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  3. Main developments in 2014 and challenges for 2015

Report BFA - Bankia 2014 / Risk managementMain developments in 2014 and challenges for 2015

The main measures taken in 2014 and planned for 2015 are intended to enhance the institution’s risk management and controls, as part of the Risk Function Transformation Plan drawn up in 2013. They are also designed to ensure the bank complies with new regulatory requirements (Basel III) and supervisory arrangements (Single Supervisory Mechanism), while contributing to ramping up lending to aid the economic recovery.

The new initiatives are intended to enhance risk management and control, responding to the new regulatory environment and boosting new lending to fuel the economic recovery.

The Risk Function Transformation Plan entailed the launch of 71 projects in 2013, 31 of which were pending completion at year-end 2014. The most notable projects completed in 2014 are as follows:

Establishment of a Risk Advisory Committee

In October 2014, Bankia’s Board of Directors approved the setting up of a Risk Advisory Committee, granted powers to provide advice and consultation to the Board regarding risk control and supervision. The Board Risk Committee retains executive functions. This measure has enhanced corporate governance and fulfils the requirement laid down in the Spanish law on the planning, oversight and solvency of credit institutions (Ley de Ordenación, Supervisión y Solvencia de Entidades de Crédito).

Definition and roll-out of the Risk Appetite Framework

The Risk Appetite Framework was approved by the boards of Bankia and BFA on 23 and 24 September, respectively, giving rise to substantive changes in the institution’s risk management and control.

Review and industrialisation of the recoveries process

Significant progress was made in rolling out the Recovery IT tool, which can be used to effectively and efficiently manage recoveries while also reducing the manpower needed at central services and regional and business units. The year drew to a close with the successful launch of the Collection Agencies recoveries management module, while the Insolvency Proceedings and Litigation module and Amicable and Pre-trial Settlement module are pending roll-out – planned for the first half of 2015.

Amendments to the credit risk approval circuit

In September, the Board of Directors also approved a new Credit Risk Approval Circuit, the most important features of which are: a more simplified calculation method, iso-risk curves analysing capital consumption, a move towards unifying decision-making across the entire transaction generated for each economic group, introduction of the financial programme concept within the authorisation framework (providing greater flexibility and speed when approving transactions), and the introduction of new delegation levels at retail branch and business centre levels, enabling greater control and discrimination depending on use by branches.

Formalisation and documentation of processes

Working process were formalised to ensure they are duly documented and can be consulted and audited internally and externally, including by Europe’s single supervisor.

The most important projects of the Transformation Plan that will be carried out in 2015 are as follows:

  • Roll-out of the Capital Planning Framework.
  • Design and launch of a Recoveries Plan.
  • Introduction of the internal liquidity adequacy assessment process.
  • Development of a credit limit scale allowing risk-adjusted returns to be optimised within the risk appetite thresholds determined by the Board of Directors.

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