Annual Financial Statements 2011 of Bank Austria

More documents

Recommendations

Info

Management Report of UniCredit Bank Austria AG Market risk management in CEE At UniCredit Bank Austria AG, market risk management covers the activities in Vienna and the positions at the subsidiaries, especially in Central and Eastern Europe. These subsidiaries have local risk management units with a reporting line to Risk Management in UniCredit Bank Austria AG. Uniform processes, methods, rules and limit systems ensure consistent Group-wide risk management adjusted to local market conditions. The "IMOD" risk model has been implemented locally at major units (Czech Republic, Slovakia, Hungary, Croatia, Bulgaria, Russia, Turkey), and a daily risk report is made available to the other units. The replacement of the previous internal model “NoRISK” by IMOD, a Group application, also requires formal approval of the system by the banking supervisory authorities in the major CEE countries. The approval process for the Czech Republic, Slovakia and Hungary will be implemented by 2013; the other relevant banking subsidiaries will undergo the approval process for the risk model from 2014 onwards. Analyses of position structure and balance sheet structure are available to all banks in the Group via "ALMRisk", a Group-wide web tool. Liquidity monitoring is also based on this instrument. The instrument was extended in the course of 2011 to cover liquidity requirements under Basel 3. The web application "ERCONIS" records the daily business results of treasury activities in CEE. In line with a total-return approach, measurements of the performance of subsidiaries include income generated by the subsidiaries and the valuation results of the banking book. To avoid risk concentrations in the market risk position, especially in tight market conditions, the bank has implemented at its subsidiaries Value-at-Risk limits and position limits for exchange rate risk, interest rate risk and equity risk, which are monitored daily. The additional capital requirements for trading books (“incremental risk charge” and “stressed VaR”) which became effective in 2011 are monitored using separate indicators. The monitoring of income trends at banking subsidiaries by means of loss-warning levels provides an early indication of any accumulation of position losses. The timely and continuous analysis of market risk and income is the basis for integrated riskreturn management of treasury units at banking subsidiaries. Liquidity risk General information, processes and management model In line with Group standards, the Bank Austria Group deals with liquidity risk as a central risk in banking business by introducing and monitoring short-term and medium-term liquidity requirements. In this context the liquidity situation for the next few days and months and also for longer periods is analysed against a standard scenario and stress scenarios. Methods and procedures of liquidity analysis, analyses of the degree of liquidity of customer positions, management responsibilities and reporting lines in this area have been laid down in the liquidity policy, which is also applicable at Bank Austria’s CEE units and includes a contingency plan in the event of a liquidity crisis. Liquidity management in UniCredit Bank Austria AG is an integral part of UniCredit Group liquidity management. In line with the Group-wide distribution of tasks, Bank Austria ensures the consolidation of liquidity flows and the funding for subsidiaries in Austria and CEE. The flow of funds is thereby optimised and external funding is reduced to the necessary extent. Liquidity transfers within the Group are based on market prices. Liquidity management methods and control In medium-term and long-term liquidity management, liquidity inflows over 1 year and over 5 years must cover a minimum of 90 % of expected liquidity outflows during these periods. This limit must be observed at Group level and for each banking subsidiary. The limit is to be observed also at individual currency level in order to avoid cross-currency funding arrangements as far as possible. At Bank Austria Group level, the liquidity ratio as at year-end 2011 was 0.99 for > 1 year and 0.98 for > 5 years. This means that in effect, long-term assets are fully funded at Group level. For the purpose of short-term liquidity management, volume limits have been implemented in the Bank Austria Group and in all banks for maturities up to three months, which limit all Treasury transactions and the securities portfolio of the respective bank. Volume limits are also established for open maturities in various currencies to keep down the risk of a need for follow-up funding in the event that foreign currency markets dry up. These limits were essentially observed although the liquidity situation in financial markets deteriorated significantly in the second half of the year, not least on account of the persistent government