Annual Report 2010 - ProCredit Bank

22
Annual Report 2010
Risk Management
In 2010, banking operations were still very
strongly influenced by the financial crisis. At the
same time, however, this situation has created
opportunities for a bank that has consistently
taken a rigorous approach to risk management.
We believe that this has been one of the key factors
behind ProCredit Bank’s success in retaining
the trust of our customers.
While ultimate responsibility for risk management
lies with the General Manager and the
Board of Administration, it is the Risk Division
which develops and implements mechanisms to
identify, assess, and mitigate the bank’s exposure
to risk. The two departments which make up
the Risk Division are the Risk Management Department,
which includes the Information Security
Unit, and the Risk Control Department. Credit
risk at the individual exposures level is managed
separately by the Credit Risk Division, while the
risk of money laundering and related illegal activities
is addressed by the Compliance Department.
These departments report to the various
committees which are responsible for decisionmaking
in connection with risk. The Risk Management
Committee works with its subcommittees
to manage and control risk: the Credit Risk
Management Subcommittee closely monitors
loan portfolio quality; the Assets and Liabilities
Subcommittee manages liquidity, market and
counterparty risks; and the Operational Risk
Management Subcommittee manages operational
and reputational risk. AML is the responsibility
of the AML&CFT Subcommittee.
The risk management policies in effect at
ProCredit Bank Romania are based on the principles
and standards applicable to all ProCredit institutions,
which in turn are based on the German
Federal Financial Supervisory Authority’s policy
document “Minimum Requirements for Risk Management”
as well as on the requirements of the
National Bank of Romania. ProCredit Bank Romania
reports its risk position to the relevant units
responsible for risk management at the ProCredit
Holding level at monthly intervals.
Risk management policies throughout the
ProCredit group are based on the concept of
“risk-bearing capacity”, i.e. the principle that
each bank’s aggregated risk exposures must
not exceed its capacity to bear risk, and that the
resources available to cover risk are sufficient
to absorb any losses that may arise and protect
creditors’ investments. Statistical models and
other procedures are used to quantify the risks
incurred, and thresholds and limits are set for
each risk category and for the aggregate exposure.
Throughout 2010 the level of risk remained
within the limit in nearly every category. One
exception was interest rate risk, which remains
at a significant level. The bank is continuing its
efforts to reduce this risk.
ProCredit Bank’s culture of internal and external
transparency is equally crucial to our risk management
efforts. Thanks to our clearly defined
procedures and our encouragement of open communication,
our well-trained staff are in a strong