GENERAL MEETING DRAFT - Bankier.pl

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>> Consolidated Financial Statements
Part E – Information on risks and related risk management policies
In accordance with the Basel II recommendations, measuring risk profile is a fundamental element of the
capital adequacy process.
The Group’s approach to capital adequacy consists of five phases:
� Risk identification, as described above
� Risk profile measurement
� Planning capital and definition of the risk appetite
� Monitoring and reporting
� Risk governance
Risk profile measurement is carried out using the internal capital, which is determined by aggregating
economic capital related to the types of risk described above net of diversification benefits plus a cushion
that takes into account significant elements for determining the risk profile, such as the variability of the
economic cycle and the risk model, with reference to the quality of the data and the accuracy of the
models.
The risk profile is defined using internal capital for large and medium-sized companies, while for small
companies a synthetic approach is used to allow for an efficient measurement process at the
consolidated level.
The capital planning process involves allocating the capital to the divisions and entities in order to reach
value creation objectives on the basis of risk propensity. Over the long run the Group aims to generate an
income greater than is necessary to remunerate risk (cost of capital at risk) and thus create value so as to
maximize the return for its shareholders.
Risk propensity can be defined as the long- and short-term variability in results that Senior Management
is willing to accept in support of a particular strategy.
The framework adopted by UniCredit comprises three areas:
� Capital adequacy;
� Profitability and risks;
� Liquidity and Funding;
Capital adequacy is the balance between capital and assumed risk, with a view to both the first and
second pillar, where it is measured respectively by the Core Tier 1 Ratio, Total Capital Ratio and the Risk
Taking Capacity. The latter is the ratio between the available capital (Available Financial Resources,
AFR) and the internal capital.
The AFR can be used to protect the bank from insolvency. These resources must be committed and
defined on a contractual basis, so that they can be relied upon in times of crisis. Since losses impact the
AFR, these can also be defined as the amount of losses that can be absorbed by the bank before it
becomes insolvent.
The internal economic capital measurements and the resulting Risk Taking Capacity are illustrated in the
following table.
Capital Adequacy December 2009 (� billion)
Internal capital 43.9
Available Financial Resources (AFR) 64.0
Risk Taking Capacity 145.9%