Annual report 2011 - VTB

VTB BankNotes to the Consolidated Financial Statements – 31 December 2011 and 2010(in billions of Russian Roubles)38. Financial Risk Management (continued)Analysis of financial assets and liabilities by measurement basis (continued)As at 31 December 2010:Held fortradingDesignatedas at fairvaluethroughprofit orlossLoansandreceivablesHeld-tomaturityAvailablefor-saleFinancialliabilitiesmeasuredatamortizedcostTotalFinancial assetsCash and short-term funds – – – 275.5 – – 275.5Mandatory cash balances with centralbanks – – – 26.4 – – 26.4Financial assets at fair value throughprofit or loss 320.0 24.6 – – – – 344.6Financial assets pledged underrepurchase agreements and loanedfinancial assets 7.5 3.4 – 1.3 4.7 – 16.9Due from other banks – – – 349.9 – – 349.9Loans and advances to customers – – – 2,785.4 – – 2,785.4Financial assets available-for-sale – – – – 55.9 – 55.9Investment securities held-to-maturity – – 34.2 – – – 34.2Other financial assets 0.2 0.6 – 21.1 – – 21.9Total financial assets 327.7 28.6 34.2 3,459.6 60.6 – 3,910.7Financial liabilitiesDue to other banks – – – – – 397.3 397.3Customer deposits – – – – – 2,212.9 2,212.9Other borrowed funds – – – – – 185.7 185.7Debt securities issued – – – – – 593.1 593.1Subordinated debt – – – – – 205.5 205.5Other financial liabilities 40.6 – – – – 24.9 65.5Total financial liabilities 40.6 – – – – 3,619.4 3,660.0Credit riskCredit risk is the risk of financial loss if a counterparty fails to meet its contractual obligations. VTB Group’s credit riskexposures arise principally from banking activities such as corporate and retail lending, issuance of letters of creditand guarantees, operations of Treasury, Investment Banking and leasing business.redit risk management within the Group is based on a combination of the following approaches:local credit risk management at the level of individual Group members;consolidated credit risk management at the Group level.Within the frame of the local credit risk management system, the Group members assume and manage credit risksindependently (including insurance, hedging, etc.) in the scope of the established powers and limits with regard to riskindicators, in accordance with the national regulations and the standards of the Group. The Group members areresponsible for the results of their lending activity, for the quality of their loan portfolios and for monitoring and controlof credit risk level in their portfolios.As per the “VTB Group Consolidated Risk Management Concept”, adopted by the GMC, the consolidated credit riskmanagement comprises the following functions:consideration and approval of the Group-wide strategy, policies, unified basic principles and approachesrelated to the lending / investment activities and credit risk management;control of the current credit risk level on a consolidated basis and elaboration of the necessary measures tomitigate risks (potential losses).Consolidated credit risk management covers the main types of assets and off-balance sheet exposures of the Groupmembers, which bear credit risk and require control of their concentration at the Group level. In the context ofconsolidated control and reporting the scope of such operations is defined by the coordinating bodies of the Group.62