Mizuho Bank Europe Annual Report 2018

24 MIZUHO BANK EUROPE N.V. Recovery Plan MBE established a Recovery Plan (RCP) to comply with the Banking Recovery and Resolution Directive (BRRD) applicable to all EU Member States in 2016 and delivered an updated RCP to the DNB as part of the Supervisory Review and Evaluation Process (SREP) in 2018. The RCP outlines actions to maintain the financial institution as a going concern by setting out the framework and steps the institution itself would initiate to recover from a severe stress situation that caused capital and liquidity ratios to fall below the crisis thresholds. We have established early warning indicators, recovery triggers, and recovery options as well as plans for crisis management organization, governance, procedures and communication plans to ensure complete and credible plans are in place. The RCP is an integral part of our RMF. Compliance with CRD IV and Basel III MBE is meeting the requirements defined in CRD IV and Basel III. We are monitoring our capital buffers, leverage ratio, large exposures, Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) on a structural and ongoing basis. Though challenging due to the complexity and sheer amount of reports and metrics to assess, the regulatory reporting on these key metrics went without any particular issues or major concerns. We introduced a modified Internal Liquidity Adequacy Assessment Process (ILAAP) stress testing framework in September 2018. StressTesting and Principal Risks In addition to the above, as part of our integrated risk management framework, MBE employs stress testing and scenario analyses. This provides a forward-looking assessment of risks, as well as identifies key pressure points and helps MBE monitor principal risks we face to prepare for appropriate mitigating actions and contingency plans. It is important to note that MBE is not subject to regulatory stress testing. Principal risks are those that may impact MBE’s financial results, reputation and business model. In the Management Board’s opinion, MBE’s key risks relate to the following. Brexit The likelihood of a so-called ‘hard Brexit’ increased significantly throughout 2018 and MBE was in continuous discussion with key stakeholders to understand both the risks and opportunities of Brexit as adequately as possible. Since the last quarter of 2018 Mizuho Bank Ltd. and MBE started executing its contingency plan for a hard Brexit, together with all relevant group entities and departments, to ensure that all of Mizuho’s clients will remain serviced in the best possible way post-Brexit. Nevertheless, Brexit continued to present risks to MBE broadly from two perspectives. Firstly, the outcome of the trade negotiation could potentially impact the repayment ability of our customers. A negative trade agreement between the UK and the EU could mean different levels of trade barriers for our customers residing in both the EU and the UK. While MBE has limited exposures to UK businesses, customers in the EU with strong business ties with UK customers or businesses would experience negative impacts from such outcomes. In 2018 we continued to see movements by UK businesses to establish a business within the EU to minimize negative effects and this presents a positive prospect for MBE. Secondly, the departure of the UK from the EU could have negative effects on MBE because we rely on certain functions from Mizuho Bank London branch. Although our risk analysis suggest that there would not be an immediate short term impact, we are less sure about the longer term impact as a result of a changing political and regulatory landscape. We will continue to monitor the progress of the Brexit negotiations and their potential impact to the