debt crisis in Europe. Liquidity stress test UniCredit Bank Austria AG performs liquidity stress tests for the Group and for individual banks on a regular basis, using a standardised Group-wide instrument and standardised Group-wide scenarios. These scenarios describe the effects of market-driven or name-driven crisis signals on liquidity inflows and outflows, with assumptions also being made about the behaviour of non-banks. The liquidity outflows expected to occur in stress situations are compared with available collateral (essentially, securities and credit instruments eligible as collateral at the central bank) to examine the banks’ risk-taking capability in the short term up to two months. The tight liquidity situation in financial markets (especially in the interbank market) put a strain on these crisis scenarios, but the existing pool of collateral was sufficient to cover liquidity outflows. The extreme scenario (combining an extreme market crisis and a name-driven crisis) calculated on the basis of the strained liquidity situation is below the one-month liquidity horizon. However, measures have been taken to strengthen the liquidity buffer for unexpected liquidity outflows. Bank Austria – Annual Financial Statements 2011 198
Management Report of UniCredit Bank Austria AG Funding plan and liquidity costs in pricing Financing that part of credit growth which is not covered by deposits and funding the CEE subsidiaries is one of the main functions of the Group’s liquidity management. Financing requirements for the coming year and the short-term and long-term funds made available to the subsidiaries for their business are defined on the basis of a funding plan, and a strategy for raising the required funds is drawn up. As financial markets in Central and Eastern Europe were under greater strain, closer attention was given in 2011 to the financial independence of the CEE subsidiaries. The focus is on a well-balanced financial position, which reduces dependence on financial markets. Part of the country risks in connection with financing the CEE subsidiaries out of Austria is covered by MIGA or SACE guarantees (MIGA: Multilateral Investment Guarantee Agency, a member of the World Bank Group; SACE: a leading Italian credit insurer). To ensure the correct settlement of liquidity premiums payable by the Bank Austria Group to external market participants, liquidity costs are charged. Liquidity costs are part of the reference rate system. The applicable alternative costs are debited or, on the basis of an opportunity cost approach, credited to the various products on the assets side and the liabilities side which have an effect on liquidity. In the current controlling process this ensures the proper pricing of our business. Counterparty risk UniCredit Bank Austria AG has made further efforts to refine the risk management model for derivatives, securities lending and repurchase agreements. The model was refined especially with regard to validation and backtesting. For the purposes of portfolio management and risk limitation in the derivatives and security financing business with banks and customers, the bank uses an internal counterparty risk model (IMM) based on a Monte Carlo path simulation to estimate the potential future exposure at portfolio level for each counterparty. The counterparty risk model (NORISK CR), which was approved by the Austrian supervisory authority in 2009, was extended in 2011 to include further CEE countries for risk management aspects; special mention should be made of the subsidiaries in Croatia and Russia because of their size. In this context the focus is on risk management and not yet on regulatory approval. The bank took account of the growing importance of counterparty risk by creating a separate unit for this purpose within Market Risk at the beginning of 2010. The calculations are based on market volatility, correlations between specific risk factors, future cash flows and stress considerations. Netting agreements and collateral agreements are also taken into account for simulation purposes. The simulation calculations are performed for all major types of transactions, e.g. forward foreign exchange transactions, currency options, interest rate instruments, equity/bond-related instruments, credit derivatives and commodity derivatives. Other transactions are taken into account with an add-on depending on factors such as maturity. The bank applies a confidence interval of 97.5%. In addition to further refinement of the model, which is currently in conformity with Basel 2 standards, we are now concentrating on preparations for adjusting the existing model to the new Basel 3 rules concerning counterparty credit risk. A project was initiated in Market Risk and Risk Integration for this purpose. Separate reporting on counterparty risk was introduced with a view to informing UniCredit Bank Austria AG’s Market Risk Committee and Derivative Committee (DECO) of current exposure trends and providing additional information relevant to risk management. Moreover, backtesting is performed at regular intervals, at the level of individual counterparties and at overall bank level, in order to check the quality of the model on an ongoing basis. Line utilisation for derivatives and security financing business of customers is available online in WSS (“Wallstreet”), the central treasury system, on a largely group-wide basis. In addition to determining the potential future exposure, the path simulation also enables the bank to calculate the average exposure and the modified average exposure pursuant to Basel 2 (exposure at default), as well as the effective maturity of the exposure to each counterparty. This makes it possible to integrate counterparty risk in an internal model compliant with Basel 2. UniCredit Bank Austria AG additionally limits the credit risk arising from its derivatives business, repurchase agreements and securities lending business through strict use of master agreements, the definition and ongoing monitoring of documentation standards by legal experts, and through collateral agreements and break clauses. Management takes proper account of default risk, especially because the relevance of this risk category has increased and on the basis of experience gained in the international financial market crisis, despite the good average credit rating of our business partners. Sovereign debt The assessment of country risk, reflected in country limits and counterparty risk, and for the sovereign of a country, reflected in counterparty limits, is in both cases performed via a groupwide risk process. The sovereign counterparty limits are assessed by the FIBS CRO risk team (FIBS: Financial Institutions, Banks and Sovereigns) and assigned to UniCredit subsidiaries according to business needs. Impairment losses are recognised, if necessary, according to accounting standards. In general, countries which are presumed less risky – e.g. the US, Japan, core EU – have no country limit assigned for cross-border business, but sovereign risk (direct state risk, e.g. bonds) is limited via counterparty limits. The overall bond exposure is monitored via nominal credit risk limits and additionally via market risk limits. The country risk for all other countries is limited by the assigned country limit. Greek bond exposure has been impaired based on a conservative approach and impairment losses will be further recognised using applicable accounting standards. Business with Greek banks has been reduced to an absolute minimum and is restricted via a watch list strategy. Bank Austria – Annual Financial Statements 2011 199
Page 1:
Annual Financial Statements 2011 of
Page 4 and 5:
Bank Austria at a Glance Income sta
Page 6 and 7:
Management Report Management Report
Page 8 and 9:
Page 10 and 11:
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
Page 20 and 21:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27:
Page 28 and 29:
Page 30 and 31:
Page 32 and 33:
Page 34 and 35:
Page 36 and 37:
Page 38 and 39:
Page 40 and 41:
Page 42 and 43:
Page 44 and 45:
Page 46 and 47:
Page 48 and 49:
Page 50 and 51:
Page 52 and 53:
Page 54 and 55:
Page 56 and 57:
Page 58 and 59:
Page 61 and 62:
Consolidated Financial Statements i
Page 63 and 64:
Page 65 and 66:
Page 69:
Notes to the Consolidated Financial
Page 72 and 73:
Page 74 and 75:
Page 76 and 77:
Page 78 and 79:
Page 80 and 81:
Page 82 and 83:
Page 84 and 85:
Page 86 and 87:
Page 88 and 89:
Page 90 and 91:
Page 92 and 93:
Page 94 and 95:
Page 97 and 98:
B - Notes to the income statement B
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107:
Page 110 and 111:
Page 112 and 113:
Page 114 and 115:
Page 116 and 117:
Page 118 and 119:
Page 120 and 121:
Page 122:
Page 126 and 127:
Page 128 and 129:
Page 130 and 131:
Page 132 and 133:
Page 134:
Page 138 and 139:
Page 140 and 141:
Page 142 and 143:
Page 144 and 145:
Page 146 and 147:
Page 148 and 149:
Page 150 and 151: Consolidated Financial Statements i
Page 167 and 168: F - Additional disclosures F.1 - Ti
Page 185 and 186: II. UniCredit Bank Austria AG Preli
Page 187 and 188: Management Report of UniCredit Bank
Page 199: Management Report of UniCredit Bank
Page 213 and 214: Financial Statements of UniCredit B
Page 215 and 216: Financial Statements of UniCredit B
Page 217 and 218: Notes to the Financial Statements o
Page 239 and 240: Shares in group companies and equit
Page 241 and 242: Supervisory Board and Management Bo
Page 243 and 244: Financial Statements for 2011 Bank
Page 245 and 246: Financial Statements for 2011 An au
Page 247 and 248: Financial Statements for 2011 Prüf
Page 249 and 250: Financial Statements for 2011 Bank
Page 251 and 252:
Financial Statements for 2011 State
Page 253:
Investor Relations UniCredit Bank A
show all

Annual Financial Statements 2011 of Bank Austria

Create successful ePaper yourself

Delete template?

Save as template?