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2018 Financial and Social Report

CRR scope of application and own funds

The scope of consolidation of the Capital Group of Bank Millennium SA as determined in accordance with the prudential regulations (Regulation CRR) is the same as the scope of consolidation made for the preparation of consolidated financial statements prepared by the Group in accordance with IAS/IFRS. The Group did not make any exclusions of consolidated entities in comparison to IFRS financial statements, based on possibility provided by article 19.1 of the CRR.

Carrying values of items
ASSETS (PLN thous.) Carrying values as reported in published financial statements Carrying values under scope of regulatory consolidation Subject to the credit risk framework Subject to the CCR framework Subject to the securitization framework Subject to the market risk framework Not subject to capital requirements or subject to deduction from capital
Cash, cash balances at central banks 2 450 176 2 450 176 2 447 954
Financial assets held for trading 794 718 794 718 693 418 112 167
Derivatives 101 372 101 372 112 167
Equity instruments 104 104 104
Debt securities 693 242 693 242 693 314
Non-trading financial assets mandatorily at fair value through profit or loss, other than Loans and advances to customers 64 796 64 796 64 796
Equity instruments 21 609 21 609 21 609
Debt securities 43 187 43 187 43 187
Financial assets at fair value through other comprehensive income 22 133 938 22 133 938 22 122 381
Equity instruments 29 299 29 299 29 299
Debt securities 22 104 639 22 104 639 22 093 082
Financial assets available for sale n/d n/d
Equity instruments n/d n/d
Debt securities n/d n/d
Loans and advances to customers 52 711 680 52 711 680 53 735 945
Mandatorily at fair value through profit or loss 1 250 525 1 250 525
Valued at amortised cost 51 461 155 51 461 155
Financial assets at amortised cost other than Loans and advances to customers 1 026 420 1 026 420 779 142 250 247
Debt securities 44 884 44 884 44 868
Deposits, loans and advances to banks and other monetary institutions 731 252 731 252 734 274
Repurchase agreements 250 284 250 284 250 247
Derivatives – Hedge accounting 125 501 125 501 115 998
Investments in subsidiaries, joint ventures and associates 0 0
Tangible assets 210 641 210 641 210 641
Intangible assets 96 464 96 464 96 464
Tax assets 335 297 335 297 335 286
Current tax assets 11 11
Deferred tax assets 335 286 335 286
Other assets 483 609 483 609 477 615
Non-current assets and disposal groups classified as held for sale 25 674 25 674 25 674
Total assets 80 458 914 80 458 914 80 989 317 478 412
Total Items subject to
Subject to the credit risk framework Subject to the CCR framework Subject to the securitization framework Subject to the market risk framework
1 Assets carryiyng value amount under the scope of regulatory consolidation (as per template EU LI1) 80 458 914 80 989 317 478 412
2 Liabilities carryiyng value amount under the scope of regulatory consolidation (as per template EU LI1) 80 458 914
3 Total net amount under the regulatory scope of consolidation 80 458 914
4 Off-balance-sheet amounts 9 855 664 9 686 300
5 Differences
6 Exposure amounts considered for regulatory purposes 90 314 578 90 675 617 478 412

Table EU LI3 – Outline of the differences in the scopes of consolidation (entity by entity)

Considering that used in the Group method of the accounting consolidation is the same as the method of regulatory consolidation, the Table EU LI3 (EBA/GL/2016/11) is not presented.

 

Table EU LIA –Explanations of differences between accounting and regulatory exposure amounts

The exposure value used to calculate minimum capital requirements consists of capital, interest due and penalty interest. The Bank adopted a more conservative formula for determining the exposure, comparing to the balance sheet items, where the adjustment of the effective interest rate was not taken under consideration and from the other hand penalty interests were included. At the same time, the full compliance between the basis of calculation and the basis for estimating risk parameters using in capital requirements calculation is assured.

Exposure amount being the base for capital requirements calculation is being higher than balance-sheet exposure amount, what is in line a conservative way of risk estimation.

