Swedbank Risk and Capital Adequacy 2015

Transcription

Risk Management and Capital Adequacy Report
Pillar 3 – 2016
0B
Table of contents
Introduction
Swedbank in brief
Economic environment
CRO's statement
1. Risk governance
Risk profile
Enterprise Risk Management Policy
Three lines of defence
Risk appetite and framework
2. Capital requirements
Page
3
3
3
5
Internal Capital Adequacy Assessment Process –
Pillar 2
66
Stress tests
67
67
68
69
70
9
16
Appendix A - Swedbank Consolidated Situation
Definitions
Terminology and abbreviations
Appendix C - Subsidiaries
85
21
21
22
24
25
27
30
34
35
37
39
40
43
Swedbank Latvia Consolidated Situation
Swedbank Lithuania Consolidated Situation
Swedbank Mortgage AB
46
46
Management of market risks
Measurement of market risk
Capital requirements for market risk
Market risk exposures
47
47
48
48
52
Risk appetite
Highlights 2016
52
52
Funding and liquidity strategy
Management of liquidity risk
Measurement of liquidity risk
Capital requirements for liquidity risk
53
56
56
59
6. Operational risk
60
Risk appetite
Highlights 2016
60
61
Management of operational risk
61
Capital requirements for operational risk
63
78
80
82
Swedbank Estonia Consolidated Situation
46
71
Appendix B - Index of Tables and Graphs
21
Risk appetite
Highlights 2016
5. Liquidity risk
64
65
The adverse ICAAP scenarios
Impact on Swedbank – simulation results
Impact on Swedbank – REA and capital
Externally performed stress tests
Capital adequacy tables
4. Market risk
Highlights 2016
Economic Capital
6
6
6
7
9
10
12
13
Risk appetite
Highlights 2016
Credit risk in important sectors
Credit risk exposures
Credit risk by business area
Management of credit risk
Measurement of credit risk
Capital requirements for credit risk
Credit risk exposures - retail exposure class (IRB)
Credit risk exposures - corporate exposure class (IRB)
Credit risk exposures - institutions exposure class (IRB)
Credit risk tables
Counterparty credit risk
Page
64
6
Highlights 2016
Capital requirements
Capital planning
Regulatory environment - impact on Swedbank
3. Credit risk
7. Stress tests and economic capital
86
98
110
122
3
Introduction
This Risk Management and Capital Adequacy Report 2016
(Pillar 3 report) provides information on Swedbank’s capital
adequacy and risk management. The report is based on
regulatory disclosure requirements set out in the Capital
Requirements Regulation (Regulation (EU) 575/2013) and the
Swedish Financial Supervisory Authority (SFSA) regulation
FFFS 2014:12.
Information in this report pertains to conditions as of 31
December 2016 for Swedbank Consolidated Situation (see
Definitions table in Appendix A) if not otherwise stated. The
disclosure is made annually in conjunction with the date of
publication of Swedbank’s Annual Report. For items where
Swedbank has assessed that more frequent disclosures are
needed, information is given in the interim reports.
Furthermore, this report includes information for significant
subsidiaries (Estonia, Latvia, and Lithuania each on a
consolidated basis as well as Swedbank Mortgage) in
accordance with Article 13 in the Capital Requirements
Regulation.
The report is part of the capital adequacy framework that
builds on three pillars:
•
•
•
Pillar 1 provides rules for how to calculate minimum
capital requirements for credit risk, market risk and
operational risks. The calculation can either be done using
prescribed standardised risk measures or based on the
bank’s own internally used risk measures. Swedbank
must fulfil certain requirements in order to use its own
internally used risk measures and must seek approval
from the SFSA and local supervisors in other countries
where it operates.
Pillar 2 requires institutions to prepare and document
their own internal capital adequacy assessment process
(ICAAP). All relevant sources of risk must be taken into
account, that is, not only those already included when
calculating the minimum capital requirement for credit,
market and operational risks. The SFSA will, together
with the regulatory supervisory college, make an
assessment of the banks’ ICAAP and may impose
additional capital requirements for Pillar 2 risks, meaning
risks not covered by the Pillar 1 calculation.
Pillar 3 requires institutions to disclose comprehensive
information about their risks, risk management and
associated capital. This report constitutes the demanded
disclosure for Swedbank.
Information about the Swedbank corporate governance
structure and measures undertaken to manage operations in
the consolidated situation is presented in the Swedbank
Corporate Governance Report. Information about the
SWEDBANK
Swedbank Board of Directors including directorships and
recruitment policy is also disclosed in the Swedbank Corporate
Governance Report. Information about risk implications of the
remuneration process (and aggregate as well as granular
quantitative information on remuneration) is disclosed in the
document “Information regarding remuneration in Swedbank
2016”, which is published in conjunction with the Annual
General Shareholders Meeting. All documents mentioned
above, as well as the Policy on Gender Equality and Diversity,
are available on www.swedbank.com.
This report is submitted by Swedbank AB, a public limited
liability company with registration number 502017-7753.
This document has not been audited and does not form part of
Swedbank AB’s audited financial statements.
Swedbank in brief
Swedbank is a full-service bank available to all households and
businesses in its home markets. With over 7 million private
customers and more than 600,000 corporate and
organisational customers across its operations, Swedbank is
the largest bank in Sweden based on number of customers.
The customers are served by 389 branches in Swedbanks four
home markets – Sweden, Estonia, Latvia and Lithuania – and a
presence in neighbouring markets such as Denmark, Finland
and Norway to support our client base in these markets.
Swedbank also operates in financial hubs such as the U.S.,
South Africa and China.
Swedbank consists of four main business segments: (i)
Swedish Banking, (ii) Baltic Banking (iii), Large Corporates &
Institutions, and (iv) Group Functions & Other.
Economic environment
Growth in Europe and US was surprisingly resilience during
2016 amid global uncertainties. Labor market continued
adding new jobs, inflation was picking up from low levels and
sentiment among businesses and consumers strenghend.
Manufacturing and services PMIs and consumer confidence
increased and pointed a stronger growth in coming months in
both Europe and the US. The effects of the financial crisis was
slowly dissipated.
In the US, the business cycle is maturing. The US has enjoyed
82 months of positive employment growth, the longest spell
in history. With a strong labor market, and uptick in wages and
stronger balance sheets, the US consumer has become more
optimistic which will translate into higher growth in private
consumption, a key determinant of US growth. In December
2016 Federal Reserve raised the reporate by 0.25 bp to 0.75
per cent and additional hikes is expected during 2017.
Risk Management and Capital Adequacy Report – Pillar 3 - 2016
4
Expectations are high that Trumponmics will deliver fiscal
stimulus and higher growth.
In the euro zone, the business cycle is less mature than in
Europe and there is hence more room for several more years
of catching up. Unemployment has come down signifacantly,
9.6 per cent in December last year lowest level since 2009.
The business cycle was supported by low interest rates and
the ECB quantitative easing which was extended to December
2017. The Brittish economy have shown a better performance
than expected although uncertainties about Brexit.
While growth was at a stronger footing in developed
countries, emerging markets showed signs of weakness.
China is struggling to balance high debt with slowing growth.
India’s economy will take a hit following the currency reform,
abolishing of higher denominated bills. Russia and Brazil is
bouncing back from recession and benefiting from higher
commodity prices. Still fundamentals remain weak.
Commodity prices picked up last year after several years of
decline. The oil price increased sharply from the low levels in
the beginning of 2016. OPEC decided to cut oil production for
the first time since 2008 and the increase in metal prices was
boosted by expectations of higher US investments going
forward.
Swedish economy showed robust growth in 2016, although
the speed decelerated somewhat after a substantial strong
development in 2015. A fast growing population, which in
January this year passed the 10 million inhabitants, was an
important driving engine in the Swedish economy. The
Riksbank's expansionary monetary policy, with a repo rate of 0.5 percent and the extension of bond purchases had also a
positive impact on growth. On average, GDP rose by 3.5
percent in average during last year's first three quarters
compared with the same period in 2015. The domestic
economy was the driving growth engine while it was still
sluggish for the export industry. Residential investments rose
by nearly 20 percent in 2016 and the number of apartment’s
permits was at the highest level since the beginning of
1970’s. The lack of housing is, however, troublesome in large
SWEDBANK
parts of the country. The introduction of amortization
requirements on new loans from last June led to a slight
slowdown in the housing market. Housing prices rose at a
more modest pace and credit growth to households cooled. A
strong labour market and low interest rates supported the
private consumption. The number of newly registered cars
reached new record levels. Although labour market
strengthened and number of employed increased by 72 000
last year the labour market is sharply divided. Unemployment
is more than twice as high for foreign-born compared to
native-born and the shortage of labour became increasingly
common in both the private and public sectors. The inflation
rate has gradually increased and inflation expectations has
picked up, which was positive news for the Riksbank. Inflation
rate in December (CPI) was 1.7 percent, the highest level in
four years. Riksbank decided in December for an extension of
bond purchases by a further six months, but the decision was
divided, with two members wanted to finish the purchases
entirely. Besides better macro data and less support for
further monetary easing boosted the Swedish krona, which
can cause headaches for the Riksbank to achieve the inflation
target of 2 percent.
In the Baltic countries, the increase in GDP slowed in 2016.
This was most evident in Latvia where GDP growth at an
annual rate fell to 0.3 percent in the third quarter, against 2
percent in the second quarter. In Lithuania the growth rate
declined from 2.1 to 1.7 percent, while the economy improved
slightly in Estonia and grew by 1.3 percent. Fixed investment
declined in all three Baltic countries, as a result of delayed
finanancial support from EU funds and subdued confidence
among businesses and households. Private consumption
remained strong, driven by higher wages and falling
unemployment. At the end of the year improved macro
indicators for the Baltic economies as a result of the ongoing
recovery in the rest of Europe. Exports improved in the second
half of last year and especially in Estonia. Inflation in the Baltic
countries has begun to increase due to higher prices,
especially of oil and food. In December, the inflation rate was
2.2 percent in Estonia and Latvia, and 1.7 percent in Lithuania.
5
Strenghtened low risk profile, strong capital base and solid
liquidity situation maintained despite the challenging low rate
environment
“2016 proved to be another strong year for Swedbank. Our capital base continued to strengthen on the back of stable
profit generation and solid asset quality, while ensuring the bank’s low risk level in the balance sheet. This was recognized as
Swedbank’s rating was upgraded during the year. The persistently strong asset quality in the credit portfolio in Sweden and in
the Baltics is demonstrated by the continued low level of loan losses. In Norway however, we will continue monitoring what we
perceive as an elevated risk level as a result of the volatile oil price and consequently a low level of investments. We have
worked together with our clients in the oil sector and taken proactive steps to restructure parts of our oil-related portfolio.
Where needed, necessary credit impairments have been taken aiming to comprise potential future loan losses.
Swedbank has been one of the highest capitalised banks in Europe for several years, and during 2016 that position was
strengthened even further. Our strong capital position is confirmed by the ICAAP stress test, by the Riksbank and the SFSA
stress tests performed during 2016. In addition several international stress test also verified Swedbanks strong position, such
as the pan-European stress test performed by the European Banking Authority and the International Monetary Fund as part of
their Financial Sector Assessment Process. Our liquidity position is equally strong, due to a proactive funding activities and solid
investor demand for our bond issuances offerings. In a hypothetical scenario of closed capital markets, our Survival Horizon
measure shows strength, as does the Net Stable Funding Ratio (NSFR).
From a risk control perspective, focus during 2016 has been to support responsible and sustainable business growth. This
has been achieved via proactive activities towards the business to strengthen and prevent undesired risks not least by actively
focusing on segments perceived as having an elevated risk. This has been accompanied by further development of steering
tools and the risk limit framework and also through the use of a more sophisticated monitoring and control structure. We have
further focused on prudent risk management during operational changes as well as taken measures to support our clients in the
light of the Swedish housing market and the increased indebtness amongst private individuals. Focus on the rapidly changing
regulatory landscape and implementation of new legislation has been important and will continue to be omnipresent part of
financial institutions challenges. During 2016, Swedbank set additional focus on digitalisation, emphasizing risks stemming
from operating a digitalized bank in several areas such as credit risk, data privacy, fraud and cyber risk.
Looking into 2017, we continue to allocate significant resources to manage the scope of digitalisation but also the
regulatory requirements, which remain key challenges going forward. We also face several challenges in the external
environment, with persistant factors like slow growth in the euro area and the low interest rate enviroment. Geopolitical
tensions and effects stemming from UK invoking Article 50 as well the foreign policy of the newly inaugurated US president,
are other factors that we are taking into account. We are closely monitoring the oil price and its impact on relevant industries,
with special focus given to our Norwegian portfolio, although the lower oil price has a neutral or beneficial impact for most of
our customers in all four home markets.
Our operating environment thus presents us with a variety of factors to manage. However, our solid capitalisation with
one of the strongest CET1 capital ratios among European banks and strong liquidity position combined with our focus on lowrisk assets puts us in a good position to meet these challenges.
With this report, we aim to provide readers with an open and clear view of how we work with risk management at
Swedbank and how we continue to ensure our low risk and strong capital base.”
Helo Meigas
Chief Risk Officer
SWEDBANK
6
1. Risk governance
Swedbank´s independent risk organisation is shaped by the three lines of
defences and a strong embedded risk culture. This ensures professional risk
management and protects us from unintentional and unnecessary risk-taking.
Risk profile
Swedbank defines risk as a potentially negative impact on the
Group’s value which can arise due to ongoing internal
processes or future internal or external events. The concept of
risk includes the probability that an event will occur and the
impact it could have on the Group’s results, equity or value.
The Group shall work towards a sustainable social,
environmental and economic development together with its
clients and other stakeholders.
The Enterprise Risk Management (ERM) Policy, decided by the
Board, states that our strategy is to maintain Swedbank´s low
risk profile which is further concretised by the risk appetite
(see Enterprise Risk Management Policy, Risk Appetite and
Framework).
Swedbank’s customer base, which mainly consists of private
individuals and small and medium-sized companies in Sweden
and in the Baltic countries, is the foundation for the low credit
risk. Our low-risk profile is confirmed by low losses, and a low
level of impaired loans, despite the challenging external
environment during 2016. Market risks were kept on a low
level throughout the year in spite of volatile markets. In terms
of operational risks, no single large loss event occurred, and
the accumulated losses declined. Both our internal as well as
external stress tests (performed by the European Banking
Authority, the Riksbank and the Swedish Financial
Supervisory Authority) confirm our low-risk profile.
Swedbank’s Common Equity Tier 1 (CET1) capital ratio, is
among the highest compared to European peers, and
correspondingly strong liquidity position.
To continuously secure the low risk level, our operations are
based on a foundation of professional risk management and
control. The risk framework has been developed to secure
solid risk awareness and business acumen within all parts of
the bank. It originates from the Group’s strategy and business
planning process, in which risk-based planning is an
integrated part. Internal regulations and guidelines are
developed to secure strong risk control and steering. The
Group’s risk limit framework includes risk limits applied for
individual risk disciplines from the Board further down to
business areas for appropriate steering (see Risk Appetite and
Framework). The risk framework also includes well-developed
origination standards for prudent lending.
SWEDBANK
Risk arises in all financial operations, and managing it well is
central for success. A strong common risk culture within
Swedbank, with decision-making and responsibility kept close
to the customer, serves as the foundation for efficient risk
management and, consequently, a strong risk-adjusted return.
The Board has the ultimate responsibility for Swedbank
Group’s risk-taking and capital assessment. Through the
Enterprise Risk Management (ERM) Policy, the Board provides
guidelines for the CEO on risk management and risk control,
and how these functions should support the business
strategy. The ERM Policy specifies the risk appetite, the
concept of three lines of defence, the fundamental principles
of risk management, and roles and responsibilities. The Board
has also established the Risk and Capital Committee (RCC), the
Audit Committee (AC) and the Remuneration Committee (RC)
as support in matters related to risk management,
governance, capital requirements and remuneration
respectively. For further information on these committees,
duties, reporting to committees and number of meetings
during 2016, see the Swedbank Corporate Governance Report
available on www.swedbank.com.
Three lines of defence
Successful risk management requires a strong risk culture and
a common approach that permeates the entire Group.
Swedbank builds its approach to risk management on the
concept of three lines of defence, signifying a clear division of
responsibilities between the risk owners and
control
functions, i.e. Group Risk, Compliance and Internal Audit.
7
Swedbank’s risk management
Risk appetite and framework
The ERM Policy states that Swedbank Group is to maintain a
low risk profile, in terms of capital and liquidity. The long-term
risk profile is to be managed so that a severely stressed
scenario, as defined in the annual Internal Capital Adequacy
Assessment Process (ICAAP), should not have a significant
negative impact on the CET1 capital ratio. If the impact
exceeds the established risk appetite, preventive measures
must be taken.
The Board establishes the main principles for the Group’s risk
management and decides on the overall risk appetite. In order
to ensure and improve the approach to risk in different
operations, the Board has also formulated risk appetites for
each main risk type (see below). The risk appetites are further
substantialised by limits set by the CEO and complemented by
CRO limits, aimed at identifying potential limit breaches at an
early stage. Business area limits, constituting the last level in
the risk limit framework, are applied where relevant. The risk
appetite and limits are designed to secure that the Group
sustains its low-risk profile, taking into account the Group’s
business operations. The risk limit framework structure
includes escalation principles in the event of any breaches of
the risk appetite or limits.
The Group Risk organisation is responsible for ensuring that
each key risk is identified, analysed and properly managed.
Decisions made on an aggregated level should always be in
line with the Group’s risk appetite. The Board as well as the
CEO are regularly informed on the overall and specific risk
profile. Further they are also regularly provided with
information regarding the functionality of Swedbank’s risk
limits and in case of breaches, the actions taken to mitigate
the breach The Risk organisation is responsible for providing
the business organisation with operational guidance and
support, in part by developing and maintaining internal rules
and guidelines in each risk category.
The CEO has established the Group Risk and Compliance
Committee (GRCC), (9 meetings during 2016) to assist in
matters related to all categories of risk and compliance. This
SWEDBANK
includes reviewing, monitoring and challenging the Group risk
profile in terms of significant exposures, risk trends, stress
tests, losses, management actions and performance versus
risk appetite, including observance of the risk limit framework.
The GRCC also reviews and monitors the management of
findings by Compliance, Risk units, Internal Audit and External
Audit to secure that these are accurately managed. To further
strengthen risk management arrangements in group
functions and local business areas, the GRCC is supported by
local Risk and Compliance Committees (BARCCs). Individual
BARCCs are established in all business areas and relevant
group functions, and have the same setup on local level as the
GRCC for the Group. Escalation routines are implemented from
the BARCCs to the GRCC to secure solid and efficient risk
management.
Credit risk
Swedbank maintains a well-diversified credit portfolio with a
low risk profile. All credit activities strive towards a long-term
customer relationship and rest on strong business acumen to
achieve solid profitability and a sound credit expansion for
long-term stability. A basic principle in Swedbank’s lending
operations is that each business unit bears full responsibility
for its transactions and its associated credit risks. Each
business unit develops and maintains a balanced credit risk
level for the respective credit portfolio, which is achieved by
lending to customers with a high debt-service coverage ratio,
by maintaining a strong collateral position and by portfolio
diversification within and between sectors and regions.
Counterparty risk arises as a result of hedging of own market
risk and from customer-related trading activities. The Group
has a conservative approach when choosing interbank
counterparts. In the derivatives business, International Swaps
and Derivatives Association (ISDA) or similar agreements are
in general established with our customers. Furthermore, the
Group restricts the extent of its counterparty risk exposure
through several actions such as setting counterparty limits
and FX settlement limits.
Market risk
According to the Group’s Risk-policy and the concept of three
8
lines of defense, market risk-taking shall only be conducted by
units granted permission by Swedbank Group’s CEO. The risktaking is limited by a certain risk appetite, established by the
Group’s Board of Directors. Originating from the risk appetites,
respectively, risk limit structures have been created in order to
protect Swedbank Group against unintentional losses and
excessive levels of market risk.
Liquidity and funding risk
Swedbank strives to maintain a conservative risk profile with
resilience to both short-term and long-term external stress
and to maintain an adequate buffer of highly liquid assets to
enable it to withstand a prolonged period of liquidity stress
without relying on forced asset sales or government
intervention. Swedbank shall have a long-term, stable, welldiversified funding and investor base with a wholesale
funding that is well diversified across markets, instruments
and currencies. Furthermore, it shall strive to avoid maturity
mismatch risk in assets funded by unsecured funding. All nonliquid assets, not eligible for covered bond issuance, shall be
funded either through customer deposits or through
wholesale funding with a maturity, to the largest extent,
matching or exceeding that of the assets.
Liquidity risk is measured, forecasted and analysed, using
various time horizons, to ensure that the Group has adequate
cash or cash-equivalents to meet its obligations in a timely
manner. The responsibility for managing the Group’s liquidity
lies with Group Treasury. Group Risk works independently to
identify all relevant aspects of liquidity risks, and is
responsible for control, measurement, monitoring and
reporting liquidity risk exposure across the Group.
Operational risk
Swedbank shall not experience operational risk-related losses
or incidents that have materially negative impact on the
Group’s funding, capitalisation and third-party credit rating.
The maximum level of operational risk is further defined in the
risk limits by a stated level of unexpected financial loss,
tolerable errors in the financial statement and as specific
qualitative statements which relate directly to the operations
of the Group.
considered in business decisions and, as far as possible, in the
pricing of products and services. Managers shall ensure that
the operational risks inherent in their respective areas are
identified, assessed and properly managed in the day-to-day
operations.
ALM and capital management
In addition to the ERM Policy, Swedbank’s Asset, Liability and
Liquidity Policy sets out the fundamental principles that apply
for the Group’s processes and structures to identify and
manage the Group’s assets and liabilities to build an optimised
balance-sheet structure, in order to meet liabilities, absorb
losses, safeguard shareholder returns, and maintain public
confidence. The Group’s capital, funding and liquidity shall be
managed in a way that does not create disproportionate
constraints on the governance or management of the Group.
The CEO has established the Group Asset Allocation
Committee (GAAC) to assist in issues related to the
management of assets, liabilities, capital and the balance
sheet structure. Group Treasury works as an internal bank and
provides funding to the business areas, retains capital at
Group level or, as directed by shareholders or the Board,
returns it to shareholders. To ensure that Treasury can act as
an internal bank, an adequate framework comprising
principles and instructions for capital allocation and internal
fund-transfer pricing is maintained.
Compliance
For governing, controlling and supporting the proper handling
of compliance matters, the CEO relies on Swedbank’s
Compliance organisation. The Compliance function is
responsible for providing assurance to the CEO and the Board
that the Group’s business is being conducted in accordance
with regulatory requirements applicable to the operations
subject to authorisation. Compliance’s activities are planned
and prioritised through a structured and documented process
aimed at identifying the key compliance risks in the Group.
The current focus areas for Compliance are internal
governance, customer protection, market conduct, ethics,
conflicts of interest, anti money-laundering activities,
counter-terrorist financing activities, and remuneration.
Operational risks are to be kept at the lowest possible level
taking into account business strategy, market sentiment,
regulatory requirements, rating ambitions and the capacity to
absorb losses through earnings and capital. They shall be
SWEDBANK
9
2. Capital requirements
Swedbank’s capitalisation continued to strengthen for the ninth consecutive
year. Swedbank has one of the highest CET1 capital ratios compared to other
European banks. Our capitalisation makes us resilient and ensures that we are
well positioned to meet upcoming capital requirements proposed by
international standard setters as well as to continue to grow our business.
Capital adequacy rules express the regulatory
requirement for how much capital a bank must hold in
relation to the risk the bank faces
Common Equity Tier 1 ratio:
25.0%
2015: 24.1%
Highlights 2016
Common Equity Tier 1 capital:
Thanks to stable earnings generation, Swedbank’s already
strong capitalisation further improved throughout the year.
Swedbank’s Common Equity Tier 1 (CET1) capital ratio was
25.0% as of year-end, which makes the Group well-positioned
to meet both current and future capital requirements. In
December 2016, Swedbank issued a new Additional Tier 1
capital instruments to further optimise its capital structure.
Internal and external stress tests also show that Swedbank
remains resilient to crises, not least the Internal Capital
Adequacy Assessment Process (ICAAP), which incorporates
adverse scenarios more severe than any recent Swedish
recessions.
SEK
98.7bn
2015: SEK 93.9bn
Risk Exposure Amount:
SEK
394.1bn
2015: SEK 389.1bn
Common Equity Tier 1 capital requirement:
21.9%
2015: 19.9%
Leverage ratio:
5.4%
2015: 5.0%
SWEDBANK
10
Capital adequacy rules express the regulatory requirement for
how much capital a bank must hold in relation to the risk the
bank faces. When assessing its capital needs, Swedbank takes
into consideration its current and future risk profile, internal
risk measurement, and assessment of the risk capital needed.
In addition to capital requirements for credit, market and
operational risk (i.e. Pillar 1), all other risks, such as interest
rate risk in the banking book, concentration risks, pension
risks, earnings volatility risk, and strategic risk must be taken
into account when assessing the total capital need (i.e. as part
of the Pillar 2 assessment). In recent years, Pillar 2 capital
charges have increased in importance as a supervisory tool. In
particular, the Swedish Financial Supervisory Authority (SFSA)
has introduced both a systemic risk buffer and a risk-weight
floor for Swedish mortgages within the Pillar 2 framework. In
2016 the SFSA also imposed a temporary additional Pillar 2
capital charge related to revised requirements on banks’
internal models requiring the banks to anticipate a larger
proportion of economic downturns in their estimates of
probability of default, as described below. The capital charge
will be imposed until the SFSA has approved the banks’
updates to their models in response to the revised
requirements.
Under the EU Capital Requirements Regulation (EU Regulation
No 575/2013, CRR), a bank’s total capital must be equivalent
to at least the sum of the capital requirements for credit,
market and operational risks, including capital buffers and
potential Pillar 2 add-ons. Banks using the internal ratingsbased (IRB) approach shall, at all times, also hold own funds
equal to or exceeding 80% of the total minimum amount of
own funds that the bank would be required to hold under
Basel 1 rules (“Basel 1 floor”). Swedbank fulfills these
requirements; see Appendix A, table A1.
Other laws and regulations also apply; for example, the
Swedish Banking and Finance Business Act require a minimum
initial capital of EUR 5m. Furthermore, the CRR includes rules
regarding large exposures, i.e. the limitation of exposures to
individual customers or groups of customers in relation to
total capital.
In brief, the total capital is the sum of CET1 capital, Additional
Tier 1 (AT1) capital, and Tier 2 (T2) capital. CET1 capital
mainly comprises shareholder equity after various
adjustments, while Additional Tier 1 capital and Tier 2 capital
are mainly made up of subordinated debt. A reconciliation of
shareholders’ equity (according to International Financial
Reporting Standards, IFRS) and the regulatory total capital is
presented below in Figure 2-1.
SWEDBANK
In December 2016, Swedbank issued USD 500m in Additional
Tier 1 capital to further optimise its capital structure. The
issuance was in the form of debt instruments that convert to
ordinary shares if the bank’s regulatory capital falls below a
certain level. The issuance strengthened Swedbank’s Tier 1
capital ratio by 1.13 percentage points.
Key figures
At year-end 2016, CET1 capital ratio (i.e. the CET1 capital in
relation to the risk exposure amount), was 25.0% (31
December 2015: 24.1%).
CET1 capital increased by SEK 4.8bn, to SEK 98.7bn. The
change is mainly attributable to earnings, net of proposed
dividend. The accounting for employee benefits (IAS 19)
creates volatility in the estimated pension liabilities and
decreased the CET1 capital by approximately SEK 1.5bn
during 2016. The changes in CET1 capital are shown in Figure
2-2 below.
The risk exposure amount (REA) increased during the year by
SEK 5.0bn, to SEK 394.1bn (31 December 2015 SEK 389.1bn).
Credit risk REA increased by SEK 9.4bn during the year. In
terms of exposure, there was an increase mainly in corporate
and private mortgage exposures in Swedish Banking and LC&I.
Negative rating migrations increased REA by a total of SEK
0.2bn. REA decreased by SEK 7.9bn due to improved LGDlevels resulting from higher property values for private
residential properties and from improved processes for
handling collateral values. Changes in exchange rates
increased REA for credit risks by SEK 3.6bn due to
depreciation of the Swedish krona.
The REA for credit value adjustment (CVA) decreased REA by
SEK 2.1bn, mainly driven by decreased exposures. The REA for
market risk decreased by SEK 1.4bn. Operational risk
decreased REA by SEK 0.9bn compared to the preceding yearend, mainly due to Swedbank’s revenue being lower in the
rolling three-year period. See Figure 2-3 for changes in REA.
Swedbank’s leverage ratio was 5.4% on 31 December 2016
(5.0%). Tier 1 capital increased by SEK 8.4bn, to SEK 113.0bn.
The change is mainly attributable to earnings, net of proposed
dividend, and to issuance of Additional Tier 1 capital in
December 2016. The issuance of Additional Tier 1 capital
impacted the leverage ratio only indirectly, it was not aimed
directly at the leverage ratio. The exposures included in the
calculation of the leverage ratio decreased by SEK 4.1bn
during the year. See Table 2-7 for a full reconciliation of the
leverage ratio.
11
Figure 2-1: Link between shareholders’ equity and total capital
SEKbn
140
129.5
130
120
14.3
12.2
125.2
Tier 2 capital
Total capital
113.0
-14.7
110
98.7
100
-14.1
-2.0
Goodwill &
intangible
assets
Other
adjustments
CET1 capital
90
80
70
Shareholders'
equity
Proposed
dividend
Total CET1
Capital
Increase
Additional Tier Total Tier 1
1 capital
Capital
Decrease
Figure 2-2: CET1 capital, changes during 2016, Swedbank Consolidated Situation
SEKbn
120
20.9
110
98.7
0.1
100
93.9
-14.7
-1.5
90
80
70
2015-12-31
Profit (CS)
Anticipated dividend
IAS 19
Other CET1 changes
2016-12-31
Figure 2-3: REA, changes during 2016, Swedbank Consolidated Situation
420
SEKbn
410
15.6
0.2
1.5
400
390
394.1
389.1
-2.1
-7.9
-1.4
-0.9
380
370
2015-12-31
Exposure
change
Rating
LGD changes Other credit
migration
risk
(PD)
Increase
SWEDBANK
CVA risk
Market risk Operational 2016-12-31
risk
Decrease
12
Figure 2-4: CET1 capital ratio
Figure 2-5: Tier 1 capital ratio
Figure 2-6: Total capital ratio
%
30
%
30
%
30
25
25
25
20
20
20
15
15
15
10
10
10
5
5
5
0
0
0
20092010201120122013201420152016
Basel 2*
Basel 3**
20092010201120122013201420152016
Basel 2*
Basel 3**
2009 2010 2011 2012 2013 2014 2015 2016
Basel 2*
Basel 3**
*As the new capital regulations came into force in January 2014, Swedbank's capital adequacy reporting under Basel 2 ceased from that date.
**2011-2013 according to Swedbank's calculation based on the proposed regulations
Capital planning
All banks are affected by macroeconomic changes that cannot
be fully mitigated by a strong risk culture and risk
management. Swedbank is adequately capitalised and has
sufficient buffers to ensure a going concern even under
adverse conditions. Capital buffers are also necessary to
absorb fluctuations of capital under normal conditions due to
factors such as volatility in the estimated pension liabilities
and variation in foreign currency exchange rates and interest
rates.
Swedbank conducts stress tests to identify the potential
effects of possible, though unlikely, negative scenarios and to
assess whether the capital buffer is satisfactory at any given
point in time. Capital planning and efforts to sustain
satisfactory capitalisation are critical for Swedbank’s ability to
maintain the market’s confidence, and consequently to retain
access to cost-efficient funding in the capital market, thus
making us able to support our customers.
The financial crisis dramatically changed the way regulators,
rating agencies and debt investors perceive banks'
capitalisation. A large number of regulatory changes have
been implemented in recent years, or are about to be
implemented, collectively aimed at increasing both the size
and quality of the banks' total capital. Stable earnings and
strong capitalisation mean that Swedbank is well positioned
today and for the future. Swedbank’s CET1 capital ratio is
among the highest compared to European peers, which is
confirmed by the quarterly Risk Dashboard issued by the
European Banking Authority (EBA).
Swedbank’s objective is to, at all times, be sufficiently
strongly capitalized to maintain confidence and access to
cost-efficient funding in the capital markets, even under
adverse market conditions. At the same time Swedbank
should uphold an efficient total capital which, by its size and
structure, ensures a high return on shareholder equity.
SWEDBANK
Swedbank’s standard procedures include a process for
reacting to leverage ratio changes and for managing the risk
of excessive leverage. In particular, Swedbank takes the risk of
excessive leverage into account in the bank’s forward-looking
capital planning process which is performed at least on a
quarterly basis. Other business steering or asset-and-liability
management tools may also be considered as a means to
affect the total exposure measure and may be accessed
should such a need arise.
Swedbank assesses that the Group as well as the parent
company and its subsidiaries are adequately capitalised. In
case of a potential shortfall, a capital injection or measures to
reduce risk exposure amount may be performed. In addition to
injection of equity capital, the total capital in a subsidiary may
also be strengthened through subordinated loans from within
the Group. To the extent that non-restricted equity is
available in subsidiaries, funds can be transferred back to the
parent company as dividends. Swedbank regularly reviews the
capitalisation of the entire Group and the individual legal
entities. The outcome of such reviews may trigger
adjustments deemed necessary to ensure compliance with
regulatory requirements and an efficient capital management
within the Group. In particular, besides regular dividends and
capital contributions in accordance with subsidiaries’ dividend
policies, extraordinary dividends from Swedbank Latvia and
Swedbank Lithuania amounting to EUR 570m to Swedbank
AB was paid in 2016. In addition a capital repatriation of
Swedbank Latvia’s share capital was made to Swedbank AB of
an amount of EUR 368m in 2016. Further, there are no
current or foreseen material practical or legal impediments to
the prompt transfer of own funds or repayment of liabilities to
or from the parent company and its subsidiaries.
Adequate and comprehensive capital allocation is an essential
tool in measuring profitability, from the level of the business
area and all the way through to each customer. At Swedbank,
shareholder value is seen as an excess return over the cost of
capital and is measured by economic profit and risk-adjusted
return on capital (RAROC). The principles of capital allocation
reflect Swedbank's risk tolerance and capital strategy.
Consolidated shareholders' equity is allocated to each
13
business area based not only on regulatory requirements, but
also on an internal assessment of risk in individual
transactions.
Regulatory environment – impact on
Swedbank
The regulation of banks is changing rapidly as a consequence
of the financial crisis that began in 2008. These efforts are
coordinated worldwide by the Financial Stability Board (FSB)
and the Basel Committee on Banking Supervision. In Europe,
this is accentuated by a push to harmonise regulations and
supervision practices through the development of a single
rulebook and the introduction of pan-European supervisory
institutions. Starting from 2014, the European Central Bank
(ECB) began directly supervising the largest banks in the euro
area; national supervisors continue to monitor the remaining
banks. As of 1 January 2015, the ECB’s supervision includes
Swedbank in Estonia, Latvia and Lithuania. An additional
feature that has emerged is that the European capital
adequacy legislation includes a framework for macro
prudential supervision, aimed at detecting and containing
systemic risks. As a consequence, the banks’ capital
requirements may be shifted quite frequently by the national
authorities, when deemed necessary to contain systemic risk.
Swedish capital requirements
The Basel 3 framework for bank regulation was introduced
within the EU in 2014 through the EU regulation CRR and the
EU Directive CRD IV. In 2014, the SFSA also decided which
capital requirements would apply to Swedish banks beyond
the minimum level of 7% CET1 capital in accordance with the
EU rules. The SFSA’s requirements can be summarised as
follows:
•
As of 1 January 2015, the four major Swedish banks are
assigned a systemic risk buffer of 3% in CET1 capital
within the framework of Pillar 1 and a further 2%
systemic risk charge within the framework of Pillar 2.
•
A risk-weight floor for Swedish mortgages of 25%
applies within the framework of Pillar 2.
•
The countercyclical buffer rate was set to 1% from 13
September 2015, was increased to 1.5% from 27 June
2016, and will be further increased to 2.0% from 19
March 2017.
Due to the risk-weight floor for the Swedish mortgage
portfolio and the countercyclical buffer requirement,
Swedbank must maintain additional CET1 capital of SEK
25.9bn for Swedish mortgages within the framework of Pillar
2, corresponding to 6.6 percentage points of the CET1 capital
ratio. These figures are forward-looking, i.e. they take into
consideration the announced increase in the Swedish
countercyclical buffer rate to 2.0% in March 2017. In its
internal steering, Swedbank allocates capital to its mortgage
business equivalent to a 25% risk-weight floor.
SWEDBANK
During 2015, the SFSA clarified its view on the capital
requirements for Pillar 2 risks. In particular, in its overall
supervisory capital assessment during the course of the
annual supervisory review and evaluation process (SREP), the
SFSA uses the methods it had presented in May 2015 for
assessing capital requirements within the framework of Pillar
2 for credit-related concentration risk, interest rate risk in the
banking book, and pension risk. On this basis, Swedbank’s
CET1 capital requirement for these Pillar 2 risks is estimated
at 1.2%, calculated as per 31 December 2016.
The SFSA has previously stated that it does not intend to
make a formal decision on the capital requirement for
individual institutions in Pillar 2. As long as a formal decision
has not been made, the capital requirement under Pillar 2 does
not affect the level at which automatic restrictions on
dividend and coupon payments take effect (due to a breach of
the combined buffer requirements). In January 2016, the SFSA
reiterated its view in a response to an EBA document on this
topic.
In May 2016 the SFSA adopted revised requirements for
Swedish banks calculating risk weights for capital
requirements using the internal ratings-based approach,
especially with regard to corporate exposures. The SFSA
began applying the revisions in its SREP for 2016, which the
SFSA finalised at end of September 2016. Thus, the revisions
have affected Swedbank’s capital requirements beginning in
the fourth quarter 2016. The revisions require banks to
anticipate a larger proportion of economic downturns in their
estimates of probability of default, which increased
Swedbank’s CET 1 capital requirement by 0.5 per cent, and to
use a so-called maturity floor, which increased Swedbank’s
CET 1 capital requirement by 0.2 per cent.
The total capital requirement for Swedbank, calculated as per
31 December 2016 based on current information, is
equivalent to a CET1 capital ratio of 21.9% and a total capital
ratio of 27.7%. These figures are forward-looking, i.e. they
take into consideration all announced increases in
countercyclical buffer rates, including the increase in the
Swedish countercyclical buffer rate to 2.0% in March 2017
(see Table 2-1 below).
At end-2016, Swedbank’s actual CET1 capital ratio and total
capital ratio were 25.0% and 31.8%, respectively. This means
that there is an adequate buffer above the fully implemented
capital requirement to manage volatilities in capital and REA.
However, due to the uncertainty related to potential
regulatory changes in the future, Swedbank’s assessment is
that the bank has no excess capital.
14
The Basel Committee’s review of capital requirements
The Basel Committee is working on several policy and
supervisory measures that aim to enhance the reliability and
comparability of risk-weighted capital ratios and to reduce the
potential for undue variation in capital requirements across
banks. The measures comprise revisions to the standardised
approaches for credit risk and for operational risk, a review of
the role of internal models in the capital requirement
framework and an introduction of a leverage ratio minimum
requirement and of aggregate capital floors for banks that use
internal models based on the proposed revised standardised
approaches.
In particular, in December 2015 the Basel Committee issued
its second consultative document on revisions to the
standardised approach for credit risk. In this document, the
Basel Committee proposes measures aimed at increasing risk
sensitivity, increasing comparability of capital requirements
under the standardised approach and the IRB approach, and
increasing comparability of capital requirements between
banks using the standardised approach. In addition, the Basel
Committee aims to reduce reliance on external credit ratings
by only allowing external credit ratings when they are used in
parallel with the bank’s own rating of the entities in question.
In 2014, the Basel Committee also issued final regulatory text
for a new standardised approach for measuring counterparty
credit risk exposures, which is included in the European
Commission’s proposals, as discussed below. Moreover, in
January 2016 the Basel Committee completed the
Fundamental Review of the Trading Book, a comprehensive
revision of the capital adequacy standard for market risk,
which is also included in the European Commission’s
proposals. The new standard implies substantial revisions to
both the standardised approach and the internal models
approach. Furthermore, in March 2016, the Basel Committee
published a proposal for a new standardised measurement
approach for operational risk, which would replace all existing
approaches for operational risks, including the Advanced
Measurement Approach.
The leverage ratio is a new non-risk-based solvency
requirement introduced through the Basel 3 framework. It is
described as a backstop to the risk-based capital requirements.
It is intended to constrain excess leverage in the banking
system and to provide an extra layer of protection against
model risk and measurement error. Since 2014, banks have
been required to report the leverage ratio to regulators, and a
formal disclosure requirement was introduced as from Q1
2015. The Basel Committee has communicated that it intends
to introduce a binding leverage ratio minimum requirement.
The leverage ratio is proposed to be defined as Tier 1 capital
divided by total exposures for the calculation of the leverage
ratio. The minimum requirement as proposed by the Basel
Committee would be calibrated to 3%. For Swedbank, such a
requirement is not expected to entail a limitation in the bank’s
capital planning. Furthermore, the Basel Committee considers
introducing a higher leverage ratio requirement for global
systemically important banks. However, Swedbank is not a
global systemically important bank.
SWEDBANK
As part of its work on strengthening the link between internal
models and the standardised approaches, and enhancing
comparability of capital requirements across banks, the Basel
Committee issued in December 2014 a consultative document
on the design of a capital floor framework. The framework
would be based on the proposed revised standardised
approaches, to limit the risk that capital requirements are too
low due to the use of internal models. The new floor
framework would replace the current capital floor, based on
the Basel 1 standard, for banks using internal models.
In March 2016, the Basel Committee proposed constraints on
the use of internal model approaches for credit risk. In
particular, the Basel Committee proposed to remove the
option of using the IRB approaches for certain exposures; to
adopt exposure-level, model-parameter floors; and to provide
greater specification of parameter estimation practices.
The Basel Committee had intended to finalise all those
revisions to the Basel III framework, including the calibration
of the aggregate capital floors framework and the leverage
ratio minimum requirement, at or around the end of 2016.
However, in January 2017, the Basel Committee announced
that it has postponed the finalisation to “the near future”.
There is a high degree of uncertainty with regards to the
Basel Committee’s final calibration of the proposed new
frameworks, and subsequently how and when this will be
implemented in the EU and in Sweden. It is thus too early to
draw firm conclusions regarding the impact of the potential
future capital requirements.
For risk-specific information regarding the Basel Committee’s
review of capital requirements, see Chapter 3 (credit risk and
counterparty risk), Chapter 4 (market risk), and Chapter 6
(operational risk) of this report.
Bank Recovery and Resolution Directive (BRRD)
The BRRD, which allows the authorities to deal with banks in
distress, was established in the EU in 2014. It was
implemented by Sweden through the Swedish Resolution Act
in February 2016. The crisis management framework set out
in the BRRD is intended to prevent crisis situations and
improve the ability to deal with crises that may arise. The aim
is to reduce the risk that taxpayers will have to bear the cost
in the event of a banking crisis. This will be accomplished
through the option of what is known as bail-in, which means
that shareholders and creditors bear the costs to a greater
extent.
According to the directive, EU member states shall appoint
one or more resolution authorities in each member state. The
Swedish government has designated the Swedish National
Debt Office (SNDO) as the Swedish resolution authority.
The resolution authorities’ tasks include drawing up
resolution plans, taking the decision that a given bank shall
enter into resolution, and applying resolution tools. To ensure
that banks always have sufficient loss-absorbing capacity, the
BRRD also provides for the resolution authorities to set
minimum requirements for own funds and eligible liabilities
15
(MREL) for each bank, based on, amongst other criteria, its
size, risk and business model.
The FSB has issued a standard on Total Loss-Absorbing
Capacity (TLAC), which sets corresponding requirements for
global systemically important banks. Swedbank is not a global
systemically important bank. The TLAC requirement will be
phased in starting from 1 January 2019. There is currently
work going on in the EU to implement the TLAC standard in
EU legislation. In particular, the European Commission has
proposed to incorporate TLAC into the capital requirements
framework, as an extension to the own funds requirements
and as part of the proposals discussed below. Although TLAC
only applies to global systemically important banks, the
European Commission has proposed that national resolution
authorities should also be permitted to require other banks in
a member state, like Swedbank, to have subordinated
liabilities, as provided for in the TLAC standard.
resolution decisions.
Swedbank’s best understanding and estimates of the SNDO’s
implementation of MREL shows that Swedbank on a
consolidated level already has enough capital and eligible
liabilities if the expected initial MREL requirements (excluding
any subordination requirement) would be introduced today.
However, due to the potential amendment of the requirement
in the future, there are still uncertainties regarding the final
configuration and level of the MREL requirement, and
consequently how this will affect Swedbank’s capital
requirements.
The Swedish Government’s focus in its implementation of the
BRRD is to build up resilience in the financial system, thereby
reducing the likelihood of banks entering into resolution. In
accordance with the BRRD, the Government introduced a
resolution reserve as a new financing arrangement together
with the existing deposit insurance fund and the stability
fund, which is intended for the banking system as a whole.
The new resolution reserve is financed by fees paid by the
banks that could be subject to resolution. Therefore, no fee to
the stability fund will be charged going forward.
On 26 April 2016, the SNDO published a proposal detailing its
plans for implementing the MREL requirement on Swedish
banks. The MREL requirement for systemically important
banks in Sweden, such as Swedbank, would be the sum of a
loss absorption amount plus a recapitalisation amount. The
loss absorption amount would equal the current total capital
requirement excluding the combined buffer requirement and
the Pillar 2 systemic risk surcharge. The recapitalisation
amount would equal the total current capital requirement (i.e.
including combined buffer and Pillar 2 requirements). The loss
absorption amount could be met with own funds instruments
(Common Equity Tier 1, Additional Tier 1 and Tier 2), while the
recapitalisation amount could only be met with eligible
liabilities (essentially senior unsecured bonds or term deposits
from large corporates, having a remaining maturity of at least
one year). The SNDO expects to revert earliest in the first
quarter of 2017 with final rules for the Swedish MREL
implementation.
The Government has decided that the target level for the
Swedish resolution reserve should be 3% of the total stock of
covered deposits in Sweden. This has caused the annual fees
to the new resolution reserve to be approximately twice as
extensive as the fees formerly paid to the stability fund. The
fee for an individual bank is determined by the bank’s size and
its risk profile based on a methodology defined in an EU
regulation. The fee to the resolution reserve is charged
starting from 2016. In 2016 the fee was set to half the
normal size. Swedbank paid an amount of SEK 596m to the
Swedish resolution fund in 2016. Swedbank is also liable to
pay fees to the resolution reserves in the Baltic countries.
These fees totaled EUR 4.9m in 2016.
In its proposal, the SNDO communicated that it intended to
make the first decisions for the Swedish banks’ MREL
requirements in fall 2017. Swedish banks would then have to
comply with the MREL requirements starting from 2018.
As part of the crisis management framework, banks need to
submit recovery plans annually to their regulators. Swedbank
submitted its initial plan to the SFSA in 2013, and has since
then submitted updated plans annually.
Moreover, the SNDO’s view is that a requirement that MREL
eligible liabilities shall be subordinated to senior liabilities
should be introduced eventually. However, since a
requirement on subordination would have major
consequences for Swedish banks, the SNDO is going to
investigate further how and when such a requirement can be
introduced. Subordination requirements are also addressed in
the European Commission’s proposals as discussed below, and
the outcome of the proposals will therefore also be relevant in
this regard. The SNDO expects to revert also regarding the
details of a subordination requirement at the earliest in the
first quarter of 2017.
As noted above, resolution authorities have to draw up
resolution plans for the banks. In 2016, the SNDO approved its
first resolution plan for Swedbank.
The Single Resolution Mechanism regulation, which is
applicable in the Baltic countries, establishes a centralised
resolution approach with a Single Resolution Board being
responsible for the overall framework, while national
resolution authorities are in charge of implementing the
SWEDBANK
The European Commission’s proposals for amendments
to the CRR, the CRD IV and the BRRD
On 23 November 2016, the European Commission published
legislative proposals for amendments to the CRR, the CRD IV,
the BRRD and an amending directive to facilitate the creation
of a new asset class of “non-preferred” senior debt.
The proposals cover multiple areas, including the Pillar 2
framework, a binding leverage ratio minimum requirement,
mandatory restrictions on distributions, permission for
reducing own funds and eligible liabilities, macroprudential
tools, the Basel Committee’s new standardised approach for
measuring counterparty credit risk exposures, the Basel
Committee’s Fundamental Review of the Trading Book, a new
16
category of “non-preferred” senior debt, the MREL framework
and the integration of the TLAC standard into EU legislation
as mentioned above.
legislation may not include all elements of the proposals and
new or amended elements may be introduced through the
course of the legislative process. Until the proposals are in
final form and adopted by the EU and until Swedish legislators
and authorities have decided on how the proposals would be
implemented in Sweden, it is uncertain how they will affect
Swedbank.
