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A strategic pillar

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BANKIA HAS AN ORGANISATIONAL STRUCTURE IN ACCORDANCE WITH REGULATORY REQUIREMENTS TO PUT ITS RISK MANAGEMENT POLICY INTO EFFECT.

The main objective of risk management is to preserve the Bankia Group’s strength, while driving value creation and business development in accordance with the risk appetite levels set by the governing bodies. To achieve that objective, it provides management with tools to assess, control and monitor requested and authorised risk, manage non-performing loans and recover defaulted loans.

The bank has an organisational model consistent with the risk function. In December 2017, the structure of the risk function was updated, following the regulatory guidelines of the European Central Bank. Management of the risk function is distributed between two corporate directorates: Risks (acting as second line of defence) and Credit Risk (responsible for the management of the bank’s foreclosed assets).

RISK APPETITE AND CAPITAL PLANNING

At the core of Bankia’s risk management is a Risk Appetite and Risk Tolerance Framework, approved by the Board of Directors, risk appetite being the amount and type of risk the bank is willing to take in the course of its activity in order to achieve its objectives. Within this framework, a set of elements allow management to gain a comprehensive view of risk appetite levels, risk tolerance levels and risk-taking capacity in relation to each risk.

The second strategic axis is the Capital Planning Framework, which lays down the action to be taken in matters of risk and capital under normal business conditions.

Supplementing the Risk Appetite and Capital Planning frameworks, the Recovery Plan establishes the measures to be taken in hypothetical crisis situations.

THE TEN PRINCIPLES OF RISK MANAGEMENT

  1. Independent, group-wide risk function that provides the information needed for decision making.
  2. Objective decision making, taking all the relevant risk factors into account.
  3. Active management of the risk life cycle, from pre-approval credit analysis until the debt is extinguished.
  4. Clear processes and procedures, subject to regular review in light of changing needs, with clearly defined lines of responsibility.
  5. Integrated management of all risks through risk identification and quantification.
  6. Differentiated risk treatment, approval levels and management procedures.
  7. Development, implementation and diffusion of advanced decision support tools.
  8. Decentralised decision making, using available methodologies and tools.
  9. Inclusion of risk as a factor in business decision-making in all areas: strategic, tactical and operational.
  10. Alignment of the objectives of the risk function and risk management staff with the objectives of the bank as a whole.

CORPORATE GOVERNANCE IS KEY

One of the most significant aspects of the European regulations is the introduction of corporate governance as a fundamental aspect of risk management. Under these regulations, institutions must establish sound corporate governance procedures, including a clear organisational structure, appropriate internal control mechanisms and effective procedures for identifying, managing, controlling and reporting risks, as well as appropriate remuneration policies and practices.

Bankia has a well-defined risk supervision and control structure, with the following assignment of roles and responsibilities:

Board of Directors

Determines and approves the general internal control strategies and procedures and the policies for the assumption, management, control and reduction of the risks to which the group is exposed. It has various internal committees with different responsibilities.


Audit and Compliance Committee

Oversees the effectiveness of the bank’s internal control, internal audit and risk management systems.


Risk Advisory Committee

The main function of this committee is to advise the Board of Directors on the bank’s overall risk propensity and its risk strategy.


Board Risk Committee

This committee is responsible for approving risks within the scope of its authority and for overseeing and administering the exercise of delegated authority by lower-ranking bodies.


ORGANISATIONAL STRUCTURE OF RISK CONTROL

2016-2018 TRANSFORMATION PLAN

The risk management strategy is governed by the 2016-2018 Transformation Plan, which is guided by five principles:

  1. An effective recoveries model. Intensifying the use of collection agencies, centralising processes and systematising the sale of small portfolios.
  2. Promotion of sound lending. Encouraging the use of models to analyse the available information and to improve the credit rating system.
  3. Early warning system. Aiming to build the necessary infrastructure to detect potential impairments before they materialise.
  4. Asset allocation. Orienting the business towards maximising economic value, while respecting the risk levels set in the Risk Appetite Framework.
  5. Culture and training. Promoting a training plan focused on the risk profile and data quality. 

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