Zenith Bank : Pillar 3 Disclosure Report June 2021

Zenith Bank Plc.

Pillar 3 Disclosures

Report

June 2021

Zenith Bank Plc - June 2021 Pillar 3 Disclosure

TABLE OF CONTENT

Glossary of terms.......................................................................................................................	1
1 INTRODUCTION AND EXECUTIVE SUMMARY ................................................................	4
	1.1	The Bank Overview......................................................................................................	4
	1.2	Business Activities .......................................................................................................	4
	1.3	Zenith Bank's Legal Entities.........................................................................................	6
	1.4	Objectives ....................................................................................................................	7
	1.5	Scope of application.....................................................................................................	7
	1.6	Key prudential metrics.................................................................................................	10
	1.7	Minimum capital requirements ....................................................................................	11
	1.8	Updates on local regulatory landscape .......................................................................	11
2	RISK MANAGEMENT ........................................................................................................	13
	2.1	Enterprise risk management (ERM) Framework .........................................................	13
	2.2	Risk management philosophy/strategy........................................................................	13
	2.3	Risk management approach .......................................................................................	13
	2.4	Risk governance .........................................................................................................	14
	2.5	Risk appetite ...............................................................................................................	14
	2.6	Stress testing ..............................................................................................................	15
	2.7	Global risk function .....................................................................................................	16
3 CAPITAL MANAGEMENT AND LEVERAGE .....................................................................	17
	3.1	Capital management approach and policy ..................................................................	17
	3.2	Regulatory capital structure and capital adequacy ......................................................	17
	3.3	Summary of Capital Adequacy....................................................................................	19
	3.4	Leverage.....................................................................................................................	20
4	CREDIT RISK ....................................................................................................................	21
	4.1	Credit risk....................................................................................................................	21
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	4.2	Sources of risk ............................................................................................................	21
	4.3	General Disclosures....................................................................................................	21
	4.4	Measurement of Credit Risk........................................................................................	24
	4.5	Management of Credit Risk.........................................................................................	25
	4.6	Risk mitigation ............................................................................................................	26
	4.7	Capitalization ..............................................................................................................	29
5	MARKET RISK...................................................................................................................	30
	5.1	Market Risk.................................................................................................................	30
	5.2	Sources of risk ............................................................................................................	30
	5.3	Management of market risk.........................................................................................	30
	5.4	Measurement of market risk........................................................................................	31
	5.5	Risk mitigation ............................................................................................................	32
	5.6	Capitalization ..............................................................................................................	32
6	OPERATIONAL RISK ........................................................................................................	33
	6.1	Operational risk...........................................................................................................	33
	6.2	Sources of risk ............................................................................................................	33
	6.3	Risk mitigation ............................................................................................................	33
	6.4	Capitalization ..............................................................................................................	33
7 INTERNAL CAPITAL ADEQUACY AND ASSESMENT PROCESS (ICAAP) .....................	35
	7.1	Material Risk Identification and Assessment ...............................................................	35
	7.2	Credit Concentration Risk ...........................................................................................	36
	7.3	Interest Rate Risk in the Banking Book .......................................................................	37
	7.4	Strategic Risk..............................................................................................................	38
	7.5	Liquidity Risk...............................................................................................................	38
	7.6	Group Risk..................................................................................................................	40
	7.7	Regulatory Compliance Risk .......................................................................................	41
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7.8	Fraud Risk ..................................................................................................................	41
7.9	Reputational Risk........................................................................................................	42
7.10	Information Technology Risk.......................................................................................	42
7.11	Cyber Security Risk ....................................................................................................	43
7.12	Business Risk .............................................................................................................	44
7.13	Legal Risk ...................................................................................................................	44
7.14	Ratings Downgrade Risk.............................................................................................	45
7.15	Model Risk ..................................................................................................................	46
8 LIQUIDITY RISK ................................................................................................................	47
8.1	Liquidity risk ................................................................................................................	47
8.2	Internal Liquidity Adequacy Assessment Process (ILAAP)..........................................	47
8.3	Liquidity coverage ratio (LCR).....................................................................................	51
8.4	Net Stable Funding Ratio (NSFR) ...............................................................................	52
8.5	Overview of Zenith Bank's Contingency Funding Plan ................................................	53
9 EQUITY POSITION: DISCLOSURE FROM THE BANKING BOOKS.................................	55
9.1	Level 3 fair value measurements ................................................................................	55
10	RENUMERATIONS ........................................................................................................	58
10.1	Remuneration policy ...................................................................................................	58

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Zenith Bank Plc - June 2021 Pillar 3 Disclosure
LIST OF TABLES
Table 1: Key metrics as at 30 June 2021 ..................................................................................	10
Table 2: IFRS 9 Static analysis. ................................................................................................	11
Table 3: Pillar 1 RWAs and capital required ..............................................................................	11
Table 4: Regulatory capital disclosure and capital adequacy as at 30th June, 2021...................	18
Table 5: Risk Weighted Assets as at 30th June 2021.................................................................	19
Table 6: Leverage ratio as at 30th June 2021 ............................................................................	20
Table 7: Credit risk by exposure class as at 30thJune, 2021......................................................	21
Table 8: Credit quality of loans by Industry or counterparty types..............................................	22
Table 9: Credit quality of loans per geographical region............................................................	23
Table 10: Credit quality of loans by ratings................................................................................	23
Table 11: Credit quality of loans per residual contractual maturity.............................................	24
Table 12: Credit Risk Capital Charge ........................................................................................	29
Table 13: Market risk capital charge..........................................................................................	32
Table 14 Operational risk capital charge. ..................................................................................	34
Table 15: Liquidity risk drivers and materiality assessment .......................................................	48
Table 16: Liquidity Coverage Ratio ...........................................................................................	52
Table 17 Net Stable Funding Ratio (NSFR) ..............................................................................	52
Table 18: Unobservable inputs used for level 3 fair value measurements .................................	56
Table 19: Effect of unobservable inputs on fair value measurements........................................	56
Table 20: Effect of changes in cost of equity and terminal growth rate on OCI ..........................	57
Table 21: Directors renumerations ............................................................................................	58
Table 22: Directors emoluments ...............................................................................................	59

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