Notes to and forming part of the Unconsolidated Financial Statements

For the year ended December 31, 2018

2018 2017
46. CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS ------- (Rupees in '000) -------

Minimum Capital Requirement (MCR):

Paid-up capital (net of losses) 12,241,798 12,241,798

Capital Adequacy Ratio (CAR):

Eligible Common Equity Tier 1 (CET 1) Capital 109,026,135 110,649,879
Eligible Additional Tier 1 (ADT 1) Capital 8,875,000 -
Total Eligible Tier 1 Capital 117,901,135 110,649,879
Eligible Tier 2 Capital 38,449,649 40,892,332
Total Eligible Capital (Tier 1 + Tier 2) 156,350,784 151,542,211

Risk Weighted Assets (RWAs):

Credit Risk 729,807,059 666,405,810
Market Risk 9,991,738 174,331,695
Operational Risk 141,621,143 140,304,148
Total 881,419,940 981,041,653

Common Equity Tier 1 Capital Adequacy Ratio 12.37% 11.28%

Tier 1 Capital Adequacy Ratio 13.38% 11.28%
Total Capital Adequacy Ratio 17.74% 15.45%

The SBP through its BSD Circular No. 07 dated April 15, 2009 has prescribed the minimum paid-up capital (net of
accumulated losses) for Banks to be raised to Rs.10,000 million by the year ending December 31, 2015. The paid-up
capital of the Bank for the year ended December 31, 2018 stood at Rs.12,241.798 million (2017: Rs.12,241.798 million)
and is in compliance with SBP requirements. Banks are also required to maintain a minimum Capital Adequacy Ratio
(CAR) of 10.0% plus capital conservation buffer of 1.90% of the risk weighted exposures of the Bank. Further, under Basel
III instructions, Banks are also required to maintain a Common Equity Tier 1 (CET 1) ratio and Tier 1 ratio of 6.0% and
7.5%, respectively, as at December 31, 2018. As at December 31, 2018 the Bank is fully compliant with prescribed ratios
as the Bank’s CAR is 17.74% whereas CET 1 and Tier 1 ratios stood at 12.37% and 13.38% respectively. The Bank and
its individually regulated operations have complied with all capital requirements throughout the year.

Furthermore, under the SBP’s Framework for Domestic Systematically Important Banks (D-SIBs) introduced vide BPRD
Circular No. 04 of 2018 dated April 13, 2018, UBL has been designated as a D-SIB. Under this framework, the Bank is
required to meet the Higher Loss Absorbency capital charge of 1.5%, in the form of Additional CET 1 capital, on a
standalone as well as consolidated level. The additional capital requirement shall be effective from the end of March 2019.

Under the current capital adequacy regulations, credit risk and market risk exposures are measured using the Standardized
Approach and operational risk is measured using the Basic Indicator Approach. Credit risk mitigants are also applied
against the Bank’s exposures based on eligible collateral under comprehensive approach.

2018 2017
------- (Rupees in '000) -------
Leverage Ratio (LR):
Eligible Tier-1 Capital 117,901,135 110,649,879
Total Exposures 2,423,130,058 2,880,164,756
Leverage Ratio 4.87% 3.84%

Liquidity Coverage Ratio (LCR):

Total High Quality Liquid Assets 404,144,218 414,579,250
Total Net Cash Outflow 212,338,866 255,636,947
Liquidity Coverage Ratio 190.33% 162.18%

Net Stable Funding Ratio (NSFR):

Total Available Stable Funding 1,489,318,075 1,128,634,708
Total Required Stable Funding 1,181,920,887 1,086,955,065
Net Stable Funding Ratio 126.01% 103.83%

46.1 The full disclosures on the CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS as per SBP
instructions issued from time to time are placed on the website. The link to the full disclosure is available at
http://www.ubldirect.com/Corporate/InvestorRelations/CapitalAdequacyStatements.aspx

Annual Report 2018 131