Regulatory disclosures
1 Capital adequacy requirements (Pillar I)
The Banking Law and Banking Ordinance of the Principality of Liechtenstein form the legal basis of capital adequacy requirements, which in turn are based on the directives of the Basel Committee on Banking Supervision as adapted by the European Union.
In accordance with Basel III, banks may choose from various approaches to calculate the capital requirements for credit, market and operational risks. The LLB Group applies the standard approach for credit risk, the basic indicator approach for operational risks and the standard approach for market risks (trading book activities of insignificant materiality in accordance with Article 94 (1) CRR). The determination of capital requirements and tier capital is carried out on the basis of the IFRS consolidated financial statement.
Further information regarding the regulatory framework and key figures of the LLB Group can be found in the separately published Disclosure Report 2018.
1.1 Segmentation of credit risks
Download |
|
Regulatory risk weighted |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
in CHF thousands |
0 % |
10 % |
20 % |
35 % |
50 % |
75 % |
100 % |
150 % |
250 % |
Total |
||||||||||
31.12.2018 |
|
|
|
|
|
|
|
|
|
|
||||||||||
Central governments and central banks |
5'761'359 |
0 |
15'626 |
0 |
5'672 |
0 |
0 |
0 |
0 |
5'782'657 |
||||||||||
Regional governments |
0 |
0 |
144'992 |
0 |
3'497 |
0 |
0 |
0 |
0 |
148'489 |
||||||||||
Public sector entities |
0 |
0 |
149'303 |
0 |
5'055 |
0 |
0 |
0 |
0 |
154'358 |
||||||||||
Multilateral development banks |
76'978 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
76'978 |
||||||||||
Banks and securities firms |
0 |
0 |
2'014'964 |
0 |
191'736 |
0 |
8'363 |
24 |
0 |
2'215'087 |
||||||||||
Corporates |
0 |
0 |
202'799 |
0 |
73'687 |
0 |
1'459'459 |
65'438 |
0 |
1'801'382 |
||||||||||
Retail |
0 |
0 |
0 |
0 |
0 |
329'301 |
682'251 |
0 |
0 |
1'011'552 |
||||||||||
Secured by real estate |
0 |
0 |
0 |
8'269'397 |
1'794'073 |
0 |
927'753 |
0 |
0 |
10'991'222 |
||||||||||
In default |
0 |
0 |
0 |
0 |
0 |
0 |
135'637 |
63'425 |
0 |
199'062 |
||||||||||
Equity instruments |
0 |
0 |
0 |
0 |
0 |
0 |
26'467 |
0 |
30 |
26'497 |
||||||||||
Covered bonds |
0 |
357'496 |
357'431 |
0 |
6'807 |
0 |
0 |
0 |
0 |
721'734 |
||||||||||
Collective investments and others |
62'885 |
0 |
605 |
0 |
0 |
0 |
221'424 |
0 |
20'770 |
305'683 |
||||||||||
Total |
5'901'221 |
357'496 |
2'885'720 |
8'269'397 |
2'080'527 |
329'301 |
3'461'353 |
128'886 |
20'800 |
23'434'701 |
||||||||||
Total previous year |
4'324'656 |
217'771 |
2'540'482 |
7'906'146 |
2'049'596 |
280'767 |
2'891'508 |
101'856 |
63 |
20'312'845 |
1.2 Mitigation of credit risk
Download |
|
31.12.2018 |
31.12.2017 |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
in CHF thousands |
Covered by recognised financial collateral |
Covered by guarantees |
Other credit commitments |
Total |
Covered by recognised financial collateral |
Covered by guarantees |
Other credit commitments |
Total |
||||||||
Balance sheet positions |
0 |
6'656 |
0 |
6'656 |
0 |
11'099 |
0 |
11'099 |
||||||||
Off-balance sheet positions |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||||||||
Derivatives |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||||||||
Total |
0 |
6'656 |
0 |
6'656 |
0 |
11'099 |
0 |
11'099 |
1.3 Leverage Ratio (LR)
A further integral part of the Basel III package is the leverage ratio which, with its comparison of unweighted on-balance sheet and off-balance sheet risk positions, on the one hand, and equity held, on the other, attempts to prevent the danger of financial institutes becoming excessively indebted. In future this reference ratio is to be limited to three per cent and is currently being monitored by the supervisory authority. It is not yet legally binding.
At the end of 2018, the leverage ratio of the LLB Group amounted to 6.7 per cent (31.12.2017: 8.3 %).
1.4 Liquidity Coverage Ratio (LCR)
The Delegated Regulation (EU) 2015 / 61, which came into force in Liechtenstein in January 2016, supplements the CRR in regard to liquidity coverage criteria for banks. The regulations are to ensure that banks possess a reasonable level of liquidity in order to cover their liquidity requirements in the case of a liquidity stress scenario within 30 calendar days. As the only binding regulatory liquidity reference figure, the LCR represents an important indicator both for liquidity risk measurement as well as liquidity risk control.
At the end of 2018, a regulatory LCR lower limit of 100 per cent was applicable for the LLB Group. With a value of 147.8 per cent, the LLB Group’s ratio was substantially higher than legally required.
2 Internal capital (Pillar II)
The financial market regulatory requirements with respect to quantitative risk management, which arise from Pillar II, are fulfilled by the LLB Group by, among other measures, the conducting of a risk-bearing capacity calculation. The objective of the risk-bearing capacity calculation is to ensure the continued existence of the LLB Group. In line with this objective, the adequacy of the Group’s capital resources is tested using internal models. The results attained with the individual risk categories are aggregated in a total risk potential and are compared with the capital available to cover these potential losses. This process enables the extent to be determined to which the LLB Group is in a position to bear potential losses.
For the purpose of the calculation of its risk-bearing capacity, the LLB Group employs a value-at-risk approach with a confidence level of 99.98 per cent and a holding duration of one year. Correlations between the individual risk categories are not considered.
The LLB Group’s financial strength should remain unimpaired by fluctuations on the capital market. Scenario analyses and stress tests are employed to simulate external influences and assess their impact on equity capital. Where necessary, measures are taken to mitigate risks.