Case of NBR

VI. ICAAP disclosure (4)
• Economic capital is an important instrument in overall bank risk
management. Economic capital limits are allocated to individual business
areas during the annual budgeting process and are supplemented in dayto-day
management by volume, sensitivity, and value-at-risk limits.
• The Group planning process is undertaken on a revolving basis for the
coming three years and incorporates future changes in economic capital
as well as available internal capital. Economic capital thus substantially
influences plans for future lending activities and the overall limit for market risk.
• Economic perspective – value-at-risk approach. Parallel to the economic
capital approach, internal capital adequacy is assessed with a focus on the risk
taking capacity with regard to regulatory capital and total capital requirements.
• The figure for risk-taking capacity is compared to the overall value-at risk
(including expected losses), which is calculated using similar techniques as
those used under the economic capital approach (albeit using a lower
confidence level of 95 per cent)
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