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ePaper created 2012-04-20, 15:08:32 | version 1.23.0
38 Management Report – münchener Hypothekenbank eg l annual Report 2011 Risk report The ability to monitor and keep risks under control at all times is essential for the successful steering of business development at MünchenerHyp. For this reason risk management plays a very important role in the overall management of the Bank. The business and risk strategy defines the parameters of the Bank’s business activities. MünchenerHyp’s entire Board of Management is responsible for this strategy, which is regularly reviewed regarding the attainment of goals and updated as nec- essary and then submitted to the Supervisory Board. As part of its supervisory duties, the Supervisory Board is ad- vised about the Bank’s risk profile on a quarterly basis. This takes place using the reports on the Bank’s risk-taking ca- pabilities, lending risks, as well as the risk report prepared in accordance with the “Minimum Requirements for Risk Manage- ment” (MaRisk). The basis of risk management consists of, on one hand, the analysis and presentation of existing risks, and, on the other, comparing these risks with the collateral available to cover them (ability to bear risk). Appropriate monitoring processes are in place involving internal process-dependent supervision to ensure that this balance is maintained. Our internal audit department, as a process-independent unit, has the monitor- ing function within the Bank. The analysis and presentation of existing risks primarily distinguishes between counterparty, market price, liquidity and operational risks. Additional risks such as credit spread risks, placement risk, reputational risk, business risk etc., are viewed as parts of the abovementioned risks and are taken into consideration in the appropriate manner in the individual calculations. Counterparty risk Counterparty risk – also referred to as lending risk – is of major significance for MünchenerHyp. Counterparty risk refers to the danger that a counterparty or group of counterparties may delay, make partial repayment or even default on repaying a loan to the lender. The Credit Handbook presents the competencies and procedural requirements of entities involved in lending, as well as the Bank’s credit products. The Bank’s business and risk strategy contains additional explanations pertaining to sub-strategies regarding target customers and target markets, as well as definitions for measuring and controlling credit risks at the level of individual deals and the portfolio level. A procedure based on the credit value-at-risk (Credit-VaR) is used to determine lending limits. The specific contribution of every entity/borrower – called the Marginal Credit-VaR – to the Bank’s total credit risk is lim- ited. Furthermore, limits are also set for each country to ensure adequate regional diversification. We always take care to ensure that the vast majority of our mortgage business activities consist of top tier mortgages with moderate mortgage lending value ratios. Currently, the breakdown based on mortgage lending value is as follows: