Risk Management
Risk management and minimization of risks remain one of the Bank’s priority goals.
Risk management is focused on assessment, monitoring and control over the risks arising in the banking business, as well as on working out and planning of risk minimization measures.
For effective risk management the Bank has established the system of risk management basing on the following fundamental principles:
- Increase of no-risk transactions. It is one of the Bank’s basic economic priorities, and the Bank is oriented on increasing of no-risk commission transactions in its gross operating profit.
- Evasion. Adopting a decision on transaction efficiency taking into account all the risks followed.
- Localization. Limitation of possible losses connected with the transaction by setting loss threshold value.
- Dissipation. Limitation of possible losses by diversification of the Bank’s assets and liabilities.
- Risk-premium accounting when making a comparative efficiency of the Bank’s operations.
- Compensation. Risk limitation (hedging) by:
- insurance;
- using derivative financial instruments, compensating possible losses under the hedged assets;
- trading in financial instruments with different sensitivity to homogenous risks.
The decision on executing of a transaction is adopted with compulsory accounting of risks associated with this transaction. The Bank applies systems of limits for possible losses by diversification of the Bank’s assets and liabilities, as well as by risk limitation.
Taking into account the specific business and the balance sheet structure the main risk the Bank is faced with is credit risk. Credit risk management includes assessment and control of the credit risk inherent to individual borrowers and groups of related parties. The procedures of risk assessment and taking a decision are strictly regulated. Credit Committee and Limit Committee are the Bank’s collective bodies, they set limits to counterparts and take decisions on issue of loans or other investments.
Credit risk management is effected on the basis of limits set to different types and terms of banking operations and is followed by regular monitoring of the borrower’s credit status.
Market and structural risk management is effected by the Bank’s Asset and Liability Committee. The Bank’s management system has the system of limits on investments, open positions, maximum limits of losses, etc.
Currency and price risk management is effected by using VaR methodology. The Bank manages foreign currency risk by general management, as well as by maintaining open foreign currency positions corresponding to the reviewed and predicted dynamics of foreign currency rate changes and limits to open foreign currency positions. Value risk management is effected by active management of securities trade portfolio, following changes in fair value of the securities.
Risk of liquidity is limited by a number of internal ratios and regulated daily by the Liquidity Committee basing on on-line information about the ratio of the Bank’s assets and liabilities by maturity and payment calendar. Liquid assets are maintained on the adequate level for satisfying the Bank’s commitments to its customers, in case of any environmental changes.
The Bank’s liquidity is adequate, and in case of force-majeure followed by decrease of liquidity, the Bank has a regulation plan according to which it will restore its liquidity ratios on the required level.
The Bank corresponds to all the requirements of the Central bank of Russia with regard to obligatory economic ratios. The economic ratios are adequate for standard operations in the current financial environment.
The structural divisions are operating within the limit structure set to counterparts, positions, instruments, sub-divisions, profit and loss limitation, personal limits of accountability.
