Main indicators of bank performance

The main indicators of bank performance are regulated by:

• Law on Banks,
• Decision on Capital Adequacy of Banks, 
• Decision on Risk Management by Banks, and
• Decision on Liquidity Risk Management by Banks

Below is the summary information contained in the above regulations.

In its operation, a bank is obliged to ensure that the amount of its Common Equity Tier 1 capital is never below the dinar equivalent of EUR 10,000,000 at the NBS official middle exchange rate on the day the calculation is made.

The bank is obliged to calculate the following ratios and maintain them, at any time, at the levels not lower than the prescribed ones:

• Common Equity Tier 1 capital ratio, which is Common Equity Tier 1 capital of the bank expressed as a percentage of the total risk exposure amount – 4.5%;
• Tier 1 capital ratio, which is Tier 1 capital of the bank expressed as a percentage of the total risk exposure amount – 6%;
• total capital ratio, which is the capital of the bank expressed as a percentage of the total risk exposure amount – 8%;
• leverage ratio, which is Tier 1 capital expressed as a percentage of the total exposure amount – 3%.

The NBS may require a bank to maintain ratios above the prescribed ones if it is established, on the basis of the type and level of risks and operations of the bank, that this is necessary for the bank’s stable and sound operations and/or fulfilment of its obligations to creditors. In addition to the above ratios, the bank is also required to maintain capital buffers in accordance with the regulations and criteria defined by the NBS. The NBS may also prescribe the manner of covering risks identified through the results of stress testing that it conducts.

A large exposure of a bank to a single person or a group of related persons is exposure of at least 10% of the bank’s Tier 1 capital, while the bank’s exposure to a single person or to a group of related persons must not exceed 25% of the bank’s Tier 1 capital. The sum of all large exposures of the bank shall not exceed 400% of the bank’s Tier 1 capital.

A bank’s investment in a single non-financial sector person must not exceed 10% of the bank’s capital.

A bank’s total investment in non-financial sector persons, as well as in fixed assets and investment property must not exceed 60% of the bank’s capital.

A bank is obliged to maintain the level of liquidity so that:

the liquidity ratio equals:

• at least 1.0 if calculated as the average liquidity ratio for all business days in a month,
• not less than 0.9 for more than three business days in a row,
• at least 0.8 if calculated for one business day only;

the narrow liquidity ratio equals:

• at least 0.7 if calculated as the average liquidity ratio for all business days in a month;
• not less than 0.6 for more than three business days in a row;
• at least 0.5 if calculated for one business day only.

A bank is obliged to maintain the FX risk ratio (the ratio of total net open FX position, including the absolute value of net open position in gold to bank’s capital) at the end of each business day at the level that does not exceed 20%.

A bank is obliged to maintain the liquidity coverage ratio (the ratio of liquidity buffer and net liquidity outflows over a 30-day stress period) of at least 100% aggregately in all currencies.

A bank is obliged to maintain the net stable funding ratio (the ratio of available stable funding to required stable funding) of at least 100% aggregately in all currencies.