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27Management Report Münchener Hypothekenbank eG The rise in uncovered refinancing over the previous year’s figure is due to higher regulatory requirements regarding liquidity. Rating Rating agencies again raised their creditworthiness require- ments as the sovereign debt crisis worsened. As a result, Moody’s also reduced their rating for MünchenerHyp’s unco- vered liabilities in September 2011. However, ratings awarded to many other banks were cut to an even greater degree. Thanks to our good standing in the capital market, Moody’s down- grade from A1 (outlook negative) to A2 (outlook stable) for uncovered liabilities did not have a material effect on our abil- ity to access refinancing, or the conditions we faced. On an overall basis we still have a good rating in comparison to our peers. Furthermore, the outlook for all ratings was stated as “stable”. Current ratings at a glance: Rating Outlook Public Pfandbriefe Aaa stable Mortgage Pfandbriefe Aaa stable Uncovered liabilities A2 stable Short-term liabilities Prime-1 stable Fundamental financial strength D+ stable Moody’s again commented favourably on our loan portfolio, which they viewed as more heavily diversified in comparison to other Pfandbrief banks’ loan portfolios. They also viewed MünchenerHyp’s risk profile favourably as the mortgage lend- ing value ratios are moderate in comparison to the figure for the market. Moreover, our close collaboration with the Coop- erative Financial Network continued to be viewed as a positive factor. Moody‘s commented critically on the Bank’s profitability and level of equity in international comparison, as well as our abil- ity to fulfill future Basel III equity capital requirements. The complete Moody’s document, and additional information regarding our ratings, is available at MünchenerHyp’s website. Overall legal conditions Basel III In 2011 we successfully completed the first phase of the pro- ject to introduce the Internal Ratings Based Approach (IRBA). IRBA is a procedure whereby banks set capital requirements for loans they have made using their own assessment of the risks associated with these loans. IRBA replaces the standardised approach for credit risk defined by the supervisory authority. In July the supervisory authority confirmed that MünchenerHyp’s internal methods and processes had met the strict and compre- hensive requirements for all of the rating systems for which it had applied to receive regulatory approval. As a result, effective October 1, 2011, the Federal Financial Supervisory Authority (BaFin) authorised the Bank to employ IRBA. This means that due to the low-risk nature of its lending business, MünchenerHyp’s equity capital requirements have been eased by about € 270 million. “Approval received from the supervisory authority for the Bank to use IRBA to calculate its equity capital requirements represented a major success in 2011. This new approach permits a far more precise control of equity capital requirements.” The project must be continued until all of our loan portfolio except for minor portions is switched over to IRBA within a maximum period of 5 years. We anticipate that this will pro- vide additional relief for our capital requirements as the loans and receivables classes not yet covered by IRBA contain less risk than assumed under the standardised approach to credit risk. This makes the IRBA project an important measure ena- bling MünchenerHyp to create the conditions needed for the coming equity capital requirements.