Companies included in consolidation as at 31.12.2018 are presented in the following table:

Company Activity domain Head office % of the Group’s capital share % of the Group’s voting share Recognition in financial statements
BANK MILLENNIUM SA banking services Warsaw Parent company full consolidation
MILLENNIUM LEASING Sp. z o.o. leasing services Warsaw 100 100 full consolidation
MILLENNIUM DOM MAKLERSKI S.A. brokerage services Warsaw 100 100 full consolidation
MILLENNIUM TFI S.A. investment  funds management Warsaw 100 100 full consolidation
MB FINANCE AB funding companies from the Group Stockholm 100 100 full consolidation
MILLENNIUM SERVICE Sp. z o.o. rental and management of real estate, insurance and brokers activity Warsaw 100 100 full consolidation
MILLENNIUM GOODIE Sp. z o.o. web portals activity Warsaw 100 100 full consolidation
MILLENNIUM TELECOMMUNICATION SERVICES Sp. z o.o. financial operations – equity markets, advisory services Warsaw 100 100 full consolidation
PIAST EXPERT Sp. z o.o. marketing services Tychy 100 100 full consolidation
LUBUSKIE FABRYKI MEBLI S.A. (in liquidation) furniture manufacturer Świebodzin 50+1 share 50+1 share equity method valuation (*)
BG LEASING S.A. leasing services Gdańsk 74 74 historical cost (*)

(*) Despite having a control over the companies Lubuskie Fabryki Mebli S.A. and BG Leasing S.A., due to insignificant nature of these companies from the realization of the primary goal of the consolidated financial statements point of view, which is the correct presentation of Group’s financial situation, the Group does not consolidate capital involvement in aforementioned enterpises.

As at 31 December 2018 none of the Group’s companies disclosed the capital shortage in relation to existing capital requirements.

Group considers that there are no current or foreseen material or legal impediment to the prompt transfer of own funds or repayment of liabilities among parent undertaking and its subsidiaries. (Art. 436.c)

Group did not receive from competent authorities waiver from application of prudential requirements on an individual basis, based on CRR art. 7. Group did not receive a permission of competent authorities, based on CRR art. 9. (art. 436.e)

The below table presents own funds components of Group as at 31.12.2018.

