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ePaper created 2015-04-21, 16:47:46 | version 1.37.0
34 münchener Hypothekenbank eg | annual report 2014 Risk, outlook and opportunities report management report 2014 management report Risk report The ability to monitor and keep risks under control at all times is essential for the successful management of business develop- ment 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 con- cerning 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 analy sis 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, in- vestment, modelling and operational risks. Additional risks such as placement risks, reputational risk, business risk etc., are viewed as parts of the abovementioned risks and are taken into consid- eration at the appropriate 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 mort- gage business activities consist of top tier loans with moderate loan-to-value ratios. The current breakdown based on loan-to- value ratios is as follows: