Risk and capital adequacy
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.
Swedbank shall maintain a low risk level. The long-term risk profile will be managed so that the effect of an extremely negative but possible scenario, as determined in Swedbank’s internal capital assessment process, does not significantly reduce the Common Equity Tier 1 capital ratio. If the assessment process indicates an excessively large impact on the Group’s capitalisation, measures will be taken to mitigate the risks.
Swedbank shall maintain a low risk profile from both a capital and liquidity perspective. The vast majority of the bank’s credit risk exposure shall be in Sweden in the form of low-risk mortgages. A favourable risk distribution is achieved through a broad customer base among private individuals and companies in many different industries. Customers cash flow, solidity and collateral are always the decisive factors in the loan approval process.
Swedbank’s market funding is designed, as far as possible, to match assets of corresponding maturity and to maintain a sustainable balance between lending and deposits in all markets where the bank is active. To remain resilient to both short- and long-term disruptions in the capital market, Swedbank shall consistently maintain a robust liquidity buffer comprising high-quality liquid assets.
Risk and capital adequacy report
On February 1st 2007, the capital adequacy rules Basel 2 came into effect in Sweden. The rules strengthen the link between risk taking and capital requirements and entail, among other things, stricter requirements on banks concerning risk management and information disclosure. Shareholders have an interest in a high return on the capital they invest in the bank and thus in ensuring that shareholders’ equity is not unnecessary high. For creditors and society, on the other hand, it is important that the bank maintains a sufficient buffer, or risk capital, to cover potential losses. The capital adequacy rules therefore set minimum requirements on the size of the buffer based on how much risk the bank assumes. Swedbank’s Risk and capital adequacy reports according to the rules is to be found on the right hand side under relevant links.