A4 für Copyshop GB.indd - Bayerische Landesbank

BayernLB’s subsidiaries (Hungarian Foreign Trade Bank, Budapest; Banque LBLux S.A.,
Luxembourg; Landesbank Saar, Saarbrücken; Deutsche Kreditbank AG, Berlin) imple-
ment risk controlling processes, strategies and procedures as well as risk management
in accordance with their own individual purposes.
The Group Audit Division supports the Board of Management in its capacity as a proc-
ess-independent unit within the internal monitoring system. Its activities are defined
by the Minimum Requirements for the Structure of Internal Audits at Banking Institu-
tions (MaIR) issued by the BaFin.
Monitoring and controlling the various risk types
Counterparty risk
BayernLB defines counterparty risk as the potential loss resulting from a counterparty’s
default or from a decreased value owing to an unforeseeable deterioration in a coun-
terparty’s credit standing. Counterparty risks may be broken down into risks arising
from traditional credit business, issuer risks resulting from securities transactions and
counterparty risks from trading transactions.
BayernLB bases every credit extension on an individual analysis and assessment of the
borrower’s credit standing, using certain rating methods. In 2004, introduction of a
new 24-tier rating method was continued according to plan. This procedure is
designed to comply with the requirements of Basel II. The rated gross exposure of the
Group may be broken down as follows:
Gross exposure of the Group
by rating category
[%]
80
60
40
20
0
2003
2004
63 68
27 22
6 7
2 1 2 2
0 to 7 8 to 11 12 to 17 18 to 21 Default
categories
Report on the Bank and the Group
} Group Audit
Division
} Definition
} Credit rating
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