Geschäftsbericht 2015, englisch

41 management report The scenario deducts market risks, counterparty risks, operational 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 con- servative basis and without taking diversification effects between the risk categories into consideration. MünchenerHyp’s risk bearing capacity was continuously given throughout the entire 2015 business year. Use of Finance Instruments for Hedging Purposes We engage in hedging activities – interest rate and currency deriv- atives – in order to further reduce our risks and to hedge our busi- ness activities. Credit derivatives are not employed. We use asset swaps as micro-hedges at the level of individual transactions. Structured fundamental transactions such as callable securities are hedged accordingly with structured asset swaps. Matching currency funding is primarily sought to hedge foreign exchange risks arising from transactions involving foreign currencies; 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 addition to linear instruments, Bermudan options on interest swaps (swaptions) and interest op- tions (caps and floors) are also used as hedges for embedded legal termination rights or arrangements 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 instructions. It con- tains organisational security measures, and ongoing measures and controls that are integrated in the work processes. These are, in par- ticular, separation of functions, the double-check principle, access limitations, payment guidelines, new product and new structure process and balance confirmations. Process-independent meas- ures are, above all, carried out by the internal audit department. The risk management methods described in the risk report provide continuous qualitative and quantitative statements regarding MünchenerHyp’s economic situation, including, for example, the development of performance. This evaluation involves aspects of all risk categories. A close coordination procedure exists between the risk controlling and accounting departments at MünchenerHyp. This coordination procedure is supervised by the entire Board of Management. 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 resi- dential and commercial property financing activities based on a solid foundation of Pfandbrief-based refinancing. The further 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, increase cost effi- ciency, 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 in- tegrated process plays a key role in the planning and management of our operations. This process synchronises our sales goals, manage- ment of the decentral and central components of our administra- tive 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 elements, as well as our ability to bear risks, are continually monitored, or additionally planned on a rolling basis, 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 meets all of the requirements for equity capital. Equity capital planning also contains measures to achieve a Leverage Ratio of 3 percent.

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