Page 30 - CCB_Annual Report_2022

30 Strategic Report 31

The Bank has a strong, high quality
capital base. All the Bank’s shareholder
funds qualify as Tier 1 capital, with its
share capital and reserves qualifying as
Common Equity Tier 1 capital.
Total shareholders’ funds increased
during the year from £163.8m to
£184.8m as a result of the growth in the
Bank’s retained earnings.
The Bank elected to adopt the original
IFRS 9 capital transitional arrangements
from 1 January 2018, and during 2020
elected to adopt the extension to these
arrangements announced within the
CRR Quick Fix regulations in June 2020.
In total the Bank’s IFRS 9 transitional
relief was £4.6m in 2022 reflecting both Risk Management Governance of Risk Management annual review of the Bank’s risk appetite
the original and 2020 new transitional The Chief Risk Officer has operational statements and KRIs is facilitated and
relief arrangements, this relief reduced in responsibility for the management of the challenged by Second Line Risk, driven by
2022 reflecting the scheduled reduction Approach to risk, enterprise risk bank’s Enterprise-wide Risk Management the recommendations of the appropriate
in the original transitional relief factor management framework and accountability Framework. The Board has responsibility executives and subject matter experts.
from 50% to 25% and the 2020 relief for the setting of the firm’s Risk Appetite This process includes ensuring that the
scheme from 100% to 75%. The Enterprise Risk Management Framework key risks identified remain appropriate
clearly articulates the Bank’s approach to risk and approval of this framework, as well as against the strategic plan, current business,
The Bank continues to benefit from its management, the risks the Bank is willing ongoing oversight, principally through the macroeconomic, geopolitical, regulatory,
British Business Bank ‘Enable’ Guarantee to take, and the inherent risks, in pursuit of Board Risk and Compliance Committee. The and legal environment, and experience of
facility. As at the 31 December, £42.6m its strategy. Bank’s corporate governance framework risk throughout the preceding year.
of loans were included within the and committee structure is outlined in the
guarantee facility. The guarantee, which The framework ensures that from the corporate governance section. The Bank’s performance against Risk
for regulatory reporting purposes is top down there is effective identification, Appetite is monitored via reporting to
treated as a synthetic securitisation, assessment, control, management, reporting Three lines of defence model the executive risk committees. This is
enables the Bank to risk weight the loans and escalation of risk, to operate within The Bank adopts the ‘three lines of defence’ summarised within the Chief Risk Officer
within the guarantee at 0%. This benefit the appetite set by the Board resulting in a model to provide robust risk management, Risk Management Report, presented
is partially offset by the cost of the first transparent and strong risk culture. The key oversight and assurance with clear regularly to the Risk Management
loss tranche which is reported as a principles, tools, documentation, governance responsibilities established for all colleagues Committee and appropriate Board
capital deduction of £1.68m. structure, roles and responsibilities for risk committees. The reporting shows status
management, across all risk categories, are in relation to risk management, including against each Key Risk Indicator (KRI) and
The Bank’s capital ratios exceeded its confirmed in the framework along with the executive and non-executive responsibilities overall rating, based on parameters set
regulatory requirements throughout methodologies used to measure and monitor documented as applicable under the Senior within the Enterprise Risk Management
the year. the ‘Risk Management Cycle’. In addition, the Managers and Certification Regime. The Framework, using a Red/Amber/Yellow/
internal and external oversight, assurance, Bank outsources the Internal Audit function
The Bank’s Common Equity Tier 1 to Deloitte LLP. Green scale and the expert judgement of
capital ratio (including the impact of and approvals provided by Executive, Board, the first and second lines. These KRI’s detail
the transitional arrangements) at the Line 2 and Line 3 is confirmed. Risk Appetite the Bank’s Risk Appetite and are reviewed
31 December 2022 was 20.7%, (2021: A Risk and Control Self-Assessment at least annually or in the event of a major
19.9%). The Bank’s total capital ratio programme and Top and Emerging risk The Risk Appetite is the type and level of change to strategy and/or environment
(including the impact of the transitional reporting exist which supports monitoring risks the Board is willing to take in pursuit within which the Bank operates.
arrangements) at 31 December 2022 and management of the Bank’s risk profile. of its strategy and objectives. The overall
was 23.6% (2021: 23.0%). The Bank’s objective is to protect the Bank from
Common Equity Tier 1 capital ratio and A forward-looking risk management unacceptable levels of risk while supporting
total capital excluding the transitional approach is taken using quarterly stress and enabling overall business strategy
arrangements were 20.1% and 23.1% at testing and scenario analysis, feeding into (including the assessment of new business
the annual Internal Capital and Liquidity
31 December 2022 respectively. opportunities). The Bank’s Risk Appetite
Adequacy Assessment processes (ICAAP and Statements outline a mixture of qualitative
ILAAP) to ensure there is sufficient capital and and quantitative measures (Principal Risk
liquidity to cover the risks to the Bank.
Statements and Key Risk Indicators). An