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Geschäftsbericht 2013, englisch

Management report 39 1) Reputation scenario (high stress) 2) Market scenario (high stress) 3) Market and reputations scenario (light stress) 4) Market and reputations scenario (high stress) 5) Worst Case scenario  Complementary to the stress tests, corresponding measures were defined for simulation purposes to reduce the liquidity risks in the respective cases. The limitation of liquidity risks takes place using the structured liquidity forecast and the stress scenarios based on the Bank’s uncovered refinancing needs. In order to reduce refinancing risks, MünchenerHyp strives to re- finance loans with matching maturities and continuously checks if its relevant refinancing sources (primarily those within the Cooperative Financial Network) remain available. In order to limit market liquidity risks in its lending business with public-sector borrowers and banks, MünchenerHyp primarily acquires securities that are acceptable as collateral by the European Central Bank (ECB), and which can be used for open market business at any time. Investments in less liquid bonds, like Mortgage Backed Securities (MBS), are no longer being made. The portfolio was valued at € 13 million as of December 31, 2013 and consisted of one final Commercial Mortgage Backed Security (CMBS) backed by prop- erty in Europe. As of December 31, 2012 the anticipated time-to- maturity of this security was about 3 years. Operational Risks Operational risks refer to possible losses caused by personal mis- conduct, weaknesses in procedural or project management, tech- nical failure or negative outside influences. Personal misconduct also includes unlawful actions, improper sales practices, unau- thorised actions and transaction errors. The major portion of damages incurred last year stemmed from losses related to the disposal of properties that were too highly mortgaged. We minimise our operational risks by qualifying our employees, using transparent processes, automating standard procedures, and by having fixed working instructions, comprehensive func- tional testing of the IT-systems, as well as appropriate emergen- cy plans and preventive measures. Insurable risks are covered by insurance to the normal extent required by banks. Ability to bear risks The professional concepts and models used to calculate the abilities to bear risks are continuously further developed in ac- cordance with legal supervisory requirements. MünchenerHyp calculates its ability to bear risks based on the Going-Concern as well as the so-called Insolvency Case scenarios. The Going- Concern scenario is the relevant method used for control pur- poses. This scenario is used to determine if the bank still would have an adequate equity capital ratio exceeding the legally re- quired minimums after the occurrence of risks contained in all of the risk categories. The only cover potential that may be used to cover risks in this scenario is the freely available regulatory equity capital. The scenario deducts market risks, counterparty risks, operational risks, spread and migration risks, participation risks, as well as model risks containing other non-explicitly defined risks. Risks on cover potential for risks are accounted for on a conservative basis and without taking diversification effects between the risk categories into consideration. MünchenerHyp’s risk bearing capacity was continuously given throughout the entire 2013 business year. The Gone-Concern, or insolvency scenario, was additionally in- troduced in 2012 to establish a method of controlling in accord- ance with the BaFin paper, “Supervisory assessment of banks’ internal concepts concerning their ability to bear risks”. This method of controlling takes all unrealised losses into consider- ation that are not included in the Going-Concern scenario. The Bank’s risk bearing capacity was also continuously given through- out last year using the insolvency scenario.

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