We have placed our sustainable and profitable performance within a framework of robust risk, capital and liquidity management.
Our risk management is based on a ‘Three Lines of Defence' model, to shield us against risks that might threaten the achievement of our goals. Read more about the ‘Three Lines of Defence' model
Our priority: putting the client at the centre of our risk management efforts.
This requires risk management to support the business side in the offering of appropriate, fair and sustainable products and services.
Our constant concern: protecting the client from unfair or inappropriate practices.
Client protection is also increasingly enshrined in regulations like the Markets in Financial Instruments Directive/Regulation (MiFID/MiFIR) and the Insurance Mediation Directive (IMD), and in various initiatives launched by the European Securities and Markets Authority (ESMA).
Our environment: increasing regulation
Increasing regulation is an issue for the financial sector as a whole. In addition to legislation already in force, such as the General Data Protection Regulation (GDPR), Markets in Financial Instruments Directive II (MiFID II and MiFIR) and Payment Services Directive II (PSD2), it includes the following in the years ahead:
- EU measures to mobilise financial resources for sustainable growth (including disclosure requirements for environmental, social and governance (ESG) matters).
- The Shareholder Rights Directive (SRD II), which will, amongst other things, affect the way banks, as security custodians, communicate certain information to their investor clients.
- Planned reforms to the European Market Infrastructure Regulation (EMIR) to enhance the functioning of the derivatives market in the EU, the new Prospectus Regulation (PR3) and the new Securitisation Regulation for simple, transparent and standardised (STS) securitisation. We also expect a European Regulation on crowdfunding.
- The ePrivacy Regulation (ePR), which will supplement the GDPR to improve privacy in electronic communication.
- The ECB is working on a regulatory framework to cover the outsourcing of activities and services by banks, with the emphasis on internal governance, risk management and reporting.
- Initiatives with regard to solvency, including the calculation of risk-weighted assets (Basel IV) and the further streamlining of legislation to ensure that shareholders and creditors absorb losses at banks rather than the government (bail-in and MREL).
- New IFRS, including IFRS 17, which applies to insurance activities and will probably become effective as from 2022.
New risks linked to an ever changing operating context
We also view cyber risk, including hacking, as a key risk. Cyber-attacks are a constant threat in an increasingly digital world, with the potential to cause significant financial and reputational harm.
Business risk arises whenever changes in external factors threaten to undermine demand for our products and services, or their profitability. Significant causes of this type of risk include changes in the competitive environment or shifting client behaviour.
Our approach to sector specific risks
In addition to these general risks, we are inherently exposed as a bank-insurer to sector-specific risks such as credit risk, country risk, interest rate risk, foreign exchange risk, insurance underwriting risk and operational risk. A summary of the most important banking and insurance-specific risks can be found in the annual report, under Risk Management.
We monitor our performance
In addition to the comprehensive monitoring of various risk indicators, we monitor our solvency and liquidity performance via a number of Key Performance Indicators (KPIs), the most important of which are listed in the table below. Effective results per KPI can be found in the annual report.
|Common equity ratio||[common equity tier-1 capital] / [total weighted risks]. The calculation is fully loaded.||
≥ 10.7% in 2019 (with additional pillar 2 guidance of 1.0% CET1)
[own funds and eligible liabilities] / [risk weighted assets]
|≥ 25.9% in 2019|
|Net stable funding ratio (NSFR)||[available amount of stable funding] / [required amount of stable funding].||≥ 100% as of now|
|Liquidity coverage ratio (LCR)||[stock of high-quality liquid assets] / [total net cash outflows over the next 30 calendar days].||≥ 100% as of now|