The proposals are to be considered by the European
Parliament and the Council of the European Union and
therefore remain subject to change. The final package of new
Capital adequacy tables
Table 2-1: Capital requirements (incl. fully implemented buffers and Pillar 2 requirements)1
Pillar 1
CET1
Minimum CET1 requirement
Systemic risk buffer
4.5%
(P1)2
AT1
1.5%
T2
Total capital
2.0%
8.0%
3.0%
3.0%
Capital conservation buffer (CCoB)
2.5%
2.5%
Countercyclical capital buffer (CCyB)3
1.3%
1.3%
11.3%
1.5%
2.0%
14.8%
Mortgage floor5
6.6%
0.7%
0.9%
8.2%
Systemic risk charge (P2)
2.0%
Individual Pillar 2 charge
2.0%
0.3%
0.4%
2.7%
of which Interest rate risk in the banking book
0.7%
0.1%
0.1%
0.9%
of which Credit-related concentration risk
Pillar 24
2.0%
0.6%
0.1%
0.1%
0.8%
of which Adjustment to estimates of probability of
default5
0.5%
0.1%
0.1%
0.6%
of which Maturity floor for corporate exposures
0.2%
0.0%
0.0%
0.3%
of which Pension risk
0.0%
0.0%
0.0%
0.0%
of which Other
0.1%
0.0%
0.0%
0.1%
10.6%
1.0%
1.3%
12.9%
Capital
requirements
21.9%
2.5%
3.3%
27.7%
Actual capital ratios as of 31 December 2016
25.0%
3.6%
3.1%
31.8%
1) Swedbank's estimate based on the SFSA's announced capital requirements, including fully implemented buffers and Pillar 2 requirements.
2) The Other Systemically Important Institution buffer (O-SII buffer) entered into force on 1 January 2016. The higher of the systemic risk buffer and the O-SII buffer applies.
The O-SII buffer is 2%.
3) The estimate is based on Swedbank's relevant exposures, and the calculation takes into account the impending increases in the countercyclical buffer rates published by
the ESRB as of 17 January 2017.
4) Mortgage floor and systemic risk buffer as of 31 December 2016. The individual Pillar 2 charge as of 31 December 2016 according to SFSA’s SREP report of 30 September
2016 in relation to REA as of 31 December 2016.
5) The calculation takes into account the impending increase in the Swedish countercyclical buffer rate to 2.0% in March 2017.
Table 2-2: Capital adequacy in Swedbank Consolidated Situation
SEKm
Common Equity Tier 1 capital
Tier 1 capital
Total capital
Risk exposure amount
Minimum capital requirement 1)
Surplus of capital
Common Equity Tier 1 capital ratio, %
Tier 1 capital ratio, %
Total capital ratio, %
Capital requirement Basel 1 floor
Total capital adjusted according to rules for Basel 1
floor
Surplus of capital according to Basel 1 floor
2016
98 679
112 960
125 189
394 136
31 531
93 658
25.0
28.7
31.8
2015
93 926
104 550
117 819
389 098
31 128
86 691
24.1
26.9
30.3
75 749
68 577
126 565
118 908
50 816
50 331
As of 31 December 2015 the Swedbank Consolidated Situation included the Swedbank Group with the following exceptions. In the consolidated accounts, the associated
company EnterCard (group) is consolidated according to the equity method. In Swedbank Consolidated Situation, EnterCard is consolidated according to the proportional
consolidation method. The insurance companies included in the consolidated accounts, Swedbank Försäkrings AB, Sparia Group Insurance Company Ltd., Swedbank Life
Insurance SE, and Swedbank P&C Insurance AS, are not included in Swedbank Consolidated Situation and are instead subject to solvency rules rather than capital adequacy
rules.
1) Total minimum capital requirement under Pillar 1, i.e. 8% of total risk exposure amount.
SWEDBANK
17
Table 2-3: Total capital, Swedbank Consolidated Situation
Note
SEKm
1
2
3
4
5
6
7
8
9
10
11
12
13
Shareholders’ equity according to the Group balance sheet
Non-controlling interests
Anticipated dividends
Deconsolidation of insurance companies
Unrealised value changes in financial liabilities due to changes in own creditworthiness
Cash flow hedges
Additional value adjustments
Goodwill
Deferred tax assets
Intangible assets
Net provisions for reported IRB credit exposures
Shares deducted from CET1 capital
Defined benefit pension fund assets
2016
129 515
78
-14 695
96
-2
-76
-599
-12 497
-114
-1 601
-1 376
-50
0
2015
123 163
54
-11 828
-1 249
31
-17
-474
-12 097
-95
-1 438
-1 089
-42
-993
14
Total CET1 capital
98 679
93 926
15
16
Additional Tier 1 capital
Total Tier 1 capital
14 281
10 624
112 960
104 550
17
18
Tier 2 capital
Total capital
12 229
13 269
125 189
117 819
1 Shareholders’ equity according to the Group balance sheet
This item includes capital contributed by the shareholders, which is reported as share capital and statutory reserves. This item also includes earnings in previous years and in
the current year reported via the comprehensive income statement, including the capital part of untaxed reserves. Profit generated during the year is included in CET1
capital as soon as it has been verified by the company’s auditor.
2 Non-controlling interests
The equity interests of minority equity holders in companies that are fully consolidated, eligible for inclusion in CET1 capital.
3 Anticipated dividends
Deduction for estimated dividends.
4 Deconsolidation of insurance companies
Deduction of equity capital emanating from the insurance companies in Swedbank Group. The insurance companies are consolidated in the Group but not in Swedbank
Consolidated Situation under the capital adequacy rules.
5 Unrealised value changes in financial liabilities due to changes in own creditworthiness
Recognised changes in the value of equity arising from financial liabilities (not held for trade or not subject of an effective and documented fair value hedge but reported at
fair value) due to changes in own creditworthiness are not eligible for inclusion in the capital.
6 Adjustment for cash flow hedges
Recognised changes in the value of equity arising from cash flow hedges are not eligible for inclusion in the capital.
7 Additional value adjustments
Adjustment due to the implementation of the EBA’s technical standards on prudent valuation. The objective of these standards is to determine prudent values of fair valued
positions.
8 Goodwill
Goodwill reported on the balance sheet is deducted from CET1 capital. Goodwill emanating from significant holdings of shares is also deducted. Goodwill attributable to
shareholdings in foreign subsidiaries can vary due to exchange rate fluctuations.
9 Deferred tax assets
Deferred tax assets reported on the balance sheet are deducted from CET1 capital. However, under certain conditions and if below specified threshold levels, parts of
deferred taxes can instead be included in Risk Exposure Amount.
10 Intangible assets
Intangible assets, other than goodwill, such as the value of acquired customer relationships are deducted from CET1 capital.
11 Net provisions for reported IRB credit exposures
Deduction for the negative difference between expected losses calculated within the IRB approach and the reported provisions. The difference arises when losses calculated
in accordance with the capital adequacy rules exceed Swedbank’s best assessment of loss levels and provision needs according to incurred loss model in financial reporting.
Expected losses are calculated in accordance with the capital adequacy regulations and using data from Swedbank’s internal risk rating system, where risks are
overestimated rather than underestimated. In addition, extra safety margins are applied, which have been built into the risk rating system due to the SFSA’s interpretation
of the regulations.
12 Shares deducted from CET1 capital
Deduction according to CRR from CET 1 capital for certain types of equity shares and contributions, if such holdings exceed specified threshold levels. Swedbank's holdings
do not exceed threshold levels, but are instead included in Risk Exposure Amount.
During Q4 2014, the European Banking Authority (EBA) published its interpretation of how trading in own shares and capital instruments in the securities operations
affects capital. As a result, the maximum holding approved by the SFSA has to be deducted, compared with previous practice where the actual holding was deducted.
13 Defined benefit pension fund assets
Net pension assets.
SWEDBANK
18
14 Total CET1 capital
Common Equity Tier 1 (CET1) capital consists mainly of equity capital less proposed dividends and deduction for goodwill/intangible assets and deferred tax assets. The ratio
of CET1 capital to Risk exposure amount is the CET1 capital ratio.
15 Additional Tier 1 capital
Additional Tier 1 capital is made up of subordinated loans whose terms are such that they fulfil requirements in CRR, either fully or according to grandfathering rules, to
include them in Tier 1 capital. They may be redeemed or repurchased on approval by the Competent Authority (SFSA). Normally, such approval cannot be given until five
years after the loan was issued. Additional Tier 1 capital is also called “hybrid capital” because the properties of these instruments contain elements of both debt and equity.
Interest payments are determined according to the contract, but are allowed only if there are distributable funds. For Additional Tier 1 capital to be fully compliant with CRR
(which entered into force 1 Jan 2014), there must be a discretionary right for the issuer to cancel the interest payments.
The priority rights of the contribution are subordinated to all other deposits and borrowings including subordinated loans that may not be included as Additional Tier 1
capital. The principal amount of Additional Tier 1 capital can be appropriated to cover losses to the extent that may be required to avoid Swedbank AB being obliged to enter
into liquidation. The appropriation is processed by writing down the principal amount fully or partially and converting such amount into a conditional capital contribution,
given a resolution hereof is passed at General Meeting and the SFSA has given its permission. For Additional Tier 1 capital to be fully compliant with CRR specific terms
around mandatory write-down or conversion to shares when breaching a pre-determined trigger, the CET1 capital ratio level must be included.
Additional Tier 1 capital is included in the total capital in accordance with CRR, including grandfathering rules related to such instruments issued under earlier rules and not
fully compliant with CRR rules on Additional Tier 1 capital. Since some of the loans are issued in foreign currencies, the size of the Additional Tier 1 capital can vary due to
exchange rate fluctuations. For specification of outstanding Additional Tier 1 capital, please see Appendix A, table A2.
16 Total Tier 1 capital
Tier 1 capital consists mainly of equity capital less proposed dividends and deduction for intangible assets. Additional Tier 1 capital compliant with CRR is also included.
Subject to grandfathering rules in CRR, Additional Tier 1 capital issued under earlier rules may be included in Tier 1 capital. The ratio of Tier 1 capital to Risk Exposure
Amount is the Tier 1 capital ratio.
17 Tier 2 capital
Tier 2 capital instruments are made up of subordinated loans whose terms are such that they fulfil requirements in CRR, either fully or according to grandfathering rules, to
include them in Tier 2 capital. Term reductions are made according to CRR rules if the remaining maturity is less than five years. They may be redeemed or repurchased on
approval by the Competent Authority (SFSA). Normally, such approval cannot be given until five years after the loan was issued. Tier 2 capital instruments loans may be
included in the total capital because they constitute a subordinated debt, which means that if the obligor is declared bankrupt, the holder would be repaid after other
creditors, but before shareholders and holders of Additional Tier 1 capital. In addition, subordinated loans may be used to cover any losses from ongoing operations to
prevent liquidation. Since some of the loans are issued in foreign currencies, the size of the Tier 2 capital instruments can vary due to exchange rate fluctuations. For
specification of outstanding Tier 2 capital instruments, please see Appendix A, table A2.
18 Total capital
The capital base is intended to act as a buffer against the risks to which Swedbank Consolidated Situation is exposed and comprises the sum of CET 1 capital, Additional Tier
1 capital, and Tier 2 capital. The ratio of the Total capital to the Risk Exposure Amount is the Total capital ratio.
Table 2-4a: Amount of institution-specific countercyclical capital buffer in Swedbank Consolidated Situation
SEKm
Total risk exposure amount
Institution-specific countercyclical buffer rate
Institution-specific countercyclical buffer requirement
2016
394 136
0.98%
3 863
Table 2-4b: Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer
for Swedbank Consolidated Situation as of 31 December 2016
General credit exposures
Trading book exposure
Exposure
value for
SA
Sum of
long and
short
position
of
trading
book
Value of
trading
book
exposure
for
internal
models
Exposure
value for
IRB
Securitisation
exposures
Exposure
value for
SA
Own funds requirements
Exposure
value for
IRB
Of which:
General
credit
exposures
Of which:
Trading
book
exposures
Of which:
Securitisati
on
exposures
Total
Own funds
requiremen
t weights
Countercyclica
l capital buffer
rate
Sweden
48 823
1 306 295
0
0
0
0
14 418
0
0
14 418
59
1.50%
Estonia
4 333
65 519
0
0
0
0
2 242
0
0
2 242
9
0.00%
Latvia
1 547
33 571
0
0
0
0
1 583
0
0
1 583
7
0.00%
Lithuania
5 338
43 698
0
0
0
0
1 586
0
0
1 586
7
0.00%
Norway
11 504
39 027
0
0
0
0
1 418
0
0
1 418
6
1.50%
463
20 516
0
0
0
0
493
0
0
493
2
0.00%
4 975
5 727
0
0
0
0
400
0
0
400
2
0.00%
46
3 147
0
0
0
0
135
0
0
135
1
0.00%
2
229
0
0
0
0
19
0
0
19
0
0.00%
2 352
35 519
12 289
0
0
0
1 837
103
0
1 940
8
0.00%
79 383
1 553 248
12 289
0
0
0
24 131
103
0
24 235
100
Finland
Denmark
USA
Russia
Other
countries
Total
SWEDBANK
19
Table 2-5: Capital requirement – Swedbank Consolidated Situation
SEKm
2016
3 800
21 478
34
0
754
732
563
169
22
424
4 972
69
2015
3 823
20 801
4
1
858
848
525
323
10
594
5 047
0
Minimum capital requirement for credit risks, standardised approach
Minimum capital requirement for credit risks, IRB
Minimum capital requirement for credit risk, default fund contribution
Minimum capital requirement for settlement risks
Minimum capital requirement for market risks
Trading book
of which VaR and SVaR
of which risks outside VaR and SVaR
FX risk other operations
Minimum capital requirement for credit value adjustment
Minimum capital requirement for operational risks
Additional minimum capital requirements, Article 3 CRR
31 531
31 128
Risk exposure amount credit risks
Risk exposure amount settlement risks
Risk exposure amount market risks
Risk exposure amount credit value adjustment
Risk exposure amount operational risks
Additional risk exposure amount, Article 3 CRR
316 407
0
9 419
5 297
62 152
861
307 856
7
10 730
7 422
63 083
394 136
389 098
1) Capital requirement under Pillar 1, i.e. 8% of total risk exposure amount.
Table 2-6: Risk Exposure Amount and Own funds requirement, Swedbank Consolidated Situation, 31 Dec. 2016
SEKm
Credit risks, STD
Central government or central bank exposures
Regional governments or local authorities exposures
Public sector entities exposures
Multilateral development banks exposures
International organisation exposures
Institutional exposures
Corporate exposures
Retail exposures
Exposures secured by mortgages on immovable property
Exposures in default
Exposures associated with particularly high risk
Exposures in the form of covered bonds
Items representing securitisation positions
Exposures to institutions and corporates with a short-term credit assessment
Exposures in the form of units or shares in collective investment undertakings
Equity exposures
Other items
Credit risks, IRB
Corporate exposures
of which specialised lending in category 1
Retail exposures
of which mortgage lending
of which other lending
Securitisation
Non-credit obligation
Credit risks, Default fund contribution
Settlement risks
Market risks
Trading book
Credit value adjustment
Operational risks
of which Basic indicator approach
of which Standardised approach
Additional risk due to Art 3 CRR
Total
Risk exposure
amount
47 503
449
276
60
20
0
127
4 630
10 485
8 362
403
0
7
0
0
0
19 691
2 993
268 473
13 406
175 810
9
274
638
654
72 151
45 410
26 741
0
7 106
431
0
9 419
9 147
7 033
2 114
272
5 297
62 152
Own funds
requirement 1)
3 800
36
22
5
2
0
10
370
839
669
32
0
1
0
0
0
1 575
239
21 478
1 072
14 065
1
22
51
52
0
5 772
3 633
2 139
0
568
431
0
754
732
563
169
22
424
4 972
0
62 152
861
0
4 972
69
394 136
31 531
1) Own funds requirement under Pillar 1, i.e. 8% of total risk exposure amount.
SWEDBANK
20
Table 2-7: Leverage ratio
SEKm
Total assets as per published financial statements
Adjustment for entities which are consolidated for accounting purposes but are outside the scope of regulatory consolidation
Adjustment for fiduciary assets recognised on the balance sheet pursuant to the applicable accounting framework but excluded from the leverage
ratio exposure measure in accordance with Article 429(13) of Regulation (EU) No 575/2013
2016
2 154 203
-159 715
0
Adjustments for derivative financial instruments
Adjustments for securities financing transactions, SFTs
Adjustment for off-balance sheet items
Adjustment for intragroup exposures excluded from the leverage ratio exposure measure in accordance with Article 429 (7) of Regulation (EU) No
575/2013
Adjustment for exposures excluded from the leverage ratio exposure measure in accordance with Article 429 (14) of Regulation (EU) No 575/2013
-23 177
23 106
123 526
Other adjustments
Total leverage ratio exposure
-19 763
0
0
2 098 180
SEKm
On-balance sheet items (excluding derivatives, SFTs and fiduciary assets, but including collateral)
Asset amounts deducted in determining Tier 1 capital
Total on-balance sheet exposures (excluding derivatives, SFTs and fiduciary assets)
2016
1 856 965
-19 763
1 837 202
Replacement cost associated with all derivatives transactions (net of eligible cash variation margin)
Add-on amounts for PFE associated with all derivatives transactions (mark-to-market method)
Exposure determined under Original Exposure Method
Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the applicable accounting framework
Deductions of receivables assets for cash variation margin provided in derivatives transactions
Exempted CCP leg of client-cleared trade exposures
Adjusted effective notional amount of written credit derivatives
Adjusted effective notional offsets and add-on deductions for written credit derivatives
Total derivative exposures
35 021
29 572
Gross SFT assets (with no recognition of netting), after adjusting for sales accounting transactions
Netted amounts of cash payables and cash receivables of gross SFT assets
Counterparty credit risk exposure for SFT assets
Derogation for SFTs: Counterparty credit risk exposure in accordance with Article 429b (4) and 222 of Regulation (EU) No 575/2013
Agent transaction exposures
Exempted CCP leg of client-cleared SFT exposure
Total securities financing transaction exposures
54 216
0
18 603
0
0
0
0
0
0
-534
1 240
-666
64 633
72 819
306 929
-183 403
Off-balance sheet exposures at gross notional amount
Adjustments for conversion to credit equivalent amounts
Other off-balance sheet exposures
123 526
Exemption of intragroup exposures (solo basis) in accordance with Article 429(7) of Regulation (EU) No 575/2013 (on and off balance sheet)
Exposures exempted in accordance with Article 429 (14) of Regulation (EU) No 575/2013 (on and off balance sheet)
Tier 1 capital
Total leverage ratio exposures
0
0
112 960
2 098 180
Leverage ratio
5.4%
Choice on transitional arrangements for the definition of the capital measure
Amount of derecognised fiduciary items in accordance with Article 429(11) of Regulation (EU) NO 575/2013
SEKm
Total on-balance sheet exposures (excluding derivatives, SFTs, and exempted exposures), of which:
Trading book exposures
Banking book exposures
of which covered bonds
of which exposures treated as sovereigns
of which exposures to regional governments, MDB, international organisations and PSE not treated as sovereigns
of which institutions
of which secured by mortgages of immovable properties
of which retail exposures
of which corporate
of which exposures in default
of which other exposures (e.g. equity, securitisations, and other non-credit obligation assets)
Transitional definition
0
2016
1 856 965
56 641
1 800 324
32 066
236 176
8 116
20 599
955 838
84 203
409 304
6 333
47 689
Note: For definitions of abbreviations, see the table “Terminology and abbreviations” in the Appendix A.
SWEDBANK
21
3. Credit risk
Swedbank’s credit portfolio is focused on stable low-risk segments such as private
mortgage and real estate corporates in our four home markets. Tight lending
standards and close dialogue with customer are key to the sustainability of high
quality in our credit portfolio.
Total loans net:
Credit risk
The risk that a borrower will fail to meet their contractual
obligations to Swedbank and the risk that pledged
collateral will not cover the claim.
Credit risk also includes concentration risk, which means
large individual exposures as well as significant
exposures to groups of counterparties whose probability
of default is driven by common underlying factors, such
as sector, economy, geographical location, or type of
instrument.
Counterparty risk is the risk that a Counterparty to a
trading transaction will not meet its financial obligations
towards Swedbank and that collateral held will not be
enough to cover the claims. This definition encompasses
repurchase agreements, derivatives and securities
financing transactions.
SEK
1 453bn
2015: 1 371bn
Credit impairment ratio:
0.10%
2015: 0.04%
Impaired loans net ratio:
0.56%
2015: 0.40%
Total exposure:
SEK
Risk appetite
1 989bn
2015: SEK 1 989bn
The Group shall maintain a well-diversified credit portfolio
with a low risk profile. All credit activities shall strive towards
a long-term customer relationship and rest on sound business
acumen to achieve solid profitability and avoid credit
expansion that may endanger the long-run stability of the
Group.
Credit Risk Exposure Amount (REA):
SEK
317bn
2015: SEK 308bn
Highlights 2016
Swedbank’s strong position withheld in spite of global uncertainties
SWEDBANK
quality and capital situation by showing the lowest impact on
CET1 capital ratio of all Swedish banks and a result among the
best in Europe.
Figure 3-1: Swedbanks historical loan losses
5.0
%
4.0
3.0
2.0
1.0
-16
-13
-10
-07
-04
-01
-98
-95
-1.0
-92
0.0
-89
Swedbank’s low credit risk and stable loan portfolio was
confirmed in 2016. Contingencies from the Brexit referendum,
the US presidential election, geopolitical uncertainties and
economic slowdown in China resulted in uncertainty about
the macroeconomic development. However, internal analyses
indicate that the direct impact on Swedbank’s credit portfolio
will be minor from all these factors. Credit impairment and
impaired loans remain on low levels.
During 2016, Swedbank focused on supporting loan growth in
segments with solid economic growth and where forthcoming
risks are predicted to stay low. Strong growth in the
economies in all our four home markets continued to
contribute positively to the credit portfolio development.
In 2016 the EBA performed its bi-annual stress test for large
EU banks. The result reaffirms Swedbank’s strong credit
22
Credit risk in important sectors
The drop in oil price put pressure on the oil-related exposures
Swedbank oil-related exposure are small, they amount to
SEK 33bn, of which SEK 28bn are negatively impacted by the
low oil-price. Loans net stand for less than 2% of total loans.
The oil price has been fairly stable during 2016. The OPEC
decision to limit oil output in combination with the Trump
effect has fueled the oil the last months. However the oil price
is still too low for investments to pick up and lead time from
investment to oil services companies’ revenue is long. The
companies still suffer from contraction of demand from
services.
Swedbank is following the market thoroughly and are in a
close dialogue with affected customers. First restructuring
including all stakeholders, like new equity, prolongation or
conversion of bonds to equity extended repayment schedules
are done or under progress. Swedbank’s customers in oilrelated sectors have all taken actions to adjust their business
to the changed market situation.
During the year a few customers have failed to fulfill agreed
restructuring terms. Provisionings have been made and the
loans have been classified as impaired loans. Other
restructurings have been classified as performing forbourne
exposures.
The continued review of all exposures in 2016 has resulted in
downgradings of a majority of the exposures. The effect on
REA in 2016 for the negative PD-migrations in the oil-sector
is about SEK 3.3bn.
Figure 3-2: LC&I Shipping & Offshore portfolio, loans
gross
10
SEKbn
2015-12-31
8
2016-12-31
6
4
2
0
Figure 3-3: Oil-related exposures by internal risk grade
14
SEKbn
12
10
8
6
4
2
0
Def 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
2014-12-31
2015-12-31
2016-12-31
Private mortgage loans a low risk portfolio
SWEDBANK
Figure 3-4: Private mortgage exposure risk grade
distribution
400
SEKbn
350
300
250
200
150
100
50
0
Def 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Swedish Banking
Estonia
Latvia
Lithuania
Figure 3-5: Private mortgage, average past-due loans
and LTV
14
12
% of gross
volumes
Average LTV
180
160
140
10
120
8
100
6
80
60
4
40
2
20
0
0
-07
-08
-09
-10
-11
-12
-13
-14
-15
-16
-07
-08
-09
-10
-11
-12
-13
-14
-15
-16
-07
-08
-09
-10
-11
-12
-13
-14
-15
-16
-07
-08
-09
-10
-11
-12
-13
-14
-15
-16
Private mortgage loans constitutes Swedbank’s largest loan
segment; it comprised SEK 783bn at year-end and represents
54% of Swedbank’s total loans net. It is a low-risk portfolio
with very low losses historically as well as low loss results in
stress tests.
One reason for the low losses is Swedbank’s well-developed
credit review process. Prior to a new mortgage being
approved, the individual household undergoes a cashflowbased affordability analysis, including a stress test to
determine whether the household can afford a significant
interest rates increase and handle relevant amortisation.
Swedbank’s loan portfolio periodically undergoes stress tests.
The results in the Swedish portfolio indicate robust solvency
among mortgage customers and an average LTV ratio that
suggests a low risk of credit impairments. Furthermore, a
close relationship to and deep understanding of customers
gained via Swedbank's large retail network has helped
Swedbank to maintain losses at low levels.
On 1 June the Swedish Financial Supervisory Authority (SFSA)
introduced an amortisation requirement on new mortgages,
similar to guidelines Swedbank introduced in 2015. In 2016
Swedbank has introduced further risk reducing measures
aiming to slow-down the debt build-up in Swedish households
during recent years in the wake of the rise in housing prices,
mainly in large cities. At the second half of 2016, prices
stagnated somewhat and households indicated that they had
lowered their expectations regarding price increases.
Sweden
Estonia
Past-due loans >60 days (lhs)
Latvia
Lithuania
Average LTV (rhs)
23
Property Management – high lending standards avoid risk in the low yield environment
Swedbank’s property management portfolio concluded the
year with loans net of SEK 223bn (EAD of SEK 256bn). The
portfolio consists mainly of well-known customers with
whom Swedbank has increased its business relations over
time.
The Swedish property management portfolio has low risk,
which is demonstrated by low historical losses as well as a
low number of customers with payment problems. The low
risk is confirmed by internal and external stress tests. The low
average LTV, 52%, confirms that the portfolio is wellcollateralised, with a sound and low risk profile.
The Swedish real estate market is expected to continue to
grow in the short-term perspective supported by a growing
population, strong urbanisation trend, and low interest rates.
High demand for rental apartments continues to prevail in
most Swedish municipalities. Modern offices remain in high
demand in the larger cities. The market development is driven
by the low interest rate environment and good access to
capital, which an increased risk taking in new investments.
In the Baltic countries, the residential property management
market is small since a majority of the apartments are
privately owned and not rented. Vacancy rates in commercial
real estate have returned to low levels (about 5%). Moderate
increases in rental rates are expected. The outlook for 2017 is
expected to remain positive, as the market should absorb
most of the new supply.
When financing properties in the low interest and yield
environment, Swedbank focuses on the long term ability to
pay stressed interest and proper amortisations and takes a
conservative stance regarding LTV levels.
Figure 3-6: Property management exposure risk grade
distribution
35 SEKbn
30
25
20
15
10
5
0
Def 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Swedish Banking
Estonia
Latvia
Lithuania
LC&I
Figure 3-7: Property management by subsegment and
country
Residential properties
Commercial properties
SEK 64bn
SEK 88bn
Industrial properties
Other prop. mgmt.
SEK 45bn
Sweden
Estonia
SEK 26bn
Latvia
Lithuania
Norway
etc.
exposure
Finland
Agriculture - large share of private individual risk
Swedbank’s loans to customers in the agriculture, forestry
and fishing sector amounted to SEK 66bn (EAD 70bn), of
which SEK 62bn is counterparties in Sweden. A large share,
52%, of this industry sector, comprises private investment
customers who have invested either in forest areas or in
former agricultural properties now used only as residences,
which reduces the risk to similar private mortgage low risk
level.
Swedbank’s portfolio consists of many small customers
included in the retail exposure class with a high share of
collateral. The average LTV for Swedish agriculture mortgage
lending is 51%. The resilience in the Swedish agriculture
portfolio is high. Historical losses are stable on low levels, with
only small variations over business cycles.
The number of family farmers is declining in Sweden. There is
a significant structural trend towards fewer and specialised
large farms with higher productivity and increasing
investment credit needs. The farms closed down are to a large
content converted to residential premises.
Overproduction of milk in the EU and globally during the past
year has reduced milk prices to very low levels. This has
affected milk farmers negatively in 2015 and throughout
2016. Problems that now to a large extent have been handled
by the farmers in cooperation with the bank.
Figure 3-8:
distribution
15
Agriculture
grade
SEKbn
10
5
0
Def 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Swedish Banking
Estonia
Latvia
Lithuania
LC&I
Figure 3-9: Ariculture etc. by subsegment and country
20
SEKbn
15
10
5
0
Private
Private Growing of
Milk
residential investm.
crops
farmers
forestry
Sweden
SWEDBANK
risk
Raising of
livestock
Estonia
Mixed
Latvia
Other
Forestry
agriculture
Fishing
Lithuania
24
Credit risk exposures
Credit risk is the single largest risk discipline for Swedbank.
Our lending knowledge and strong local presence, in
conjunction with our low-risk strategy, has resulted in low
loan losses, despite the external macro challenges around us.
In parallel, we have been able to continue the growth in more
low-risk segments.
The portfolio is well diversified due to the wide customer base
of private households and corporates in many different
sectors, with a focus on the four home markets.
Table 3-1: Key parameters by business area
Swedish
Banking
Baltic
Banking
- of
which
Estonia
- of
which
Latvia
- of
which
Lithuania
873 455
60 019
28 432
12 901
0.27
2.06
1.77
3.17
10.3
15.3
13.2
3.8
20.0
297
- of which
Investment
and Other
LC&I
Group
Functions
Total
2016
Total
2015
18 686
103
2 965
936 542
882 979
1.77
0.57
0.31
0.38
0.42
17.9
16.6
16.6
8.8
10.6
10.7
16.2
28.9
19.6
11.1
2.9
4.8
5.2
198
67
74
57
0
1
496
517
78 173
16 933
7 621
4 292
5 020
641
9
95 756
91 929
1.17
2.86
2.46
4.17
2.34
2.04
2.39
1.47
1.47
Exposure weighted avg. LGD, %
35.8
44.8
45.3
50.3
39.4
43.4
15.6
37.5
37.6
Average risk weight, %
23.7
47.1
46.0
61.3
36.6
35.1
15.6
27.9
28.1
Expected loss on non-defaults in SEKm
348
217
85
84
47
5
0
570
548
31 December 2016
Retail - mortgages
Exposure, in SEKm
Exposure weighted avg. PD (excl defaults), %
Retail - other
Exposure, in SEKm
Corporate - Advanced IRB
186 644
242 201
831
429 676
398 255
0.94
0.50
0.07
0.69
0.61
18.5
22.0
26.9
20.5
21.4
29.9
28.5
8.8
29.1
29.3
343
309
0
652
507
Exposure, in SEKm
Corporate - Foundation IRB
6 546
61 475
27 837
14 546
19 092
8 729
929
77 679
71 127
0.99
1.86
1.86
2.92
1.05
0.72
1.08
1.65
1.67
35.3
44.5
44.5
44.3
44.5
44.2
43.9
43.7
43.7
50.8
65.8
61.7
80.2
60.7
59.3
48.3
63.6
65.5
26
496
224
185
87
28
4
554
512
0
1 410
1 781
111.7
105.6
Exposure, in SEKm
Corporate - specialised lending
Exposure, in SEKm
1 410
720
493
197
111.7
107.1
133.1
75.2
208
Institutions
7 027
1 447
477
769
201
26 361
49 124
83 959
108 019
0.07
0.14
0.21
0.11
0.15
0.09
0.04
0.06
0.07
44.9
44.9
44.7
45.0
45.0
32.7
17.4
25.0
22.3
24.2
34.0
36.9
33.3
29.5
23.6
10.2
16.0
15.1
3
1
0
0
0
8
4
16
18
4 201
3 432
999
1 371
1 062
4 226
323
12 182
62 846
60.9
23.0
25.8
38.7
81.4
100.0
58.3
10.8
1 156 046
144 716
66 086
34 372
44 258
282 261
54 181 1 637 204
1 616 936
0.44
2.05
1.88
3.11
1.51
0.47
0.08
0.57
0.56
13.7
32.0
30.8
34.7
31.8
23.7
17.5
17.1
17.3
10.0
43.7
40.1
56.6
39.1
29.8
10.9
16.4
16.1
1 015
912
376
344
191
351
10
2 288
2 310
60 649
70 204
27 546
15 012
27 144
502
36 558
184 468
351 879
371 639
51.0
9.7
7.2
4.5
10.6
250.0
10.7
3.2
13.5
12.9
1 216 695
214 920
93 632
49 384
71 402
502
318 819
238 649
1 989 083
1 988 575
12.0
32.6
30.4
40.8
28.2
250.0
27.6
4.9
15.9
15.5
Exposure, in SEKm
Other IRB exposure classes
Exposure, in SEKm
Total IRB approach
Exposure, in SEKm
Standardised approach
Exposure, in SEKm
Total exposures
Exposure, in SEKm
Note: Exposures according to the capital adequacy framework, IRB approach exposures defined as EAD.
SWEDBANK
25
Credit risk by business area
Swedish Banking
Swedish Banking is Swedbank’s largest business area and has
SEK 1 217bn in total exposure. Its main business is lending to
private individuals, mainly mortgages, and lending to small
and medium-sized corporates in Sweden. Tenant-owner
associations and property management also make up
substantial parts of the portfolio. The sensitivity of the
portfolio is mainly related to the Swedish economy in general.
Figure 3-10: Swedish Banking, credit exposure by risk grade
400
Figure 3-11: Loans by sector
SEKbn
Private
Institutions
350
300
Corporate
250
Retail
Tenant owner
associations
Agriculture,
forestry, fishing
Manufacturing
200
150
Construction
100
Retail
50
Property
management
Other corporate
lending
0
Def 0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21
Baltic Banking: Estonia
At end-2016, the Estonian part of Baltic Banking had SEK
94bn in total exposure, or 44% of all Baltic Banking
exposures. The exposure and sensitivity of this part of the
portfolio is related to the Estonian economy in general. The
Estonian portfolio performed well in 2016, with a decreased
share of problem loans and improved average ratings.
Figure 3-12: Baltic Banking: Estonia, credit exposure by risk grade
15
Private
Institutions
SEKbn
Manufacturing
Corporate
10
Public sector and
utilities
Retail
Retail
Transportation
5
Property
management
Professional
services
Other corporates
0
Def 0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21
Baltic Banking: Latvia
The Latvian part of Baltic Banking has SEK 49bn in total
exposure. It thus comprises Swedbank's smallest market in
the Baltic business area, and makes up 2.5% of Swedbank’s
total exposures. Swedbank's exposure, as well as the
sensitivity of the portfolio, is linked to the Latvian economy in
general.
Figure 3-14: Baltic Banking: Latvia, credit exposure by risk grade
5
Private
Institutions
SEKbn
4
Corporate
Retail
3
Agriculture etc.
Manufacturing
Retail
2
Transportation
1
0
Def 0
SWEDBANK
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21
Property
management
Professional
services
Other corporates
26
Baltic Banking: Lithuania
The Lithuanian part of Baltic Banking has a total exposure of
SEK 71bn. Swedbank's exposure, as well as the sensitivity of
its portfolio in the country, is related to the Lithuanian
economy in general.
Figure 3-16: Baltic Banking: Lithuania, credit exposure by risk grade
10
Private
Institutions
SEKbn
8
Agriculture,
forestry, fishing
Manufacturing
Corporate
Retail
6
Public sector and
utilities
Retail
4
Transportation
2
Property
management
Other corporates
0
Def 0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21
Large Corporates & Institutions (LC&I)
Swedbank’s LC&I business area had SEK 319bn in total
exposure at end-2016. LC&I business includes lending, as well
as dealing in financial instruments and products, to large
Swedish, international corporate and institutional customers,
such as international banks or asset managers. It also includes
Swedbank’s advisory operations. The sensitivity of the LC&I
portfolio is related to the Swedish economy, as well as the
global economy in general and the European economy in
particular. The development of the oil price is highly important
for the development of the oil-related portfolio.
Figure 3-18: LC&I, credit exposure by risk grade
50
Manufacturing
Institutions
SEKbn
Public sector and
utilities
Construction
Corporate
40
Retail
30
Retail
20
10
0
Def 0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21
Shipping and
offshore
Property
management
Professional
services
Other corporates
Group Functions
Exposures within Group Functions mainly consist of
exposures within Group Treasury, as the latter is responsible
for the funding and management of Swedbank’s liquidity
portfolio. Exposures are credit exposures similar to those of
LC&I, meaning exposures to international banks and central
banks. At end-2016, total credit risk exposures amounted to
SEK 239bn.
Figure 3-20: Group Functions, credit exposure by risk grade
40
SEKbn
Figure 3-21: Exposures by sector
Institutions
Corporate
30
Retail
20
Public Sector and
Utilities
Other Corporates
Credit Institutions
10
0
Def 0
SWEDBANK
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21
27
Management of credit risk
Working with credit exposures
To maintain a well-diversified credit portfolio with a low risk
profile, and to find a favourable balance between risk and
return, Swedbank works continuously to understand
customers and their market conditions. We follow up
borrowers through regular monitoring and additional periodic
credit reviews of corporate customers, financial institutions
and sovereigns at least once per year.
An essential steering tool in Swedbank is risk-adjusted
profitability. The business has full responsibility for the
business and its risk. Profitability, in terms of economic profit
and risk-adjusted return on capital (RAROC) is measured on all
levels, down to individual customers and contracts. This is
possible through the use of various models that measure the
risk on all individual credit exposures and by allocating capital
adequately and comprehensively, making it possible to deliver
a correct price on credit agreements. The overall risk appetite
is broken down into detailed risk limits and target levels for
different industries, geographies and products, but also to
certain limits of each borrowers and group of connected
borrowers. To safeguard that business performance remains
within the risk appetite and that Swedbank maintains a welldiversified credit portfolio with a low risk profile, the CEO and
CRO issue steering documents and limits for the credit
portfolio.
The credit organisation achieves enhanced duality with the
business and acts as the second line of defence by
participating in credit committees when dealing with credit
risk decisions. The credit risk organisation also guides the
business organisation by setting a credit risk framework and
additional qualitative standards.
Figure 3-22: Classification of risks in the credit portfolio
Swedbank’s risk classification system is central in assessing
and monitoring individual credit exposures. The risk profile of
the credit portfolio is continuously analysed. For portfolio
segments and individual customers where the risk of default
appears higher, consequently reviews are performed more
frequently. If a customer’s risk profile has deteriorated, a
number of corrective measures are considered and
implemented. The risk classifications system and RAROCcalculation are used as a base when pricing loans and other
services. At least annually, Swedbank conducts a thorough
and comprehensive stress test of the entire Group (see
SWEDBANK
Chapter 7 of this report for further information on Group-wide
stress tests) which includes the entire credit portfolio. Specific
stress tests, portfolio analysis or ad-hoc reviews are also
conducted to further evaluate Swedbank’s loan portfolio and
credit risk. These tests provide additional understanding and
information on specific segments or exposure types which
may be perceived as having a high or increased risk or a high
potential impact on the Group. By identifying increased risk
levels at an early stage, Swedbank can take swift and
appropriate actions for relevant exposures or segments of
exposures. Credit portfolio trends and findings from stress
tests form an important part of the monthly risk reports that
are presented to Group’s senior management and the Board of
Directors.
A sustainability analysis is carried out in all large and mediumsized corporate lending and covers (i) social responsibility
(how the company works to ensure respect for human rights,
for example in its supply chain, among its employees and in its
local community), (ii) human rights, (iii) corruption and (iv)
environment (to determine whether there is a structured
environmental program). The sustainability analysis is an
integral part of the credit analysis. The aim is to assess how
risks related to these areas affect Swedbank’s and its
customers’ profitability, repayment ability, collateral security
value and reputation –should they materialise.
Repayment capacity and collaterals
When Swedbank considers a credit application, a thorough
analysis is performed which includes the counterparty’s
capacity to repay the new credit as well as other credits.
According to Swedbank Group´s Credit Policy, Swedbank shall
strive to obtain adequate collateral. A borrower’s cash flow,
solvency and collateral are always key variables when lending.
This applies to mortgage loans to private customers and
property management companies, as well as to securities
lending, factoring, lease agreements and all other types of
financing.
Collateral for granted credits varies depending on the
assessed risk and the choice of product. Swedbank uses a
variety of collateral types, but the most common type is
immovable property, both residential property as well as
commercial property. The valuation of collateral is based on a
thorough review and analysis of the pledged assets, and is an
integrated part in the credit risk assessment of the borrower.
The establishment of the collateral value is a part of the credit
decision. The value of the collateral is reassessed within
periodic credit reviews of the borrower and in situations
where the Group has reason to believe that the value has
deteriorated or the exposure has become a problem loan. The
established value of the collateral shall correspond to the
most likely sales price at the date of valuation estimated in a
process of high quality and characterised by prudence. For
financial collateral, such as debt securities, equities and
collective investment undertakings (CIUs), valuation is
normally monitored on a daily basis. Credits without collateral
are mainly granted for small loans to private customers or
loans to large companies with very sound repayment capacity.
For the latter, special loan covenants are commonly drawn up
which entitle the Group to renegotiate or terminate the
28
agreement if the borrower’s repayment capacity deteriorates,
or if the covenants are otherwise breached.
In special circumstances, the Group may buy credit derivatives
or financial guarantees to hedge the credit risk, but this is not
part of the Group’s normal lending operations (see
Counterparty risk below).
Loans to credit institutions and the public, categorised as
loans and receivables, are recognised on the balance sheet on
the settlement day. These loans are measured at amortised
cost as long as there is no objective evidence indicating that a
loan or a group of loans is impaired, which occurs when it is
likely that payment will not be received in accordance with
the contractual terms. The interest rate that produces the
loan’s cost as a result of the calculation of the present value of
future payments is considered the effective interest rate.
The loan’s amortised cost is calculated by discounting the
remaining future payments by the effective interest rate.
Interest income includes interest payments received and the
change in the loan’s amortised cost during the period, which
produces a consistent return. On the closing day, it is
determined whether there is objective evidence to indicate an
impairment need for a loan or a group of loans. If, after the
loan is initially recognised, one or more events have occurred
that negatively impact estimated future cash flows, and the
impact can be estimated reliably, recognition of impairment is
made.
assessment, no realistic chance of recovery. Recoveries
consist of payments on actual losses that were written off in
previous years, or reversals of previous provisions for
probable loan losses.
Credit impairment is calculated as the difference between the
loan’s carrying amount and the present value of estimated
future cash flows discounted by the loan’s original effective
interest rate or if the loan has been renegotiated by the latest
effective interest rate. These exposures are reported as
impaired exposures. If the total exposure of the borrower is
significant, normally all the exposures of such borrower are
treated as impaired. The Group determines first whether there
is objective evidence for impairment of each individual loan.
Loans without individual evidence of loss event are assessed
together in portfolios with similar credit risk characteristics.
Impairment is then calculated for the portfolio as a whole.
Homogenous groups of loans with limited value and similar
credit risk that have been individually identified as having
objective evidence of impairment are assessed in a
standardised way based on the loss risk in the portfolio
segment as a whole. If the impairment decreases in
subsequent periods, previously recognised impairment losses
are reversed. Loans are never recognised at a value higher
than what the amortised cost would have been if the writedown had not occurred.
Loan impairments are recognised through profit or loss as
credit impairments. This is done either as provisions for
individually impaired loans, portfolio provisions or write-offs
of impaired loans. Write-offs can be recognised within credit
impairments before utilisation of any previous provisions.
Provisions utilised in connection with write-offs are
recognised on a separate line within credit impairments.
Write-offs are recognised when the amount of the loss is
ultimately determined. Repayments of write-offs and
recovery of provisions are recognised within credit
impairments. The carrying amount of loans is amortised cost
less write-offs and provisions.
Individual provisions and portfolio provisions are recognised in
the special provision account in the balance sheet, while
write-offs reduce the book value of outstanding loans.
Provisions for assumed losses on guarantees and other
contingent liabilities are recognised on the liability side.
Credit impairment
Past-due loans and impairments
Loss events on an individual level include when a borrower
incurs financial difficulties, when it is likely that the borrower
will file for bankruptcy or liquidation, when the borrower is
facing a financial reconstruction, or when there is a breach of
contract such as late or nonpayment of interest or principal or
various concessions due to the borrower’s financial
difficulties. Exposures past due by more than 60-90 days or
those for which the terms have changed in a significant
manner due to the borrower’s financial difficulties are
automatically considered impaired loans. A loan is not
considered impaired if there is collateral that covers the
principal, unpaid interest and any late fees by a satisfactory
margin. These loans are reported as “Fully collateralised
exposures with incurred loss event”.
Established loan losses may refer to all or part of a credit and
are recognised when there is, using a conservative
Past-due loans refer to overdrafts or loans where amounts
due for payment have not been paid in accordance with the
terms of the loan. Loan agreements will be defined as
“impaired loans” when there is objective proof that a loss
event has occurred at an individual level after the loan’s first
reporting date, and a loss arises when the loan’s anticipated
future cash flows differ from the contractual cash flows (both
discounted by the loan’s original effective interest rate).
Working with distressed credits
Each business unit is responsible for monitoring signals and
conditions that might suggest that the level of credit risk in
individual exposures has increased, and in such situations a
series of customised actions is taken without delay to
minimise Swedbank’s risk or losses.
Financial Restructuring and Recovery (FR&R) is a special unit
within the Swedbank Credit Risk organisation which supports
the business units when the risk associated with a certain
exposure has increased. FR&R provides expertise in managing
insolvency and restructuring cases. This organisation is built
up with knowledge and expertise from previous crises.
Amortised cost according to International Financial
Reporting Standards (IFRS)
SWEDBANK
Impairment for financial instruments measured at fair
value
If there is a default on a counterpart with a financial
instrument measured at fair value, the credit impairment part
is determined by a net present value calculation of future
expected cash flows. The discount factor used is the market
interest of the product which is then compared to the
29
Table 3-2: Change in provisions
instrument’s amortised cost. If the net present value is lower
than the amortised cost amount, a provision or a value
adjustment is recognised. The loss is reported as credit
impairment. All other changes in the instrument’s fair value
are reported as market changes in net gain and losses on
financial instruments at fair value.
2016
SEKm
2015
Opening balance
3 381
3 330
New provisions
Utilisation of previous provisions
Reversal of previous provisions
Portfolio provisions for loans that are not
impaired
Group adjustments
Change in exchange rates and other
adjustments
1 375
-850
-455
906
-501
-204
97
-132
207
-18
Closing balance
Recoveries on credit risk adjustments recorded
directly to the statement of profit or loss
Specific credit risk adjustments recorded directly to
the statement of profit or loss
3 755
3 381
-253
-428
603
452
Table 3-3: Impaired* and past-due** loans by geographical areas
31 December
2016
SEKm
Sweden
Estonia
Latvia
Lithuania
Norway
Denmark
Finland
USA
Other
Total Swedbank
Provisions for anticipated loan
losses***
Principal past-due loans, that are not impaired
Impaired
loans
gross
1 695
1 146
669
833
3 747
5
0
0
0
31-60
days
463
107
112
175
5-30 days
316
586
358
505
3
8 095
1 768
857
61-90
days
185
19
14
51
> 90 days
110
2
19
139
269
Total
impaired
and pastdue loans
2 769
1 860
1 172
1 703
3 750
5
0
0
0
270
Individual
provisions
700
451
292
225
1 035
4
11 259
Portfolio
provisions
476
177
140
62
145
2 707
4
5
39
Total
provisions
1 176
628
432
287
1 180
4
4
5
39
1 048
3 755
Effect on result 2016****
Individual
provision
change
Portfolio
Total
and writeprovision
effect on
offs
change
result
105
5
110
101
23
124
73
-14
59
1
-20
-19
1 255
93
1 348
1
0
1
0
-1
-1
-7
5
-2
0
0
0
1 529
91
1 620
Table 3-4: Impaired* and past-due** loans by industry
31 December 2016
SEKm
Private mortgage
Tenant owner associations
Private other
Agriculture, forestry, fishing
Manufacturing
Public sector and utilities
Construction
Retail
Transportation
Shipping and offshore
Hotels and restaurants
Information and communication
Finance and insurance
Property management
Commercial
Industrial and Warehouse
Other
Professional services
Other corporate lending
Credit institutions
losses***
Impaired
loans
gross
1 378
34
297
293
378
95
131
345
39
3 770
83
48
9
400
89
36
82
193
671
124
0
5-30
days
1 151
1
203
51
36
39
30
90
66
0
9
6
16
24
7
11
6
0
35
11
0
31-60
days
458
0
51
39
28
3
44
47
10
0
0
5
0
131
5
23
1
102
27
14
0
61-90
days
159
3
23
23
13
4
15
4
2
0
0
0
0
8
8
0
0
0
2
13
0
> 90 days
183
0
16
6
5
0
2
1
4
0
7
0
0
42
17
17
8
0
1
3
0
Total
impaired
and pastdue loans
3 329
38
590
412
460
141
222
487
121
3 770
99
59
25
605
126
87
97
295
736
165
0
Individual
provisions
405
0
191
76
169
16
87
215
16
1 033
13
26
9
92
8
6
24
54
300
59
0
Portfolio
Total
provisions provisions
151
556
30
30
73
264
44
120
203
372
34
50
32
119
58
273
6
22
155
1 188
20
33
10
36
15
24
144
236
40
48
60
66
23
47
21
75
44
344
29
88
0
0
Individual
provision
change Portfolio
Total
and writeprovision effect on
offs
change
result
111
-10
101
7
-5
2
129
-5
124
38
-8
30
-360
74
-286
7
4
11
58
-6
52
72
-34
38
22
-21
1
1 261
116
1 377
4
0
4
27
-1
26
11
-14
-3
-74
5
-69
n.a.
n.a.
na
n.a.
n.a.
na
n.a.
n.a.
na
n.a.
n.a.
na
153
-5
148
55
1
56
8
0
8
Total Swedbank
8 095
1 768
857
269
270
11 259
2 707
1 048
3 755
1 529
91
1 620
Loans where payments are unlikely to be made in accordance with contract terms. Such loans are not considered impaired if there is collateral that covers the full amount of the loan and any
late fees by a safe margin
**
Past-due loans refer to overdrafts or loans where, according to the terms of the loan, amounts due for payment have not been paid
***
Impaired loans are measured, individually and collectively, to determine whether provisioning is needed. When provisioning is needed, a calculation is made between the loan’s carrying amount
and the present value of estimated future cash flows discounted by the loan’s effective interest rate
****
Effect on result, excl. recoveries for write-offs from previous years
*
SWEDBANK
30
Measurement of credit risk
Swedbank’s internal risk classification system
Swedbank’s internal risk classification system is a central
component in the credit process. It comprises working
methods and decision-making processes for lending
operations, credit monitoring and quantification of credit risk.
