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Market risk limit utilisation in CEE remained moderate in 2005. On average, the CEE
subsidiaries utilised their Value-at-Risk limits to the extent of 22 %, which corresponded
to about one-fifth of the Group’s market risk. The budgeted figure for income from
treasury activities in CEE was exceeded by about 18 % in 2005.
In addition, short-term and medium-term liquidity management is performed centrally
for subsidiaries through position limits. On the whole, the restrictions placed on liquidity
transformation at subsidiaries were observed in 2005. Liquidity management of subsidiaries
and of the Group is supported by “ALVIS”, a web application introduced in 2005.
Steady business expansion and the acquisition of additional banks in CEE require the
permanent adjustment of processes, systems and methods. In 2005, the integration of
Eksimbanka (Serbia) was completed and essential aspects of the integration of market
risk positions of Hebros Bank (Bulgaria) and Banca Tiriac (Romania) were ensured. The
integration of Nova banjalucka banka (Bosnia and Herzegovina), a bank acquired at the
end of 2005, has started.
The Bank Austria Creditanstalt Group has gained strong integration expertise through
numerous integration projects carried out over the past years. Integrated market risk
systems enable BA-CA to integrate additional units within the BA-CA Group’s risk
management framework in the future.
Interest rate risk and liquidity risk from customer transactions is attributed to Bank Austria
Creditanstalt’s treasury operations through a matched funds transfer pricing system
applied throughout the Group. This makes it possible to attribute credit, market and
liquidity risk and contribution margins to the bank’s business divisions in line with the
principle of causation. ALCO ensures that the bank’s overall maturity structure is
optimised, with the results from maturity transformation being reflected in the INM
division. Factors taken into account in this context include the costs of compensation for
assuming interest rate risk, liquidity costs and country risk costs associated with foreign
currency financing.
Products for which the material interest-rate and capital maturity is not defined, such as
variable-rate sight and savings deposits, are modelled in respect of investment period and
interest rate sensitivity by means of analyses of historical time series, and taken into
account in the bank’s overall risk position. Interest rate sensitivities are determined and
taken into account in hedging activities, which results in a positive contribution to profits
from customer business.
To assess its balance sheet structure, the bank uses the Value-at-Risk approach, complemented
by a scenario analysis covering subsequent quarters and years. In addition to the
banking book in Austria, such scenario calculations are performed for the larger subsidiaries
in Poland, the Czech Republic, Slovakia and Hungary. The bank thus also follows
the Basel II recommendation concerning the simulation of future net interest income
under different interest rate scenarios (“earnings perspective”).
In the earnings perspective analysis, simulations of the future development of net interest
income and of the market value of the banking book are based on assumptions regarding
volume and margin developments under different interest rate scenarios. Parallel interest
rate shocks as well as inversions and low-interest-rate scenarios are analysed to identify
their possible impact on the bank’s net interest income and market value. Such analyses
focus on modelling customer behaviour in respect of products for which the material interest-rate
and capital maturity is unclear. The existing hedge of customer business against
interest rate risk significantly reduces the volatility of the bank’s net interest income.
160 Risk report
Management of balance sheet
structure