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ePaper created 2013-04-15, 17:20:51 | version 1.25.7
Management report – münchener Hypothekenbank eg l annual Report 201244 banking supervisory authority regarding the method of controlling. Use of finance instruments for hedging purposes We engage in hedging activities – interest rate and currency derivatives – in order to further reduce our risks and to hedge our business activities. Credit derivatives are not employed. In the past, we have only occasionally insured individual loans or portfolios against counterparty risk. At the level of individual transactions, we use asset swaps as micro-hedges. Structured fundamental transactions such as callable securities are hedged accordingly with structured asset swaps. (Interest)-currency swaps are used to hedge exchange rate risks. At the portfolio level, the main hedging instruments we use are interest swaps and swaptions. Bermudan options on interest swaps (swaptions) or interest options (caps and floors) are used as hedges for embedded legal termination rights or arrangements to limit interest rates. Accounting-based internal control and risk management procedures The accounting-based internal control system is documented in organisational guidelines, descriptions of work processes, finan- cial reporting handbooks, and numerous operating instructions. It contains organisational security measures, and ongoing auto- matical measures and controls that are integrated in the work processes. These are, in particular, separation of functions, the double-check principle, access limitations, payment guidelines, new product process and balance confirmations. Process inde- pendent measures are, above all, carried out by the internal audit department. The risk management methods described in the risk report make qualitative and quantitative statements regarding MünchenerHyp’s economic situation, including, for example, the development of performance. This evaluation involves aspects of all risk categories. A close coordination procedure exists between the risk control- ling and accounting departments at MünchenerHyp. This coor- dination procedure is supervised by the entire Board of Man- agement. The results from the risk management system form the basis for the multi-year planning calculations, year-end projections, and agreement procedures for approving the realised key figures generated by the Bank’s accounting process.