Start : About the Bank

Information disclosure for 2014

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.

The principal activities of the Bank involve local and international money transfers, foreign Exchange transactions on behalf of customers and trust operations. The activities of the Bank are regulated the FCMC.

At the end of 2009 the Bank received a permission to open a branch office in the Republic of Cyprus from supervisory authorities in Latvia and Cyprus. As a result, activities of the Bank’s branch were started on October 8, 2010.

At the end of 2014 the Bank received a permission to open a local representative office in Hong Kong (China) from supervisory authorities in Latvia and Hon Kong (China).

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

Information about the branch:

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 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

Concluded Group agreements (management agreements) were registered with the Enterprise Register of the Republic of Latvia on 27 December 2012. It is stated in the agreements that the Bank is a governing entity and subsidiaries are dependent entities.

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.

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 2014 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 31.12.2014. (EUR)

 

Assets

489 674 608

Off-balance items

2 038 018

Tier 1 capital

64 185 100

Leverage ratio

13.1%

 

Leverage ratio during 2014 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 2014.

Group unencumbered and encumbered  assets on  31.12.2014 (EUR)

 

 

Carrying amount of encumbered assets

Carrying amount of unencumbered assets

Assets total

29 823 163

465 509 683

Due from on demand

 

314 177 191

Capital securities

 

16 742

Debt securities

 

59 762 169

Due from (other than on demand)

29 823 163

86 009 542

Other assets

 

5 544 039

 

Group encumbered collateral received on 31.12.2014 (EUR)

 

 

Fair value

Collateral received total

31 239 966

Debt securities

24 040 278

Real estate

7 199 688

 

Remuneration policy

The information is prepared in accordance with the EU 575/2013 Regulation and the Financial and Capital Market commission No.126 "Legislative, regulatory provision on of the remuneration policy the fundamental principles of" compliant with principles of physical persons data protection.

Bank’s remuneration policy is approved by Board of Directors of the Bank. The Management Board is responsible for the implementation of the remuneration policy in the Bank. Taking into account the volume, types and complexity of Bank’s products and organizational structure, Bank has not established remuneration committee.

Basic principles of the Bank’s remuneration policy are developed and implemented in accordance with the Bank's strategy and values, which corresponds to the Bank's activities and risk profile.

Bank’s remuneration system is organized adhering to the principle, that the employee's remuneration shall not depend from short-term achievements, as well as from possibilities to increase the Bank's profit, to avoid additional risks taking, that exceeds prescribed risk-taking-levels.

Bank’s existing remuneration system contains only constant part of remuneration, without the imposition of results, with no variable part of remuneration.

The Bank's remuneration system is based on determination of the competitive monthly wages rates (as of remuneration constant part) for each employee that corresponds to the desired level of education, practical skills, responsibility and level of contribution in respective business structural unit performance.

Neither Bank’s remuneration policy, neither the other documents of the Bank, nor other contracts does not envisage any for similar consideration, the severance grant or other types of costs or material benefits granting of aid for of labor legal relations - the initiation or termination of the contract. Only cases and amount specified in Labour Law.

In 2014 there has not been highly rewarded employee, whose reporting year remuneration was equal greater than 1 million euro.

 

Information on employee’s remuneration in 2014

 

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

4

3

31

32

14

Total remuneration (EUR)

587 946

544 506

112 289

938 340

0

657 949

268 154

0

Including: variable part of remuneration (EUR)

0

0

0

0

0

0

0

0

 

Information on employees with material impact on risk profile in 2014 (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

9

 

4

4

 

 

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

4

4

2

4

 

4

3

 

Fixed remuneration part

Total fixed remuneration part

587 946

544 506

108 809

470 886

 

117 884

91 804

 

Including money and other payables

587 946

544 506

108 809

470 886

 

117 884

91 804

 

Including shares and related instruments

 

 

 

 

 

 

 

 

Including other instruments

 

 

 

 

 

 

 

 

 

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
I-Bank Latvia
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