COMMERZBANK AKTIENGESELLSCHAFT

Group Risk Report
238
182 Commerzbank Annual Report 2011
Market risk
Market risk is the risk of financial losses due to changes in market prices (interest rates,
commodities, credit spreads, exchange rates and equity prices) or in parameters that affect
prices such as volatilities and correlations. The losses may impact profit or loss directly, e.g.
in the case of trading book positions, or may be reflected in the revaluation reserve or in
hidden liabilities/reserves in the case of banking book positions. We also monitor market
liquidity risk, which covers cases where it is not possible for the Bank to liquidate or hedge
risky positions in a timely manner and to the desired extent on acceptable terms as a result
of insufficient liquidity in the market.
Strategy and organisation
Based on our experience from the financial market crises, comprehensive guidelines relating
to the management and monitoring of market price risks were implemented with the market
risk strategy. The market risk strategy is derived from the overall risk strategy and the
business strategies of the individual segments and sets the market risk management
objectives with regard to Commerzbank’s key business activities. The core tasks of market
risk management are the identification of all key market risks and drivers of market risk for
the Group, the independent measurement and evaluation of these risks, and the risk/returnoriented
management for the Commerzbank Group based on these results and evaluations.
The Board of Managing Directors of Commerzbank is responsible for ensuring the
effective management of market price risk throughout the Commerzbank Group. Specific
levels of authority and responsibility in relation to market risk management were assigned to
the respective market risk committees. Within the Bank various market risk committees are
established, in which segment representatives discuss current risk positioning issues and
management measures with the Risk Function and with Finance. The Segment Market Risk
Committee meets weekly and focuses on Corporates & Markets, Public Finance, PRU and
Treasury. The Group Market Risk Committee, which meets monthly, in addition deals with
the market risk position in Commerzbank Group and the remaining business divisions.
The risk management process (risk identification, risk measurement, management,
limitation and reporting) is the responsibility of Market Risk Management in functional
terms. The centralised market risk management function is supplemented by decentralised
market risk management units at segment level, in both regional units and subsidiaries.
As the central and local risk management is closely interlocked with the business units, the
risk management process already starts in the trading units. The trading units are in
particular responsible for the active management of the market risk position (e.g. pricing,
increasing or decreasing exposure and hedging).