Annual Report - VÚB banka

37. Financial risk management
Introduction and overview
The Group 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 Group’s
exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring
and managing risk.
Risk management framework
The Board of Directors is the statutory body governing
the executive management of the Bank, and
has absolute authority over all matters concerning
risk. The Board of Directors 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 Board of Directors 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 VUB Group’s risk management policies are established
to identify and analyze the risks faced by
the Group, 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 Group,
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
Group’s Internal Audit Department is responsible
for monitoring compliance with the Group’s risk
management policies and procedures, and for reviewing
the adequacy of the risk management framework
in relation to the risks faced by the VUB
Group. 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 Group if
a customer or counterparty to a fi nancial instrument
fails to meet its contractual obligations, and arises
principally from the Group’s loans and advances to
customers and banks as well as investment securities.
For risk management reporting purposes, the
Group 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