Risk Management

Risk management, both financial and non-financial, including climate and environmental risks, is key to the Ibercaja Banco Group's business development strategy.

The Ibercaja Banco Group's risk management is based on the following strategic principles:

Maintain a medium-low Group risk profile, while achieving profitability, liquidity and solvency objectives and maintaining prudent limits to exposures vulnerable to climate and environmental risks.

Comply at all times with regulatory requirements.

Maintain effective risk governance that is led by the Board of Directors and senior management and extends to all areas involved.

Promote a risk culture and facilitate a better understanding by the organization of the level and nature of the risks to which it is exposed.

To ensure the confidence of customers, investors, employees, suppliers and other agents.

RISK MANAGEMENT STAKEHOLDERS

Governance and organization: The Ibercaja Group has a strong organizational structure that ensures effective risk management and control. The governance structure provides the appropriate communication channels to transmit information and decisions to all levels of the organization.

For further details, see Note 3.4 Governance Model of the Consolidated Financial Statements.

Global risk management processes: The Group has the following tools for risk identification, measurement, control and communication:

Risk Appetite Framework: The Group's risk management is organized through the Risk Appetite Framework (RAF), a tool whose main objective is to establish a set of principles, procedures, controls and systems through which the Group's risk appetite is defined, communicated and monitored, understood as the level or profile of risk that the Ibercaja Group is willing to assume and maintain, both in terms of its type and amount, as well as its level of tolerance, and must be oriented towards achieving the objectives of the strategic plan, in accordance with the lines of action established therein.

The Risk Appetite Framework forms a consistent management framework integrated into the existing risk management processes and is approved and reviewed at least once a year by the Board of Directors.

Capital and liquidity self-assessment (ICAAP & ILAAP): the capital and liquidity self-assessment processes (ICAAP & ILAAP) seek to provide certainty about the risks to which the Entity is or may be exposed and the Entity's ability to remain viable, maintaining an adequate level of capitalization and liquidity and managing its risks effectively.

This requires ensuring prospectively that all material risks are identified, effectively managed (with an appropriate mix of measurement and controls) and covered by a sufficient amount of high quality capital in the case of ICAAP and by a sufficient amount of liquid assets and stable sources of funding in the case of ILAAP. Its objectives are, therefore, to ensure an adequate relationship between the entity's risk profile and the equity and liquidity that it effectively maintains.

Recovery plan: this document responds to the requirement of Directive 2014/59/EU of May 15, 2014, on the recovery and resolution of credit institutions and investment firms, providing a detailed overview of the Bank, through an analysis of its main business lines and critical economic functions and identifying the set of recovery indicators that will be periodically monitored to anticipate possible situations of severe stress.

Risk catalog: description of the material risks identified in the Risk Appetite Framework, with annual review.

For further details, see Note 3.2 Material risk catalog for the Ibercaja Group and Note 3.3. Global risk management processes and tools of the Consolidated Financial Statements.

Risk culture: the Group's Governing Bodies and Management are constantly monitoring the evolution of the business and risk management.

For more information regarding Ibercaja’s risk management policies, please refer to the last Prudential Relevance report here.