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Geschäftsbericht 2013, englisch

40 Management report – münchener Hypothekenbank eg l annual report 2013 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 default. 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. Matching currency funding is pri- marily sought to hedge foreign exchange risks arising from trans- actions involving foreign currencies; the remaining deals are hedged using (interest rate) – currency swaps. The main hedg- ing instruments we use at the portfolio level are interest rate swaps and swaptions. In addition to linear instruments, Bermu- dan options on interest swaps (swaptions) and interest options (caps and floors) are also used as hedges for embedded legal ter- mination 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 mea­ sures and controls that are integrated in the work processes. These are, in particular, separation of functions, the double-check prin- ciple, access limitations, payment guidelines, new product pro- cess and balance confirmations. Process-independent measures are, above all, carried out by the internal audit department. The risk management methods described in the risk report pro- vide continuous qualitative and quantitative statements regard- ing MünchenerHyp’s economic situation, including, for example, the development of performance. This evaluation involves as- pects 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 Manage- ment. 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 fig- ures generated by the Bank’s accounting process. Corporate Planning MünchenerHyp continues to pursue a growth strategy for its residential and commercial property financing activities built on a solid foundation of Pfandbrief-based financing. The fur- ther strengthening of the Bank’s earning power will continue to be our overarching strategic goal. In working towards this goal the Bank’s strategic planning is focused on measures to improve net interest income and net commission income, in- crease cost efficiency, and keep risks under control. The annual adjustment of our business and risk strategy required by the MaRisk defines the formal planning framework for this. Our integrated process plays a key role in the planning and man- agement of our operations. This process synchronises our sales goals, management of the decentral and central components of our administrative expenses – including our project portfolio – with the outlook for the profit and loss account as it develops over the course of the year. All of the income and expense ele- ments, as well as our ability to bear risks, are continually moni- tored respectively planned on a continuous basis, thereby allow- ing the Bank to respond appropriately and in a timely manner to fluctuations in earnings or costs.

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