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2019 Capital Adequacy Ratio Report

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2019 Capital Adequacy Ratio Report AGRICULTURAL BANK OF CHINA LIMITED 中國農業銀行股份有限公司 2019 CAPITAL ADEQUACY RATIO REPORT Contents 1 Overview......................................................................................................................................4 1.1 Profile................................................................................................................................4 1.2 Capital Adequacy Ratio.................................................................................................... 5 1.3 Disclosure Statement........................................................................................................ 6 2 Risk Management Framework.....................................................................................................8 2.1 Firm-wide Risk Management........................................................................................... 8 2.2 Risk Appetite.................................................................................................................... 8 2.3 Structure and Organization of Risk Management.............................................................9 2.4 Risk Management Policies and Systems........................................................................ 10 2.5 Risk Management Tools and IT Systems....................................................................... 11 3 Information on Composition of Capital.....................................................................................14 3.1 Scope for Calculating Capital Adequacy Ratio.............................................................. 14 3.2 Regulatory Capital Shortfall of Invested Entities........................................................... 16 3.3 Restrictions on Intra-group Capital Transfers.................................................................16 3.4 Contrast between Regulatory Consolidation and Financial Statement...........................16 3.5 Composition of Capital...................................................................................................18 3.6 Main Features of Eligible Capital Instruments............................................................... 24 3.7 Threshold Deduction Limit and Limit of Excess Loan Loss Provisions.............. 41 3.8 Changes in Paid-in Capital.............................................................................................. 42 3.9 Significant Capital Investments.......................................................................................43 4. Credit Risk................................................................................................................................ 44 4.1 Credit Risk Management.................................................................................................44 4.2 Credit Risk Exposure...................................................................................................... 45 4.3 Internal Ratings-Based Approach...................................................................................47 4.4 Credit Risk Exposure Uncovered by IRB Approach...................................................... 50 2 4.5 Credit Risk Mitigation.................................................................................................... 52 4.6 Loans and Advances to Customers.................................................................................55 5 Market Risk................................................................................................................................61 5.1 Market Risk Management...............................................................................................61 5.2 Market Risk Exposure.................................................................................................... 61 6 Operational Risk........................................................................................................................ 63 6.1 Operational Risk Management....................................................................................... 63 6.2 Operational Risk Exposure............................................................................................. 63 7 Other Risks................................................................................................................................ 64 7.1 Securitization Risk..........................................................................................................64 7.2 Counterparty Credit Risk................................................................................................ 69 7.3 Equity Risk of Banking Book.........................................................................................70 7.4 Interest Rate Risk of Banking Book............................................................................... 71 7.5 Liquidity Risk................................................................................................................. 72 8 Internal Capital Adequacy Assessment..................................................................................... 74 8.1 Internal Capital Adequacy Assessment Methods and Process....................................... 74 8.2 Capital Planning and Capital Adequacy Ratio Management Plan..................................75 9 Remuneration.............................................................................................................................76 9.1 Nomination and Remuneration Committee under the Board of Directors..................... 76 9.2 Remuneration Policy.......................................................................................................76 10 Outlook.................................................................................................................................... 78 3 1 Overview 1.1 Profile The predecessor of the Bank was Agricultural Cooperative Bank established in 1951. Since the resumption of establishment in February 1979, the Bank has evolved from a state-owned specialized bank to a wholly state-owned commercial bank and subsequently a state-controlled commercial bank. The Bank was restructured into a joint stock limited liability company in January 2009. In July 2010, the Bank was listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange. As one of the major integrated financial service providers in China, the Bank is committed to building an international first-class commercial banking group with featured operations, efficient and convenient services, diversified functions, as well as demonstrated value-creation capability. Capitalizing on its comprehensive business portfolio, extensive distribution network and advanced IT platform, the Bank provides a diverse portfolio of corporate and retail banking products and services for a broad range of customers, and conducts treasury operations and asset management. Our business scope also includes, among other things, investment banking, fund management, financial leasing and life insurance. As of the end of 2019, the Bank had total assets of RMB24,878,288 million, total loans and advances to customers of RMB13,360,188 million1 and deposits from customers of RMB18,542,861 million. Our capital adequacy ratio was 16.13%. The Bank achieved a net profit of RMB212,924million in 2019. The Bank had a total of 23,149 domestic branch outlets. As of the end of 2019, including the Head Office, the Business Department, three specialized business units managed by the Head Office, four Training Institutes, 37 tier-1 branches, 390 tier-2 branches, 3,445 tier-1 sub-branches, 19,216 branch outlets, and 52 other establishments. Our overseas branch outlets consisted of 13 overseas branches and 4 overseas representative offices. The Bank had 16 major subsidiaries, including 11 domestic subsidiaries and 5 overseas subsidiaries. The Financial Stability Board has included the Bank into the list of Global Systemically Important Banks for six consecutive years since 2014. In 2019, the Bank ranked No. 36 in Fortune’s Global 500, and ranked No. 3 in The Banker’s “Top 1000 World Banks” list in terms of tier 1 capital. As at the date of this announcement, Standard & Poor’s affirmed long-/short-term issuer credit ratings of the Bank at A/A-1 with stable outlook. Moody’s affirmed long-/short-term bank deposits ratings of the Bank at A1/P-1 with stable outlook, and Fitch Ratings affirmed long-/short-term issuer default ratings of the Bank at A/F1+ with stable outlook. 1 Including accrued interest. 4 1.2 Capital Adequacy Ratio In 2014, the China Banking and Insurance Regulatory Commission1 (hereinafter referred to as the “CBIRC”) approved the Bank’s use of foundation Internal Ratings-Based (IRB) approach for non-retail exposure, IRB approach for retail exposure and standardized approach for operational risk on bank and group levels. As a result, the Bank became one of the first batch of domestic banks implementing advanced approaches for capital management in China. In January 2017, the CBIRC officially approved our application of the Internal Models Approach (IMA) for market risks, unification of the major benchmarks of non-retail ratings among domestic and overseas branches, and abolishment of the regulatory restriction which provides that retail risk weighted assets shall not be less than those calculated using the weighted approach. In accordance with the Capital Rules for Commercial Banks (Provisional) (Decree of CBRC [2012] No. 1), the CBIRC determined a parallel implementation period for a commercial bank approved to adopt the advanced
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