The system aims to measure the risk that a customer or a
contract will default and, in that case, what the losses would
be for Swedbank.
Swedbank’s internal risk classification system is a proprietary
system that is approved by the regulatory supervisory college.
The system, and the results it produces, is based on
Swedbank's experience and expertise in assessing and
managing credit risks. Swedbank’s internal risk classification
system serves as a basis for:
•
risk assessments and credit decisions (automated and
in committees )
•
calculating risk-adjusted profitability (including
RAROC)
•
calculating portfolio provisions
•
monitoring and managing credit risk (including
migrations)
•
reporting credit risks to the Board of Directors, the
CEO and senior management
•
developing credit strategy and subsequent risk
management activities
•
estimating capital requirements and capital allocation
Swedbank has been granted permission to use the IRB
approach as a basis for calculating capital requirements for
credit risk. The IRB approach is applied for the absolute
majority, 82%, of Swedbank’s credit exposures. For additional
portfolios, a roll-out plan has been established.
For the retail exposure class in Sweden and the Baltic
countries, Swedbank has approval to use the IRB approach for
calculating capital requirements. For corporate exposures in
Sweden and Norway, Swedbank has approval to use the
advanced IRB approach. For other IRB-approved exposure
classes (corporate exposures outside the advanced IRB scope
and institutions exposures) in the Nordic countries and in the
Baltic countries, Swedbank uses the Foundation IRB approach,
and hence calculates its own probabilities of default, but uses
prescribed levels for other parameters in calculating capital
requirements.
For non IRB-approved parts of Swedbank’s credit portfolio,
and also where an exception has been granted by the
regulatory supervisory college, Swedbank uses the
standardised approach in calculating its capital requirement
for credit risks.
Swedbank defines its risk classification system through
governing documents. The overarching rules are established
by the Board of Directors, with more detailed regulations
issued by the CEO, CRO, or CCO, respectively. These
regulations contain rules as to how models should be
structured and validated for development and regular quality
controls. To maintain efficiency and reliability, Swedbank
performs yearly quantitative and qualitative validations of the
system. The validation tests conducted to date have shown
that the models are functional and are reliable.
Swedbank’s risk rating systems
When calculating capital requirements and expected loss
using the IRB approach, three concepts (PD, LGD and EAD) are
central.
When developing rating systems for various counterparties,
the most relevant information for the assessment of PD must
be taken into account. For this reason, Swedbank’s rating
involves a number of methods ranging from individual expert
assessments (rating) to quantitative methods and models
based on statistical analysis of large numbers of customers
and related customer information (scoring).
Swedbank uses a scale of 23 grades to classify the risk that a
customer could default, where 21 represents the lowest risk
of default and 0 represents the highest risk. In addition, there
is a default grade. Based on the PD estimate calculated using
the through-the-cycle (TtC) method, Swedbank assigns the
customer or exposure a value on this risk scale. With the help
of the risk scale, customers or exposures are ranked from
those with the highest risk, to those with the lowest. The risk
is also quantified.
Risk grade according to IRB methodology
Internal
Default
0 to 5
6 to 8
9 to 12
13 to 21
PD,%
100
>5.7
2.0 - 5.7
0.5-2.0
<0.5
Indicative rating Standard & Poor’s
D
C to B
B+ to BBBB to BB+
BBB- to AAA
Table 3-5: Capital adequacy approaches, 2016
31 Dec 2016
SEKm
Swedish
Banking
LC&I
Baltic Banking
Group Functions
Swedbank CS
SWEDBANK
Advanced IRB approach
EAD
REA
Portfolios
Retail and corporate
1 138 273 107 592
exposures
Retail and corporate
242 945
69 293
exposures
76 952
3 804
1 461 974
19 969 Retail exposures
161 Retail exposures
197 015
Foundation IRB approach
EAD
REA
Portfolios
17 774
7 585 Institutions exposures
39 316
14 833 Institutions exposures
67 764
50 377
175 231
Corporate and
institutions exposures
Corporate and
5 764
institutions exposures
71 458
43 276
EAD
REA
Portfolios
EnterCard, government
60 649 30 919
exposures
Government exposures,
36 558
3 921
parts of the Nordic branches
70 204
184 468
351 879
6 780 Government exposures
5 883 Government exposures
47 503
31
Probability of default (PD)
Swedbank’s goal is to be as precise as possible in its risk
calculations for each customer. Swedbank has developed a
number of different models for rating counterparties,
customers, or contracts in which each counterparty or
contract is assigned a risk grade. For each risk grade, a risk
value has been quantified and established. The PD estimates
the risk that a counterparty or contract will default within a
12-month period.
When calculating capital requirements, Swedbank generally
takes a TtC-perspective, which aims at producing PD values
that indicate the average 12-month default frequency across
a full business cycle. PD values also include a safety margin to
account for the statistical uncertainty in the estimates. Thus,
TtC-adjusted PD figures should remain stable across a
business cycle at the portfolio level, while reflecting
underlying long-term trends in the risk profile of the portfolio
and taking a conservative view in estimated level of defaults.
PD varies over the cycle
Scoring
In a scoring system, the risk grade of the counterparty (or
contract) is based on the statistical relation between a
number of selected variables and defaults. Scoring systems
are mainly used in portfolios with large numbers of smaller
exposures where statistical relationships between different
variables and default help to identify potential high-risk
customers. When granting loans to counterparties in this type
of portfolio with many small exposures, a credit process with
a highly automated risk evaluation process is applied, and the
Swedbank scoring system is organised as follows:
•
Medium-sized corporates: represents a combination
of a number of different scoring models and an expert
system. In the statistical component, the risk
assessment is based on information regarding the
borrower’s financial status and behaviour. Market
conditions and the borrower’s strategy are assessed in
the model’s expert component.
•
Retail exposures (private individuals and small
corporates): comprises a number of different statistical
scoring models where each model is designed to
provide an effective instrument in its particular area.
The risk assessment is based on information regarding
the borrower’s financial status and behaviour.
PD rating process
Rating
A rating system derives a risk rating for a counterparty with
the help of an expert-based system, in which values for
selected criteria are weighted and converted into a risk grade.
Rating systems are mainly used for large exposures where a
thorough understanding of the risks is needed to ensure
sound credit decisions. For this reason, Swedbank always
conducts an extensive individual analysis before granting
credits, and updates the ratings at least annually.
Swedbank’s rating system can be described as follows:
•
Sovereigns: The rating is based on an assessment of
a number of parameters that, combined, describe the
level of development, stability and financial strength
of the sovereign (government) in question.
•
Financial institutions: The rating is based on a total
appraisal of the sovereign’s (government’s) rating and
the level of risk in the banking system and the specific
bank. The level of risk in the banking system is
determined by weighing a number of parameters that
reflect the development, stability and financial
strength of the banking system. The level of risk of the
specific bank is calculated by weighing up the financial
strength, strategy and risk level of its operations.
•
Large corporates: The rating is based on a total
appraisal of a quantitative component that assesses
the company’s financial strength, and a qualitative
component that assesses the position of the industry,
as well as the company’s market position and strategy.
SWEDBANK
Swedbank’s credit exposures are risk-classified in accordance
with an internal credit risk framework. All counterparties are
risk-classified before a credit limit is established, and
thereafter at least once every 12 months. A new risk
classification is always made if the bank receives information
indicating that the risk has changed in such a way that the
risk grade established is no longer considered relevant.
Duality and segregation of duties in the risk classification
process applied within Swedbank ensure well-founded
decisions and are reflected in the organisation of independent
credit decision-making authorities.
Any risk grade proposed for countries and financial
institutions as well as corporate customers (including SME &
Large Corporate Segment) is approved individually by an
independent credit decision-making body in accordance with
the established decision mandates.
Risk classification concerning credits to the retail segment is
performed in automated sub-systems.
Loss given default (LGD)
LGD measures what proportion of the exposure amount
would be lost in the event of default. Swedbank uses its own
LGD estimates for retail exposures. Swedbank has an approval
to apply the bank’s own LGD estimates to corporate
exposures in Sweden and Norway. These estimates are in turn
based on internal historical data on extent of loss. The extent
of loss depends on factors including the counterparty’s
financial status, the value of the collateral, and assumptions
of amounts recovered through the sale of any collateral based
on historical outcomes and other factors. The Advanced IRB
(A-IRB) approval has increased Swedbank’s competitiveness in
the corporate segment, as the bank’s own LGD estimates are,
on average, lower than the prescribed estimates due to
favourable collateral.
32
For institutions and outstanding corporate exposures, LGD is
prescribed by the SFSA.
Capital requirements are based on LGD estimates which are
representative for a severe economic downturn; this means
that they correspond to a degree of loss incurred under
economic stress and cannot be directly compared to the
current affirmed loss levels. The LGD values also include a
safety margin that takes into account the statistical
uncertainty in the estimates. Swedbank’s LGD system is
divided between real estate credit and other retail credit.
LGD over economic cycles
The risk rating system is applied to the entire Consolidated
Situation, with the exception of a few small portfolios. The
validation tests conducted to date have shown that the LGD
models are reliable and that, in general, downturn
adjustments have been sufficient for downturn conditions.
Estimated loss vs. realised loss in 2016
losses in 2016 were below the expected loss (EL) for
Swedbank CS as well as for the separate business areas. This
also applies for corporate exposures in Swedish Banking and
Baltic Banking. As a result of the severe problems in the
oil-sector affecting Swedbanks corporate portfolio in LC&I, the
estimated loss and the default rates is higher than the
estimates at the beginning of the year. This affects also the
outcome for Swedbank CS, as seen in the graph below.
In the Baltic countries, the realised losses were on low levels
compared to the expected loss levels. One explanation is that
the average PD is annually recalibrated and mapped to
historical observed default frequencies. With each additional
year of normalised loss data, the difference between the
realised loss level and the estimated level is reduced, which
can be seen in decreasing EL in the graph for corporate
exposures below. Another explanation is that the customers
with highest risk defaulted during the crisis, resulting in a
portfolio with only the best customers remaining.
Since the estimates in each risk dimension are adjusted to the
business cycle and include safety margins, PD, LGD and EL
estimates will normally be more conservative than actual
outcome.
In the graphs below the regulatory values are used for
estimates made at 1 January. The graph shows the calculated
loss according to the capital requirement framework as
EL-ratio = PD * LGD with FSA regulatory add-ons and
downturn adjustments.
For the Retail and Institutions exposures the levels of realised
Figure 3-23: Estimated loss vs. realised loss
Retail Mortgage
0.10
%
Retail Other
1.00
Corporate
%
0.70
0.60
0.08
0.80
0.06
0.60
0.40
0.04
0.40
0.30
0.02
0.20
0.00
SWEDBANK
Estimated loss
Realised loss
0.50
0.20
0.10
0.00
2012 2013 2014 2015 2016
%
0.00
2012 2013 2014 2015 2016
2012 2013 2014 2015 2016
33
Table 3-6: Estimated and realised outcome*
2016
EL, in %
PD, in %
LGD, in %
Estimated
on the
defaults
CCF, in %*****
Realised****
Estimated
Realised
Estimated
Realised
Estimated
Realised***
Estimated
on total
portfolio
Swedbank CS
Retail - mortgages
Retail - other
Corporate**
Institutions
0.06
0.60
0.22
0.02
0.01
0.19
0.30
0.00
0.43
1.48
0.77
0.07
0.14
0.82
1.63
0.00
10.64
37.60
24.98
22.74
13.23
38.99
29.12
n.a.
4.65
22.53
6.02
n.a.
63.61
31.64
52.56
n.a.
0.00
33.40
36.64
n.a.
Swedish Banking
Retail - mortgages
Retail - other
Corporate**
Institutions
0.04
0.46
0.20
0.03
0.00
0.16
0.12
0.00
0.30
1.19
0.97
0.07
0.11
0.79
1.04
0.00
10.33
36.14
19.49
45.01
12.93
37.79
25.70
n.a.
3.48
20.28
11.07
n.a.
n.a
17.08
61.86
n.a.
n.a
n.a
24.12
n.a.
Baltic Banking
Retail - mortgages
Retail - other
Corporate
Institutions
LC&I
Retail - mortgages
Retail - other
Corporate**
Institutions
0.35
1.30
0.86
0.03
0.13
0.36
0.06
n.a.
2.27
2.93
1.93
0.07
0.57
1.02
0.36
0.00
15.38
44.52
44.37
37.25
18.63
46.77
43.94
n.a.
22.11
34.79
15.61
n.a.
63.61
64.04
n.a
n.a.
0.00
33.40
n.a
n.a.
0.07
0.74
0.09
0.03
0.00
0.00
0.59
0.00
0.63
1.76
0.35
0.10
0.00
0.02
2.39
0.00
15.72
45.12
24.34
28.32
n.a.
14.26
28.32
n.a.
n.a.
0.00
23.41
n.a.
n.a
n.a
47.46
n.a.
n.a
n.a
61.00
n.a.
Group Functions
Retail - mortgages
Retail - other
Corporate
Institutions
0.03
0.78
0.06
0.01
0.00
0.00
0.00
0.00
0.33
4.82
0.21
0.05
0.00
0.00
0.00
0.00
8.82
14.38
32.04
16.98
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
*
**
***
****
*****
For previous four years, please see excel file on the website
Swedbank applies own estimates for most of the corporate exposures in Swedish Banking and Large Corporates & Institutions. For business areas Baltic Banking and Group Functions and the
institution exposure class, Swedbank applies prescribed LGD and CCF values
In Swedbank Group, a credit exposure is regarded to be in default if any of the following criteria are fulfilled:
a. There has been an assessment indicating that the counterpart is unlikely to pay its credit obligations as agreed or
b. The counterpart is past due more than 90 days on any material credit obligation to Swedbank Group, and the Group will have to claim collateral or take other similar action
LGD is defined as the portion exposure amount that is lost in the event of default. Realised LGD is based on all available data as of 31 December for defaulted counterparties/accounts. For
defaults that still have an ongoing workout process, provisioning amount is used instead of established loss. The outcome for these will be adjusted as additional information becomes available
For CCF, only internal estimates are presented. This differs from the approach used for LGD, where prescribed values are presented in order to support the EL estimates
SWEDBANK
34
Capital requirements for credit risk
residential properties and from improved processes for
handling collateral values, mainly for corporate
customers in Swedish Banking and LC&I.
REA increased by SEK 4.1bn from some new customers in
default for which capital need has been replaced by
provisions.
In the Other category, the main reason for the reduced
REA was that, for corporate exposures in Swedish
Banking and LC&I, the maturity profile was shortened.
Changes in exchange rates, mainly attributable to the
Baltic credit portfolio and LC&I credit portfolios, increased
REA for credit risks by SEK 3.6bn due to depreciation of
the Swedish krona vs. the euro and the Swedish krona vs.
the USD.
Risk exposure amount development in 2016
In 2016, credit risk REA increased by SEK 9.4bn, reaching SEK
317.3bn at year-end. The main changes were:
•
Increased exposures, mainly corporate and private
mortgage exposures in Swedish Banking and LC&I.
•
Total REA-effects from PD migrations was an increase by
SEK 0.2bn. Negative migrations were mainly seen in
Corporates in LC&I, primarily the shipping and offshore
sector. This was offset by positive migrations, mainly
seen in corporates in Swedish Banking in tenant-owner
associations.
•
REA decreased by SEK 7.9bn due to improved LGD-levels
resulting from higher property values for private
•
•
•
Figure 3-24: Credit risk REA attribution 2016
330
SEKbn
3.6
325
0.2
12.0
4.1
320
317.3
315
307.9
310
-2.6
-7.9
305
300
2015-12-31
Exposure
change
FX
PD migration LGD migration
Increase
Upcoming regulatory changes
In December 2015, the Basel Committee on Banking
Supervision issued a second Consultative Document on
revisions to the standardised approach for credit risk. This
document forms part of the Committee’s broader work on
reducing variability in the capital required for banks, and the
proposed revisions seek to improve the standardised approach
in several ways (see also Chapter 2 of this report).
One of the Committee’s aims is to reduce reliance on external
credit ratings. In its first consultation, the Committee
proposed that references to external ratings should be
replaced with a number of risk drivers which should vary
depending on the type of exposure. In the second
consultation, the Committee instead proposed that external
ratings should be allowed, but only if they are used in parallel
with the bank’s own rating of the entities in question. The
Committee also holds the view that the standardised
approach does not include enough risk-weighted buckets and
that the risk weights no longer accurately reflect the risk of
certain claims. To increase risk sensitivity, the proposal
SWEDBANK
Defaults
Other
2016-12-31
Decrease
enhances granularity of the risk weights and modifies the
current risk weights.
These proposed changes affect the risk weights for exposures
to banks, corporates and retail, as well as residential and
commercial real estate. Revisions are also proposed for the
capital required for off-balance sheet exposures and in the
credit risk mitigation framework.
In March 2016, the Basel Committee proposed constraints on
the use of internal model approaches for credit risk. In
particular, the Committee proposes to remove the option to
use the IRB approaches for certain low default portfolios such
as institutions and very large companies and to adopt
exposure-level, model-parameter floors to ensure a minimum
level of conservatism for portfolios where the IRB approaches
remain available. The Committee also provides greater
specification of parameter estimation practices to reduce
variability in risk-weighted assets (RWA) for portfolios where
the IRB approaches remain available.
The Basel Committee planned to finalise those revisions to the
Basel III framework around the end of 2016; however the
Committee is still working on outstanding details
35
Credit risk exposures - retail exposure class (IRB)
Retail exposures refer to exposures to private individuals,
exposures to small or medium-sized legal entities and to
tenant owner associations where the total exposure to such
legal entities is less than SEK 6m. However, exposures
secured by residential property eligible to reduce LGD are
excluded at hurdle.
Table 3-7: Retail exposure class, outstanding exposures by risk grade
2016-12-31
Risk
grade
Def
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
PD
100.000%
38.400%
27.153%
19.200%
13.576%
9.600%
6.788%
4.800%
3.394%
2.400%
1.697%
1.200%
0.849%
0.600%
0.424%
0.300%
0.212%
0.150%
0.106%
0.075%
0.053%
0.038%
0.030%
Total Swedbank
Retail mortgage
Retail other
Exposure,
SEKm
1 954
1 410
891
1 278
1 397
2 025
2 493
3 972
6 311
8 495
10 903
17 481
20 491
18 686
20 968
29 029
23 735
37 044
139 359
125 298
55 406
38 938
368 978
Loans
onbalance,
SEKm
1 943
1 403
884
1 272
1 383
2 014
2 479
3 949
6 293
8 439
10 834
17 579
20 359
18 553
20 917
28 812
23 592
36 830
138 875
124 889
55 051
38 675
368 035
Offbalance
limit,
SEKm
3
5
8
5
18
13
17
33
47
69
84
127
162
216
178
242
282
300
482
293
290
220
564
Exposure
offbalance,
SEKm
2
3
5
3
11
8
11
25
37
57
67
107
134
189
152
214
246
248
425
286
290
219
563
Average
risk
weight, %
60.4
95.0
85.5
78.4
74.1
58.3
53.9
46.5
39.2
32.7
27.0
20.1
16.3
14.4
10.9
7.1
6.1
4.7
2.6
2.1
1.6
1.2
0.8
936 542
933 060
3 658
3 302
4.8
Figure 3-25: Retail exposure class, risk profile
40
30
Offbalance
limit,
SEKm
32
27
19
65
81
161
207
465
736
1 743
1 078
2 149
1 988
2 515
3 445
1 974
2 980
3 163
3 748
4 760
5 483
5 392
19 915
Exposure
offbalance,
SEKm
31
21
16
59
68
137
169
403
627
1 579
914
1 648
1 508
1 777
2 404
959
1 556
1 045
1 149
1 297
1 741
1 125
5 972
Average
risk
weight, %
167.7
111.9
91.9
77.0
67.3
60.4
58.1
54.4
53.5
50.3
43.6
41.0
34.9
26.9
24.5
21.3
16.8
13.1
8.9
7.2
4.8
3.7
2.9
95 756
70 664
62 126
26 205
27.9
Figure 3-26: Retail exposure class, 12-month migration
800
%
Exposure,
SEKm
727
384
295
495
710
1 005
1 502
2 953
3 869
5 729
5 724
7 099
6 610
7 962
7 427
5 038
5 824
5 133
6 391
5 367
4 721
4 154
6 637
Loans onbalance,
SEKm
728
388
293
451
657
881
1 357
2 225
3 973
4 236
4 875
5 594
5 162
6 240
5 096
4 108
4 300
4 094
5 254
4 071
2 980
3 033
668
2015-12-31
700
2016-12-31
600
EAD, SEKbn
500
400
300
20
200
100
10
0
to default ≥4 grades 2-3 grades +/- 1 grade 2-3 grades ≥4 grades
0
Def 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
SWEDBANK
Downgrades
Swedish Banking
Baltic Banking
from
default
Upgrades
LC&I
36
Table 3-8: Retail exposure class, exposures by industry and business area, SEKm
31 December 2016
Private mortgage
Private other
Manufacturing
Construction
Retail
Transportation
Property management
Commercial
Other
Total Swedbank
Swedish
Banking
703 857
95 650
36 417
57 229
4 307
1 839
8 130
7 260
2 429
60
1 795
897
491
22 228
11 307
4 322
1 811
4 788
5 626
3 413
951 628
Baltic
Banking
59 499
0
13 113
451
536
142
389
892
500
0
114
101
22
257
28
54
10
165
889
47
76 952
- of which
Estonia
28 047
0
5 767
168
283
72
284
459
247
0
75
67
15
201
22
35
7
137
342
26
36 053
- of which
Latvia
12 802
0
3 173
249
131
41
55
220
151
0
22
17
3
27
5
8
2
12
283
19
17 193
- of which
Lithuania
18 650
0
4 173
34
122
29
50
213
102
0
17
17
4
29
1
11
1
16
264
2
23 706
LC&I
9
42
39
5
8
38
3
13
2
0
6
5
319
165
115
33
13
4
37
53
744
Group
Functions
2 965
0
2
0
0
0
0
1
0
0
0
1
3
0
0
0
0
0
2
0
2 974
Total
766 330
95 692
49 571
57 685
4 851
2 019
8 522
8 166
2 931
60
1 915
1 004
835
22 650
11 450
4 409
1 834
4 957
6 554
3 513
1 032 298
Table 3-9: Retail exposure class, exposure-weighted average risk weights by industry and business area, %
31 December 2016
Private mortgage
Private other
Manufacturing
Construction
Retail
Transportation
Property management
Commercial
Other
Total Swedbank
Swedish
Banking
2.3
6.0
16.0
13.0
31.7
27.2
25.6
37.7
24.8
37.2
41.9
30.8
41.7
23.2
23.3
22.6
30.3
20.8
26.7
33.0
5.4
Baltic
Banking
19.9
0.0
46.1
49.9
50.7
44.2
54.1
48.3
47.4
46.7
54.6
46.7
29.8
48.7
31.9
58.3
49.5
48.3
45.4
46.0
26.0
- of which
Estonia
16.0
0.0
44.4
49.1
50.4
40.2
52.7
45.4
49.4
46.7
51.2
46.1
31.2
44.9
32.2
47.0
44.5
46.4
41.1
45.3
22.5
- of which
Latvia
28.9
0.0
65.6
50.1
49.3
44.7
51.7
49.9
45.0
0.0
48.2
45.1
32.3
49.9
31.7
57.6
60.2
49.3
45.9
46.4
37.0
- of which
Lithuania
19.5
0.0
33.6
53.3
52.9
53.2
64.4
52.9
46.1
0.0
77.9
50.9
21.8
73.4
28.4
95.3
57.0
63.7
50.3
50.5
23.2
LC&I
4.7
12.1
26.4
43.0
27.1
45.7
32.7
21.3
17.3
0.0
47.7
15.4
27.6
38.0
33.4
50.0
53.4
23.8
58.1
49.7
31.8
Group
Functions
2.9
0.0
11.7
0.0
0.0
0.0
0.0
20.9
0.0
8.3
0.0
0.0
31.4
18.5
0.0
50.0
0.0
0.0
0.0
0.0
2.9
Total
3.7
6.0
23.9
13.3
33.8
28.7
26.9
38.7
28.7
37.2
42.6
32.3
36.0
23.6
23.4
23.2
30.5
21.8
29.4
33.5
7.0
Table 3-10: Retail exposure class, exposure-weighted average PD by industry and business area, %
31 December 2016
Private mortgage
Private other
Manufacturing
Construction
Retail
Transportation
Property management
Commercial
Other
Total Swedbank
SWEDBANK
Swedish
Banking
0.20
0.20
0.43
1.05
1.78
1.42
1.69
2.02
1.83
2.28
2.72
1.89
1.91
1.04
1.03
1.05
1.19
0.99
1.69
1.62
0.34
Baltic
Banking
2.04
0.00
2.15
6.13
5.25
5.44
5.50
4.61
5.82
2.75
6.27
3.79
2.21
5.25
5.37
7.29
5.50
4.55
5.36
5.76
2.24
- of which
Estonia
1.73
0.00
1.76
5.90
4.92
5.39
5.14
4.08
5.15
2.75
5.35
3.54
1.84
4.76
4.75
7.53
2.78
4.14
4.06
5.23
1.92
- of which
Latvia
3.15
0.00
3.38
6.42
6.18
3.76
7.30
6.02
7.32
0.00
6.16
4.26
2.65
10.00
11.09
9.41
11.86
9.63
6.54
6.29
3.42
- of which
Lithuania
1.75
0.00
1.77
5.13
5.02
7.82
5.56
4.28
5.20
0.00
10.45
4.24
3.47
4.51
1.42
4.90
8.41
4.27
5.79
7.94
1.89
LC&I
0.34
0.55
4.61
3.07
5.01
2.43
3.43
1.23
9.65
0.00
2.12
2.90
0.63
3.11
2.80
3.66
4.80
2.10
1.80
3.02
1.84
Group
Functions
0.00
0.69
0.00
1.23
13.43
0.00
3.65
3.44
0.00
0.00
3.77
2.70
7.13
0.00
2.92
9.60
0.00
2.22
0.00
0.31
Total
0.33
0.20
0.80
1.08
1.99
1.63
1.79
2.10
2.26
2.27
2.78
1.92
1.39
1.10
1.06
1.13
1.24
1.08
1.99
1.67
0.48
37
Credit risk exposures - corporate exposure class (IRB)
Exposures not assigned to any other exposure class are
assigned to the corporate exposure class. This category
includes mainly exposures to large and to medium-sized legal
entities where the total exposure is more than SEK 6m, after
reduction of collateral in residential property eligible to reduce
LGD.
Within corporate exposures, specialised lending is a sub-class
referring to exposures with a high degree of correlation
between the exposure and the collateral or asset financed,
e.g. special purpose vehicles (SPVs).
Table 3-11: Corporate exposure class, outstanding exposures by risk grade
2016-12-31
Risk
grade
Def
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
PD
100.000%
38.400%
27.153%
19.200%
13.576%
9.600%
6.788%
4.800%
3.394%
2.400%
1.697%
1.200%
0.849%
0.600%
0.424%
0.300%
0.212%
0.150%
0.106%
0.075%
0.053%
0.038%
0.030%
Corporate A-IRB
Exposure,
SEKm
6 383
30
212
185
1 014
2 937
2 452
3 124
11 203
11 149
17 783
16 289
19 725
37 362
33 009
46 124
49 564
54 909
46 261
47 087
17 884
3 041
1 949
Loans
onbalance,
SEKm
4 734
30
212
180
909
2 950
3 269
3 670
9 383
11 042
17 795
16 562
18 384
32 650
28 443
40 865
40 514
39 298
29 189
32 279
9 952
667
759
Offbalance
limit,
SEKm
943
0
8
15
12
62
232
168
2 080
1 432
2 208
1 649
3 443
8 112
9 522
7 819
13 107
24 341
27 871
26 593
11 246
3 869
531
429 676
343 735
145 263
Total Swedbank
Corporate F-IRB
Exposure
offAverage
balance,
risk
SEKm
weight, %
783
99.1
63.5
5
135.6
11
103.0
6
166.5
42
97.9
167
56.1
113
64.9
1 354
68.1
964
57.2
1 520
46.2
1 107
39.8
1 986
34.8
4 094
37.9
4 940
33.3
5 151
27.4
6 104
22.5
10 775
18.4
11 895
15.7
11 589
12.7
5 819
10.1
1 715
8.2
207
10.8
70 347
29.1
Figure 3-27: Corporate exposure class, risk profile
15
77 679
68 888
Offbalance
limit,
SEKm
9
22
58
32
150
150
172
1143
446
221
849
1010
2445
2472
5849
543
4988
2673
3558
3274
2597
19
18
Exposure
offbalance,
SEKm
4
11
32
11
54
58
60
430
240
88
416
403
988
1162
2179
207
1295
679
1426
660
933
19
5
Average
risk
weight, %
0.0
175.8
225.1
185.2
185.9
142.5
112.7
125.0
98.6
91.3
84.2
81.8
79.2
67.4
60.1
34.4
43.0
35.8
30.2
26.5
21.2
17.5
24.4
32 698
11 360
63.6
Figure 3-28: Corporate exposure class, 12-month
migration
350
2015-12-31
2016-12-31
%
Exposure,
SEKm
1 166
190
1 036
476
868
935
767
3 454
1 528
1 641
2 731
3 629
9 766
1 860
15 204
2 229
14 279
2 210
7 477
669
4 712
532
320
Loans onbalance,
SEKm
1 172
182
1 004
466
822
908
748
3 035
1 312
1 753
2 402
3 349
8 917
1 067
13 006
2 023
13 408
3 080
5 606
130
3 845
513
139
EAD, SEKbn
300
250
200
10
150
100
5
50
0
0
Downgrades
Def 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Swedish Banking
from
default
Upgrades
Baltic Banking
LC&I
Table 3-12: Specialised lending, remaining maturity
31 December 2016
SEKm
Less than 2.5 years
2.5 years or more
SWEDBANK
Category 1
1
13
Category 2
70
251
Category 3
179
376
Category 4
2
259
Category 5
3
257
38
Table 3-13: Corporate exposure class, exposures by industry and business area, SEKm
31 December 2016
Private mortgage
Private other
Manufacturing
Construction
Retail
Transportation
Property management
Commercial
Other
Total Swedbank
Swedish
Banking
206
14 067
251
6 834
11 538
4 151
6 744
9 734
3 836
51
3 189
1 542
3 673
113 145
44 788
34 525
20 216
13 616
9 238
4 991
193 190
Baltic
Banking
0
0
432
3 713
10 489
5 529
2 271
8 123
5 273
565
2 094
582
425
16 975
16
11 642
2 356
2 961
4 914
90
61 475
- of which
Estonia
0
0
105
1 823
4 523
1 021
1 240
2 498
2 032
565
781
187
410
9 489
0
5 580
1 594
2 315
3 125
38
27 837
- of which
Latvia
0
0
140
1 253
2 362
692
372
2 275
2 247
0
645
140
5
3 577
0
2 983
378
216
786
52
14 546
- of which
Lithuania
0
0
187
637
3 604
3 816
659
3 350
994
0
668
255
10
3 909
16
3 079
384
430
1 003
0
19 092
LC&I
0
2 159
21
560
36 650
15 905
10 497
12 659
3 373
36 360
1 846
7 111
15 759
94 502
13 122
48 635
24 292
8 453
8 986
4 542
250 930
Group
Functions
0
0
1
8
40
613
10
30
654
0
0
0
32
65
0
15
12
38
118
189
1 760
Total
206
16 226
705
11 115
58 717
26 198
19 522
30 546
13 136
36 976
7 129
9 235
19 889
224 687
57 926
94 817
46 876
25 068
23 256
9 812
507 355
Table 3-14: Corporate exposure class, exposure-weighted average risk weights by industry and business area, %
31 December 2016
Private mortgage
Private other
Manufacturing
Construction
Retail
Transportation
Property management
Commercial
Other
Total Swedbank
Swedish
Banking
47.4
44.9
85.6
44.2
50.6
51.8
42.5
47.3
39.3
60.2
44.8
57.5
38.2
19.9
19.5
20.9
18.0
21.6
39.5
50.5
30.6
Baltic
Banking
0.0
0.0
87.8
82.0
73.9
50.9
70.0
73.1
58.9
45.8
72.5
78.1
102.4
57.8
72.2
56.2
61.1
61.6
65.8
90.9
65.8
- of which
Estonia
0.0
0.0
108.9
72.9
83.5
60.9
66.2
63.0
54.7
45.8
57.9
66.4
102.6
51.3
63.0
48.0
54.5
57.3
53.4
76.2
61.7
- of which
Latvia
0.0
0.0
72.2
97.8
72.4
52.3
83.7
101.1
60.9
0.0
105.8
85.9
141.7
73.4
0.0
70.5
89.2
84.8
101.1
101.8
80.2
- of which
Lithuania
0.0
0.0
87.6
76.9
62.7
48.0
69.5
61.7
62.7
0.0
57.4
82.5
74.0
59.5
72.4
57.3
60.8
73.2
76.8
72.4
60.7
LC&I
0.0
46.8
21.2
21.6
36.0
22.7
18.4
31.9
24.7
64.6
43.5
19.9
23.4
13.8
14.8
11.6
14.6
22.3
48.6
59.1
29.6
Group
Functions
0.0
0.0
0.0
55.9
100.8
23.4
156.7
52.8
9.3
0.0
0.0
103.8
89.6
49.1
0.0
49.8
46.3
49.8
136.0
10.9
29.6
Total
47.4
45.1
84.9
55.7
45.7
33.3
32.8
47.8
41.9
64.3
52.6
29.9
27.9
20.2
18.5
20.5
18.4
26.6
49.0
54.1
34.3
Table 3-15: Corporate exposure class, exposure-weighted average PD by industry and business area, %
31 December 2016
Private mortgage
Private other
Manufacturing
Construction
Retail
Transportation
Property management
Commercial
Other
Total Swedbank
SWEDBANK
Swedish
Banking
1.32
0.36
1.12
1.41
1.28
1.80
1.63
1.06
1.05
1.74
2.01
0.95
1.12
0.81
0.63
0.90
1.05
0.80
0.93
1.28
0.94
Baltic
Banking
0.00
0.00
3.40
3.81
2.70
0.64
1.66
2.14
1.41
0.21
2.25
1.89
1.55
1.33
0.91
1.14
1.71
1.78
1.90
3.81
1.86
- of which
Estonia
0.00
0.00
4.64
3.15
4.53
1.25
1.63
1.63
1.12
0.21
1.08
1.00
1.56
1.08
3.39
0.69
1.57
1.69
0.99
1.95
1.86
- of which
Latvia
0.00
0.00
4.43
5.45
1.71
0.91
2.71
4.29
1.59
0.00
5.03
2.79
1.85
2.26
0.00
2.12
2.99
2.97
5.12
5.27
2.92
- of which
Lithuania
0.00
0.00
2.13
2.39
1.00
0.43
1.11
1.03
1.61
0.00
0.86
2.04
1.08
1.07
0.87
0.99
1.04
1.67
1.91
0.00
1.05
LC&I
0.00
0.10
0.11
0.11
0.46
0.15
0.26
0.25
0.15
2.04
0.21
0.29
0.23
0.24
0.25
0.20
0.22
0.49
0.30
1.17
0.51
Group
Functions
0.00
0.00
1.17
1.07
6.00
0.09
4.80
0.47
0.04
0.00
0.00
1.73
2.88
1.34
0.00
0.45
0.34
2.02
3.87
0.19
0.60
Total
1.32
0.33
2.49
2.15
1.03
0.52
0.90
1.03
0.92
2.01
1.62
0.50
0.43
0.61
0.54
0.57
0.68
0.82
0.91
1.23
0.84
39
Credit risk exposures - institutions exposure class (IRB)
The institutions exposure class includes exposures to credit
institutions, banks and investment firms, as well as exposures
to local authorities in the Baltic countries. Operations with
customers in the institutions exposure class are concentrated
to Sweden, and in particular to the LC&I and Group Functions
(Group Treasury) business areas, which have the most
expertise in analysing these types of customers, business
areas and countries. Swedbank’s exposures are mainly to
large and established credit institutions with which it has
long-standing business relations, and most are from the
Nordic countries. The risk for these types of customers is
considered low.
Table 3-16: Institutions exposure class, outstanding exposures by risk grade
2016-12-31
Risk grade
Def
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
Total Swedbank
PD
100.000%
38.400%
27.153%
19.200%
13.576%
9.600%
6.788%
4.800%
3.394%
2.400%
1.697%
1.200%
0.849%
0.600%
0.424%
0.300%
0.212%
0.150%
0.106%
0.075%
0.053%
0.038%
0.030%
Exposure,
SEKm
Loans onbalance,
SEKm
Off-balance
limit, SEKm
0
7
42
2
4
37
2
1
15
3
1
-
177
170
141
139
2
467
2
425
145
29
104
112
18
1 380
18
899
257
133
68
65
65
11 598
56
3 220
2 536
1 560
41
24
29 430
9 813
6 364
4 578
19
40 941
83 959
32 867
47 340
258
9 576
173
6 476
9
16
Figure 3-30: Institutions exposure class, 12-month
migration
80
%
40
Average
risk weight,
%
3
Figure 3-29: Institutions exposure class, risk profile
50
Exposure
off-balance,
SEKm
2015-12-31
70
2016-12-31
60
EAD, SEKbn
50
40
30
30
20
10
20
0
10
Downgrades
0
Def 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
SWEDBANK
Swedish Banking
from
default
Upgrades
Baltic Banking
LC&I
Group Functions
40
Credit risk tables
Table 3-17: Exposure*, average exposure and off-balance
2016-12-31
IRB approach
SEKm
Total exposure
Exposure before credit risk mitigation
Average exposure
Off-balance limits
Exposure from off-balance
Retail mortgages
Retail other
Corporate
Institutions
Other
936 542
937 689
95 756
97 442
508 765
518 533
83 959
83 462
12 182
9 749
911 287
7 946
3 302
95 125
70 007
26 205
503 112
139 328
81 959
99 657
9 685
6 476
49 593
0
0
Local govts
Govts and
or local
Other
central banks
authorities
245 746
32 453
73 680
241 126
24 992
73 987
407 770
4 940
1 879
33 785
19 730
11 208
73 320
4 225
1 811
Total
1 989 083
1 986 980
2 173 649
255 861
132 840
* Exposures according to the capital adequacy framework, IRB approach exposures defined as EAD.
Credit risk mitigation
The most common collateral is physical collaterals, mainly
mortgage deeds in real estate. These are mainly found in the
Retail mortgage and Corporate exposure classes, where the
vast majority of the exposures are collateralised.
For further information on collateral and management of
collaterals we refer to the credit risk measurement section
above.
Table 3-18: Collateral and credit risk mitigation techniques
2016-12-31
IRB approach
SEKm
Exposures covered by physical
collaterals*
Exposures covered by financial
collaterals
Exposures covered by guarantees
and credit derivatives**
Govts and
Local govts or
central
local
banks
authorities
Other
Retail mortgages**
Retail other
Corporate
Institutions
909 880
24 184
190 465
7
0
0
0
23 884
1 148 420
0
0
5 132
12 834
0
0
0
1 588
19 554
1 147
2 431
58 402
22
0
0
0
1 470
63 472
Other
Total
* Mainly collaterals in residential properties.
**Municipalities and property management companies are the major guarantors.
Geographical distribution
Swedbank focuses on customers in the four home markets,
89% of the exposures are towards customers in Sweden,
Estonia, Latvia and Lithuania. Excluding exposures to central
government the share of exposures to the home markets is
90%.
The vast majority of Swedbank’s exposures, 78%, constitute
exposures to Swedish customers. This share has increased
since the year-end 2015, mainly due to the growth of
Swedish exposures in the retail mortgage and corporate while
having decreasing placements in central banks outside
Sweden.
Table 3-19: Outstanding exposures by geographical area*
2016-12-31
SEKm
Sweden
Estonia
Latvia
Lithuania
Norway
Denmark
Finland
USA
Other
Total Swedbank
IRB approach
Retail mortgages
875 796
28 238
12 790
18 599
356
237
40
41
445
936 542
Retail other
78 600
7 587
4 285
5 004
89
16
31
11
133
95 756
Corporate
343 249
28 695
15 279
19 033
38 572
5 467
20 438
3 055
34 977
508 765
Institutions
44 355
2
12
0
2 062
2 981
2 597
5 653
26 297
83 959
Other
8 642
998
1 371
1 062
19
4
7
62
17
12 182
Govts and
central
banks
134 023
23 226
15 264
22 388
652
556
30 606
17 250
1 781
245 746
Local govts
or local
authorities
30 976
905
175
52
137
0
208
0
0
32 453
Other
37 123
3 563
1 290
6 296
4 886
3 380
2 340
957
13 845
73 680
Total
1 552 764
93 214
50 466
72 434
46 773
12 641
56 267
27 029
77 495
1 989 083
* Exposures to customers in the country. For institutions exposures, the country of origin where the customer’s head office is located is used for all exposures
SWEDBANK
41
Sector distribution
Swedbank focuses on low risk segments such as private
mortgage loans, tenant owners associations, property
management agriculture and other non-volatile sectors. In
general their repayment abilities are stable and the collateral
mainly within low loan-to-values. Credit losses are generally
on low, stable levels for the focus sectors.
Long-term mortgage lending in Sweden continued to increase
during 2016, rising SEK 37bn or 5.6%. Swedbank has been
advocating lower debt levels in the household sector, through
stricter requirements on down payments for housing
purchases, amortisation requirements, and by caps on debtto-income-ratios.
Table 3-20: Outstanding exposures by industry
2016-12-31
SEKm
Private mortgage
Private other
Manufacturing
Construction
Retail
Transportation
Property management
Commercial
Other
Credit institutions
Other exposures
Total Swedbank
IRB approach
Retail mortgages
757 184
93 839
6 169
50 874
897
796
3 008
1 361
434
7
508
187
126
17 293
9 367
3 190
656
4 080
2 288
1 571
0
0
Retail other
9 146
14 969
30 287
6 811
3 954
1 223
5 514
6 805
2 497
53
1 407
817
708
5 357
2 083
1 220
1 177
877
4 266
1 942
0
0
Corporate
206
16 867
271
11 116
58 718
26 198
19 620
30 555
13 142
36 999
7 130
9 236
19 898
225 907
58 750
94 841
46 897
25 419
23 280
9 823
0
-201
Institutions
0
0
1
73
119
3
92
22
86
0
8
7
24
13
2
10
0
1
41
17
83 453
0
Other
0
424
5
138
1 140
254
1 098
1 058
398
15
58
418
1 223
354
50
63
24
217
1 352
2 864
10
1 373
936 542
95 756
508 765
83 959
12 182
Govts
Local
and
govts or
central
local
banks authorities
1
0
202
831
0
0
42
5
1 744
0
25 497
20 156
4
29
151
0
1
114
449
0
0
160
0
25
546
647
531
4 222
39
2 499
17
748
0
561
475
414
1 291
175
112
533
214 822
4 811
353
745
Other
7 434
141
15 068
859
641
6 154
318
11 881
63
6
71
182
7 735
2 130
318
317
9
1 486
1 374
5 960
10 875
2 788
Total
773 971
127 273
51 801
69 918
67 213
80 281
29 683
51 833
16 735
37 529
9 342
10 872
30 907
255 807
73 108
100 406
49 325
32 969
34 067
22 822
313 971
5 058
73 680
1 989 083
Govts
Local
and
govts or
central
local
banks authorities
Other
0
0
2
0
0
0
0
0
3
0
0
6
0
0
225
0
0
74
0
0
24
0
0
95
0
0
12
0
0
0
0
0
23
0
0
53
0
0
0
0
0
1 699
0
0
234
0
0
41
0
0
0
0
0
1 424
0
0
223
0
0
46
0
0
0
0
0
97
Total
670
92 293
633
4 461
7 064
2 357
7 327
10 713
4 137
78
2 524
1 131
1 019
28 258
16 386
4 172
3 410
4 291
6 777
1 905
0
97
245 746
32 453
Table 3-21: Outstanding exposures to SME corporates by industry
2016-12-31
SEKm
Private mortgage
Private other
Manufacturing
Construction
Retail
Transportation
Property management
Commercial
Other
Credit institutions
Other exposures
Total Swedbank
SWEDBANK
IRB approach
Retail mortgages
592
89 756
0
299
59
241
383
295
34
3
197
61
106
6 470
5 480
375
58
557
589
57
0
0
Retail other
22
1 622
301
1 959
3 490
1 055
4 471
6 065
2 161
47
1 174
761
553
4 009
1 605
829
929
646
3 715
1 112
0
0
Corporate
54
915
329
2 197
3 290
987
2 449
4 258
1 930
28
1 130
256
360
16 080
9 066
2 927
2 423
1 664
2 250
690
0
0
Institutions
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Other
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
99 142
32 517
37 203
0
0
0
0
2 582
171 444
42
Maturity distribution
Maturity is the remaining contractual maturity as of 31
December 2016, except for contracts where the terms and
conditions are set periodically, for example mortgages. For
these contracts the next terms and conditions revision is used
as maturity date in accordance with the guidelines from the
SFSA.
For exposure class retail mortgage, the majority of loans
relates to private mortgages and has a contracted floating
interest rate, i.e. a three-month fixed rate, after which the
loans roll over to a new three-month fixed rate.
Table 3-22: Outstanding exposures by maturity*
2016-12-31
IRB approach
SEKm
Payable on demand
< 3 months
3-12 months
1-5 years
5-10 years
> 10 years
Without maturity
Total Swedbank
Retail mortgages**
1 884
568 022
78 448
216 447
20 607
51 051
83
936 542
Retail other
18 195
38 990
9 608
20 828
5 368
2 526
241
95 756
Corporate Institutions
26 244
6 999
182 323
7 866
55 071
14 535
198 140
27 889
38 105
6 033
7 641
19 978
1 241
659
508 765
83 959
Other
1 909
474
1 406
5 006
158
16
3 213
12 182
Govts and
central
banks
13 550
173 001
3 078
8 881
2 622
1 457
43 157
245 746
Local govts
or local
authorities
8 343
3 325
5 190
12 740
2 500
350
5
32 453
Other
2 160
32 064
4 494
12 674
2 578
10 651
9 059
73 680
Total
79 284
1 006 065
171 830
502 605
77 971
93 670
57 658
1 989 083
* Maturity is the remaining contractual maturity as of 31 December, except for contracts where the terms and conditions are set periodically, for example mortgages. In these cases, the time to the next
change in terms and conditions is used as maturity, in accordance with the guidelines from the Swedish Financial Supervisory Authority.
** Looking at the exposure class of retail mortgage exposure, the majority of loans relate to private mortgages and have a contracted floating interest rate, i.e. a three-month fixed rate, after which the
loans roll over to a new three-month fixed rate. Compared to the Baltic countries, mortgage loans in Sweden tend to have substantially shorter contracted interest rate fixing periods. The majority of
mortgage loans that have a remaining maturity of over 10 years represent lending in the Baltic countries.
Specific credit risk adjustments
The total amount of specific provisions increased somewhat in
2016 compared to at year-end 2015 to end at SEK 4.5bn.
New provisions were mainly made for some larger customers
in the Shipping and Offshore sector.
Table 3-23: Specific credit risk adjustments during the periods
IRB approach
SEKm
2016
2015
Retail mortgages
599
722
Retail - other
561
600
Corporate
2 717
2 020
Institutions
0
0
Other
0
0
Govts and
central
banks
0
0
Local govts
or local
authorities
0
2
Other
624
613
Total
4 501
3 958
Equity exposures
In the Consolidated Situation, holdings in equities not included
in the trading book are of strategic nature for Swedbank’s
operations. These holdings make up a relatively minor
proportion of the portfolio. For holdings classified as
associates, the equity method is applied. In 2016, holdings in
associates contributed SEK 2.0bn to the comprehensive
SWEDBANK
income (2015: SEK 0.8bn). Other holdings are measured at fair
value. In most cases, the fair value is determined by quoted
prices. Otherwise, the bank’s own assumptions are used,
based on last transaction price. In 2016, total unrealised gains
or losses in other holdings measured at fair value amounted to
SEK 2.2bn (2015: SEK 0.5bn).
43
Stress tests
Counterparty Credit Risk (CCR)
Most of Swedbank’s counterparty risk belongs to the trading
operations in Sweden and emanates primarily from two units:
Group Treasury and LC&I. Counterparty credit exposure arises
mainly as a result of hedging of own market risk and from
customer-related trading activities. As for products, most
counterparty risk derives from interest rate swaps, basis
swaps, and currency forwards. In nominal terms, forward rate
agreements comprise a large share of the derivatives trading.
