VP Bank : Disclosure report 2020

Disclosure report 2020

 Seize opportunities

4 · Introduction

5 · Corporate governance

7 · Risk management objectives and policies (Art. 435 CRR) 9 · Scope of application (Art. 436 CRR)

11 · Own funds (Art. 437 CRR)

15 · Capital requirements (Art. 438 CRR)

16 · Exposure to counterparty credit risk (Art. 439 CRR)

19 · Capital buffers (Art. 440 CRR)

21 · Credit risk adjustments (Art. 442 CRR)

30 · Unencumbered assets (Art. 443 CRR)

32 · Use of ECAIs (Art. 444 CRR)

33 · Exposure to market risk (Art. 445 CRR)

34 · Operational risk (Art. 446 CRR)

1. · Exposures in equities not included in the trading book (Art. 447 CRR)
2. · Exposure to interest rate risk on positions not included in the trading book (Art. 448 CRR)
3. · Remuneration policy (Art. 450 CRR)
4. · Leverage (Art. 451 CRR)

40 · Use of credit risk mitigation techniques (Art. 453 CRR) 41 · Liquidity

"Seize opportunities"

With its Strategy 2026, VP Bank set a milestone for the future of the Group. Under the motto "Seize opportunities", we have defined, among other things, a sharpened positioning and a number of strategic measures. The annual report 2020 guides you through the key components of the new strategy and presents seven themes that illustrate the idea of seizing opportunities. Learn about our approach to markets, trends, sustainable investments, risk management, data analytics, private markets and the

intermediary business. The themes we show you here will also be encountered in a media advertising campaign slated for 2021.

report.vpbank.com

Additional information on the topic of seizing opportunities can be found in the annual report 2020 as well as in your daily ­cooperation with the VP Bank team.

Index disclosure part 8 Capital Requirements Regulation (CRR)

Article	Topic	Disclosure document
CRR
435	Risk management objectives and policies	Disclosure report p. 7 ff., Annual report p. 111 ff.
436	Scope of application	Disclosure report p. 9 ff., Annual report p. 156 ff.
437	Own funds	Disclosure report p. 11 ff., Annual report p. 118 ff.
438	Capital requirements	Disclosure report p. 15, Annual report p. 118 ff.
439	Exposure to counterparty credit risk	Disclosure report p. 16 ff., Annual report p. 155 ff.
440	Capital buffers	Disclosure report p. 19 ff., Annual report p. 118 ff.
441	Indicators of global systemic importance	Not applicable
442	Credit risk adjustments	Disclosure report p. 21 ff., Annual report p. 118 ff.
443	Unencumbered assets	Disclosure report p. 30 ff.
444	Use of ECAIs	Disclosure report p. 32
445	Exposure to market risk	Disclosure report p. 33, Annual report p. 118 ff.
446	Operational risk	Disclosure report p. 34, Annual report p. 129 ff.
447	Exposures in equities not included in the trading book	Disclosure report p. 35 Annual report p. 141 ff.
	Exposure to interest rate risk on positions not included in the trading
448	book	Disclosure report p. 36, Annual report p. 119 ff.
449	Exposure to securitisation positions	Not applicable
450	Remuneration policy	Disclosure report p. 37, Annual report p. 79 ff.
451	Leverage	Disclosure report p. 38 ff.
452	Use of the IRB Approach to credit risk	Not applicable
453	Use of credit risk mitigation techniques	Disclosure report p. 40 ff., Annual report p. 104 ff.
454	Use of the Advanced Measurement Approaches to operational risk	Not applicable
455	Use of Internal Market Risk Models	Not applicable
EBA/GL	Liquidity	Disclosure report p. 41 ff.

