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Risk and compliance

Risk Management

Managing risk is a fundamental part of banking. Triodos Bank manages risk as part of a long-term strategy of resilience.

Risk Management is embedded throughout the organisation. While business managers are primarily responsible for delivering a resilient business approach, they are supported by risk managers, with local business knowledge, to identify, assess and manage risk. At a group level, a risk appetite process is implemented to align Triodos Bank’s risk profile with the willingness to take risk in achieving its business objectives.

During this process each business unit performs a strategic risk assessment to identify and manage potential risks that could impede the realisation of their business objectives. The outcome of these assessments are consolidated and used as input for the Executive Board’s own risk assessment and to determine Triodos Bank’s risk appetite.

An integration of the strategic risk management objectives as part of the risk appetite, recovery plan, internal capital and liquidity adequacy assessment process was achieved.

The outcome of the strategic risk assessments and strategic risk management objectives are used to determine scenarios that were used to stress test Triodos Bank’s solvency, liquidity and profitability during 2013. The results of these tests were satisfactory.

A fully integrated risk management report gives insights into the Triodos Bank risk profile in relation to the accepted risk appetite. The report gives insights on specific risk themes and provides an integrated picture of risk at business unit level. This report is made four times a year and is presented to the Supervisory Board Audit and Risk Committee.

The monthly Asset and Liability Committee is responsible for assessing the risks associated with interest rate risk, liquidity risk, currency risk and capital management.

The credit risk function plays an important role in assessing the risk of new loans and managing the credit risk of the entire loan portfolio.

The assessment of credit risk is as close as possible to the business and the day-to-day operations, and therefore primarily the responsibility of local branches. The central risk function sets norms, approves large loans, and monitors the credit risk of Triodos Bank’s entire loan book.

The Risk Management section of Triodos Bank’s annual accounts provides a description of the main risks related to the strategy of the company. It also includes a description of the design and effectiveness of the internal risk management and control systems for the main risks during the financial year. No major deficiencies in the internal risk management and control systems were discovered in the financial year. The developments of the main risks within Triodos Bank are discussed on a regular basis in the Audit and Risk Committee of the Supervisory Board.