However, since these contracts have short maturities and to a
large extent are centrally cleared, the counterparty risk
inherent in these derivatives is low.
Measurement of counterparty credit risk
Measuring the risk arising from instruments such as loans and
placements is straightforward as the exposure is known for
any point in the future. Derivatives and securities financing
transactions, on the other hand, require a more advanced
approach, as future exposure is unknown and therefore needs
to be estimated. The exposure value is equal to the net
present value of the contract plus an add-on to reflect future
potential positive market value changes. Positive derivative
values generate counterparty risk for Swedbank and
consequently the claim towards the counterparty increases.
Based on conservative estimate, an add-on factor is attached
to the market value of the derivative to reflect future
potential positive market value changes.
Counterparty Credit Risk limits
Credit limits for Counterparty Credit Risk (CCR) are assessed
and allocated using the calculated estimates for a potential
future change of the market-values. In the process for setting
and approving counterparty’s risk exposure limits a number of
factors have to be taken into account; such as guidance from
the core credit policies, the credit quality and rationale for the
trading activity. Last but not least, the credit risk
professionals’ place the last view and judgement.
Risk measurement and evaluation
Risk measurement and evaluation is an ongoing process and
Swedbank makes regular assessments, for example by
specifying detailed internal add-ons for different risk types
and their maturities. The internal risk add-on factors are
reviewed at least annually and more often if deemed
necessary. The add-on factors are based on simulations of
various asset price volatilities. The follow-up and
measurement of counterparty risk exposure against approved
limits is performed in a system specific to the task, and factors
such as legal agreements as well as collateral held are also
taken into consideration.
Swedbank maintains an independent control on Group level
with responsibility to identify, quantify, follow up, analyse and
report the counterparty credit risk inherent in the business.
This unit also proposes preventive actions, implements
policies, works with early warning indicators and addresses
relevant mitigating actions. New products and processes are
reviewed in the New Product Approval Process (NPAP) before
becoming operational.
SWEDBANK
In addition to the standard measurements, Swedbank
conducts stress tests to estimate the effects of tail events.
The portfolio of stress tests being carried out includes a
monthly stress test of extreme exchange rate and interest
rate movements as well as a stress test on downgrades on
deals covered by agreements with rating triggers. Swedbank
also conducts various ad-hoc stress tests pertaining political
or market events. Effects on counterparty exposures, credit
losses, REA, collateral flows and market risk are considered.
Foreign exchange settlement risk
For foreign exchange (FX) settlement risk, the amount at risk
is equal to the nominal transfer amount. All decision-making
bodies within Swedbank that decide on counterparty limits
need to establish limits for FX Settlement in addition to credit
limits for CCR for each legal counterparty.
Wrong Way Risk
Wrong way risk (WWR) is divided into specific and general
WWR. Specific WWR is considered in the credit review process
and also measured via stress tests. General WWR is typically
measured via a range of stress test scenarios. For Swedbank,
it makes sense to examine sectors and/or counterparties
individually to detect relationships and significant correlation
between exposures and counterparties’ probabilities of
default.
For capital adequacy purposes, Swedbank uses the mark-tomarket method to calculate the exposure for counterparty
risk.
New regulations
In March 2014, the Basel Committee finalised the
Standardised Approach for measuring counterparty credit risk
exposures (SA-CCR), its proposed new non-modeled approach
for measuring counterparty credit risk for capital adequacy
purposes. A draft EU proposal to implement the SA-CCR, based
on the Basel Committee’s methodology, was released in
November 2016 as a part of an extensive package of
proposed amendments to the current capital requirements
regulation. The entry into force date is not yet decided, but at
the earliest in 2019. From the entry into force date there is an
additional two year period until the regulation becomes
applicable in the EU member states.
The approach is supposed to replace both the mark-to-market
method (the approach currently employed by Swedbank) and
the standardised method in the current regulatory framework.
It is also expected to be used in other parts of the regulatory
framework such as the large exposures framework, and in the
standard for capital requirements for bank exposures to
central counterparties. The main features of the SA-CCR
method are that it is considerably more risk-sensitive and
more effectively recognises netting effects, differentiates
between margined and unmargined trades, and is calibrated
to a stressed period, unlike the mark-to-market method. On an
overall level, the new method can be expected to generate
notable increases in capital requirements for counterparty
credit risk, in particular for non-collateralised exposures.
However, other regulatory initiatives to mitigate
counterparty credit risk such as mandatory margining
44
between financial counterparties for non-cleared derivatives,
and the gradual phasing in of clearing obligation for certain
classes of derivatives, can be expected to reduce the overall
impact on capital requirements.
Another regulatory initiative concerning counterparty risk is
the Basel Committee’s proposal on a new framework for
Credit Value Adjustment (CVA) Risk. CVA is an adjustment to
the fair value of derivative contracts to account for
counterparty credit risk, and has been subject to regulatory
capital requirements since January 2014. The proposed
framework is closely aligned with the market risk framework
‘Minimum Capital Requirements for Market Risk (commonly
referred to as the ‘Fundamental Review of the Trading Book’
(FRTB) framework). It aims to capture CVA risks more
effectively than the current framework and introduces better
recognition of CVA exposure hedges. The proposal, which has
been revised during 2016, is divided into two parts. The first
being the ‘FRTB-CVA framework’, which will be available to
banks that satisfy a number of specified conditions related to
the calculation and risk management of their CVA. The second
part of the proposal, the ‘Basic-CVA framework’, is available to
banks that do not meet the aforementioned eligibility criteria.
This is essentially an enhanced version of the current
framework’s standardised method, which Swedbank currently
uses. The new CVA framework is reported to be under
finalisation at the Basel Committee, although the
implementation schedule remains uncertain.
Mitigating counterparty risks
The Group uses a variety of methods to mitigate counterparty
risk; the most important is netting and collateral
management, as outlined below. Other actions include
steering exposure and risks to clearing houses, which is
standard procedure and mandatory for a range of products, to
reduce bilateral counterparty risk; and closing out risk through
various portfolio compression activities. In addition, a small
part of the counterparty risk exposure is reduced by credit
derivatives.
Swedbank conducts credit derivative transactions primarily in
connection with counterparty risk, and mainly trades with
counterparties where an ISDA CSA agreement has been
established. Rather than using credit derivatives to mitigate
counterparty risk in its trading operations, Swedbank prefers
to make use of collateral arrangements.
Table 3-24: Counterparty risks – Outstanding credit derivatives
31 December 2016
SEKm
Single name
CDS
Index CDS
Total
31 December 2015
Own credit portfolio
Trading operations
Own credit portfolio
Protection
Protection
Protection
Bought
Sold
Bought
Sold
Bought
Protection
Sold
Bought
Sold
98
671
92
642
568
568
2 561
1 968
666
1 240
2 653
2 610
Swedbank mitigates settlement risk through Delivery-vsPayment (DVP) or Payment-vs-Payment (PVP) arrangements
when possible. One such settlement vehicle is the global FX
clearing that is conducted through CLS Group (originally
Continuous Linked Settlement), where Swedbank is a
member. They eliminate settlement risk in FX transactions
with counterparties that are eligible for CLS clearing.
Derivative netting and collateral arrangements
Swedbank actively mitigates its counterparty risk mainly by
establishing netting agreements whereby derivatives with
the same counterparties can be offset. All netting agreements
need to be legally documented accordingly with Group policy.
Trading with OTC derivatives leads to counterparty risk which
needs to be covered with capital. Swedbank strives to have
ISDA Master Agreements with CSA agreements in place with
all our financial counterparties to ensure a well-functioning
netting and collateral management process. As part of the
credit process, the credit memos provided to credit
committees specify what collateral is accepted for each
individual counterpart. The vast majority of the current
SWEDBANK
Trading operations
received and pledged collateral is cash. Financial collateral is
subject to daily monitoring and an independent valuation.
Swedbank has 41 netting and collateral agreements with
rating triggers. In the event of a credit rating downgrade, the
rating triggers require various actions such as additional
collateral posting, procurement of a third counterparty to step
in between Swedbank and the original counterparty, or early
termination of derivatives at market value. Rating triggers
may apply to the ratings of one or both parties in the
agreement.
The effects of a potential rating downgrade do not pose a
threat to Swedbank’s balance sheet. A three-notch
downgrade by Standard & Poor’s of Swedbank AB’s long-term
credit rating to ‘A-’ would lead to SEK 1.893m in collateral
being posted. A three-notch downgrade by Moody’s of
Swedbank AB’s long-term credit rating to ‘A3’ would cause
the posting of SEK 3.214m in collateral. Collateral calls
resulting from a similar downgrade by Fitch would be smaller.
Novation would first start occurring at the ‘Baa1’ level, four
notches below Swedbank’s current rating by Moody’s.
Terminations would start occurring only if Swedbank were
rated sub-investment grade.
45
Table 3-25: Counterparty risks – Derivatives
SEKm
2016
2015
Positive market value of derivative contracts
84 672
Exposure reduction from netting agreements
55 432
48 191
Exposure after considering netting agreements
29 240
37 916
Exposure covered by collateral
Exposure after considering netting agreements and collateral
86 107
8 555
16 972
20 685
20 944
Potential future exposure from internal risk add-ons, thresholds and minimum transfer amounts
61 971
54 607
Net credit exposures for derivatives including potential future exposure according to internal model
82 656
75 551
Figure 3-31: Netting and collateral effects for derivatives
Exposure, SEKbn
90
80
70
60
50
40
30
20
10
0
Exposure before netting and collateral
(Sum of positive market values)
Exposure after considering netting
agreements
Exposure after considering netting
agreements and collateral
Figure 3-32: Maturity profile for derivative exposures
Exposure, SEKbn
100
80
60
40
20
0
Add-on 2016
Net credit exposure 2016
Add-on + Net credit exposure 2015
Note: Add-on + net credit exposure is the exposure according to the internal model. Net credit exposure is the largest of market values after netting and collateral and
threshold plus minimum transfer amount for transfer of collateral.
SWEDBANK
46
4. Market risk
Swedbank Group’s market risk exposures were kept at low and stable levels
throughout the year. This was achieved through pro-active management of the
Group’s positions in the highly volatile environment, not least navigating in the
turbulent financial markets reacting to exceptional events like the UK referendum
and the US presidential election.
Market risk
The risk that the Group’s results, equity or value will
decrease due to changes in risk factors in financial
markets. Market risk includes interest rate risk, currency
risk, share price risk and commodity risk, as well as risks
from changes in volatility and correlations
Risk appetite
The Group’s primary objective in the financial markets is to
satisfy the long-term needs of its customers. Risk must
always be weighed against expected return. No positions shall
be taken that could be deemed unethical or that could
jeopardise the Group’s reputation.
Total capital requirement for market risk:
SEK
754m
2015: SEK 858m
Total trading book VaR on average:
SEK
17m
2015: SEK 20m
Highlights 2016
The markets reacted with increased volatility to several
political events during the year, such as the UK referendum
and the US presidential election but also as a consequence of
geopolitical tension and monetary easing actions by various
central banks. Throughout these turbulent times, Swedbank
Group managed the market movements well, keeping market
risks at low and stable levels.
SWEDBANK
47
Management of market risks
At Swedbank, market risk-taking is closely monitored along all
levels of the Group. Only risk-taking units, i.e. units that have
been granted permission by the Group’s CEO, are allowed to
carry market risks.
Swedbank’s market risk-taking is first and foremost limited
via risk appetites established by the Group’s Board of
Directors. Using the risk appetites as starting points, a market
risk limit structure has been adopted on CEO and CRO level in
order to prevent the Group from unintentional losses. To
enhance the management of market risks even further, limits
have also been established on business unit level.
The risk organisation performs daily limit monitoring, in-depth
analysis, frequent stress testing, and reporting of the Group’s
market risks. Internal reporting of market risk exposure and
follow-up on limit usage is performed on a daily basis and
delivered to various stakeholders in Swedbank Group. By way
of exception a limit is breached, the risk organisation has
established sound escalation principles in which the market
risk-takers, as well as the Group’s senior management, are
informed of the incident as well as how it has been mitigated.
The majority of Swedbank’s market risks is structural or
strategic in nature and emerges within Group Treasury.
Moreover, market risk also arises in the daily market-making
and client-facilitation activities of the trading book.
Swedbank’s trading operations are managed within the
business unit LC&I (Large Corporates & Institutions) primarily
to fulfil the clients’ transaction requirements in the financial
markets.
Structural interest rate risks are a natural part of any banking
business that manages lending and funding. Interest rate risk
arises from mismatches in interest-fixing periods between the
assets and liabilities. Group Treasury manages these risks
within given mandates matching the assets and liabilities
directly, or by, for example, using derivatives such as interestrate swaps.
Strategic currency risks arise mainly through risks related to
strategic holdings of foreign operations and when deposits
and lending take place in different currencies. Group Treasury
is mandated to manage these risks and may use derivatives
such as cross-currency interest-rate swaps and forward rate
agreements.
On a daily basis, Swedbank’s risk organisation controls and
monitors the effectiveness of the business’ management of
market risks. The follow-up is executed through a solid limit
monitoring process being a natural part of the risk
management and control.
Measurement of market risk
Swedbank uses a variety of risk measures, both statistical and
non-statistical, that guides its day-to-day operations as well
as address important regulatory requirements. Statistical
SWEDBANK
measures such as VaR and SVaR have become mainstays of
the risk measurement process and are used for calculating
regulatory capital. Non-statistical measures such as
sensitivity analyses and stress tests are important
complementary measures that provide a better understanding
of specific market risk factors or possible tail scenarios.
VaR and Stressed VaR
Swedbank’s VaR model (using Monte Carlo simulations and a
99% confidence level over a one-day time horizon) is a useful
tool for comparing risk levels across different asset classes
such as interest rate, credit spread, foreign exchange or
equity; and thus gives insight into each asset class as well as
into their relative risk levels. VaR does not include strategic
currency risk, since a VaR measure on a one-day time horizon
for positions which are meant to be held strategically for
longer periods of time is not relevant. VaR does, however,
include positions that are not marked to market and have no
direct impact on Swedbank’s net gains and losses on financial
items at fair value.
The estimations of the parameters included in the VaR model
are updated on a daily basis and when simulating potential
movements in risk factors, both absolute and relative returns
are used. The 10-day VaR is determined by multiplying oneday VaR by the square root of 10. The same methodology
applies when calculating the 10-day SVaR. The valuation
approach of both VaR and SVaR is based on approximations.
Since VaR is premised on model assumptions, Swedbank
conducts daily back-testing to assess the accuracy and
relevance of the model. Since 2012, Swedbank has also been
using its SVaR model, together with VaR, to calculate
regulatory capital requirements for market risks occurring in
the trading book. The SVaR model uses market data from the
one-year period covering early 2008 to 2009, a period
deemed to be of significant stress. In addition to these Monte
Carlo-based VaR and SVaR models, Swedbank also runs
Historical VaR, and other variants such as Exponential VaR
and Expected Shortfall, for further complementary monitoring
and analysis.
Sensitivity analysis
Swedbank uses various sensitivity measures in order to grasp
each portfolio’s sensitivity to changes in one or more market
risk factors. For example, measures used for interest rate
sensitivities may include the one basis point shift along
various parts of the curve to capture basis risk or the
100 basis point parallel shift which attempts to capture
convexity effects. Another example is FX matrix risk which
shows each foreign currency’s sensitivity to changes in both
price and volatility. Together these sensitivity measures
provide important information to risk analysts who monitor
changes, trends and anomalies. These measures also form the
building blocks of important risk limits that guide the Group’s
trading activities and banking operations.
Stress tests
Several stress tests are performed and reported to various
stakeholders on a daily basis. The various statistical and
48
sensitivity measures described above have known shortfalls
and limitations. For example, the VaR model inputs are based
on market data from the past year which might not include
stressed market conditions, i.e. VaR figures may not capture
hypothetical extreme market movements. Moreover, the VaR
model does not accurately capture correlation breakdown
during extreme financial market stress. Additionally,
sensitivity measures only show general sensitivity to small
and large movements but provide no historical context for the
figures. To address these limitations, Swedbank has a
comprehensive set of stress tests which are broadly
categorised into scenarios: (i) historical, (ii) hypothetical, and
(iii) method and model. The stress tests (and the scenarios on
which they are based) are meant to cover significant
movements in market risk factors and to highlight
mismatches in open positions that might cause large-scale
losses.
Historical stress tests attempt to capture various effects on
the current portfolio using past market data from periods of
particular stress. In effect, these tests present the possible
losses to the current portfolio if history were to repeat itself.
The set of historical scenarios and relevant market data goes
as far back as 25 years. It covers financial events (such as the
1992 Swedish banking crisis or the 2008 subprime mortgage
meltdown) and non-financial events (such as the September
2001 terror attacks or the 2011 Japan earthquake).
Hypothetical stress tests attempt to quantify the change in
portfolio value that would result from hypothetical and
extreme shifts in risk factors. These tests include standardised
single or cross-asset tests with large but probable shifts that
are historically informed. Other forward-looking tests can
include more customised tests which may be run on an ad-hoc
basis, such as the 2014 European Banking Authority (EBA)
stress test. Some customised tests may be more routinely
established, such as the yearly ICAAP (see chapter 7 of this
report) or the bi-annual Reverse Stress Test.
Method and model stress tests measure how statistical
measures (such as VaR, Expected Shortfall, or Historical Worst
Loss) respond to changes in assumptions, parameters and
market conditions. The purpose is partly to capture the
uncertainty in reported risk figures due to assumptions and
parameter estimations, and partly to capture how dependent
the reported risk figures are on current market conditions
(such as interest rate levels and risk factor covariance).
Capital requirements for market risks
Capital requirements for market risk may be based either on a
standardised model or on an internal VaR model. The latter
model requires approval from the Swedish Financial
Supervisory Authority (SFSA), which was received by the
Group in 2004.
858m). The majority of the decrement was due to a reduction
of the specific interest rate risk in trading book, calculated
according to the standardised approach. However, the
reduction was slightly offset by e.g. increased capital
requirements for general interest rate risk as well as FX risk in
the trading book.
Fundamental Review of the Trading Book
The Basel Committee’s new global capital adequacy standard
for Market Risk, the ‘Minimum capital requirements for market
risk’ (most commonly referred to as the Fundamental Review
of the Trading Book, FRTB) was published in January 2016.
The Committee's objective is that the new standard will
address weaknesses that have been identified in risk
measurement under the existing framework.
The new standard implies substantial revisions to both the
standardised approach and the internal models approach. The
changes include a strengthened relationship between the
standardised and the model-based approaches, encompassing
mandatory calculation and public disclosure of standardised
capital charges on a desk-by-desk basis. The measure of risk
has also been shifted from VaR to expected shortfall, to better
capture tail risk. Further, the proposal includes a revised
boundary between the trading book and the banking book
that is better aligned with banks’ risk management practices
and reduces incentives for regulatory arbitrage.
Swedbank’s work on implementing the upcoming standard
will comprise development of a new internal model as well as
implementation of the revised standardised approach. The
Group is preparing these tasks, which will require significant
attention and resources in order to ensure compliance with
the new framework when it enters into force. The recently
published regulatory proposal from the EU commission
indicates an entry into force date in 2019, with the regulation
becoming applicable in EU member states two years later.
Although quantitative impact studies performed so far
indicate an increase in market risk capital requirements, it is
still too early to draw firm conclusions regarding the
conclusive levels. The uncertainty relates partly to how
certain requirements within the new framework should be
interpreted, and partly to the final calibration of the
framework and whether capital floors linked to the
standardised approach will be introduced.
Market risk exposures
Swedbank analyses market risk exposures using risk factors
such as interest rates, exchange rates and share prices.
Broadly speaking, market risk exposures fall under either the
trading book (managed within the LC&I organisation) or the
banking book (managed by Group Treasury).
As of year-end 2016, the Group’s capital requirement for
market risk, based on calculations according to the
standardised approach, was SEK 754m (year-end 2015: SEK
SWEDBANK
49
Table 4-1: VaR allocated by risk category
Credit spread risk
Jan - Dec 2016 (2015)
SEKm
Interest rate risk
Currency rate risk
Share price risk
Diversification
Max
Min
Average
131 (112)
13 (15)
12 (24)
44 (53)
2 (3)
2 (4)
80 (81)
6 (7)
5 (7)
-13 (-15)
31 Dec
2016
46
4
2
-9
31 Dec
2015
82
7
5
-14
Total
128 (113)
43 (56)
79 (80)
43
80
In June 2015, Swedbank got an approval of a model change in VaR due to low and
negative interest rates. Hence, the VaR figures for 2015 and 2016 are not comparable.
Value-at-Risk
Geopolitical and macroeconomic events such as monetary
easing and other actions by various central banks caused
market volatility to increase during the year. However,
Swedbank Group managed its market risk exposure
efficiently, thus VaR and other risk measures were kept at low
and stable levels.
Interest rate risk
Most of the interest rate risk at Swedbank is structural and
arises in the banking book, where interest-fixing periods and
maturities on assets and liabilities, including derivatives, may
not coincide. The interest rate risk from fixed-rate assets,
primarily customer loans, is for the most part hedged either
through fixed-rate funding or through interest-rate swap
contracts. The trading book also generates interest rate risk
from customer-related activities. An increase in all market
interest rates (including real interest rates) of one percentage
point as of 31 December 2016 would have decreased the
value of Swedbank’s interest-bearing assets and liabilities,
including derivatives, by SEK 651m (2015: SEK 25m). The
value of positions in SEK would have decreased by SEK
1154m (2015: SEK 1103m), while positions in foreign
currency would have increased in value by SEK 503m
(SEK 1.078m), see table 4-4.
Currency risk
Currency risk arises mainly through risks related to strategic
holdings of foreign operations and when deposits and lending
take place in different currencies. The trading book also
generates currency risk from customer-related activities. A
general shift in exchange rates of foreign currencies against
the Swedish krona of both positive and negative 5% would
entail effects on Swedbank’s net gains and losses on financial
items at fair value of SEK 18m (2015: SEK 17m) and SEK 17m
(2015: SEK 77m).
Credit spread risk within Swedbank arises when issuerspecific spreads change on interest-bearing assets and credit
derivatives. Credit spread risk is present in client-related and
mandated activities of the trading book and in the banking
book through Group Treasury’s liquidity portfolio consisting of
interest-bearing assets. An increase of all issuer-specific
spreads as of 31 December 2016 by one basis point would
have reduced the value of Swedbank’s interest-bearing
assets, including derivatives, by SEK 11m (2015: SEK 12m).
Share price risk
Share price risk occurs only in the trading book, and comes
from exposure to equities and equity-related derivatives.
Swedbank’s equity trading book is primarily customer-driven
and exists for the purpose of providing liquidity to the Group’s
customer base. Thus, share price risks were kept at low levels.
Swedbank measures and limits share price risk through a risk
matrix that maps the outcome of 80 different scenarios
where share prices are changed by a maximum of +/– 20%and
volatilities by a maximum of +/– 30%. A limit is in place for the
worst-case outcome from this matrix. At year-end, the worstcase outcome would have entailed a decline in the value of the
trading operation’s positions by SEK 15m (2015: SEK 11m).
Commodity risk
Exposure to commodity prices arises only as a part of clientrelated business, and only in exceptional cases. As a rule,
Swedbank hedges any positions with commodity exposure
with a third party.
Value-at-Risk (Trading Book)
Though volatilities rose during 2016, Swedbank’s trading unit
was well positioned against these fluctuations, keeping the
Trading Book VaR averaging around SEK 14m, i.e. slightly
lower than in 2015.
Table 4-2: Trading book, VaR and SVaR
Jan - Dec 2016 (2015)
SEKm
Value-at-Risk
Stressed Valueat-Risk
Max
14 (18)
31 Dec
2016
9
31 Dec
2015
20
40 (47)
30
30
Min
Average
22 (29)
9 (11)
82 (82)
23 (28)
Swedbank conducts both actual backtesting (using actual
daily results) and hypothetical backtesting (using close-ofbusiness positions and revaluing the portfolio with the latest
market data) to ensure the validity of the VaR model. During
2016, none of the hypothetical losses exceeded the VaR level.
SWEDBANK
50
Figure 4-1: Trading book, hypothetical profit/loss and VaR, 2016
30
SEKm
20
10
0
-10
-20
-30
J
F
M
A
M
J
J
A
S
O
Hypothetical profit / loss
N
D
VaR
In addition to the VaR model for capital requirement calculations, Swedbank also uses a VaR model and SVaR model for internal risk
management purposes which includes credit spread risk factors. The total trading book VaR in 2016 averaged SEK 17m, compared to
SEK 20m in 2015. In general, risk measured in VaR was well balanced between the asset classes and, in total, exhibited favourable
diversification.
Table 4-3: Trading book, VaR by risk category
Net interest income sensitivity
In addition to interest rate sensitivities, other measures such
as net interest income (NII) sensitivity in the banking book are
calculated and monitored regularly. NII sensitivity is a result of
any mismatch between the interest rate fixing periods for
assets and liabilities of which the structural risk in the bank’s
demand deposits is an important part. Swedbank measures its
NII sensitivity over a one-year time period using a variety of
different interest rate scenarios. The calculations take into
account internal assumptions of the relation between market
rates and customer rates for deposits and also include
scenarios to measure the NII impact of different pass-through
assumptions.
Jan - Dec 2016 (2015)
SEKm
Credit spread
Equity
FX
Interest rate
Diversification
Total
11 (9)
5 (7)
7 (7)
13 (16)
-18 (-19)
31 Dec
2016
10
3
6
9
-17
31 Dec
2015
6
5
8
20
-17
17 (20)
11
22
Max
Min
Average
14 (11)
12 (20)
14 (15)
21 (29)
6 (6)
2 (4)
2 (3)
9 (9)
27 (33)
11 (13)
Note: VaR figures above are generated from the VaR model used for internal
risk-management purposes and are different from the figures generated from
the VaR model used for capital requirement calculation.
Table 4-4: Change in value of assets and liabilities measured at fair value, incl. derivatives, if market interest rate rises 1
pp
31 December 2016
<3
mths.
3-6
mths.
6-12
mths.
1-2
yrs.
2-3
yrs.
3-4
yrs.
4-5
yrs.
5-10
yrs.
> 10
yrs.
Total
-333
651
318
-1
-82
-83
-250
88
-162
-327
88
-239
-121
-97
-218
28
-10
18
-148
-112
-260
-121
-106
-227
119
83
202
-1 154
503
-651
Of which financial instruments measured at fair value through profit and loss
SEK
147
216
-109
-578
461
Foreign currency
465
-17
54
122
-7
Total
612
200
-55
-456
454
47
61
107
-615
-79
-693
300
-39
261
-73
90
17
-204
650
446
Swedbank Group, SEKm
SEK
Foreign currency
Total
SWEDBANK
51
Table 4-5: Capital requirement for market risks as of 31 December – Swedbank Consolidated Situation
Capital requirement 2016
Swedbank Consolidated Situation (SEKm)
Risks in trading book Interest rate risk
of which specific risk
of which general risk
Equity risk
of which positions in CIUs
of which options where the capital requirement is
equal to the option's market value
Currency risk in trading book
Commodity risk
Total capital requirement for risks in trading book
of which stressed VaR**
Currency risk outside trading book
Total capital requirement for market risks
standard
method
166
165
1
4
0
1
3
internal
method*
579
579
99
99
Total
745
165
580
103
0
100
3
0
3
0
0
3
internal
method*
525
525
195
195
Total
812
287
525
198
0
195
3
0
202
0
732
435
22
563
435
22
191
standard
method
287
287
0
202
0
169
563
200
33
323
200
33
848
159
10
525
159
10
754
333
525
858
Table 4-6: Capital requirement for market risks as of 31 December – Swedbank AB
Swedbank AB (SEKm)
Risks in trading book Interest rate risk
Equity risk
of which positions in CIUs
of which options where the capital requirement is
equal to the option's market value
standard
method
internal
method*
160
159
1
0
0
0
0
579
0
579
98
98
Total
739
159
580
98
0
98
0
0
standard
method
internal
method*
283
283
527
527
0
0
195
Total
810
283
527
0
0
195
0
0
Currency risk in trading book
202
202
199
199
Commodity risk
0
0
2
2
Total capital requirement for risks in trading book
160
562
722
285
527
812
of which stressed VaR**
435
435
0
Currency risk outside trading book
21
21
8
8
Total capital requirement for market risks
181
562
743
293
527
820
* The parent company’s capital requirement for general interest-rate risk, share price risk and currency risk in the trading book as well as Swedbank Estonia AS’, Swedbank
Latvia AS’ and Swedbank Lithuania AB’s capital requirement for general interest-rate risk and currency risk in the trading book are calculated in accordance with the VaR
model.
** Stressed VaR is a requirement in CRDIII from end-December 2011.
SWEDBANK
52
5. Liquidity risk
Swedbank’s liquidity position remained strong, supported by investors who are
confident in Swedbank’s overall business strategy, solid profitability, strong
capitalization and low risk position
Liquidity risk
The risk that the bank cannot fulfill its payment
commitments at maturity or when they fall due. Liquidity
risks arise because the maturity structures on the asset
and liability sides of the balance sheet do not coincide.
Risk appetite
Swedbank shall maintain a conservative liquidity risk profile
with resilience to both short-term and long-term external
stress and maintain an adequate buffer of highly liquid assets
to enable it to withstand a prolonged period of liquidity
stress without relying on forced asset sales or government
intervention.
Swedbank strives to maintain a long-term, stable, welldiversified funding and investor base with a wholesale
funding that is well-diversified across markets, instruments,
and currencies.
Highlights 2016
Liquidity Coverage Ratio (according to FFFS 2012:6):
156%
2015: 159%
Liquidity Coverage Ratio (according to EU DA 2015/61):
155%
2015: 144%
Net Stable Funding Ratio:
108%
2015: 107%
Liquidity Reserve:
326.5bn
In 2016, the Group issued SEK 161bn (229) of long-term debt
to meet term-debt maturities with a nominal value of SEK
110bn and to further improve the liquidity position. Covered
bond issues accounted for a major proportion, SEK 125bn. In
2017, the bank plans to issue approximately SEK 200bn to
meet maturities of nominal SEK 166bn and rising credit
demand.
SEK
With one of the highest capital ratios in Europe, solid asset
quality and stable earnings capacity, together with a
continued good liquidity position, Swedbank has a reputation
in the capital market that has further benefited the Group’s
absolute and relative funding cost.
2015: 57,9%
2015: SEK 364.5bn
Overcollateralization of covered bonds:
67.3%
Issued Long Term Funding:
SEK
160.5bn
2015: SEK 229.2bn
SWEDBANK
53
Funding and liquidity strategy
Strategy
Swedbank’s funding strategy reflects its asset composition.
More than half of the lending consists of Swedish mortgages,
which are primarily financed through covered bonds. Deposit
volumes, together with covered bonds and shareholder
equity, cover the majority of Swedbank’s total funding
requirements. This means that Swedbank has a limited
structural need for senior unsecured funding. The funding
strategy is also closely linked to the credit quality of the
assets in the balance sheet. Swedbank strives to match fund
assets with unsecured funding of an equivalent amount and
maturity.
The share of unsecured funding is mainly determined by the
Group’s desire to maintain a conservative stable funding
profile and a diversified set of funding sources.
Funding
Swedbank uses a number of different funding programs for its
short- and long-term funding, including programs for
commercial paper, certificates of deposit, covered bonds, and
senior unsecured debt (see tables 5-1 to 5-3).
Swedbank also complements its public funding activities with
long-term investor-targeted private placements. In addition,
Swedbank continuously evaluates various markets and
currencies with the intent to further diversify the investor
base.
Credit spreads in general peaked in Q1 2016 on the back of
market volatility that started already towards the end of
2015, due to among many things the US Federal Reserve rate
increase and continued oil price decline. By end of Q1 2016,
however, credit spreads began a long tightening trend postECB’s announcement of further QE and the introduction of 4
new TLTROs. The tightening trend persisted - despite Brexit
and other political and macro uncertainties - until early fall
and began to retrace ahead of the US election.
As with other issuers trying to fund during market volatility
and macro uncertainties, Swedbank front-loaded the funding
activities during the year (i.e. executing 60% in H1 2016 and
40% in H2 2016). Also, in December 2016, in order to
optimize its capital structure and to pre-fund for upcoming
maturities, Swedbank issued USD 500m in AT1 capital.
Table 5-1: Outstanding debt securities in issue
SEKm
Commercial papers
Covered bonds
Senior unsecured bonds
Structured retail bonds
Total
2016
102 225
558 295
166 161
14 992
841 673
2015
107 046
550 669
154 244
14 576
826 535
Table 5-2: Outstanding short-term funding volumes
SEKm
Domestic CP
Domestic CP - Swedbank Mortgage
European CP/CD
USCP
Yankee CD
Finnish CD
Total
2016
0
0
13 386
33 391
55 872
0
102 649
2015
0
0
14 585
60 852
32 882
0
108 319
2016
125 365
31 415
3 695
160 475
2015
157 728
64 804
6 687
229 219
Table 5-3: Issued long-term debt
SEKm
Covered bonds
Senior unsecured bonds
Total
Figure 5-1: Long-term funding by maturity, as of 31
December 2016
Nominal,
SEKbn
200
Senior unsecured debt
Covered bonds
150
100
50
0
2017
2018
2019
2020
2021
2022
2023-
Figure 5-2: Long-term funding by currency, as of 31
December 2016
60%
50%
40%
30%
20%
10%
0%
SEK
SWEDBANK
EUR
USD
CHF
Other
54
The liquidity reserve and the Liquidity Coverage ratio (LCR)
fluctuate over time depending on factors such as the maturity
structure of the bank’s issued securities. The Group’s LCR was
156% (159) in combined currencies, 160% in USD, and 330%
in EUR. If calculated in accordance with the Basel Committee’s
most recently stated Net Stable Funding Ratio (NSFR),
Swedbank’s NSFR was 108% (107). The improvement during
the year was driven by increased deposits, which also reduced
the bank’s structural liquidity sensitivity.
Liquidity reserve
Swedbank has established and is maintaining a liquidity
reserve to manage its liquidity risk. When future refinancing
needs arise, the liquidity reserve is increased to meet these
maturities in various types of stressed scenarios such as
partly or fully closed markets for new issuance. Consequently,
when maturing funding volumes are lower, the liquidity
reserve is reduced as liquidity risk decreases.
The liquidity reserve amounted to SEK 327bn (365bn) as of
31 December 2016 (see table 5-4).
Table 5-4: Liquidity Reserve, Group*, as of 31 December 2016
SEKm
Total
Cash and holdings in central banks
Deposits in other banks available overnight
Securities issued or guaranteed by sovereigns, central banks or multilateral
development banks
Securities issued or guaranteed by municipalities or Public sector entities
Covered bonds
- Issued by other institutions
- Own issued
Securities issued by non-financial corporates
Securities issued by financial corporates (excl. covered bonds)
Other
Total
SEK
23 458
5
126 426
14
118 211
6 171
74 030
67 525
6 505
526
1 092
104 774
4 531
66 712
60 303
477
326 470
199 957
Currency distribution
EUR
USD
84 634
17 441
6 285
Other
893
9
6 292
728
941
926
15
49
820
860
912
6 377
6 296
81
160
112
92 729
24 621
9 163
* According to the template defined by the Swedish Bankers’ Association. Note: 95% of the securities in the liquidity reserve are rated AAA.
Definition of Liquidity Reserve by the Swedish Bankers’ Association
Assets included in the liquidity reserve should comply with the following:
- assets shall be included and held by the Treasury function in a bank
- assets cannot be encumbered
- market values are used for the assets: only unencumbered securities receiving 0-20% risk weight under the standardised approach to credit risk of the Basel 3 framework
can be included
- securities received in reverse repo transactions are included in the liquidity reserve, and securities used as collateral for repo transactions are excluded
Rating
F1+ with a stable outlook. The upgrade reflected Swedbank's
strong execution of its low-risk strategy since 2009, and
Fitch's expectation that this strategy will continue under the
new management team. The rating also reflected Swedbank's
strong retail franchise, solid asset quality, and strong
capitalisation.
Swedbank aims to have a credit rating in line with the highest
rated banks in the Nordic region. The Group’s funding costs
are affected by the level of its credit rating. It is, therefore, a
key priority for Swedbank to continue improving its relative
rating.
Swedbank continues to maintain efficient business
management practices, prudent risk management processes,
and strong capitalisation. These efforts contribute to the
Group’s high comparative ratings.
On 17 February, S&P affirned Swedbank's ratings to AA- and
A-1+ following the departure of the CEO. S&P’s outlook for
Swedbank’s rating remained negative.
On 26 May, Fitch upgraded Swedbank's ratings to AA- and
Table 5-5: Swedbank’s ratings, 31 December 2016
Swedbank AB
Rating
Outlook
Standard &
Poor’s
Short-term
A-1+
Swedbank Mortgage
AB
Rating
Outlook
Covered bonds
Rating
Outlook
A-1+
Long-term
AA-
N
Moody's
Short-term
Long-term
P-1
Aa3
S
Fitch
Short-term
Long-term
F1+
AA-
S
AAP-1
Aa3
N
AAA
S
S
Aaa
-*
* Based on Moody's rating methodology for covered bonds, no outlook is assigned.
SWEDBANK
55
Asset encumbrance
The types of assets and funding instruments that are being
utilised to encumber the balance sheet of a bank determine
the nature of the asset encumbrance. In Swedbank’s view,
secured funding in the form of covered bonds, which has a
direct link to the underlying business line of mortgage lending,
is of higher quality than secured funding in the form of repos,
where a number of different types of assets are used.
Encumbered mortgages used as covered bond collateral
represent the main part of the source for asset encumbrance.
Apart from encumbered mortgage loans, smaller encumbrance
volumes also derive from derivatives and repos, with the
majority of such encumbrance stemming from Swedbank AB.
Less than 1% of asset encumbrance has its source in other
subsidiaries than Swedbank Mortgage. Unencumbered assets
under “other assets” include assets not eligible for pledging in
central banks such as intangible assets. See table 5-6
illustrating Swedbank's current and potential level of asset
encumbrance. Also refer to table 5-7 for the information on
the overcollateralisation level,
Table 5-6: Asset encumbrance, as of 31 December 2016
Type of assets (Balance Sheet items)
SEKm
Carry Amount
Assets of the reporting institution
Loans on demand
Equity instruments
Debt securities
Loans and advances other than loans on demand
of which mortgage loans
Other assets
Purpose for encumbrance (On- and off-balance sheet items)
SEKm
Carrying amount of selected financial liabilities
of which Derivatives
of which Deposits
of which Debt securities issued
Other sources of encumbrance
Total
SWEDBANK
Fair Value
565 295
14 214
551 081
537 047
14 268
31 Dec
2016
547 554
16 989
10 741
519 824
20 866
568 420
Unencumbered assets - available for pledging in Central Bank (including repos)
SEKm
31 Dec 2016
Government debt securities
Central banks and supranational debt instruments
Covered bonds
Debt instruments issued by corporate and other issuers
Securities issued by corporate issuers
ABS
Mortgage loans
Total
Unencumbered assets, additional assets
available for secured funding
Encumbered assets
31 431
91 597
74 335
1 429
853
0
336 119
535 764
Carry Amount
1 429 193
120 800
23 815
168 142
996 350
604 270
120 086
Encumbered Assets
30 Sep
30 Jun
2016
2016
559 845
572 737
16 328
15 860
22 660
32 882
520 857
523 995
20 367
20 065
580 212
592 802
Fair Value
23 815
170 431
31 Mar
2016
575 433
20 537
22 015
532 881
3 997
579 430
31 Dec 2015
42 243
57 405
75 773
7 416
4 368
164
300 043
487 412
56
Management of liquidity risk
Managing liquidity risk is an integral part of Swedbank’s
business operation. Thus, liquidity risk is forecasted and
analysed continuously, using different time horizons, to
ensure that the Group has adequate cash or cash equivalents
to meet its obligations in a timely manner.
Swedbank’s funding strategy and liquidity buffer are key
components in liquidity management. In analysing the
liquidity position, the Group’s balance sheet structure is
crucial, since this is where key ratios and other essential
information are derived. Maturity structure and maturity
mismatches, in SEK and foreign currencies, are also taken into
account. The analysis of the Group’s expected future cash
flows provides important information for managing liquidity
risk and for planning the Group’s funding.
Intra-day liquidity
Swedbank attaches the utmost importance to meeting its
intra-day payment and settlement obligations in a timely
manner, and hence uses methodologies and systems which
ensure that obligations are fulfilled under normal and under
stressed conditions during the day. The management of intraday liquidity comprises the following elements:
•
Measurement of daily liquidity inflows and outflows
•
Monitoring of intra-day liquidity positions
•
Funding of intra-day liquidity needs
•
Management of timing of liquidity outflows
•
Capacity to deal with unexpected disruptions in intra-day
liquidity flows
Transferability
Swedbank manages liquidity risk centrally, which means that
individual subsidiaries or legal entities have very limited
mandates to take on liquidity risk. If it is deemed necessary to
provide additional liquidity to a subsidiary or branch, from a
parent company, a loan facility can be set up to establish a
clear responsibility for the parent company to provide liquidity
in times of crisis.
Funds Transfer Pricing
The purpose of the Funds Transfer Pricing methodology is to
assign each business transaction a price that reflects the cost
of funding and the cost of liquidity, ensure the correct
allocation to the business areas, and incentivise prudent
management of liquidity risks.
SWEDBANK
Business continuity plans and Early Warning Indicators
Swedbank has special continuity plans to manage any serious
disruption in the liquidity situation, and uses a number of
forward-looking risk indicators to perceive and act on
increased liquidity risks as early as possible. These indicators
show different kinds of market information, such as volatility
in market prices and price discrepancies between various
financial instruments. The indicators can signal increased
stress and risk aversion on the financial market and hence
increased liquidity risks.
Measurement of liquidity risk
Within Swedbank, Group Risk is responsible for defining the
methods of measuring Group-wide liquidity risks. Swedbank
uses several risk measures to capture the liquidity risk profile.
Both the cash flow projections and the liquidity ratios
(including structural balance sheet ratios) are used to
estimate different aspects of liquidity risk profile. All relevant
liquidity risks must be identified and measured. The liquidity
metrics are either defined internally or developed based on
the external regulatory requirements, e.g. LCR, NSFR.
Liquidity risk limit framework
The Board decides on the Group’s overall liquidity Risk
Appetite and has therefore set limits on the minimum Survival
Horizon and minimum required overcollateralisation (OC) level.
The liquidity risk limit framework is further established in
order to safeguard business performance within the Risk
Appetite and to avoid unwanted risk concentrations. The
limits are defined for the Group, relevant legal entities and
branches as well as across currencies.
Survival Horizon
The Survival Horizon measure is the main internal liquidity
risk metric used within Swedbank and forms the basis for the
Liquidity risk limit framework, including the risk appetite as
defined by the Board of Directors. The guiding principle in the
measure is to capture all relevant future daily cash flows, and
combined with the liquidity buffer of highly liquid assets, the
metric illustrates the bank’s liquidity position over time.
The Survival Horizon represents the number of days with
positive cumulative net cash flows, taking the Group’s future
cash flows into consideration. The model is conservative to
the extent that it assumes no access to the wholesale funding
markets and considerable withdrawals of client deposits over
short time period. At present, the bank would survive far
longer than 12 months with the capital markets completely
shut down (see figure 5-7).
57
Figure 5-3: Survival Horizon, as of 31 December 2016
SEKbn
600
500
400
300
200
100
0
0
20
Days forward
40
60
80
100
120
140
160
180
200
220
240
260
280
300
320
340
360
The survival horizon represents the number of days with positive cumulative net cash flows taking into consideration the Group’s future cash flows assuming no access to
wholesale funding markets as well as a considerate deposit run. Lending to private and corporate customers is not generating cash inflows. The survival horizon is hence
considered as a base stress scenario from a going concern perspective.
The below main principles are used in the calculation:
- Central bank holdings and highly liquid securities (i.e. interest bearing securities that are pledgeable at central banks) are assumed to generate liquidity day 1, and it is
assumed that the liquidity generating capacity of the highly liquid securities is intact
- The corresponding cash equivalent of the highly liquid securities is market value reduced for haircuts set by central banks
- Highly liquid securities are available from the day they are registered on an account with a Swedbank clearer
- Non-pledgeable securities are assumed to generate cash flow at coupon payment days and at maturity
- Holdings of securities issued by entities within Swedbank Group are not part of highly liquid securities
- Cash flows from debt security funding transactions are assumed to occur according to contractual terms and are not rolled over
- Deposits from financial customers are assumed to occur according to contractual terms and are not rolled over
- Deposits from private and non-financial customers are considered to gradually be withdrawn and cash outflows occur from these deposits.
- Undrawn committed and non-committed customer credit and/or liquidity facilities are not utilised
Exceptions and clarifications:
- The survival horizon takes into account management actions to create liquidity and include the effect from these in the curve. As an example consideration is taken to
facilities for issuing and pledging covered bonds
- Securities issued by Swedbank Mortgage AB and overcollateralisation in Swedbank Mortgage AB’s cover pool may be used as intraday collateral in the Riksbank and Norges
Bank
Exceptions and clarifications - liquid assets:
- The liquidity effect of repo/reversed repo transactions, with highly liquid securities as collateral, is assumed to be zero
- The liquidity effect of repo/reversed repo transactions with non-pledgeable securities occur on the start day and end day of the repo transaction. The cash flows from the
securities in a reversed repo transaction are modeled to generate contractual cash flows at coupon payment days and at maturity day from the day it is registered on
account with a Swedbank clearer
- The liquidity effect of repo/reversed repo transactions with securities issued by Swedbank Group is confined to the cash leg's cash flows, since such securities are not part
of highly liquid securities.
Stress tests
In addition to daily measurement of the Survival Horizon,
Swedbank performs regular stress tests and sensitivity
analysis of relevant risk drivers to increase readiness for
liquidity disturbances such as, for example, a severe bank run.
The annual internal liquidity risk assessment process relies on
the results of a designated ILAAP liquidity risk stress tests.
The ILAAP stress test aims to assess strength of the liquidity
and funding risk profile of the entire Group, as well as for the
relevant legal entities.
The regular sensitivity analysis of relevant risk drivers allows
to identify and assess all those factors which during a
stressed situation have a significant impact on the liquidity
position of the bank.
market-related issues as well as a combination of the two.
The adverse scenarios are unlikely but plausible and triggers a
range of risk drivers. The major risk drivers are:
•
Client withdrawals of deposits
•
Severe utilisation of customer credit lines
•
Higher collateral requirements due to increased intraday
requirements and margin calls
•
General price fall in the liquidity portfolio
•
Severe drop in real estate prices in the mortgage portfolio,
which in turn will have a negative impact on the covered
bond pool
•
No or limited access to the capital markets
The stress tests scenarios incorporate both idiosyncratic and
SWEDBANK
58
Swedbank’s cover pool
in the event of a large housing price fall. At end-2016, the OC
level was 67.3%, which is well above the OC levels required by
the rating agencies to maintain an AAA-rating (Moody’s 0.0%,
S&P 3.34%). In June 2016 the Swedish covered bond law
requiring issuers to hold a minimum overcollateralization ratio
of 2% came into force.
The volume of covered bonds that can be issued is determined
by the size of Swedbank’s cover pool. A certain
overcollateralisation must also be maintained as the rating
agencies require in order for the triple-AAA rating to be
maintained. As stipulated in the ERM policy, the Group’s
covered bond pool shall be overcollateralised to such a level
that the highest rating from at least one rating agency shall
be maintained and the compliance with legal requirement
shall be met even under a scenario with a real estate price
drop of 20%. This level is meant to ensure that sufficient
collateral is available to protect covered bond investors – even
A sensitivity analysis of a possible house price fall affecting
the cover pool is run regularly as part of the internal liquidity
stress tests. The impact on the OC level is described in table 58. The loan-to-value (LTV) structure of Swedbank’s cover pool
demonstrates strong resilience when experiencing a fall in
house prices.
Figure 5-4: House price sensitivity of the cover pool
80%
Overcollateralisation level, %
Overcollateralisation
70%
60%
50%
40%
30%
20%
10%
0%
Current
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
House price decline
Table 5-7: Cover pool sensitivity analysis, 31 December 2016
House price decline, SEK bn
Total assets in the cover pool
Total outstanding covered
bonds
Overcollateralisation level, %
Current
878.4
-5%
874.9
-10%
868.7
-15%
858.9
-25%
827.4
-30%
804.4
-35%
776.0
-40%
742.3
525.1
525.1
525.1
525.1
525.1
525.1
525.1
525.1
525.1
67.30%
66.60%
65.40%
63.60%
61.00%
57.60%
53.20%
47.80%
41.40%
Liquidity ratios
Swedbank also monitors liquidity risks through additional
measures including Liquidity Coverage Ratio (LCR) and Net
Stable Funding Ratio (NSFR) (see table 5-9).
The LCR aims to ensure that a bank maintains an adequate
level of unencumbered, high-quality assets (a liquidity
reserve) to meet its liquidity needs for a 30-day horizon under
the assumption of a severe liquidity stress scenario. Thus, the
LCR metric focuses on a bank’s short-term liquidity. As of 1
January 2013, the SFSA requires Swedish banks to uphold a
LCR of 100% on total exposure (all currencies combined) and
in USD and EUR respectively. As of 31 December 2016,
Swedbank’s LCR amounted to 156% according to FFFS
2012:6, and the LCR was reassuringly above 100%
throughout the year. From 1 October 2015, the European
SWEDBANK
-20%
845.3
implementation of LCR according to the Delegated Regulation
(EU) 2015/61 (LCR DA) supplementing Capital Requirements
Regulation (CRR) became the binding regulatory requirement
within the European Union. The minimum requirement
according to the LCR DA was set to 70% from 1 January 2016,
80% from 1 January 2017, and 100% from 1 January 2018. At
year-end LCR DA was 155% (year-end 2015: 144%).
