According to the Risk Management Strategy in the Bank and the Bank’s Group, the Bank oversees risk management systems in both the Bank and other entities within the Bank’s Group and supports the development of these systems. It also takes into account the risk profile of individual entities in the monitoring and reporting of risk at the Bank’s Group level. The principles and method of assessment of the individual types of risk in the Bank’s subsidiaries are specified in the internal regulations developed taking into account the opinions and recommendations formulated by the Bank, as well as provisions of the Risk Management Strategy in the Bank and in the Bank’s Group.

The risk management system is adapted to the nature, scale, and complexity of the operations of the Bank’s Group, and the regulatory, social and natural environment. The Bank’s Management Board is responsible for the functioning of an effective risk management system. The Management Board regularly verifies whether the methods of identifying, measuring or estimating risk, controlling, monitoring and reporting risk are adjusted to the size and profile of the risk at the Bank and in the Bank’s Group as well as the external environment. The Bank's Management Board provides the Supervisory Board with information on the functioning of the risk management system in the Bank and the Bank's Group.

The Bank’s Group has identified types of risks that are to subject to management and deemed some of them significant. The Bank conducts risk significance assessment no less than one a year. The following risks are considered material in the Bank: credit risk, the risk of mortgage loans in foreign currencies for households, foreign exchange risk, interest rate risk, liquidity risk (with a distinction of financing risk), operational risk, business (strategic) risk, macroeconomic change risk, and model risk. Other entities within the Bank’s Group may consider different types of risk to be material. The Bank then verifies the materiality of such risks at the Bank’s Group level.

In 2021, the Bank conducted an analysis of the risk management process and introduced basic ESG definitions into the risk management strategy in the Bank and the Bank’s Group. They include:

  • ESG factors: environmental, social, and governance factors that may have a positive and/or negative impact on the Bank's clients and counterparties and/or its balance sheet; ESG factors with a negative impact are referred to as ESG risk factors.
  • ESG risk: the risk of negative financial consequences for the Bank resulting from the current and/or future impact of ESG risk factors on clients and counterparties and/or the Bank’s balance sheets positions.

The purpose of ESG risk management is to support sustainable development and building long-term value for the Bank through integrated management of ESG factors’ impact. ESG risk management considers the perspective of double materiality: the impact of ESG factors on the activities, financial result and development of the Bank as well as the impact of the Bank’s activities on society and the environment. The Bank manages ESG risk as part of managing other types of risk. ESG risk is not a separate type of risk but a cross-cutting one that affects the individual types of risks. Committees operating within the Bank support ESG risk management in their activities and competencies related to ESG risk.

As the first step in preparing the Statement, the Bank reviewed the ESG risks in the Bank’s Group, which were identified in 2022. It was confirmed that the list had not changed and includes the following risks:

  • violation of customer safety and their funds risk,
  • unethical business conduct risk,
  • product non-compliance risk,
  • corruption risk,
  • risk of improper communication,
  • risk of negative impact on the environment,
  • climate-related risk,
  • risk for sustainable development,
  • employment risk,
  • risk of a negative impact on the social environment,
  • risk of human rights violation,
  • supply chain risk,
  • occupational health and safety (OHS) risk.
Security of customers and their funds
Product compliance
Sustainable development
Social environment
Human rights
Supply chain