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Report BFA - Bankia 2015 / Risk managementA strategic pillar

Risk management is one of the bank’s strategic pillars. Its main objective is to preserve the group’s financial and capital strength, driving value creation and business development in accordance with the risk appetite and risk tolerance set by the group’s governing bodies.

To achieve this, the bank provides tools for the assessment, control and monitoring of requested and authorised risk, the management of non-performing loans and the recovery of defaulted risks.

Significant steps were taken in 2015 to streamline the lending process by setting individual exposure limits and to increase the efficiency of recoveries processes.

Within this frame of reference, in 2015 the bank completed a risk function transformation project aimed at improving information quality and providing better tools, so as to bring the function into line with national and international best practices. This project specifies the general principles of the risk function (which include global scope, independence and top management commitment) and creates a comprehensive organisational model encompassing the complete risk life cycle.

In addition, significant steps were taken in 2015 to streamline the lending process by setting individual exposure limits and to increase the efficiency of recoveries processes. In recoveries, new tools were introduced, the level of specialisation was increased and certain processes were optimised, all of which contributed to the marked reduction in Bankia’s non-performing loans in 2015.

These advances tie in with the Transformation Plan 2016-2018 (see attached information), which will continue to improve risk management

Ten principles of risk management

  1. Independent, group-wide risk function that provides the necessary information for decisión making at all levels.
  2. Objective decision making, taking account of all the relevant risk factors (both quantitative and qualitative).
  3. Active risk management at every stage of the risk life cycle, from pre-approval credit analysis until the debt is extinguished.
  4. Clear processes and procedures subject to regularly review in light of changing needs, with clearly defined lines of responsibility.
  5. Integrated management of all risks through risk identification and quantification, and homogeneous risk management based on a common measure (economic capital).
  6. Differentiated risk treatment, approval process and management procedures, based on risk characteristics.
  7. Development, implementation and diffusion of advanced decision support tools that will facilitate risk management, making effective use of new technologies.
  8. Decentralised decision making, using the available methodologies and tools.
  9. Risk variable to be included in business decisions in all areas: strategic, tactical and operational.
  10. The objectives of the risk function and risk management staff must be aligned with the objectives of the bank as a whole, so as to maximise value creation.