Page 120 - 86395_CCB - 2024 Annual Report (web)

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• Operational Risk The ICAAP represents the Board’s risk
assessment for the Bank, and it is used by
Operational Risk is the risk of direct or indirect the Board, Management, and shareholders to
loss arising from inadequate or failed internal understand the levels of capital required to be
processes, people and systems or from external held over the short and medium term, and to
events that cause regulatory censure, reputational assess the resilience of the Bank against failure.
damage, financial loss, service disruption and/or Management presents regular reports on the
customer detriment.
current and forecast level of capital to the
The Bank’s objective is to manage Operational Executive Committee, ALCO, Risk & Compliance
Risk to balance the avoidance of financial losses or Committee, and Board. The key assumptions and
damage to the Bank’s reputation with overall cost risk drivers used to create the ICAAP are regularly
effectiveness and innovation. In all cases, Bank monitored and reported, and any material
policy requires compliance with all applicable legal deviation from the forecast and risk profile of the
and regulatory requirements. Bank would require the ICAAP to be reviewed.

The Board of Directors has delegated responsibility The Bank’s Total Capital Requirement (TCR) is
for Operational Risk to the Risk & Compliance set by its Regulator, the PRA. The Bank’s TCR
Committee, which is responsible for the oversight was 13.19% of Risk Weighted Assets (RWA)
of the management of the full range of operational at 31 December 2024. The Bank’s regulatory
risks the Bank faces, including: capital at 31 December 2024 totalled £241.1m
(2023: £218.7m), (after IFRS 9 transitional
– People
relief). In addition to the TCR requirement
– Fraud the Bank is required to hold additional capital
buffers, referred to as Pillar 2B, which includes
– Execution, delivery and process management
the Counter Cyclical Buffer and the Capital
– Information security and management Conservation Buffer. The Capital Conservation
Buffer was 2.5% of RWA and the Counter Cyclical
– Technology and cyber security
Buffer was 2% of RWA in 2024.
– Model risk
As at 31 December 2024, the Bank’s regulatory
– Supplier risk capital consists of Tier 1 capital which includes
ordinary share capital, convertible loan notes,
– Change management/execution
retained earnings, reserves, and deductions for
– Employment practices and workplace safety intangible assets as well as £5m of tier 2 capital.
The Bank’s intangible assets as at 31 December
– Conduct
2024 are fully deducted from CET1 (Common
– Operational Resilience Equity Tier 1) capital.

– Environmental risk • Impact of IFRS 9 on capital planning
The Bank uses various tools to monitor its exposure In June 2020, as part of the economic
to Operational Risk, including Risk and Control Self support initiatives implemented because of
Assessments, monitoring of Operational Risk Events, the COVID‑19 pandemic, the CRR ‘Quick Fix’
scenario analysis and the use of key risk indicators. package announced measures that enable banks
to reduce the impact on Tier 1 capital from
31 Capital management increased expected credit losses in 2020 and
2021. The Bank elected to adopt this transitional
The Bank manages its capital under the Capital relief and informed its Regulator of this decision.
Requirements Regulation (CRR) and Capital The relief allowed the impact of increased
Requirements Directive (together referred to as CRD expected loss provision balances in stage 1 and
IV) framework. The framework is enforced in the UK stage 2 cases in 2020, 2021 and 2022 on CET 1
by the Prudential Regulation Authority (PRA) who regulatory capital, to be phased in over 5 years.
sets and monitors capital requirements for the Bank.
The relief ended on 31 December 2024.
The Bank’s policy is to maintain a strong capital The Bank’s capital requirement is calculated
base, to maintain investor and market confidence, based on the gross exposures net of specific
and to sustain the future development of the provisions. The tables below set out the Bank’s
business. The Board manages its capital levels for capital resources at 31 December and reconciles
both current and future activities, and documents these resources to the Bank’s reported
its Risk Appetite, and capital requirements as part regulatory capital.
of the Bank’s Internal Capital Adequacy Assessment
Process (ICAAP). The Bank’s ICAAP was updated
during the year and approved by the Board in
July 2024 and reviewed by the Bank’s regulator
in September 2024.