Key metrics

in CHF 1,000	31.12.2020	31.12.2019
Own Funds
Tier 1 Capital	972,754	973,197
Tier 1 Ratio	20.8 %	20.1 %
Risk weighted assets	4,675,482	4,841,859
Combined capital buffer requirement	212,314	242,093
Leverage
Total exposure measure	13,725,548	13,803,380
Leverage Ratio	7.1 %	7.1 %
Liquidity
Liquidity Coverage Ratio (LCR)	179.4 %	213.1 %

The decrease in risk weighted assets is mainly due to the decrease in loans and advances to customers (decrease in volume CHF 0.5 billion).

3

Introduction

VP Bank

VP Bank is an internationally active private bank and is one of the biggest banks in Liechtenstein. It has offices in Vaduz, Zurich, Luxembourg, Tortola / British Virgin Islands, Singapore and Hong Kong.

Since its foundation in the year 1956, VP Bank has focused on asset management and investment consultancy for private individuals and financial intermediaries. Today, 990 employees manage client assets of CHF 47.4 billion.

VP Bank is listed on the SIX Swiss Exchange. Its financial strength has been given an "A" rating by Standard & Poor's. The shareholder base with three anchor shareholders ensures stability, independence and sustainability.

Basis and purpose of the disclosure

The Disclosure Report is based upon Part 8 of the Regulation (EU) No. 575/2013 CRR, which has been directly applicable in Liechtenstein with amendments of the Banking Act Liechtenstein (BankA) and the Banking Ordinance Liechten- stein (BankO) since 1 February 2015.

The Disclosure Report provides a comprehensive picture of the bank's capital and liquidity adequacy, its risk profile and risk management.

Frequency and means of disclosure

A comprehensive disclosure report is drawn up annually and published as a separate document on the VP Bank homepage (www.vpbank.com). Supplementary information is provided in the annual report. Publications performed during the course of the year are set out in the interim report. A supplementary Disclosure Report is issued semi-annually and is also published on the VP Bank web- site.

Preparation and assessment of the disclosure

VP Bank has implemented a process for preparing the Disclosure Report, and has defined the tasks and responsibilities in writing. Within this context, the content and frequency of the disclosure is regularly reviewed in order to ascertain that this is reasonable. The Disclosure Report is not subject to any review by statutory banking auditors.

No significant obstacles exist that limit the prompt transfer of equity capital or the repayment of liabilities between the parent company and fully-consolidated subsidiaries.

Changes since last year's Disclosure Report

No additional tables are disclosed compared with the previous year.

Content and scope of application of the disclosure

The Disclosure Report contains all qualitative and quantitative information specified in Part 8 Section II CRR that has not already been published in the semiannual report of VP Bank. The exemption rules set out under Art. 432 CRR for immaterial or confidential information as well as business secrets have not been applied.

VP Bank Ltd with registered domicile in Vaduz, Liechten- stein, is the parent company of VP Bank Group and fulfils the disclosure requirements pursuant to Art. 13 Para. 1 CRR on a consolidated level. The basis for this is the prudential scope of consolidation pursuant to Art. 18 to 24 CRR. For this reason, all information in the Disclosure Report relate to VP Bank Group.

COVID-19

Despite the impact of the COVID 19 crisis, the capital and liquidity ratios disclosed in this report are well above the regulatory requirements.

4	Introduction·  Disclosure report 2020

Corporate governance

Board of Directors

Pursuant to Art. 23 BankA, the Board of Directors is responsible for the overall management, supervision and control of the bank. It is responsible for the medium to long-term strategic focus of VP Bank and of VP Bank Group (Group Board of Directors).

The powers and obligations of the Board of Directors are set out in the Articles of Association and in the Organisation and Business Rules (OBR) of VP Bank.

Committees of the Board of Directors

To help it fulfil its responsibilities, the Board of Directors is supported by four committees: the Nomination & Compensation Committee, the Audit Committee, the Risk Committee and the Strategy & Digitalisation Committee. Each committee consists of at least three members of the Board of Directors.

