GB00_erste lage_E - Erste Group

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2000 CONSOLIDATED FIANCIAL STATEMENTS ACCORDING TO IAS Value-at-risk of trading portfolio as of 31 Dec 2000 by risk-taking units in EUR thousand Total Interest Currency Shares Commodity Volatility Group 12,861 2,147 495 12,175 224 248 Hedge funds 12,472 0 0 12,472 0 0 Trading portfolio 2,286 2,147 495 630 224 248 Treasury Vienna 2,050 1,920 487 366 224 174 Investment banking 635 4 151 530 0 154 Activities abroad 926 841 338 32 0 177 The market risks from the trading portfolio were distributed as follows at the end of December 2000: The total Value-at-Risk with a 99% confidence interval and a one day holding period was EUR 12.9 million including hedge funds. The risk arising from interest rate fluctuations was EUR 2.1 million, from exchange rate fluctuations EUR 0.5 million, from commodities transactions EUR 0.2 million, from share price fluctuations EUR 12.2 million, from fluctuations in the implicit options volatility EUR 0.2 million. The difference between the sum of individual risks and the total risk is explained by diversification effects amounting to EUR 2.4 million. Credit risk Credit risk results from traditional lending business as well as from trading in market risk instruments. Credit risk is measured for all of the lending business done by Erste Bank AG in the Central Risk Management department based on credit Value-at-Risk. In future the credit risk will be calculated for the rest of the Group as well. The calculation is based on the CreditMetrics method used by the American investment banker J.P. Morgan with the support of CreditManager software; Erste Bank opts for an observation period of one year and a 95% confidence interval. Operational risk Erste Bank defines operational risk as the “risk of direct or indirect losses resulting from inadequate or lacking processes and systems, from employee error or external events”. Thus operational risks are potential losses that cannot be attributed to either market or credit risk. In keeping with current practice in most international banks, line management is responsible for operational risks. 110 Erste Bank 2000
In March 2000 Erste Bank launched a project in collaboration with internationally recognised consultants to define and measure operational risk throughout the entire bank for the first time. After completing the initial phase of the project for Erste Bank AG at the end of the first quarter of 2001, this approach is to be gradually implemented throughout the Group. This project will lay the groundwork for rational cost-benefit decisions on measures to reduce, limit and mitigate operational risks (e.g. for possible insurance solutions). This will allow Erste Bank to integrate operational risks into risk-adjusted performance measurement based on Valueat-Risk. Risk-absorbing capacity and risk-adjusted performance measurement The overall measure of risk applied at bank as well as Group level is the Economic Capital that a bank has to hold in order to cover risk. This amount is defined as the annual loss which, with a very high probability, will not be exceeded. The level of probability is determined on the basis of capital market default analyses. The objective of calculating this figure is to determine the amount of capital needed in order to secure solvency of Erste Bank even in extreme loss scenarios. Furthermore, this figure enables comparative measurement and aggregation of all risks. The central instrument for securing the Bank’s solvency is risk-absorbing capacity. In this calculation, a multiple-stage process is used to compare the Economic Capital to the resources (earning power, reserves and equity) available to cover potential losses. Aside from the risk actually measured, a safety buffer and the existing risk limits are taken into account. Risk-absorbing capacity thus serves as a limit for all risk activities in Erste Bank. Economic Capital is also a substantial component used in calculating the risk-adjusted return on capital (RAROC). This figure compares returns with the risks that are taken in order to achieve them, using Economic Capital as risk measure. Full implementation of RAROC will allow the entire bank to be managed on the basis of risk/return ratios. Thus, Economic Capital and RAROC combine risk limitation aimed at preserving the Bank’s solvency and active risk and capital management geared towards increasing enterprise value. Erste Bank 2000 111
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The leading financial services prov
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Key figures of Erste Bank share 200
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2000 Annual Report We are Erste Ban
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September ❚ The 24 Styrian branch
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from left to right Franz Hochstrass
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The third factor, the effectiveness
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ution channels. The complete classi
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❚ Operating income ❚ General ad
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❚ Net interest income ❚ Net com
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❚ Securities transactions ❚ Bui
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greater, since some of the staff cu
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▲ Cost-income ratio ■ ROE ❚ L
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❚ Amounts owed to credit institut
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▲ Solvency ratio ■ Core capital
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Results by business segment The act
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Retail and Real Estate
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Innovative advisory tools now also
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Volume has risen further The market
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Strong, united identity conveyed by
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Holdings of Erste Bank in Central E
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Erste Bank— a seal of quality Hun
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Asset Gathering
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Erste Bank in the top tier of asset
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Strong rise in insurance premium in
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The Large Corporate Customers segme
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Positive trend in International Bus
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Domestic credit risk by sectors A g
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Foreign credit risk by sectors Inte
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As a supplement to the general cred
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The Trading and Investment Banking
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However, lower income from trading
Page 63 and 64: Corporate Centre
Page 65 and 66: Harmonisation of EDP systems enhanc
Page 67 and 68: Leading-edge technology for Erste B
Page 69 and 70: 2000 Consolidated Financial Stateme
Page 71 and 72: II. Group Income Statement of Erste
Page 73 and 74: IV. Cash Flow Statement in EUR Mio
Page 75 and 76: During the reporting period 52.07%
Page 77 and 78: Scope of Consolidation The impact o
Page 79 and 80: While the agreement is in force (un
Page 81 and 82: Principles of Consolidation Account
Page 83 and 84: All realised and unrealised gains f
Page 85 and 86: In the case of operating leases (in
Page 87 and 88: 13) Loans and advances to credit in
Page 89 and 90: 17) Investments available for sale
Page 91 and 92: 20) Other assets in EUR million 200
Page 93 and 94: a) Employee benefits Total provisio
Page 95 and 96: lower limits defined above, a gradu
Page 97 and 98: As all own shares held in the Compa
Page 99 and 100: The above figures do not include th
Page 101 and 102: In addition to the above-mentioned
Page 103 and 104: Sundry operating expenses are compr
Page 105 and 106: 37) Segment reporting The aim of se
Page 107 and 108: Asset Gathering Corporate Center To
Page 109 and 110: 38) Additional information Assets a
Page 111 and 112: Organisation of risk management at
Page 113: Risks at Erste Bank Market risk Flu
Page 117 and 118: Open fixed-income positions not att
Page 119 and 120: Nominal amount by remaining maturit
Page 121 and 122: Česká spořitelna, a.s. is the de
Page 123 and 124: Delegated by the Employee Council G
Page 125 and 126: Percentage Investment Net Fin. stat
Page 127 and 128: Percentage Investment Net Fin. stat
Page 129 and 130: Trading assets All trading assets a
Page 131 and 132: Other operating results This item i
Page 133 and 134: It is our conviction that the Finan
Page 135 and 136: Report of Supervisory Board During
Page 137 and 138: Prague Hlavní nádrazí (Central R
Page 139: Erste Bank share is included in fol
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GB00_erste lage_E - Erste Group

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