Disclosure Report 2020

Disclosure Report 2020 Disclosure on the Annual Report 2020 pursuant to Art. 431 et seq. CRR and Art. 29c BankV

1DISCLOSURE REPORT 2020

Disclosure Report 2020Disclosure on the Annual Report 2020 pursuant to Art. 431 et seq. CRR and Art. 29c BankV

2 DISCLOSURE REPORT 2020

DISCLOSURE REPORT 2020

1 Introduction

1.1 Legal basis and purpose of disclosure This disclosure report has been created in accordance with the requirements under Part 8 of Regulation (EU) 575/2013 (CRR), Article 431 through and including Article 455, of the European Parliament and Council dated June 26, 2013 re-garding supervisory requirements for credit institutions and investment firms as well as the amendment of (EU) Regulation No. 646/2012 (Capital Adequacy Regulation, CRR). This Regulation is applicable in Liechtenstein as of the amendment of the Banking Law and Banking Regulation Article 29c.

The disclosure report provides a comprehensive picture of the capital adequacy, liquidity, risk profile and risk manage-ment of credit institutions and investment firms.

1.2 Scope and delimitation Bank Alpinum AG (the "Bank") is an independent private bank headquartered in Vaduz in the Principality of Liechtenstein. The disclosure requirements as an integral part of the FMA supervisory requirements are therefore to be implemented.

The Bank's core business is the provision of private banking services. It provides customers with services such as payment transactions, asset management and the management of accounts and securities deposits. The Bank cooperates with partners at home and abroad. There is no need for consoli-dation of affiliated companies.

The appropriateness of a disclosure is paramount, whereby non-applicable duties, non-essential or confidential informa-tion as well as business secrets are not disclosed. The disclo-sure report is published annually on the Bank's website with a reporting date of December 31 by May 31 of the following year at the latest.

2 Corporate governance, risk management objectives and policy

2.1 Risk organization and risk strategy The collective Board of Directors of the Bank has ultimate responsibility for corporate governance, overall bank man-agement and thus risk management and monitoring. It regulates the corresponding organization and processes through regulations, in particular through the Organization and Business Regulations (OGR) and the risk policy.

The risk policy defines risk management procedures and -sys-tems that are aligned with the bank's strategy and appro-priate for the resulting risk profile. Thereby a qualitative risk appetite is derived, which in turn is limited by measurable parameters. Of key importance is ensuring that the risk pro-file is compatible at all times with possible effects on capital and liquidity, the so-called risk-bearing capacity, as well as regulatory requirements.

Regularly assessing the risk-bearing capacity and reporting these figures against appropriate limits enables the Board of Directors to manage, monitor and, if necessary, adjust the Bank's risk profile. A comprehensive internal system of controls formalises the operational implementation of the risk management procedures and systems and also serves the Board of Directors to monitor them on an ongoing basis.

The Bank's Executive Board implements the risk manage-ment procedures and systems of operations in connection with the risk policy and, at its discretion, issues specific direc-tives if further detail is required for operational risk manage-ment and monitoring. The overall operational responsibility for risk monitoring lies with the Chief Risk Officer. The Chief Risk Officer has a direct link to the Board of Directors in order to guarantee the independence of his risk monitoring activi-ties from risk management at all times.

The internal and external auditors support the Board of Directors with regular and extraordinary audits with respect to the implementation of risk management and monitoring, as well as their suitability in relation to the Bank's risk profile.

2.2 Risk appetite along risk categories The Bank's overall risk profile is divided into thematic risk categories: liquidity risks, market risks (incl. interest rate risks in the banking book, capital risks), credit risks (incl. concentra-tion risks, counter-party risks, capital risks), operational risks (incl. compliance risks, capital risks), corporate risks (business risks, strategic risks, reputational risks).

In line with and compatible with the overall risk-bearing capacity of the Bank's capital and liquidity position, a qual-itative risk appetite is set for each of these risk categories.

2.2.1 Liquidity risks The appetite for liquidity risks is low. In order to ensure li-quidity availability at short notice, the regulatory minimum requirements for the liquidity position (Liquidity Coverage Ratio, LCR) are always complied with. In the event of excess liquidity, securities are purchased or money market invest-ments are made on a small scale. As at 31 December 2020, the LCR is 214 %.



2.2.2 Market risks (incl. interest rate risks in the banking book, capital risks) The appetite for market risk is very low. The Board of Directors sets the maximum range for the duration of the equity cap-ital annually. As care is taken to ensure that the maturity structure of the assets and liabilities business is largely con-gruent, the interest rate sensitivity on the banking book is effectively negligible. No derivatives are used for interest rate risk management. Active interest rate risk management is only carried out within the framework of financial invest-ments in the banking book.