ID Item Amount
1 OWN FUNDS 7 942 989
1.1 TIER 1 CAPITAL 7 242 989
1.1.1 COMMON EQUITY TIER 1 CAPITAL 7 242 989
1.1.1.1 Capital instruments eligible as CET1 Capital 2 360 619
1.1.1.1.1 Paid up capital instruments 1 213 117
1.1.1.1.2 Memorandum item: Capital instruments not eligible 0
1.1.1.1.3 Share premium 1 147 502
1.1.1.1.4 (-) Own CET1 instruments 0
1.1.1.1.4.1 (-) Direct holdings of CET1 instruments 0
1.1.1.1.4.2 (-) Indirect holdings of CET1 instruments 0
1.1.1.1.4.3 (-) Synthetic holdings of CET1 instruments 0
1.1.1.1.5 (-) Actual or contingent obligations to purchase own CET1 instruments 0
1.1.1.2 Retained earnings -257 351
1.1.1.2.1 Previous years retained earnings -257 351
1.1.1.2.2 Profit or loss eligible 0
1.1.1.2.2.1 Profit or loss attributable to owners of the parent 760 651
1.1.1.2.2.2 (-) Part of interim or year-end profit not eligible -760 651
1.1.1.3 Accumulated other comprehensive income 73 692
1.1.1.4 Other reserves 5 217 876
1.1.1.5 Funds for general banking risk 228 902
1.1.1.6 Transitional adjustments due to grandfathered CET1 Capital instruments 0
1.1.1.7 Minority interest given recognition in CET1 capital 0
1.1.1.8 Transitional adjustments due to additional minority interests 0
1.1.1.9 Adjustments to CET1 due to prudential filters 30 576
1.1.1.9.1 (-) Increases  in equity resulting from securitised assets 0
1.1.1.9.2 Cash flow hedge reserve 55 541
1.1.1.9.3 Cumulative gains and losses due to changes in own credit risk on fair valued liabilities 0
1.1.1.9.4 Fair value gains and losses arising from the institution’s own credit risk related to derivative liabilities 0
1.1.1.9.5 (-) Value adjustments due to the requirements for prudent valuation -24 965
1.1.1.10 (-) Goodwill 0
1.1.1.10.1 (-) Goodwill accounted for as intangible asset 0
1.1.1.10.2 (-) Goodwill included in the valuation of significant investments 0
1.1.1.10.3 Deferred tax liabilities associated to goodwill 0
1.1.1.11 (-) Other intangible assets -96 464
1.1.1.11.1 (-) Other intangible assets gross amount -96 464
1.1.1.11.2 Deferred tax liabilities associated to other intangible assets 0
1.1.1.12 (-) Deferred tax assets that rely on future profitability and do not arise from temporary differences net of associated tax liabilities 0
1.1.1.13 (-) IRB shortfall of credit risk adjustments to expected losses -456 878
1.1.1.14 (-) Defined benefit pension fund assets 0
1.1.1.14.1 (-) Defined benefit pension fund assets gross amount 0
1.1.1.14.2 Deferred tax liabilities associated to defined benefit pension fund assets 0
1.1.1.14.3 Defined benefit pension fund assets which the institution has an unrestricted ability to use 0
1.1.1.15 (-) Reciprocal cross holdings in CET1 Capital 0
1.1.1.16 (-) Excess of deduction from AT1 items over AT1 Capital 0
1.1.1.17 (-) Qualifying holdings outside the financial sector which can alternatively be subject to a 1250% risk weight 0
1.1.1.18 (-) Securitisation positions which can alternatively be subject to a 1250% risk weight 0
1.1.1.19 (-) Free deliveries which can alternatively be subject to a 1250% risk weight 0
1.1.1.20 (-) Positions in a basket for which an institution cannot determine the risk weight under the IRB approach. and can alternatively be subject to a 1250% risk weight 0
1.1.1.21 (-) Equity exposures under an internal models approach which can alternatively be subject to a 1250% risk weight 0
1.1.1.22 (-) CET1 instruments of financial sector entities where the institution does not have a significant investment 0
1.1.1.23 (-) Deductible deferred tax assets that rely on future profitability and arise from temporary differences 0
1.1.1.24 (-) CET1 instruments of financial sector entities where the institution has a significant investment 0
1.1.1.25 (-) Amount exceeding the 17.65% threshold 0
1.1.1.26 Other transitional adjustments to CET1 Capital 142 018
1.1.1.27 (-) Additional deductions of CET1 Capital due to Article 3 CRR 0
1.1.1.28 CET1 capital elements or deductions – other 0
1.1.2 ADDITIONAL TIER 1 CAPITAL 0
1.1.2.1 Capital instruments eligible as AT1 Capital 0
1.1.2.1.1 Paid up capital instruments 0
1.1.2.1.2 Memorandum item: Capital instruments not eligible 0
1.1.2.1.3 Share premium 0
1.1.2.1.4 (-) Own AT1 instruments 0
1.1.2.1.4.1 (-) Direct holdings of AT1 instruments 0
1.1.2.1.4.2 (-) Indirect holdings of AT1 instruments 0
