ratio of customer funds to lending standing at 106%. The liquidity position at the end of 2023 made it possible to achieve an LCR of 206.3%, comfortably above both internal and regulatory limits.
The NSFR liquidity ratio (Net Stable Funding Ratio), which measures the proportion of long-term assets that are covered with stable financing, closed the year at 141.03%, exceeding the ratio of 139.72% in the previous year. 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 indicator.
No wholesale funding issuances matured in 2023. Bond issues in the year included: in February, preference debentures convertible into shares for 300 million euros; in May, a 500 million euro senior bond; and in September a 500 million euro senior preferred bond. During the year, 10,388 million euros matured from the liquidity auction of the European Central Bank's TLTRO (Targeted Long Term Refinancing Operations) programme.
Bankinter measures market risk (the possibility of losses as a result of changes in the market prices of on- and off-balance sheet trading book positions) using the historical value at risk (VaR) methodology with data for one year and a 95% confidence interval.
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 the limits unchanged from the previous year.
The following table sets out the VaR values of trading positions at the close of 2023.
The VaR of the positions in financial assets at fair value of the subsidiary Bankinter Luxembourg are monitored on a monthly basis using the historical simulation methodology. The VaR of this portfolio at the end of the year was 0.22 million euros.
VaR 2023 trading | |
---|---|
Millions of euros | Last |
VaR – Interest rate |
0.49 |
VaR – Equities |
0.81 |
VaR – Exchange rate |
0.04 |
VaR – Volatility rate |
0.72 |
Total VaR |
0.89 |
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