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Management Report |
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| Management Report
Modern risk management
Active risk management is a major priority for Raiffeisen-Landes-
bank Tirol AG to secure its long-term success. In compliance with
statutory requirements (BWG (Austrian Banking Act) and Basel II),
RLB Tirol AG has set itself the objective of guaranteeing the se-
curity and profitability of the bank in the interests of its customers
and owners, by using up-to-date methods and appropriate risk
management and controlling systems. Our experience in 2009
has confirmed that our risk policy, risk management and their
organisation are appropriate.
Principles of risk policy
The principles of risk policy are defined by the Board of Managing
Directors, and are regularly reviewed and modified as necessary:
• The Board of Managing Directors and all the employees feel
an obligation to comply with the principles of risk policy and
make their day-to-day decisions in line with these directives.
• If the risks are unclear or there are doubts about methodol-
ogy, the principle of prudence is employed.
• The introduction of new business areas or products is
generally preceded by an appropriate analysis of the specific
business risks involved (product launch process).
Principles of risk management
Our risk management approach is based on the following principles:
• The Board of Managing Directors bears overall responsibility
for risk management supervision within Raiffeisen-Landes-
bank Tirol AG, while the Supervisory Board reviews the bank's
risk policy at regular intervals.
• Loan, market, liquidity and operational risks are managed as
a coordinated process at all the relevant levels of the bank.
• The risk committee prepares and proposes the risk strategy,
the limitation of risk capital within the scope of risk-bearing
capacity as well as risk capital allocation.
Organisation of risk management
Risk management is organised in a manner that prevents conflicts
of interest on both a personal and organisational level (separa-
tion of front office/back office). The duties and organisational
procedures involved in the measurement and monitoring of risks,
the limit structure and the actions to be taken should limits be
exceeded, are undertaken by Financing and Market Risk
Management organisational units and are described in the
relevant Raiffeisen-Landesbank Tirol AG manuals.
Credit risk
The credit risk is calculated for counterparts, banks, investments,
countries and concentrations of positions.
The extension of loans, i.e. the specific acceptance of risk, is one
of the core business areas of Raiffeisen-Landesbank Tirol AG.
For this reason the Financing Management organisational unit
supports the sales units in checking, measuring and controlling
the credit risk, as well as managing distressed loans. Various
analyses of the existing risk profile are an integral part of Finan-
cing Management reporting. Closing date reports and forecasts
are prepared in the course of periodic risk committee meetings.
Risk assessment and control methods have been developed and
implemented in line with the principle of proportionality. Different
weightings are given to the risk content of loans in the relevant
calculations. On the basis of supervisory requirements and re-
commendations, and to provide business management benefits,
RLB Tirol AG has set itself the task of continually developing and
improving the risk management process.
The risk presented by a borrower is considered on two dimen-
sions using an in-house rating system. This involves an ongoing
assessment of the business situation on the one hand, and the
evaluation and review of collateral to reduce risk on the other.
When supplemented by aggregation, control, monitoring and
checking, this ensures a risk management process that is active
at every stage.
The related tasks and organisational procedures, as well as the
credit risk strategy approved by the Board, are clearly described
in the Raiffeisen-Landesbank Tirol AG credit manual. They have
also been communicated to all personnel with executive functions
and are additionally available online. This ensures that in each
particular case, only risks that comply with our risk policy are
actually incurred. In addition, sufficient provisions are formed for
existing risks in line with the principle of commercial prudence.
Market risk
Market risk consists of the risks incurred through interest rate
changes, currencies and prices resulting from positions held in
securities, interest rates and foreign exchange. Market risk arises
both in trading and non-trading transactions.
Raiffeisen-Landesbank Tirol AG uses a combination of various
risk parameters in order to control market risks and set appropri-
ate limits.
Market risk is managed by the Treasury organisational unit, where
all interest rate, currency and price positions are systematically
compiled and appropriately controlled. In addition to the lending
business, Raiffeisen-Landesbank Tirol AG's own transactions are
one of its core business areas.
The Market Risk Management organisational unit supports the
Treasury in the pre- and post-control of market risks. Identifying,
measuring, aggregating and monitoring the market risks (limits)
and reporting constitute the principal areas of responsibility
for Market Risk Management. Special attention is paid to the
systematic monitoring of strategy and hedge positions as part of
dynamic risk monitoring. Daily risk/performance analyses and re-
ports ensure that, despite volatile financial markets, the Treasury
organisational unit can apply the appropriate control measures.
Liquidity risk
The refinancing of loans at matching maturities is highly important
at Raiffeisen-Landesbank Tirol AG. This strategy is supplemented
by a liquidity parameters system and the corresponding limits,
with a distinction made between short-term (operational) and
long-term (strategic) liquidity control. Market Risk Management
checks that these limits are adhered to.
A sufficient supply of short-term and long-term liquidity for pos-
sible bottlenecks is included in the bank's liquidity plans and this
topic is regularly discussed by the risk committee. In order to
strengthen its liquidity position, Raiffeisen-Landesbank Tirol AG
has extended its issuing volume and its portfolio of securities that
can be refinanced, among other measures. Additional control
instruments are being developed in the context of proactive
liquidity control.
Operational risk
Operational risks are managed in a separate organisational unit
at RLB Tirol AG. All risks that could arise due to errors in sys-
tems, processes, employee misconduct or external events, are
analysed, assessed and suitable counter-measures are taken.
The equity requirement for operational risk is calculated using the
basic indicator method. Risks are presented and processed us-
ing modern computer systems. Regular checks by Internal Audit
ensure that operational risks are managed appropriately.
Risk-bearing capacity
As part of overall risk control at the bank, the bank's potential for
covering risks is balanced against all major risks, which are deter-
mined using the latest methods and appropriate systems.
The annual risk-bearing capacity figure represents the limit for the
total bank risk. Non-quantifiable risks are taken into account by
means of a "risk buffer" as well as the actual measured risk.
All risk-related information is included in the monthly risk-bearing
capacity analyses. They determine total bank risk using various
scenarios in order to ensure that sufficient capital would be avail-
able in difficult situations.
The key factors in Raiffeisen-Landesbank Tirol AG risk manage-
ment processes are credit and market risks, as the focus of bank
business is on retail and commercial customers and treasury
transactions.
The market risk resulting from trading books and banking books
is calculated using sensitivity parameters, while credit risk is
analysed using probabilities of default.
Risk Report