Zenith Bank : Pillar 3 Disclosure Report December 2021

Zenith Bank Plc.

Pillar 3 Disclosures

Report

December 2021

Zenith Bank Plc - December 2021 Pillar 3 Disclosure

TABLE OF CONTENT

Glossary of terms.......................................................................................................................	1
1 INTRODUCTION AND EXECUTIVE SUMMARY ................................................................	4
	1.1	The Bank Overview......................................................................................................	4
	1.2	Business Activities .......................................................................................................	4
	1.3	Zenith Bank's Legal Entities.........................................................................................	6
	1.4	Objectives....................................................................................................................	7
	1.5	Scope of application.....................................................................................................	7
	1.6	Key prudential metrics..................................................................................................	9
	1.7	Minimum capital requirements ....................................................................................	10
	1.8	Updates on local regulatory landscape .......................................................................	12
2	RISK MANAGEMENT ........................................................................................................	14
	2.1	Enterprise risk management (ERM) Framework .........................................................	14
	2.2	Risk management philosophy/strategy........................................................................	14
	2.3	Risk management approach .......................................................................................	14
	2.4	Risk governance .........................................................................................................	15
	2.5	Risk appetite ...............................................................................................................	15
	2.6	Stress testing ..............................................................................................................	16
	2.7	Global risk function .....................................................................................................	17
3 CAPITAL MANAGEMENT AND LEVERAGE .....................................................................	18
	3.1	Capital management approach and policy ..................................................................	18
	3.2	Regulatory capital structure and capital adequacy ......................................................	18
	3.3	Summary of Capital Adequacy....................................................................................	21
	3.4	Leverage.....................................................................................................................	21
4	CREDIT RISK ....................................................................................................................	22
	4.1	Credit risk....................................................................................................................	22
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	4.2	Sources of risk ............................................................................................................	22
	4.3	General Disclosures....................................................................................................	22
	4.4	Measurement of Credit Risk........................................................................................	25
	4.5	Management of Credit Risk.........................................................................................	26
	4.6	Risk mitigation ............................................................................................................	27
	4.7	Capitalisation ................................................................	Error! Bookmark not defined.
5	MARKET RISK...................................................................................................................	31
	5.1	Market Risk.................................................................................................................	31
	5.2	Sources of risk ............................................................................................................	31
	5.3	Management of market risk.........................................................................................	31
	5.4	Measurement of market risk........................................................................................	32
	5.5	Risk mitigation ............................................................................................................	33
	5.6	Capitalisation ................................................................	Error! Bookmark not defined.
6	OPERATIONAL RISK ........................................................................................................	34
	6.1	Operational risk...........................................................................................................	34
	6.2	Sources of risk ............................................................................................................	34
	6.3	Risk mitigation ............................................................................................................	34
	6.4	Capitalisation ................................................................	Error! Bookmark not defined.
7 INTERNAL CAPITAL ADEQUACY AND ASSESMENT PROCESS (ICAAP)	.....................36
	7.1	Material Risk Identification and Assessment ...............................................................	36
	7.2	Credit Concentration Risk ...........................................................................................	38
	7.3	Interest Rate Risk in the Banking Book .......................................................................	39
	7.4	Strategic Risk..............................................................................................................	40
	7.5	Liquidity Risk...............................................................................................................	42
	7.6	Group Risk..................................................................................................................	43
	7.7	Regulatory Compliance Risk .......................................................................................	44
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7.8	Fraud Risk ..................................................................................................................	45
7.9	Reputational Risk........................................................................................................	46
7.10	Information Technology Risk.......................................................................................	47
7.11	Cyber Security Risk ....................................................................................................	48
7.12	Business Risk .............................................................................................................	49
7.13	Legal Risk ...................................................................................................................	50
7.14	Ratings Downgrade Risk.............................................................................................	51
7.15	Model Risk ..................................................................................................................	52
8 LIQUIDITY RISK ................................................................................................................	55
8.1	Liquidity risk ................................................................................................................	55
8.2	Internal Liquidity Adequacy Assessment Process (ILAAP)..........................................	55
8.3	Liquidity coverage ratio (LCR).....................................................................................	59
8.4	Net Stable Funding Ratio (NSFR) ...............................................................................	60
8.5	Overview of Zenith Bank's Contingency Funding Plan ................................................	61
9 EQUITY POSITION: DISCLOSURE FROM THE BANKING BOOKS.................................	63
9.1	Level 3 fair value measurements ................................................................................	63
10	RENUMERATIONS ........................................................................................................	66
10.1	Remuneration policy ...................................................................................................	66

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Zenith Bank Plc - December 2021 Pillar 3 Disclosure
LIST OF TABLES
Table 1: Key metrics as at 31 December 2021...........................................................................	9
Table 2: IFRS 9 Static analysis. ..................................................	Error! Bookmark not defined.
Table 3: Pillar 1 risk measurement approaches.........................................................................	11
Table 4: Pillar 1 RWAs and capital required ..............................................................................	12
Table 5: Regulatory capital disclosure and capital adequacy as at 31st December, 2021 .........	20
Table 6: Risk Weighted Assets as at 31st December, 2021 .......................................................	21
Table 7: Leverage ratio as at 31st December, 2021 ...................................................................	21
Table 8: Credit risk by exposure class as at 31 December 2021. ..............................................	22
Table 9: Credit quality of loans by Industry or counterparty types..............................................	23
Table 10: Credit quality of loans per geographical region ..........................................................	24
Table 11: Credit quality of loans by ratings................................................................................	24
Table 12: Credit quality of loans per residual contractual maturity	.............................................	25
Table 13: Credit Risk Capital Charge ........................................................................................	30
Table 14: Market risk capital charge..........................................................................................	33
Table 15 Operational risk capital charge. ..................................................................................	35
Table 17: Risk Assessment Findings ........................................................................................	37
Table 16: Liquidity risk drivers and materiality assessment .......................................................	56
Table 17: Liquidity Coverage Ratio ...........................................................................................	60
Table 18 Net Stable Funding Ratio (NSFR) ..............................................................................	60
Table 19: Unobservable inputs used for level 3 fair value measurements .................................	64
Table 20: Effect of unobservable inputs on fair value measurements........................................	64
Table 21: Effect of changes in cost of equity and terminal growth rate on other comprehensive
income ......................................................................................................................................	66
Table 22: Directors emoluments ...............................................................................................	67
Table 23: Directors emoluments ...............................................................................................	67
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