BAWAG GROUP AG QUALITATIVE DISCLOSURE REPORT ACCORDING TO REGULATION (EU) NO. 575/2013 ("CRR")
2023
CONTENTS
CONTENTS
QUALITATIVE DISCLOSURE
10 GENERAL PRINCIPLES
10 Scope of consolidation and consolidation methods
12 Impediments to the transfer of own funds
12 Total shortfall in own funds of all subsidiaries not included in the scope of consolidation 12 Usage of Articles 7 and 9 CRR
13 RISK MANAGEMENT
13 Group-wide risk management
19 Internal Capital Adequacy Assessment Process (ICAAP) and Group-wide stress test 24 Capital allocation and limitation at total Bank level
26 CREDIT RISK
26 Objectives and principles of credit risk management
30 Counterparty default risk arising from derivatives, repurchase transactions, securities and commodities lending transactions, margin lending transactions and long settlement transactions
33 Credit risk mitigation
35 Value adjustments and reserves
37 Rating systems and rating processes
45 MARKET RISK
45 Objectives and principles of the management of market risk 47 Internal models for limitation of market risk
47 Interest rate risk from positions not held in the trading book
53 OPERATIONAL RISK
53 Strategies, processes and management
53 Structure and organization of operational risk management
54 Risk measurement systems
56 Risk hedging and mitigation
56 Own fund requirements
57 LIQUIDITY RISK
57 Strategies, processes and management
59 Structure and organization of relevant risk management functions
59 Risk measurement systems
60 Risk reporting systems
61 Risk hedging and mitigation
61 Liquidity coverage ratio
62 Net stable funding ratio
2
CONTENTS
63 CONCENTRATION RISK
63 Strategies, processes and management
63 Structure and organization of relevant risk management functions
63 Risk measuring systems and limitation
64 Reporting systems
65 ESG RISK
65 Qualitative information on environmental risk
65 Business strategy and processes
66 Governance
68 Risk management
75 Qualitative information on social risk
75 Business strategy and processes
77 Governance
87 Risk management
88 Qualitative information on governance risk
88 Governance
101 Risk management
102 RISK OF MONEY LAUNDERING AND FINANCING OF TERRORISM 102 Strategies, processes and management
102 Structure and organization of relevant risk management functions
103 Risk measurement systems
103 Risk reporting systems
103 Risk hedging and mitigation
-
RESIDUAL RISK FROM TECHNIQUES OF CREDIT RISK MITIGATION 104 Strategies, processes and management
104 Structure and organization of the relevant risk management functions 104 Risk hedging, risk mitigation and risk measurement systems - MACROECONOMIC RISKS
105 Strategies, processes and management
105 Structure and organization of relevant risk management functions
105 Risk measurement, risk reporting system and risk hedging or mitigation
3
CONTENTS
106 PARTICIPATIONS NOT HELD IN THE TRADING BOOK
106 Objectives and principles for the management of participations
107 Accounting and valuation methods
108 SECURITIZATIONS
108 Disclosure of exposure to securitization positions
- LEVERAGE RATIO
- REMUNERATION POLICY DISCLOSURE
- APPENDIX
4
Qualitative disclosure
LIST OF TABLES
Table 1: | Divergent consolidation basis | 11 |
Table 2 | Risk appetite statement | 14 |
Table 3: | Functions held by Management Board and Supervisory Board members | 19 |
Table 4: | Types of collateral and collateral valuation and management | 34 |
Table 5: | Mapping of external ratings to the individual credit quality steps | 38 |
Table 6: | Rating notches and classes for all segments | 39 |
Table 7: | Description of the validation methods | 40 |
Table 8: | Description of the reference definitions for default | 41 |
Table 9: | Overview of rating and scoring systems | 42 |
Table 10: | Interest rate sensitivities | 48 |
Table 11: | Instantaneous change of the economic value of equity | 49 |
Table 12: | Change in the forecasted net interest income within 12 months | 50 |
Table 13: | Scope of risk materiality assessment | 69 |
Table 14: | Results and outlook of risk materiality assessment | 70 |
Table 15: | Financed emissions overview according to PCAF asset classification | 74 |
Table 16: | Material topics (related to ESG) | 90 |
6
QUALITATIVE DISCLOSURE
LIST OF ABBREVIATIONS
ALM | Asset Liability Management |
AML | Anti money laundering |
AS | Application scoring |
BCBS | Basel Committee on Banking Supervision |
BP | Basis point |
BPV | Basis point value |
BS | Behavioral scoring |
BWG | Bankwesengesetz (Austrian Banking Act) |
CAC | Credit Approval Committee |
CCF | Credit conversion factor |
CEO | Chief Executive Officer |
CFO | Chief Financial Officer |
CHAID | Chi-square automatic interaction detectors |
CHF | Swiss franc |
CLO | Collateralized loan obligation |
CMM | Capital Management Meeting |
CRD | Capital Requirements Directive |
CRO | Chief Risk Officer |
CRR | Capital Requirement Regulation |
CSA | Credit Support Annex |
CET1 | Common Equity Tier 1 |
EAD | Exposure at default |
EBA | European Banking Authority |
ECB | European Central Bank |
ECL | Expected credit loss |
EDP | Electronic data processing |
EEA | European Economic Area |
ERM | Enterprise Risk Meeting |
ESG | Environmental, social and governance |
EUR | Euro |
EV | Economic value |
EVE | Economic value of equity |
FACE | Free Available Cash Equivalent |
FMA | Financial Market Authority |
FTP | Funds transfer pricing |
FVPL | Fair value through profit or loss |
FVOCI | Fair value through other comprehensive income |
FX | Foreign exchange |
GBP | British pound |
GDP | Gross domestic product |
HQLA | High-quality liquid assets |
IAS | International Accounting Standards |
ICS | Internal control system |
