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. It includes the following in the years ahead:
- General Data Protection Regulation (GDPR), which imposes rules on the processing of personal data and could have a significant impact on a range of activities, including marketing, databases and insurance policies.
- Markets in Financial Instruments Directive II (MiFID2 and MiFIR), which aims to make European financial markets more efficient and transparent and to enhance investor protection. It will affect all areas relating to investment products and processes.
- Payment Services Directive II (PSD2), which includes opening up account information to third parties so that they can enter the market more readily. This could directly impact financial institutions’ traditional business models.
- Other legislation worth mentioning includes the anticipated ePrivacy Regulation on the protection of electronic communication, PRIIPs (Packaged Retail and Insurance-based Investment Products), which will standardise the information on the products in question, and the Insurance Distribution Directive, which will protect the client’s interests and establish product oversight and governance arrangements.
- Various initiatives are currently underway in the area of solvency, mainly in relation to the banking business. The main initiatives relate to the method for calculating 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.
- Others factors are the new IFRS that have yet to become effective, including IFRS 17, which applies specifically to the insurance business and will come into effect as from 2021 (subject to EU endorsement) and especially IFRS 9, which becomes effective as from 2018 and introduces a number of measures, including a new classification system for financial instruments and new impairment rules (see Note 1.0 in the ‘Consolidated financial statements’ section).
- We also anticipate more stringent transparency requirements in the future with regard to the risks and opportunities associated with climate change.
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.||
≥ 10.6% 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|