A4 für Copyshop GB.indd - Bayerische Landesbank

112 Report on the Bank and the Group
} Controlling
} Monitoring and
reporting
} Risk structure
} Situation and
outlook for the
regions
Country risks are controlled with the help of country limits derived from a model port-
folio on the basis of the country risk capital provided. The limit structure is determined
by various factors, including country ratings, resulting default probabilities and LGDs
(loss given default values), as well as international trade flows. Concentrations in indi-
vidual countries lead to increased drawings on risk capital. In the year under review, a
Value at Risk of EUR 670 million was calculated for BayernLB in terms of country risk,
based on a risk capital of EUR 881 million.
Central risk controlling monitors compliance with country limits on an ongoing basis.
Exceeded limits are reported directly to the Board of Management.
Ninety-two percent of BayernLB’s foreign exposures are in countries that do not have
limits (usually countries in the top two rating categories). Countries with limits account
for 8 percent of the Bank’s exposures abroad. Thus, exposures in countries without
limits increased relatively to those with limits against the previous year.
Exposures in countries with limits at Group level increased by 5 percent to EUR 15 bil-
lion, while falling by 7 percent to EUR 12 billion in the Bank. Of foreign exposures,
85 percent at Group level and 84 percent in the Bank are classed in the good rating
categories 0 – 11, of which 42 percent (53 percent in the Bank) are rated in the very
good categories 0 – 7. Only 15 percent (16 percent in the Bank) are classified in the
rating categories 12 – 24.
In Central and South American emerging markets, the economic rebound continued
in 2004. This has triggered a risk of inflation in some countries. Exposure in countries
with limits in this region remained roughly unchanged year on year (down 5 percent at
Group level, down 6 percent in the Bank).
In the Near and Middle East, the economic outlooks of the oil-producing countries
have brightened. Nonetheless, political risks linger in some parts.
Exposure in Asia was down 12 percent in 2004 (down 23 percent at Bank level). This
was due primarily to the closure of Asian branches.
The eight new EU members from Central and Eastern Europe continued to catch up in
terms of economic development during the year. The upward trend in these countries
is carried by both export activities and domestic economic activity. Central and Eastern
Europe and the CIS countries gained in importance in the country portfolio, increasing
by 39 percent in absolute terms at Group level, and 37 percent in the Bank alone.