saxo-bank-annual-report-2015

of 2014 the corresponding ratios were 16.0%, 18.3%
and 19.7% respectively.
The Capital base has in 2015 been affected by negative
earnings, influenced by the loss of DKK 0.7 billion related
to the Swiss Event in January, and positively by issuance of
new capital. The new capital instruments comprise DKK
228 million new share capital (CET1) and new subordinated
debt in EUR corresponding to DKK 337 million in book
value (Tier 2 capital).
In November 2015 the Group redeemed guarantor capital
worth of DKK 114 million in the subsidiary Saxo Privatbank,
materialising in a decrease in the regulatory capital base.
The capital contribution of the subordinated debt issued
by the Group before 2014 is gradually being phased out
until the end of 2017, as they do not completely fulfil the
requirements in the CRR and the Danish Transition Rules.
The gradual reduction of subordinated debt does not affect
the excess Common Equity Tier 1 capital. As of 31
December 2015, DKK 92 million of subordinated debt issued
by the Bank under old regulation is included in the
Tier 2 capital.
The total Risk Exposure Amounts of the Group was DKK
13.0 billion as of 31 December 2015 compared with DKK
14.3 billion as of 31 December 2014.
As of 31 December 2015, the ICAAP of Saxo Bank
showed a capital requirement of 14.0% of Risk Exposure
Amounts, equivalent to DKK 1.8 billion. The Common Equity
Tier 1 buffer was DKK 0.8 billion corresponding to
6.1% of the Risk Exposure Amounts.
The Risk Report 2015 and the ICAAP Q4 2015 Report, provide
additional information regarding the Bank´s and the
Group´s Total Capital (including regulatory own funds disclosures),
Risk Exposures Amounts and capital requirements.
CRD IV and CRR require the Bank and the Group to monitor
and report a short term Liquidity Coverage Ratio (LCR)
and a long term Net Stable Funding Ratio (NSFR). In Denmark,
LCR is phased in gradually as a new minimum liquidity
requirement, meaning a gradual phase-in of 60%
of the full requirement from October 2015, 70% in 2016,
80% in 2017 and 100% in 2018. As of 31 December
2015, the Bank and the Group had a LCR of 101% and
105% respectively.
The LCR requirement is more restrictive than the current Danish
regulation due to higher liquidity requirements on investment
bank activities, which are the Group’s core business.
The Bank and the Group are required to hold liquidity at
least equal to the current Internal Liquidity Adequacy Assessment
Process (ILAAP) level as determined by the Board
of Directors. This ILAAP level cannot be less than the current
minimum regulatory requirements. The ILAAP is performed
quarterly based on guidelines issued by the DFSA.
In the ILAAP per end of 2015, it is concluded, that the
Bank has a safe operational setup within the liquidity area
and that the current level of liquidity is sufficient to uphold
the Bank’s operation and meet a prudent requirement
under the LCR regime. Since the LCR requirement is
the most challenging for the Bank to fulfil it is also the
one used for the internal liquidity adequacy measurement.
The fulfilment of current Danish liquidity requirement is
published in the Supervisory Diamond 2015 report available
at www.saxobank.com/investor-relations.
The Risk Report 2015 provides additional information regarding
the Bank´s and the Group´s liquidity, the liquidity
requirements and the ILAAP. The report is available at
www.saxobank.com/investor-relations.
FSA INSPECTION AT SAXO BANK A/S
Review of the Bank’s Risk Management
of Margin Trading
The Danish Financial Supervisory Authorities conducted an
inspection at Saxo Bank A/S in May 2015. The inspection
was partly a follow-up on the review in spring 2014 of the
Bank’s risk management of clients’ margin trading and
partly carried out following the bank’s losses on 15 January,
2015 due to the Swiss event.
18 · SAXO BANK · ANNUAL REPORT 2015