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ePaper created 2012-04-20, 15:08:32 | version 1.23.0
40 Management Report – münchener Hypothekenbank eg l annual Report 2011 Total portfolio of mortgage and other loans (including open commitments) Sovereign state 31 Dec. 2011 31 Dec. 2010 € relative € relative Austria 50,256,385.41 0.2% 49,605,951.95 0.3% France 269,243,746.63 1.3% 273,073,462.35 1.4% UK 371,790,449.67 1.8% 231,880,879.94 1.2% Spain 97,828,714.99 0.5% 102,714,104.09 0.5% Luxembourg 64,619,180.61 0.3% 64,633,155.78 0.3% Sweden 5,126,458.71 0.0% 43,576,710.72 0.2% Switzerland 3,023,614,478.29 14.5% 2,632,836,226.25 13.5% The Netherlands 193,011,306.37 0.9% 194,051,646.72 1.0% USA 2,141,509,465.98 10.3% 2,579,869,597.09 13.2% Total foreign 6,217,000,186.66 29.9% 6,172,241,734.89 31.5% Total domestic and foreign 20,794,617,647.44 100.0% 19,567,266,454.32 100.0% 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 identify risks on a timely basis. A widely diversified property finance portfolio with an emphasis on residential 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 primarily focused on central and regional governments, regional and local authorities, and west European banks, whereby our goal is to reduce our portfolio of bank loans over the mid-term. Very creditworthy bonds issued by sovereign states will con- tinue to be required in significant volumes as they can be rap- idly converted into cash during stress situations thereby make it possible to fulfil liquidity requirements. Depending on their ratings, mortgage loans are examined to de- termine 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. In principle, an adjustment to value in our non-mass market area of lending is based on the current market value minus an appropriate margin of safety, or 100 percent of the current break-up value exceeding the value of the loan plus the out- standing interest payments. The Bank has created a general adjustment-to-value reserve as a precautionary measure to cover latent lending risks. This general adjustment to value is calculated per the terms