Start : About the Bank : Information disclosure

Information disclosure

AS Expobank hereby discloses information about risk and capital management under the provisions of Paragraph one of Section 36.3 (3) of the „Law on Credit Institutions” of the Republic of Latvia and Regulation (EU) Nr 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms.

Information on the Group and Bank

AS Expobank (until 28 April 2012 AS LTB Bank, hereinafter the “Bank”) was established in the Republic of Latvia on 6 December 1991 as a closed joint stock company. The Bank operates under a banking license issued by the Financial and Capital Market Commission of the Republic of Latvia (“FCMC”) according to which the Bank is allowed to conduct financial services.

Main business of the Bank is servicing cash flows of its customers, including: current and deposit account maintenance services, documentary operations, exchange transactions, payment card services, as well as trust management services, brokerage, investment products and services to its customers. The activities of the Bank are regulated the FCMC.

The Bank’s Branch in Cyprus has operated since 8 October 2010.

In 2016, the Bank received a Latvian and Luxembourg from supervisory authorities permit the Bank to open a branch in Luxembourg (Grand Duchy of Luxembourg). Luxembourg branch commenced its operations in 2017, on January 9.

From 2015 in Hong Kong (China) operates local representative office of Bank.

In order to expand brokerage business the Bank acquired FXCM Securities Limited (name changed subsequently to Walbrook Capital Markets Limited), a UK based brokerage company, and its subsidiary FXCM Nominees Limited (name changed subsequently to Walbrook Capital Markets Nominees Limited) (together the “Walbrook entities”) on 2 December 2015.

 

Information about the Bank and its branch, representative office and subsidiaries (together the “Group”):

Information about the Bank:

AS Expobank

Address:

Valdemāra iela 19, Rīga, LV-1010, Latvia

Address:

AS Expobank Cyprus Branch,

Agiou Athanasiou, 46, INTERLINK HERMES PLAZA,

1st floor, Flat/Office 101B, 4102,  Limassol, Cyprus

Information about representative office

AS Expobank Luksemburg Branch,

Address:

L-1855 Luxembourg, 35F, avenue J.F. Kennedy

Information about representative office

AS Expobank representative office in Hong Kong

Address:

6/F Citibank Tower, 3 Garden Road, Central, Hong Kong

Information about the first tier subsidiary:

SIA „Axi Invest”

Address:

Valdemāra iela 19, Rīga, LV-1010, Latvia

Information about the first tier subsidiary:

SIA „Kappa Capital”

Address:

Valdemāra iela 19, Rīga, LV-1010, Latvia

Information about the first tier subsidiary:

Walbrook Capital Markets Limited

Address:

 

Northern & Shell building, 10Lower Thames Street,

8th Floor, London EC3R 6AD, United Kingdom

Information about the second tier subsidiary:

Walbrook Capital Markets Nominees Limited

Address:

 

Northern & Shell building, 10Lower Thames Street,

8th Floor London EC3R 6AD, United Kingdom

AS Expobank’s (hereinafter – the Bank) strategic goal for risk management is to achieve an adequate balance between risks assumed by the Bank and profit and to minimize the potential adverse effect of risks on the Bank’s financial performance and operation.

The Bank applies the requirements of FCMC regulations concerning risk management and ensures that risk control and compliance control functions are exercised independently from business and internal control units, including enabling direct contact between these functions and the Bank’s Council and Board of Directors. Risk management is based on systemic approach and is integrated into the Bank’s internal control system. Risk management process in the Bank is carried out in the aggregate, i.e., the Bank consolidates its operations and carries out risk management including branches and subsidiaries.

Risk control function is organized into a separate structural unit – the Risk Department, which focuses on setting up and maintaining a risk management system consistent with the Bank’s operation and regulatory requirements, as well as on planning, revising and improving this system in line with changes in the Bank’s operation and external factors impacting it.

The Bank has established a structural unit for compliance risk management, including its identification, assessment and control, whereas certain common functions of compliance control function are delegated to other structural units.

