GrønlandsBANKEN A/S: Quarterly 4 – 2021

BANK of Greenland Risk Report 2021



Risk management


basic capital


Market risk


Leverage risk


Credit risks


BANK of Greenland Risk Report 2021


Risk management

General risk management

BANK of Greenland works with a balanced risk profile.

The Bank’s Board of Directors constantly monitors the Bank’s risks and ensures their regular monitoring.

Based on the Bank’s business model, the Board of Directors has defined a general framework and principles in the various risk areas. The Bank is constantly developing its risk identification and management tools.

The board of directors has appointed an audit committee and a risk committee. The audit committee and the risk committee are both composed of the full board, and it was therefore deemed more appropriate to maintain the same structure as within the board, so that the chairman of the board of directors is also the chairman of the board of directors. the audit committee and the risk committee.

The missions of the Audit Committee mainly concern monitoring:

  • the accountability process;
  • the proper functioning of the Bank’s internal control system;
  • the effective operation of the Bank’s risk management systems;
  • internal audit follow-up;
  • the legal control of the annual report; and
  • control of the independence of the auditor.

The missions of the Risk Committee mainly concern monitoring:

  • the Bank’s current and future risk profile and strategy;
  • the implementation of the board’s risk strategy in the organization;
  • ensuring that the Bank’s products and services are in line with the business model and risk profile, etc. ;
  • whether the incentives in the Bank’s compensation structure reflect the Bank’s risks, etc.

In this regard, the Bank’s control environment for the calculation of significant accounting estimates is reviewed and assessed.

Committees meet immediately prior to Board meetings.

The risk management function is anchored in General Management. Day-to-day risk management is carried out by the Bank’s Credit Bureau/International Department, with independent monitoring by the Accounting Department.

The BANK of Greenland applies the standard method to credit and market risks and the basic indicators method to operational risks.

BANK of Greenland Risk Report 2021


The most significant risks associated with the operation of the BANK of Greenland, and which are material to the growth, results and financial condition of the Bank, are the following:

Credit risk:: Risk of loss in the event of default by customers or counterparties in their payment obligations.

Market risk:: Risk of loss resulting from fluctuations in the fair value of financial instruments and derivative financial instruments, due to changes in market prices. The BANK of Greenland classifies three types of risk in the area of ​​market risk: interest rate risk, currency risk and equity risk.

Liquidity risk: Risk of loss resulting from a disproportionate increase in funding costs, risk that the Bank cannot maintain the business model adopted due to a lack of funding/financing, or, ultimately, risk that the Bank cannot not honor agreed payment commitments when they fall due, due to lack of funding.

Operational risk:: The risk that the Bank suffers in whole or in part financial losses due to inadequate or inappropriate internal procedures, human errors, IT systems, compliance or other business risks, etc.

Capital base risk: The risk that the Bank may not be able to meet the minimum legal capital ratio requirement or satisfy the individual solvency requirement and other capital requirements, including buffer requirements and the requirement MREL.

Leverage risk: If there is a risk of excessive gearing, the risk is understood as resulting from the Bank’s vulnerability due to gearing or possible gearing, which may require unforeseen corrective measures in the management plan. business of the Bank, including the emergency sale of assets, which could result in losses or adjustments in the value of the remaining assets.

Credit risk

The objective of the BANK of Greenland in the field of credit is to limit losses on loans, credits and guarantees. The limitation of losses is however subject to the consideration that the area of ​​credit is the most important area of ​​income of the Bank, so that income and risks are subject to continuous assessment.

The BANK of GREENLAND’s credit risk management is carried out through established policies and procedures, as determined by the Bank’s Board of Directors, to ensure that loans are made to customers who , through solvency and profits, ensure good credit quality in relation to the margin paid.

Credits, loans and guarantees are authorized at different levels within the Bank, depending on the size and risk of the exposure. A permanent follow-up of all credits and guarantees beyond a ceiling is ensured, in order to identify as soon as possible the signs of a default of payment by a customer, thus making it possible to avoid a loss, in consultation with the customer.

BANK of Greenland Risk Report 2021


Concentration risk

The Bank’s risk concentration in loans and guarantees is an element of credit risk management. The Bank seeks an appropriate distribution of loans and guarantees to the corporate and private sectors, respectively. A balanced sectoral distribution of loans and guarantees to the corporate sector is also targeted. The distribution is considered appropriate given the possible sectoral diversification in the Bank’s market area.

In accordance with Diamond Supervision, it is the Bank’s objective that debtors of loans and guarantees relating to “real estate” and “execution of construction projects” may at no time exceed 25% of total loans and Bank guarantees.

BANK of Greenland has a policy that the sum of the 20 largest risks does not exceed 175% of the capital base.

Market risk

The Bank’s objective is to minimize the losses that may result, for example, from unforeseen developments in the financial markets.

Politics The BANK of Greenland’s market risk is managed by fixed limits for a large number of risks.

Equity and currency positions are set within a framework relative to Tier 1 capital after deductions.

The stock portfolio in 2021 amounts to TDKK. 138,902, of which sector shares of 111,564 TDKK.

Bond positions must be held with a given interest rate risk of no more than 3%. At the end of 2021, the total interest rate risk amounted to 1.8% of Tier 1 capital after deductions. The Bank has outsourced the portfolio management of the Bank’s bond holdings to an external portfolio manager. The portfolio manager is subject to a risk framework with a duration of 0.5 to 1.5 years.

The BANK of Greenland has a limited position in foreign currencies. Currency risk at the end of 2021, measured by currency indicator 1, is 9,799 TDKK, which is equivalent to 0.8% of the capital base after deductions.

Compilation and monitoring takes place on a daily basis and the general management and the board receive continuous reports based on the defined guidelines.

Liquidity risk

The BANK of Greenland’s objective is to ensure adequate and stable liquidity reserves, and that the LCR established in accordance with the rules of the CRR, Articles 411 to 428, is at least 140 percentage points at all times. However, the Bank’s objective is for the constant LCR ratio to be at the level of 175-225%. At the end of 2021, the Bank’s LCR is 238.6%.

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