annual report - Hypo Real Estate Holding AG

The HRE Group risk management committee is responsible for:
The review of ALCO reports detailing compliance with liquidity limits
The review of the HRE Group’s liquidity policy
The review of the HRE Group’s funding position
Risikoberichtbericht
Liquidity risk management policies
The liquidity management process of the Group, that has been developed by the above risk management
framework includes the following liquidity policies:
DEPFA will, as a minimum, comply with limits set down by the Financial Regulator.
The notional amount of liquidity support facilities must not exceed EUR €20 billion.
The Bank must maintain sufficient liquid assets, to enable it to access funding sufficient to continue to fund the
balance sheet activities for a minimum of 20 days, should access to unsecured money markets or capital
markets be disrupted.
DEPFA has put in place and will continue to update contingency plans that address the strategy for handling
liquidity crises and include procedures for emergency situations.
Liquidity Risk Management through the DEPFA business model
Aspects of the business model of DEPFA, as they impact liquidity risk, are summarised through review of the
following characteristics of the Group’s balance sheet:
Credit quality of the Bank’s assets
Diversity of the sources of funds
Increased demand for collateral
Credit quality of the bank’s assets
DEPFA’s balance sheet is predominantly composed of highly rated assets of high credit quality. Some 34% of the
assets of DEPFA as at 31 December 2007 are AAA rated using internal ratings models whilst a further 40% are
AA rated. This reflects the concentration on public sector lending to the top tier of sovereigns and sub-sovereigns
(as defined in the credit risk section above). In general, the higher the rating of the asset base, the better the
access the Bank has to the secured short term funding markets, such as bilateral and tri-party repo markets and
the long term covered security market.
Diversity of the sources of funds
DEPFA has developed an extremely diversified source of funding, diversified both across maturities and currencies.
This reduces the reliance of the Group on any one source of funding and allows it flexibility in the event of an un -
anticipated market event in any one funding segment. DEPFA is a large issuer of Pfandbriefe and Asset Covered
Securities, which provide significant medium to long term financing to the Bank. The Group has also issued a
number of unsecured medium term notes (“MTNs”).
In the short term, the Bank is also active in the issuance of unsecured bearer bonds, promissory notes and
commercial paper (“CP”), repurchase agreements (“repos”) as well as participating in money market transactions.
Such products are traded across a variety of currencies. The Bank also receives deposits from other banks and
directly from institutional investors worldwide. Investor categories include central banks, state agencies,
supranationals, fund managers, insurance companies and corporates.
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