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Geschäftsbericht 2012, englisch

Management report – münchener Hypothekenbank eg l annual Report 201238 Total portfolio of mortgage and other loans (including open commitments) Sovereign state 31 Dec. 2012 31 Dec. 2011 € relative € relative Austria 48,234,102.30 0.2% 50,256,385.41 0.2% France 333,525,403.97 1.5% 269,243,746.63 1.3% UK 516,328,353.25 2.3% 371,790,449.67 1.8% Spain 89,728,936.12 0.4% 97,828,714.99 0.5% Luxembourg 52,279,856.25 0.2% 64,619,180.61 0.3% Sweden 5,323,584.25 0.0% 5,126,458.71 0.0% Switzerland 3,225,676,920.69 14.3% 3,023,614,478.29 14.5% The Netherlands 192,105,590.27 0.9% 193,011,306.37 0.9% Belgium 6,440,814.73 0.0% 0.00 0.0% USA 1,604,495,184.25 7.1% 2,141,509,465.98 10.3% Total foreign 6,074,138,746.08 27.0% 6,217,000,186.66 29.9% Total domestic and foreign 22,509,591,135.05 100.0% 20,794,617,647.44 100.0% 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- testing 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. Regional empha- sis is on Germany or Western Europe. Our goal is to gradually reduce our portfolio of bank loans. Very creditworthy bonds issued by sovereign states will continue to be required as they can also converted into cash during stress situations thereby making it possible to fulfil the new liquidity requirements within the framework of Basel III. 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-retail market business. The Bank has created a general adjustment-to-value reserve as a precautionary measure to cover latent lending risks. This gen- eral adjustment to value is calculated per the terms contained in a Federal Ministry of Finance notice dated January 10, 1994. The key default rate is calculated using 60 percent of the aver- age volume of defaults that took place over the last five years vis-a-vis the average volume of loans-at-risk made over this period. The general adjustment to value is the result of multi- plying the default rate by the volume of loans-at-risk on the balance sheet date.

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