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INDEXO Interim / Quarterly Report 2024
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Interim / Quarterly Report
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AS INDEXO BANKA
Saturs Unaudited public quarterly report
January September 2024 # Table of Contents
| 3 4 |
|
|---|---|
| Management report | 5 7 |
| Events after the reporting period | 8 |
| Statement of responsibility of the management board of AS INDEXO Banka | 9 |
| Financial statements: | |
| Statement of comprehensive income | 10 |
| Statement of financial position | 11 |
| Statement of changes in equity | 12 |
| Risk management | 13 - 17 |
Basic Principles for Preparing the Report
Preparation of Quarterly Public Reports of the merger Bank of Latvia).
Information on the shareholders and equity
participation
AS INDEXO Bank is a subsidiary of IPAS INDEXO.
As of September 30, 2024, the registered and paid-up share capital was divided into 17 309 445 single-category shares with equal voting rights. All shares of the Bank have a nominal value of EUR 1.00 (one euro, 00 cents). The sole shareholder of AS INDEXO Banka on September 30, 2024, was IPAS INDEXO, which owns 100% of the -up share capital.
| Shareholder | Paid-up share capital, EUR |
% of all paid-up share capital |
|---|---|---|
| IPAS INDEXO | 17 309 445 | 100% |
| Total | 17 309 445 | 100% |
| Name, Surname | Position held |
|---|---|
| s | Chairman of the Supervisory Board |
| Svens Dinsdorfs | Deputy Chairman of the Supervisory Board |
| Member of the Supervisory Board | |
| Member of the Supervisory Board | |
| Ivita Asare | Member of the Supervisory Board (until 03.07.2024) |
| Name, Surname | Position held |
|---|---|
| Valdis Siksnis | Chairman of the Management Board |
| Vladimirs Bolbats | Member of the Management Board |
| Evija Sloka | Member of the Management Board |
| Member of the Management Board | |
| Ieva Bauma | Member of the Management Board |
| Member of the Management Board | |
| Member of the Management Board (until 28.06.2024) | |
| Ivita Asare | Member of the Management Board |
sational structure
Information about the organisational structure of the INDEXO Group can be found here: indexo.lv/en/companystructure/ .
Management report
AS INDEXO Bank started operations on August 28, 2024 three and a half months after receiving its banking license. During the reporting period, INDEXO Bank has completed its first month of operation, and we are proud of the results achieved.
In the first month of banking operation, AS INDEXO Bank attracted more than 10 thousand clients with total deposits almost amounting to EUR 9.0 million. For comparison, it took more than a year for the pension management company IPAS INDEXO, which now has over 137.5 thousand clients, to attract its first 10 thousand clients.
All client applications at the INDEXO BANK are received through the new bank's mobile app. Client activity was
The bank's operations were launched with a suite of daily banking services for private individuals. It is still too early to draw conclusions about specific user habits or client profiles. We see that some clients are transferring their salary payments to INDEXO Bank, others are actively using payment cards, while still others appreciate the advantages of our savings products and the ability to track their third-pillar pension savings and easily making deposits to the 3rd pillar thru the mobile app.
Since starting operations, we have already released six updates for the mobile app. These updates included over 200 small improvements and bug fixes, as well as added functionality to provide clients with detailed information on interest earned from savings products. The app now fully integrates e-signature functionality and allows users to create detailed account statements in PDF format. In the coming weeks and months, we will continue to improve our mobile app and expand the range of available banking services. At the present, our timeline for the planned introduction of new services is as follows:
| Q4 2024 |
Q1 2025 |
Q2 2025 |
Q3 2025 |
Q4 2025 |
|
|---|---|---|---|---|---|
| Improvements and bug fixes | |||||
| Regular payments | |||||
| Mortgage lending | |||||
| Family accounts | |||||
| Google / Apple pay | |||||
| 2PL in Mobile app | |||||
| Servicing of SMEs |
To separate the costs of establishing the bank from other group expenses, a subsidiary of IPAS INDEXO, AS IDX1R, was established on December 19, 2022. After receiving the banking license, it was renamed to AS INDEXO Banka. However, several cost items related to the bank's establishment still need to be recorded in the parent company, IPAS INDEXO. The largest of these are capital-raising expenses, fees for signed commitment letters to support future bank capital needs, and stock option costs for INDEXO Banka employees. The total amount of these expenses for the first 9 months of this year was EUR 495 thousand. All other bank establishment costs are separated from IPAS INDEXO and reflected in this AS INDEXO Banka quarterly public report.
