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Management report
The regulatory capital requirement for the credit risk is ascertained
in accordance with the standard rate. In line with supervisory
law requirements and recommendations, as well as potential
operational benefits, Raiffeisen-Landesbank Tirol AG has set
itself the goal of continuously developing and improving its
risk management processes as well as its risk evaluation and
monitoring methods.
Market risk
Market risk is the risk of interest rate, exchange rate, price and
spread changes adversely affecting securities, interest and
currency positions. Market risk is generated by both bank book
and trading book transactions.
Raiffeisen-Landesbank Tirol AG uses a combination of risk
measurement parameters to manage market risks and set
associated limits. The treasury department manages market risk,
systematically compiling all interest-, currency- and price-sensitive
positions and controlling them in line with the prevailing market
situation. Alongside the credit business, the bank’s own account
trading constitutes another core line of business.
The risk management organisational unit helps the treasury
organisational unit to control market risks. The measurement and
monitoring of market risk and regular reporting are the central
tasks in this respect. The dynamic risk-monitoring process involves
giving particular emphasis to the systematic monitoring of strategic
and hedging positions. Daily risk and performance analyses and
reports ensure that the treasury department provides appropriate
steering momentum.
Liquidity risk
At Raiffeisen-Landesbank Tirol AG, we set great store by
refinancing with matching maturities, and this policy is supported
by a key liquidity figures system and associated limits, duly
distinguishing here between short-term operational and longer-
term structural liquidity management and also liquidity price risk.
The unexpected withdrawal of customer deposits is classified as
short-term liquidity risk, while increased own refinancing costs as
a result of the refinancing structure are classified as a structural
liquidity risk or liquidity price risk. The liquidity risks are steered by
the treasury department.
Compliance with limits is monitored by the risk management
department. Various liquidity scenarios are used to simulate
adequate supplies of short- and long-term liquidity during
hypothetical financial squeezes. To reinforce liquidity, Raiffeisen-
Landesbank Tirol AG gives great weight to factors such as
issuance activity and available refinanceable collateral. Additional
steering instruments are continuously being developed in
furtherance of proactive liquidity steering, something which will
increase in importance with the implementation of Basel III.
RLB Tirol AG’s LCR performance indicator was 89 per cent as
of 31.12.2014 and thereby has prematurely fulfilled the limit
demanded by the supervisory authority by the end of 2017. The
NSFR performance indicator with a value of 100 per cent as of the
balance sheet date bears witness to a balanced relationship of
required and available stable refinancing at RLB Tirol AG.
Investment risk
Investment risk is steered by the management board, measured
by the risk management department and monitored by the finance
department.
An expert approach ensures the appropriate assessment of
potential risk.
Operational risk
The management of operational risk is the task of the risk
management organisational unit. All potential risks that can result
from system or process failures, mistakes by employees and
external events are analysed and evaluated with a view to devising
suitable countermeasures.
The regulatory capital resources needed to combat operational
risk are determined using a base indicator approach. The risks are
depicted and managed using modern IT systems. This process
is backed up by regular internal audits and periodic reporting to
ensure that operational risk is tackled vigorously.
Risk-bearing capacity
In the process of steering overall risk, our capacity to cover risk
is tallied against all significant risks identified using appropriate
methods and systems suitable for this purpose.
The planned annual risk exposure represents the limitation of the
aggregated overall bank risk, taking into account not just the risks
actually identified and quantified but also other non-quantifiable
risks by putting in place a risk buffer. All risk-relevant information is
fed into monthly risk-bearing capacity reports, which are discussed
in depth by the risk committee. Various different scenarios
are used to determine overall bank risk in order to ensure that
sufficient capital would be available to cope with a range of
problematic and extreme situations.
At Raiffeisen-Landesbank Tirol AG, greater attention is given to
the credit, market and liquidity risk management processes due
to the fact that the focus of the bank’s activities is on private and
commercial customers and also treasury business. Credit risk,
including the macroeconomic risk, is calculated on the basis
of default probabilities and loss ratios, and trading book and
banking book market risk and liquidity risk are calculated using
key sensitivity figures. Aside from the market-dependent risks, the
overall bank-steering process also involves calculating investment
risk and operational risk in order to both represent all risks and
take into account the ever-growing supervisory requirements.
The risk capacity analysis thus forms the starting point for keeping
risky activities down to a reasonable level in order to ensure the
trouble-free continuing existence of Raiffeisen-Landesbank Tirol
AG while also fully exploiting its revenue potential.
The consequences of events which cannot be accounted for
adequately or at all via conventional risk assessment methods are
identified by conducting regular stress tests. This involves defining
stress scenarios for each of the principal risk categories and
analysing the impact of these exceptional situations on our capital
adequacy and risk-bearing ability.
