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Basel III Capital and Liquidity Requirements

Regulations are demanding a more resilient banking sector by strengthening the solvency of the banks and introducing strict liquidity requirements, such as those developed by the Basel Committee on Banking Supervision. Based on the latest available information, Triodos Bank complies already with the capital and liquidity requirements as from 2019, known as Basel III.

Triodos Bank capital strategy is to be strongly capitalised. This has become an even more important strategic objective as the regulation to strengthen the capital base of banks have come into force following the financial crisis. Triodos Bank aims for a regulatory solvency ratio of approximately 14%, well above its own internal economic capital calculations, in order to guarantee a healthy and safe risk profile. The quality of capital is important, as well as the solvency rate. Almost 100% of Triodos Bank’s solvency comes from equity. Economic capital is calculated as a result of the yearly Internal Capital Adequacy Assessment Process, which is reviewed by the Dutch Central Bank.

In 2013, Triodos Bank successfully raised capital from its customers, exceeding targets and raising over EUR 68 million. This has helped it to maintain a regulatory solvency ratio of 17.8%, at the end of 2013, well above external but also its internal requirements.

Triodos Bank’s liquidity position remained very strong during 2013. Its policy is to invest excess liquidities in highly liquid assets in the country where it has raised the funds. In The Netherlands Triodos Bank has invested its liquidities mainly in Dutch government bonds, municipalities, banks and the European Central Bank. In Belgium most of its liquidity has been invested in Belgian government bonds and placed with banks. In Spain part of the liquidity surplus is invested in Spanish Government Bonds. In the other countries where Triodos Bank operates, the surplus liquidities are placed with other banks.

The Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) are both well above the minimum limits of Basel III.

In Control statement

The Executive Board is responsible for designing, implementing and maintaining an adequate system for internal control over financial reporting. Financial reporting is the product of a structured process carried out by various functions and branches under the direction and supervision of the financial management of Triodos Bank.

The Executive Board is responsible for the risk management function and compliance function. The risk management function works together with management to develop and execute risk policies and procedures involving identification, measurement, assessment, mitigation and monitoring of the financial and non-financial risks. The compliance function plays a key role in monitoring Triodos Bank’s adherence to external rules and regulation and internal policies. The adequate functioning of the risk management and compliance function as part of the internal control system is frequently under discussion with the Audit and Risk Committee. Triodos Bank’s Internal Audit function provides independent and objective assurance of Triodos Bank’s corporate governance, internal controls, compliance and risk management systems. The Executive Board, under the supervision of the Supervisory Board and its Audit and Risk Committee, is responsible for determining the overall internal audit work and for monitoring the integrity of these systems.

The enterprise risk management framework is the basis for an integrated in control statement process. The Executive Board indicates that this process should lead to a statement providing positive assurance in the coming years.

Triodos Bank’s Executive Board states that it has no indication that the risk management and control systems have not functioned adequately and effectively in 2013.

The risk management and control systems provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation and fair presentation of its financial statements.