At the end of reporting period we have increased the total number of full-time equivalent employees at AS INDEXO Banka to 53 (at the end of June 30 2024 the total number of full-time equivalent employees were 421 ) ensuring that Bank has sufficient recourses to provide an excellent costumer experience and to meet all the regulatory requirements. At the end of September INDEXO Bank moved This step will not only promote teamwork but also enhance INDEXO's appeal as an employer.
reporting period, INDEXO Bank's operating income amounted to just 50 thousand EUR. Meanwhile, the bank continues to make significant IT investments to develop and expand its range of banking services. Consequently, INDEXO Bank incurred losses of 3.9 million EUR during the reporting period.
The largest category of investment and expenses related to the establishment of the bank is IT expenses and investments. Since the beginning of the INDEXO Bank development as of September 30, 2024, the total 4.1 million, of which EUR 2.2 million were made in the nine month of thi totaled EUR 1.5 million, of which EUR 1.4 million were recognized as expenses, and EUR 0.2 million accounted for the amortized portion of previously capitalized costs.
As of September 30, 2024, AS INDEXO Banka complies with all regulatory requirements regarding liquidity and capital adequacy at both the individual and consolidated level. At the end of reporting period, INDEXO Bank's capital and reserves were EUR 10.7 million, and our equity for capital adequacy calculation was EUR 8.5 million, consisting entirely of Common Equity Tier 1 (CET1) capital. Since the value of the bank's risk exposures was very low at the end of the quarter, our capital ratios significantly exceeded the capital requirements set by our regulators, and at the end of the quarter, INDEXO Banka's capital adequacy ratio was 89.55%. The liquidity coverage ratio was 1232.51%, significantly exceeding the regulatory minimum of 100%.
1 the correct, updated figure is 42 FTEs, rather than 53.
We have invested significant effort to ensure that INDEXO Banka stands out in the Latvian financial market with the ease of use of its services and innovative products, offering new opportunities and more favorable conditions for clients. We involved our customers in this process by gathering their opinions on various topics, from the design of the mobile app to the appearance of payment cards. A survey1 conducted in collaboration with the Delfi portal shows that our efforts have achieved the intended result 93% of survey participants rated the account opening process in the INDEXO mobile app as simple and gave high ratings for the app's ease of use, functionality, speed, and operational stability.
The central management tool of the new INDEXO Banka's services will be a modern mobile app, and the only bank customer service centre will be in the "Verde" office complex, which we plan to open at the beginning of 2025. Establishing a physical customer service centre will increase the visibility of the INDEXO brand and improve accessibility for both existing and future clients of the INDEXO group.
The results from the first month of operations confirm that INDEXO Bank, with more than 137 thousand pension management clients, a well-known and positively received brand, and a developed modern IT infrastructure, is excellently positioned to challenge the oligopolistic banking market and to change entrenched market practices high fees, complex and non-transparent pricing, complicated service acquisition processes, and a risk-averse culture."
You can learn about the INDEXO group's history, values, mission, and vision here: indexo.lv/en/values-andhistory/ . 2
2delfi.lv survey data, period: 30.09.-13.10.2024, n=985, all, 18+
Events after the reporting period
The following strategically important events occurred after the end of the reporting period:
- As of the end of October 2024, INDEXO Bank's number of clients has grown to 14 thousand, deposit volumes doubled to EUR 17.8 million, while the amount of issued loans has reached EUR 0.5 million.
