Aktia Pankki Oyj : Capital and Risk Management Report 2020

Capital and Risk Management Report 2020

Content

1.

Main events 4

2. Introduction 8

2.1

Description of Aktia Group 8

2.2 Statement of key risks in Aktia's operations 9

2.3

Legal and governance structure 11

3. Governance of risk 12

3.1

Risk management 12

3.2 Internal control and risk management

system associated with the financial reporting process 14

4. Capital management 16

4.1 Capital position 16

4.2 Capital management and internal capital requirements 21

5. Credit risk 25

5.1 Management, governance and measurement of credit risk 25

5.2 Credit risk approach 31

5.3 Development of exposure and RWA 31

5.4 Rating and scoring 34

5.5 Collateral 40

5.6 Estimation and validation of credit risk parameters 41

5.7 Loan portfolio, impaired loans and loan losses 41

5.8 Counterparty credit risk in the treasury activities 49

6. Market risk 51

6.1 Management, governance and measurement of market risk 51

6.2 Interest rate risk in the banking book 51

6.3 Foreign exchange rate risk 53

6.4 Equity risk 53

6.5 Measurement and stress testing of

the market risk in financial assets available for sale 53

7.

Liquidity risk and funding 54

7.1 Management, governance and measurement of liquidity risk 54

7.2 Asset encumbrance 57

8. Risk and capital in the life insurance business 59

8.1 Risk management system and governance 59

8.2 Key risks in the life insurance company 59

8.3 Capital management and solvency position 65

9.

Operational risk 67

9.1 Management, governance and measurement of operational risks 67

9.2 Information Security Management and Governance 69

10. Regulatory development 70

List of abbreviations 71

Appendix 72

Appendix 1 a. Differences between accounting and regulatory scopes of consolidation and mapping of financial statement

categories with regulatory risk categories 73

Appendix 1 b. Main sources of differencies between regulatory

exposure amounts and carrying values in financial statements 74

Appendix 2. Own funds disclosure template 75

Appendix 3. Main features of the CET1 capital instruments 80

Appendix 4. Main features of the Tier 2 capital instruments 81

Appendix 5. Leverage Ratio - Disclosure Template 83

Appendix 6. Navigation 86

Tables and appendixes 91

1. Main events

Aktia's funds available to private investors through Nordnet

Aktia signed a fund distribution contract with Nordnet. Nordnet's customers can now invest in ten funds managed by Aktia.

in Finland. The average rating for Aktia's funds was 4.20 stars in August 2020, whereas the next best had an average of 3.77. The fund unit type of each fund that has received the most stars has been considered in the comparison based on Morningstar's ratings.

Aktia founded Suomen Yrittäjäturva - a new company specialised in personal insuranceAktia's acquisition of Alandia's life insurance portfolio completed

Aktia extends its distribution network for insurances and founded Suomen Yrittäjäturva - a company that specializes in entrepreneurs and their insurances as well as the distribution of the insurances. The new company is owned by Aktia, Veritas and private owners. The new actor offers mainly private insurances for entrepreneurs as well as statutory and voluntary pension insurances.

Change in Aktia's number of shares

Aktia Bank Plc invalidated 7 October 2020, supported by a decision taken by the company's Board of Directors, 717,196 shares. The invalidated shares were shares that the ownercustomers of Veritas Mutual Non-Life Insurance Company received, on the basis of paid insurance premiums, as merger consideration in connection with the merger of Veritas Mutual Non-Life Insurance Company to Aktia Plc on 1 January 2009. The Annual General Meeting decided on 16 April 2020 that the right to unregistered consideration shares were to be forfeited.

Aktia extends its selection of alternative investment products and bought Askel Partners' business

Aktia Bank Plc and Alandia Försäkring Abp informed 19 December 2019 that Aktia Life Insurance Ltd and Försäkringsaktiebolaget Liv-Alandia have agreed on the transfer of Alandia's life insurance portfolio to Aktia. Financial Supervisory Authority accepted the transfer, and the acquisition was completed 31 May 2020.

Changes in Aktia's Executive Committee

Anssi Huhta was appointed EVP, Corporate customers and member of the Executive Committee at Aktia as of November 2020. Huhta reports to the CEO Mikko Ayub. Irma Gillberg-Hjelt, Executive Vice President, Corporate Customers, resigned from her duties at Aktia 15 April 2020.

Aktia Asset Management was rewarded in the Refinitiv Lipper Fund Awards 2020

The fund Aktia Corporate Bond+ was rewarded by the Lipper Fund Awards 2020 as the best fund in euro in the series "Bond EUR Global Corporates" in the category "Best Fund Over Past 10 years". The fund award is granted based on the best return development.

Aktia Fund Management Company Ltd bought the fund business operations of Askel Partners Oy, a provider of fund services. With the purchase Aktia extends its selection of alternative investment products according to its strategy and establishes a Finnish infrastructure fund.

Aktia's funds at the top of the independent Morningstar's ratings

Aktia's funds were at the top when comparing the Morningstar ratings for the funds of different fund management companies

Aktia was chosen for the sixth time as the best fixed income fund house in Finland

Aktia won the category of Fixed Income Fund House in Morningstar's Finland Awards 2020, which was published on 11 March 2020. It was already the sixth time that Aktia was awarded as the best asset manager in Finland and the eighth consecutive year Aktia was among the three best fixed income fund houses.

Capital and Risk Management Report 2020 - Main events

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