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(58) FAIR VALUE BALANCE SHEET.<br />
Fair value<br />
Value of Banking Available Trading Micro<br />
in EUR m item book for sale book hedge Total<br />
Cash and balances with central banks 15 15 0 0 0 15<br />
Loans and advances to banks 887 859 34 0 0 893<br />
Loans and advances to customers 6,086 5,686 320 0 124 6,129<br />
Risk provision -69 -69 0 0 0 -69<br />
Trading assets 94 0 0 94 0 94<br />
Financial investments 3,831 1,735 1,980 0 122 3,837<br />
Tangible fixed assets 289 289 0 0 0 289<br />
Other assets 61 61 0 0 0 61<br />
Aggregate 11,194 8,576 2,334 94 245 11,249<br />
Amounts owed to banks 2,810 1,946 0 0 870 2,817<br />
Amounts owed to customers 687 630 0 0 53 683<br />
Debts evidenced by certificates 6,453 5,147 0 0 1,361 6,508<br />
Provisions 45 45 0 0 0 45<br />
Other liabilities 517 351 0 78 56 485<br />
Subordinated capital 291 202 0 0 95 297<br />
Minority interests 133 133 0 0 0 133<br />
Equity 258 281 0 0 0 281<br />
Aggregate 11,194 8,735 0 78 2,435 11,249<br />
(59) RISK MAN<strong>AG</strong>EMENT. A good management of risks that might occur in all fields of business reinforces a bank’s competitive<br />
position. Investkredit’s basic principles of risk management are documented in various handbooks and internal guidelines. As part of<br />
the banking risks, the credit risk constitutes the most essential risk the Investkredit Group is exposed to. Other risks that may be<br />
encountered are market risks, liquidity risks and operational risks. Basically, a value at risk is fixed for all fields by an organisational<br />
unit that does not depend on the closing of deals. Furthermore, stress tests simulating extreme market fluctuations are carried out.<br />
In addition, the determination of a bank’s economic equity is essential in assessing the risks it is able to bear. New agreements<br />
reached by the Basel Committee are likely to entail changes concerning the capital adequacy requirements. Investkredit aims at<br />
quickly applying new methods and has already carried out parallel calculations to this end.<br />
(60) MARKET RISKS ARISING OUT OF TRADING ACTIVITIES. Market risks arising out of trading activities are calculated continuously<br />
– broken down by interest rate risk, share price risk and currency risk – and are assessed daily after close of business. With a<br />
confidence level of 99 % and a holding period of 1 day, a variance/covariance approach is applied for the interest rate risk and the<br />
currency risk; in the case of the share price risk, volatility shown by market data or figures calculated by the Bank is taken as the basis.<br />
The strict rules of an internal risk management handbook are applied to the conduct of trading activities. These rules also contain<br />
limits for value at risk. The breakdown of risk is as follows:<br />
Average Average<br />
in EUR m 2001 31.12.2001 2000 31.12.2000<br />
Debt issues 1.2 1.1 0.6 0.4<br />
Share price risks 0.2 0.3 0.4 0.2<br />
Currency 0.1 0.0 0.1 0.1<br />
Aggregate 1.5 1.4 1.1 0.7<br />
(61) INTEREST RATE AND LIQUIDITY RISKS IN THE BANKING BOOK. With changing market interest rates, the bank may encounter<br />
interest rate risks, if it holds a surplus of fixed-rate positions. The interest rate risk is, however, assessed continuously in the light of<br />
the interest risk item. For this purpose, fixed-rate assets and liabilities, as well as derivative instruments are entered into maturity<br />
tables according to their respective interest-lockup period. As a consequence, a gap analysis using different scenarios is carried out<br />
and the value at risk is calculated by means of the RiskMetrics method (confidence level of 99%, holding period of 1 month).<br />
Notes<br />
THE BANK FOR CORPORATES<br />
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