- The government of the Republic of Latvia plans to make a decision to reduce 2nd pension pillar contributions from 6% to 5%, starting from January 1, 2025 for the four years, which is expected to impact the results of INDEXO Group company, IPAS INDEXO. In the same legislation draft, it is proposed that the current cap on management fees of 0.4% will be reduced to 0.2%, thereby reducing 2nd pillar income for all major market participants in the long term. IPAS INDEXO, the sole shareholder of INDEXO Bank and the third-largest 2nd pension pillar manager in Latvia, would also be affected by these legal changes once the law will be enforced.
Signed on behalf of the Management Board of AS INDEXO Banka:
Valdis Siksnis, Chairman of the Management Board Vladimirs Bolbats, Member of the Management Board Evija Sloka, Member of the Management Board , Member of the Management Board Ieva Bauma, Member of the Management Board , Member of the Management Board Ivita Asare, Member of the Management Board
Statement of responsibility of the management board of AS INDEXO Banka
The Management Board of AS INDEXO Banka is responsible for the bank's public quarterly report, which clearly and accurately reflects the bank's financial position as of September 30, 2024.
The data and additional information presented in this public quarterly report are true and complete. The public Quarterly Public Reports of Credit Ins
Signed on behalf of the Management Board of AS INDEXO Banka:
Valdis Siksnis, Chairman of the Management Board Vladimirs Bolbats, Member of the Management Board Evija Sloka, Member of the Management Board Ieva Bauma, Member of the Management Board Ivita Asare, Member of the Management Board
Financial Condition and Performance
Profit and loss statement
| 01/01/2024 01/01/2024 30/09/2024 30/09/2024 Unaudited, EUR Unaudited, EUR Interest income 189 795 224 054 Interest expense (-) (35 029) (331 821) Dividend income - - Commission income 1 848 3 169 518 Commission expense (-) (39 347) (46 017) Net profit/loss from derecognition of financial assets and - - |
|---|
| financial liabilities not measured at fair value through profit or loss (+/ ) |
| Net profit/loss from financial assets and financial liabilities - - measured at fair value through profit or loss (+/ ) |
| Net profit/loss from hedge accounting (+/ ) - - |
| Net foreign exchange difference profit/loss (+/ ) (857) (997) |
| Net profit/loss from derecognition of non-financial assets - - (+/ ) |
| Other operating income - 124 |
| Other operating expenses ( ) (178 134) (891 299) |
| Administrative expenses ( ) (3 367 190) (5 143 681) |
| Depreciation ( ) (311 371) (375 787) |
| Profit/loss recognized due to changes in the contractual - - cash flows of a financial asset (+/ ) |
| Provisions made or reversed ( /+) (150 000) (150 000) |
| Impairment or reversal of impairment ( /+) (8 709) (10 716) |
| Negative goodwill recognized in the income statement - - |
| Profit/loss from investments in subsidiaries, joint ventures, - - |
| and associates recognized using the equity method (+/ ) |
| Profit/loss from long-term assets and disposal groups - - |
| classified as held for sale (+/ ) Profit/loss before corporate income tax (+/ ) (3 898 994) (3 556 623) |
| Corporate income tax 525 6 498 |
| Profit/loss for the reporting period (+/ ) (3 899 519) (3 563 120) |
| Other comprehensive income for the reporting period (+/ ) (3 899 519) (3 563 120) |
| Return on Equity (ROE) % -72.41 -55.05 |
| Return on Assets (ROA) % -55.22 -35.45 |
The financial statements have been authorised for issue on 5 November 2024 and signed on behalf of the AS INDEXO Banka Management Board by:
Valdis Siksnis, Chairman of the Management Board
Vladimirs Bolbats, Member of the Management Board
Evija Sloka, Member of the Management Board
Ieva Bauma, Member of the Management Board
Ivita Asare, Member of the Management Board
Balance sheet statement