ICT | Information and communications technology |
ICAAP | Internal Capital Adequacy Assessment Process |
ID | Identity document |
IFRS | International Financial Reporting Standards |
IKS | Internal control system |
ILAAP | Internal Liquidity Adequacy Assessment Process |
IRB | Internal ratings-based approach |
7
QUALITATIVE DISCLOSURE
ISDA | International Swap and Derivatives Association |
ISTC | ICAAP & Stress Test Committee |
KRI | Key risk indicator |
KSHK | Kreditsicherheitenkatalog (Credit Collateral Catalogue) |
KSV | Kreditschutzverband |
KYC | Know your customer |
LAS | Liquidity adequacy statement |
LCR | Liquidity coverage ratio |
LGD | Loss given default |
LTIP | Long-term incentive program |
LTV | Loan-to-value |
NFR & ESGC | Non-Financial Risk and Environment Social Governance Committee |
NII | Net interest income |
NPL | Non-performing loans |
PD | Probability of default |
PIP | Product implementation process |
P&L | Profit and loss |
PSC | Portfolio Steering Committee |
PVBP | Present value of a basis point |
RAP | Risk-adjusted pricing |
RBC | Risk-bearing capacity |
RCC | Risk and Credit Committee |
RCSA | Risk control self-assessment |
RM | Risk Modelling |
RMBS | Residential mortgage-backed securities |
ROC | Receiver operating characteristic |
RWA | Risk-weighted assets |
SA-CCR | Standardized approach for counterparty credit risk |
S-ALCO | Strategic Asset and Liability Committee |
SEQ | Sicherheitenerlösquotient (collateral return rate) |
SICR | Significant increase in credit risk |
SME | Small and medium-sized enterprises |
S&P | Standard & Poor's |
SSPE | Securitization Special Purpose Entity |
TM | Treasury & Markets |
TMA | Asset Liability Management |
TPU | Temporary partial use |
UGB | Unternehmensgesetzbuch (Austrian Commercial Code) |
USD | US dollar |
VaR | Value-at-risk |
WAL | Weighted average life |
WAM | Weighted average maturity |
WGG | Wohnungsgemeinnützigkeitsgesetz (Austrian Non-profit Housing Act) |
8
QUALITATIVE DISCLOSURE
DISCLOSURE INDEX
Review of risk management systems | Consolidated Annual Report IFRS 2023 | |
according to Article 435 | (1) point (e) CRR | |
Figures and information | Consolidated Annual Report IFRS 2023 | |
according to Article 435 | (1) point (f) CRR |
Information according to Article 41 FMA circular letter on accounting issues in connection with derivatives for controlling interest rates
Details on accounting and valuation methods according to Article 447 point (a) CRR
BAWAG P.S.K. Annual Financial Report according to Section 124 Stock Exchange Act
Consolidated Annual Report IFRS 2023
9
QUALITATIVE DISCLOSURE
GENERAL PRINCIPLES
According to Article 13 of Regulation (EU) No 575/2013 (hereinafter abbreviated to "CRR"), this Disclosure Report is published on the BAWAG Group AG level. BAWAG Group AG is a financial holding company in the form of a corporation. Its main business purpose is the management of the company's assets. From a risk perspective, the main Bank-wide steering processes are performed by its subsidiary, BAWAG P.S.K. AG. These processes are disclosed in this report.
SCOPE OF CONSOLIDATION AND CONSOLIDATION METHODS
Article 436 points (a), (b) sublit (i-iv) CRR
Owing to diverging regulations in the International Financial Reporting Standards ("IFRS") and the CRR, there are two different sets of consolidation guidelines, one for accounting and one for regulatory purposes, which also lead to two different scopes of consolidation. The following paragraphs present the scopes of consolidation and explain changes that occurred in 2023.
Consolidation for accounting purposes
In accordance with IFRS 10, the scope of consolidation includes BAWAG Group AG and all material subsidiaries owned directly and indirectly.
The Group's share in the total assets and profit or loss of the subsidiary are the criteria for materiality. The proportionate total assets (higher than € 30 million) and profit or loss (higher than € 3 million) of the subsidiary are the criteria for inclusion.
The consolidated financial statements as of 31 December 2023 contained 40 fully consolidated companies and 2 companies that are accounted for using the equity method. The book value of associated equity interests including banks not consolidated at equity amounted to € 0 million as of 31 December 2023.
Controlled companies with a book value of € 16 million were not consolidated because of their negligible effect on the assets, financial and earnings position of the Group. Subsidiaries with a negligible effect on the assets, financial and earnings position of the Group are not included in the consolidation.
Changes in the scope of consolidation with no material impact on the consolidated financial statements
In 2023, one company was deconsolidated, as the requirements for consolidation in accordance with IFRS 10 were no longer met. One company was added to the scope of consolidation, due to materiality. Two newly established companies were included in the scope of consolidation and five companies were merged within the scope of consolidated entities.
Changes in the scope of consolidation with material impact on the consolidated financial statements
In the fourth quarter of 2023, two companies were included in the scope of consolidation due to the successful completion of the acquisition process for Idaho First Bank.
For further details, please refer to Note 48 List of consolidated subsidiaries in the BAWAG Group consolidated annual report 2023.
10
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
BAWAG Group AG published this content on 13 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 March 2024 14:11:28 UTC.