To manage, control and regulate inherent risks the Bank applies the following basic principles:

·      Comprehensive management – the Bank implements risk management as a systematic set of measures, and supports risk identification and management at the level of risk inherent in individual risk transactions, set of transactions exposed to risk, and the Bank’s operations in general;

·     Prudence –the Bank acts with discretion, only accepts risks in known spheres of business, does not accept unreasonable risks in any of such spheres, places limitations on or refuses to introduce services associated with heightened risks;

·     Adequate risk management environment –the Bank creates an internal environment and management culture, which stresses high standards of ethical conduct at all levels of the Bank’s organizational structure thereby facilitating effective internal control;

·    Integrity – risk management systems are integrated into the Bank’s internal control system;

·      Obligation – the Bank ensures that risk management requirements are binding on all structural units and employees. The Bank does not introduce new products, services, processes or systems until identified inherent significant risks have been addressed by the Bank’s risk management system and permissible exposure levels have been defined;

·       Continuity – the Bank views risk management as an ongoing continuous process: risk identification, analysis, decision making, implementation and control are performed on ongoing basis as part of the Bank’s development process;

·       Function separation – within the risk management process risk measurement, analysis and control functions are separated from the functions of business units (risk acceptance functions);

·      Consistency – the Bank defines permissible exposure levels and implements adequate risk management according to its business and corporate strategy;

·      Holistic approach – the Bank performs risk analysis in its entirety at the level of relevant committees and the Risk Department, thereby enabling holistic assessment of interaction of risks and the Bank’s total risk exposure;

·      Individuality – the Bank manages inherent significant risks for all types of activity at the level where such risks occur in the structural unit, which is chiefly responsible for deals and actions exposed to the respective type of risk;

·    Regularity – the Bank specifies the periodicity of risk identification, measurement, assessment, stress-testing, control and reporting;

·       Transparency – the Bank discloses risk management information on its website;

      ·     Discipline –the Bank exercises constant control over compliance with regulatory requirements applicable to risk management, including limits, restrictions and powers.

 

 

The Bank identifies all inherent significant risks, also prior to introduction of new products and services, and develops policies for risk management in compliance with laws and regulations, standards of self-governing institutions pertaining to banking, codes of professional conduct and ethics and other best practice banking standards. Under these policies the Bank documents and implements procedures for risk measurement, assessment, mitigation, control, risk reporting and disclosures. Policies are revised at least once a year based on changes in the Bank’s operation and external factors impacting it.

In its risk management process the Bank applies prudent risk management methods consistent with the Bank’s business activity types and their specific character achieving efficient minimization of total risk.

Risk control is implemented as a set of systemic measures with adequate risk control procedures, including restrictions and limits on maximum permissible exposure levels, exposure limitation methods, and control procedures to mitigate risks that cannot be defined in quantitative terms.

The Bank’s Council, Board of Directors and heads of relevant structural units regularly receive reports about inherent risks to be able to timely and continuously assess the risks that can impair the Bank’s ability to achieve its goals.

The Bank’s Council supervises risk management in the Bank and assesses its efficiency at least once a year, approves general corporate and risk management strategy, reviews and approves risk management policies and supervises the performance of the Board of Directors in the implementation of such policies.

The Board of Directors ensures ongoing identification and management of the Bank’s risk exposure under risk management policies approved by the Council, as well as the development and approval of internal regulations establishing adequate risk measurement, assessment, control and reporting procedures, division of authority and responsibility between structural units, and procedure for risk management reporting and disclosures.

The Bank has identified the following inherent significant risks that require risk management and control: credit risk, concentration risk, liquidity risk, market risk (interest rate risk, foreign exchange risk, market price (position) risk) country risk, operational risk (including legal risk), IT risk, compliance risk, money laundering and terrorist financing risk, reputation risk and strategy and business risk. Leverage, models and fiduciary risks has identified as not significant.