| Unaudited, EUR 30/09/2024 Unaudited, EUR Cash and demand deposits with central banks 15 756 133 15 756 133 Demand deposits with credit institutions 3 927 1 243 843 Financial assets measured at fair value through profit or loss - - including loans - - Financial assets measured at fair value through other - - comprehensive income Financial assets measured at amortized cost 332 815 556 251 including loans 283 324 506 760 Derivative financial instruments hedge accounting - - Changes in fair value of hedged items for portfolio hedge of - - interest rate risk Investments in subsidiaries, joint ventures, and associates - 260 033 Tangible assets 2 179 681 2 283 177 Intangible assets 3 867 508 3 924 556 Tax assets 12 567 16 993 Other assets 323 721 2 223 708 Non-current assets and disposal groups classified as held for - - sale Total assets 22 476 352 26 264 694 Liabilities to central banks - - Demand liabilities to credit institutions - - Financial liabilities measured at fair value through profit or loss - including deposits - Financial liabilities measured at amortized cost 8 965 612 8 965 612 including deposits 8 965 612 8 965 612 Derivative financial instruments hedge accounting - - Changes in fair value of hedged items for portfolio hedge of - - interest rate risk Provisions 195 404 713 173 Tax liabilities 117 945 144 006 Other liabilities 2 457 505 2 589 066 Liabilities included in disposal groups classified as held for sale - - Total liabilities 11 736 466 12 411 857 Capital and reserves 10 739 886 13 852 837 Total equity and liabilities 22 476 352 26 264 694 Off-balance sheet items - - Contingent liabilities - - |
Bank | Consolidated | |
|---|---|---|---|
| 30/09/2024 | Group | ||
| Off-balance sheet commitments to clients | - | - |
The financial statements have been authorised for issue on 5 November 2024 and signed on behalf of the AS INDEXO Banka Management Board by:
Valdis Siksnis, Chairman of the Management Board
Vladimirs Bolbats, Member of the Management Board
Evija Sloka, Member of the Management Board
Management Board
Ieva Bauma, Member of the Management Board
Ivita Asare, Member of the Management Board
THIS DOCUMENT IS SIGNED WITH A SECURE DIGITAL SIGNATURE AND CONTAINS A TIMESTAMP
Summary of equity capital and minimum capital requirements
| Bank | Consolidated | |
|---|---|---|
| 30/09/2024 | Group | |
| Unaudited, EUR | 30/09/2024 | |
| Unaudited, EUR | ||
| Equity capital | 8 451 852 | 13 508 667 |
| Tier 1 capital | 8 451 852 | 13 508 667 |
| Common Equity Tier 1 capital | 8 451 852 | 13 508 667 |
| Additional Tier 1 capital | - | - |
| Tier 2 capital | - | - |
| Total exposure measure | 9 438 232 | 12 053 168 |
| Risk-weighted exposure value for credit risk, counterparty | 4 438 232 | 7 053 168 |
| credit risk, dilution risk, and unpaid delivery risk | ||
| Total exposure measure for settlement/delivery risk | - | - |
| Total exposure measure for position risk, foreign exchange risk, and commodities risk |
- | - |
| Total exposure measure for operational risk | 5 000 000 | 5 000 000 |
| Total exposure measure for credit valuation adjustment | - | - |
| Total exposure measure related to large exposures in the | - | - |
| trading portfolio | ||
| Other exposure measures | - | - |
| Capital ratios and levels | ||
| Common Equity Tier 1 capital ratio (%) | 89.55 | 112.08 |
| Common Equity Tier 1 capital surplus (+)/deficit ( ) | 8 027 132 | 12 966 274 |
| Tier 1 capital ratio (%) | 89.55 | 112.08 |
| Tier 1 capital surplus | 7 885 558 | 12 785 477 |
| Total capital ratio (%) | 89.55 | 112.08 |
| Total capital surplus (+)/deficit ( ) | 7 696 793 | 12 544 414 |
| Combined capital buffer requirement | 241 399 | 306 000 |
| Capital conservation buffer | 235 956 | 301 329 |
| Conservation buffer due to macroprudential or systemic risk identified at the level of a member state |
||
| Institution-specific countercyclical capital buffer | 5 443 | 4 671 |
| Systemic risk capital buffer | ||
| Other systemically important institution buffer | ||
| Capital ratios taking into account adjustments | ||
| Adjustment amount for prudential purposes | - | - |
| Common Equity Tier 1 capital ratio taking into account the adjustment amount mentioned in row 5.1 (%) |
89.55 | 112.08 |
| Tier 1 capital ratio taking into account the adjustment amount mentioned in row 5.1 (%) |
89.55 | 112.08 |
| Total capital ratio taking into account the adjustment amount mentioned in row 5.1 (%) |
89.55 | 112.08 |
The bank does not apply the transitional period specified in Article 473a of Regulation (EU) No. 575/2013 for the implementation of IFRS 9. The bank chooses not to apply the temporary regime specified in Article 468 of Regulation (EU) No. 575/2013.
