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Liquidity risk

Liquidity risk refers to the risk that Triodos Bank is unable to fulfill its payment obligations to its customers and counterparties at a particular point in time without incurring unacceptable losses.

Customers’ savings and deposits are attracted in order to finance Triodos Bank’s lending operations. The surplus is primarily placed with the ECB, financial institutions or invested in bonds. Triodos Bank has a strong liquidity position, and is funded entirely by deposits from private customers and small and medium sized enterprises. As a result, Triodos Bank does not need to rely on funding from the wholesale money and capital markets. Triodos Bank regularly assesses its liquidity position based on stress scenarios. The results of these stress tests were satisfactory in 2013. Actions to be taken to manage our liquidity position in case of a future liquidity crisis are described in the Liquidity Contingency Plan.

On a weekly basis the detailed liquidity position at branch level is reported to the CFO. Every month the Asset and Liability Committee reports the liquidity ratios related to the Basel III requirements:

  • The Liquidity Coverage Ratio (LCR): to ensure an adequate level of unencumbered, high-quality assets that can be converted into cash to meet liquidity needs over a 30-day time horizon under an acute liquidity stress scenario specified by supervisors.
  • The net stable funding (NSF) ratio indicates the relation between available longer-term, stable funding and the required longer-term, stable funding resulting from the liquidity profiles of assets and off balance sheet items.

These ratios comply with the Basel III guidelines but are not yet made compulsory by supervisors. The minimum LCR would be 60% in 2015 and increase by 10 percentage points per year to reach 100% in 2019. Minimum NSFR standards will be set by 2018. However, given the importance of these two ratios for the resilience of the banking sector, Triodos Bank already includes these indicators in its internal reporting and measurement of liquidity risk.

Asset encumbrance

Assets can be differentiated between assets which are used to support funding or collateral needs (encumbered assets) and assets which are available for potential funding needs (unencumbered assets).

Download XLS

2013
Amounts in thousands of EUR

Encumbered

Unencumbered

 

Asset type

Pledged as collateral

Other1

Available as collateral2

Other

Total

 

 

 

 

 

 

Cash and other liquid assets

 

42.5

1,404.8

 

1,447.3

Other investment securities

10.0

 

1,171.7

90.5

1,272.2

Loans

 

 

 

3,544.7

3,544.7

Other financial assets

 

 

 

131.6

131.6

Non-financial assets

 

 

 

50.9

50.9

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

10.0

42.5

2,576.5

3,817.7

6,446.7

 

 

 

 

 

 

Download XLS

2012
Amounts in thousands of EUR

Encumbered

Unencumbered

 

Asset type

Pledged as collateral

Other1

Available as collateral2

Other

Total

1

Assets which are restricted from using to secure funding. These are cash reserves held at Central Banks.

2

Assets that are readily available in the normal course of business to secure funding or meet collateral needs. Readily available asstes are assets that are accepted by central banks or in the repo markets.

 

 

 

 

 

 

Cash and other liquid assets

 

34.1

907.6

 

941.7

Other investment securities

14.2

 

771.8

110.5

896.5

Loans

 

 

 

3,285.4

3,285.4

Other financial assets

 

 

 

116.4

116.4

Non-financial assets

 

 

 

50.9

50.9

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

14.2

34.1

1,679.4

3,563.2

5,290.9

 

 

 

 

 

 

Liquidity Coverage Ratio

Download XLS

Amounts in millions of EUR

2013
Total
amount

2013
Weighted
amount

2012
Total
amount

2012
Weighted
amount

 

 

 

 

 

Stock of high quality liquid assets:

 

 

 

 

 

 

 

 

 

Total stock of high quality liquid assets

1,809

1,802

1,021

1,021

 

 

 

 

 

Total cash outflow

6,242

665

5,116

715

 

 

 

 

 

Total cash inflow

462

445

458

416

Cap on cash inflows

 

499

 

536

 

 

 

 

 

Net cash outflow

 

220

 

299

 

 

 

 

 

Liquidity Coverage Ratio

 

818%

 

342%

 

 

 

 

 

The Net cash outflow must be covered by the stock of High quality liquid assets, so the ratio must be at least 100%.

Net Stable Funding Ratio

Download XLS

Amounts in millions of EUR

2013
Total
amount

2013
Weighted
amount

2012
Total
amount

2012
Weighted
amount

 

 

 

 

 

Total available stable funding

6,405

5,206

5,255

4,312

 

 

 

 

 

Total required stable funding

7,108

3,604

5,987

3,359

 

 

 

 

 

Net stable funding ratio

 

144%

 

128%

 

 

 

 

 

The Net Stable Funding Ratio must be more than 100%. This means that the available stable funding must cover the required stable funding.