Capital adequacy management is a process intended to ensure that the level of risk which the PKO Bank Polski and the bank’s Group take in connection with the development of their business may be covered with their capital, taking into account a specific risk tolerance level and time horizon. The process of managing capital adequacy comprises, in particular, compliance with the applicable regulations of the supervisory and control authorities, as well as the risk tolerance level determined within the bank and the bank’s Group, and the capital planning process, including the policy concerning the sources of acquisition of capital.
The objective of capital adequacy management is to maintain own funds at all times at a level that is adequate for the scale and risk profile of the bank’s Group’s business.
In the year 2019 the bank’s Group maintained a safe capital base exceeding the supervisory and regulatory limits.
On 4 November 2019, PKO Bank Polski received a letter from the bank Guarantee Fund regarding the plan of achieving the minimum requirement for own funds and eligible liabilities (MREL). The amount of MREL determined for the bank at the consolidated level is 14.376% of the sum of total liabilities and own funds (“TLOF”), which corresponds to 22.807% of the total risk exposure (“TRE”). This requirement must be satisfied from 1 January 2023. The BGF indicated the path to attaining the target MREL level which showed that at the end of 2019 the level of MREL in relation to TLOF is 9.316% on the consolidated level, which corresponds to 14.779% of TRE.
The amount of MREL determined for the bank at the entitiy level is 13.726% TLOF that corresponds to 23.014% TRE. This requirement must be satisfied from 1 January 2023. The BGF indicated the path to attaining the target MREL level, which showed that at the end of 2019 the level of MREL in relation to TLOF is 8.923% on the entity level, which corresponds to 14.961% of TRE.
A detailed description of capital adequacy management is provided in the Consolidated financial statements of the PKO Bank Polski Group for the year ended 31 December 2019, in Note 65 and in the Capital Adequacy Report, and other disclosures of the PKO Bank Polski Group as at 31 December 2019.