9 Capital adequacy requirements (Pillar I)

The Banking Law and Banking Ordinance of the Principality of Liechtenstein form the legal basis of capital adequacy requirements, which in turn are based on the directives of the Basel Committee on Banking Supervision as adapted by the European Union.

In accordance with Basel III, the banks may choose from various approaches to calculate the capital requirements for credit, market and operational risks. The LLB Group applies the standard approach for credit risk, the basic indicator approach for operational risks, and the standard approach for market risks (trading book activities of insignificant materiality in accordance with Article 94 (1) CRR). The determination of capital requirements and tier capital is carried out on the basis of the IFRS consolidated financial statement, whereby non-realised gains are deducted from core capital.

At the LLB Group, the scope of consolidation for determining capital requirements and for the financial accounts is identical.

9.1 Segmentation of credit risks

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Segmentation of credit risks

 

 

Regulatory risk weighted

in CHF thousands

 

0 %

 

10 %

 

20 %

 

35 %

 

50 %

 

75 %

 

100 %

 

150 %

 

250 %

 

Total

31.12.2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central governments and central banks

 

3'528'032

 

0

 

10'472

 

0

 

0

 

0

 

0

 

0

 

0

 

3'538'504

Regional governments

 

0

 

0

 

112'370

 

0

 

10'222

 

0

 

0

 

0

 

0

 

122'592

Public sector entities

 

0

 

0

 

50'758

 

0

 

0

 

0

 

0

 

0

 

0

 

50'758

International organisations

 

73'399

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

73'399

Banks and securities firms

 

0

 

0

 

2'888'271

 

0

 

740'917

 

0

 

280

 

0

 

0

 

3'629'468

Corporates

 

0

 

0

 

87'255

 

0

 

113'625

 

0

 

1'043'159

 

40'811

 

0

 

1'284'849

Retail

 

0

 

0

 

0

 

0

 

0

 

263'921

 

520'703

 

0

 

0

 

784'624

Secured by real estate

 

0

 

0

 

1'849

 

7'570'622

 

1'573'117

 

0

 

679'629

 

0

 

0

 

9'825'216

In default

 

0

 

0

 

0

 

0

 

0

 

1'269

 

94'619

 

77'549

 

0

 

173'437

Equity

 

0

 

0

 

0

 

0

 

0

 

0

 

27'448

 

0

 

47

 

27'495

Covered bonds

 

0

 

175'030

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

175'030

Collective investments and others

 

65'490

 

0

 

19'386

 

0

 

0

 

1

 

501'262

 

0

 

0

 

586'139

Total

 

3'666'921

 

175'030

 

3'170'361

 

7'570'622

 

2'437'881

 

265'192

 

2'867'099

 

118'361

 

47

 

20'271'513

Total previous year

 

2'831'199

 

95'501

 

4'594'176

 

7'298'124

 

2'012'106

 

236'711

 

2'821'944

 

84'528

 

0

 

19'974'289

9.2 Mitigation of credit risk

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31.12.2016

 

31.12.2015

in CHF thousands

 

Covered by reco­gnised financial collateral

 

Covered by guarantees

 

Other credit commitments

 

Total

 

Covered by reco­gnised financial collateral

 

Covered by guarantees

 

Other credit commitments

 

Total

Balance sheet positions

 

0

 

9'148

 

0

 

9'148

 

0

 

6'408

 

0

 

6'408

Off-balance sheet positions

 

0

 

352

 

0

 

352

 

0

 

50

 

0

 

50

Derivatives

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

Total

 

0

 

9'499

 

0

 

9'499

 

0

 

6'458

 

0

 

6'458

9.3 Leverage Ratio (LR)

A further integral part of the Basel III package is the leverage ratio which, with its comparison of unweighted on-balance sheet and off-balance sheet risk positions, on the one hand, and equity held, on the other, attempts to prevent the danger of financial institutes becoming excessively indebted. This reference ratio stands at 3.0 percent and is currently being monitored by the supervisory authority. It is not yet legally binding. At the end of the year 2016, the leverage ratio of LLB Group amounted to 7.8 percent.