The financial statements have been authorised for issue on 5 November 2024 and signed on behalf of the AS INDEXO Banka Management Board by:
Valdis Siksnis, Chairman of the Management Board
Vladimirs Bolbats, Member of the Management Board
Evija Sloka, Member of the Management Board
Ieva Bauma, Member of the Management Board
Ivita Asare, Member of the Management Board
Liquidity coverage ratio calculation
| Bank | Consolidated | |
|---|---|---|
| 30/09/2024 | Group | |
| Unaudited, EUR | 30/09/2024 | |
| Unaudited, EUR | ||
| Liquidity reserve | 15 756 683 | 15 756 683 |
| Net outflows | 1 278 423 | 335 211 |
| Liquidity coverage ratio (%) | 1 232.51 | 4700.53 |
Expected Credit Losses by Stage
(According to IFRS 9 "Financial Instruments")
| 30/09/2024 | |||
|---|---|---|---|
| Bank | EUR | EUR | EUR |
| Stage 1 | Stage 2 | Stage 3 | |
| Cash and demand deposits with central banks | (551) | - | - |
| Demand deposits with credit institutions | - | - | - |
| Financial assets measured at fair value through other comprehensive income | - | - | - |
| Financial assets measured at amortized cost | (5 473) | - | (1 631) |
| Other assets | (1 055) | - | - |
| Book value | (7 079) | - | (1 631) |
| 30/09/2024 | |||
| Consolidated Group | EUR | EUR | EUR |
| Cash and demand deposits with central banks | Stage 1 | Stage 2 | Stage 3 |
| Demand deposits with credit institutions | (551) | - | - |
| Financial assets measured at fair value through other comprehensive income | - | - | - |
| Financial assets measured at amortized cost | - | - | - |
| Other assets | (5 473) (1 217) |
(5 342) - |
(1 631) - |
Securities Portfolio Concentration Analysis
As of September 30, 2024, AS INDEXO Banka did not have any securities portfolios.
Risk management
The bank identifies all material risks inherent to its operations and develops, documents, and implements appropriate policies for managing these risks, including their measurement, assessment, control, mitigation measures, and risk reporting and information provision.
The risk management system is integrated into the bank's internal control system, ensuring independent risk control and compliance functions separate from business functions.
The risk management framework includes risk strategies, policies, procedures, risk limits, and controls, ensuring adequate, timely, and continuous identification, assessment, measurement, monitoring, mitigation, and reporting of material risks.
INTERNAL CONTROL SYSTEM
Risk management in the bank is based on the three lines of defense model and is organized to prevent or escalate any potential conflicts of interest.
The first line of defence involves primary risk management, conducted by all business and compliance departments and those employees who manage risks daily as part of their operational activities. This line involves risk identification and the implementation of risk mitigation measures.
The second line of defence involves further, in-depth, and independent risk identification and assessment, analysis, and monitoring conducted by the Risk management, Compliance, AML, Sanctions departments as well as data protection department.
The third line of defence provides independent assurance on the risk management process and its effectiveness, conducted by the Internal Audit department.
