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ePaper created 2015-04-21, 16:47:46 | version 1.37.0
41management report accumulated total cash flow requirements, available uncovered and covered funding potential including planned new business and prolongations in line with the sur- plus cover requirements set by the rating agency Moody’s, additional detailed data for planning and control activities. The limitation of liquidity risks takes place using the structured liquidity forecast and the stress scenarios based on the available liquidity within a year. In addition, pursuant to CRD IV, the NSFR is calculated on a quar- terly basis for all currencies and presented separately for all rele- vant currencies; these are currently the euro and the Swiss franc. As the supervisory authority has not yet issued any binding plans for complying with NSFR requirements, and the values are cur- rently stable at about 100 percent, this ratio is not being active- ly managed at this time. In order to reduce refinancing risks, MünchenerHyp strives to refinance loans with matching maturities and continuously checks if its relevant refinancing sources (primarily those with- in the Cooperative Financial Network) remain available. In order to limit market liquidity risks in its lending business with pub- lic-sector borrowers and banks, MünchenerHyp primarily ac- quires securities that are acceptable as collateral by the 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 about € 8 million as of December 31, 2014 and consisted of one final Commercial Mortgage Backed Security (CMBS) backed by property in Europe. The remaining anticipated time-to-maturity of this security is about 2.3 years. Investment Risk Investment risk is understood to mean the danger of financial loss due to a decline in the value of a long-term investment to less than its book value and held by MünchenerHyp in compa- nies belonging to the Cooperative Financial Network due to stra- tegic reasons. 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 (more than 50 percent) of damages from op- erational risks incurred last year stemmed, as usual, from losses related to the disposal of properties which were too highly mort- gaged. 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 emergency plans and preventive measures. Insurable risks are covered by in- surance to the normal extent required by banks. Ability to Bear Risks The professional concepts and models used to calculate the abili- ties to bear risks are continuously further developed in accor dance with legal supervisory requirements. MünchenerHyp calcu- lates 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 purposes. This scenario is used to determine if the bank still would have an ad- equate equity capital ratio exceeding the legally required mini- mums after the occurrence of risks contained in all of the risk cat- egories. 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, operation- al risks, spread and migration risks, investment risks, property risks, as well as modelling 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 2014 business year.