The NSFR shows a bank’s ability to manage stressed liquidity
situations over a one-year horizon. It ensures that a bank’s
long-term illiquid assets are funded with a minimum amount
of stable long-term funding. An NSFR of above 100% means
that the long-term illiquid assets are adequately funded with
stable funding. The NSFR will become a minimum standard by
1 January 2018. As of 31 December 2016, Swedbank had an
NSFR of 108%, according to the standard defined by the Basel
Committee on Banking Supervision.
59
Figure 5-5: LCR and NSFR
31 Dec 2015
31 Dec 2016
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
LCR (FFFS 2012:6)
LCR DA
NSFR Basel III
Table 5-8: Liquidity coverage ratios and other liquidity and funding ratios
Liquidity coverage ratios (new Swedish regulation FFFS 2012:6) 1)
Liquidity coverage ratio (LCR), Total, %
Liquid assets, SEKbn
Liquid assets level 1, SEKbn
Liquid assets level 2, SEKbn
Cash outflows, SEKbn
Customer deposits, SEKbn
Market borrowing, SEKbn
Other cash outflows, SEKbn
Cash inflows, SEKbn
Inflow from maturing lending to non-financial customers, SEKbn
Other cash inflow, SEKbn
Liquidity coverage ratio (LCR), EUR, %
Liquidity coverage ratio (LCR), USD, %
Liquidity coverage ratio (LCR), SEK, % 2)
31 Dec 2016
156
297
239
58
226
103
83
40
36
6
30
330
160
85
31 Dec 2015
159
269
207
62
321
126
153
42
152
8
144
638
363
71
Liquidity coverage ratio (DA) 3)
Liquidity coverage ratio (LCR), Total
31 Dec 2016
155
31 Dec 2015
144
Liquidity and funding ratios
31 Dec 2016
31 Dec 2015
108
1 411
1 305
107
1 350
1 263
200
160
106
167
127
110
Net stable funding ratio (NSFR) according to new recommendation 4)
Available stable funding (ASF), SEKbn
Required stable funding (RSF), SEKbn
Liquid assets in relation to maturing funding during next 3, 6 and 12 months 5)
liquidity reserve 3 months
1) LCR - calculated in accordance with the new Swedish regulation 2012:6. LCR = Liquidity reserve / (cash outflows - cash inflows).
2) LCR in SEK is lower in comparison to EUR and USD LCRs due to capped liquid assets and capped cash inflows denominated in SEK and cash flows in general as main
operations are conducted in SEK. It is also due to foreign currency funding and the corresponding swap agreements used to hedge FX risks. In contrast to EUR and USD, it is
also more restrictive to invest in SEK-denominated liquid assets due to the low availability/restrictions of these assets. There is currently no regulatory requirement to reach
100%.
3) LCR - calculated in accordance with Commission Delegated Regulation (EU) 2015/61 to supplement Regulation (EU) No 575/2013 with regard to liquidity coverage
requirement for Credit Institutions.
4) NSFR according to Swedbank’s best understanding of BCBS’s new consultative document on new NSFR recommendation (BCBS295)
5) Liquidity ratios: liquid assets in relation to maturing wholesale funding during next 3, 6 and 12 months:
Liquidity reserve according to definition of the Swedish Bankers' Association
Additional liquid assets: assets, pledgeable in central banks, held by the Group outside of Group Treasury
Maturing funding during 3, 6 and 12 months: All wholesale funding maturing within 3, 6 and 12 months, including short-term CP/CDs, and net of lending and borrowing
to/from credit institutions (net Interbank)
Capital requirements for liquidity risk
There is no direct capital requirement for liquidity risk.
However, liquidity constraints may arise as a result of an
imbalance between risk and capital. The internal capital
adequacy assessment process (ICAAP; see chapter 7 of this
report) is designed to ensure that such imbalances do not
arise. Consequently, a conservative view of liquidity risks is
SWEDBANK
important to the capital process. The Group’s liquidity needs
are assessed annually in the internal liquidity adequacy
assessment process (ILAAP).
60
6. Operational risk
Swedbank’s IT availability continued to improve and operational risk losses
remained low despite challenges such as increasing cyber threats and the high
pace of changes within and outside the bank.
Operational risk
The risk of losses resulting from inadequate or failed
internal processes, people and systems, or from external
events. The definition of operational risk includes legal
risk and information risk. Operational risk is further
broken down into the following sub-risk categories:
personnel risk, process risk, information risk (incl.
technology risk) and external risk
Swedbank has established tailored key risk indicators on
business area level and monitor indicators related to IT
resilience, IT lifecycle, human resources, client trust and
operational risk losses on Group level. In addition,
Swedbank’s framework of recovery indicators is updated
monthly.
Risk Appetite
The Group shall not experience operational risk related losses
or incidents that have materially negative impact on the
funding, capitalisation, market value or third-party credit
rating of the Group.
Failures in critical functions shall never cause delays that
impair the Group’s ability to fulfil its obligations towards its
customer base or that have the potential to threaten the
systemic stability in the geographies in which the Group
operates.
The Group shall at no time be exposed to financial reporting
risks with a potential to result in a material misstatement.
This means that the surrounding process for recognition,
confirmation, valuation, reconciliation, allocation and
disclosure shall be robust and timely.
The Group shall at all times manage information risk in order
to protect information assets from breaches that have
materially negative impact for the bank, its customers and
other stakeholders.
SWEDBANK
61
Highlights 2016
Management of operational risk
In 2016, the operational risk loss amount remained on a low
level. Accumulated losses for 2016 were on par with previous
years and below expected loss amount.
Operational risks are inherent in the Group’s business
activities and are typical of any financial institution. It is not
cost-efficient to attempt to eliminate all operational risks, nor
is it possible to do so. Swedbank seeks to maintain the lowest
possible level of operational risks, taking into account market
sentiment and regulations, as well as our strategy, rating
ambition and capacity to absorb operational risk losses.
Figure 6-1: Operational risk – total annual losses (SEKm)
140
Personnel
Process
IT- and Systems
External
Larger losses of material significance are rare, and Swedbank
seeks to reduce the likelihood of these through relevant
operational risk control, continuity management and
compliance to maintain readiness for events that could cause
financial losses or reputational damage, or could impact the
availability of our services.
120
100
80
60
40
Risk-based planning
20
0
2012
2013
2014
2015
2016
Figure 6-2: Annual loss – by Basel Event Type
0%
10% 20% 30% 40% 50% 60% 70%
Risk Assessment
Internal fraud
External fraud
Employment Practices &
Workplace Safety
2016
Clients, Products &
Business Practices
2014
Execution, Delivery &
Process Management
Figure 6-3: Annual loss – by Basel Business Line
10%
20%
30%
40%
50%
60%
Corporate Finance
Trading & Sales
Retail Banking
Commercial Banking
Agency Services
Asset Management
Retail Brokerage
SWEDBANK
New Product Approval Process
Swedbank has a Group-wide process for New Product
Approval (NPA) covering all new and/or revised products,
services, activities, processes and/or systems as well as
major operational and/or organisational changes. The
purpose is to ensure that the Group does not enter into
activities which entail unintended risks or risks that are not
immediately managed and controlled as part of the process.
In addition, the Group is able to assure quality when
launching new and/or revised products and services.
Business Disruption &
System Failures
Payment & Settlement
All business areas apply the same method to self-assess
operational risks e.g. Risk Assessment (RA). This method is
used on regular basis to cover all key processes within the
Group and include risk identification, action planning and
monitoring to manage any risks that may arise.
2015
Damage to Physical
Assets
0%
The risk-based planning process serves to make sure that
relevant risk management and risk control activities are
planned, to address key risks, changes and recurring activities,
and that there are adequate resources to complete these
tasks. It also helps to improve coordination and informationsharing between Group Risk, Group Compliance and Internal
Audit. The risk-based planning process is an integrated part of
the Group´s annual activity planning.
2016
2015
2014
70%
During 2016, the NPAP has been further simplified and
aligned with existing product and project management
processes. It is designed to emphasise the responsibility of the
business areas for risk identification, analysis and mitigation.
Group Risk contributes with an expert evaluation of the risk
analysis process and the residual risks, and has the mandate
to halt changes where the residual risks exceed the risk
appetite and the underlying limits.
Business Continuity Management
Swedbank’s principles for Business Continuity Management
are defined in a Group-level framework. Crisis Management
teams are available both on Group and local level to
coordinate and communicate internally and externally. In
62
addition, business continuity plans are in place for all critical
processes, for IT systems supporting these processes, and for
services that are critical for society in the countries where
Swedbank operates. The plans are implemented on Group and
local level, and describe how Swedbank shall operate in the
event of a severe business disruption or potential crisis
situation. Swedbank’s Business Continuity and Crisis
Management models are derived from the international
standard ISO/IEC ISO 22301:2012 Societal security - Business
continuity management systems.
Processes and controls
Swedbank has established a framework for process and
internal control which is common to all types of process
controls. Specific frameworks for internal control over
financial reporting (ICFR) and credit process control (CPC) are
currently applied for the processes concerned. A process
universe is established and Swedbank is integrating the
process into the governance model. The purpose of
Swedbank’s process universe is to clarify the responsibility
for the Group’s significant processes as well as for controls in
the processes and for ensuring that they are effective and
appropriate. To create a process-based method for risk
management, the process universe will be used as a basis for
all risk management and risk control within the Group.
Incident management
Swedbank has established procedures and system support to
facilitate reporting and following up incidents. Group Risk
supports the business areas in reporting, analysing and
drafting action plans to ensure that the underlying causes are
identified and suitable actions are taken. Incidents and related
operational risk losses are reported in a central database for
further analysis.
Risk Management Maturity Assessment (RMMA)
RMMA is a scorecard used to assess the business’ risk
management maturity level in various topics. A high riskmanagement maturity level within the business indicates a
strong risk culture and risk awareness – which in turn reduces
the threat of unforeseen losses and keeps business assets
secure and safe. The RMMA tool has proven to be very
efficient in clarifying expectations, steering and evolving the
risk management forward, and establishing risk ownership
where it is best suited. The tool has been further improved
with an expanded four-point scale and specific requirements
on documentation have been clarified to improve quality off
assessment and support audit trail. The maturity assessment
score is also used for adjusting capital allocation for
operational risk to encourage the business to improve its
operational risk management.
measures that can be applied in distress in order to restore the
sound financial position of the Group, and to ensure the
continuity of critical financial services provided by Swedbank
Group in all its home markets. The plan describes a wide range
of recovery indicators along with trigger levels that can be
easily monitored to capture potential stress in a timely
manner. Further, in the corporate governance structure, the
rules for escalation and decision-making to be used under
stressful conditions are described.
Information risk and information security
Swedbank has a structured approach to protect information.
The information control framework is based on Information
Security Forums Standard of Good Practice. Continuous work
is ongoing to improve and redefine processes in order to
strengthen the management of information security risks.
Swedbank has also established a set of cyber risk tolerance
limits to govern and control the cyber risk area.
Legal
The CEO has established Group Legal for governing,
controlling and supporting the proper handling of legal
matters.
The Group has lawyers in all major business areas with
specialisation in all core areas of Swedbank. The lawyers
provide legal services by supporting, understanding and
acting upon the need in the business. There are also internal
rules on escalation, information-sharing and reporting of legal
risks and lawsuits. Each business area has implemented
appropriate overall processes and procedures for the effective
handling of legal risks within its area of responsibility in order
to mitigate potential threats. Regular reviews are carried out
to identify and follow up on actual and/or potential legal risks,
so that practices can be modified to ensure compliance with
local regulatory requirements.
Insurance policies
Swedbank has insurance protection for significant parts of its
operations and maintains several insurance programs to
mitigate operational risks (and other types of risks). These
insurance programs consist of external insurance solutions,
internal captive solutions, and externally reinsured captive
solutions. The external programs include Crime, Professional
Liability, Directors’ and Officers’ Liability, Property insurance
and Cyber Insurance.
Recovery planning
Swedbank Group has established a Group-level recovery plan
in accordance with the Bank Recovery and Resolution
Directive (BRRD) regulatory framework and complemented by
the guidelines and technical standards issued by the European
Banking Authority. The recovery plan describes a set of
SWEDBANK
63
Capital requirements for operational risk
Pillar 1 capital
Operational risk capital requirements are calculated under the
standardised approach, as a percentage of the average of the
last three financial years’ gross revenues. The standardised
approach assigns different multipliers (beta factors) to
different business lines depending on the inherent risk of the
operation. These beta factors express the capital requirement
for the industry in relation to gross income for each business
line. The beta factors are determined by the capital adequacy
rules.
Table 6-1: Capital requirement for operational risk, by business line
SEKm
Basic indicator approach
Corporate finance
Trading and sales
Retail banking
Commercial banking
Payment and settlement
Agency services
Asset Management
Retail brokerage
Total
2016
Income
Indicator
0
37 977
235
1 788
24 720
6 433
1 546
258
2 981
14
37 977
Capital requirement
Beta (%) *
2016
2015
2014
15
13.09
18
18
12
15
18
15
12
12
13.09
0
4 972
42
322
2 966
965
278
39
358
2
4 972
0
5 047
49.024
692.898
2 876
842.948
262.214
33.293
286.1
4.548
5 047
115
4 630
33
592
2 685
827
248
24
216
7
4 745
*The capital requirement for each business line is derived by multiplying the business line’s beta factor by its gross income. The total capital requirement for an entity or a
group of undertakings is obtained by adding the respective capital requirement of all 8 business lines.
Upcoming regulatory changes
In March 2016 the Basel Committee issued the first
consultation paper regarding the Standardized Measurement
Approach (SMA) for Operational Risk, the new method for
calculating operational risk capital requirement that will
replace all existing methods (AMA, TSA, and BIA). The method
combines a simple standardised measure of operational risk
SWEDBANK
exposure with bank-specific loss data to produce the capital
number. Initial analysis of SMA impact on Pillar 1 capital
charge for operational risk shows slightly lower capital figures
than the current approach, however, uncertainty about the
final approach and its implementation time remains high.
Regulatory developments are closely monitored and
Swedbank has taken part of several responses to the Basel
Committee regarding the consultation paper.
64
7. Stress tests and economic capital
During 2016, both internal and external assessments presented a unanimous
picture of Swedbank’s adequate capitalisation and strong capacity to handle
severe negative scenarios in all four home markets.
Stress tests
Swedbank uses stress tests for the purpose of projecting
its solvency need and capital level.
Economic capital
Economic Capital (EC) models are used to provide an
objective view of the capital requirement for risks
affecting Swedbank
EC models and internal stress tests are important tools used
by Swedbank to assess and maintain, on an ongoing basis, the
capital level needed considering the adopted risk profile. In
addition, Swedbank consider the outcome of external
assessments such as the Supervisory Review and Evaluation
Process (SREP) and the EBA stress test. The major purpose of
the SREP is to ensure that Swedbank has adequate capital
and liquidity levels. This to ensure a sound management of
the risks, to which Swedbank is or might be exposed, including
those obtained in stress tests and risks Swedbank may pose
to the financial system.
The outcome of the SFSA assessment presented in the SREP
states that the size of Swedbank´s capital planning buffer is
less than 2.5% of REA (i.e. less than the capital conservation
buffer), and thereby will not add to the total capital
requirement of the bank.
The result of the stress test performed by the European
Banking Authority (EBA) confirms Swedbank’s strong asset
quality and capital position but also demonstrate that
Swedbank has sufficient capital to withstand the EBA
prescribed adverse scenario. Swedbank’s CET 1 capital ratio
decreased by 1.8 percentage points to 22.3% at the scenario
low point. The stress test is performed by EBA on bi-annual
basis to assess the resilience of the European banking sector.
The stress tests conducted by the International Monetary
Fund (IMF) as part of the Financial Sector Assessment
Program (FSAP) suggest that solvency of the Swedish banks
is resilient and they would cope in a severe adverse scenario.
Highlights 2016
During 2016 Swedbank has performed and participated in a
larger number of external stress tests than previous years.
The main stress tests performed include the Internal Capital
Adequacy Assessment Process (ICAAP),
the European
Banking Authority (EBA) stress test, the remake of the EBA
stress test by the SFSA, the International Monetary Fund (IMF)
stress test as part of the Financial Sector Assessment
Program (FSAP) and the stress test designed by the SFSA to
assess the size of the capital planning buffer. Swedbank
demonstrated its strong position by uniformly showing solid
results in all the abovementioned stress tests.
The stress test performed in the ICAAP is designed to reflect
identified systemic risks that may have an adverse impact on
Swedbank’s capital. Swedbank withstands the severe
recession scenario, expected to occur once in 25 years, with a
fully loaded common equity tier 1 (CET 1) capital ratio of
20.9%, the figure represents the low point of the scenario.
Thus, the result demonstrates Swedbank’s strong resilience to
severe circumstances.
The stress test designed by the SFSA to assess the size of the
capital planning buffer is carried out annually as part of SREP.
SWEDBANK
65
Economic Capital
Economic Capital (EC) models are used in Swedbank to provide
an objective view of the capital requirement for significant
risks affecting the bank. In contrast to the capital assessment
within Pillar 1, the estimation of Swedbank’s EC is not limited
by assumptions applied in the Basel framework. Consequently,
the EC generates a more accurate assessment of the risk to
which the bank is exposed.
Within the EC framework, credit risk, market risk, operational
risk and post-employment risk are considered, while insurance
risk and business risk are evaluated separately.
In general, Value-at-Risk (VaR) based models on a confidence
level of 99.9% are used to calculate the EC for the different
risk types. The confidence level, which corresponds to the
confidence level used in the Basel internal ratings-based (IRB)
framework calibration, isuses a one-year horizon.
EC models by risk type
Swedbank’s EC model for credit risk is based on the similar
theoretical foundation as the Basel IRB framework, but while
the IRB framework is limited to a one-factor model,
Swedbank’s EC framework applies a multi-factor model.
Accordingly, the actual portfolio setup can be used, and both
concentration- and diversification effects are taken into
account.
The operational loss model is a simulation approach based on
historical operational losses. The model has been developed
primarily using internal and external data and is
complemented with scenario information to capture areas
where additional input is required beyond loss data. The main
drivers for operational losses are IT and system risk, as the
bank is heavily dependent on solid IT solutions.
Table 7-1: Economic Capital by risk type (SEKbn)
Risk type
2016
2015
Credit risk
23.5
23.9
Market risk
2.5
2.7
Operational risk
3.8
4.5
Risks in post-employment benefits
0.0
0.0
29.8
31.1
Total
At year-end 2016, Swedbank’s total EC amounted to SEK
29.8bn (year-end 2015: SEK 31.1bn). This outcome is driven
by the lower capital requirement for all risk types but post
employement benefit risk. The assessed capital for credit risk
amounts to SEK 23.5bn and, consequently, constitutes the
most significant risk type. The decrease in capital need for
credit risk compared to year-end 2015 follows the
development in the Pillar 1 capital requirement for credit risk.
For market risk, the EC decreased from SEK 2.7bn at year-end
2015 to SEK 2.5bn at year-end 2016, driven by the reduced
capital requirement for market risk in the trading book and
IRRBB. The EC for operational risk amounts to SEK 3.8bn.
Compared to year-end 2015, the capital requirement for
operational risk has decreased due to methodology changes.
For post-employment benefit risk, no capital is added,
meaning that the model outcome indicates that the postemployment benefit plan is sufficiently capitalised under
stress. This result is a consequence of the solid capitalisation
within Sparinstitutens PensionsKassa Forsäkringsforening
(SPK). Further, the EC is a crucial component for and serves as
primary input to the ICAAP.
The EC for market risk is primarily driven by the bank’s trading
risk, which to a large extent coincides with the view of market
risk within Pillar 1. The main difference is thatSwedbank uses
a standardised approach to calculate interest rate risk in Pillar
1, while an internal model is applied within the EC framework.
In addition to market risk in the trading book, the EC
assessment also accounts for credit value adjustment (CVA)
risk as well as interest rate risk in the banking book (IRRBB),
where an economic value methodology is used.
Post-employment benefit risk is the final risk type captured
within the EC framework. The methodology for calculating
post-employment benefit risk is based on the current postemployment benefit plan, where the underlying market risk
factors are stressed. Consequently, the outcome provides an
indicator of whether the post-employment benefit plan is
sufficiently capitalised under stressed conditions.
SWEDBANK
66
Internal Capital Adequacy Assessment
Process (ICAAP) – Pillar 2
In the ICAAP under Pillar 2, Swedbank’s solvency and capital
need is determined by applying the Economic Capital (EC)
methodology and stress tests. Swedbank calculates Pillar 2
capital for all relevant risk types. Strategic risk and
reputational risk are handled indirectly within the capital
adequacy assessment, as the capital buffer implicitly protects
against such risks, and they are carefully monitored and
managed. Liquidity constraints may arise as a result of an
imbalance between risk and capital. The ICAAP is designed to
ensure that such imbalances do not arise, and consequently, a
conservative view of liquidity risk is important to the process.
Table 7-2: Risk types according to the ICAAP process
Risk type
Pillar 1
Capital is allocated
Pillar 2
Contributes to calculated capital need?
Credit risk
Yes
Yes
Concentration risk
Yes1
Yes
Market risk
Yes
Yes
Market risk: Interest rate risk in banking book
No
Yes
Operational risk
Yes
Yes
Insurance risk
Yes 2
Yes 3
Risks in post-employment benefits
No
Yes
Strategic risk: Business plans
No
Yes
Strategic risk: Projects and acquisitions
No
Yes, as a one-off sum added
Risk type
Pillar 1
Pillar 2
No specific capital is allocated
Identified and mitigated?
Reputational risk
No
Yes
Liquidity risk
No
ILAAP
Strategic risk: Decision risk
No
Yes
1. The Basel formulae are calibrated to include sector- and geographical concentration risk, i.e. the Pillar 1 measure already includes a large amount of concentration risk.
2. Holdings in insurance business are deducted from capital, and an assessment is made to determine whether the invested capital amount is adequate considering the
adverse scenario applied in the Group’s ICAAP.
3. The insurance companies within Swedbank Group perform an Own Risk and Solvency Assessment (ORSA). The aim of the ORSA process is to assess (qualitatively and
quantitatively) risks and solvency position over the business planning period of the next three years by projecting the risk metrics under the base and adverse scenarios.
SWEDBANK
67
Stress tests
Swedbank uses macroeconomic scenario-based stress tests in
the ICAAP for the purpose of projecting its solvency need and
capital level. The stress tests are an important means of
analysing how the Group’s portfolios are affected by severe
macroeconomic changes, including the effects of negative
events on the Group’s total capital and risk profile.
The Group-wide stress test methodology takes its starting
point in the identification of systemic risks that may have an
adverse impact on Swedbank’s capital. The identified systemic
risks are transformed into quantitative effects on key
macroeconomic variables to build macroeconomic scenarios.
The scenarios include variables for Swedbank’s four home
markets and can thereby be used both at Group level and for
subsidiaries. When stressing credit risk, Swedbank uses
statistical models that transform the adverse macroeconomic
scenarios into loss levels for relevant balance-sheet items to
calculate the solvency need and the total capital under each
scenario. Finally, the stress test outcome and the
methodology are evaluated and discussed by Swedbank’s
experts in respective field and by management, to ensure
consistency and reliability. The scenarios are presented to the
Board of Directors for approval along with an assessment of
the effects on the main risk types.
The adverse ICAAP scenarios
For ICAAP purposes, Swedbank uses one macro scenario with
different severity levels, both with a three-year time horizon.
One is a mild recession scenario reflecting a possible
macroeconomic development expected to occur once in 7
years, and the other is a severe recession scenario reflecting a
possible but improbable event occurring no more than once in
25 years.
The 1-in-7-years scenario is mainly used to determine
whether the solvency need should be supplemented by an
add-on for business cycle fluctuations. If a negative
macroeconomic trend indicates that the Group will incur a loss
for the year, an add-on is included in the calculation of the
solvency need. Currently, no such need has been identified.
For capital planning purposes, the Group uses the 1–in-25years scenario to determine whether the capital level is
satisfactory. If excess capital is deemed insufficient, relevant
measures are taken to restore a sufficient capital level.
Figure 7-1: Swedish historical downturns compared to the stress test scenarios for the ICAAP
104
102
100
98
96
94
Year-0
Year-1
Sweden 76-79
Sweden 07-10
2016 ICAAP (1-in-7)
Year-2
Year-3
Sweden 90-93
2016 ICAAP (1-in-25)
Sources: Swedbank, Statistics Sweden and the Swedish central bank
Note: Indexed real GDP with 100 representing the real GDP level at the start of the scenario (year 0).
The 1-in-25 years scenario is designed to reflect identified
systemic risks that may have an adverse impact on
Swedbank’s capitalisation. The scenario begins with a fall in
consumer and corporate sentiment in Sweden due to policy
changes that have dampening effect on household’s spending
power (amortization requirements) and disposable income
(income tax increases). The fall in sentiment is amplified by an
increase in the form of geopolitical tensions between Europe
and Russia, and in addition the European recovery is set on
hold due to the increase of immigration in Northern Europe
and unresolved structural challenges in Southern Europe. The
SWEDBANK
fall in sentiment and affordability immediately affect Swedish
house prices and household consumption, while firms hold
back on investments. The Swedish house prices drop by 31%
over the scenario horizon. Hence, the Swedish GDP growth is
forced into negative territory during the first half of 2016.
Altogether the above events are further assumed to impact
Swedish bank’s wholesale funding cost, which in turn forces
banks to hold back on new credit and further tighten their
lending standards. The Baltic States are affected both trough
reduced trade with Sweden and by tighter lending standards
imposed by the Swedish banks. The reduced credit growth is
68
accompanied by a fall in house prices, consumption and
investments. Combined with increased geopolitical tensions
this leads to a regional Baltic downturn by end- 2016. The
regional downturn is later amplified by a global shock due to
an unexpectedly sharp fall in Chinese growth in combination
with Greece leaving the Eurozone in 2017. The events lead to
a GDP collapse in Swedbank’s home markets during 2017. The
economic trend is dominated by a continued fall in
consumption, investments and exports until mid-2018, when
the economies start to recover.
Table 7-3: Stress test ICAAP scenario parameters
Stress test ICAAP scenario parameters
1)
Q4
2015
Severity level "1 in 25 years"
Q1
Q2
Q3
Q4
2016
2016
2016
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Q4
2018
Sweden
Real GDP growth, % yoy
Unemployment, %
Inflation, % yoy
Real estate prices, % yoy
Estonia
3.2
7.3
0.3
3.7
0.6
7.6
-0.5
-5.8
0.1
8.1
-0.3
-9.1
-0.5
8.4
-0.3
-9.6
0.0
8.6
-0.2
-6.7
-1.0
9.2
-0.5
0.0
-3.2
9.7
-0.9
-1.5
-3.8
10.6
-1.1
-0.5
-4.3
11.3
-1.2
-2.1
-2.7
11.5
-0.3
-0.3
-1.1
11.6
0.2
1.2
0.8
11.4
0.7
1.9
1.7
11.3
1.0
4.1
Unemployment, %
Inflation, % yoy
Latvia
1.6
6.6
0.5
3.3
1.4
6.3
0.0
1.8
1.1
6.2
0.0
-0.8
0.1
6.2
-0.2
-2.5
-0.7
6.9
-0.1
-9.0
-1
7.5
-0.4
-5.4
-2.7
9
-0.8
-3.3
-3.5
9.8
-1.0
-0.6
-5
10.4
-1.3
-0.3
-1.9
11.3
0.1
-0.1
0.9
11.4
0.6
0.1
1
11.4
0.9
2.8
2.4
11
1.3
2.4
Unemployment, %
Inflation, % yoy
Lithuania
2.4
9.9
0.0
3.8
2.4
10.4
0.3
1.0
1.4
10.2
0.0
-0.2
0.3
10.7
-0.1
-2.8
-0.7
10.7
-0.1
-7.7
-1.5
11.3
-0.5
-2.5
-2.2
12.9
-0.7
-1.7
-4.7
13.7
-1.2
-0.2
-5.2
14.6
-1.3
-0.4
-2.5
14.9
0.0
-0.1
0.5
15.4
0.4
0.5
1.2
15.2
1.0
0.9
2.7
14.9
1.3
3.4
Unemployment, %
Inflation, % yoy
Interest rates
1.8
9.3
-0.5
3.1
2.0
10.7
0.2
1.4
1.4
10.6
0.0
-0.5
0.4
11.0
-0.1
-2.6
-1.1
11.3
-0.2
-8.3
-2.0
12.7
-0.6
-4.0
-2.8
13.6
-0.8
-2.5
-4.6
14.7
-1.2
-0.4
-4.8
15.2
-1.2
-0.4
-2.5
15.9
0.0
-0.1
0.8
16.0
0.4
0.3
1.2
15.9
0.9
1.9
3.0
15.3
1.4
2.9
-0.38
-0.45
-0.40
-0.23
-0.41
-0.24
-0.42
-0.46
-0.31
-0.48
-0.35
-0.54
-0.38
-0.82
-0.40
-0.88
-0.36
-0.90
-0.76
-0.27
-0.63
-0.19
0.05
0.04
3m Government rate SEK, %
3m Government rate EUR, %
FX
USD/SEK
EUR/SEK
-0.30
-0.32
8.35
9.18
9.64
9.82
9.82
9.91
10.20
10.31
10.37
10.14
9.91
9.42
8.50
9.14
10.15
10.20
10.25
10.19
10.39
10.32
9.96
10.07
10.36
10.48
10.13
9.59
1) Q4 2015 figures are based on preliminary estimates as final figures were published after the submission of the ICAAP report.
Impact on Swedbank – simulation results
In the ICAAP, the scenario simulation calculations are based on
the Swedbank CS balance sheet as of 31 December 2015. The
result of the simulation shows the impact on Swedbank
during a three-year recession scenario with a severity level of
1-in-25 years. To ensure that the scenario result is on the
conservative side, no management interventions to improve
the outcome during the scenario range are included.
Table 7-4: Income statement under ICAAP scenario
Income statement under ICAAP
scenario 1)
SEKbn
Total net interest income
Total income
Total expenses
Profit before impairments
Credit impairments
Operating profit
Tax expense
Profit for the period
Profit for the period attributable to: 2)
Shareholders of Swedbank AB
2015
24.0
37.4
Severity level "1 in 25 years"
2016
24.3
38.4
2017
21.0
31.9
2018
22.0
32.4
17.0
18.0
18.2
18.3
20.4
20.5
13.7
14.1
0.7
4.8
9.2
4.5
19.7
4.5
0.0
15.7
3.4
0.0
4.5
1.0
0.0
9.6
2.1
0.0
15.2
12.2
3.5
7.5
15.2
12.2
3.5
7.5
1) ICAAP is based on the Swedbank CS which does not include insurance companies.
2) The Board of Directors has set the dividend policy to 75% of profit for the year. This policy is applied in the ICAAP scenario.
SWEDBANK
69
Net interest income
Expenses
Net interest income (NII) starts at SEK 24.0bn and remains
almost unchanged in 2016. As the scenario evolves, NII starts
to decrease as expenses for deposits and funding costs
increase, while the margin stress on the lending side does not
fully offset the increase. The decrease in NII constitutes 14%.
Recovery is not seen until mid-2018, and then NII begins to
recover as well. The recovery is fully driven by an increase in
lending income as policy rates pick up.
In the scenario, a conservative stance concerning costs and
expenses is set as expenses are assumed to grow with
inflation while they remain constant in the event of falling
consumer prices. No major cost cuts are incorporated in the
scenario, which is a conservative approach considering
Swedbank’s cost awareness.
Credit impairments
During the scenario, credit losses accumulate to SEK 18.5bn or
1.1% of the 2015 exposure level. The losses pick up already in
2015, peak during the 2016, and fall back as recovery sets in
2018. The credit losses are somewhat frontloaded due to the
low oil price environment in the end of 2015 and throughout
the scenario, which affects oil related exposures in
Swedbank’s Norwegian portfolio. Swedish Banking accounts
for 45% of the losses throughout the scenario, LC&I 40% and
Baltic Banking 16%, or SEK 8.2bn, SEK 7.4bn and SEK 2.8bn
respectively.
Both lending and deposit volumes are kept flat as a result of
limited deleveraging and reduced investment interest
The NII level and Swedbank’s overall strong result in 2015
generated a stable starting point for the scenario simulation.
In addition, the income statement outcome from the severe
recession scenario indicates Swedbank’s resilience during
difficult times.
Table 7-5: Credit impairments under ICAAP scenario
Credit impairment per segment 1)
SEKbn
Agriculture, forestry and fishing
Manufacturing
Construction
Retail
Transportation
Property management
Private mortgage
Private other
Bank
Other
Total
EAD
Severity level 1 in 25 years
2015
70.7
58.5
24.0
24.6
38.4
13.8
38.8
6.4
6.8
16.6
217.1
102.9
25.9
29.1
638.6
134.0
108.0
62.8
1616.9
2016
0.16
0.26
0.11
0.12
0.34
0.07
1.72
0.09
0.03
0.03
0.71
0.11
0.29
0.17
0.45
0.14
0.00
0.00
4.81
2017
0.30
0.83
0.25
0.24
0.54
0.15
2.52
0.15
0.05
0.06
1.70
0.23
0.75
0.28
0.89
0.25
0.00
0.00
9.19
2018
0.15
0.54
0.10
0.11
0.24
0.08
0.83
0.10
0.03
0.03
0.96
0.09
0.36
0.11
0.58
0.16
0.00
0.00
4.47
Accumulated
2016 - 2018 ratio,
%
0.86
2.79
1.89
1.93
2.90
2.11
13.07
5.34
1.54
0.77
1.55
0.42
5.43
1.96
0.30
0.42
0.00
0.00
1.14
1) The ICAAP segment breakdown differs somewhat from the other asset quality segment breakdown.
Impact on Swedbank – REA and capital
During the first two years of the scenario, REA increases by
11%, from SEK 407bn to SEK 453bn. The REA increase stems
from negative probability of default (PD) migrations,
increasing loss-given-default (LGD) values and foreign
exchange fluctuations. Between 2017 and 2018, REA
decreases by 6.4% as positive PD migrations gradually
decrease REA while the defaults taken out decrease the
lending volumes.
SWEDBANK
As the effects from the scenario set in, Swedbank’s CET)
capital ratio drops by 2.2% during the first two years of the
scenario. In the final scenario year, the CET1 capital ratio
recovers. The dividend policy to distribute 75% of profits is
assumed to remain unchanged throughout scenario. Thus, the
scenario simulation result demonstrates Swedbank’s strong
resilience to severe circumstances, and consequently no risk
capital buffer is deemed necessary.
70
Table 7-6: Swedbank CS capital assessment results
Capital assessment
SEKbn
Total REA 1)
Common Equity Tier 1
Common Equity Tier 1 ratio % 2)
2015
407.0
2016
452.7
2017
466.5
2018
436.6
93.9
23.1
96.7
21.4
97.4
20.9
98.3
22.5
1) Adjustment for REA associated with change in PD calculation in accordance with a memorandum "FIs supervision of banks calculation of risk weights to corporates" and
acquisition of Danske Retail portfolios in the Baltics are included already in starting values (December 2016) in order to distinguish between scenario and known effects
independent from scenario assumptions.
2) In Q1 2016 REA for credit risk increased as long-term credit quality in oil-related sectors was assessed as deteriorating, which contributed to negative PD migrations.
These migrations were known when the ICAAP was finalised therefore the scenario simulation outcome presented above mixes Pillar 2 scenario effects with known Pillar 1
effects. If the oil related Pillar 1 effects would be disregarded the drop in CET 1 ratio would decrease from 2.2 per cent to 1.6 per cent, which Swedbank considers to be an
outcome that better presents impact of the scenario.
Externally performed stress tests
During 2016 Swedbank has participated in several external
stress tests, such as the European Banking Authority (EBA),
stress test, the remake of the EBA stress test by the SFSA, the
International Monetary Fund (IMF) stress test as part of the
Financial Sector Assessment Program (FSAP) and the stress
test designed by the SFSA to assess the size of the capital
planning buffer for largest firms. Swedbank demonstrated its
strong position by uniformly showing solid results in all stress
tests.
The result of the stress test performed by the European
Banking Authority (EBA) by confirms Swedbank’s strong asset
quality and capital position and clearly demonstrate that
Swedbank have sufficient capital to withstand the adverse
scenario prescribed by EBA. Swedbank’s CET 1 capital ratio
decreased by 1.8 percentage points to 22.3% at the low point
of the scenario. The stress test is performed by EBA on biannual basis to assess the resilience of the European banking
sector. The result templates of the stress test can be accessed
at EBA’s website by using the following link
https://www.eba.europa.eu/risk-analysis-and-data/eu-widestress-testing/2016/results .
The methodology, assumptions and templates are adopted by
the EBA to assess the resilience of the European banking
sector, and will not display specifics of each firm. As a
consequence, the SFSA required Swedish institutes
SWEDBANK
participating the EBA stress test to perform an additional test
using the EBA adverse scenario, but applying the respective
institute´s own methodology, templates and assumptions.
The outcome of the re-make additionally confirms Swedbank’s
solid asset quality and strong capital position as the CET 1
capital ratio does not decrease by more than 1.3 percentage
points to 22.8%.
The stress test designed by the SFSA to assess size of the
capital planning buffer is carried out as part of SREP on annual
basis. The SFSA’s assessment in 2016 SREP is that the size of
capital planning buffer for Swedbank is less than 2.5% of REA
(capital conservation buffer), thus it does not add to the total
capital requirement of the bank.
The stress test conducted by the International Monetary Fund
(IMF) as part of the Financial Sector Assessment Program
(FSAP) reflected the strong capital buffers of the Swedish
banks and suggested that their solvency is resilient under a
severe scenario where a slump in global growth is associated
with a sharp rise in unemployment and a large fall in housing
prices. The stress test conducted by the IMF was a two-step
assessment, which included "bottom-up" and “top-down”
stress tests. The “bottom-up” assessment required Swedbank
to perform stress testing on a number of factors, such as
effect of an interest rate shock on the banking book, the
effect of a market shock, the impact of the default of largest
exposures and the effect of a shock on the FX swap market.
For the “top-down” assessment data from the income
statement, balance sheet and capital adequacy were provided
to be used as starting point for further analysis by the IMF.
71
Appendix A — Swedbank Consolidated
Situation
Contents
No.
Name
Page
A1
Transitional own funds disclosure according to Article 5 in EU Regulation No 1423/2013
A2
Subordinated debt: Capital instruments main features
75
A3
Capital requirement split by business area/country
77
72
Definitions
78
80
72
Appendix A
A1: Transitional own funds disclosure according to Article 5 in EU Regulation No 1423/2013
SEKm
31-Dec-16
B
C
B: Regulation (EU) No 575/2013 article reference
C: Amounts subject to pre-regulation (EU) No 575/2013 treatment or prescribed residual amount of Regulation (EU) 575/2013
Common Equity Tier 1 capital: instruments and reserves
1
Capital instruments and the related share premium accounts
of which: Instrument type 1
2
3
3a
4
5
5a
6
Retained earnings
Accumulated other comprehensive income (and any other reserves)
Funds for general banking risk
Amount of qualifying items referred to in Article 484 (3) and the related share premium accounts subject to phase out
from CET1
Public sector capital injections grandfathered until 1 January 2018
Minority interests (amount allowed in consolidated CET1)
Independently reviewed interim profits net of any foreseeable charge or dividend
Common Equity Tier 1 (CET1) capital before regulatory adjustments
38 110
26 (1), 27, 28, 29, EBA list
26 (3)
N/A
N/A
N/A
EBA list 26 (3)
EBA list 26 (3)
N/A
N/A
N/A
50 500
23 460
EBA list 26 (3)
26 (1) (c)
26 (1)
N/A
N/A
N/A
0
26 (1) (f)
N/A
N/A
486 (2)
N/A
N/A
78
6 194
483 (2)
84, 479, 480
26 (2)
N/A
N/A
N/A
N/A
118 342
Common Equity Tier 1 (CET1) capital: regulatory adjustments
7
9
Additional value adjustments (negative amount)
Intangible assets (net of related tax liability) (negative amount)
-599
-14 098
Empty set in the EU
34, 105
36 (1) (b), 37, 472 (4)
0
10
11
Deferred tax assets that rely on future profitability excluding those arising from temporary difference (net of related tax
liability where the conditions in Article 38 (3) are met) (negative amount)
Fair value reserves related to gains or losses on cash flow hedges
12
13
N/A
N/A
N/A
-114
-76
36 (1) (c), 38, 472 (5)
33 (a)
N/A
N/A
Negative amounts resulting from the calculation of expected loss amounts
Any increase in equity that results from securitised assets (negative amount)
-1 376
0
36 (1) (d), 40, 159, 472 (6)
32 (1)
N/A
N/A
14
15
16
Gains or losses on liabilities valued at fair value resulting from changes in own credit standing
Defined-benefit pension fund assets (negative amount)
Direct and indirect holdings by an institution of own CET1 instruments (negative amount)
-2
0
-3 398
33 (1) (b) (c)
36 (1) (e), 41, 472 (7)
36 (1) (f), 42, 472 (8)
N/A
N/A
N/A
17
Direct, indirect and synthetic holdings of the CET1 instruments of financial sector entities where those entities have
reciprocal cross holdings with the institution designed to inflate artificially the own funds of the institution (negative
amount)
0
36 (1) (g), 44, 472 (9)
N/A
18
Direct, indirect and synthetic holdings of the CET1 instruments of financial sector entities where the institution does not
have a significant investment in those entities (amount above 10% threshold and net of eligible short positions)
(negative amount)
0
36 (1) (h), 43, 45, 46, 49
(2) (3), 79, 472 (10)
N/A
19
20
Direct, indirect and synthetic holdings of the CET1 instruments of financial sector entities where the institution has a
significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative
amount)
Empty set in the EU
0
0
36 (1) (i), 43, 45, 47, 48
(1) (b), 49 (1) to (3), 79,
470, 472 (11)
N/A
20a
Exposure amount of the following items which qualify for a RW of 1250%, where the institution opts for the deduction
alternative
0
36 (1) (k)
N/A
20b
of which: qualifying holdings outside the financial sector (negative amount)
0
36 (1) (k) (i), 89 to 91
N/A
N/A
N/A
20c
of which: securitisation positions (negative amount)
0
36 (1) (k) (ii), 243 (1) (b),
244 (1) (b), 258
20d
of which: free deliveries (negative amount)
0
36 (1) (k) (iii), 379 (3)
N/A
21
22
Deferred tax assets arising from temporary difference (amount above 10% threshold, net of related tax liability where
the conditions in Article 38 (3) are met) (negative amount)
Amount exceeding the 15% threshold (negative amount)
0
0
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
48 (1)
N/A
N/A
23
24
of which: direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the
institution has a significant investment in those entities
Empty set in the EU
0
0
25
of which: deferred tax assets arising from temporary difference
0
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
N/A
25a
25b
Losses for the current financial year (negative amount)
Foreseeable tax charges relating to CET1 items (negative amount)
0
0
36 (1) (a), 472 (3)
36 (1) (l)
N/A
N/A
26
26a
Regulatory adjustments applied to Common Equity Tier 1 in respect of amounts subject to pre-CRR treatment
Regulatory adjustments relating to unrealised gains and losses pursuant to Articles 467 and 468
0
N/A
26b
Amount to be deducted from or added to Common Equity Tier 1 capital with regard to additional filters and deductions
required pre-CRR
N/A
481
N/A
0
-19 663
36 (1) (j)
N/A
N/A
36 (1) (i), 48 (1) (b), 470,
472 (11)
N/A
N/A
N/A
N/A
27
28
Qualifying AT1 deductions that exceed the AT1 capital of the institution (negative amount)
Total regulatory adjustments to Common Equity Tier 1 (CET1)
29
Common Equity Tier 1 (CET1) capital
Additional Tier 1 (AT1) capital: instruments
98 679
30
31
32
of which: classified as equity under applicable accounting standards
of which: classified as liabilities under applicable accounting standards
11 219
0
0
51, 52
N/A
N/A
N/A
33
from AT1
3 110
0
486 (3)
483 (3)
N/A
N/A
10
0
14 339
85, 86, 480
486 (3)
N/A
N/A
N/A
34
35
36
Qualifying Tier 1 capital included in consolidated AT1 capital (including minority interest not included in row 5) issued by
subsidiaries and held by third parties
of which: instruments issued by subsidiaries subject to phase-out
Additional Tier 1 (AT1) capital before regulatory adjustments
N/A
Additional Tier 1 (AT1) capital: regulatory adjustments
37
Direct and indirect holdings by an institution of own AT1 instruments (negative amount)
SWEDBANK
-59
52 (1) (b), 56 (a), 57, 475
(2)
N/A
73
Appendix A
38
Holdings of the AT1 instruments of financial sector entities where those entities have reciprocal cross holdings with the
institution designed to artificially inflate the own funds of the institution (negative amount)
0
56 (b), 58, 475 (3)
N/A
39
Direct, indirect and synthetic holdings of the AT1 instruments of financial sector entities where the institution does not
have a significant investment in those entities (amount above 10% threshold and net of eligible short positions)
(negative amount)
0
56 (c), 59, 60, 79, 475 (4)
N/A
40
Direct, indirect and synthetic holdings of the AT1 instruments of financial sector entities where the institution has a
significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative
amount)
0
56 (d), 59, 79, 475 (4)
N/A
41
Regulatory adjustments applied to Additional Tier 1 capital in respect of amounts subject to pre-CRR treatment and
transitional treatments subject to phase-out as prescribed in Regulation (EU) No 585/2013 (i.e. CRR residual amounts)
N/A
N/A
41a
Residual amounts deducted from Additional Tier 1 capital with regard to deduction from Common Equity Tier 1 capital
during the transitional period pursuant to article 472 of Regulation (EU) No 575/2013
N/A
472, 473(3)(a), 472 (4),
472 (6), 472 (8) (a), 472
(9), 472 (10) (a), 472 (11)
(a)
41b
Residual amounts deducted from Additional Tier 1 capital with regard to deduction from Tier 2 capital during the
transitional period pursuant to article 475 of Regulation (EU) No 575/2013
N/A
477, 477 (3), 477 (4) (a)
N/A
41c
42
43
Amounts to be deducted from added to Additional Tier 1 capital with regard to additional filters and deductions required
pre-CRR
Qualifying T2 deductions that exceed the T2 capital of the institution (negative amount)
Total regulatory adjustments to Additional Tier 1 (AT1) capital
N/A
0
-59
467, 468, 481
56 (e)
N/A
N/A
N/A
14 281
112 960
N/A
44
45
Additional Tier 1 (AT1) capital
Tier 1 capital (T1 = CET1 + AT1)
N/A
N/A
46
12 870
62, 63
N/A
47
from T2
0
0
486 (4)
483 (4)
N/A
N/A
48
Qualifying own funds instruments included in consolidated T2 capital (including minority interest and AT1 instruments
not included in rows 5 or 34) issued by subsidiaries and held by third party
24
87, 88, 480
N/A
49
50
Credit risk adjustments
0
0
486 (4)
62 (c) & (d)
N/A
N/A
51
Tier 2 (T2) capital before regulatory adjustment
Tier 2 (T2) capital: instruments and provisions
12 894
N/A
Tier 2 (T2) capital: regulatory adjustments
-45
63 (b) (i), 66 (a), 67, 477
(2)
N/A
Holdings of the T2 instruments and subordinated loans of financial sector entities where those entities have reciprocal
cross holdings with the institutions designed to artificially inflate the own funds of the institution (negative amount)
0
66 (b), 68, 477 (3)
N/A
Direct, indirect and synthetic holdings of the T2 instruments and subordinated loans of financial sector entities where
the institution does not have a significant investment in those entities (amount above 10% threshold and net of eligible
short positions) (negative amount)
Of which new holdings not subject to transitional arrangements
Of which holdings existing before 1 January 2013 and subject to transitional arrangements
0
0
0
66 (c), 69, 70, 79, 477 (4)
N/A
N/A
N/A
-620
66 (d), 69, 79, 477 (4)
N/A
52
Direct and indirect holdings by an institution of own T2 instruments and subordinated loans (negative amount)
53
54
54a
54b
55
Direct, indirect and synthetic holdings of the T2 instruments and subordinated loans of financial sector entities where
the institution has a significant investment in those entities (net of eligible short positions) (negative amounts)
56
Regulatory adjustments applied to Tier 2 in respect of amounts subject to pre-CRR treatment and transitional
treatments subject to phase out as prescribed in Regulation (EU) No 575/2013 (i.e. CRR residual amounts)
N/A
56a
Residual amounts deducted from Tier 2 capital with regard to deduction from Common Equity Tier 1 capital during the
N/A
472, 472(3)(a), 472 (4),
472 (6), 472 (8), 472 (9),
472 (10) (a), 472 (11) (a)
N/A
56b
Residual amounts deducted from Tier 2 capital with regard to deduction from Additional Tier 1 capital during the
N/A
475, 475 (2) (a), 475 (3),
475 (4) (a)
N/A
56c
57
58
Amounts to be deducted from or added to Tier 2 capital with regard to additional filters and deductions required pre-CRR
Total regulatory adjustments to Tier 2 (T2) capital
Tier 2 (T2) capital
59
59a
60
N/A
-665
12 229
N/A
467, 468, 481
N/A
N/A
N/A
125 189
N/A
Risk-weighted assets in respect of amounts subject to pre-CRR treatment and transitional treatments subject to phase
out as prescribed in Regulation (EU) No 575/2013 (i.e. CRR residual amount)
N/A
N/A
Of which:… items not deducted from CET1 (Regulation (EU) No 575/2013 residual amounts) (items to be detailed line by
line, e.g. Deferred tax assets that rely on future profitability net of related tax liability, indirect holdings of own CET1,
etc.)
