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·· THE RISK MANAGEMENT SYSTEM
The Bank's risk management system is based on
the following basic parameters:
·· Clear separation of market areas from market
monitoring and risk controlling at all levels of the
Bank;
·· Clearly defined levels of authority and responsi-
bilities set out in writing, adhering to the principle
of keeping market and market monitoring sepa-
rate from one another;
·· Overall responsibility of the Board of Managing
Directors for the risks assumed by the Bank; the
Board, together with the Supervisory Board,
sets out the Bank's risk profile and risk limits on
the basis of the strategic commercial orienta-
tion;
·· Monitoring of risk profile and risk exposure by
the Supervisory Board;
·· Calculation of risk volume and monitoring of the
Bank’s overall capacity to assume risk by the
Risk Controlling unit, which reports directly to
the Board of Managing Directors and is inde-
pendent of the operating divisions;
·· Technical supported processes to measure,
monitor and manage the different types of risk,
with these being regularly reviewed and adap-
ted as and when required;
·· Comprehensive – in some cases daily – risk
reporting to provide an up-to-date overview of
the Bank’s current risk situation and enable
timely action to be taken where necessary;
·· Consistent implementation of the minimum
requirements stipulated by the bank supervisory
authorities with regard to operations.
In order to be able to counter unexpected risks,
one of the key objectives of the risk management
system lies in the development of instruments
that can be used to recognise and assess risks in
good time. This is a prerequisite with regard to
preventing any significant impairment of the
Bank’s ability to act. The following is a description
of the risks typical to our area of business and of
the processes used to measure and assess these
risks.
The following types of risk are relevant to the
Bank:
·· Counterparty and loan default risk
·· Market price risk
·· Liquidity risk
·· Operational risk
·· COUNTERPARTY RISK AND LOAN DEFAULT
RISK
Counterparty risks are the risks of losses or pay-
ment problems caused through the default or
deteriorating solvency of our contractual partner.
In the first instance, this includes classic credit
default risk, which describes the potential loss in
value of claims due to a deterioration in the sol-
vency or default of the customer (credit default
risk in the narrow sense), as well as settlement
risk and sovereign risk.
The credit default risk strategy as drawn up by the
Board of Managing Directors provides guidelines
on entering into and managing counterparty risk.
This strategy is subject to ongoing review and,