1.1.2.1.4.3 (-) Synthetic holdings of AT1 instruments 0
1.1.2.1.5 (-) Actual or contingent obligations to purchase own AT1 instruments 0
1.1.2.2 Transitional adjustments due to grandfathered AT1 Capital instruments 0
1.1.2.3 Instruments issued by subsidiaries that are given recognition in AT1 Capital 0
1.1.2.4 Transitional adjustments due to additional recognition in AT1 Capital of instruments issued by subsidiaries 0
1.1.2.5 (-) Reciprocal cross holdings in AT1 Capital 0
1.1.2.6 (-) AT1 instruments of financial sector entities where the institution does not have a significant investment 0
1.1.2.7 (-) AT1 instruments of financial sector entities where the institution has a significant investment 0
1.1.2.8 (-) Excess of deduction from T2 items over T2 Capital 0
1.1.2.9 Other transitional adjustments to AT1 Capital 0
1.1.2.10 Excess of deduction from AT1 items over AT1 Capital (deducted in CET1) 0
1.1.2.11 (-) Additional deductions of AT1 Capital due to Article 3 CRR 0
1.1.2.12 AT1 capital elements or deductions – other 0
1.2 TIER 2 CAPITAL 700 000
1.2.1 Capital instruments and subordinated loans eligible as T2 Capital 700 000
1.2.1.1 Paid up capital instruments  and subordinated loans 700 000
1.2.1.2* Memorandum item: Capital instruments and subordinated loans not eligible 0
1.2.1.3 Share premium 0
1.2.1.4 (-) Own T2 instruments 0
1.2.1.4.1 (-) Direct holdings of T2 instruments 0
1.2.1.4.2 (-) Indirect holdings of T2 instruments 0
1.2.1.4.3 (-) Synthetic holdings of T2 instruments 0
1.2.1.5 (-) Actual or contingent obligations to purchase own T2 instruments 0
1.2.2 Transitional adjustments due to grandfathered T2 Capital instruments and subordinated loans 0
1.2.3 Instruments issued by subsidiaries that are given recognition in T2 Capital 0
1.2.4 Transitional adjustments due to additional recognition in T2 Capital of instruments issued by subsidiaries 0
1.2.5 IRB Excess of provisions over expected losses eligible 0
1.2.6 SA General credit risk adjustments 0
1.2.7 (-) Reciprocal cross holdings in T2 Capital 0
1.2.8 (-) T2 instruments of financial sector entities where the institution does not have a significant investment 0
1.2.9 (-) T2 instruments of financial sector entities where the institution has a significant investment 0
1.2.10 Other transitional adjustments to T2 Capital 0
1.2.11 Excess of deduction from T2 items over T2 Capital (deducted in AT1) 0
1.2.12 (-) Additional deductions of T2 Capital due to Article 3 CRR 0
1.2.13 T2 capital elements or deductions – other 0
Common Equity Tier1 Ratio (CET1) 19.77%
Total Capital Ratio (TCR) 21.68%
Table 8 Reconciliation of items of own funds and equity reported in the Yearly Financial Report (in PLN thous.)
Item Note of financial report Value in financial report Item in Table No. 7
Subordinated liabilities 35 701 883 1.2.1.1
Share capital 39 1 213 117 1.1.1.1.1
Capital from sale of shares over nominal value List of equity items page 10 1 147 502 1.1.1.1.3
Revaluation capital 39 73 692 1.1.1.3
Retained earnings 39 5 950 075 1.1.1.2
1.1.1.4
1.1.1.5
1.1.1.2.2.1
Total equity and subordinated liabilities reported in the audited financial report 9 086 270
Part of net result, which cannot be included in own funds as of reporting date for purposes of calculation of prudential standards -760 651 1.1.1.2.2.2
Gross amount of other intangible assets -96 464 1.1.1.11.1
Shortage of credit risk corrections in view of expected losses according to IRB approach -456 878 1.1.1.13
Transitional adjustments due to IFRS 9 142 018 1.1.1.26
Value correction due to requirements on prudential valuation -24 965 1.1.1.9.5
Correction by part of principal of subordinated liability. which cannot be included in own funds 0 1.2.1.1
Correction by interest accrued on subordinated liability -1 883 1.2.1.1
Provision for instruments hedging cash flows 55 541 1.1.1.9.2
Total own funds 7 942 989 1

Items non deducted from own funds

As at 31 December 2018 the Group did not make significant investments in financial sector entities, as mentioned in article 43 CRR.

In case of deferred tax assets, mentioned in article38 CRR, their value constitutes 4.6% of adjusted Tier I and in consequence it is exempted from deductions in keeping with article 48 CRR. At the same time this amount was assigned a risk weight of 250% for purposes of calculation of capital requirements.