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ePaper created 2014-04-15, 13:56:41 | version 1.30.00
32 Risk, outlook and opportunities report management report 2013 Risk Report Management report – münchener Hypothekenbank eg l annual report 2013 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 Man- agement is responsible for this strategy, which is regularly re- viewed regarding the attainment of goals and updated as nec- essary and then submitted to the Supervisory Board no less than once a year. As part of its supervisory duties, the Supervisory Board is advised about the Bank’s risk profile no less than on a quarterly basis and additionally as required. This takes place using the reports concerning the Bank’s risk-taking capabilities, lending risks, as well as the risk report prepared in accordance with the “Minimum Requirements for Risk Management” (MaRisk). The basis of risk management consists of, on one hand, the anal- ysis and presentation of existing risks, and, on the other, compar- ing these risks with the risk cover potential (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-inde- pendent unit, has the monitoring function within the Bank. The analysis and presentation of existing risks primarily distinguishes between counterparty, market price, credit spread, liquidity and operational risks. Additional risks such as placement risks, rep- utational risk, business risk etc., are viewed as parts of the above- mentioned risks and are taken into consideration at the appro- priate place in the individual calculations. Counterparty Risk Counterparty risk (lending risk) is of major importance for MünchenerHyp. Counterparty risk refers to the danger that counterparties may delay their payment obligations to the Bank, only make partial payments or even default. The Credit Handbook presents the competencies and procedural requirements of entities involved in lending, as well as the ap- proved credit products. The 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 individual deal and portfolio levels. A procedure based on the credit value-at-risk (Credit-VaR) is used to determine lending limits. The individual contribution of every borrower (aggregate debtor or borrower unit as appropriate) – the Marginal Credit-VaR – to the Bank’s total credit risk is limited. 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. The current break- down based on mortgage lending value is as follows: