Disclosure of Information

Joint Stock Company "Baltic International Bank" includes the information relating to

•  risks inherent in the Bank’s activities

•  risk management objectives, techniques and policies

•  own funds requirements and internal capital adequacy 

in the Bank’s financial statements and makes the information available in accordance with the requirements of the Credit Institutions Law of the Republic of Latvia, the Information Disclosure Regulations adopted by the Financial and Capital Market Commission, and other national laws and regulations that are legally binding and directly applicable.

According to the ICAAP Policy, JSC Baltic International Bank (hereinafter referred to as the Bank) conducts an internal capital adequacy assessment process (ICAAP) for assessing its overall capital adequacy.

The purpose of the Bank’s ICAAP is to ensure that

• the Bank maintains, on an ongoing basis, an amount of internal capital sufficient to cover material risks inherent in the Bank’s activities

• the Bank’s capital is sufficient to absorb losses during periods of possible economic downturn.

In determining the required capital charges for various risk profiles, the Bank identifies and evaluates the following material risks to which the Bank is exposed:

• risks that are subject to the minimum regulatory requirements;
• risks that are not subject to the minimum regulatory requirements.

In addition, the Bank assesses the impact of possible adverse events on the Bank’s capital.

With regard to risks subject to the minimum regulatory requirements, the Bank assesses whether adherence to the minimum regulatory capital requirements ensures that the Bank’s capital is adequate for covering future possible losses associated with the risks. To this end, Bank measures the following risks:

• credit risk;
• market risk;
• operational risk.

With regard to risks with no minimum regulatory requirements, the Bank measures the probability of loss to be incurred as a result of inherent material risks. Therefore the Bank analysis:

• concentration risk;
• interest rate risk in the non-trading (banking) book;
• liquidity risk;
• ML/TF risk;
• other material risks inherent in Bank's business.

To assess the impact of possible negative events on the Bank’s capital, the Bank uses a scenario analysis method, including stress testing for the capital adequacy. The Bank determines the size of the capital buffer to ensure that the Bank’s capital is sufficient:

• to support banking activities upon the occurrence of possible adverse events;
• throughout the economic cycle.

The total required capital charge, as determined by the Bank as part of the ICAAP, represents the sum of the capital charges for all risks plus the capital buffer.

As part of its overall business planning, the Bank conducts internal capital planning on a forward-looking basis, i.e., for at least the next three years.

Capital Adequacy Ratio As Of 31 December 2011 (in THS. of LVL)

Items	Amount
Tier 1 capital elements
Paid-in share capital	20 772
Reserve capital and other reserves	545
Retained earnings	438
Profit for the current year	1 235
Intangible assets	-2 862
Specific decline in Tier 1 capital, as stipulated by the applicable law	-14
Lеss revaluation of investment property	-387
Tier 1 Core Capital	19 727
Tier 2 capital elements
Subordinated liabilities	1 557
Specific decline in Tier 2 capital, as stipulated by the applicable law	-14
Tier 2 Supplementary Capital	1 543
TOTAL CAPITAL	21 270
Сapital charge for credit risk inherent in the Bank‟s book, including the breakdown of exposures by categories:	8 285
Central governments or central banks	0
Public entities	2 468
Commercial companies	2 864
Overdue  exposures	939
High-risk exposures	42
Other items	1 972
The total capital charge for market risks	168
Сapital charge for operational risk	1 058
Total capital charge	9 511
Capital adequacy ratio	17,89%

According to the results of the ICAAP as of 31 December 2011, the Bank’s capital is sufficient to support all material risks inherent in the Bank’s activities.

More detailed information is availiable in the Bank's Annual Report. To access the information, please click Records of the financial performance.