N/A
472, 472 (5), 472 (8) (b),
472 (10) (b), 472 (11) (b)
N/A
Of which:…items not deducted from AT1 items (Regulation (EU) No 575/2013 residual amounts) (items to be detailed
line by line, e.g. Reciprocal cross holdings in T2 instruments, direct holdings of non-significant investments in the capital
of other financial sector entities, etc.)
N/A
475, 475 (2) (b), 475 (2)
©, 475 (4) (b)
N/A
Total capital (TC = T1 + T2)
Items not deducted from T2 items (Regulation (EU) No 575/2013 residual amounts) (items to be detailed line by line, e.g.
Indirect holdings of own T2 instruments, indirect holdings of non-significant investments in the capital of other financial
sector entities, indirect holdings of significant investments in the capital of other financial sector entities, etc.)
Total risk-weighted assets
N/A
394 136
477, 477 (2) (b), 477 (2)
(c), 477 (4) (b)
N/A
N/A
Capital ratios and buffers
61
62
Common Equity Tier 1 (as a percentage of total risk exposure amount)
Tier 1 (as a percentage of total risk exposure amount)
25.04%
28.66%
92 (2) (a), 465
92 (2) (b), 465
N/A
N/A
63
Total capital (as a percentage of total risk exposure amount)
31.76%
92 (2) (c)
N/A
64
Institution-specific buffer requirement (CET1 requirement in accordance with article 92 (1) (a) plus capital conservation
and countercyclical buffer requirements plus a systemic risk buffer, plus systemically important institution buffer
expressed as a percentage of total risk exposure amount) 1)
11.0%
CRD 128, 129, 140
N/A
65
of which: capital conservation buffer requirement
SWEDBANK
2.5%
N/A
74
Appendix A
66
67
67a
of which: countercyclical buffer requirement
of which: systemic risk buffer requirement
1.0%
3.0%
of which: Global Systemically Important Institution (G-SII) or Other Systemically Important Institution (O-SII) buffer
68
69
Common Equity Tier 1 available to meet buffers (as a percentage of risk exposure amount) 2)
[non-relevant in EU regulation]
70
71
not yet
implemented
20.5%
N/A
N/A
N/A
CRD 131
N/A
CRD 128
N/A
N/A
N/A
N/A
N/A
N/A
Amounts below the thresholds for deduction (before risk-weighting)
72
Direct and indirect holdings of the capital of financial sector entities where the institution does not have a significant
investment in those entities (amount below 10% threshold and net of eligible short positions)
73
74
Direct and indirect holdings of the CET1 instruments of financial sector entities where the institution has a significant
investment in those entities (amount below 10% threshold and net of eligible short positions)
Empty set in the EU
75
Deferred tax assets arising from temporary difference (amount below 10 % threshold, net of related tax liability where
the conditions in Article 38 (3) are met)
137
7 703
N/A
36 (1) (h), 45, 46, 472
(10), 56 (c), 59, 60, 475
(4), 66 (c), 69, 70, 477 (4)
36 (1) (i), 45, 48, 470, 472
(11)
N/A
N/A
N/A
25
36 (1) (c), 38, 48, 470, 472
(5)
N/A
62
62
N/A
N/A
Applicable caps on the inclusion of provisions in Tier 2
76
77
Credit risk adjustments included in T2 in respect of exposures subject to standardised approach (prior to the application
of the cap)
Cap on inclusion of credit risk adjustments in T2 under standardised approach
0
0
78
Credit risk adjustments included in T2 in respect of exposures subject to internal ratings-based approach (prior to the
application of the cap)
0
62
N/A
79
Cap for inclusion of credit risk adjustments in T2 under internal ratings-based approach
0
62
N/A
N/A
N/A
484 (3), 486 (2) & (5)
484 (3), 486 (2) & (5)
N/A
N/A
3 762
0
2 157
484 (4), 486 (3) & (5)
484 (4), 486 (3) & (5)
484 (5), 486 (4) & (5)
N/A
N/A
N/A
0
484 (5), 486 (4) & (5)
N/A
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2014 and 1 Jan 2022)
80
81
- Current cap on CET1 instruments subject to phase-out arrangements
- Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)
82
83
84
- Current cap on AT1 instruments subject to phase-out arrangements
- Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities)
- Current cap on T2 instruments subject to phase-out arrangements
85
- Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)
CET1 capital requirement including buffer requirements
2) CET1 capital ratio as reported, less minimum requirement of 4.5% (excluding buffer requirements) and less any CET1 items used to meet the Tier 1 and total capital
requirements.
1)
SWEDBANK
75
Appendix A
A2: Subordinated debt: Capital instruments main features, 31 December 2016
1
2
3
Issuer
Unique identifier (e.g. CUSIP, ISIN or
Bloomberg identifier for private
placement)
Governing law(s) of the instrument
Swedbank AB
(publ)
Swedbank AB
(publ)
Swedbank AB
(publ)
Swedbank AB
(publ)
Swedbank AB
(publ)
Swedbank AB
(publ)
XS0321184706
XS0363160127
XS1190655776
XS1535953134
SE0000122111
XS0861583887
English/Swedish
English/Swedish
English/Swedish
English/Swedish
Swedish
English/Swedish
Add'l Tier 1
Ineligible
Add'l Tier 1
Ineligible
Add'l Tier 1
Add'l Tier 1
Add'l Tier 1
Add'l Tier 1
Tier 2
Tier 2
Tier 2
Tier 2
Solo & Consolidated
Solo & Consolidated
Solo & Consolidated
Solo & Consolidated
Solo & Consolidated
Solo & Consolidated
Add'l Tier 1
(grandfathered) as
in Regulation (EU)
No 575/2013 art
484.4
Add'l Tier 1
(grandfathered) as
in Regulation (EU)
No 575/2013 art
484.4
Add'l Tier 1 as
published in
Regulation (EU) No
575/2013 art 52
Add'l Tier 1 as
published in
Regulation (EU) No
575/2013 art 52
Tier 2 as in
Regulation (EU) No
575/2013 art 63
Tier 2 as in
Regulation (EU) No
575/2013 art 63
SEK 2,071m
SEK 1,039m
SEK 6,750m
SEK 4,469m
SEK 126m
SEK 4,827m
SEK 2,000m
100%
100% of Nominal
amt
Liability - amortised
cost
17/Sep/07
Perpetual
No maturity
SEK 873m
100%
100% of Nominal
amt
cost
12/May/08
Perpetual
No maturity
USD 750m
100%
100% of Nominal
amt
cost
19/Feb/15
Perpetual
No maturity
USD 500m
100%
100% of Nominal
amt
cost
16/Dec/16
Perpetual
No maturity
SEK 111m
100%
100% of Nominal
amt
cost
26/Apr/89
Dated
26/Apr/19
EUR 500m
99.98%
100% of Nominal
amt
cost
05/Dec/12
Dated
05/Dec/22
Regulatory treatment
4
5
6
7
Transitional CRR rules
Post-transitional CRR rules
Eligible at solo/(sub-)consolidated/solo &
(sub-)consolidated
Instrument type (types to be specified by
each jurisdiction)
9
9a
Amount recognised in regulatory capital
(currency in million, as of most recent
reporting date)
Nominal amount of instrument
Issue price
8
9b
Redemption price
10
Accounting classification
11
12
13
Original date of issuance
Perpetual or dated
Original maturity date
Issuer call subject to prior supervisory
approval
14
15
Optional call date, contingent call dates,
and redemption amount
16
Subsequent call dates, if applicable
Yes
Yes
Yes
Yes
No
Yes
17-Sep-17, 100%
of Nominal amt, In
add'n
Tax/Regulatory call
17-Mar and 17-Sep
each yr,
after first call date
17-Sep-18, 100%
of Nominal amt, In
add'n
Tax/Regulatory call
17-Mar and 17-Sep
each yr, after first
call date
17-Mar-20, 100%
of Nominal amt, In
add'n
Tax/Regulatory call
17-Mar-22, 100%
of Nominal amt, In
add'n
Tax/Regulatory call
N/A
05-Dec-17, 100%
of Nominal amt, In
add'n
Tax/Regulatory call
Any Reset Date
Any Reset Date
N/A
N/A
Fixed to floating
Fixed to floating
Fixed 6.665 % per
yr, until first call
date, thereafter
Floating Stibor 6month +3 % per yr
Fixed
Fixed 5.5% per yr to
call date (equiv to
USD Swap Rate
+3.767% per yr),
thereafter reset
Fixed rate equiv to
USD Swap Rate
+3.767% per yr
No
Fixed
call date (equiv to
USD Swap Rate
+4.106% per yr),
thereafter reset
Fixed rate equiv to
USD Swap Rate
+4.106% per yr
No
Fixed
Fixed 8.278% per
yr, until first call
date, thereafter
Floating Stibor 6month +4.50% per
yr
Fixed 11% per yr
until maturity
Coupons / dividends
17
Fixed or floating dividend/coupon
Yes
Yes
No
Fixed
Fixed 3% per yr to
call date (equiv to
Euro Swap Rate
+2.15% per yr),
thereafter reset
Fixed rate equiv to
Euro Swap Rate
+2.15% per yr
No
20a
Fully discretionary, partially discretionary
or mandatory (in terms of timing)
Partially
discretionary
Partially
discretionary
Fully discretionary
Fully discretionary
Mandatory
Mandatory
20b
Fully discretionary, partially discretionary
or mandatory (in terms of amt)
Partially
discretionary
Partially
discretionary
Fully discretionary
Fully discretionary
Mandatory
Mandatory
Yes
Yes
No
No
No
No
22
23
Existence of step up or other incentive to
redeem
Noncumulative or cumulative
Convertible or non-convertible
Noncumulative
Non-convertible
Noncumulative
Non-convertible
Cumulative
Non-convertible
If convertible, conversion trigger (s)
N/A
N/A
N/A
N/A
25
If convertible, fully or partially
N/A
N/A
N/A
N/A
26
If convertible, conversion rate
N/A
N/A
Noncumulative
Convertible
8% CET1 ratio on
consolidated level,
5.125% CET1 ratio
on solo level
Fully
The greater of the
current market
price of an Ordinary
Share, the Quota
value of an
Ordinary Share and
the Floor Price, all
as of the
Conversion Date.
Floor price means
USD 15.70 (subject
to limited antidilution
adjustments)
Cumulative
Non-convertible
24
Noncumulative
Convertible
8% CET1 ratio on
consolidated level,
5.125% CET1 ratio
on solo level
Fully
The greater of the
current market
price of an Ordinary
Share, the Quota
value of an
Ordinary Share and
the Floor Price, all
as of the
Conversion Date.
Floor price means
USD 15.70 (subject
to limited antidilution
adjustments)
N/A
N/A
N/A
N/A
Mandatory
Mandatory
N/A
N/A
N/A
N/A
Ordinary Share
Ordinary Share
N/A
N/A
N/A
N/A
Swedbank AB (publ)
Swedbank AB (publ)
N/A
N/A
Yes
When equity is less
than half of the
registered share
capital
Full or Partially
Temporary
Shareholders
resolution re
Reconversion and
Reinstatement
made out of
unappropriated
earnings
Yes
When equity is less
than half of the
registered share
capital
Full or Partially
Temporary
Shareholders
resolution re
Reconversion and
Reinstatement
made out of
unappropriated
earnings
No
No
No
No
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
18
Coupon rate and any related index
19
Existence of a dividend stopper
21
30
If convertible, mandatory or optional
conversion
If convertible, specify instrument type
convertible into
If convertible, specify issuer of
instrument it converts into
Write-down features
31
If write-down, write-down trigger (s)
32
33
If write-down, full or partial
If write-down, permanent or temporary
34
If temporary write-down, description of
write-up mechanism
27
28
29
SWEDBANK
76
Appendix A
36
Position in subordination hierarchy in
liquidation (specify instrument type
immediately senior to instrument)
Non-compliant transitioned features
37
If yes, specify non-compliant features
35
Tier 2
Tier 2
Tier 2
Tier 2
Senior debt
Senior debt
Yes
Instrument issued
according to earlier
rules. Features
include e.g. step-up
and do not include
fully discretionary
coupons
Yes
Instrument issued
according to earlier
rules. Features
include e.g. step-up
and do not include
fully discretionary
coupons
No
No
No
No
N/A
N/A
N/A
N/A
1
Issuer
2
Unique identifier (e.g. CUSIP, ISIN or Bloomberg
identifier for private placement)
3
Swedbank AB (publ)
Swedbank AB (publ)
Swedbank AB (publ)
Swedbank AB (publ)
Swedbank AB (publ)
XS1036494638
SEK220530X
SE0005497781
SE0004899961
SE0005561594
English/Swedish
Swedish
Swedish
Swedish
Swedish
Tier 2
4
Tier 2
Tier 2
Tier 2
Tier 2
5
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
6
Eligible at solo/(sub-)consolidated/solo & (sub)consolidated
Solo & Consolidated
Solo & Consolidated
Solo & Consolidated
Solo & Consolidated
Solo & Consolidated
7
Instrument type (types to be specified by each
jurisdiction)
Tier 2 as in Regulation
(EU) No 575/2013 art
63
(EU) No 575/2013 art
63
(EU) No 575/2013 art
63
(EU) No 575/2013 art
63
(EU) No 575/2013 art
63
SEK 7,141m
SEK 35m
SEK 400m
SEK 250m
SEK 150m
EUR 750m
99.81%
SEK 35m
100%
SEK 400m
100%
SEK 250m
100.00%
SEK 150m
100.00%
100% of Nominal amt
100% of Nominal amt
100% of Nominal amt
100% of Nominal amt
100% of Nominal amt
cost
26/Feb/14
Dated
cost
30/May/12
Dated
cost
25/Oct/13
Dated
cost
21/Nov/12
Dated
cost
27/Nov/13
Dated
26/Feb/24
30/May/22
25/Oct/23
21/Nov/22
27/Nov/23
8
9
9a
Amount recognised in regulatory capital
(currency in million, as of most recent reporting
date)
Issue price
9b
Redemption price
10
11
12
Perpetual or dated
13
14
Issuer call subject to prior supervisory approval
15
Optional call date, contingent call dates, and
redemption amount
16
17
18
Yes
Yes
Yes
Yes
Yes
26-Feb-19, 100% of
Nominal amt, In add'n
Tax/Regulatory call
N/A
30-May-17, 100% of
Nominal amount, In
add'n Regulatory call
N/A
25-Oct-18, 100% of
Nominal amount, In
N/A
21-Nov-17, 100% of
Nominal amount, In
N/A
27-Nov-18, 100% of
Nominal amount, In
N/A
Fixed
call date (equiv to Euro
Swap Rate +1.40% per
yr), thereafter reset
Fixed rate equiv to
Euro Swap Rate
+1.40% per yr
No
Floating
Floating
Floating
Floating
Floating Stibor 3month +4.5% per yr
until maturity
until maturity
until maturity
Floating Stibor 3month + 3% per yr
until maturity
Coupons / dividends
No
No
No
No
20a
19
Fully discretionary, partially discretionary or
mandatory (in terms of timing)
Mandatory
Mandatory
Mandatory
Mandatory
Mandatory
20b
Fully discretionary, partially discretionary or
mandatory (in terms of amt)
Mandatory
Mandatory
Mandatory
Mandatory
Mandatory
22
23
24
25
Existence of step up or other incentive to
redeem
26
21
No
No
No
No
No
Cumulative
Non-convertible
N/A
N/A
Cumulative
Non-convertible
N/A
N/A
Cumulative
Non-convertible
N/A
N/A
Cumulative
Non-convertible
N/A
N/A
Cumulative
Non-convertible
N/A
N/A
N/A
N/A
N/A
N/A
N/A
27
If convertible, mandatory or optional conversion
N/A
N/A
N/A
N/A
N/A
28
If convertible, specify instrument type
convertible into
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
No
No
No
No
No
30
If convertible, specify issuer of instrument it
converts into
Write-down features
31
N/A
N/A
N/A
N/A
N/A
32
33
If temporary write-down, description of writeup mechanism
Position in subordination hierarchy in liquidation
(specify instrument type immediately senior to
instrument)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Senior debt
Senior debt
Senior debt
Senior debt
Senior debt
No
N/A
No
N/A
No
N/A
No
N/A
No
N/A
29
34
35
36
37
Note: The full terms and conditions of all Additional Tier 1 and Tier 2 instruments can be found on Swedbank’s website: https://www.swedbank.com/investorrelations/debt-investor/funding/final-terms--conditions/index.htm.
SWEDBANK
77
Appendix A
A3: Capital requirement split by business area/country
Minimum capital requirement1 split by business area, as of 31 December 2016
SEKm
Minimum capital requirement for credit risk
Credit risks, IRB approach
of which institutional exposures
of which corporate exposures
mortgage
other
of which securitisation exposures
of which other non-credit-obligation assets
Credit risk, standardised approach
of which exposures to central governments &
central banks
of which exposures to regional governments or
local authorities
of which public sector entities exposures
of which multilateral development banks
of which exposures to international organisations
of which exposures to institutions
of which exposures to corporates
of which exposures secured on immovable
property
of which exposures associated with particularly
high risk
of which exposures in the form of covered bonds
of which equity exposures
of which exposures to institutions & corporates
with a short-term credit assessment
of which exposures to CIUs
of which other items
7 044
2 278
1 612
1 613
100
21 478
1 072
14 065
5 772
3 633
2 139
9 214
135
4 725
4 149
2 666
1 483
6 730
498
5 938
19
1
18
2 119
14
1 436
648
368
280
1 557
21
985
509
298
211
1 384
5
939
440
293
147
0
0
0
0
0
0
474
399
42
7
7
0
0
0
0
0
569
3 800
205
2 474
275
314
36
0
22
LC&I
Estonia
Latvia
Lithuania
Investment
0
0
0
21
159
42
55
0
229
0
100
26
469
6
0
0
0
0
30
-
5
14
3
-
-
-
5
-
4
-
1
-
-
2
-
-
-
2
-
-
-
-
-
-
-
-
-
-
10
1
8
-
370
839
13
746
244
18
57
48
9
16
669
553
-
-
32
19
-
-
-
-
-
-
1
1
-
-
1 575
1 092
-
-
-
-
-
-
-
-
-
-
239
49
29
40
0
-
-
1
45
11
-
2
-
22
94
-
-
3
10
-
-
-
-
-
2
0
-
-
-
-
100
381
-
-
-
-
-
-
66
0
55
34
0
34
Minimum capital requirement for market risk
754
0
732
of which risks in trading book where VaR and
SVaR models are applied
of which risks in trading book outside VaR and
SVaR
of which currency rate risk outside VaR
Minimum capital requirement for settlement risk
Minimum capital requirement for credit value
adjustment
Minimum capital requirement for operational risk
563
0
563
169
0
169
0
22
0
0
0
0
0
22
0
424
16
304
104
4 972
2 817
836
315
69
69
0
0
31 531
14 590
8 950
2 593
Credit risks, default fund contribution
Minimum total capital requirement
1)
11 688
Group
Functions and
Other
943
SCS
25 278
Baltic Banking
Swedish
Banking
-
0
0
22
0
222
1 834
213
0
0
0
0
1 826
100
1 638
Total minimum capital requirement under Pillar 1, i.e. 8% of total risk exposure amount.
SWEDBANK
0
0
569
78
Appendix A
Definitions
Swedbank Consolidated Situation
Swedbank Latvia
CS
Investment management
Lithuania
•
•
IT
Sweden
•
•
Swedbank Asset Management S A
Banking operations
Luxembourg
•
•
Sparfrämjandet AB
Inactive
Sweden
•
•
Sparia Group Insurance Company Ltd
Insurance company
Sweden
•
−
Swedbank Franchise AB
Holding company
Sweden
•
•
Swedbank Fastighetsbyrå AB
Real estate franchiseor
Sweden
•
•
Ölands Bank AB
Banking operations
Sweden
•
•
Bankernas Kontantkort CASH Sverige
AB
Inactive
Sweden
•
•
Ektornet AB
Parent company
Sweden
•
•
Ektornet Land Estonia OÜ
Real estate
Estonia
•
•
Ektornet Project Estonia 1 OÜ
Inactive
Estonia
•
•
SIA Ektornet Residential Latvia
Real estate
Latvia
•
•
SIA Juglas Skati
Real estate
Latvia
•
•
SIA Ektornet Real Estate Latvia
Real estate
Latvia
•
•
UAB Ektornet Lithuania SPV 2
Real estate
Lithuania
•
•
Tsedar Management I Ltd
Holding company
Cyprus
•
•
Tsedar Management II Ltd
Holding company
Cyprus
•
•
Swedbank Försäkring AB
Insurance company
Sweden
•
−
ATM Holding AB
Holding company
Sweden
•
•
Bankomat AB
ATM operations
Sweden
20%
20%
Swedbank och Sparbankerna Mobile
Solutions AB
Mobile applications
Sweden
•
•
FR&R Invest AB
Financial reconstruction &
recovery
Sweden
•
•
Swedbank Securities US LLC
Securities company
USA
•
•
FRIR Rus OOO
Loan operations
Russia
•
•
First Securities AS
Securities company
Norway
•
•
Swedbank Management Company SA
(ManCo)
Holding company
Luxembourg
•
•
Swedbank AS (Latvia)
Banking operations
Latvia
•
•
•
•
Swedbank Lizings SIA
Leasing, factoring
Latvia
•
•
•
•
•
•
•
Latvia
•
•
Banking operations
Lithuania
•
•
•
•
Swedbank Lizingas UAB
Leasing, factoring
Lithuania
•
•
•
•
Swedbank valda UAB
Real estate management
Lithuania
•
•
•
•
Korteliu skaitytuvu paslaugos UAB
Rental business
Lithuania
•
•
•
•
Banking operations
Estonia
•
•
•
•
Leasing, factoring
Estonia
•
•
•
•
Business activity
Banking operations
Country
Sweden
Mortgage
Sweden
•
•
Swedbank Robur AB
Holding company
Sweden
•
•
Swedbank Robur Fonder AB
Fund management
Sweden
•
•
Swedbank Investeerimisfondid AS
Estonia
•
•
Latvia
•
•
Swedbank leguldijumu Parvaldes
Sabierdiba AS
Swedbank AS (Estonia)
Swedbank Liising AS
SWEDBANK
Swedbank
Estonia CS
Swedbank Atklatais Pensiju Fonds AS
Swedbank AB (Lithuania)
Legal entity name
Swedbank AB
Swedbank
Estonia Group
Swedbank
Lithuania CS
•
Swedbank
Lithuania Group
Swedbank CS
Swedbank investiciju valdymas UAB
Cerdo Bankpartner AB
Swedbank Group
Swedbank Latvia
Group
The consolidated situation for Swedbank as of 31 December 2016 comprised the Swedbank Group with the exception of insurance companies. The
EnterCard Group is included through the proportionate consolidation method. The difference between Swedbank Group and Swedbank Consolidated
Situation (CS) is shown more in detail below, where “•” means 100% consolidation and “–“ means not consolidated. Where percentages are shown, the
company is included using the equity method unless otherwise stated. Any changes in legal entity structure are reflected on www.swedbank.com.
79
Appendix A
Swedbank Life Insurance SE
Life insurance
Estonia
•
−
•
−
Swedbank P&C Insurance AS
Insurance
Estonia
•
−
•
−
Swedbank Support OÜ
IT, property management
Estonia
•
•
•
•
AS Sertifitseerimiskeskus
Certification services
Estonia
25%
25%
25%
25%
EnterCard Holding AB1
Credit card transactions
Sweden
50%
Proportional
method
Swedbank Sjuhärad AB
Banking operations
Sweden
48%
48%
Sparbanken Rekarne AB
Banking operations
Sweden
50%
50%
Sparbanken Skåne AB
Banking operations
Sweden
22%
22%
Vimmerby Sparbank AB
Banking operations
Sweden
40%
40%
Finansiell ID-Teknik BID AB
Computer services
Sweden
28%
28%
BGC Holding AB
Giro transactions
Sweden
29%
29%
Rosengård Invest AB
Investments
Sweden
25%
25%
UC AB
Business and credit information
Sweden
20%
20%
Getswish AB
Mobile transactions
Sweden
20%
20%
Babs Paylink AB
Rental of terminals for card
Sweden
49%
49%
VISA Sweden, ek för
Association for the benefit of
card
Sweden
39%
39%
50%
1) Parent company in EnterCard Group with subsidiaries EnterCard Norge AS and EnterCard Sverige AB.
Swedbank definitions of risk types
Credit risk
The risk that a borrower will fail to meet their contractual obligations to Swedbank and the risk that pledged collateral will not cover the claim.
Credit risk also includes concentration risk, which means large individual exposures as well as significant exposures to groups of counterparties whose
probability of default is driven by common underlying factors, such as sector, economy, geographical location, or type of instrument.
Counterparty risk is the risk that a Counterparty to a trading transaction will not meet its financial obligations towards Swedbank and that collateral
held will not be enough to cover the claims. This definition encompasses repurchase agreements, derivatives and securities financing transactions.
Market Risk
The risk that the bank’s results, equity or value will decrease due to changes in risk factors in financial markets. Market risk includes interest rate risk,
currency risk, share price risk and commodity risk, as well as risks from changes in volatility and correlations.
Liquidity risk
The risk that the bank cannot fulfill its payment commitments at maturity or when they fall due. Liquidity risks arise because the maturity structures
on the asset and liability sides of the balance sheet do not coincide.
Operational risk
The risk of losses resulting from inadequate or failed internal processes, people and systems, or from external events. The definition of operational risk
includes legal risk and information risk. Operational risk is further broken down into the following sub-risk categories: personnel risk, process risk,
information risk (incl. technology risk) and external risk.
SWEDBANK
80
Appendix A
“AC”
Audit Committee
“A-IRB”
“ALL Policy”
“AMA”
Advanced Internal Ratings-Based Approach
Swedbank’s Asset, Liability and Liquidity Policy
Advanced Measurement Approach
“AQR”
“AT1”
Asset Quality Review
“BARCC”
Business Area Risk and Compliance Committee
“BCBS”
“Board”
Basel Committee on Banking Supervision
Board of Directors of Swedbank AB
“BRRD”
“Capital base”
Bank Recovery and Resolution Directive (EU)
The capital base serves as a buffer against unexpected losses that can arise from risks to which a bank is exposed. The capital base must at
all times be of such size that the minimum capital requirements are met. The main constituent of the capital base is the CET1 capital,
which consists mainly of equity capital less proposed dividends and various deductions (e.g. goodwill) as set out in capital adequacy
regulations. “Basel 2” and “Basel 3” in this report mean the EU and Swedish implementation of these international regulatory standards.
“CCF”
“CCoB”
Credit Conversion Factor
Capital Conservation Buffer
“CCP”
“CCyB”
“CET1”
Central Counterparty
Countercyclical Capital Buffer
Common Equity Tier 1
“CIS”
“CIU”
Commonwealth of Independent States
Collective Investment Undertaking
“CPC”
Credit Process Control
“CRO”
“CRD IV”
“CRR”
“CS”
“CSA”
“CVA”
“DDOS”
“EAD”
“EBA”
“EC”
Chief Risk Officer of Swedbank AB
Capital Requirements Regulation and Directive – CRR/CRD IV
EU Capital Requirements Regulation (EU Regulation No 575/2013)
Consolidated Situation
Credit Support Annex
Credit Value Adjustment
Distributed denial of service
Exposure at Default
European Banking Authority
Economic Capital
“ECB”
European Central Bank
“EL”
Expected Loss
“EMIR”
“EMU”
“ERM Policy”
“EUR”
“F-IRB”
European Markets Infrastructure Regulation
Economic and Monetary Union of the European Union
Euro (European currency)
Foundation IRB
“FR&R”
“FRTB”
“FSA”
“FSB”
“FTP”
“GAAC”
“GF”
“GIIPS”
“GRCC”
“Group”
“G-SII”
“ICAAP”
“ICFR”
Financial Restructuring & Recovery
Fundamental Review of the Trading Book (review by the BCBS)
Financial Supervisory Authority
Financial Stability Board
Funds Transfer Pricing
Group Asset Allocation Committee
Group Functions
Greece, Ireland, Italy, Portugal and Spain
Group Risk and Compliance Committee
Swedbank Group (see definition below)
Global Systemically Important Institution
Internal Capital Adequacy Assessment Process
Internal Control over Financial Reporting
“IFRS”
“ILAAP”
“IRB”
“IRRBB”
“ISDA”
“LC&I”
“LCC”
“LCR”
“LDA”
“LGD”
“LNG/LPG”
“LTV”
“M”
“MDB”
“MREL”
International Financial Reporting Standards
Internal Liquidity Adequacy Assessment Process
Internal Ratings-Based Approach
Interest Rate Risk in the Banking Book
International Swaps and Derivatives Association
Large Corporate & Institutions
Low-Cost Carriers
Liquidity Coverage Ratio
Loss Distribution Approach
Loss Given Default
Liquefied Natural Gas/Liquefied Petroleum Gas
Loan-To-Value
Maturity (risk parameter)
Multilateral Development Bank
Minimum level of own funds and eligible liabilities
SWEDBANK
81
Appendix A
“NII”
“NPAP”
Net Interest Income
New Product Approval Process
“NSFR”
Net Stable Funding Ratio
“OC”
“O-SII buffer”
Overcollateralisation
Other Systemically Important Institution buffer
“OTC”
“Parent Company”
Over-the-Counter
Swedbank AB (publ)
“PD”
“PFE”
“PSE”
Probability of Default
Potential Future Exposure
Public Sector Entity
“QE”
“RAROC”
Quantitative Easing
Risk Adjusted Return On Capital
“RC”
Remuneration Committee
“RCC”
Risk and Capital Committee
“RCSA”
“REA”
“Riksbank”
Risk and Control Self-Assessment
Risk Exposure Amount
Sweden's Central Bank
“RMBS”
“RMMA”
Residential Mortgage-Backed Securities
Risk Management Maturity Assessment
“RORO”
“RSA”
“RTS”
Roll-On, Roll-Off (vessels designed to carry wheeled cargo)
Revised Standardised Approach
Regulatory Technical Standards
“RW”
“SA-CCR”
Risk Weight
Standardised Approach for Measuring Counterparty Credit Risk Exposures
“SCS”
“SEK”
“SFSA”
“SFT”
“SMA”
“SME”
Swedish Financial Supervisory Authority
Securities Financing Transaction
Standardised Measurement Approach
Small and Medium-Sized Enterprises
“SNDO”
“SPK”
“Spb”
“SREP”
“SSM”
“SVaR”
“Swedbank”
“Swedbank Baltic”
“Swedbank Group”
“Swedish FSA”
“T2”
Swedish National Debt Office (Swedish: Riksgälden)
Sparinstitutens PensionsKassa Försäkringsförening (pension fund)
Sparbanken (refers to e.g. Sparbanken Skåne, Sparbanken Öresund)
Supervisory Review and Evaluation Process
Single Supervisory Mechanism
Stressed Value-at-Risk
Swedbank Consolidated Situation (see definition above)
Swedbank AS (Estonia), Swedbank AS (Latvia) and Swedbank AB (Lithuania)
Swedbank AB (publ) and all its underlying legal entities (regardless of percentages of holding), (see definition above)
Swedish Financial Supervisory Authority
Tier 2 capital
“TLAC”
“UL”
“VaR”
“VAT”
“WWR”
Total Loss-Absorbing Capacity
Unexpected Loss
Value-at-Risk
Value-Added Tax
Wrong Way Risk
SWEDBANK
Swedish Krona (Swedish currency)
82
Appendix B
Appendix B — Index of Tables and Graphs
Table/
Graph no.
Table/ Graph name
Page
Capital Requirements
Figure 2-1
Link between shareholders’ equity and total capital
11
Figure 2-2
CET1 capital, changes during 2016, Swedbank Consolidated Situation
11
Figure 2-3
REA changes during 2016, Swedbank Consolidated Situation
11
Figure 2-4
CET1 capital ratio
12
Figure 2-5
Tier 1 capital ratio
12
Figure 2-6
Total capital ratio
12
Table 2-1
Capital requirements (incl. fully implemented buffers and Pillar 2 requirements)
16
Table 2-2
Capital adequacy in Swedbank Consolidated Situation
16
Table 2-3
Total capital, Swedbank Consolidated Situation
17
Table 2-4a
18
Table 2-5
Amount of institution-specific countercyclical capital buffer in Swedbank Consolidated Situation
Geographical distribution of credit exposures relevant for the calculation of the countercyclical
capital buffer for Swedbank Consolidated Situation
Capital requirement – Swedbank Consolidated Situation
19
Table 2-6
Risk Exposure Amount and Own funds requirement, Swedbank Consolidated Situation
19
Table 2-7
Leverage ratio
20
A1
Transitional own funds disclosure according to Article 5 in EU Regulation No 1423/2013
72
A2
Subordinated debt: Capital instruments main features
75
A3
Capital requirements split by business area/country
77
Table 2-4b
18
Credit Risk
Figure 3-1
Swedbank’s historical loan losses
21
Figure 3-2
LC&I Shipping & Offshore portfolio, loans gross
22
Figure 3-3
Oil-related exposures by internal risk grade
22
Figure 3-4
Private mortgage exposure risk grade distribution
22
Figure 3-5
Private mortgage, average past-due loans and LTV
22
Figure 3-6
Property management exposure risk grade distribution
23
Figure 3-7
Property management by sub-segment and country
23
Figure 3-8
Agriculture etc. exposure risk grade distribution
23
Figure 3-9
Agriculture etc. by sub-segment and country
23
Figure 3-10
Swedish Banking, credit exposure by risk grade
25
Figure 3-11
Swedish Banking, loans by sector
25
Figure 3-12
Baltic Banking: Estonia, credit exposure by risk grade
25
Figure 3-13
Baltic Banking: Estonia, loans by sector
25
Figure 3-14
Baltic Banking: Latvia, credit exposure by risk grade
25
Figure 3-15
Baltic Banking: Latvia, loans by sector
25
Figure 3-16
Baltic Banking: Lithuania, credit exposure by risk grade
26
Figure 3-17
Baltic Banking: Lithuania, loans by sector
26
SWEDBANK
83
Appendix B
Figure 3-18
Large corporates & institutions, credit exposure by risk grade
26
Figure 3-19
Large corporates & institutions, loans by sector
26
Figure 3-20
Group Functions, credit exposure by risk grade
26
Figure 3-21
Group Functions , exposures by sector
26
Figure 3-22
Classification of risks in the credit portfolio
27
Figure 3-23
Estimated loss vs. realized loss
32
Figure 3-24
Credit risk REA attribution 2016
34
Figure 3-25
Retail exposure class, risk profile
35
Figure 3-26
Retail exposure class, 12-month migration
35
Figure 3-27
Corporate exposure class, risk profile
37
Figure 3-28
Corporate exposure class, 12-month migration
37
Figure 3-29
Institutions exposure class, risk profile
39
Figure 3-30
Institutions exposure class, 12-month migration
39
Figure 3-31
Netting and collateral effects for derivatives
45
Figure 3-32
Maturity profile for derivative exposures
45
Table 3-1
Key parameters by business segment
24
Table 3-2
Change in provisions
29
Table 3-3
Impaired and past-due loans by geographical areas
Table 3-4
Impaired and past-due loans by industry
29
29
Table 3-5
Capital adequacy approaches, 2016
30
Table 3-6
Estimates and realised outcome
33
Table 3-7
Retail exposure class, outstanding exposures by risk grade
35
Table 3-8
Retail exposure class, exposures by industry and business area
36
Table 3-9
Retail exposure class, exposure-weighted average risk weights by industry and business area
36
Table 3-10
Retail exposure class, exposure-weighted average PD by industry and business area
36
Table 3-11
Corporate exposure class, outstanding exposures by risk grade
37
Table 3-12
Specialised lending, remaining maturity
37
Table 3-13
Corporate exposure class, exposures by industry and business area
38
Table 3-14
Corporate exposure class, exposure-weighted average risk weights by industry and business area
38
Table 3-15
Corporate expocure class, exposure-weighted average PD by industry and business area
38
Table 3-16
Institutions exposure class, outstanding exposures by risk grade
39
Table 3-17
Exposure, average exposure and off-balance
40
Table 3-18
Collateral and credit risk mitigation techniques
40
Table 3-19
Outstanding exposures by geographical area
40
Table 3-20
Outstanding exposures by industry
41
Table 3-21
Outstanding exposures to SME corporates by industry
41
Table 3-22
Outstanding exposures by maturity
42
Table 3-23
Specific credit risk adjustments during the periods
42
Table 3-24
Counterparty risks – Outstanding credit derivatives
44
Table 3-25
Counterparty risks – Derivatives
45
Figure 4-1
Trading book, hypothetical profit/ loss and VaR, 2016
50
Table 4-1
VaR allocated by risk category
49
Table 4-2
Trading book, VaR and SVaR
49
Table 4-3
Trading book, VaR by risk category
Change in value of assets and liabilities measured at fair value, incl. derivatives, if market interest
rate rises 1 pp
50
Market Risk
Table 4-4
SWEDBANK
50
84
Appendix B
Table 4-5
Capital requirement for market risks as of 31 December – Swedbank Consolidated Situation
51
Table 4-6
Capital requirement for market risks as of 31 December – Swedbank AB
51
Liquidity Risk
Long-term funding by maturity
53
Figure 5-2
Long-term funding by currency
53
Figure 5-3
Survival Horizon, as of 31 December 2016
57
Figure 5-4
House price sensitivity of the cover pool
58
Figure 5-5
LCR and NSFR
59
Table 5-1
Outstanding debt securities in issue
53
53
Figure 5-1
Table 5-2
Outstanding short-term funding volumes
Table 5-3
Issued long-term debt
53
Table 5-4
Liquidity Reserve, Group
54
Table 5-5
Swedbank’s ratings, 31 December 2016
54
Table 5-6
Asset encumbrance
55
Table 5-7
Cover pool sensitivity analysis
58
Table 5-8
Liquidity coverage ratios and other liquidity and funding ratios
59
Operational Risk
Figure 6-1
Operational risk – total annual losses
61
Figure 6-2
Annual loss – by Basel Event Type
61
Figure 6-3
Annual loss – by Basel Business Line
61
Table 6-1
Capital requirement for operational risk, by business line
63
Stress tests and economic capital
Figure 7-1
Swedish historical downturns compared to the stress test scenarios for the ICAAP
67
Table 7-1
Economic Capital by risk type
65
Table 7-2
Risk types according to the ICAAP process
66
Table 7-3
Stress test ICAAP scenario parameters
68
Table 7-4
Income statement under ICAAP scenario
68
Table 7-5
Credit impairments under ICAAP scenario
69
Table 7-6
Swedbank CS capital assessment results
70
SWEDBANK
85
Appendix C — Subsidiaries
Contents
Appendix
Page
86
98
110
122
86
Appendix Estonia CS
Appendix: Swedbank Estonia Consolidated
Situation (CS)
Introduction
Swedbank’s Risk Management and Capital Adequacy Report
2016 (Pillar 3 report) provides information on Swedbank’s
capital adequacy and risk management. The report is based on
Requirements Regulation (Regulation (EU) 575/2013). In
Directive, certain information shall be provided for significant
subsidiaries. Information for Swedbank Estonia Consolidated
Situation (CS) is provided in this Appendix and pertains to
conditions as of 31 December 2016. Information on the
organisational and legal structure of Swedbank Estonia
Consolidated Situation is provided in the Appendix for
Swedbank Consolidated Situation, in the Swedbank Risk
Management and Capital Adequacy Report 2016. Information
about the Swedbank corporate governance structure and
measures undertaken to manage operations in Swedbank
Consolidated Situation is presented in the Swedbank
Corporate Governance Report. Information about risk
implications of the remuneration process (and aggregate as
well as granular quantitative information on remuneration) for
Swedbank Estonia Consolidated Situation is disclosed in the
2016”. Swedbank’s Group-wide framework includes
instructions for management of credit risk, including
instructions for granting and prolonging credits, for collateral
valuation, for determining impairment and for credit risk
adjustments. Information about management of credit risk is
provided in Chapter 3 in the Swedbank Risk Management and
Capital Adequacy Report 2016. The Group-wide framework
also includes instructions describing the approach used to
assess the adequacy of internal capital to support current and
future activities. This information is provided in Chapter 7 in
the Swedbank Risk Management and Capital Adequacy Report
2016. All documents mentioned above are available on
www.swedbank.com. All figures are in EUR thousands unless
otherwise stated.
SWEDBANK
Under the EU Capital Requirements Regulation (CRR), a bank’s
total capital must be equivalent to at least the sum of the
capital requirements for credit- market- and operational risks,
including capital buffers and potential Pillar 2 add-ons. In
addition to a capital conservation buffer of 2.5%, the Estonian
Financial Supervisory Authority has also introduced a buffer
requirement of 2% for other systemically important
institutions (O-SII) and systemic risk buffer of 1%. The capital
conservation buffer was introduced in Q2 2014. The O-SII
buffer was introduced in Q3 2016 and simultaneously the
systemic risk was reduced from 2% to 1%. Also the
countercyclical capital buffer was measured in Q4 2016 at 0%
to be applied starting 1 January 2017. This means that the
capital requirement for Swedbank Estonia CS in Pillar 1, as a
percentage of REA, amounts to 10% for CET1 capital and
13.5% for total capital. In addition, the capitalisation of
Swedbank Estonia CS must comply with the capital
requirement in Pillar 2. The structure of Pillar 2 capital
requirement has been changed in the 2016 Supervisory
Review and Evaluation Process (SREP). The Pillar 2 capital
requirement has been broken down into Pillar 2 requirement
(P2R) of 1.2% and Pillar 2 capital guidance (P2G) of 1%. Banks
are expected to treat a failure to meet the P2G as an early
warning signal, but not as in indicator. Further, the P2G does
not set limititation for Maximum Distributable Amount. Still
the expectation is for the banks to meet the P2G. The total
capital requirement for Swedbank Estonia CS is equivalent to
a CET 1 capital ratio of 12.2% and a total capital ratio of
15.7%. As a backstop rule, Swedbank Estonia CS also needs
to comply with the Basel 1 floor, i.e. 80% of the capital
requirements according to Basel 1.
87
Appendix Estonia CS
Estimated capital requirements1, Estonia Consolidated Situation
%
CET1
AT1
T2
Total capital
Pillar 1
Minimum requirement
4.5
2
1.0
1.0
2.5
2.5
Countercyclical buffer (CCyB)³
0.0
0.0
Systemic buffer (P1)
O-SII
buffer 2
1.5
2.0
8.0
2.0
2.0
10.0
1.5
2.0
13.5
2.2
0.0
0.0
2.2
Pillar 2⁴
of which Pillar 2 requirement (P2R)
of which Pillar 2 capital guidance (P2G)
Actual capital ratios as of Dec 31, 2016
1.2
1.2
1.0
1.0
12.2
1.5
2.0
15.7
38.33%
0.0
0.0
38.33%
1) Swedbank's estimate based on the Estonian FSA's announced capital requirements, including fully implemented buffers and Pillar 2 add-on.
2) Starting from 1 August 2016, systemic risk buffer will be decreased from 2% to 1%, according to SREP report as of 29 September 2016.
In addition, at the same time O-SII buffer of 2% is introduced in Swedbank Estonia CS.
3) The estimate is based on Swedbank's relevant exposures, and the calculation takes into account the applied countercyclical buffer value of 0%.
4) Individual Pillar 2 add-on has been broken down into Pillar 2 requirement (P2R) and Pillar 2 capital guidance (P2G) based on SREP report 29 September
2016.
At 31 December 2016, Swedbank Estonia CS’s Common Equity
Tier 1 and Total Capital ratio were 38.33% and 38.33%,
respectively (38.41% and 38.41% end-2015). Swedbank
Estonia CS’s leverage ratio was 14.09% (13.06%) at end-2016
(end-2015). The actual total capital at end-2016 exceeded the
capital requirement according to the Basel 1 floor by EUR
1,081m. Hence, the capitalisation of Swedbank Estonia CS is
well above the capital requirements according to CRR/CRDIV
and the Basel 1 floor with. In the 2016 Supervisory Review
and Evaluation Process (SREP), Swedbank Estonia CS was
SWEDBANK
assessed to be broadly adequately capitalised and able to
comply with regulatory capital requirements going forward.
The Bank Recovery and Resolution Directive, which will allow
the authorities to deal with banks in distress, was established
in the EU in 2014 and has been transposed to Estonian
national laws as of 29 March 2015. The directive includes a
requirement on banks to hold a minimum level of own funds
and eligible liabilities (MREL). MREL requirement shall enter
into force from 2019, however have not been finalised at end2016.
88
Appendix Estonia CS
Estonia 1. Capital adequacy
EURt
2016
2015
Tier 1 capital
Total capital
Minimum capital requirement¹
Surplus of capital
1 442 926
1 442 926
1 442 926
3 764 612
301 169
1 141 757
38.33%
38.33%
38.33%
1 373 985
1 373 985
1 373 985
3 542 296
283 384
1 090 601
38.79%
38.79%
38.79%
384 936
365 912
1 465 652
1 080 716
1 397 352
1 031 440
floor
The corresponding information for Swedbank Consolidated Situation can be found in table 2-2 in the Swedbank Risk Management and Capital Adequacy Report 2016.
Estonia 2. Total capital
Note
EURt
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Cash flow hedges
Goodwill
Deferred tax assets
Intangible assets
Total CET1 capital
15
16
17
18
Tier 2 capital
Total capital
2016
2015
1 444 524
1 373 115
24 249
26 713
-1 802
-703
-1 319
-22 726
-1 773
-23 367
1 442 926
1 373 985
1 442 926
1 373 985
1 442 926
1 373 985
For definitions, please see table 2-3 in the Swedbank Risk Management and Capital Adequacy Report 2016.