Information about credit risk, concentration risk, liquidity risk, foreign exchange risk, interest rate risk and operational risk management, capital adequacy and internal capital assessment is available from the Bank’s Annual Report for the Year Ended 31 December 2015 that is available also on the Bank’s website.

 

Leverage risk

Leverage risk definition

"Leverage risk" is the risk arising from the establishment of vulnerability caused by the actual or potential leverage of its funding structure, which may cause corrective measures in relation to the business plan, including financial difficulties caused by the sale of assets, which could result in losses or asset value adjustments.

Risk management policy defines leverage risk management principles of the Bank.

Leverage risk management contains monitoring of asset-liability structure, changes in funding, unfunded protection and derivatives volumes.

Bank in accordance with Regulation at least quarterly calculates leverage ratio, which reflects the ratio of Tier I capital against average assets and off-balance volume.

Risk management controls compliance of leverage ratio specified in with the Regulation as well as the quarterly reports to Management of the Bank.

 


Group leverage ratio 31.12.2016. (EUR)

 

Assets

297 211 471

Off-balance items

375 335

Tier 1 capital

52 512 275

Leverage ratio

17.65%

 

Leverage ratio during 2016 did not changed significantly, according changes in assets volumes.

 

Unencumbered assets

 

Bank in accordance with the FCMC "Rules on Information disclosure on encumbered and unencumbered assets” displays information about the encumbered assets, where they are pledged, mortgaged or is subject to any kind of agreement on the balance sheet or off-balance sheet transaction assurance.

Main sources of collateral assets are loans against securities and loans against real estate. The corresponding amount of credits occurred in 2016.

Group unencumbered and encumbered  assets on  31.12.2016 (EUR)

 

 

Carrying amount of encumbered assets

Carrying amount of unencumbered assets

Assets total

3 413 875

375 006 616

Due from on demand

 

240 420 337

Capital securities

 

40 752

Debt securities

 

35 737 657

Due from (other than on demand)

3 413 875

22 818 814

Other assets

 

75 989 056

 

Group encumbered collateral received on 31.12.2016 (EUR)

 

 

Fair value

Collateral received total

19 711 746

Debt securities

9 420 778

Real estate

10 470 968

 

Own funds

Group discloses such information on its own funds on 31.12.2016 (th EUR)

 

Common equity Tier 1 capital

Amount on disclosure date

Capital instruments and share premium accounts related to those

18 004

   of which: shares

11 644

   of which: personnel shares

6 360

Retained earnings

38 965

Accumulated other comprehensive income (ant other reserves to report unrealized gains and losses in accordance with applicable accounting

691

Common equity Tier 1 capital before regulatory adjustments

57 660

Common equity Tier 1 capital: regulatory adjustments

 

Intangible assets

-496

Gain or losses on liabilities valued at fair value resulting from change in own credit standing

-267

Direct, indirect and synthetic holdings by the institution 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)

-1

Total regulatory adjustments to common equity Tier 1 capital

-763

Common equity Tier 1 capital

56 897

Tier 2 capital: reserves and instruments

 

Capital instruments and share premium accounts related to those

144

Tier 2 capital

144

Capital ratios and reserves

 

Common equity Tier 1 capital (percentage of exposure value)

38.03%

Tier 1 capital (percentage of exposure value)

38.03%

Total capital (percentage of exposure value)

38.13%

Institution’s specific buffer requirement (percentage of exposure value)

3 832

  of which: the requirement for the capital conservation buffer

3 688

Common equity Tier 1 capital available for meeting the buffer requirement (percentage of exposure value)

33.53%

Deferred tax assets that arise from temporary differences (the amount does not exceed the threshold of 10%)

51

 

Remuneration policy

Pursuant to the Regulation (EU) No 575/2013 of the European Parliament and of the Council (26 June 2013) on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, and the requirements of FCMC “Regulations on Core Principles of the Remuneration Policy” No 126, the Bank reveals the information about the remuneration policy in the Bank by adhering to the confidentiality and personal data protection principles.