The tasks, powers, rights and obligations of the committees of the Board of Directors are set out in the Organisation and Business Rules of VP Bank. The functions of the Audit Committee, of the Risk Committee as well as of the Strategy & Digitalisation Committee are also defined in regulations.

The Risk Committee is responsible in particular for the following tasks:

• Receiving and processing the reports prepared by Group Risk as well as assessing the appropriateness of the pro- cedures deployed to control and monitor the risks
• Assessing the strategic, business, financial, operational and reputation risks as well as discussing these with the Chief Risk Officer and the Head of Group Risk
• Assessing the integrity of the risk control and monitoring as well as of the internal control system
• Assessing the precautions taken to ensure adherence to statutory (such as e.g. equity capital, liquidity & risk distri- bution regulations) and internal regulations (compliance), and adherence to these regulations
• Receiving and processing the reports prepared by Group Legal Services, Group Compliance and Group Tax Center
• Assessing the quality (effectiveness) of the risk govern- ance as well as of the cooperation between Risk Control, Risk Supervision, Group Executive Management (GEM), Group Risk Committee, Risk Committee and the Board of Directors
• Reviewing whether the pricing of the liabilities and invest- ments offered adequately takes into account the bank's business model and risk strategy and, if this is not the case, presenting a plan with remedial measures
• Assessment whether the incentives offered by the remu- neration system take account of the risk, the capital, the liquidity as well as the likelihood and the timing of reve- nues.
• Advising the Board of Directors on the appointment or dismissal of the Chief Risk Officer

As a rule, the Risk Committee holds five to eight meetings per year; in the 2020 financial year, seven ordinary meet-

ings and one extraordinary meeting were held. The Chief Risk Officer, the Chief Financial Officer and the Head of Group Internal Audit attend the regular meetings. At a joint meeting with the Audit Committee, an exchange of information took place with the GEM on the quality of the internal control system and other concerns.

Members of the Board of Directors

Pursuant to Art. 16 of the Bank's Articles of Association, the Board of Directors shall consist of at least five members who are elected individually for three-year terms of office.

In professional and personal terms, the members of the Board of Directors must at all times ensure proper business operations. Criteria governing the selection of the members of the Board of Directors are prepared and reviewed by the Nomination & Compensation Committee. In this conjunction, attention is paid to the balance of the knowhow and capabilities, the diversity and the experience of the Board of Directors in its entirety.

Changes to business activities (e.g. expansion into new markets, products, etc.) or new regulatory requirements are leading to new tasks and increased complexity in business operations. This may result in additional requirements on the supervisory duties of the Board of Directors.

The Nomination & Compensation Committee therefore conducts ad hoc reviews at least annually as to any potential new requirements for the qualifications of members of the Board of Directors, and whether or not these requirements are adequately met by the body as a whole and/or by individuals. Where a deficit is discovered, the Nomination & Compensation Committee immediately initiates effective measures to ensure smooth management across all members of the body and within individual roles.

At the 57th annual general meeting of VP Bank on April 24, 2020, Dr Beat Graf and Michael Riesen, whose mandates expired, were re-elected for a further term of three years.

Prof. Dr Teodoro D. Cocca has waived re-election and stepped down from the Board of Directors.

Katja Rosenplänter-Marxer was elected to the Board of Directors for a term of three years; she represents the interests of the anchor shareholder "Marxer Stiftung für Bank und Unternehmenswerte".

On April 24, 2020, there was a change in the chairmanship of the Board of Directors. Fredy Vogt relinquished his function as Chairman of the Board of Directors. In an extraordinary meeting of the Board of Directors following the Annual General Meeting, Dr. Thomas R. Meier was elected as the new Chairman with immediate effect. Dr Thomas R. Meier has been a member of the Board of Directors of VP Bank since 2018 and also served as its Vice Chairman since Feb- ruary 2019. As of 31 December 2020, the Board of Directors of VP Bank consists of eight members. None of the members of the Board of Directors belonged to the GEM, the

Disclosure report 2020  ·  Corporate governance

5