Annual report 2006 - Dexia.com

RISK MANAGEMENT
IRBA approach for regulatory capital calculation from January
1, 2008. As part of our application file, an impact study has
been carried out, estimating the capital requirement with the
new methods at different levels of consolidation. This study has
been carried out using our final IT method and infrastructure,
proving that Dexia’s Basel II organization is up and running for
future regulatory calculations. The result of this study confirmed
the magnitude of regulatory capital saving estimated in previous
quantitative impact studies.
2007 will see intense relations with the different regulatory
authorities as our application is examined. Two official exercises
will be performed for the purpose, consisting of calculating
capital requirements under Basel I and Basel II regulations
(double runs). Additional projects linked to Basel II will also
be commissioned, such as the new integrated tool for limit
monitoring or the common reporting platform.
MARKET RISKS
Market risk comprises the Group’s exposure to adverse movements
in market prices (general and specific interest rates,
exchange rates, share prices, spreads) stemming from its
Treasury and Financial Market activities. As a general rule, the
market risks generated by the other businesses are hedged.
The market exposure evaluation rules are explained in point 4.1.
of note 1 “Accounting principles and rules of the consolidated
financial statements” on page 133.
Dexia’s exposure to market risk arises mainly from European
interest rates. Its market risk exposure generated by equity,
foreign exchange and spread (trading only) positions remains
much lower.
Dexia Group has adopted the Value at Risk (VaR) measurement
methodology as one of the leading risk indicators.
The VaR calculated by Dexia is a measure of the potential
loss that can be experienced with a 99% confidence level
and for a holding period of 10 days. Dexia has developed
and employs multiple VaR-approaches which are based on
their ability to accurately measure the market risk inherent
in the different portfolios. General interest rate & forex risks
are measured through a parametric VaR-approach. Specific
interest rate risk in trading books and equity risk are
moreover measured by means of an historical VaR approach.
Nonlinear and particular risks are measured through specific
and historical VaR methodologies, with a view to a better
apprehension and measurement of the sensitivity of those
positions to market volatilities.
As a complement to VaR risk measures, market risk exposure
is captured by nominal volume limits, limits on basis point
interest rate sensitivity and spread sensitivity and limits on
option sensitivities (delta, gamma, vega, thêta, rhô).
Dexia Group uses its internal VaR model for the capital requirement
calculus on general interest rate risk and foreign exchange
risk exposure within the Dexia Bank Belgium and Dexia Banque
Internationale à Luxembourg trading scope.
MANAGEMENT REPORT
COMPTES CONSOLIDÉS
C
D
E
A
B
C
D
E A
B
C
B
D
E
A
COMPTES SOCIAUX
OVERALL (PUBLIC FINANCE +
ASSET-BACKED SECURITIES) (FSA)
TOTAL NET PAR OUTSTANDING:
USD 376.5 BILLION
A AAA 23%
B AA 32%
C A 32%
D BBB 12%
E NON-INVESTMENT GRADE < 1%
PUBLIC FINANCE (FSA)
TOTAL NET PAR OUTSTANDING:
USD 251.4 BILLION
A AAA 2%
B AA 39%
C A 46%
D BBB 12%
E NON-INVESTMENT GRADE < 1%
ASSET-BACKED SECURITIES (FSA)
TOTAL NET PAR OUTSTANDING:
USD 125.1 BILLION
A AAA 66%
B AA 18%
C A 3%
D BBB 13%
E NON-INVESTMENT GRADE < 1%
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