70. Capital adequacy

Capital adequacy is a process which objective is to ensure that, for a given level of risk tolerance, the level of risk assumed by the Bank associated with development of its business activity may be covered with capital held within given time horizon. The process of managing capital adequacy comprises in particular compliance with prevailing supervisory standards and risk tolerance level determined within the Bank, the process of capital planning, inclusive of policy regarding capital acquiring sources.

The objective of capital adequacy management is to continuously maintain capital on a level that is adequate to the risk scale and profile of the Group's activities.

The process of managing the Group’s capital adequacy comprises:

  • identifying and monitoring of all of significant risks,
  • assessing internal capital to cover the individual risk types and total internal capital,
  • monitoring, reporting, forecasting and limiting of capital adequacy,
  • performing internal capital allocations to business segments, client segments and entities of the Group in connection with profitability analyses,
  • using tools affecting the capital adequacy level (including: tools affecting the level of equity, the scale of equity item reductions and the level of the loan portfolio).

The fundamental regulation applicable in the capital adequacy assessment process as at 31 December 2014 is the Regulation (EU) No. 575/2013 of the European Parliament and of the Council as of 26 June 2013 on prudential requirements for credit institutions and investment firms, amending the Regulation (EU) No. 648/2012, hereinafter called ‘CRR Regulation’. The CRR Regulation constitutes a part of so-called CRD IV/CRR package, which apart from the Regulation comprises CRD IV Directive – Directive 2013/36/EU of the European Parliament and of the Council as of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (hereinafter called ‘CRD Directive’). In contrast to the CRR Regulation which is directly applicable, the CRD Directive must be implemented within the national law. As at 31 December 2014 the Banking Law has not been amended yet and the work on amending the Act implementing CRD IV regulation is currently ongoing. In case of conflict between provisions of the CRR Regulation and national regulations, precedence is given to the CRR Regulation.

In accordance with the CRR Regulation for the purposes of capital adequacy a prudential consolidation is applied, which unlike the consolidation consistent with International Financial Reporting Standards, comprises Bank’s subsidiaries being institutions and financial institutions. Non-financial and insurance entities are excluded from prudential consolidation.

In accordance with the CRR Regulation, for the purpose of prudential consolidation the Group comprises: PKO Bank Polski SA, PKO Leasing SA, PKO BP Faktoring SA, PKO BP BANKOWY PTE SA, PKO Towarzystwo Funduszy Inwestycyjnych SA, KREDOBANK SA, PKO Finance AB, Finansowa Kompania ‘Prywatne Inwestycje’ Sp. z o.o. and PKO Bank Hipoteczny SA.

As at 31 December 2014 capital adequacy measures were calculated in accordance with the provisions of the CRR Regulation, including i.a. as regards the scope of consolidation taking into account known to the Bank and planned to implement national options. As at 31 December 2014 the Bank meets requirements relating to capital adequacy measures defined within the CRR Regulation.

The level of capital adequacy of the Group in 2014 remained on a safe level, significantly above the supervisory limits.

As at 31 December 2013 all capital adequacy measures were calculated in accordance with the provisions of the Banking Law, Resolution of the Polish Financial Supervision Authority No. 76/2010 of 10 March 2010 on the scope and detailed procedures for determining capital requirements for particular risks and Resolution of the Polish Financial Supervision Authority No. 325/2011 of 20 December 2011 on decreasing own funds. The scope of consolidation which has been taken into account in capital adequacy as at 31 December 2013 included all subsidiaries of the
PKO Bank Polski SA Group.

70.1.  Own funds for capital adequacy purposes

70.2.  Requirements as regards own funds (Pillar 1)

70.3. Capital requirements for insurance companies

70.4. Internal capital (Pillar 2)

70.5. Disclosures (Pillar 3)