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Preliminary consultations
with Austrian Financial
Market Authority and
Austrian central bank
(42b) Liquidity risk
A strong decline in the EUR yield curve would have the strongest impact on the bank’s net
interest income. A downward interest rate shock of 2 percentage points would thus
depress net interest income in the first year by about € 50 m if all other factors (volume,
margins, maturities) remain constant.
The future New Basel Capital Accord (“Basel II”) will be effective from 2007. For the first
time, the new rules establish a relation between “interest rate risk in the banking book”
and the bank’s capital by comparing a change in the market value of the banking book
after a 2 % interest rate shock with the bank’s net capital resources. In the event that such
an interest rate shock absorbs more than 20 % of a bank’s net capital resources, the bank
supervisory authority could require the bank to take measures to reduce risk.
The complete and automated integration of the Group’s risk position means that
Bank Austria Creditanstalt is already well prepared to meet this requirement with its
“NoRISK” risk measurement system. A 2 % interest rate shock would absorb about 3.9 %
of the Group’s net capital resources; this calculation also includes the current investment
of equity capital as an open risk position. This means that the figure for Bank Austria
Creditanstalt is far below the outlier level of 20 %.
Preliminary consultations with the Austrian Financial Market Authority (FMA) and the Austrian
central bank (Oesterreichische Nationalbank – OeNB) took place in February and
March 2005 with a view to recognition of our credit risk tools as compliant with Basel II
requirements for the advanced internal ratings-based approach Bank Austria Creditanstalt
seeks to use. The bank presented its models and methods for rating/scoring, credit risk
mitigation and estimation of parameters. In this context the bank also entered into an
intensive process of discussion and sharing of experience with the competent authorities.
Feedback from the FMA and from OeNB was highly encouraging, confirming us in our
determination to pursue the chosen course.
In line with Group-wide standards, the Bank Austria Creditanstalt Group deals with
liquidity risk as a central risk in banking business by introducing and monitoring short-term
and medium-term liquidity limits. In this context the liquidity situation for the next few
days and also for longer periods is analysed against a standard scenario and against scenarios
of a general and a bank-specific liquidity crisis. The degree of liquidity of customer
positions and proprietary positions is analysed on an ongoing basis. Procedures, responsibilities
and reporting lines in this area have been laid down in the liquidity policy, which is
also applicable at Bank Austria Creditanstalt’s CEE units and includes a contingency plan
in the event of a liquidity crisis.
Short-term and long-term liquidity limits of the Group were observed at all times in 2005.
The degree to which accumulated liquidity outflows are covered by accumulated inflows
within the following month and year is determined on an ongoing basis. It is used as a
key figure in managing the Group’s liquidity and funding.
Risk report 161