INVESTKREDIT BANK AG - Xetra

(58) FAIR VALUE BALANCE SHEET.
Fair value
Value of Banking Available Trading Micro
in EUR m item book for sale book hedge Total
Cash and balances with central banks 15 15 0 0 0 15
Loans and advances to banks 887 859 34 0 0 893
Loans and advances to customers 6,086 5,686 320 0 124 6,129
Risk provision -69 -69 0 0 0 -69
Trading assets 94 0 0 94 0 94
Financial investments 3,831 1,735 1,980 0 122 3,837
Tangible fixed assets 289 289 0 0 0 289
Other assets 61 61 0 0 0 61
Aggregate 11,194 8,576 2,334 94 245 11,249
Notes
THE BANK FOR CORPORATES
Amounts owed to banks 2,810 1,946 0 0 870 2,817
Amounts owed to customers 687 630 0 0 53 683
Debts evidenced by certificates 6,453 5,147 0 0 1,361 6,508
Provisions 45 45 0 0 0 45
Other liabilities 517 351 0 78 56 485
Subordinated capital 291 202 0 0 95 297
Minority interests 133 133 0 0 0 133
Equity 258 281 0 0 0 281
Aggregate 11,194 8,735 0 78 2,435 11,249
(59) RISK MANAGEMENT. A good management of risks that might occur in all fields of business reinforces a bank’s competitive
position. Investkredit’s basic principles of risk management are documented in various handbooks and internal guidelines. As part of
the banking risks, the credit risk constitutes the most essential risk the Investkredit Group is exposed to. Other risks that may be
encountered are market risks, liquidity risks and operational risks. Basically, a value at risk is fixed for all fields by an organisational
unit that does not depend on the closing of deals. Furthermore, stress tests simulating extreme market fluctuations are carried out.
In addition, the determination of a bank’s economic equity is essential in assessing the risks it is able to bear. New agreements
reached by the Basel Committee are likely to entail changes concerning the capital adequacy requirements. Investkredit aims at
quickly applying new methods and has already carried out parallel calculations to this end.
(60) MARKET RISKS ARISING OUT OF TRADING ACTIVITIES. Market risks arising out of trading activities are calculated continuously
– broken down by interest rate risk, share price risk and currency risk – and are assessed daily after close of business. With a
confidence level of 99 % and a holding period of 1 day, a variance/covariance approach is applied for the interest rate risk and the
currency risk; in the case of the share price risk, volatility shown by market data or figures calculated by the Bank is taken as the basis.
The strict rules of an internal risk management handbook are applied to the conduct of trading activities. These rules also contain
limits for value at risk. The breakdown of risk is as follows:
Average
Average
in EUR m 2001 31.12.2001 2000 31.12.2000
Debt issues 1.2 1.1 0.6 0.4
Share price risks 0.2 0.3 0.4 0.2
Currency 0.1 0.0 0.1 0.1
Aggregate 1.5 1.4 1.1 0.7
(61) INTEREST RATE AND LIQUIDITY RISKS IN THE BANKING BOOK. With changing market interest rates, the bank may encounter
interest rate risks, if it holds a surplus of fixed-rate positions. The interest rate risk is, however, assessed continuously in the light of
the interest risk item. For this purpose, fixed-rate assets and liabilities, as well as derivative instruments are entered into maturity
tables according to their respective interest-lockup period. As a consequence, a gap analysis using different scenarios is carried out
and the value at risk is calculated by means of the RiskMetrics method (confidence level of 99%, holding period of 1 month).
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