Notes to Consolidated Financial Statements continued Thousands of Georgian Lari 31. Capital Adequacy The Group maintains an actively managed capital base to cover risks inherent to the business. The adequacy of the Group’s capital is monitored using, among other measures, the ratios established by the NBG in supervising the Bank. During the year ended 31 December 2018, the Bank and the Group complied in full with all its externally imposed capital requirements. The primary objectives of the Group’s capital management are to ensure that the Bank complies with externally imposed capital requirements and that the Group maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives, policies and processes from the previous years. NBG (Basel II/III) capital adequacy ratio Effective 30 June 2014, the NBG requires banks to maintain a minimum total capital adequacy ratio of 10.5% of risk-weighted assets, computed based on the Bank’s standalone special purpose financial statements prepared in accordance with NBG regulations and pronouncements, based on Basel II/III requirements. As at 31 December 2017 the Bank’s capital adequacy ratio on this basis was as follows: 2017 2016 Tier 1 capital 1,141,845 892,613 Tier 2 capital 501,689 519,726 Total capital 1,643,534 1,412,339 Risk-weighted assets 11,115,315 9,790,282 Total capital ratio 14.8% 14.4% Tier 1 capital comprises share capital, additional paid-in capital and retained earnings, less investments in subsidiaries, intangible assets and goodwill. Tier 2 capital includes subordinated long-term debt and general loss provisions. Certain adjustments are made to IFRS-based results and reserves, as prescribed by the NBG. NBG (Basel III) capital adequacy ratio In December 2017, the NBG adopted amendments to the regulations relating to capital adequacy requirements, including amendments to the regulation on capital adequacy requirements for commercial banks, and introduced new requirements on the determination of the countercyclical buffer rate, on the identification of systematically important banks, on determining systemic buffer requirements and on additional capital buffer requirements for commercial banks within Pillar 2. The NBG requires the Bank to maintain a minimum total capital adequacy ratio of risk-weighted assets, computed based on the Bank’s standalone special purpose financial statements prepared in accordance with NBG regulations and pronouncements, based on Basel III requirements. As at 31 December 2018 and 31 December 2017, the Bank’s capital adequacy ratio on this basis was as follows: 2018 2017 Tier 1 capital 1,379,953 1,141,845 Tier 2 capital 502,355 501,689 Total capital 1,882,308 1,643,534 Risk-weighted assets 11,338,660 9,192,078 Total capital ratio 16.6% 17.9% Minimum Requirement 15.9% 12.4% 282 Annual Report 2018Bank of Georgia Group PLC