NEDBANK CAPITAl - Nedbank Group Limited

isk and BALANCE SHEET management reportEconomic capital adequacyNedbank Group’s economic capital methodology has been summarised on page 166. Set out below is a summary of the group’seconomic capital adequacy and capital allocation to the business clusters:Nedbank Group summary of economic capital adequacyRm45 00040 00035 00030 00025 0005 771 8 234Surplus2 45210% buffer32 744Tier A(non-corecapital)38 2169 610 9 880SurplusTier A(non-corecapital)2 60110% buffer11 783 16 104 5 238 9 045Tier A(non-coreSurpluscapital)2 5792 42540 14742 78020 00010%buffer15 00010 000MinimumrequirementvsTier A(core capital)24 521 24 510MinimumrequirementvsTier A(core capital)26 005 28 336Minimumrequirement25 785 24 251vsTier A(core capital)34 909 33 7355 0000RequirementAvailablefinancial resourcesRequirementAvailablefinancial resourcesNew basis99,93%Old basis99,9%RequirementNew defn Old defnAvailablefinancial resources200720082009The following changes were made to the group’s 2008 economic capital model (used for ICAAP), which introduce even moreconservatism around the group’s target solvency standard:• Increased the target debt solvency standard from A- (99,9%) (same as Basel II) to A (99,93%).• Excluded ‘50% of next year’s earnings’ from the definition of AFR (even though business risk economic capital is still included).• Created a Tier A and Tier B category for AFR, with Tier A having to cover at least the minimum economic capital requirement at anA rating.Definitions:Tier A = core Tier 1 regulatory capital and qualifying reserves*Tier B = perpetual preference shares and hybrid debt capital(* In Tier A we include SBP, FCT and AFS reserves, as we deem this as correct and appropriate.)The effect of the changes on required economic capital and AFR for 2009 is shown by comparing it with the required and availablecapital prior to and after these changes.180NEDBANK GROUP ANNUAL REPORT 2009