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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 main goals of market risk management at ING Bank Śląski S.A. are to ensure that the Bank’s exposure to market risk is understood and properly managed, and, if applicable, that the exposure is within approved limits.

The Bank defines market risk as the potential loss due to unfavourable changes in:

  • market prices (e.g. yield curves, FX rates, equity prices, etc.)
  • market parameters (e.g. volatility of market prices and the correlation between moves in market prices)
  • customer behaviour (e.g. loan prepayments).

Risk management process

The market risk management process within the Bank covers the identification, measurement, monitoring and reporting of risk. The Market Risk Management Department provides FM and Bank Treasury Management, selected Management Board and ALCO Committee members with regular risk updates. Additionally ALCO, Bank Management Board and Supervisory Board receive periodic updates with the most important market risk metrics. The MRM Department is staffed with trained specialists and the independence of this department is ensured by its separation from the Bank units which generate market risk.

The market risk management process at the Bank also covers the Product Control function which assures correctness of Financial Markets and Bank Treasury products valuation by monitoring the correctness of valuation models and controlling the quality of market data used for valuation and calculation of a financial result. Decisions about issues related to the valuation process e.g. sources of market data used for valuation, pricing model provisions calculation, etc. are taken by the Parameterisation Committee which is composed of representatives from the MRM Department, Financial Markets Division, Bank Treasury and Finance Division.

Bank’s book structure and risk measurement methods

The Bank maintains an intention-based book structure which drives many processes, including market risk management. The book structure reflects what kind of market risk is expected and acceptable in different parts of the Bank and where market risk should be internally transferred/hedged within the Bank. Books are categorized based on intention as

  • “trading” (positions taken in expectation of short-term financial gains from market movements) and
  • “banking” (all other positions).

A high-level structure of the Bank’s books is as follows:

Banking Books are further split into Commercial Banking Books and Bank Treasury Banking Books. Commercial Banking Books are Retail and Wholesale Banking books containing commercial loans and deposits. The risk of these positions is transferred to:

  • Bank Treasury Banking Books (for interest rate risk, basis risk and liquidity risk) and
  • trading books of the Financial Markets Division (for FX risk) via internal contracts.

The process ensures that these books do not contain material economic market risk. However, as described later in more detail, the short-term financial results of these books are sensitive to changes in market rates. The commercial activities of the subsidiaries belong to the commercial banking books.

Bank Treasury Banking Books serve to manage:

  • the liquidity risk of the Bank as a whole, and
  • the interest rate risk of the banking book.

Open positions are allowed within approved market risk limits.

Trading Books are books in the Financial Markets area: FX and interest rate trading. These books include items held:

  • for resale, or
  • with the intent of benefiting from actual or expected short-term price movements, or
  • items to lock in arbitrage profits.

The market risks of open positions in trading books are limited.

More information on the methods of the interest rate risk measurement were presented in 2017 Consolidated Financial Statement of ING Bank Śląski S.A. Group on page 161.

Measuring the interest rate risk in the banking book

In measuring the interest rate risk of the banking book, the Bank applies the measures required by the regulations of the European Banking Authority (EBA/GL/2015/08). The main measures are:

  • Net Interest Income at Risk – measuring the sensitivity of the reported results of an item booked on an accrual basis based on a set of interest rate scenarios that assume different movements of the yield curve. We analyse the scenarios that assume gradual:
    • parallel movement of the curve,
    • steeping of the curve,
    • flattening of the curve.
  • Net present value of discounted future cash flows exposed to risk (Economic Value of Equity – EVE) – measurement of the sensitivity of the economic value of interest rate positions to sudden changes in interest rates. In the EVE measurement, the Bank applies the scenarios described in the EBA regulation as a shock regulatory scenario. The idea of EVE calculation is based on subtracting from the appropriate NPV values for regulatory scenarios, the NPV values from the baseline scenario.

As additional measures in the area of the banking book, the Bank measures:

  • optionality risk – potential losses on these positions resulting from early withdrawal of deposits and/or prepayment of loans,
  • residual risk – potential loss on these positions resulting from the application of non-standard pricing mechanisms which are not transferred to the Treasury Department that manages the interest rate risk.

The above risks have immaterial status (potential losses have a very small share in the historical and forecasted results).

More information on the measuring the interest rate risk in the banking book were presented in 2017 Consolidated Financial Statement of ING Bank Śląski S.A. Group on page 163.

Market risk measurement in trading book

The Bank calculates VaR in line with the best market practice taking into account the following assumptions:

  • one day position holding period, 99% confidence level,
  • 260-day observation period.

The adequacy of the VaR model is checked daily in a back-testing process („VaR backtesting”). The financial result, both “daily” and “hypothetical” (change in the end-of-day market value of the positions in a trading portfolio over 1 day, so excluding all intra-day activities that occurred during that day) are compared to the VaR figure. Any model outliers are investigated and explained.

To tighten risk control, the Bank in the area of the FX risk book also implemented measurement of FX risk and monitoring of the approved intra-day limits.

The Bank is aware that VaR metrics does not give a full picture of market risk in individual portfolios as it does not account for potential losses in extreme market changes. Therefore “Stressed VaR” calculation has been introduced. Stressed VaR is a metrics that replicates calculation of historical simulation provided that in measurement we use the current portfolio and historical market data – they are taken from the cumulative yearly period and characterized by a significant deviation of the market parameters relevant for a given portfolio.

A bank-wide stress test is performed on a half-yearly basis covering market risk, liquidity risk and credit risk under regulatory scenario and other scenarios developed by the Bank’s economists and approved by ALCO. Moreover, on a quarterly basis a derivatives portfolio stress-test is performed to present the impact of shock scenarios on valuation of those instruments.

More information on the market risk measurement in trading book were presented in 2017 Consolidated Financial Statement of ING Bank Śląski S.A. Group on page 165.

Sensitivity of the result and capital to the interest rate risk

The tables below present an overview of the Bank’s consolidated sensitivity to the interest rate risk:

  • banking book – the changes observed in the measurement for both the NII and EVE measure result mainly from the two factors:
    • changes (increase) in product volumes, and
    • changes in model parameters used to determine the economic value of product portfolios without maturity,
  • market value of debt instruments classified as available for sale AFS in the Treasury Department’s portfolio:
    • slight changes in the sensitivity of the AFS portfolio were observed compared to the previous year. The BPV measure of the portfolio (BPV short position) went up from PLN 1.1 million to PLN 1.3 million.


The sensitivity of consolidated results to the interest rate movements resulting from the banking book:

Change in the economic result

for yield curve move (PLN million)

Change in the reported financial result

for yield curve move (PLN million)

-2% 2% -2%
2017 -607.1 230.7 -29.6 60.3
2016 -592.3 -177.2 52.5 -6.0

Note: The full methodology that meets the requirements of the European Banking Authority was implemented in 2017, in line with KNF recomendations. This change significantly affects the measures, hence it is not sensible to compare them to the values reported in 2016. Therefore, to ensure comparability, the measurement results presented in the table above of sensitivity to interest rate risk show the measurements for 2016 made using the new methodology.


The sensitivity of the equity to the interest rate movements resulting from the debt securities available for sale:

Approximate change in regulatory capital base for yield curve move (PLN million)
-2% -1% +1% +2%
2017 159.5 80.1 -94.5 -190.0
2016 141.0 72.0 -77.4 -160.2


In the reporting period, the market risk profile and the method of managing this risk did not change significantly. In terms of risk measurement, the main changes concerned IRRBB and resulted from the EBA guidelines.

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