In accordance with the Regulation of the European Parliament and of the Council (EU) No. 575/2013 on prudential requirements for credit institutions and investment firms (CRR), the Group sets a liquidity coverage requirement (LCR). The net outflow coverage ratio is determined individually by each entity of the Group subject to the requirement to determine this ratio and consolidated for the Group. The minimum, supervisory level of the 100% LCR ratio, which was in force in 2018, was met by the Group on each reporting date (at the end of December 2018, the LCR ratio was 212%). The amount and main components of the net outflow coverage ratio for the Group in 2018 are presented in Appendix 3, in accordance with the guidelines on disclosure of the net coverage ratio in addition to disclosing information on liquidity risk management pursuant to art. 435 of Regulation (EU) No 575/2013 (EBA/GL/2017/01). The data presented were designated as simple averages from observations at the end of each month in the twelve-month period preceding December 31, 2018.
The Group recognizes derivative transactions as material (the total nominal value of such transactions exceeded 10% of the net liquidity outflow of the LCR). The liquidity risk in the unfavorable market scenario results from the change in the market value of derivative instruments, which creates liquidity needs due to coverage of margins. Both in stress scenarios and in the LCR approach, this additional liquidity requirement is included as the largest absolute flow of net hedges realized over a 30-day period over 24 months.
Detailed information on the strategy, organizational model and liquidity risk management process in the Bank Millennium SA Group. presented in the Annual Financial Report, in the part concerning liquidity risk management, in the chapter on financial risk management (Art. 435).