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Geschäftsbericht 2014, englisch

münchener Hypothekenbank eg | annual report 201442 management report 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 used. We use asset swaps as micro-hedges at the level of individual transac- tions. Structured fundamental transactions such as callable se- curities are hedged accordingly with structured asset swaps. Matching currency funding is primarily sought to hedge foreign exchange risks arising from transactions involving foreign cur- rencies; the remaining deals are hedged using (interest rate) – currency swaps. The main hedging instruments we use at the portfolio level are interest rate swaps and swaptions. In addi- tion to linear instruments, Bermudan options on interest swaps (swaptions) and interest options (caps and floors) are also used as hedges for embedded legal termination rights or arrange- ments 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, financial reporting handbooks, and numerous operating in- structions. It contains organisational security measures, and ongoing measures and controls that are integrated in the work processes. These are, in particular, separation of functions, the double-check principle, access limitations, payment guidelines, new product process and balance confirmations. Process-inde- pendent measures are, above all, carried out by the internal au- dit 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 figures gen- erated 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 refinancing. 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 rollingly planned, thereby allowing the Bank to respond appropriately and in a timely manner to fluctuations in earnings or costs. Planning also includes issues regarding appropriate levels of equity capital. Following the assumption of direct supervision of the Bank by the ECB, MünchenerHyp met all of the require- ments for equity capital. Mid-term equity capital planning is geared towards fulfilling the Leverage Ratio of 3 percent.

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