The objective of the remuneration policy is to determine the core principles and organization of the remuneration system of Bank employees and officials in order to ensure achievement of the objectives set forth in the Bank’s development strategy and to make sure that work of the employees and officials is performance-oriented in accordance with specifics and risk profile of the Bank’s activity.

The Board of Directors determines the core principles of the remuneration policy and approves the remuneration policy. On a regular basis, but at least once a year, the Board of Directors revises the core principles of the remuneration policy as well as revises and approves a program for the variable remuneration part.

The Board of Directors sets remuneration for members of the Bank’s Management Board, top-level officials or employees of the internal audit function, and positions where remuneration is equal to or exceeding the lowest remuneration scale set for the Management Board members.

The Shareholders’ Meeting of the Bank determines the remuneration for the Members of the Board of Directors.

The Management Board is in charge of elaborating a remuneration policy that would comply with the core principles determined for the remuneration policy by the Board of Directors, and for elaboration, approval, and implementation of internal regulatory documents compliant with the policy. The issues of the Bank’s staff remuneration are transposed in the staff policy, remuneration policy and the program for the variable remuneration part.

Upon evaluating the volume, complexity, specific character and organizational structure of the Bank’s operations, no remuneration committee has been established in the Bank.

The remuneration system aims at motivating the staff and facilitating their growth, as well as at fair evaluation of their achieved performance and at ensuring fair remuneration for high-quality work.

The remuneration system is basically created to ensure long-term development of the Bank’s business, to provide an opportunity for hiring highly qualified professionals, to maintain the current staff, to develop skills and professional competence of the employees, and to facilitate remuneration that is appropriate and competitive on the labor market.

 

Organization of the remuneration system is based on the principle that the remuneration does not depend on reaching short-term objectives and on abilities of certain positions to generate profit for the Bank to make sure that the employees do not take risks exceeding the risk level established by the Bank and that the Bank is not limited in its efforts to strengthen its equity capital.

 

The remuneration system is created in a way that meets the Bank’s values, ethics standards, long-term interests, business objectives determined in the development strategy, as well as in a way to meet and promote cautious and effective risk management and prevention of conflicts of interests.

 

The principles of the Bank’s remuneration policy provide for the attraction and motivation of officials or employees with relevant qualifications, supporting the Bank’s competitiveness, as well as the facilitation of such conduct that complies with the Bank’s values and reflects the Bank’s efforts in customer service.

 

The Bank’s remuneration structure consists of the invariable part of remuneration (a competitive monthly salary (basic salary), which is the main component of remuneration and which is set for each employee in view of the employee’s education, professional/academic growth, work experience, the contents of the work to be performed and responsibility, as well as the amount of remuneration in comparison with the remuneration of kindred positions in the financial sector) and the variable part of remuneration (which is only granted within the framework of the program of the variable part of remuneration, confirmed by the Board of Directors, in compliance with the requirements of remuneration policy and which aims at stimulating particular action and desirable results, to harmonize the remuneration with employees’ exposure to risk, to motivate and promote the performance-oriented culture in the Bank).

 

The Bank ensures that the invariable part of remuneration is sufficiently large to determine a flexible remuneration policy in respect of the variable part of remuneration, including the possibility to refrain from disbursing the variable part of remuneration.

 

The variable part of remuneration is determined individually upon the evaluation of the performance results of the entire Bank, the respective structural unit and each employee.

 

The Bank applies both the qualitative and quantitative indicators in order to determine the variable part of remuneration and assess the performance results. The employees’ variable part of remuneration depends on the individual work performance and attitude, the initiative for the attained results of both financial and non-financial nature and the results of achieving the aims, the Bank’s performance results and their stability and the risks related to the attained results, by taking into account the compliance of the aims and results, achieved in a particular period of time, with the Bank’s long-term goals and development pursuant to the established risk management principles and the level of risk undertaking.