RISK CULTURE
The bank promotes a risk culture that encourages proper behavior based on the bank's values, best industry practices, and ethical standards.
The bank ensures the establishment of a comprehensive risk culture that facilitates the implementation of effective risk management processes, considering the bank's development strategy and risk strategy.
RISK MATERIALITY ASSESSMENT PROCESS
Material risks are inherent to the bank's operations and can significantly negatively impact the bank's reputation, ability to provide services, achieve strategic objectives, and/or cause substantial financial losses.
According to the bank's operational specifics, the following are considered material risks:
- Credit Risk
- Liquidity Risk
- Interest Rate Risk
- Operational Risk
- Compliance Risk
- Reputational Risk
- Business Model Risk
- AML/CFT Risk
- Sanctions Risk
- Excessive Leverage Risk
- Concentration Risk
- Model Risk
Capital adequacy
The bank consistently maintains capital that exceeds the minimum requirements set by regulations. The bank uses capital efficiently and builds its capital position through profit, focusing on adequate return on capital as one of the main indicators in decision-making.
The bank consistently maintains a capital level that supports the achievement of strategic goals, ensuring that the structure.
The bank ensures that the amount of capital is sufficient to cover risks and support the bank's operations.
Credit Risk
The bank's credit risk management strategy aims to maximize asset returns and ensure an optimal balance between credit risk, the planned level of return, and liquidity. The bank's credit risk management is based on an adequate assessment of borrowers and counterparties, as well as adherence to the restrictions and limits set by the bank.
The bank primarily assumes credit risk in Latvia. The bank only issues loans where it is possible to identify, assess, and manage the borrower's risks.
Liquidity risk
The goal of the bank's liquidity risk management strategy is to ensure the necessary level of liquidity while achieving an appropriate, optimal balance between return and risk in accordance with established risk management principles.
The bank implements its liquidity management strategy by considering the maturity, volatility, and currency of the funds raised, changes in operations, and the external conditions affecting them.
The bank assumes liquidity risk within defined limits and restrictions.
Interest rate risk
The goal of the interest rate risk management strategy is to ensure an appropriate balance between the interest rate risk taken by the bank and returns in order to reduce the potential negative impact of interest rate risk on the bank's financial condition and operations.
The bank plans to generate interest income by increasing the loan portfolio, primarily financing Latvian residents, and making every effort to prevent the share of NPL (non-performing loans) from exceeding the limits set in the risk appetite.
Operational risk
The bank uses a forward-looking and risk-based approach to identify, assess, and mitigate potential risk losses. Operational risk includes information technology risk, outsourcing risk, and legal risk.
Operational risk is mitigated by developing clearly defined processes and implementing appropriate internal controls.
The bank builds and maintains a skilled and motivated team of employees who conduct their daily work according to high ethical and professional standards. Regular employee training is conducted.
To quickly identify operational risk events and implement appropriate risk mitigation measures in a timely manner, the bank has established and implemented a database for the systematic recording of operational risk events. The bank has established a procedure whereby any employee, regardless of their position, must immediately register any operational risk event upon its identification, for any circumstances that have caused or may potentially cause losses to the bank (regardless of their form) or that may damage the bank's reputation. All operational risk events registered in the database are reviewed, and if necessary, risk mitigation measures are developed and implemented to improve the internal control system.
The bank's information systems are vital for maintaining sustainable business practices, and there is low tolerance for damage to information systems caused by malicious attacks and internal threats. To mitigate this risk, the bank focuses on the timely resolution of identified control deficiencies, consistent third-party risk management, technological control development, and continuous improvement. The bank has low tolerance for risks associated with system availability.
The bank establishes and implements the procedures, scope, and quality for the use of necessary outsourcing services to manage and minimize the risks associated with outsourcing and the potential impact on the bank's operational continuity, as well as to reduce expenses related to specific outsourcing services as much as possible. Before delegating any function, the bank evaluates all risks associated with outsourcing to ensure that it can continue to provide stable and sustainable operations.
