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Geschäftsbericht 2015, englisch

37 management 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 55.8 19.0 -5.3 -3.5 3.8 69.8 General adjustments to value 13.0 0.0 0.0 0.0 0.0 13.0 The individual and general adjustments to value developed as follows in 2015: our commercial property financing business, whereby continuing difficult market conditions in the Netherlands in 2015 resulted in individual provisions for risk, although they were low. One adjust- ment to value took place for the USA. 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 quantified 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 spe- cific interest rate risks. General interest rate risks refers to risk aris- ing from changes in the market value of investments or liabilities 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 cate- gories. The Bank’s portfolio of bonds issued by eurozone countries more heavily affected by the sovereign debt crisis, or in bonds issued by banks domiciled 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. We do not believe that our investments are in danger of default. We are of the opinion that the measures taken by individual states, as well as protective mechanisms enacted at EU levels, are appro- priate to ensure the repayment of the affected liabilities. In the case of bank bonds, all of these bonds are covered bonds so that in this instance we also anticipate that they will be repaid as con- tractually agreed. Among other risks, options involve the following risks: volatility risk (Vega; risk that the value of a derivative instrument will change due to increasing or decreasing volatility), time risk (Theta; is under- stood to the risk that measures how the passage of time impacts ments to value 55.819.0 -5.3 -3.53.869.8 to value 13.00.00.00.00.013.0

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