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For the second time now, the ING Bank Śląski S.A. Group has compiled the annual report in line with the best global practices of integrated reporting. To help readers use the interactive tools, we prepared a user guide with key features. We encourage you to watch a short animated video before reading the report.

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The following material risks were identified under the business risk:

  • financial result risk,
  • macroeconomic risk,
  • FX mortgage portfolio risk.

Financial result risk

Financial result risk, deemed permanently material, is defined at the Group as the risk associated with taking adverse or erroneous business decisions, the lack of or faulty execution of taken assumptions/actions and changes in the external environment plus an inappropriate response to these changes which results in the financial result being below the requirements arising from the need to conduct ongoing operations and grow, mainly in order to supply the capital base.

In principle, financial result risk is recognised in the area of planned mergers and acquisitions on the market. For organic growth of the Group, the risk is recognised as limited.

The main financial result risk triggers are: failure to earn the income planned or budget cost overrun. The said triggers are influenced by accomplishment of the planned client number, volume and market share, offer for clients and cost control.

Additionally, innovativeness and attractiveness of the Group as well as its perception by clients and the market are crucial.

In 2017, the Group increased the number of clients served to 4.53 million. The client base augmented thanks to the systematically implemented innovations for clients (e.g. introduction of mobile authorisation, BLIK deposits at CDM or a multicurrency card) and marketing campaigns. The Group attaches great significance to development and promotion of the online channel, which translates into a high share of cash loans sold in that channel to individual clients and entrepreneurs (74% and 65%, respectively). Moreover, 99.86% of all transfers are electronic transfers.

The Group continues actions to consolidate its market position by promoting cash and mortgage loans and incentivising clients to accumulate their savings. This is done using attractive financial solutions under simple and fair product offer.

By carrying out the above actions, in Q4 2017, the Bank increased its market share (versus Q4 2016) in household loans by 0.79 p.p. (to 5.78%) and deposits by 0.23 p.p. (to 9.10%). For the corporate segment, it was +0.20 p.p. (to 10.68%) and +0.79 p.p. (to 8.81%), respectively.

The above factors enabled us to deliver the financial plan.

Macroeconomic risk

Macroeconomic risk – the risk due to macroeconomic factors changes and their impact on the minimum capital requirements. The Bank manages that risk by conducting regular internal stress tests, whereby the sensitivity of minimum capital requirements to macroeconomic factors can be monitored on an ongoing basis. In 2017, the Bank ran full capital tests twice: for the data as at Q4 2016 and Q2 2017.

Based on internal stress test results for the mild recession scenario, the Group estimates the additional capital requirement to secure against the impact of the said scenario materialisation. Stress-test results show that should the mild recession risk materialise it will not effect a decline in the capital adequacy below the required level. Therefore, the Group quantified the additional economic capital for that risk at zero.

FX mortgage portfolio risk

FX mortgage portfolio risk is the risk of financial losses connected with FX mortgage loans conversion into PLN mortgage loans.

To manage risk, the Group uses current legislation proposals for conversion of FX mortgage loans.

One should highlight at that point that the Group did not receive a capital add-on for that risk (imposed by the Polish Financial Supervision Authority on the banks having significant FX mortgage portfolios). Still, bearing in mind the risk of legislative uncertainty in that area, the Group resolved to secure itself by computing the economic capital add-on.

As at 2017 yearend, the value of the FX mortgage portfolio of the Group was PLN 1.0 billion.

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