The objective of legal risk management is to ensure compliance with the legislative acts of the Republic of Latvia, the European Union, and other applicable laws, regulations, and standards in legal operations.
During the reporting period, the bank did not incur any losses from operational risk events.
Compliance risk
The bank operates in a manner that ensures compliance with all applicable laws and regulations.
Compliance risk management in the bank is ensured by establishing clear responsibilities in the area of compliance, and by implementing current external regulatory requirements in internal policies and procedures that are understandable and transparent to employees.
The bank takes all necessary measures to comply with all applicable laws and regulations, particularly in the areas of AML risk and sanctions risk, as well as in other areas such as conflict of interest management, personal data protection, information security, etc.
Reputational risk
The bank refrains from engaging in activities that pose or could be associated with increased reputational risk, regardless of financial gains and rewards. Reputation is fundamentally important and is carefully analysed when making decisions.
Any news coverage of the bank in media channels is monitored to maintain a positive corporate image, with constant attention to media representation and timely actions taken to avoid negative media escalation and public reaction.
Legitimate customer complaints are reviewed at the management level and addressed appropriately and promptly. Special attention is paid to managing information security risks and mitigating significant information security incidents, such as mass customer data breaches or breaches of sensitive information confidentiality.
Business model risk
The bank maintains a reasonably diversified, viable, and sustainable business model by offering a wide range of financial services to clients with diverse needs.
The bank strategically develops its service offerings based on next-generation financial technologies.
The bank mitigates business model risk by continuously monitoring operational performance indicators against established plans and taking appropriate actions when necessary.
AML and Sanctions risk
The bank operates in a manner that ensures compliance with all applicable laws and regulations. This includes a low-risk appetite concerning compliance risks and a zero-tolerance principle toward intentional violations in AML and sanctions risk matters, collaborating only with trusted clients that fit the defined target customer base and
products, geography, and delivery channels, implementing appropriate risk mitigation measures.
Excessive leverage risk
Excessive leverage occurs when the bank increases its balance sheet size in ways that do not directly affect capital adequacy (e.g., by using risk mitigation techniques to reduce risk-weighted assets, etc.). However, due to the volume, market changes (e.g., changes in asset values or unfavourable changes in interest rates) may threaten the
The bank consistently maintains its leverage ratio (calculated by dividing Tier 1 capital by the total exposure measure, i.e., the sum of assets and off-balance sheet items, regardless of their risk level) above the minimum level set by regulations.
The bank mitigates excessive leverage risk by monitoring the asset-liability structure and its changes, as well as the volume of products that include funded and unfunded protection.
Concentration risk
The bank integrates the concentration risk management system into its internal control system and identifies risk drivers that may create concentration risk in various areas of operation.
Concentration risk is closely related to other risks, and its management system is part of the bank's various risk management policies and related procedures.
The bank mitigates concentration risk by setting limits on large risk exposures with clients, groups of connected clients, or risk exposures with clients whose creditworthiness is determined by a common risk factor.
The bank ensures timely reporting on approved limits, their control, and actions to be taken in cases of noncompliance.
Model risks
The objective of the model risk strategy is to ensure that the developed models meet their intended purpose, align with the bank's operational specifics and complexity, are sufficiently accurate and reliable, and are properly documented and managed.
The bank takes all necessary measures to ensure that, when using internal models, their methodology, input data, assumptions, limitations, and results are understandable, validated, reviewed, monitored, and, if necessary, appropriately adjusted.
The bank uses automated models for creditworthiness assessment and credit decision-making, implementing measures to ensure the quality of input data, traceability, and verifiability of results, and adequate model documentation.
The financial statements have been authorised for issue on 5 November 2024 and signed on behalf of the AS INDEXO Banka Management Board by:
Valdis Siksnis, Chairman of the Management Board
Vladimirs Bolbats, Member of the Management Board
Evija Sloka, Member of the Management Board
Ieva Bauma, Member of the Management Board
Ivita Asare, Member of the Management Board