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2018 Pillar 3 Disclosures
Risk Management
Policies and Objectives
2 | 2.1
The Board of Directors of Cecabank (hereinafter, the Board) establishes the corporate objectives
of the bank and has the highest responsibility regarding the risks incurred as a result in the
performance of its activities. It is therefore this body that establishes the general policies with
regard to the assumption of risks. Similarly, the Board is the driving force in the corporate
risk culture, which focuses on guaranteeing efficient internal control systems and rigorous and
complete risk management and measurement processes.
To assist the Board of Directors to fulfil its risk responsibilities regarding the maintenance of the risk
profile and the implementation of the policies agreed, it has established a supporting structure and
a reporting and monitoring system. This structure is described in the following sections.
The risk management philosophy is based on rigorous criteria of prudence, in a manner consistent
with commercial strategy, aiming to ensure the efficient use of the capital assigned to the
business units. The results of applying this philosophy are seen in a highly conservative risk
profile, in particular with regard to high levels of solvency and a comfortable liquidity position.
The Board establishes the type and intensity of risks which it deems reasonable to assume in
order to achieve corporate objectives. The definition and annual updating of this risk appetite are
set out in the Risk Tolerance Framework, as well as in the general policies in each case, always
subject to approval by the Board itself. It is also the responsibility of the Board to monitor the
effective risk profile and to ensure that both are consistent. It is supported in this regard by the
work performed by the Risk Committee.
In order to achieve its business objectives the Board of Directors assumes that Cecabank maintains
a conservative risk profile at all times, allowing it to reasonably anticipate that losses produced
by the implementation of the risks, even in stress situations, can be withstood within the normal
operations of the bank, without permanently affecting the capital and liquidity objectives.
Alongside this quantitative definition of the desired risk profile, the Board establishes tolerance
levels with quantitative metrics which determine the risk appetite. These are defined as follows:
•
For each relevant risk identified, the maximum losses that the bank is prepared to assume in
the course of the business are established. The definition is established in terms of forward-
looking measures which serve to anticipate any losses which might be registered, if the
risks were to materialise, but also in terms of the maximum losses tolerated (Annex I to this
document provides greater detail as to the metrics employed). These metrics relate to the
income statement and the available capital base, for the aforementioned purpose of ensuring
that, in the event of losses, they can be withstood within the normal operations of the bank;
•
The minimum available liquidity position must allow for ample compliance with all the bank’s
commitments, incorporating a safety margin to ensure that unexpected situations can be
handled at any time.
•
The solvency and leverage levels which the Board intends for the bank remain substantially
above the regulatory requirements. This surplus of capital is considered essential to achieve
the appropriate levels of quantity and quality of solvency and leverage for the wholesale
business, and represents one of the elements defining the competitive position of Cecabank.
The principles established by the Board and which determine risk management at Cecabank are
mainly as follows:
•
The business and the management will focus on a stable and recurring results structure and
on the conservation of economic value of equity, in order to guarantee the long-term orderly
growth of the bank;