saxo-bank-annual-report-2015

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ured as the expected one day loss for the portfolio using a Value-at-Risk model (VaR). The VaR model has a lookback period of one year, but puts more weight on recent observations (Exponential Weighting). The model takes into account risk diversifications effects. Operational, Compliance and Legal risk The Group’s operational risk is assessed through a self-assessment process where likelihood and impact levels of risk events are determined. The risk in the Group has been determined using a portfolio approach and a Monte Carlo simulation with a 0% event correlation. To incorporate stress, a number of combined event scenarios have been introduced in the simulation. Liquidity risk The liquidity risk is determined as the increased cost of raising capital in a very illiquid market. The Saxo Bank Group has determined the liquidity risk based on scenarios with a liquidity shortfall within the Group. To the extent that the events cannot be absorbed by the budgeted income, capital will be explicitly allocated to cover the risk. Business and Other risk The business risk and other risk, reflects the risks of a direct or an indirect loss, or damaged reputation as a result of changes in external circumstances or events. Some of these risks are only partially captured in the other risk categories, and these risks are therefore addressed in this category. CAPITAL REQUIREMENT, 8+ METHODOLOGY The third step calculates the capital requirement in line with the requirements of the DFSA’s capital adequacy requirement guideline (referred to as 8+). Each defined risk category is examined in order to determine whether additional capital beyond the Pillar I requirement should be set aside and as determined by the internal Pillar II calculation. The total capital requirement is specified in the ICAAP Q4 2015 report at www.saxobank.com/investor-relations. STRESS TESTING USING A SCENARIO-BASED APPROACH In addition to the pillar I and pillar II approach, the Group performs a scenario-based approach to assess the adequate capital requirement as a step four in the ICAAP. The scenario-based approach reflects a loss given the occurring of an impact or event. The scenarios are developed on the basis of the risk register, and reflect exceptional but possible single events or chains of events. Furthermore, the Group uses a number of combined scenarios, combining multiple events across risk categories. One of the combined events entails a close to unlikely chain of events, in order to ensure the utmost degree of stress. Where applicable, the scenario takes insurance coverage into account. The scenarios are updated and reviewed according to significant changes in the market and economic environment, and at least once a year. CAPITAL ADEQUACY DETERMINATION To determine the appropriate level of capital adequacy, the results using the different methods are compared for each risk category. As the 8+ method results in the largest capital requirement for each risk category, the sum of these will compose the advised minimum capital level required to operate the Group. CAPITAL PLANNING Part of the ICAAP is planning future capital needs in relation to the future regulatory requirements, the business environment, growth and strategic plans in the years to come. Potential major changes to the risk profile, and thereby the future solvency needs, are estimated using the ICAAP and captured in the Capital Plan. The Capital Plan is used in the strategic decision-making process by the Board of Directors and the Board of Management. 30 · SAXO BANK · ANNUAL REPORT 2015
LIQUIDITY MANAGEMENT In accordance with EU-regulation, Danish credit institutions are required to perform an internal liquidity adequacy assessment process (ILAAP). Accordingly, the purpose of the ILAAP is to determine the adequate level of liquidity that is required to operate the Saxo Bank Group. The ILAAP is based on an internal process in which the Board of Management assesses the overall liquidity and funding risks. It is the policy of the Group to update, maintain and execute stress tests on the liquidity on an ongoing basis. In addition, the Group’s objectives and liquidity risk appetite are monitored as part of the ILAAP process. Liquidity management in the Saxo Bank Group covers short-term and long-term, as well as intraday liquidity management. The Group relates to both regulatory and self-assessed liquidity ratios and stress tests to insure that liquidity requirements and operating obligations are met on all time horizons. Procedures for the intraday liquidity management ensure that the Bank is positioned for timely and accurate settlements and executions of any demands, requirements and obligations. The Group operates with a day-to-day strategy of handling liquidity. Details regarding the liquidity management and the ILAAP can be found in the Saxo Bank Group Risk Report 2015 available at www.saxobank.com/investor-relations. SAXO BANK · ANNUAL REPORT 2015 · 31
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Page 4 and 5: TRADING OPPORTUNITIES. ANYTIME, ANY
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Page 8 and 9: The continued rise in client’s co
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Page 12 and 13: As of 31 December 2015, Saxo Bank e
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Page 18 and 19: FINANCIAL REVIEW Saxo Bank Group re
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Page 38 and 39: HIGHLIGHTS 2015 JANUARY Saxo Bank r
Page 40 and 41: FINANCIAL STATEMENTS 38 · SAXO BAN
Page 42 and 43: INCOME STATEMENT - SAXO BANK GROUP
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110 · SAXO BANK · ANNUAL REPORT 2
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INCOME STATEMENT - SAXO BANK A/S 1
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STATEMENT OF FINANCIAL POSITION - S
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STATEMENT OF CHANGES IN EQUITY - SA
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STATEMENT OF TOTAL CAPITAL (OWN FUN
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NOTES - SAXO BANK A/S Note (DKK 1,0
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NOTES - SAXO BANK A/S 23 Branches a
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STATEMENTS BY THE INDEPENDENT AUDIT
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COMPANY INFORMATION
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ADDRESSES DENMARK ADDRESSES EUROPE
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ADDRESSES WORLD AUSTRALIA Saxo Capi
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