Annual Report 2012 - Bank Sarasin

Credit Committee (CCC) are chaired by the
Chief Financial Officer (CFO), the Treasury
Committee and the Investment Committee
by the Global Treasurer.
The Risk Office is separate from trading
activities and performs in-depth analysis
of the Group’s market, credit and
operational risks, evaluates the potential
of different opportunities and risks and,
where appropriate, takes steps to adjust
the Group’s risk profile. It is responsible
for ensuring compliance with the risk
management process, which consists of
risk identification, risk measurement, risk
reporting and risk control. The Risk Office
makes proposals to the Board of Directors
regarding the risk models to be used. It
also provides individual reporting to the
Audit Committee, the Risk Committee, the
CEO, the appropriate committees and
those charged with managing risk.
The Legal & Compliance department
monitors compliance with legal and
regulatory requirements, and also ensures
that generally accepted market standards
and codes of conduct are adhered to.
Risk categories
The Bank is exposed to the following risks
through its business activities and
services:
> Market risks
> Credit risks including concentration of
risks
> Liquidity risks
> Operational risks and reputation risks
Market risk
The market risk refers to the risk of a loss
to the Bank due to changes in the market
variables (share prices, interest rates and
currency exchange rates).
Depending on their investment strategy,
the management of positions carrying a
market risk is delegated either to the
division “Trading & Family Offices” or to
the Treasury Committee. Not just the
divisions, but also the committees
manage the associated market risks with
instruments tailored to their particular
requirements. These include an adequate
limits system and permanent monitoring
of risk positions.
Since the takeover by J. Safra Sarasin
Holding Ltd, the management of
admissible market risk positions is
performed primarily through the
application of newly defined nominal
limits, and in particular what are known as
“gross notional limits”. In addition, the
Board of Directors has defined Value at
Risk (VaR) and net nominal limits, as well
as stop loss trigger levels for each trading
desk. Furthermore, additional sensitivity
limits (including delta, gamma and vega
limits) were defined for risks associated
with options positions that exist mainly in
the area of structured products. Scenario
limits have also been set in order to limit
the non-linear risks which often only arise
in stress situations.
While the nominal limits chiefly limit
portfolio sizes overall, the VaR measure
takes into account the specific risk factors
of the portfolio in question, by calculating
the potential future loss during the
defined holding period that is not
exceeded under normal market conditions
with a specific probability. This allows a
comparison between the individual trading
activities. Using a historical simulation,
the VaR is worked out with a holding
period of one day and a confidence level
of 97.5%. The quality of the VaR model is
checked periodically by means of backtesting
and extended where necessary.
The Group’s VaR in the trading area
amounted to CHF 0.128 million as at 31
December 2012 (1 day retention period,
97,5% confidence level). The total VaR of
the trading book averaged CHF 0.255
million and over the course of the year
fluctuated between CHF 0.080 million and
CHF 0.615 million. In the updated limits
concept revised by J. Safra Sarasin
Holding Ltd, the VaR limit is no longer
defined at the overall level, but allocated
directly to the individual trading desks.
Bank Sarasin & Co. Ltd, Annual Report 2012 | 65