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ePaper created 2015-04-21, 16:47:46 | version 1.37.0
37management report Total lending business in € millions Opening balance Addition Reversals Utilisation Changes related to exchange rate shifts and other factors Closing balance Individual adjust- ments to value 52.8 11.0 -8.4 -3.8 4.2 55.8 General adjust- ments to value 13.5 0.0 -0.5 0.0 0.0 13.0 The individual and general adjustments to value developed as follows in 2014: stability of the residential property market. This also generally applies for our commercial property financing business, where- by continuing difficult market conditions in the Netherlands in 2014 resulted in provisions for risk, although they were low. MünchenerHyp has not entered into any new business trans- actions in the USA since 2009. Provisions for risk taken for the remaining loan portfolio were reduced. Business relationships with financial institutions are primarily based on master agreements that permit settlement of claims and liabilities (netting) vis-a-vis the other institution. In general, we also enter into security agreements. In the future we will use a so-called Central Counterparty (CCP) as the preferred basis for settling derivative trades. Market Price Risks Market price risks consist of the risks to the value of positions due to changes in market parameters including interest rates, volatility and exchange rates among others. These risks are quan- tified as potential losses of present value using a present value model that differentiates between risks related to interest rates, options and currency rates. Interest rate risks are divided into two categories: general and specific interest rate risks. General interest rate risks refers to risk arising from changes in the market value of investments or lia- bilities that are dependent on the general level of interest rates, and which will react negatively if interest rates change. Specific interest rate risks are also referred to as (credit) spread risks, and are included under market price risks. Credit Spread is the term used to describe the difference between the yield generated by a risk-less bond and a risky bond. Spread risks take into account the danger that this difference in interest rates can change although creditworthiness ratings remain unchanged. The reasons for altered yield premiums are: varying opinions of market participants regarding positions, the creditworthiness of the issuer actually changes although the issuer’s credit rating does not yet reflect this change, macro-economic factors that influence creditworthiness categories. This risk remained the focal point of attention in 2014 – due to the ongoing debt and confidence crisis in certain European coun- tries – especially for supervisory authorities and market partici pants. The valuation of our securities portfolio was favourably affected as spreads – which had widened sharply in earlier years – have almost completely closed in recent years. The Bank’s port- folio of bonds issued by eurozone countries more heavily affect- ed by the sovereign debt crisis, or in bonds issued by banks domi- ciled in these countries, remained at a moderate level. The Bank has not made any new investments in countries located on the periphery of eurozone since 2011. Figures shown under “Sovereign states” also include claims against non-government debtors, which are additionally secured by direct and immediate guarantees issued by the respective ments to value 52.811.0 -8.4 -3.84.255.8 ments to value 13.50.0 -0.50.00.013.0