The bank maintains a trading book, but does not engage in market making. The market risks in the trading book are always so low that the regulatory capital requirement is de-termined using the De-Minimis method. A small market risk also arises in currencies due to transactions of our payment services and asset management clients. This risk is kept very marginal through active management.

To calculate the capital requirements for market risks, the bank applies the standardised approach in accordance with Art. 325 et seq. CRR (see Art. 438 Capital Requirements).

2.2.3 Credit risks (incl. concentration risks, counterparty risks, capital risks) As a result of its core activity of lending to high-net-worth clients, the Bank is exposed to material credit risk. The Bank focuses on Lombard lending as a complement to the wealth management business. The lending portfolio must always be widely diversified and the probability of default must be at least a standard risk. Mortgage business in the DACHL re-gion is generally only conducted if material customer assets are managed in the same amount. In addition to traditional lending business, the bank also issues guarantees, which are secured by blocking or pledging equivalent account balances. Country risks are only entered into in a few strategically rel-evant countries and are limited by the Board of Directors.

Credit transactions that do not fulfil the above conditions can be carried out in the sense of an exception-to-policy with the explicit approval of the Board of Directors.

As a rule, OTC derivative transactions, correspondent bank-ing relationships and payment settlements are only carried out via counterparties with a rating of BBB- or better. At the request of the Executive Board, the BoD may also approve counterparties with a credit rating lower than BBB-.

Loans are not securitised and thus no securitisation risks arise. The Bank does not participate in syndicated loans.

Counterparty default risk is considered to be the risk of loss resulting from the non-fulfilment of a contractual obligation by the counterparty or from the total default of the counter-party. New counterparties are assessed and receive a coun-terparty limit, which is approved by the Board of Directors.

The Bank uses credit risk mitigation techniques in the man-agement of counterparty risks. When considering financial collateral, the Bank currently applies the simple method. No use is made of derivative financial instruments as credit risk mitigation techniques and possible netting agreements within the meaning of Articles 219 and 259 et seq. CRR.

The Bank applies the standardised approach for capital ade-quacy for credit risks and credit valuation adjustments.

2.2.4 Operational risks (incl. compliance risks) Overall, there is a small risk appetite for operational risks. Operational risks with a high expected loss are catalogued in the internal control system (ICS), monitored and, if neces-sary, provided with corrective or further measures to reduce the risk.

The IT infrastructure and IT services are consistently out-sourced by the bank. Outsourcing is monitored, controlled and documented by means of the ICS in accordance with the EBA guidelines.

Risks from social engineering attacks, cyber fraud and cyber theft are also covered by adequate risk policies. Other op-erational risks or residual risks are insured externally (e.g. professional liability, breach of trust, computer crimes, etc.).

For the calculation of operational risk, the basic indicator approach according to Art. 315 CRR is applied. The equity capital requirement is calculated according to the three-year average of the last three adjusted gross earnings (see Art. 438 Equity Capital Requirements).

There is moderate risk appetite for compliance risks. The Bank maintains a list of countries in which it actively and passively conducts business. As asset management and payment transactions cover various countries, certain cross-border risks are intentionally entered into and effec-tively mitigated by both qualified employees and estab-lished procedures and systems.

The Bank pursues a consistent, risk-based legitimate money strategy. Detailed documentation is required and main-tained as part of the automatic exchange of information.

Countries and individual client relationships in countries that are neither actively nor passively served are only served at the request of the Executive Board to the Board of Directors (in the context of an exception-to-policy). Client relationships with politically exposed persons and thus higher risk can be entered into, but entail increased compliance measures. The Bank thus strives for a risk-based, appropriate ratio of account openings under exception-to-policy in relation to all openings.

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In order to effectively and efficiently prevent money laun-dering, the Bank takes an active approach through customer profiling, customer classification and regular risk-based re-views.

The Bank's sanctions list is in line with local and global sanctions regulations of OFAC, EU, G7, UN, USA according to World-Check and is consistently implemented (see Art. 438 Equity Capital Requirements).

2.2.5 Corporate risks (incl. business risks, strategic risks, reputational risks) The Bank is in the process of building a reputation in the market as a serious, trustworthy and reliable private bank. In this respect, it strives for long-term client relationships, promotes motivated employees, offers transparent services, promotes sustainable developments and proves itself in a dynamic environment. The organisation, the management culture and the remuneration system are based on these principles. The structure and amount of the total remuner-ation are in line with the market, performance-oriented and promote risk awareness in accordance with the risk policy.

