Page 210 - Capricorn IAR 2020

GLOSSARY OF TERMS ANNUAL FINANCIAL GLOSSARY OF TERMS STATEMENTS
NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS (continued)
for the year ended 30 June 2020
3. FINANCIAL RISK MANAGEMENT (continued)
3.7 Capital management (continued)
Deduction approach means deductions of 50 percent of the cost of investment in the affiliate is made from Tier 1 capital and 50% from Tier 2 capital.
The table below summarises the composition of regulatory capital and the ratios of Capricorn Group for the years ended 30 June, at consolidated supervision level. During these two years, the individual entities within the Group complied with all externally-imposed capital requirements to which they are subjected.
Tier 1 capital
Share capital and premium General banking reserves Retained earnings Minority interests
Subtotal
Deduct: 50% investments in Group entities
Goodwill
50% investments in deconsolidated financial subsidiaries, significant minority and majority insurance entities and significant commercial entities
Net total Tier 1 capital Tier 2 capital
Subordinated debt
Five-year callable bonds General provisions
Subtotal
Deduct: 50% investments in Group entities
50% investments in deconsolidated financial subsidiaries, significant minority and majority insurance entities and significant commercial entities
Net total Tier 2 capital Net total Tier 3 capital Total regulatory capital
Risk-weighted assets:
Operational risk Credit risk Market risk
Total risk-weighted assets
The increase in risk-weighted assets during the year is mainly attributable to the increase in credit risk, which relates to the growth in loans and advances and the acquisition of Entrepo during the year under review.
Capital adequacy ratios:
Leverage capital ratio
Tier 1 risk-based capital ratio Total risk-based capital ratio
Group
2020 N$’000
760,667 3,868,463 2,188,674
214,424
7,032,228
(101,489) (411,574)
6,519,165
826,161
433,535 392,626
826,161
(371,874)
454,287 (33,947)
6,939,505
5,112,099 41,354,688 654,509
47,121,296
12.1% 13.8% 14.7%
2019 N$’000
765,507 3,843,797 1,580,520
345,382
6,535,206
(101,489) (298,837)
6,134,880
310,750
310,750
(255,753)
54,997 –
6,189,877
4,866,635 37,205,932 495,551
42,568,118
10.9% 12.3% 14.9%
208
In addition to the above minimum capital requirements, the Bank of Namibia requires the Group to perform an internal capital adequacy and assessment process (“ICAAP”) in terms of Pillar II of Basel II, which has been documented and approved by the board. The process results in:
• The identification of all significant risk exposures to the banking group
• The quantification of risk appetites for the major risks identified
• Control measures to mitigate the major risks
Based on the ICAAP assessment performed on 30 November 2019, which includes a capital projection for the next five years, it is envisaged that the Group will be able to maintain its capital ratios and will not require additional capital.
310,750 –