The Group acknowledges that risk undertaking is an integral part of its operations, in order to meet its strategic and business objectives. Therefore, the Group’s Management has established adequate mechanisms to identify and monitor these risks in a timely manner and assess their potential impact on meeting its corporate objectives.
The Board of Directors (Board) has delegated specific responsibilities to the Board Risk Committee regarding the design and formulation of the risk management strategy, the management of assets and liabilities, and the establishment of effective mechanisms to identify, assess and manage risks that derive from the Group’s activities overall. The Board Risk Committee consists of six (6) Non-Executive Directors of the Board, convenes on a monthly basis and reports to the Board on a quarterly basis. According to the European Central Bank’s (ECB) expectations, the BoD appointed a specific member of the BoD responsible for the climate-related and environmental (CR and E) risks at Group level. The appointed BoD member updates the Board Risk Committee (BRC) and the BoD on climate change and environmental related risks at least on a semi-annually basis.
The Group’s Management has allocated adequate means for updating its policies, methods and infrastructure, in order to ensure Group’s compliance to the requirements of the European Central Bank (ECB), the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM), the guidelines of the European Banking Authority (EBA) and the Basel Committee on Banking Supervision, as well as with the best international banking practices.
Τhe maximum risk the Group is willing to undertake in order to pursue its strategic objectives is stipulated in an internal document, the Risk Appetite Framework (RAF), and is determined by means of quantitative and qualitative criteria/parameters, which also include specific tolerance levels, both in terms of each risk type and overall. The main objectives that determine the risk appetite are complying with regulatory requirements, safeguarding the Group’s ability to smoothly continue its activities, and balancing a strong capital adequacy with high returns on equity. The Risk Appetite Framework is communicated within the Group, and shapes its risk undertaking and management culture, forming the foundation on which risk policies and risk thresholds are established both overall and per business activity. Risk Appetite Framework comprises the following components:
The Risk Appetite Framework is sufficiently specified and documented. The Board Risk Committee reviews and approves the risk appetite statements and risk assumption thresholds at least annually, to ensure compliance with the regulatory requirements and with the Bank’s risk appetite in the prevailing business environment.
The Group’s Management has established adequate mechanisms to monitor that the Risk Appetite Framework and the related thresholds are observed and implemented. In cases where these thresholds have been exceeded, the Group implements clearly defined procedures and escalation actions, so as to make the necessary decisions on time and take action as the case may be.
The Group’s Risk Management General Division is headed by the Group Chief Risk Officer GCRO), functions independently from the business units, and is fully responsible for monitoring the credit, market, liquidity and operational risk. It comprises, the Group Credit General Division, the Group Credit Control Sector, the Group Credit Risk Capital Adequacy Control Sector, the Group Market and Counterparty Risk Sector, the Group Operational Risk Sector, the Group Model Validation and Governance Sector, the Group Risk Management Strategy Planning and Operations Division, the Group Climate Risk Division, the Risk Analytics Division and the Supervisory Relations and Resolution Planning Sector (with dual reporting also to the Group CFO).
The Group is exposed to several risks such as credit risk, market risk, Counterparty and Liquidity Risk, Operational Risk and climate risk.
Credit risk is the risk of loss from a possible failure of a counterparty to fully honour the terms and obligations that derive from any contractual obligation. It derives predominantly from the Group’s corporate and retail loan portfolios.
Credit risk is managed and monitored by independent, centralised and dedicated risk units, which report to the GCRO.
Find more about credit risk.
The Group is exposed to market risks, which arise from open positions in interest rates, credit spreads, foreign exchange rates, equity prices and other relevant factors, such as the implied volatilities, or any combination of these.
Find more about market risk.
Counterparty risk refers to the risk that a counterparty in an off-balance sheet transaction (e.g. a transaction in a derivative product) defaults prior to maturity of this transaction while the Bank still has a claim over this counterparty (the current market value of the transaction is positive for the Bank Liquidity risk management is of a critical importance for the smooth operation and profitability of a banking group. At the Eurobank Group, liquidity risk management is structured as follows:
Find more about Counterparty and liquidity risk.
Οperational risk is embedded in every business activity undertaken by the Group. The primary goal of operational risk management is to ensure the integrity of the Group’s operations and its reputation by mitigating its impact. To best manage operational risk, the Group has established an Operational Risk Management Framework to define its approach to identifying, assessing, managing, monitoring and reporting operational risk.
Find more about operational risk.
The Group Model Validation and Governance Sector has two key mandates:
Find more about the Group Model Validation and Governance Sector.
The scope of the Group Risk Management Strategy Planning and Operations Division (GRMSPO) is to:
Find more about risk management strategy planning and operations.
The scope of the Risk Analytics Division (RAD) is to develop and deploy advanced analytics solutions through utilising ‘big-data’ sources and innovative modelling techniques such as ‘Machine Learning’.
Find more about Risk Analytics Division.
Aiming to respond efficiently to the increased requirements of the supervisory authorities, the Bank has established the Supervisory Relations and Resolution Planning Sector.
The Sector has a coordinating and supervisory role in projects and initiatives associated with the Single Supervisory Mechanism and the Single Resolution Mechanism institutional frameworks, and constitutes a central point of reference for requests by regulatory and supervisory authorities.
Find more about Single Supervisory Mechanism and the Single Resolution Mechanism.
Recognizing the importance of climate related and environmental (CR and E) risks the Bank increased the number and capabilities of its resources to manage and monitor climate and environmental risk. Furthermore, it has approved the establishment of a dedicated Group Climate Risk Division for the integration of CR and E risks into the Bank’s Risk Management Framework.
The main duties and responsibilities of the Division are to:
In January 2022, the European Central Bank (ECB) launched a supervisory climate risk stress test (CRST) to assess to what extend the banks are prepared for dealing with financial and economic shocks stemming from climate risk. The CRST exercise, which is run and coordinated by the Group Climate Risk Division, will be concluded in the first half of 2022, after which the ECB will publish aggregate results.
This test is a learning exercise for banks and supervisors alike. It aims to identify vulnerabilities, best practices and challenges banks face when managing climate-related risk. Importantly, this is not a pass or fail exercise, nor does it have direct implications for the banks’ capital levels.
