Annual report 2006 - Dexia.com

RISK MANAGEMENT
RISK MANAGEMENT
MAJOR PROJECTS IN 2006
The main achievement of the year 2006 was the continuation
of the effort allowing to implement the required methodologies
and procedure in relation to the advanced approach of
Basel II, leading the Group at the end of 2006 to present the
regulators with a complete application file for the advanced
approach. After validation by the regulators, this should allow
Dexia to implement the full internal rating-based approach
(IRBA) approach from January 1, 2008.
CREDIT RISKS
ORGANIZATION
Risk Management Group (RMG) oversees Dexia’s risk policy
under the guidance of Dexia’s Management Board or
specialized risk committees. It sets Group guidelines on
limits and delegations, sets and manages the risk surveillance
function and decision processes and implements
Group-wide risk assessment methods for each of Dexia’s
activities and operating entities (Dexia Crédit Local, Dexia
Bank Belgium, Dexia Banque Internationale à Luxembourg,
DenizBank).
The organization of all risk committees has been completely
reviewed in 2006, in particular to reflect the new Group governance
and to adjust to Basel II requirements. Several specialized
committees dealing with risk management exist at Group
level. The two main ones are:
• the Risk Policy Committee which defines the Group’s risk
profile and risk guidelines;
• the Management Credit Committee which rules on questions
that are beyond the scope of the delegations granted to
business lines or entities.
In general, all limits are set directly by the Management
Board, but delegations are also given to specific committees
to oversee the risks of specialized portfolios (i.e. Credit Spread
Portfolio...).
DEXIA’S CONSOLIDATED EXPOSURE
AS OF DECEMBER 31, 2006
The credit exposure evaluation rules are in point 4.2. of the
note 1 “Accounting principles and rules of the consolidated
financial statements“ on page 134.
Exposure by category of counterpart
The Group’s total exposure increased to EUR 794.3 billion as
of December 31, 2006, against EUR 742 billion one year earlier
(increase of 7.0%).
The mix of counterpart in Dexia’s portfolio is very stable. Half
of the exposure is on the local public sector (EUR 396.4 billion,
up 5.6% compared to year-end 2005).
G
F
E
D
C
H
I
A
BREAKDOWN OF DEXIA
EXPOSURE BY CATEGORY
OF COUNTERPART
(AS OF DECEMBER 31, 2006)
CONSOLIDATED EXPOSURE:
EUR 794.3 BILLION
B
MANAGEMENT REPORT
COMPTES CONSOLIDÉS
COMPTES SOCIAUX
A CENTRAL GOVERNMENTS 7.1%
B LOCAL PUBLIC SECTOR 49.9%
C CORPORATE 4.6%
D MONOLINE 2.2%
E ABS/MBS 16.2%
F PROJECT FINANCE 2.5%
G INDIVIDUALS, PROFESSIONALS,
SELF-EMPLOYED, SMEs 4.6%
H FINANCIAL INSTITUTIONS 12.4%
I OTHER 0.5%
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