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Capital adequacy

One of the bank’s main tasks is to ensure an adequate level of capital.

As part of the capital management policy, the bank creates a framework and guidelines for the most effective planning and use of the capital base, which:

  • are compliant with external and internal regulations in force,
  • guarantee a continuity of financial targets achievement, which render an appropriate rate of return for shareholders,
  • ensure the maintenance of a strong capital basis being a fundamental support for business development.

The capital management policy in mBank is based on:

  • maintenance of an optimal level and structure of own funds with the application of available methods and means, like among others retention of net profit, subordinated loan or issue of shares,
  • effective use of existing capital, among others through application of a set of measures of effective use of the capital, limitation of activities that do not provide an expected rate of return and development of products with lower capital absorption.

The strategic goals of mBank and mBank Group are aimed at maintaining the total capital ratio as well as the Common Equity Tier 1 capital ratio above the levels required by the supervision authority. This allows to maintain business development while meeting the supervisory requirements in the long perspective.

Capital ratios on consolidated and individual basis were above the values required throughout 2017.

Capital ratio mBank Group mBank
Required level 31.12.2017 Required level 31.12.2017
Total capital ratio (TCR) 17.55% 20.99% 18.12% 24.62%
Tier 1 ratio 13.67% 18.31% 14.09% 21.51%

Capital adequacy of mBanku Group

The capital ratios of mBank Group in 2017 were driven by the following factors:


  • inclusion, in Common Equity Tier 1 capital, of the remaining part of the net profit of mBank Group for the year 2016, not included in Common Equity Tier 1 capital on the basis of the PFSA decision obtained in 2016;
  • inclusion, in Common Equity Tier 1 capital, of the verified net profit of the mBank Group for Q1, Q2 and Q3 2017, net of expected charges and dividends, on the basis of the PFSA decisions of May 29, 2017, September 7, 2017, and December 19, 2017, respectively;
  • classification of capital instruments issued within incentive programs in the period from August 1, 2016, till June 30, 2017, as instruments in Common Equity Tier 1 capital on the basis of the PFSA decision of December 8, 2017;
  • change of the limit for unrealized gains measured at the fair value included in the own funds calculation from 60% in 2016 to 80% in 2017;
  • change of the limit for grandfathered subordinated instruments included in the own funds;
  • inclusion of the company Future Tech Fundusz Inwestycyjny Zamknięty in prudential consolidation from June 2017;
  • extensions of the AIRB approach: confirmation of June 12, 2017, from ECB and PFSA regarding high significance conditions that have been met in respect to the conditional consent to the application of the advanced internal rating based approach (AIRB approach) to the calculation of own funds requirement for credit risk for mBank non-mortgage portfolio;
  • implementation of the Resolution of the Ministry of Development and Finance of May 25, 2017, regarding higher risk weight for exposures secured by mortgages (regarding mainly foreign exchange mortgage exposures); the increase in risk weight from 100% to 150% for FX exposures secured by mortgages on immovable property under standardised approach had no impact on the Group capital charges as the Group applies advanced internal rating based approach for the given portfolio. However the accompanying change, implemented according with the PFSA communication of September 19, 2017, with regard to the application of the preferential risk weight for a part of the exposure secured by mortgage on residential property up to 80% of the property market value had a significant influence on Group RWAs;
  • expansion of the mBank Group business activity;
  • appreciation of the Polish zloty against the foreign currencies.

The level of the required capital ratios at the end of 2017 was among others affected by the following administrative decisions:

  • according to the PFSA decision, in 2016 mBank had been identified as other systemically important institution (O-SII) subject to a capital buffer; according to the PFSA decision of December 19, 2017, the capital buffer amounted to 0,75% of the total risk exposure amount, calculated in accordance with the provisions of the CRR Regulation, to be maintained on individual and consolidated levels. The bank has applied the required capital buffer, defined in the December decision, to December 31, 2017 end data.
  • according to the PFSA decision of November 20, 2017, and the subsequent communication of December 15, 2017 mBank should maintain additional own funds on individual basis with regard to the risks related to the portfolio of FX retail mortgage loans of 4.10% at the level of total capital ratio and 3.07% at the level of Tier 1 capital (on consolidated basis: 3.53% and 2.65% accordingly).


The level of the required capital ratios encompasses:

  • the basic requirement of PFSA addressed to banks in Poland as at December 31, 2017, to maintain the total capital ratio of 12% and the Tier 1 ratio of 9%;
  • the additional capital charge in Pillar II with regard to FX mortgage loan portfolio – 3.53% at the level of total capital ratio and 2.65% at the level of Tier 1 capital on consolidated basis (and on individual basis 4.10% and 3.07% accordingly);
  • the combined buffer requirement of additional 2.02%, which consists of the collateral buffer, the other systemically important institution buffer and countercyclical capital buffer.

With a considerable surplus of own funds mBank Group comfortably meets the additional own funds requirement and the combined buffer requirement.

Requirements resulting from article 500 of the CRR Regulation

The next component of the adequacy assessment of Group’s capital base is verification whether Group meets requirements resulting from article 500 of the CRR Regulation. For this purpose, the value of the Group’s own funds is compared to the value of 80% of the comparable standardised-driven total capital requirement. This parallel calculation is to ensure that the Group’s own funds calculated under the internal rating based approach are sufficient and that they will not fall below 80% of own funds that the Group would have to maintain under the standardised approach. mBank Group’s own funds are well above the level determined by the reference value.

The consolidated leverage ratio calculated in accordance with the provisions of the CRR Regulation and Commission Delegated Regulation (EU) 2015/62 of October 10, 2014, including provisions regarding transitional period, amounted to 9.00%. The stand-alone leverage ratio amounted to 9.05%.

Stress tests

Stress tests are an essential tool used for managing the bank and the Group and for capital and liquidity planning. In order to ensure compliance with regulatory requirements under normal and stress conditions the Group and the bank carry out sensitivity analyses and scenario analyses for key concentration risks. The Management Board decides on the choice of risk scenario used for management purposes to ensure adequate capital resistance of the mBank Group in crisis situations.

Additionally integrated stress tests are conducted based on scenario of unfavourable economic conditions that may adversely affect the bank’s financial position in at least a full two-year time horizon (for liquidity risk: a one-year time horizon). The risk scenario, i.e. the most plausible (in at least a full two-year time horizon) scenario of negative deviations from the base scenario, expressed in terms of macroeconomic and financial ratios, is common for all risk types, applied at Group level and aligned with the corresponding scenario accepted by the consolidating entity.

The Group and the bank carries out so called reverse stress tests the goal of which is to identify events potentially leading to unviability of the Group and the bank. Reverse stress tests are used for the verification of capital and liquidity contingency plans of the Group and for making strategic decisions concerning accepted risk profile of the Group.