Risk and capital adequacy
| On February 1st 2007, new 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. This is Swedbank’s first yearly report on risk management and capital adequacy according to the new rules. |
| |
|
|
|
|
| |
|
|
|
|
Capital base & capital requirement
|
Risk
|
Basel 2
|
|
|
| Capital adequacy expresses how much capital a credit institution, such as a bank, must have in relation to the size of its risk. |
|
|
|
|
|
|
| The concept of risk comprises both the likelihood that an event will occur and the impact it would have on the company. |
|
|
|
|
|
|
| Basel 2 is rules on capital adequacy and consists of three pillars. |
|
|
|
| |
|
|
Credit risk
|
Operational risk
|
Financial risk
|
|
|
| Credit risk is defined as the risk of a counterparty failing to meet contractual obligations to the lender and the risk that collateral will not cover the claim. |
|
|
|
|
|
|
| Inadequate or failed internal processes, human error, incorrect systems or external events are examples of operational risks. |
|
|
|
|
|
|
| Financial risks are divided into two main classes: market risk and liquidity risk. |
|
|
|
|
|
|
|
