KB prezent. angl - Komerční banka

(G) Operational risk
The Group does not presently monitor and manage operational risk centrally. Operational risk is monitored at the level of
organisational units. Pursuant to the anticipated introduction of a capital requirement in respect of operational risk, the Group has
been centrally monitoring and reporting significant events of operational risk to its parent company since mid-2003. Management of
the Group are currently not considering putting other tools in place for measuring and managing operational risk.
(H) Legal risk
The Group regularly monitors and evaluates legal disputes filed against it. The Group categorises the estimated risk of loss in the
disputes into three categories: low risk (below 50 percent), medium risk and high risk. In order to cover all contingent liabilities arising
from legal disputes, the Group establishes a reserve equal to the claimed amount in respect of all litigation, where it is named as
a defendant and the likelihood of loss has been estimated to exceed 50 percent. The Group also manages its legal risk through the
assessment of legal risks involved in the contracts to which the Group is a party.
(I) Estimated fair value of assets and liabilities of the Group
Fair value of financial instruments is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm's length transaction. Where available, fair value estimates are made based on quoted market
prices. However, no readily available market prices exist for a significant portion of the Group’s financial instruments.
In circumstances where the quoted market prices are not readily available, the fair value is estimated using discounted cash flow
models or other generally acceptable pricing models as appropriate. Changes in underlying assumptions, including discount rates and
estimated future cash flows, significantly affect the estimates. Therefore, the calculated fair market estimates cannot be realised in
a current sale of the financial instrument.
In estimating the fair value of the Group’s financial instruments, the following methods and assumptions were used:
(a) Cash and balances with the central bank
The carrying values of cash and balances with the central bank are generally deemed to approximate their fair value.
(b) Investments held to maturity
Fair values of securities carried in the “Held to maturity” portfolio are calculated by discounting future cash flows using prevailing
market rates.
(c) Due from banks
The estimated fair value of amounts due from banks that mature in 180 days or less approximates their carrying amounts. The fair
value of other amounts due from banks is estimated based upon discounted cash flow analyses using interest rates currently offered
for investments with similar terms (market rates adjusted to reflect credit risk). The fair value of non-performing amounts due from
banks is estimated using a discounted cash flow analysis or the appraised value of the underlying collateral. Provisions are not taken
into consideration when calculating fair values.
(d) Loans to customers
The fair value of variable yield loans that regularly reprice, with no significant change in credit risk, generally approximates their
carrying value. The fair value of loans at fixed interest rates is estimated using discounted cash flow analyses, based upon interest
rates currently offered for loans with similar terms to borrowers of similar credit quality. The fair value of non-performing loans to
customers is estimated using a discounted cash flow analysis or the appraised value of the underlying collateral, where available.
Loans at fixed interest rates represent only a fraction of the total carrying value and hence the fair value of total loans to customers
approximates the carrying values as of the balance sheet date. Provisions are not taken into consideration when calculating fair
values.