 

The Bank does not allow for the variable part of remuneration to reach and exceed a considerable variable part of remuneration or particularly high variable part of remuneration, determining that the variable part of remuneration may not exceed 60% (sixty) percent in the reporting year of the invariable part of remuneration, set for the employees in the reporting year.

 

The Bank decreases or does not pay the variable part of remuneration if the Bank’s financial performance deteriorates or is negative, the Bank’s solvency deteriorates taking into account long-term capital adequacy maintenance and in other cases. The Bank decreases or does not pay the variable part of remuneration taking into account evaluation of compliance of decisions made by positions affecting the risk profile with the set risk management principles and risk undertaking level, as well as the performance considered when determining the variable part of remuneration, long-term consistency of such performance following the Bank’s long-term objectives and development.

 

The Bank does not apply the deferment policy of the variable part of remuneration. The Bank’s remuneration system does not provide for establishing and receipt of a guaranteed variable part of remuneration. The Bank’s remuneration system only provides for the variable part of remuneration in monetary form.

  

In 2016, there were no highly paid employees in the Bank, whose remuneration in the reporting year was equal or exceeded one million euro. In 2016, 13 (thirteen) employee, who held a post affecting the risk profile, terminated employment relationship with the Bank, of which 6 (six) was paid compensation for the termination of the employment relationship for a total of 175 313 EUR. In 2016 was not paid remuneration for launching labor relations.

 

Information on employee’s remuneration in 2016 (EUR)

 

Board of Directors

Management Board

Investment services

Private persons and SME services

Asset management

Corporate support function

Internal control function

Other

Number of employees on end of year

4

3

3

27

 

36

16

Total remuneration (EUR)

304 929

896 261

128 950

1 787 670

 

1 097 658

535 218

0

Including: variable part of remuneration (EUR)

0

89 250

6 540

119 782

 

77 454

13 252

0

 

Information on employees with material impact on risk profile in 2016 (EUR)

 

 

Board of Directors

Management Board

Investment services

Private persons and SME services

Asset management

Corporate support function

Internal control function

Other

 

Number of employees with material impact on risk profile at end of year

4

3

2

6

 

6

8

 

 

Including employees with material impact on risk profile in top management positions

4

3

2

4

 

5

3

 

Fixed remuneration part

Total fixed remuneration part

304 929

807 011

103 958

746 358

 

422 512

365 770

 

Including money and other payables

304 929

807 011

103 958

746 358

 

422 512

365 770

 

Including shares and related instruments

 

 

 

 

 

 

 

 

Including other instruments

 

 

 

 

 

 

 

 

Variable remuneration part

Total variable remuneration part

0

89 250

0

40 077

 

9383

12 512

 

Including money and other payables

0

89 250

0

40 077

 

9 383

12 512

 

Including shares and related instruments

 

 

 

 

 

 

 

 

Including other instruments

 

 

 

 

 

 

 

 

Remuneration for termination of the employment relationship

The number of employees who have received compensation for the termination of the employment relationship

 

0

0

5

 

0

0

 

The amount of compensation paid for the termination of the employment relationship during the financial year

 

0

0

175 313

 

0

0

 

The largest amount of compensation for employment termination per person

 

0

0

50 000

 

0

0

 

Benefits related with the retirement

The number of employees who have received benefits related with the retirement

 

0

0

3

 

0

0

 

Amount of benefits related with retirement

 

0

0

6 510

 

0

0

 

 

The said information on previous reporting periods is available also on the Bank’s website at:

http://www.expobank.eu/eng/left/about-us/financial-statements

Quantitative information about risk indicators, as well as capital adequacy and internal capital adequacy is also given on the Bank’s website:

http://www.expobank.eu/eng/left/about-us/financial-statements



AS Expobank
Kr. Valdemara 19
Riga, LV-1010, Latvia
(+371) 67043510
info@expobank.eu
Cyprus Branch
I-Bank Latvia I-Bank Cyprus
_