Annual Report 2010 - Muenchener Hypothekenbank eG

the management of lending risks begins with the selection of the target business when drafting the terms of the loan, using risk-cost functions that are validated by a continuous back-test- ing process. a variety of rating or scoring procedures are used, depending on the type and risk content of the transaction. in addition, a computer-based early warning system is used to spot risks on a timely basis. a widely diversified property finance portfolio with an emphasis on private property financing, combined with our credit approval procedures, which have proven their value over many years, ensures a portfolio with a manageable level of credit risk. our lending business with public sector borrowers and banks is pri- marily focused on central and regional governments, regional and local authorities, and west european banks with above-aver- age creditworthiness, whereby our goal is to reduce our port- folio of bank loans for reasons including future liquidity cover- age ratio requirements. depending on their ratings, mortgage loans are examined to determine any non-performance or other negative factors which could trigger an individual adjustment to value. furthermore, an additional system to monitor individual adjustment to value is used by the Bank’s work-out management group, especially for non-mass market business. generally, if it is determined that the value of a loan needs to be adjusted in the mass market segment the portion of the loan exceeding 60 percent of the mortgage lending value, or 70 per- cent of its current market value, plus the outstanding interest payments, is value adjusted. individual deviations from this policy must be justified. in principle, an adjustment to value in our non-mass market area of lending is based the current market value of the mort- gage lending value minus an appropriate margin of safety, or 100 percent of break-up value exceeding the value of the loan plus the outstanding interest payments. total PortFolio oF MortGaGe anD otHer loanS (incluDinG oPen coMMitMentS) region 31 dec. 2010 31 dec. 2009 € relative € relative austria 49,605,952 0.3% 45,907,411 0.3% france 273,073,462 1.4% 295,638,708 1.7% uK 231,880,880 1.2% 199,730,257 1.1% spain 102,714,104 0.5% 113,367,940 0.7% Luxembourg 64,633,156 0.3% 64,287,318 0.4% sweden 43,576,711 0.2% 38,167,026 0.2% switzerland 2,632,836,226 13.5% 1,128,322,027 6.5% the netherlands 194,051,647 1.0% 209,511,618 1.2% usa 2,579,869,597 13.2% 2,558,621,775 14.7% total ForeiGn 6,172,241,735 31.5% 4,653,554,080 26.8% total DoMeStic anD ForeiGn 19,567,266,454 100.0% 17,379,147,136 100.0%