The Board of Directors decides on transactions with special business policy or strategic risks, conflicts of interest or spe-cial effects on the reputation.

No specific risk systems are used for measuring reputational, business and strategic risks. The primary report is the quar-terly report of the Chief Financial Officer (CFO) on the asset and earnings situation and, along with it, the reporting on business risks, on strategic target achievement and on the in-tegrated risk-return perspective. The quarterly report of Legal & Compliance also provides an insight into the current repu-tation of the Bank (see Art. 438 Equity Capital Requirements).

Art. 437 CRR Equity Capital In accordance with Art. 437 CRR, the Bank discloses its equity capital and the main characteristics of the capital instru-ments in the following tables:

(in CHF 1000)

Capital instruments and their 26 000 Art. 26 par. 1,respective premium 27, 28, 29of which: ordinary shares 26 000 List of EBA according

to Art. 26 par. 3Retained earnings – 13 795 Art. 26 par. 1 lit. cOther intangible – 528 Art. 36 par. 1 lit. b, Assets 37 lit. aDeferred tax liabilities – 2 Art. 36 par. 1 lit. c, 38CET1 11 675

Art. 438 CRR Equity Capital RequirementsEquity Capital Requirements are calculated according to the following methods:

- Standard method for credit risk according to Part 3 Title II Chapter 2 CRR

- Basic indicator method for operational risks pursuant to Art. 315 CRR

- Standard method for market risks pursuant to Art. 325 ff CRR

- Standard method for CAV risks according to Art. 384 CRR

The following table provides an overview of the regulatory Equity Capital Requirements of 8%

Equity Capital disclosure as at 31.12.2020

Receivables class (in CHF 1000)

Risk-weighted Position

Equity Capital Requirement

Institutions 2 880 230Companies 3 850 308Retail Business 6 515 521Real Estate collateralised 15 187 1 215Positions in default 2 699 216Participations 314 25Other positions 727 58Market risk 1 298 104Operational risk 26 748 2 140Credit valuation adjustment 12 1Total 60 230 4 818



Art. 440 Capital bufferIn the 2020 financial year, the Bank was required to deter-mine the institution-specific countercyclical capital buffer. The amount of the institution-specific countercyclical capital buffer as at 31 December 2020 is 1%.

Art. 442 CRR Credit risk adjustmentsThe Bank assesses the need for individual value adjustments in each case on the basis of the available collateral. Individual value adjustments and provisions are made for all risks iden-tifiable on the balance sheet date in accordance with the principle of prudence. Value adjustments are offset against the corresponding assets.

The amount of the value adjustments on the balance sheet date can be found in the bank's annual report.

Art. 443 CRR Unencumbered assetsAs at 31.12.2020 all assets are unencumbered.

Art. 450 CRR Remuneration PolicyBasically, neither management nor staff are entitled to avariable remuneration. However, variable remuneration com-ponentscan be concluded within individual employmentcontracts.

Art. 451 LeverageThe bank's leverage ratio was 7.3% as at the disclosure date. The leverage ratio is calculated and assessed on a quarterly basis.

Geographical distribution of credit risk positions relevant for the calculation of the countercyclical capital buffer (in CHF 1000)

General credit risk exposures

Risk exposures in trading book

Securitisation risk exposures

Equity capital requirements

Riskexposures

value (SA*)

Riskexposures

value (IRB*)

Sumof long

and shortposition

of tradingbook

Value ofrisk expo-

sures in trading book

(internalmodels)

Riskexposure

value (SA*))

Riskexposure

value (IRB*)

Of which:general

credit riskexposures

Of which:risk exposu-

res inthe trading

book

Of which:securi-

tisation riskexposures Total

Weightingequity capital require-

ments

Ratio ofcountercy-

clical capitalbuffers

Breakdown by country

Czech Republic 0 0 0 0.50 %Hong Kong 7 1 1 0.10 %Luxemburg 38 2 2 0.25 %Norway 3 402 215 215 1.00 %* SA: standard approach; IRB: internal rating based.

Amount of the bank-specific countercyclical capital buffer:Total receivables amount 60 230Bank-specific ratio of countercyclical capital buffer 0.09 %Requirement for bank-specific countercyclical capital buffer 55


Bank Alpinum AGAustrasse 59 · P.O. Box 15289490 Vaduz · Principality of LiechtensteinTelephone + 423 239 62 11 · Fax + 423 239 62 [email protected] · www.bankalpinum.com

www.bankalpinum.com

Disclosure Report 2020

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