Estonia 3. Transitional own funds disclosure according to Article 5 in EU Regulation No 1423/2013
EURt
31-Dec-16
B
C
1
2
3
3a
4
5
5a
6
7
9
Retained earnings
115 982
1 310 666
20 284
21 841
Amount of qualifying items referred to in Article 484 (3) and the related share premium accounts subject
to phase out from CET1
Empty set in the EU
SWEDBANK
26 (1), 27, 28, 29, EBA
list 26 (3)
EBA list 26 (3)
EBA list 26 (3)
EBA list 26 (3)
26 (1) (c)
26 (1)
26 (1) (f)
486 (2)
483 (2)
84, 479, 480
26 (2)
1 468 773
-1 802
-1 319
34, 105
36 (1) (b), 37, 472 (4)
89
Appendix Estonia CS
10
11
Deferred tax assets that rely on future profitability excluding those arising from temporary difference
(net of related tax liability where the conditions in Article 38 (3) are met) (negative amount)
12
13
14
15
16
17
Direct, indirect and synthetic holdings of the CET1 instruments of financial sector entities where those
entities have reciprocal cross-holdings with the institution designed to inflate artificially the own funds
of the institution (negative amount)
18
Direct, indirect and synthetic holdings of the CET1 instruments of financial sector entities where the
institution does not have a significant investment in those entities (amount above 10% threshold and net
of eligible short positions) (negative amount)
19
20
institution has a significant investment in those entities (amount above 10% threshold and net of eligible
Empty set in the EU
20a
Exposure amount of the following items which qualify for a RW of 1250%, where the institution opts for
the deduction alternative
20b
20c
20d
21
22
Deferred tax assets arising from temporary difference (amount above 10% threshold, net of related tax
23
24
of which: direct and indirect holdings by the institution of the CET1 instruments of financial sector
entities where the institution has a significant investment in those entities
Empty set in the EU
25
25a
36 (1) (c), 38, 472 (5)
33 (a)
-22 726
36 (1) (g), 44, 472 (9)
36 (1) (h), 43, 45, 46,
49 (2) (3), 79, 472 (10)
36 (1) (i), 43, 45, 47,
48 (1) (b), 49 (1) to (3),
79, 470, 472 (11)
36 (1) (k)
36 (1) (k) (i), 89 to 91
36 (1) (k) (ii), 243 (1)
(b), 244 (1) (b), 258
36 (1) (k) (iii), 379 (3)
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
48 (1)
36 (1) (i), 48 (1) (b),
470, 472 (11)
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
36 (1) (a), 472 (3)
25b
26
Regulatory adjustments applied to Common Equity Tier 1 in respect of amounts subject to pre-CRR
treatment
26a
26b
27
28
29
Amount to be deducted from or added to Common Equity Tier 1 capital with regard to additional filters
and deductions required pre-CRR
30
31
32
33
to phase out from AT1
34
35
36
36 (1) (d), 40, 159, 472
(6)
32 (1)
33 (1) (b) (c)
36 (1) (e), 41, 472 (7)
36 (1) (f), 42, 472 (8)
36 (1) (l)
481
36 (1) (j)
-25 847
1 442 926
51, 52
Qualifying Tier 1 capital included in consolidated AT1 capital (including minority interest not included in
row 5) issued by subsidiaries and held by third parties
486 (3)
483 (3)
85, 86, 480
486 (3)
52 (1) (b), 56 (a), 57,
475 (2)
37
38
Holdings of the AT1 instruments of financial sector entities where those entities have reciprocal crossholdings with the institution designed to artificially inflate the own funds of the institution (negative
amount)
39
Direct, indirect and synthetic holdings of the AT1 instruments of financial sector entities where the
56 (c), 59, 60, 79, 475
(4)
40
56 (d), 59, 79, 475 (4)
41
Regulatory adjustments applied to Additional Tier 1 capital in respect of amounts subject to pre-CRR
treatment and transitional treatments subject to phase-out as prescribed in Regulation (EU) No
585/2013 (i.e. CRR residual amounts)
41a
Residual amounts deducted from Additional Tier 1 capital with regard to deduction from Common Equity
Tier 1 capital during the transitional period pursuant to article 472 of Regulation (EU) No 575/2013
41b
Residual amounts deducted from Additional Tier 1 capital with regard to deduction from Tier 2 capital
41c
Amounts to be deducted from added to Additional Tier 1 capital with regard to additional filters and
deductions required pre-CRR
SWEDBANK
56 (b), 58, 475 (3)
472, 473(3)(a), 472
(4), 472 (6), 472 (8) (a),
472 (9), 472 (10) (a),
472 (11) (a)
477, 477 (3), 477 (4)
(a)
467, 468, 481
90
Appendix Estonia CS
42
43
44
45
46
47
to phase out from T2
48
49
50
51
56 (e)
1 442 926
62, 63
486 (4)
483 (4)
Qualifying own funds instruments included in consolidated T2 capital (including minority interest and
AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third party
87, 88, 480
486 (4)
62 (c) & (d)
52
Direct and indirect holdings by an institution of own T2 instruments and subordinated loans (negative
amount)
53
Holdings of the T2 instruments and subordinated loans of financial sector entities where those entities
have reciprocal cross-holdings with the institutions designed to artificially inflate the own funds of the
institution (negative amount)
66 (b), 68, 477 (3)
54
Direct, indirect and synthetic holdings of the T2 instruments and subordinated loans of financial sector
entities where the institution does not have a significant investment in those entities (amount above
10% threshold and net of eligible short positions) (negative amount)
66 (c), 69, 70, 79, 477
(4)
54a
63 (b) (i), 66 (a), 67,
477 (2)
54b
55
entities where the institution has a significant investment in those entities (net of eligible short
positions) (negative amounts)
56
Regulatory adjustments applied to Tier 2 in respect of amounts subject to pre-CRR treatment and
transitional treatments subject to phase out as prescribed in Regulation (EU) No 575/2013 (i.e. CRR
residual amounts)
56a
Residual amounts deducted from Tier 2 capital with regard to deduction from Common Equity Tier 1
capital during the transitional period pursuant to article 472 of Regulation (EU) No 575/2013
472, 472(3)(a), 472
(4), 472 (6), 472 (8),
472 (9), 472 (10) (a),
472 (11) (a)
56b
Residual amounts deducted from Tier 2 capital with regard to deduction from Additional Tier 1 capital
475, 475 (2) (a), 475
(3), 475 (4) (a)
56c
57
58
59
Amounts to be deducted from or added to Tier 2 capital with regard to additional filters and deductions
required pre-CRR
Tier 2 (T2) capital
59a
Risk-weighted assets in respect of amounts subject to pre-CRR treatment and transitional treatments
subject to phase out as prescribed in Regulation (EU) No 575/2013 (i.e. CRR residual amount)
60
467, 468, 481
1 442 926
Of which:… items not deducted from CET1 (Regulation (EU) No 575/2013 residual amounts) (items to be
detailed line by line, e.g. Deferred tax assets that rely on future profitability net of related tax liability,
indirect holdings of own CET1, etc.)
472, 472 (5), 472 (8)
(b), 472 (10) (b), 472
(11) (b)
Of which:…items not deducted from AT1 items (Regulation (EU) No 575/2013 residual amounts) (items to
be detailed line by line, e.g. Reciprocal cross-holdings in T2 instruments, direct holdings of non-significant
investments in the capital of other financial sector entities, etc.)
475, 475 (2) (b), 475
(2) ©, 475 (4) (b)
Items not deducted from T2 items (Regulation (EU) No 575/2013 residual amounts) (items to be detailed
line by line, e.g. Indirect holdings of own T2 instruments, indirect holdings of non-significant investments
in the capital of other financial sector entities, indirect holdings of significant investments in the capital
61
62
63
64
65
66
67
Institution-specific buffer requirement (CET1 requirement in accordance with article 92 (1) (a) plus capital
conservation and countercyclical buffer requirements plus a systemic risk buffer, plus systemically
important institution buffer expressed as a percentage of total risk exposure amount) 1)
67a
68
69
70
71
66 (d), 69, 79, 477 (4)
of which: Global Systemically Important Institution (G-SII) or Other Systemically Important Institution (OSII) buffer
477, 477 (2) (b), 477
(2) (c), 477 (4) (b)
3 764 612
38.3%
38.3%
38.3%
92 (2) (a), 465
92 (2) (b), 465
92 (2) (c)
10.00%
2.5%
0%
1.0%
CRD 128, 129, 140
2%
30.3%
CRD 131
CRD 128
36 (1) (h), 45, 46, 472
(10), 56 (c), 59, 60,
475 (4), 66 (c), 69, 70,
477 (4)
72
Direct and indirect holdings of the capital of financial sector entities where the institution does not have
a significant investment in those entities (amount below 10% threshold and net of eligible short
positions)
73
74
Direct and indirect holdings of the CET1 instruments of financial sector entities where the institution has
positions)
Empty set in the EU
36 (1) (i), 45, 48, 470,
472 (11)
75
Deferred tax assets arising from temporary difference (amount below 10 % threshold, net of related tax
liability where the conditions in Article 38 (3) are met)
36 (1) (c), 38, 48, 470,
472 (5)
SWEDBANK
91
Appendix Estonia CS
76
Credit risk adjustments included in T2 in respect of exposures subject to standardised approach (prior to
the application of the cap)
77
62
62
78
79
Credit risk adjustments included in T2 in respect of exposures subject to internal ratings-based approach
(prior to the application of the cap)
62
62
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2014
and 1 Jan 2022)
80
81
82
83
84
85
484 (3), 486 (2) & (5)
484 (3), 486 (2) & (5)
484 (4), 486 (3) & (5)
484 (4), 486 (3) & (5)
484 (5), 486 (4) & (5)
484 (5), 486 (4) & (5)
CET1 capital ratio as reported, less minimum requirement of 4.5% (excluding buffer requirements) and less any CET1 items used to meet the Tier 1 and total capital
requirements.
The corresponding information for Swedbank Consolidated Situation can be found in table A1 in the Appendix A in the Swedbank Risk Management and Capital Adequacy
Report 2016.
1)
2)
Note: Table 4, Subordinated debt: Capital instruments main features, is not relevant for Swedbank Estonia CS.
Estonia 5a. Amount of institution-specific countercyclical capital buffer as of 31 December 2016
EURt
2016
Total REA
Institution-specific countercyclical buffer
rate
3 764 612
0.00%
The corresponding information for Swedbank Consolidated Situation can be found in table 2-4a in the Swedbank Risk Management and Capital Adequacy Report 2016.
Estonia 5b. Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer
as of 31 December 2016
Estonia
Exposure
value for
SA
Exposure value
for IRB
Sum of
long and
short
position
of trading
book
Value of
trading
book
exposure
for
internal
models
Securitisation
exposures
Exposu
re
value
for SA
Exposu
re
value
for IRB
Of which:
General
credit
exposures
Of which:
Trading book
exposures
Of which:
Securitisa
tion
exposures
Total
Own
funds
requireme
nt
weights
Countercycl
ical capital
buffer rate
553 176
6 849 300
301
0
255 823
24
255 847
98.54%
0.00%
Latvia
36
23 908
15
0
1 288
1
1 289
0.50%
0.00%
Finland
0
28 654
0
0
1 260
0
1 260
0.50%
0.00%
Russia
11
3 095
0
0
183
0
183
0.07%
0.00%
Cypros
Antigua
and
Barbuda
Sweden
9 855
771
0
0
49
0
49
0.02%
0.00%
0
1 846
0
0
0
0
0
0.00%
0.00%
133
2 526
12
0
84
0
84
0.03%
1.50%
Ireland
Cayman
Islands
Norway
0
1 970
6
0
57
0
57
0.02%
0.00%
6 701
65
0
0
1
0
1
0.00%
0.00%
0
1 188
0
0
24
0
24
0.01%
1.50%
Other
2 510
13 130
1 284
0
488
362
850
0.31%
0.00%
Total
572 422
6 926 453
1 618
0
259 257
387
0
0
0
259 644
The corresponding information for Swedbank Consolidated Situation can be found in table 2-4b in the Swedbank Risk Management and Capital Adequacy Report 2016.
SWEDBANK
92
Appendix Estonia CS
Estonia 6. Capital requirement
EURt
Trading book
FX risk
2016
2015
40 587
223 547
33 984
212 096
493
493
692
603
493
181
36 361
301 169
603
89
402
36 210
283 384
3 301 680
0
6 157
2 265
454 510
3 764 612
3 075 990
0
8 651
5 026
452 629
3 542 296
Estonia 7. Risk Exposure Amount and Own funds requirement, 31 December 2016
EURt
Credit risks, STD
Corporate exposures
Retail exposures
Equity exposures
Other items
Credit risks, IRB
Corporate exposures
Retail exposures
Securitisation
Settlement risks
Market risks
Trading book
Operational risks
Total
SWEDBANK
Risk
exposure
amount
507 339
Own funds
requirement
18 929
1 514
14 791
75 283
62 396
1 183
6 023
4 992
34
3
282 782
53 124
2 794 341
27 244
1 892 845
906
11 786
26 431
41 484
0
847 273
480 857
366 415
22 623
4 250
223 547
2 180
151 428
72
943
2 114
3 319
0
67 782
38 469
29 313
26 979
2 158
6 157
6 157
6 157
493
493
0
493
2 265
454 510
181
36 361
454 510
3 764 612
36 361
301 169
1)
40 587
93
Appendix Estonia CS
Estonia 8. Credit risk: Remaining maturity in specialised lending
31 December 2016
EURt
Less than 2.5 years
2.5 years or more
Category 1
Category 2
Category 3
Category 4
Category 5
56
1 254
3 146
10 648
4 276
18 708
228
16 366
272
20 331
Estonia 9. Credit risk, Outstanding exposures by geographical area*
31 December 2016
IRB approach
Retail mortgages
Retail other
Corporate
Institutions
Other
Govts and
central banks
Local govts
or local
authorities
Other
Total
Sweden
1 202
151
1 160
1
12
0
0
70 593
73 119
Estonia
2 951 612
792 636
3 000 033
168
104 305
2 428 310
94 646
471 601
9 843 311
475
110
23 320
0
2
0
0
62
23 969
83
63
0
0
0
0
0
890
1 036
1 081
99
0
1
8
1
0
2 252
3 442
272
16
0
2 470
0
0
0
0
2 758
4 037
1 938
22 629
1
50
0
0
0
28 655
EURt
Latvia
Lithuania
Norway
Denmark
Finland
USA
1 119
50
0
16 055
0
0
0
61 792
79 016
Other
12 718
2 246
4 956
124 230
76
82 690
0
95 985
322 901
Total
2 972 599
797 309
3 052 098
142 926
104 453
2 511 001
94 646
703 175
10 378 207
* Exposures to customers in the country. For institutions exposures, the country of origin where the customer’s head office is located is used for all exposures.
Estonia 10. Credit risk, Outstanding exposures by industry
31 December 2016
EURt
Private mortgage
IRB approach
Retail mortgages
Retail other
Corporate
Institutions
Other
Govts and
central banks
Local govts
or local
authorities
Other
Total
2 932 358
0
0
0
0
0
0
0
2 932 358
0
0
0
0
0
0
0
0
0
Private other
0
602 966
10 981
0
44 262
0
0
0
658 209
2 376
15 197
191 229
0
1 712
0
0
0
210 514
Manufacturing
2 712
26 930
473 327
0
6 767
0
0
2 568
512 304
2 589
4 919
164 190
0
1 977
169 416
91 186
9 926
444 203
176 292
Construction
2 704
26 896
138 229
0
7 835
0
0
628
Retail
6 057
42 070
262 676
0
16 141
0
0
12 146
339 090
Transportation
1 195
24 703
214 438
0
6 826
11
7
76
247 256
0
15
61 518
0
0
0
0
0
61 533
2 121
5 715
81 677
0
902
0
0
17
90 432
1 445
5 540
19 547
0
2 789
21
0
989
30 331
506
1 334
44 270
0
257
0
0
200 866
247 233
1 308 048
Property management
8 804
12 180
1 056 610
0
2 011
49 686
2 433
176 324
1 442
835
21 469
0
77
0
0
20 854
44 677
Commercial
1 012
2 628
585 578
0
298
0
0
6 843
596 359
171 060
Other
Credit institutions
Other exposures
Total
143
594
170 149
0
174
0
0
0
6 207
8 123
279 414
0
1 462
49 686
2 433
148 627
495 952
8 995
26 888
329 481
0
12 590
89
971
65 283
444 297
737
1 956
3 925
0
384
48
49
25 402
32 501
0
0
0
142 926
0
2 291 730
0
168 593
2 603 249
0
0
0
0
0
0
0
40 357
40 357
2 972 599
797 309
3 052 098
142 926
104 453
2 511 001
94 646
703 175
10 378 207
Lender’s industry displayed in the case of an eligible guarantee since 31 December 2015.
SWEDBANK
94
Appendix Estonia CS
Estonia 11. Credit risk, Outstanding exposures to SME corporates, by industry
31 December 2016
IRB approach
EURt
Private mortgage
Govts and
central
banks
Local govts or
local
authorities
Retail mortgages
Retail other
Corporate
Other
Total
3 280
0
0
0
3 280
Institutions
Other
0
0
0
0
0
Private other
0
8 496
10 624
0
19 120
2 354
15 123
62 001
0
79 478
Manufacturing
2 610
25 493
70 931
2 019
101 053
2 589
4 914
10 799
2 263
20 565
Construction
2 653
25 945
24 777
277
53 652
Retail
5 918
41 144
64 663
155
111 880
Transportation
1 191
24 100
40 774
48
66 113
0
15
0
0
15
2 120
5 474
11 035
17
18 646
12 341
1 445
5 299
5 578
19
506
1 305
1 999
2
3 812
Property management
8 738
11 593
93 152
173 708
287 191
1 442
831
27
20 853
23 153
Commercial
1 012
2 599
37 794
4 250
45 655
143
594
26 144
0
26 881
6 141
7 569
29 187
148 605
191 502
8 922
26 473
23 951
2 050
61 396
737
1 911
2 251
2 937
7 836
Credit institutions
0
0
0
0
0
Other exposures
0
0
0
0
0
43 063
197 285
422 535
183 495
846 378
Other
Total
0
0
0
0
Estonia 12. Collateral and credit risk mitigation techniques
31 December 2016
IRB approach
Local govts or
local
authorities
Other
Total
0
0
0
2 795 639
310
0
0
445
16 425
8
0
37
13 916
107 502
EURt
Retail mortgages
Retail other
Corporate
Institutions
Other
Exposures covered by physical collateral*
2 695 226
7 750
92 663
0
Exposures covered by financial collateral
0
0
15 670
Exposures covered by guarantees and
credit derivatives**
0
72 150
21 391
Govts and
central banks
*Mainly collaterals in residential properties.
Estonia 13. Credit risk, Outstanding exposures by maturity*
31 December 2016
EURt
Payable on demand
IRB approach
Retail mortgages**
Retail other
Corporate
Institutions
Other
Govts and
central banks
Local govts or
local
authorities
Other
Total
3 683
6 135
43 149
66
741
199
13
92 844
146 830
2 123
21 253
124 108
10 003
4 654
8 515
52
168 106
338 814
15 669
118 982
609 725
5 594
15 785
59 946
3 455
71 213
900 369
1-5 years
128 101
600 223
1 966 341
80 558
83 185
124 435
20 977
67 537
3 071 357
5-10 years
321 536
42 518
286 470
0
88
36 385
59 331
50 573
796 901
> 10 years
2 501 487
6 649
6 850
0
0
72 480
10 818
105 002
2 703 286
< 3 months
3-12 months
Without maturity
Total
0
1 549
15 455
46 705
0
2 209 041
0
147 900
2 420 650
2 972 599
797 309
3 052 098
142 926
104 453
2 511 001
94 646
703 175
10 378 207
* Maturity is the remaining contractual maturity as of 31 December, except for contracts where the terms and conditions are set periodically, for example mortgages. In
these cases, the time to the next change in terms and conditions is used as maturity, in accordance with the guidelines from the Swedish Financial Supervisory Authority.
** Looking at the exposure class of retail mortgage exposure, the majority of loans relate to private mortgages and have a contracted floating interest rate, i.e. a threemonth fixed rate, after which the loans roll over to a new three-month fixed rate. Compared to the Baltic countries, mortgage loans in Sweden tend to have substantially
shorter contracted interest rate fixing periods. The majority of mortgage loans that have a remaining maturity of over 10 years represent lending in the Baltic countries.
SWEDBANK
95
Appendix Estonia CS
Estonia 14. Credit risk, Exposures* and average exposure
31 December 2016
IRB approach
Retail mortgages
Retail other
Corporate
Institutions
Other
Govts and
central
banks
Local govts
or local
authorities
Other
Total
2 972 599
797 309
3 052 098
142 926
104 453
2 511 001
94 646
703 175
10 378 207
2 972 600
869 265
3 070 038
142 726
104 453
2 408 793
94 163
717 060
10 379 098
Average exposure
2 917 658
765 555
3 032 837
137 073
97 161
2 242 997
92 778
913 449
10 199 508
EURt
Total exposure
Estonia 15. Credit risk, Change in provisions
EURt
Opening balance
New provisions
Portfolio provisions for loans that are not impaired
Group adjustments
Change in exchange rates and other adjustments
Closing balance
Recoveries on credit risk adjustments recorded directly to the statement of profit or loss
Specific credit risk adjustments recorded directly to the statement of profit or loss
2016
2015
62 468
56 668
4 041
-506
-5 245
4 476
5 520
-2 704
-3 998
6 383
464
65 698
599
62 468
-7 740
10 214
-7 916
3 994
Estonia 16. Impaired* and past-due** loans, by significant geographical area
31 December
2016
losses***
Individual
provision
change
and
writeoffs
Portfolio
provision
change
Total
effect
on
result
Impaired
loans gross
5-30
days
31-60
days
61-90
days
> 90
days
Total
impaired
and pastdue loans
Estonia
119 841
61 249
11 231
1 979
182
194 482
47 113
18 585
65 698
11 654
1 832
13 486
Total
119 841
61 249
11 231
1 979
182
194 482
47 113
18 585
65 698
11 654
1 832
13 486
EURt
Individual
provisions
Portfolio
provisions
Total
provisio
ns
* Loans where payments are unlikely to be made in accordance with contract terms. Such loans are not considered impaired if there is collateral that covers the full amount
of the loan and any late fees by a safe margin.
** Past-due loans refer to overdrafts or loans where, according to the terms of the loan, amounts due for payment have not been paid.
*** Impaired loans are measured, individually and collectively, to determine whether provisioning is needed. When provisioning is needed, a calculation is made between the
loan’s carrying amount and the present value of estimated future cash flows discounted by the loan’s effective interest rate.
**** Effect on result, excl. recoveries for write-offs from previous years.
SWEDBANK
96
Appendix Estonia CS
Estonia 17. Impaired* and past-due** loans, by industry
31 December
2016
EURt
Private mortgages
Tenant owner
associations
Private other
Agriculture,
forestry, fishing
Manufacturing
Public sector and
utilities
Construction
Retail
Transportation
Shipping and
offshore
Hotels and
restaurants
Information and
communication
Finance and
insurance
Property
management *****
Residential
properties
Commercial
properties
Industrial and
warehouse
properties
Other property
management
Professional
services
Other corporate
lending
Credit institutions
Total Swedbank
Principal past-due loans, that are not
impaired
Impaired
loans
gross
26 518
5-30
days
43 819
31-60
days
6 492
61-90
days
1 345
losses***
> 90
days
0
Total
impaired
and
pastdue
loans
78 174
Individual
provisions
3 197
Portfolio
provisions
2 908
Total
provisions
6 105
Individual
provision
change
and writeoffs
461
Portfolio
provision
change
108
Total
effect on
result
569
0
0
0
0
0
0
0
0
0
791
-791
0
1 241
7 912
1 292
333
23
10 801
316
1 625
1 941
-972
469
-503
3 360
473
495
39
1
4 368
743
534
1 277
447
-1
446
6 921
1 090
1 503
107
0
9 621
5 202
9 736
14 938
-843
7 720
6 877
-243
5
3 539
0
0
0
3 544
1
177
178
199
-442
1 193
392
153
93
0
1 831
282
86
368
57
-292
-235
15 952
1 426
416
57
37
17 888
13 847
412
14 259
6 617
-2 231
4 386
2 555
1 464
546
0
0
4 565
1 410
-1 041
369
2 456
-1 553
903
2 700
0
0
0
0
2 700
446
1 275
1 721
-1 249
1 249
0
237
26
6
0
0
269
53
76
129
35
-79
-44
204
34
10
0
0
248
46
25
71
5
-56
-51
0
34
0
0
1
35
0
237
237
1 893
-1 757
136
20 278
382
149
0
0
20 809
6 213
1 568
7 781
-2 634
-337
-2 971
3
6
0
0
0
9
1
28
29
n.a
n.a
n.a
26
159
0
0
0
185
6
450
456
n.a
n.a
n.a
2 225
217
149
0
0
2 591
873
256
1 129
n.a
n.a
n.a
18 024
0
0
0
0
18 024
5 333
834
6 167
n.a
n.a
n.a
38 626
601
163
5
96
39 491
15 346
326
15 672
1 455
-415
1 040
51
57
6
0
24
138
11
641
652
2 936
240
3 176
0
0
0
0
0
0
0
0
0
0
0
0
119 841
61 249
11 231
1 979
182
194 482
47 113
18 585
65 698
11 654
1 832
13 486
***** For Property management, the split into sub-segments for provisions for anticipated loan losses is not applicable.
SWEDBANK
97
Appendix Estonia CS
Estonia 18. Leverage ratio
Summary reconciliation of accounting assets and leverage ratio exposures
EURt
2016
9 776 527
Adjustment for fiduciary assets recognised on the balance sheet pursuant to the applicable accounting framework but excluded from the leverage ratio
exposure measure in accordance with Article 429(13) of Regulation (EU) No 575/2013
34 910
454 448
575/2013
Other adjustments
-25 847
10 240 038
Leverage ratio common disclosure
EURt
2016
9 753 630
-25 847
9 727 783
19 909
36 698
56 607
1 200
1 200
1 288 874
-834 426
454 448
Tier 1 capital
1 442 926
10 240 038
Leverage ratio
14.09%
Split-up of on balance sheet exposures (excluding derivatives, SFTs and exempted exposures)
EURt
2016
9 753 630
2 317
9 751 313
70 788
2 358 683
249 335
114 854
2 909 195
855 133
2 744 062
of which corporate
72 899
376 364
For a description of Swedbank Estonia’s process for managing the risk of excess leverage, please see Swedbank Risk Management and Capital Adequacy Report 2016, page
12.
SWEDBANK
98
Appendix Latvia CS
Appendix: Swedbank Latvia Consolidated
Situation (CS)
Introduction
subsidiaries. Information for Swedbank Latvia Consolidated
organisational and legal structure of Swedbank Latvia
measures undertaken to manage operations in Swedbank
Swedbank Latvia Consolidated Situation is disclosed in the
otherwise stated.
SWEDBANK
including capital buffers and potential Pillar 2 add-ons. Besides
a capital conservation buffer of 2.5%. the Latvian Financial
Supervisory Authority (FSA) has identified other systemically
important financial institutions for which additional capital
requirments will be introduced starting from 2017. Swedbank
Latvia CS has been identified as systemically important
institution and will apply buffer requirement for other
systemically important institutions (O-SII) of 1% starting from
30 June 2017 and of 2% from 30 June 2018. The capital
conservation buffer came into force in 2014. Additionally, the
countercyclical capital buffer of 0% is applied starting 1
February 2016 and assessed on quarterly basis. This means
that the capital requirement for Swedbank Latvia CS in Pillar
1, as a percentage of REA, amounts to 9% (incl. O-SII of 2%)
for CET1 capital and 12.5% (incl. O-SII of 2%) for total capital.
In addition, the Swedbank Latvia CS must comply with the
capital requirement in Pillar 2. The structure of Pillar 2
requirement has been changed in the 2016 Supervisory
Review and Evaluation Process (SREP). The Pillar 2 capital
requirement has been broken down into Pillar 2 requirement
(P2R) of 1% and Pillar 2 capital guidance (P2G) of 1%. Banks
are expected to treat a failure to meet the P2G as an early
warning signal, but not as an indicator. Further, the P2G does
not set the limitation to Maximum Distributable Amount.Still,
capital requirement for Swedbank Latvia CS is equivalent to a
CET 1 capital ratio of 11% (incl. O-SII of 2%) and total capital
ratio of 14.5% (incl. O-SII of 2%). As a backstop rule,
Swedbank Latvia CS also needs to comply with the Basel 1
floor, i.e. 80% of the capital requirements according to Basel 1.
99
Appendix Latvia CS
Estimated capital requirements1, Latvia Consolidated Situation
%
CET1
AT1
T2
Total capital
Pillar 1
Minimum requirement
O-SII buffer
(P1)2
4.5
1.5
2.0
8.0
2.0
2.0
2.5
2.5
Countercyclical buffer (CCyB)3
0.0
0.0
9.0
1.5
2.0
12.5
2.0
0.0
0.0
2.0
Pillar 24
1.0
1.0
1.0
1.0
11.0
1.5
2.0
14.5
23.25%
0.0
0.0
23.25%
1) Swedbank's estimate based on Latvian FSA's announced capital requirements, including fully implemented buffers and Pillar 2 add-on.
2) Swedbank Latvia CS has been identified as systemically important financial institution. However, O-SII buffer will be applied only from year 2017/2018 (1% as of 30 June
2017, 2% as of 30 June 2018). In December 2016, the Latvian FSA’s adopted decisions on reciprocation of Estonian and Belgian macro-prudential measures on a crossborder basis. The decision will be applied from April, 2017. However, the estimated impact to total capital requirements is minor (0.0007% as of Dec. 2016).
3) The estimate is based on Swedbank's relevant exposures and the calculation takes into account the applied countercyclical buffer value of 0%.
4) Individual Pillar 2 charge has been broken down into Pillar 2 requirement (P2R) and Pillar 2 capital guidance (P2G) based on SREP report 29 September 2016.
At 31 December 2016, Swedbank Latvia CS’s Common Equity
Tier 1 and Total Capital ratio were 23.25% and 23.25%,
Latvia CS’s leverage ratio was 10.59% (17.88% is based on
average three months calculation and 17.71% on year-end) at
end-2016 (end-2015). The decline in capital adequacy and also
leverage ratios over the year is related to decrease of the
capital base, a combined consequence of dividend payout and
paid-in capital reduction accomplished in 2016. The actual
total capital at end-2016 exceeded the capital requirement
according to the Basel 1 floor by EUR 403m. Hence, the
capitalisation of Swedbank Latvia CS is maintained above the
capital requirements according to CRR/CRDIV and the Basel 1
floor with adequate buffers. In the 2016 Supervisory Review
SWEDBANK
and Evaluation Process (SREP), Swedbank Latvia CS was
assessed to be broadly adequately capitalised and able to
comply with regulatory capital requirements going forward.
in the EU in 2014 and has been transposed to Latvian national
laws as of 1 July 2015. The directive includes a requirement on
banks to hold a minimum level of own funds and eligible
liabilities (MREL). MREL requirement shall enter into force from
2019, however have not been finalised at end-2016.
100
Appendix Latvia CS
Latvia 1. Capital adequacy
EURt
2016
2015
Tier 1 capital
Total capital
Surplus of capital
580 043
580 043
580 043
2 494 419
199 554
380 489
23.25%
23.25%
23.25%
1 030 754
1 030 754
1 030 754
2 566 182
205 295
825 459
40.17%
40.17%
40.17%
199 267
188 973
602 233
402 966
1 054 780
865 807
floor
1) Total minimum capital requirement under Pillar 1, i.e. 8% of total risk exposure amount.
Latvia 2. Total capital
Note
EURt
2016
2015
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Cash flow hedges
Goodwill
Deferred tax assets
Intangible assets
Total CET1 capital
611 049
0
0
0
0
0
-538
0
-2 032
-6 246
-22 190
0
0
580 043
1 062 951
0
0
0
0
0
-223
0
-1 249
-6 699
-24 026
0
0
1 030 754
15
16
0
580 043
0
1 030 754
17
18
Tier 2 capital
Total capital
0
580 043
0
1 030 754
*) according to transitional rules (CRR 575/2013 article 478 (2) and Financial and Capital Market Commission Regulations No. 285), 10% deduction is applied to DTA in 2015.
Latvia 3. Transitional own funds disclosure according to Article 5 in EU Regulation No 1423/2013
EURt
31-Dec-16
B
C
1
2
3
3a
4
5
5a
6
7
9
26 (1), 27, 28, 29, EBA
list 26 (3)
EBA list 26 (3)
EBA list 26 (3)
EBA list 26 (3)
26 (1) (c)
26 (1)
26 (1) (f)
Retained earnings
575 000
N/A
N/A
N/A
35 570
479
N/A
N/A
N/A
N/A
N/A
611 049
486 (2)
483 (2)
84, 479, 480
26 (2)
-538
-6 246
N/A
34, 105
36 (1) (b), 37, 472 (4)
Empty set in the EU
SWEDBANK
101
Appendix Latvia CS
10
11
(net of related tax liability where the conditions in Article 38 (3) are met) (negative amount)**
12
13
14
15
16
17
-2 032
N/A
36 (1) (c), 38, 472 (5)
33 (a)
-22 190
N/A
N/A
N/A
N/A
36 (1) (d), 40, 159, 472
(6)
32 (1)
33 (1) (b) (c)
36 (1) (e), 41, 472 (7)
36 (1) (f), 42, 472 (8)
N/A
36 (1) (g), 44, 472 (9)
18
N/A
36 (1) (h), 43, 45, 46,
49 (2) (3), 79, 472 (10)
19
20
Empty set in the EU
N/A
N/A
20a
N/A
36 (1) (k)
20b
N/A
36 (1) (k) (i), 89 to 91
20c
N/A
36 (1) (k) (ii), 243 (1)
(b), 244 (1) (b), 258
20d
N/A
36 (1) (k) (iii), 379 (3)
21
22
N/A
N/A
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
48 (1)
23
24
Empty set in the EU
N/A
N/A
25
N/A
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
25a
0
36 (1) (a), 472 (3)
36 (1) (l)
25b
N/A
26
treatment
N/A
26a
N/A
26b
27
28
29
30
31
32
33
34
35
36
36 (1) (i), 43, 45, 47,
48 (1) (b), 49 (1) to (3),
79, 470, 472 (11)
36 (1) (i), 48 (1) (b),
470, 472 (11)
N/A
N/A
-31 006
580 043
481
36 (1) (j)
N/A
N/A
N/A
51, 52
N/A
N/A
486 (3)
483 (3)
N/A
N/A
N/A
85, 86, 480
486 (3)
37
N/A
52 (1) (b), 56 (a), 57,
475 (2)
38
amount)
N/A
56 (b), 58, 475 (3)
39
N/A
56 (c), 59, 60, 79, 475
(4)
40
N/A
56 (d), 59, 79, 475 (4)
41
N/A
41a
N/A
472, 473(3)(a), 472
(4), 472 (6), 472 (8) (a),
472 (9), 472 (10) (a),
472 (11) (a)
41b
N/A
477, 477 (3), 477 (4)
(a)
41c
N/A
467, 468, 481
SWEDBANK
102
Appendix Latvia CS
42
43
44
45
46
47
48
49
50
51
N/A
N/A
N/A
580 043
56 (e)
N/A
62, 63
N/A
N/A
486 (4)
483 (4)
N/A
N/A
N/A
N/A
87, 88, 480
486 (4)
62 (c) & (d)
52
amount)
N/A
63 (b) (i), 66 (a), 67,
477 (2)
53
N/A
66 (b), 68, 477 (3)
54
N/A
66 (c), 69, 70, 79, 477
(4)
54a
N/A
54b
N/A
55
N/A
56
residual amounts)
N/A
56a
N/A
472, 472(3)(a), 472
(4), 472 (6), 472 (8),
472 (9), 472 (10) (a),
472 (11) (a)
56b
N/A
475, 475 (2) (a), 475
(3), 475 (4) (a)
56c
57
58
59
required pre-CRR
Tier 2 (T2) capital
59a
0
Deferred tax assets that rely on future profitability net of related tax liability
0
0
472, 472 (5), 472 (8)
(b), 472 (10) (b), 472
(11) (b)
472 (5)
N/A
475, 475 (2) (b), 475
(2) ©, 475 (4) (b)
60
in the capital of other financial sector entities, indirect holdings of significant investments in the capital
61
62
63
64
65
66
67
N/A
N/A
N/A
580 043
N/A
2 494 419
66 (d), 69, 79, 477 (4)
467, 468, 481
477, 477 (2) (b), 477
(2) (c), 477 (4) (b)
23.25%
23.25%
23.25%
92 (2) (a), 465
92 (2) (b), 465
92 (2) (c)
7.0%
2.5%
0.0%
0.0%
CRD 128, 129, 140
0.0%
15.3%
CRD 131
CRD 128
72
Direct and indirect holdings of the capital of financial sector entities where the institution does not have
positions)
N/A
36 (1) (h), 45, 46, 472
(10), 56 (c), 59, 60,
475 (4), 66 (c), 69, 70,
477 (4)
73
74
positions)
Empty set in the EU
N/A
N/A
67a
68
69
70
71
SWEDBANK
36 (1) (i), 45, 48, 470,
472 (11)
103
Appendix Latvia CS
75
804
36 (1) (c), 38, 48, 470,
472 (5)
76
77
N/A
N/A
62
62
78
79
N/A
N/A
62
62
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2014
and 1 Jan 2022)
80
N/A
484 (3), 486 (2) & (5)
81
82
83
84
85
N/A
N/A
N/A
N/A
N/A
484 (3), 486 (2) & (5)
484 (4), 486 (3) & (5)
484 (4), 486 (3) & (5)
484 (5), 486 (4) & (5)
484 (5), 486 (4) & (5)
requirements.
Report 2016.
1)
2)
Note: Table 4, Subordinated debt: Capital instruments main features, is not relevant for Swedbank Latvia CS.
Latvia 5a. Amount of institution-specific countercyclical capital buffer as of 31 December 2016
EURt
2016
Total REA
2 494 419
rate
0.00%
Latvia 5b. Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer as
of 31 December 2016
Exposure
value for SA
Exposure
value for
IRB
Trading book
exposure
Securitisation
exposures
Sum of
long
and
short
positio
n of
trading
book
Value of
trading
book
exposur
e for
internal
models
Exposur
e value
for SA
Exposur
e value
for IRB
Of which:
General
credit
exposure
s
Of which:
Trading
book
exposure
s
Of which:
Securitisatio
n exposures
Total
Own funds
requirement
weights
Countercyclic
al capital
buffer rate
Latvia
158 136
3 462 563
184
0
0
0
162 943
15
0
162 958
97.99%
0.00%
Russia
73
17 485
0
0
0
0
1 513
0
0
1 513
0.91%
0.00%
Israel
16
9 390
0
0
0
0
861
0
0
861
0.52%
0.00%
1 651
4 719
0
0
0
0
443
0
0
443
0.27%
0.00%
Lithuania
73
3 685
0
0
0
0
171
0
0
171
0.10%
0.00%
Sweden
81
1 754
0
0
0
0
66
0
0
66
0.04%
1.50%
USA
179
829
0
0
0
0
53
0
0
53
0.03%
0.00%
Germany
810
193
0
0
0
0
42
0
0
42
0.03%
0.00%
Ireland
427
472
0
0
0
0
28
0
0
28
0.02%
0.00%
Estonia
143
693
550
0
0
0
20
44
0
64
0.04%
0.00%
Norway
70
81
0
0
0
0
5
0
0
5
0.00%
1.50%
Other
861
2 586
0
0
0
0
105
0
0
105
0.06%
0.00%
Total
162 520
3 504 450
734
0
0
0
166 250
59
0
166 309
Great Britain
SWEDBANK
104
Appendix Latvia CS
Latvia 6. Capital requirement
EURt
Trading book
FX risk
2016
2015
8 761
163 375
0
0
273
273
0
273
0
62
27 082
199 553
6 792
170 863
0
0
563
563
0
563
0
79
26 998
205 295
2 151 712
0
3 417
770
338 520
2 494 419
2 220 688
0
7 036
989
337 469
2 566 182
Latvia 7. Risk Exposure Amount and Own funds requirement, as of 31 December 2016
EURt
Credit risks, STD
Corporate exposures
Retail exposures
Exposures in the form of units or shares in collective investment
undertakings
Equity exposures
Other items
Credit risks, IRB
Corporate exposures
Retail exposures
Securitisation
Settlement risks
Market risks
Trading book
Operational risks
Total
SWEDBANK
Risk
exposure
amount
109 519
21 375
3 661
577
0
0
12 160
12 358
21 483
28 010
4 048
0
0
0
0
Own funds
requirement
0
300
5 547
2 042 193
35 809
1 285 857
18
10 992
34 469
23 062
0
665 050
389 888
275 162
0
55 477
0
0
3 417
3 417
0
3 417
0
770
338 520
0
338 520
2 494 419
0
24
444
163 376
2 865
102 869
1
879
2 758
1 845
0
53 204
31 191
22 013
0
4 438
0
0
273
273
0
273
0
62
27 082
0
27 082
199 556
1)
8 763
1 710
293
46
0
0
973
989
1 719
2 241
324
0
0
0
0
105
Appendix Latvia CS
Latvia 8. Credit risk: Remaining maturity in specialised lending
31 December 2016
EURt
Less than 2.5 years
2.5 years or more
Category 1
Category 2
Category 3
Category 4
Category 5
2
24
73
12 157
11 439
18 534
3
9 222
3
55
Latvia 9. Credit risk: Outstanding exposures by geographical area*
31 December 2016
EURt
Sweden
IRB approach
Retail mortgages
329
Retail other
122
Corporate
1 302
Institutions
0
Other
0
Govts and
central banks
0
Local govts
or local
authorities
0
Other
49 891
Total
51 644
497
196
0
0
0
0
0
8 947
9 640
1 335 834
447 838
1 551 659
570
143 306
1 594 136
18 305
131 331
5 222 979
Lithuania
365
54
3 267
0
0
0
0
379
4 065
Norway
77
4
0
55
0
0
0
1 545
1 681
Denmark
222
20
0
4 137
0
0
0
42
4 421
17
5
0
0
0
0
0
10
32
401
30
398
4 556
0
0
0
33 657
39 042
Estonia
Latvia
Finland
USA
Other
11 051
620
6 836
114 662
0
0
0
100 609
233 778
Total
1 348 793
448 889
1 563 462
123 980
143 306
1 594 136
18 305
326 411
5 567 282
Latvia 10. Credit risk: Outstanding exposures by industry
31 December 2016
EURt
Private mortgage
IRB approach
Retail mortgages
1 338 445
Retail other
0
Corporate
0
Institutions
0
0
331 827
15 897
0
Private other
Govts and
central banks
0
Local govts
or local
authorities
0
Other
96 416
0
0
0
0
0
5 348
353 072
158 661
Other
0
0
Total
1 434 861
2 598
23 440
131 304
0
0
0
0
1 319
Manufacturing
670
13 060
248 012
0
0
0
0
3 013
264 755
507
3 778
75 711
0
0
235 988
8 941
29 305
354 230
Construction
Retail
Transportation
239
5 531
39 920
0
0
0
0
266
45 956
1 322
21 689
237 730
0
0
0
0
2 512
263 253
884
14 858
234 942
0
0
0
9 364
1 685
261 733
0
0
0
0
0
0
0
0
0
421
1 920
67 472
0
0
0
0
28
69 841
16 457
20
1 779
14 658
0
0
0
0
0
0
295
528
0
0
0
0
1 871
2 694
Property management
829
2 013
408 582
0
0
0
0
35
411 459
210
265
49 269
0
0
0
0
0
49 744
16
872
297 132
0
0
0
0
9
298 029
39 778
Commercial
Other
Credit institutions
Other exposures
Total
0
259
39 519
0
0
0
0
0
603
617
22 662
0
0
0
0
26
23 908
2 464
27 145
83 265
0
0
0
0
16 954
129 828
394
1 554
5 441
0
0
0
0
568
7 957
0
0
0
123 980
0
1 357 737
0
162 535
1 644 252
0
0
0
0
143 306
411
0
4 556
148 273
1 348 793
448 889
1 563 462
123 980
143 306
1 594 136
18 305
326 411
5 567 282
Lender’s industry displayed in the case of an eligible guarantee since 31 December 2015.
SWEDBANK
106
Appendix Latvia CS
Latvia 11. Credit risk: Outstanding exposures to SME corporates, by industry
31 December 2016
IRB approach
EURt
Private mortgage
Retail mortgages
755
Retail other
0
Corporate
0
Institutions
0
0
1 586
4 900
0
Other
0
Private other
Govts and
central
banks
Local govts or
local
authorities
Other
60
Total
815
0
0
0
0
0
6 486
2 409
23 138
44 875
0
0
82
70 504
Manufacturing
610
12 694
34 971
0
0
2 495
50 770
507
3 573
4 627
0
0
655
9 362
Construction
239
5 293
5 537
0
0
138
11 207
1 229
21 071
53 322
0
0
640
76 262
847
14 689
17 726
0
0
300
33 562
0
0
0
0
0
0
0
415
1 862
6 927
0
0
18
9 222
3 224
Retail
Transportation
20
1 756
1 448
0
0
0
0
237
13
0
0
0
250
Property management
829
1 689
30 152
0
0
13
32 683
210
134
0
0
0
0
344
17
721
20 654
0
0
9
21 401
2 727
Commercial
Other
0
259
2 468
0
0
0
602
575
7 030
0
0
4
8 211
2 399
26 982
34 858
0
0
14 685
78 924
394
1 385
1 689
0
0
74
3 542
Credit institutions
0
0
0
0
0
0
0
Other exposures
0
0
0
0
0
0
0
10 653
115 955
241 045
0
0
19 160
386 813
Total
0
0
Latvia 12. Credit risk: Collateral and credit risk mitigation techniques
31 December 2016
IRB approach
Govts and
central banks
Local govts or
local
authorities
EURt
Retail mortgages
Retail other
Corporate
Institutions
Other
Other
Total
1 188 825
12 453
77 050
0
0
80 047
1 358 375
0
0
5 395
356
0
9
5 760
0
29 914
57 897
2 088
0
15 234
105 133
Latvia 13. Credit risk: Outstanding exposures by maturity*
31 December 2016
IRB approach
Retail mortgages**
23 465
Retail other
5 937
< 3 months
2 885
3-12 months
4 676
1-5 years
51 459
5-10 years
190 211
> 10 years
1 076 097
EURt
Payable on demand
Without maturity
Total
Local govts or
local
authorities
0
Corporate
13 736
Institutions
15 772
Other
87 829
Govts and
central banks
1 358 780
20 399
96 027
66 133
21 580
109 049
7
70 790
386 870
94 965
300 673
27 781
0
1 366
121
47 810
477 392
273 017
844 063
14 261
0
76 071
12 256
70 603
1 341 730
38 892
241 913
0
0
21 720
3 819
20 634
517 189
15 165
66 958
0
0
27 150
2 102
79 784
1 267 256
Other
35 678
Total
1 541 197
0
514
92
33
33 897
0
0
1 112
35 648
1 348 793
448 889
1 563 462
123 980
143 306
1 594 136
18 305
326 411
5 567 282
SWEDBANK
107
Appendix Latvia CS
Latvia 14. Credit risk: Exposures* and average exposure
31 December 2016
IRB approach
Other
143 306
Govts and
central
banks
1 594 136
Local govts
or local
authorities
18 305
Other
326 411
Total
5 567 282
122 395
143 306
1 533 331
12 759
325 003
5 567 629
89 294
140 327
1 641 663
37 017
392 685
5 665 118
EURt
Total exposure
Retail mortgages
1 348 793
Retail other
448 889
Corporate
1 563 462
Institutions
123 980
1 348 793
478 702
1 603 340
Average exposure
1 356 941
430 708
1 576 483
Latvia 15. Credit risk: Change in provisions
EURt
Opening balance
2016
64 774
2015
97 185
New provisions
Group adjustments
Closing balance
73
-14 629
-2 850
-2 216
2 407
-23 310
498
-12 378
32
45 184
372
64 774
-7 171
11 090
-24 556
9 568
Latvia 16. Impaired* and past-due** loans, by geographical area
31 December
2016
losses***
Latvia
Impaired
loans
gross
69 995
5-30
days
37 380
31-60
days
11 746
61-90
days
1 399
> 90
days
2 025
Total
impaired
and pastdue
loans
122 545
Total
69 995
37 380
11 746
1 399
2 025
122 545
EURt
Individual
provisions
30 495
Portfolio
provisions
14 688
30 495
14 688
Total
provisions
45 184
Individual
provision
change and
write-offs
8 255
Portfolio
provision
change
-2 157
Total
effect
on
result
6 098
45 184
8 255
-2 157
6 098
SWEDBANK
108
Appendix Latvia CS
Latvia 17. Impaired* and past-due** loans, by industry
31 December
2016
EURt
Private mortgages
Tenant owner
associations
Private other
Agriculture,
forestry, fishing
Manufacturing
Public sector and
utilities
Construction
Retail
Transportation
Shipping and
offshore
Hotels and
restaurants
Information and
communication
Finance and
insurance
Property
management *****
Residential
properties
Commercial
properties
Industrial and
warehouse
properties
Other property
management
Professional
services
Other corporate
lending
Credit institutions
Total Swedbank
Principal past-due loans, that are not
impaired
Impaired
loans
gross
55 528
5-30
days
32 361
31-60
days
5 685
61-90
days
1 138
losses***
> 90
days
1 428
Total
impaired
and
pastdue
loans
96 140
Individual
provisions
23 883
Portfolio
provisions
5 769
Total
provisions
29 652
Individual
provision
change
and writeoffs
6 263
Portfolio
provision
change
-773
Total
effect on
result
5 490
0
0
0
0
0
0
0
0
0
0
0
0
7 646
2 384
444
150
190
10 814
4 205
1 274
5 479
4 558
-599
3 959
452
153
984
23
0
1 612
162
1 005
1 167
77
-275
-198
1 221
389
68
0
1
1 679
489
536
1 025
-188
-265
-453
191
1
3
0
0
195
69
101
170
69
-125
-56
237
36
211
0
0
484
85
55
140
482
-339
143
1 406
1 103
3 629
46
0
6 184
361
1 412
1 773
-422
-335
-757
266
474
329
0
406
1 475
95
458
553
-92
-445
-537
0
0
0
0
0
0
0
0
0
0
-2
-2
1 267
59
8
0
0
1 334
456
288
744
27
-74
-47
23
0
11
0
0
34
8
71
79
-3
-1
-4
0
0
22
0
0
22
0
2
2
0
-2
-2
380
104
42
0
0
526
221
2 388
2 609
-3 561
1 133
-2 428
0
0
42
0
0
42
0
1 090
1 090
n.a.
n.a.
n.a.
152
97
0
0
0
249
55
1 037
1 092
n.a.
n.a.
n.a.
0
0
0
0
0
0
0
167
167
n.a.
n.a.
n.a.
228
7
0
0
0
235
166
94
260
n.a.
n.a.
n.a.
906
316
306
26
0
1 554
292
1 264
1 556
233
-72
161
472
0
4
16
0
492
170
65
235
812
17
829
0
0
0
0
30 496
14 688
45 184
8 255
-2 157
6 098
0
0
0
0
0
0
69 995
37 380
11 746
1 399
2 025
122 545
.* Loans where payments are unlikely to be made in accordance with contract terms. Such loans are not considered impaired if there is collateral that covers the full amount
***** For Property management, the split into sub segments for provisions for anticipated loan losses is not applicable.
SWEDBANK
109
Appendix Latvia CS
Latvia 18. Leverage ratio
EURt
2016
5 242 209
0
0
15 463
0
251 807
575/2013
Other adjustments
0
0
-31 006
5 478 473
EURt
2016
5 231 934
-31 006
5 200 928
10 266
15 463
0
0
0
0
0
0
25 729
9
0
0
0
0
0
9
670 170
-418 363
251 807
0
0
Tier 1 capital
580 043
5 478 473
Leverage ratio
10.6%
EURt
2016
5 231 934
24 361
5 207 573
0
1 561 898
113 297
140 700
1 362 943
393 363
1 436 727
of which corporate
42 410
156 235
For a description of Swedbank Latvia’s process for managing the risk of excess leverage, please see Swedbank Risk Management and Capital Adequacy Report 2016, page
12.
SWEDBANK
110
Appendix Lithuania CS
Appendix: Swedbank Lithuania Consolidated
Situation (CS)
Introduction
subsidiaries. Information for Swedbank Lithuania Consolidated
organisational and legal structure of Swedbank Lithuania
measures undertaken to manage operations in the Swedbank
Swedbank Lithuania Consolidated Situation is disclosed in the
SWEDBANK
otherwise stated.
including capital buffers and potential Pillar 2 add-ons.
