Notes to OP Financial Group Financial Statements



Note 61. OP Financial Group's capital adequacy


Note 2, OP Financial Group’s risk and capital adequacy management principles, provides a description of how the Group organises its Group-level risk and capital-adequacy management process. OP Financial Group and all of its institutions fulfil the capital adequacy requirements set by the authorities.


Capital base and capital adequacy under the Act on the Supervision of Financial and Insurance Conglomerates


EUR million 31 Dec.
1 Jan.
31 Dec.
OP Financial Group's equity capital 7,213 7,724 7,724
Cooperative capital, hybrid instruments, perpetual bonds and debenture bonds 1,072 1,335 1,488
Other sector-specific items excluded from capital base -72 -82 -5
Goodwill and intangible assets -1,286 -1,308 -1,308
Equalisation provision -179 -205 -205
Proposed profit distribution -22 -99 -99
Items under IFRS deducted from capital base* -79 -90 -135
Impairments – shortfall of expected losses -313 -358 -358
Conglomerate’s total capital base 6,334 6,918 7,104
Regulatory capital requirement for credit institutions** 2,864 2,717 3,307
Regulatory capital requirement for insurance operations*** 485 437 437
Minimum amount of conglomerate's capital resources 3,350 3,154 3,744
Conglomerate's capital adequacy 2,984 3,764 3,359
Conglomerate’s capital adequacy ratio (capital base/minimum of capital base) 1.89 2.19 1.90

* Excess funding of pension liability, Fair value measurement of investment property, Amount of cash flow hedge of fair value reserve

** Risk-weighted assets x 8%

*** Minimum solvency margin

Capital adequacy

The Group has two risk limit indicators for its capital adequacy. The first is capital adequacy prescribed in the Act on the Supervision of Financial and Insurance Conglomerates. The Group’s risk limit for this capital adequacy ratio is 1.3, while the minimum statutory requirement is 1. On 31 December 2014, this ratio was 1.89 (1.90). On 31 December 2014, OP Financial Group’s capital base was EUR 1,979 million (2,236) above the Group’s internal risk limit and EUR 2,984 million (3,359) above the limit required by law.


The other risk limit indicator for capital adequacy is the ratio of capital base to economic capital, for which the risk limit is 1.2. On 31 December 2014, the ratio of capital base to economic capital was 1.42 (1.65). The capital buffer above the Group’s internal risk limit was EUR 1,058 million (1,892). The strong capital base acts as a buffer against unexpected losses and paves the way for business growth.