Annual Report - VÚB banka

35. Financial risk management
Introduction and overview
The Bank has exposure to the following risks from
its use of fi nancial instruments:
(a) credit risk
(b) market risk
(c) liquidity risk
(d) operational risk
This note presents information about the Bank’s
exposure to each of the above risks, the Bank’s objectives,
policies and processes for measuring and
managing risk.
Risk management framework
The Management Board is the statutory body governing
the executive management of the Bank, and
has absolute authority over all matters concerning
risk. The Management Board has primary responsibility
for the creation and dissolution of risk related
governance bodies. The primary governance bodies
overseeing risk issues are:
- Asset/Liability Committee (‘ALCO’)
- Credit Risk Committee
- Corporate Credit Committee (‘CCC’)
- Retail Credit Committee (‘RCC’)
- Operational Risk Committee.
The Management Board delegates its risk authority
to these governance bodies in the form of statutes,
which identify members of the governance bodies,
competencies and responsibilities of the members.
The competency of each governance body is established
in the Risk Management Credit Principles
and Policies Charter.
The Bank’s risk management policies are established
to identify and analyze the risks faced by
the Bank, to set appropriate risk limits and controls
and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed
regularly to refl ect changes in market conditions,
products and services offered. The Bank, through
its training and management standards and procedures,
aims to develop a disciplined and constructive
control environment, in which all employees
understand their roles and obligations. The Bank’s
Internal Audit department is responsible for monitoring
compliance with the Bank’s risk management
policies and procedures, and for reviewing
the adequacy of the risk management framework
in relation to the risks faced by the Bank. Internal
Audit undertakes both regular and ad-hoc reviews
of risk management controls and procedures.
(a) Credit risk
Credit risk is the risk of fi nancial loss to the Bank if
a customer or counterparty to a fi nancial instrument
fails to meet its contractual obligations, and arises
principally from the Bank’s loans and advances to
customers and banks as well as investment securities.
For risk management reporting purposes,
the Bank considers and consolidates all elements
of credit risk exposure (such as individual obligor
default risk, country and sector risk). For risk management
purposes, the credit risk arising on trading
securities is managed independently, but reported
as a component of market risk exposure.
The basic document for credit risk management is
the Risk Management Credit Principles and Policies
Charter which contains: Principles for managing
credit risk, Authorized approval authority, Collateral
policy, Provisioning Policy, Rules for new product
proposals, Credit Concentration Limits, Governance
of rating and scoring systems, Write Off
Policy and Credit Policies for each segment (Retail
banking, Corporate banking and Central treasury).
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VUB, a bank of Intesa Sanpaolo group