Additionally, the capital conservation buffer of 2.5% was
introduced on 30 June 2015 as well as the countercyclical
capital buffer which was initially set at 0%. Furthermore, the
buffer requirement for other systemically important
institutions (O-SII) of 2% was announced in December 2015,
and to be applied from 31 December 2016. This means that
the capital requirement for Swedbank Lithuania CS in Pillar 1,
as a percentage of REA, amounts to 9.0% in CET1 capital and
12.5% in total capital. In addition, the capitalisation of
Swedbank Lithuania CS must cover the capital requirement in
Pillar 2. to the structure of Pillar 2 requirement has been
changed in the 2016 Supervisory Review and Evaluation
Process (SREP). The Pillar 2 capital requirement has been
broken down into Pillar 2 requirement (P2R) of 1.8% and Pillar
2 capital guidance (P2G) of 1%. Banks are expected to treat a
failure to meet the Pillar 2 capital guidance as an early
warning signal, but not as in indicator. Further, the P2G does
not set the limitation to Maximum Distributable Amount. Still,
capital requirement for Swedbank Lithuania CS is equivalent
to a CET 1 capital ratio of 11.8% and total capital ratio of
15.3%. As a backstop rule, Swedbank Lithuania CS also needs
to comply with the Basel 1 floor, i.e. 80% of the capital
requirements according to Basel 1.
111
Estimated capital requirements1, Lithuania Consolidated Situation
%
CET1
AT1
T2
Total capital
Pillar 1
Minimum requirement
O-SII buffer
(P1)2
4.5
1.5
2.0
8.0
2.0
2.0
2.5
2.5
Countercyclical buffer (CCyB)³
0.0
0.0
9.0
1.5
2.0
12.5
2.8
0.0
0.0
2.8
Pillar 2⁴
1.8
1.8
1.0
1.0
11.8
1.5
2.0
15.3
22.13%
0.0
0.0
22.13%
1) Swedbank's estimate based on Lithuanian Central Bank's announced capital requirements, including fully implemented buffers and Pillar 2 add-ons.
2) Starting from 31 December 2016 O-SII buffer will be applied for Swedbank Lithuania CS based on Lietuvos Bankas' decision dated 15 December, 2015. In November 2016,
the Lietuvos Bankas adopted decisions on reciprocation of Estonian and Belgian macro-prudential measures on a cross-border basis. The decision will be applied from July,
2017. However, the estimated impact to total capital requirements is minor (0.001% as of Dec. 2016).
3) The estimate is based on Swedbank's relevant exposures and the calculation takes into account the applied countercyclical buffer value of 0%.
4) Individual Pillar 2 charge has been broken down into Pillar 2 requirement (P2R) and Pillar 2 capital guidance (P2G) based on SREP report 29 September 2016.
At 31 December 2016, Swedbank Lithuania CS’s Common
Equity Tier 1 and Total Capital ratio were 22.13% and 22.13%,
Lithuania CS’s leverage ratio was 7.33% (14.24%) at end2016 (end-2015). The decline in capital adequacy and also
leverage ratios over the year is related to decrease of the
capital base, a combined consequence of dividend payout and
paid-in capital reduction accomplished in 2016. The actual
total capital at end-2016 exceeded the capital requirement
according to the Basel 1 floor by EUR 338m. Hence, the
capitalisation of Swedbank Lithuania CS is maintained above
the capital requirements according to CRR/CRDIV and the
SWEDBANK
Basel 1 floor with adequate buffers. In the 2016 Supervisory
Review and Evaluation Process (SREP), Swedbank Lithuania
CS was assessed to be broadly adequately capitalised and able
to comply with regulatory capital requirements going forward.
in the EU in 2014. The directive includes a requirement on
liabilities (MREL). MREL requirement shall enter into force from
2019, however have not been finalised at end-2016.
112
Lithuania 1. Capital adequacy
EURt
2016
2015
Tier 1 capital
Total capital
Surplus of capital
553 652
553 652
553 652
2 502 162
200 173
962 873
962 873
962 873
2 406 697
192 535
22.1
22.1
22.1
40.0
40.0
40.0
237 613
223 532
576 030
338 417
980 731
757 199
floor
Lithuania 2. Total capital
Note
EURt
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Cash flow hedges
Goodwill
Deferred tax assets
Intangible assets
Total CET1 capital
15
16
17
18
Tier 2 capital
Total capital
2016
2015
587 476
993 385
-351
-289
-10 858
-237
-22 378
-12 180
-185
-17 858
553 652
962 873
553 652
962 873
553 652
962 873
Lithuania 3. Transitional own funds disclosure according to Article 5 in EU Regulation No 1423/2013
EURt
31-Dec-16
B
C
1
2
3
3a
4
5
5a
6
7
Retained earnings
502 258
475 623
26 635
-22 629
107 847
9
Empty set in the EU
10
11
(net of related tax liability where the conditions in Article 38 (3) are met) (negative amount)
SWEDBANK
26 (1), 27, 28, 29, EBA
list 26 (3)
EBA list 26 (3)
EBA list 26 (3)
EBA list 26 (3)
26 (1) (c)
26 (1)
26 (1) (f)
486 (2)
483 (2)
84, 479, 480
26 (2)
587 476
-351
-237
34, 105
36 (1) (b), 37, 472 (4)
-10 858
36 (1) (c), 38, 472 (5)
33 (a)
113
12
13
14
15
16
-22 378
17
18
19
20
Empty set in the EU
20a
20b
20c
20d
21
22
23
24
Empty set in the EU
25
25a
36 (1) (d), 40, 159, 472
(6)
32 (1)
33 (1) (b) (c)
36 (1) (e), 41, 472 (7)
36 (1) (f), 42, 472 (8)
36 (1) (g), 44, 472 (9)
36 (1) (h), 43, 45, 46,
49 (2) (3), 79, 472 (10)
36 (1) (i), 43, 45, 47,
48 (1) (b), 49 (1) to (3),
79, 470, 472 (11)
36 (1) (k)
36 (1) (k) (i), 89 to 91
36 (1) (k) (ii), 243 (1)
(b), 244 (1) (b), 258
36 (1) (k) (iii), 379 (3)
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
48 (1)
36 (1) (i), 48 (1) (b),
470, 472 (11)
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
36 (1) (a), 472 (3)
25b
26
treatment
26a
26b
27
28
29
30
31
32
33
34
35
36
37
38
amount)
39
56 (c), 59, 60, 79, 475
(4)
40
56 (d), 59, 79, 475 (4)
41
41a
41b
41c
42
43
44
SWEDBANK
36 (1) (l)
481
36 (1) (j)
553 652
51, 52
486 (3)
483 (3)
85, 86, 480
486 (3)
52 (1) (b), 56 (a), 57,
475 (2)
56 (b), 58, 475 (3)
472, 473(3)(a), 472
(4), 472 (6), 472 (8) (a),
472 (9), 472 (10) (a),
472 (11) (a)
477, 477 (3), 477 (4)
(a)
467, 468, 481
56 (e)
114
45
46
47
48
49
50
51
62, 63
486 (4)
483 (4)
87, 88, 480
486 (4)
62 (c) & (d)
52
amount)
53
66 (b), 68, 477 (3)
54
66 (c), 69, 70, 79, 477
(4)
54a
63 (b) (i), 66 (a), 67,
477 (2)
54b
55
56
residual amounts)
66 (d), 69, 79, 477 (4)
56a
472, 472(3)(a), 472
(4), 472 (6), 472 (8),
472 (9), 472 (10) (a),
472 (11) (a)
56b
475, 475 (2) (a), 475
(3), 475 (4) (a)
56c
57
58
59
required pre-CRR
Tier 2 (T2) capital
59a
60
472, 472 (5), 472 (8)
(b), 472 (10) (b), 472
(11) (b)
475, 475 (2) (b), 475
(2) ©, 475 (4) (b)
in the capital of other financial sector entities, indirect holdings of significant investments in the capital of
other financial sector entities, etc.)
61
62
63
64
65
66
67
67a
68
69
70
71
72
Direct and indirect holdings of the capital of financial sector entities where the institution does not have a
significant investment in those entities (amount below 10% threshold and net of eligible short positions)
73
74
positions)
Empty set in the EU
75
76
467, 468, 481
SWEDBANK
477, 477 (2) (b), 477
(2) (c), 477 (4) (b)
2 502 162
22.1%
22.1%
22.1%
92 (2) (a), 465
92 (2) (b), 465
92 (2) (c)
4.5%
2.5%
0.0%
2.0%
CRD 128, 129, 140
17.6%
CRD 131
CRD 128
36 (1) (h), 45, 46, 472
(10), 56 (c), 59, 60,
475 (4), 66 (c), 69, 70,
477 (4)
36 (1) (i), 45, 48, 470,
472 (11)
36 (1) (c), 38, 48, 470,
472 (5)
62
115
77
62
78
79
62
62
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2014 and
1 Jan 2022)
80
81
82
83
84
85
484 (3), 486 (2) & (5)
484 (3), 486 (2) & (5)
484 (4), 486 (3) & (5)
484 (4), 486 (3) & (5)
484 (5), 486 (4) & (5)
484 (5), 486 (4) & (5)
requirements.
Report 2016.
1)
2)
Note: Table 4, Subordinated debt: Capital instruments main features, is not relevant for Swedbank Lithuania CS.
Lithuania 5a. Amount of institution-specific countercyclical capital buffer as of 31 December 2016
EURt
2016
Total REA
2 502 162
Institution-specific countercyclical buffer rate
0.00%
Lithuania 5b. Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer
Exposure
value for
SA
Exposure
value for
IRB
Sum of
long and
short
position
of trading
book
Value of
trading
book
exposure
for
internal
models
671 781
4 440 122
536
0
197
13 018
130
0
0
8 436
0
188
7 738
1 335
Securitisation
exposures
Expos
ure
value
for SA
Expos
ure
value
for IRB
Own
funds
requirem
ent
weights
Countercyclic
al capital
buffer rate
Of which:
Trading
book
exposures
Of which:
Securitisati
on
exposures
165 265
333
0
165 598
0
0.00%
953
102
0
1 055
0
1.50%
0
619
0
0
619
0
0.00%
0
0
561
0
0
561
0
0.00%
2 993
0
0
153
0
0
153
0
0.00%
67
1 320
0
0
68
0
0
68
0
0.00%
Ireland
385
682
0
0
36
0
0
36
0
0.00%
Denmark
214
436
0
0
23
0
0
23
0
0.00%
Estonia
United
States
Other
126
506
0
0
20
0
0
20
0
0.00%
23
1 387
0
0
17
0
0
17
0
0.00%
367
20 004
666
0
769
0
0
769
0
0.00%
674 683
4 496 642
1 332
0
168 484
435
0
168 919
0
0.00%
Of which:
General credit
exposures
Total
EURt
Lithuania
Sweden
Netherlands
Latvia
United
Kingdom
Russia
Total
0
0
SWEDBANK
116
Lithuania 6. Capital requirement
EURt
Trading book
FX risk
2016
2015
27 083
145 061
23 872
138 384
1 431
1 431
3 617
3 577
136
26 462
200 173
40
72
26 590
192 535
2 151 800
2 028 209
17 888
1 700
330 774
2 502 162
45 213
900
332 375
2 406 697
Lithuania 7. Risk Exposure Amount and Own funds requirement, as of 31 December 2016
EURt
Credit risks, STD
Corporate exposures
Retail exposures
Equity exposures
Other items
Credit risks, IRB
Corporate exposures
Retail exposures
Securitisation
Settlement risks
Market risks
Trading book
Operational risks
Total
SWEDBANK
Risk
exposure
amount
338 538
17 010
30
871
2 028
Own funds
requirement
19 598
59 901
14 657
122 340
13 572
1 568
4 792
1 173
9 787
1 086
88 531
1 813 262
6 212
1 231 427
31
5 948
5 785
3 757
7 082
145 061
497
98 514
2
476
463
301
575 623
383 326
192 297
46 050
30 666
15 384
19 588
17 888
1 567
1 431
1 700
330 774
136
26 462
330 774
2 502 162
26 462
200 173
1)
27 083
1 361
2
70
162
117
Lithuania 8. Credit risk: Remaining maturity in specialised lending
31 December 2016
EURt
Less than 2.5 years
2.5 years or more
Category 1
Category 2
Category 3
Category 4
Category 5
17
32
4 114
3 409
3 012
2 018
1 503
6 533
Lithuania 9. Credit risk: Outstanding exposures by geographical area*
31 December 2016
EURt
Sweden
Estonia
Latvia
Lithuania
IRB approach
Retail mortgages
Retail other
Corporate
Institutions
Other
Govts and
central banks
Local govts
or local
authorities
Other
Total
192
145
12 681
0
0
0
0
52 583
65 601
1 893
0
11
73
0
0
0
0
1 809
274
39
7 426
0
0
0
0
175
7 914
1 944 029
523 040
1 972 967
0
0
2 298 965
5 422
771 079
7 515 502
Norway
388
4
0
104
0
0
0
6 926
7 422
Denmark
133
304
0
2 885
0
0
0
214
3 536
0
1
0
0
0
0
0
0
1
1 348
39
0
1 197
0
0
0
23
2 607
Finland
USA
Other
7 263
1 501
24 784
16 856
0
0
0
4 240
54 644
Total
1 953 627
525 084
2 017 931
21 042
0
2 298 965
5 422
837 049
7 659 120
Lithuania 10. Credit risk: Outstanding exposures by industry
31 December 2016
EURt
Private mortgage
IRB approach
Retail mortgages
Retail other
Corporate
Institutions
Other
Govts and
central banks
Local govts
or local
authorities
Other
Total
1 949 848
0
0
0
0
0
0
368 926
2 318 774
0
0
0
0
0
0
0
0
0
Private other
0
436 453
20 364
0
0
0
0
8 194
465 011
15
3 526
66 584
0
0
4 136
0
163
74 424
Manufacturing
570
12 144
365 838
0
0
0
0
28 705
407 257
226
2 842
402 239
0
0
38 463
5 417
134 678
583 865
36
5 207
70 508
0
0
0
0
1 277
77 028
Retail
727
21 523
352 839
0
0
0
0
23 094
398 183
Transportation
151
10 512
103 887
0
0
0
0
948
115 498
0
0
0
0
0
0
0
0
0
288
1 479
69 897
0
0
0
0
8
71 672
0
29 732
Construction
29
1 870
26 652
0
381
3 886
Property management
962
2 118
428 946
0
141
17 144
454
676
323 436
Commercial
0
0
0
1 181
0
0
0
5 619
9 886
0
0
0
0
432 026
0
0
0
0
0
17 285
0
0
0
0
0
324 566
40 281
0
0
107
40 174
0
0
0
0
0
508
1 194
48 192
0
0
0
0
0
49 894
775
26 815
106 233
154
0
128 514
5
3 323
265 819
0
168
58
0
0
11 914
0
8
12 148
Credit institutions
0
0
0
20 888
0
2 115 938
0
61 317
2 198 143
199 608
199 654
2 298 965
5 422
837 049
7 659 120
Other
Other exposures
Total
0
46
0
0
0
1 953 627
525 084
2 017 931
21 042
0
Lender’s industry displayed in the case of an eligible guarantee since 31 Dec. 2015.
SWEDBANK
118
Lithuania 11. Credit risk: Outstanding exposures to SME corporates, by industry
31 December 2016
IRB approach
EURt
Private mortgage
Retail mortgages
Retail other
Corporate
1 262
0
0
0
Institutions
Other
Govts and
central
banks
Local govts or
local
authorities
Other
Total
128
1 390
0
0
0
0
0
0
Private other
0
19 500
16 104
0
323
35 927
15
3 475
9 141
0
5
12 636
Manufacturing
473
11 670
34 129
0
3 870
50 142
226
2 842
8 273
0
4 725
16 066
16
4 981
9 464
0
659
15 120
Retail
664
21 015
53 840
0
3 976
79 495
Transportation
151
10 446
31 052
0
291
41 940
Construction
0
0
0
0
0
0
288
1 463
4 720
0
0
6 471
7 066
29
1 841
4 612
0
584
0
328
719
0
0
1 047
Property management
770
2 002
34 139
0
0
36 911
Commercial
Other
0
141
0
0
0
141
406
596
17 342
0
0
18 344
9 529
0
107
9 422
0
0
364
1 158
7 375
0
0
8 897
604
26 104
24 083
0
2 063
52 854
125
0
107
10
0
8
Credit institutions
0
0
0
0
0
0
Other exposures
0
24
0
0
0
24
4 498
105 798
230 286
16 632
357 214
Total
0
0
0
0
Lithuania 12. Credit risk: Collateral and credit risk mitigation techniques
31 December 2016
IRB approach
Govts and
central banks
Local govts or
local
authorities
EURt
Retail mortgages
Retail other
Corporate
Institutions
Other
Other
Total
1 813 601
0
7 447
0
0
349 575
2 170 623
0
0
16 466
0
0
0
16 466
8
41 051
32 733
149
0
197
74 138
Lithuania 13. Credit risk: Outstanding exposures by maturity*
31 December 2016
EURt
Payable on demand
IRB approach
Retail mortgages**
4 931
Retail other
2 697
Corporate
30 450
Institutions
0
Other
0
Govts and
central banks
84
Local govts or
local
authorities
5
Other
12 477
Total
50 644
180 248
< 3 months
1 402
34 038
120 297
190
0
18 435
0
5 886
3-12 months
5 819
104 439
335 141
50
0
86 030
674
56 984
589 137
44 501
317 263
1 199 090
400
0
39 365
1 953
160 840
1 763 412
5-10 years
137 162
38 035
318 934
0
0
1 313
2 790
25 017
523 251
> 10 years
1 759 812
27 584
1 844
0
0
37 800
0
347 512
2 174 552
1-5 years
Without maturity
Total
0
1 028
12 175
20 402
0
2 115 938
0
228 333
2 377 876
1 953 627
525 084
2 017 931
21 042
0
2 298 965
5 422
837 049
7 659 120
SWEDBANK
119
Lithuania 14. Credit risk: Exposures* and average exposure
31 December 2016
IRB approach
EURt
Total exposure
Retail mortgages
1 953 627
Retail other
525 084
Corporate
2 017 931
Institutions
21 042
Other
0
Govts and
central
banks
2 298 965
Local govts
or local
authorities
5 422
Other
837 049
7 659 120
1 953 634
565 317
2 049 078
21 029
0
2 244 523
5 416
823 316
7 662 313
Average exposure
1 863 879
509 809
1 971 331
20 518
0
1 799 835
8 144
800 379
6 973 895
Total
Lithuania 15. Credit risk: Change in provisions
EURt
Opening balance
New provisions
Group adjustments
Closing balance
2016
2015
42 047
49 643
-65
-3 396
-6 175
-2 596
9 184
-7 647
-5 443
-4 781
70
29 885
1 091
42 047
-5 970
6 866
-4 485
7 960
Lithuania 16. Impaired* and past-due** loans, by geographical area
31 December
2016
losses***
Impaired
loans gross
5-30
days
31-60
days
61-90
days
> 90
days
Total
impaired
and pastdue loans
Lithuania
87 041
52 859
18 302
5 301
14 518
178 021
23 576
6 309
29 885
593
-2 563
-1 970
Total
87 041
52 859
18 302
5 301
14 518
178 021
23 576
6 309
29 885
593
-2 563
-1 970
EURt
Individual
provisions
Portfolio
provisions
Total
provisions
Individual
provision
change and
write-offs
Portfolio
provision
change
Total
effect
on
result
SWEDBANK
120
Lithuania 17. Impaired* and past-due** loans, by industry
31 December
2016
EURt
Private mortgages
Tenant owner
associations
Private other
Agriculture,
forestry, fishing
Manufacturing
Public sector and
utilities
Construction
Retail
Transportation
Shipping and
offshore
Hotels and
restaurants
Information and
communication
Finance and
insurance
Property
management *****
Residential
properties
Commercial
properties
Industrial and
warehouse
properties
Other property
management
Professional
services
Other corporate
lending
Credit institutions
Total Swedbank
losses***
Impaired
loans
gross
45 156
5-30
days
34 520
31-60
days
14 013
61-90
days
4 466
> 90
days
9 067
Total
impaired
and pastdue
loans
107 222
Individual
provisions
12 300
Portfolio
provisions
2 804
Total
provisions
15 104
Individual
provision
change and
write-offs
2 898
Portfolio
provision
change
-170
Total
effect
on
result
2 728
0
0
0
0
0
0
0
0
0
0
0
0
1 669
8 478
1 307
715
1 207
13 376
911
1 105
2 016
2 683
-340
2 343
1 587
237
7
0
0
1 831
545
113
658
375
-428
-53
21 074
603
183
0
0
21 860
7 245
458
7 703
-4 127
-400
-4 527
436
262
0
0
0
698
0
218
218
-1 024
-251
-1 275
865
176
21
0
0
1 062
356
53
409
-177
-83
-260
2 448
1 987
54
43
0
4 532
660
369
1 029
104
-457
-353
768
4 293
40
3
0
5 104
121
141
262
9
-258
-249
0
0
0
0
0
0
0
0
0
0
0
0
5 733
178
1
52
688
6 652
541
65
606
-113
-29
-142
30
146
206
0
0
382
5
127
132
11
-63
-52
12
0
0
0
0
12
0
1
1
2
-6
-4
6 784
658
2 375
0
3 556
13 373
801
637
1 438
-190
165
-25
4 287
0
0
0
1 745
6 032
448
12
460
n.a.
n.a.
n.a.
1 178
457
2 339
0
1 811
5 785
157
475
632
n.a.
n.a.
n.a.
1 283
179
0
0
0
1 462
191
50
241
n.a.
n.a.
n.a.
36
22
36
0
0
94
5
100
105
n.a.
n.a.
n.a.
352
1 136
62
20
0
1 570
56
135
191
106
-179
-73
127
185
33
2
0
347
35
83
118
36
-64
-28
0
0
0
0
0
0
0
0
87 041
52 859
18 302
5 301
14 518
178 021
29 885
593
-2 563
-1 970
23 576
6 309
0
***** For Property management, the split into sub segments for provisions for anticipated loan losses is not applicable.
SWEDBANK
121
Lithuania 18. Leverage ratio
EURt
575/2013
Other adjustments
2016
8 266 619
27 261
-2 489
-524 935
-33 824
7 732 632
EURt
2016
7 124 246
-33 824
7 090 422
13 983
27 261
2 489
-2 489
41 244
0
941 666
-524 935
416 731
Tier 1 capital
553 652
7 548 397
Leverage ratio
7.3%
EURt
2016
7 124 246
7 124 246
2 244 520
of which corporate
133 980
53 332
2 234 554
441 588
1 733 456
83 207
199 609
For a description of Swedbank Lithuania’s process for managing the risk of excess leverage, please see Swedbank Risk Management and Capital Adequacy Report 2016,
page 12.
SWEDBANK
122
Appendix Swedbank Mortgage
Appendix: Swedbank Mortgage AB
Introduction
Requirements Regulation (Regulation (EU) 575/2013) and the
Swedish Financial Supervisory Authority (SFSA) regulation
FFFS 2014:12. In accordance with Article 13 in the Capital
Requirements Directive, certain information shall be provided
for significant subsidiaries. Information for Swedbank
Mortgage AB is provided in this Appendix and pertains to
organisational and legal structure of Swedbank Mortgage AB
is provided in the Appendix A for Swedbank Consolidated
Situation, in the Swedbank Risk Management and Capital
Adequacy Report 2016. Information about the Swedbank
corporate governance structure and measures undertaken to
manage operations in Swedbank Consolidated Situation is
presented in the Swedbank Corporate Governance Report.
Information about risk implications of the remuneration
process (and aggregate as well as granular quantitative
information on remuneration) for Swedbank Mortgage AB is
disclosed in the document “Information regarding
remuneration in Swedbank 2016”. Swedbank’s Group-wide
framework includes instructions for management of credit
risk, including instructions for granting and prolonging credits,
for collateral valuation, for determining impairment and for
credit risk adjustments. Information about management of
credit risk is provided in Chapter 3 in the Swedbank Risk
Management and Capital Adequacy Report 2016. The Groupwide framework also includes instructions describing the
approach used to assess the adequacy of internal capital to
support current and future activities. This information is
Capital Adequacy Report 2016. All documents mentioned
above are available on www.swedbank.com. All figures are in
SEK million unless otherwise stated.
SWEDBANK
Swedbank Mortgage’s legal capital requirement is based on
the CRR, but more specifically restricted by the Basel 1 floor
within CRR. The SFSA has made clear that the Basel 1 floor, i.e.
80% of the capital requirements according to Basel 1, will be
maintained for Swedish institutions as a backstop rule. Since
Swedbank Mortgage’s capital requirement according to the
Basel 1 floor is higher than the requirements in CRR/CRDIV
Pillar 1 and Pillar 2 combined (including a risk-weight floor on
Swedish mortgage of 25%, conservation buffer of 2.5% and
countercyclical buffer of 1.5%), these rules constitute the
minimum capital requirements for Swedbank Mortgage.
According to calculations made and Swedbank’s best
knowledge of the future capital regulations, the Basel 1 floor
will remain as the minimum requirement for Swedbank
Mortgage.
in the EU in 2014. The directive includes a requirement on
liabilities (MREL). How this MREL requirement will affect
Swedbank Mortgage’s capitalisation and funding structure is
not yet known. The Swedish resolution authority, the Swedish
National Debt Office, is expected to clarify the MREL
requirement during 2017 (see also Chapter 2 in the Swedbank
Risk Management and Capital Adequacy Report 2016).
At 31 December 2016, Swedbank Mortgage’s Common Equity
Tier 1 and Total Capital ratio were 70.7% (66.7%) and 77.5%
(73.9%), respectively. The actual total capital at end-2016
exceeded the capital requirement according to the Basel 1
floor by SEK 8,708m (SEK 6,763m). Hence, the capitalisation
of Swedbank Mortgage is maintained above the capital
requirements according to CRR/CRDIV and the Basel 1 floor
with adequate buffers. Swedbank Mortgage’s leverage ratio
was 4.5% (4.2%) at end-2016 (end-2015). In the 2016
Supervisory Review and Evaluation Process (SREP), Swedbank
Mortgage was assessed to be adequately capitalised and able
to comply with regulatory capital requirements (including
Pillar 2 risks) going forward.
123
Swedbank Mortgage AB - Appendix
Mortgage 1: Capital adequacy
SEKm
2016
2015
Tier 1 capital
Total capital
Surplus of capital
41 789
41 789
45 789
59 085
4 727
41 062
70.7
70.7
77.5
37 109
37 109
41 109
55 633
4 451
36 658
66.7
66.7
73.9
Total capital adjusted according to rules for Basel 1 floor
37 324
46 031
8 708
34 593
41 356
6 763
Mortgage 2: Total capital
Note
SEKm
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Shareholders’ equity according to the balance sheet
Share of capital of accrual reserve
Cash flow hedges
Goodwill
Deferred tax assets
Intangible assets
Total CET1 capital
16
17
18
19
Tier 2 capital
Total capital
2016
2015
41 387
36 570
833
49
-230
-7
833
87
-124
-11
-243
-246
41 789
37 109
41 789
37 109
4 000
45 789
4 000
41 109
Mortgage 3: Transitional own funds disclosure according to Article 5 in EU Regulation No 1423/2013
SEKm
31-Dec-16
B
C
1
2
3
3a
4
5
5a
6
Retained earnings
11 500
n/a
n/a
n/a
21 950
230
Amount of qualifying items referred to in Article 484 (3) and the related share premium accounts subject to
phase out from CET1
n/a
n/a
8 540
42 220
26 (1), 27, 28, 29, EBA
list 26 (3)
EBA list 26 (3)
EBA list 26 (3)
EBA list 26 (3)
26 (1) (c)
26 (1)
26 (1) (f)
486 (2)
483 (2)
84, 479, 480
26 (2)
7
9
Empty set in the EU
10
Deferred tax assets that rely on future profitability excluding those arising from temporary difference (net
of related tax liability where the conditions in Article 38 (3) are met) (negative amount)
SWEDBANK
-7
34, 105
36 (1) (b), 37, 472 (4)
36 (1) (c), 38, 472 (5)
124
11
-230
12
13
14
15
16
-243
17
entities have reciprocal cross-holdings with the institution designed to inflate artificially the own funds of
the institution (negative amount)
18
institution does not have a significant investment in those entities (amount above 10% threshold and net of
eligible short positions) (negative amount)
19
20
Empty set in the EU
20a
Exposure amount of the following items which qualify for a RW of 1250%, where the institution opts for the
deduction alternative
20b
20c
20d
21
22
23
24
of which: direct and indirect holdings by the institution of the CET1 instruments of financial sector entities
where the institution has a significant investment in those entities
Empty set in the EU
25
25a
49
33 (a)
36 (1) (d), 40, 159, 472
(6)
32 (1)
33 (1) (b) (c)
36 (1) (e), 41, 472 (7)
36 (1) (f), 42, 472 (8)
36 (1) (g), 44, 472 (9)
36 (1) (h), 43, 45, 46,
49 (2) (3), 79, 472 (10)
36 (1) (i), 43, 45, 47, 48
(1) (b), 49 (1) to (3), 79,
470, 472 (11)
36 (1) (k)
36 (1) (k) (i), 89 to 91
36 (1) (k) (ii), 243 (1)
(b), 244 (1) (b), 258
36 (1) (k) (iii), 379 (3)
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
48 (1)
36 (1) (i), 48 (1) (b),
470, 472 (11)
36 (1) (c), 38, 48 (1) (a),
470, 472 (5)
36 (1) (a), 472 (3)
25b
26
treatment
36 (1) (l)
26a
26b
27
28
29
Amount to be deducted from or added to Common Equity Tier 1 capital with regard to additional filters and
30
31
32
33
phase out from AT1
34
35
36
Qualifying Tier 1 capital included in consolidated AT1 capital (including minority interest not included in row
5) issued by subsidiaries and held by third parties
37
38
amount)
39
institution does not have a significant investment in those entities (amount above 10% threshold and net of
eligible short positions) (negative amount)
56 (c), 59, 60, 79, 475
(4)
40
56 (d), 59, 79, 475 (4)
41
treatment and transitional treatments subject to phase-out as prescribed in Regulation (EU) No 585/2013
(i.e. CRR residual amounts)
n/a
n/a
481
36 (1) (j)
-431
41 789
51, 52
486 (3)
483 (3)
85, 86, 480
486 (3)
52 (1) (b), 56 (a), 57,
475 (2)
56 (b), 58, 475 (3)
n/a
41a
Residual amounts deducted from Additional Tier 1 capital with regard to deduction from Common Equity Tier
1 capital during the transitional period pursuant to article 472 of Regulation (EU) No 575/2013
n/a
472, 473(3)(a), 472 (4),
472 (6), 472 (8) (a), 472
(9), 472 (10) (a), 472
(11) (a)
41b
Residual amounts deducted from Additional Tier 1 capital with regard to deduction from Tier 2 capital during
the transitional period pursuant to article 475 of Regulation (EU) No 575/2013
n/a
477, 477 (3), 477 (4) (a)
41c
42
43
n/a
467, 468, 481
56 (e)
SWEDBANK
125
44
45
41 789
46
47
phase out from T2
48
49
50
51
4 000
Qualifying own funds instruments included in consolidated T2 capital (including minority interest and AT1
instruments not included in rows 5 or 34) issued by subsidiaries and held by third party
62, 63
486 (4)
483 (4)
87, 88, 480
486 (4)
62 (c) & (d)
4 000
52
amount)
53
Holdings of the T2 instruments and subordinated loans of financial sector entities where those entities have
reciprocal cross-holdings with the institutions designed to artificially inflate the own funds of the institution
(negative amount)
54
entities where the institution does not have a significant investment in those entities (amount above 10%
threshold and net of eligible short positions) (negative amount)
54a
63 (b) (i), 66 (a), 67, 477
(2)
54b
55
entities where the institution has a significant investment in those entities (net of eligible short positions)
(negative amounts)
56
transitional treatments subject to phase out as prescribed in Regulation (EU) No 575/2013 (i.e. CRR residual
amounts)
66 (b), 68, 477 (3)
66 (c), 69, 70, 79, 477
(4)
66 (d), 69, 79, 477 (4)
n/a
56a
Residual amounts deducted from Tier 2 capital with regard to deduction from Common Equity Tier 1 capital
n/a
472, 472(3)(a), 472 (4),
472 (6), 472 (8), 472
(9), 472 (10) (a), 472
(11) (a)
56b
Residual amounts deducted from Tier 2 capital with regard to deduction from Additional Tier 1 capital during
the transitional period pursuant to article 475 of Regulation (EU) No 575/2013
n/a
475, 475 (2) (a), 475
(3), 475 (4) (a)
56c
57
58
#
required pre-CRR
Tier 2 (T2) capital
n/a
467, 468, 481
59a
4 000
45 789
472, 472 (5), 472 (8)
(b), 472 (10) (b), 472
(11) (b)
Of which:…items not deducted from AT1 items (Regulation (EU) No 575/2013 residual amounts) (items to be
detailed line by line, e.g. Reciprocal cross-holdings in T2 instruments, direct holdings of non-significant
60
Items not deducted from T2 items (Regulation (EU) No 575/2013 residual amounts) (items to be detailed line
by line, e.g. Indirect holdings of own T2 instruments, indirect holdings of non-significant investments in the
capital of other financial sector entities, indirect holdings of significant investments in the capital of other
financial sector entities, etc.)
61
62
63
64
65
66
67
67a
68
69
70
71
475, 475 (2) (b), 475 (2)
©, 475 (4) (b)
477, 477 (2) (b), 477 (2)
(c), 477 (4) (b)
59 085
70.7%
70.7%
77.5%
92 (2) (a), 465
92 (2) (b), 465
92 (2) (c)
conservation and countercyclical buffer requirements plus a systemic risk buffer, plus systemically important
institution buffer expressed as a percentage of total risk exposure amount) 1)
8.5 percent
2.5 percent
1.5 percent
not yet implemented
CRD 128, 129, 140
of which: Global Systemically Important Institution (G-SII) or Other Systemically Important Institution (O-SII)
buffer
not yet implemented
66.2%
n/a
n/a
n/a
CRD 131
CRD 128
72
Direct and indirect holdings of the capital of financial sector entities where the institution does not have a
73
74
Direct and indirect holdings of the CET1 instruments of financial sector entities where the institution has a
Empty set in the EU
75
SWEDBANK
36 (1) (h), 45, 46, 472
(10), 56 (c), 59, 60, 475
(4), 66 (c), 69, 70, 477
(4)
36 (1) (i), 45, 48, 470,
472 (11)
n/a
36 (1) (c), 38, 48, 470,
472 (5)
126
76
77
Credit risk adjustments included in T2 in respect of exposures subject to standardised approach (prior to the
application of the cap)
62
62
78
79
62
62
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2014 and 1
Jan 2022)
80
81
82
83
84
85
n/a
n/a
484 (3), 486 (2) & (5)
484 (3), 486 (2) & (5)
484 (4), 486 (3) & (5)
484 (4), 486 (3) & (5)
484 (5), 486 (4) & (5)
484 (5), 486 (4) & (5)
1) CET 1 capital requirement including buffer requirements.
2) CET 1 capital ratio as reported, less minimum requirement of 4.5% (excluding buffer requirements) and less any CET 1 items used to meet the Tier 1 and total capital
requirements.
The corresponding information for Swedbank Consolidated Situation can be found in table A1 in the Appendix for Swedbank Consolidated Situation in the Swedbank Risk
Management and Capital Adequacy Report 2016.
Mortgage 4: Subordinated debt: Capital instruments main features, 31 December 2016
1
2
3
Issuer
Unique identifier (e.g. CUSIP, ISIN or Bloomberg identifier
for private placement
Swedbank Mortgage AB (publ)
Group internal / not listed
Swedish
4
5
6
7
8
9
9a
9b
10
11
12
13
14
15
16
Eligible at solo/(sub-)consolidated/solo & (sub)consolidated
Instrument type (types to be specified by each jurisdiction)
Amount recognised in regulatory capital (currency in
million, as of most recent reporting date)
Issue price
Redemption price
Perpetual or dated
Issuer call (subject to prior supervisory approval)
Optional call date, contingent call dates, and redemption
amount
Tier 2
Tier 2
Solo
Tier 2 as published in Regulation
(EU) No 575/2013 article 63
SEK 4,000m
SEK 4,000m
100.00%
100% of Nominal amount
Liability - amortised cost
17/Mar/2014
Dated
18/Mar/2024
No
N/A
N/A
Coupons / dividends
17
18
19
20a
20b
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Fully discretionary, partially discretionary or mandatory (in
terms of timing)
Fully discretionary, partially discretionary or mandatory (in
terms of amt)
Existence of step up or other incentive to redeem
If convertible, mandatory or optional conversion
If convertible, specify instrument type convertible into
If convertible, specify issuer of instrument it converts into
Write-down features
If temporary write-down, description of write-up
mechanism
Position in subordination hierarchy in liquidation (specify
instrument type immediately senior to instrument)
Floating
Stibor 3-month +1.65% per annum
No
Mandatory
Mandatory
No
Cumulative
Non-convertible
N/A
N/A
N/A
N/A
N/A
N/A
No
N/A
N/A
N/A
N/A
Senior debt
No
N/A
The corresponding information for Swedbank Consolidated Situation can be found in table A2 in the Appendix for Swedbank Consolidated Situation in the Swedbank Risk
Management and Capital Adequacy Report 2016.
SWEDBANK
127
Mortgage 5a: Amount of institution-specific countercyclical capital buffer as of 31 December 2016
SEKm
2016
Total REA
rate
59 085
1.50%
884
Mortgage 5b: Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer
General credit
exposures
Sweden
Trading book
exposure
Exposure
value for
SA
Exposure
value for
IRB
Securitisation
exposures
Sum of
long
and
short
position
of
trading
book
Value of
trading
book
exposure
for
internal
models
Exposure
value for
SA
Exposure
value for
IRB
Of which:
General
credit
exposures
Of
which:
Tradin
g book
exposu
res
Of which:
Securitisati
on
exposures
Total
Own funds
requirement
weights
Countercyclical
capital buffer
rate
18 905
895 595
0
0
0
0
3 687
0
0
3 687
99.65%
1.50%
Denmark
0
284
0
0
0
0
8
0
0
8
0.21%
0.00%
Norway
0
348
0
0
0
0
4
0
0
4
0.10%
1.50%
Germany
Great
Britain
Switzerland
0
25
0
0
0
0
0
0
0
0
0.01%
0.00%
0
27
0
0
0
0
0
0
0
0
0.01%
0.00%
0
40
0
0
0
0
0
0
0
0
0.01%
0.00%
Netherlands
0
4
0
0
0
0
0
0
0
0
0.00%
0.00%
Finland
0
7
0
0
0
0
1
0
0
1
0.01%
0.00%
USA
0
13
0
0
0
0
0
0
0
0
0.00%
0.00%
Belgium
0
3
0
0
0
0
0
0
0
0
0.00%
0.00%
Other
0
54
0
0
0
0
0
0
0
0
0.00%
0.00%
Total
18 905
896 400
0
0
0
0
3 700
0
0
3 700
Mortgage 6: Capital requirement
SEKm
2016
2015
Trading book
FX risk
Additional minimum capital requirements, Article 3 CRR
Capital requirement
576
3 124
426
3 143
995
32
4 727
850
32
4 451
46 247
44 608
12 435
403
59 085
10 622
403
55 633
Capital requirement under Pillar 1, i.e. 8% of total risk exposure amount.
SWEDBANK
128
Mortgage 7: Risk Exposure Amount and Own funds requirement, 31 December 2016
SEKm
Credit risks, STD
Corporate exposures
Retail exposures
Equity exposures
Other items
Credit risks, IRB
Corporate exposures
Retail exposures
Securitisation
Risk
exposure
amount
Own funds
requirement
1)
7 206
576
0
1 089
6 105
10
0
87
488
1
2
0
39 041
3 124
8 473
678
30 385
30 385
2 431
2 431
183
15
12 435
995
12 435
403
995
32
59 085
4 727
Settlement risks
Market risks
Trading book
Operational risks
Additional risk due to Art 3 CRR
Total
Note: Table 8, Credit risk: Remaining maturity in specialised lending, is not relevant for Swedbank Mortgage AB.
SWEDBANK
129
Mortgage 9: Credit risk: Outstanding exposures by geographical area*
31 December 2016
IRB approach
Other
247
Govts and
central
banks
276
Local govts or
local
authorities
6 969
Other
114 168
Total
1 016 803
0
0
0
0
0
1
0
0
0
0
0
6
0
0
0
0
0
0
0
0
7
0
0
0
0
0
411
241
0
53
0
0
0
0
0
294
6
0
6
0
0
0
0
0
12
USA
14
0
0
0
0
0
0
7
21
Other
272
0
0
0
0
0
0
6
278
Total
860 887
0
35 266
0
247
276
6 969
114 181
1 017 826
SEKm
Sweden
Retail mortgages
859 943
Retail other
0
Corporate
35 200
Institutions
0
Estonia
1
0
0
Latvia
6
0
0
Lithuania
0
0
Norway
404
Denmark
Finland
* Exposures to customers in the country. For institutions exposures, the country of origin where the customer’s head office is located is used for all exposures. The
corresponding information for Swedbank Consolidated Situation can be found in table 3-19 in the Swedbank Risk Management and Capital Adequacy Report 2016.
Mortgage 10: Credit risk: Outstanding exposures by industry
31 December 2016
IRB approach
Other
Govts and
central
banks
Local govts or
local
authorities
Other
Total
0
2
0
18 052
713 562
0
0
203
830
21
94 900
0
0
0
0
0
0
3 086
0
0
0
0
634
52 652
0
38
0
0
0
0
4
791
0
452
0
0
15
2 049
0
3 229
2 766
0
685
0
0
0
22
42
3 515
1 045
0
224
0
0
0
0
13
1 282
375
0
21
0
0
0
20
2
418
7
0
0
0
0
0
0
0
7
408
0
194
0
0
0
71
5
678
170
0
34
0
0
0
12
0
216
121
0
464
0
0
0
196
0
781
Property management
13 638
0
29 123
0
0
56
3 459
108
46 384
8 016
0
23 102
0
0
39
2 338
44
33 539
Commercial
1 832
0
4 542
0
0
17
483
48
6 922
177
0
275
0
0
0
553
0
1 005
3 613
0
1 204
0
0
0
85
16
4 918
2 069
0
454
0
0
0
114
24
2 661
806
0
225
0
0
0
196
24
1 251
0
0
0
0
0
0
0
95 251
95 251
0
0
0
0
247
0
0
1
248
860 887
0
35 266
0
247
276
6 969
114 181
1 017 826
Retail mortgages
Retail other
Corporate
Institutions
695 270
0
238
0
93 818
0
28
0
0
0
48 932
0
Manufacturing
749
713
Construction
Retail
SEKm
Private mortgage
Private other
Transportation
Other
Credit institutions
Other exposures
Total
SWEDBANK
130
Mortgage 11: Credit risk: Outstanding exposures to SME corporates, by industry
31 December 2016
SEKm
Private mortgage
Private other
Manufacturing
IRB approach
Retail mortgages
Retail other
Corporate
Institutions
Other
Govts and
central
banks
Local govts or
local
authorities
Other
541
0
61
0
0
0
0
0
602
89 735
0
0
0
0
0
0
0
89 735
Total
0
0
0
0
0
0
0
0
0
254
0
255
0
0
0
0
0
509
23
0
10
0
0
0
0
0
33
210
0
60
0
0
0
0
0
270
Construction
354
0
522
0
0
0
0
0
876
Retail
223
0
84
0
0
0
0
0
307
13
0
0
0
0
0
0
0
13
3
0
0
0
0
0
0
0
3
170
0
122
0
0
0
0
0
292
Transportation
47
0
1
0
0
0
0
0
48
101
0
84
0
0
0
0
0
185
Property management
6 375
0
7 789
0
0
0
0
0
14 164
5 468
0
6 751
0
0
0
0
0
12 219
360
0
529
0
0
0
0
0
889
57
0
83
0
0
0
0
0
140
490
0
426
0
0
0
0
0
916
475
0
181
0
0
0
0
0
656
46
0
26
0
0
0
0
0
72
Credit institutions
0
0
0
0
0
0
0
0
0
Other exposures
0
0
0
0
0
0
0
0
0
98 570
0
9 195
0
0
0
0
0
107 765
Commercial
Other
Total
Mortgage 12: Collateral and credit risk mitigation techniques
31 December 2016
SEKm
IRB approach
Other
Govts and
central banks
Local govts or
local
authorities
Other
Total
0
0
0
17 443
892 731
0
0
0
0
0
0
0
0
0
0
0
6 238
Retail mortgages
Retail other
Corporate
Institutions
843 721
0
31 567
0
0
0
0
1 168
0
5 070
SWEDBANK
131
Mortgage 13: Credit risk: Outstanding exposures by maturity*
31 December 2016
IRB approach
Retail mortgages**
0
Retail
other
0
Corporate
0
555 984
0
17 378
78 317
0
4 566
1-5 years
212 053
0
11 394
5-10 years
14 401
0
> 10 years
0
0
132
860 887
SEKm
Payable on demand
< 3 months
3-12 months
Without maturity
Total
Other
0
Govts and
central banks
0
Local govts or
local
authorities
0
Other
56 836
Total
56 836
0
0
90
2 017
16 183
591 652
0
0
42
1 386
6 555
90 866
0
0
112
2 726
22 970
249 255
1 928
0
0
22
840
6 258
23 449
0
0
0
0
0
5 377
5 377
0
0
0
247
10
0
2
391
0
35 266
0
247
276
6 969
114 181
1 017 826
Institutions
0
these cases, the time to the next change in terms and conditions is used as maturity, in accordance with the guidelines from the SFSA.
Mortgage 14: Credit risk: Exposures* and average exposure
31 December 2016
IRB approach
Govts and
central
banks
276
Local govts
or local
authorities
6 969
Other
114 181
Total
1 017 826
247
10
1 245
114 157
1 017 826
148
559
6 949
116 291
995 597
Retail mortgages
860 887
Retail other
0
Corporate
35 266
Institutions
0
Other
247
862 055
0
40 112
0
Average exposure
838 439
0
33 211
0
SEKm
Total exposure
Mortgage 15: Credit risk: Change in provisions
SEKm
Opening balance
New provisions
Group adjustments
Closing balance
2016
2015
117
122
12
-23
0
-13
7
-3
-1
-8
93
117
-2
-6
23
38
SWEDBANK
132
Mortgage 16: Impaired* and past-due** loans, broken down by significant geographical area
Principal past-due loans, that are
not impaired
31 December 2016
SEKm
Sweden
Total
Impaired
loans
gross
222
222
losses***
5-30
days
130
3160
days
230
6190
days
100
> 90
days
83
Total
impaired
and pastdue
loans
765
130
230
100
83
765
Individual
provisions
22
Portfolio
provisions
71
22
71
Total
provisions
93
Individual
provision
change and
write-offs
34
Portfolio
provision
change
-12
Total
effect
on
result
22
93
34
-12
22
Mortgage 17: Impaired* and past-due** loans, broken down by industry
Principal past-due loans, that are
not impaired
31 December 2016
SEKm
Private mortgages
Impaired
loans
gross
96
5-30
days
93
3160
days
201
losses***
6190
days
89
> 90
days
83
Total
impaired
and
past-due
loans
562
Individual
provisions
9
Portfolio
provisions
36
Total
provisions
45
Individual
provision
Total
change
Portfolio
effect
and writeprovision
on
offs
change
result
22
-12
10
3
1
0
3
0
7
0
15
15
0
-1
-1
Private other
0
0
0
0
0
0
0
0
0
0
0
0
84
20
11
7
0
122
12
4
16
10
-1
9
Manufacturing
0
1
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Construction
0
1
2
0
0
3
0
1
1
-1
1
0
37
0
0
0
0
37
0
0
0
0
0
0
Transportation
0
0
1
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Information and
communication
0
4
0
0
0
4
0
1
1
-1
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Property management *****
2
7
4
1
0
14
1
13
14
0
2
2
2
3
3
1
0
9
1
13
14
na
na
na
Commercial properties
0
4
1
0
0
5
0
0
0
na
na
na
0
0
0
0
0
0
0
0
0
na
na
na
0
0
0
0
0
0
0
0
0
na
na
na
0
0
4
0
0
4
0
1
1
0
0
0
0
3
7
0
0
10
0
0
0
4
-2
2
Credit institutions
0
0
0
0
0
0
0
0
0
0
0
0
Total Swedbank
222
130
230
100
83
765
22
71
93
34
-12
22
Retail
Industrial and warehouse
properties
Other property
management
***** For Property management the split into sub segments for provisions for anticipated loan losses is not applicable
SWEDBANK
133
Mortgage 18. Leverage ratio
SEKm
2016
1 007 300
0
0
10 434
0
0
575/2013
Other adjustments
-95 252
0
-431
922 051
SEKm
2016
979 317
-431
978 886
27 983
10 434
0
0
0
0
0
0
38 417
0
0
0
0
0
0
0
0
0
0
Tier 1 capital
-95 252
0
922 051
41 789
Leverage ratio
4.5%
SEKm
2016
979 317
0
979 317
0
1 255
0
56 835
878 790
1 452
40 060
of which corporate
677
For a description of Swedbank Mortgage’s process for managing the risk of excess leverage, please see Swedbank Risk Management and Capital Adequacy Report 2016,
page 12.
SWEDBANK
248

Swedbank Risk and Capital Adequacy 2015

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