UBI Banca Group

Part E - Information on risks and the relative
hedging policies
Section 1 - Banking Group Risks
In compliance with current regulations, the UBI Group has adopted a risk control system which
disciplines and integrates the organisational, regulatory and methodological guidelines of the system
of internal controls with which all Group member companies must comply in order to allow the
Parent to perform its activities of strategic, management and operational control in an effective and
economical manner.
Group member companies co-operate pro-actively in identifying risks to which they are subject and
in defining the relative criteria for measuring, managing and monitoring them.
The key principles on which Group risk analysis and management are based for the pursuit of an
increasingly more knowledgeable and efficient allocation of economic and supervisory capital are as
follows:
- rigorous containment of financial and credit risks and strong management of all types of risk;
- the use of a sustainable value creation approach to the definition of risk appetite and the
allocation of capital;
- definition of the Group’s risk appetite with reference to specific types of risk and/or specific
activities in a set of policy regulations for the Group and for the single entities within it.
The appetite for risk helps to define the strategic positioning of the Group and it is defined in
compliance with its mission and its strategy and its business and value creation objectives.
The definition of the UBI Group’s appetite for risk includes quantitative and qualitative factors:
from a quantitative viewpoint, the risk appetite is given by the amount of capital that the
Bank is willing to put at risk and it helps to define the strategic positioning of the Group;
from a qualitative viewpoint, risk appetite relates to the Group’s desire to strengthen its
management and monitoring systems and the efficiency and effectiveness of its system of
internal controls.
In view of the proposals to modify banking regulations (Basel 3) and the European Banking Authority
(EBA) recommendation on capital, the overall planning for the Basel Two Project was moved forward
by six months with respect to the original objective. Consequently, the first calculation of the
minimum capital requirement using the Advanced Internal Rating Based (AIRB) approach for credit
risk is planned for the June 2012 supervisory reports. In October and November 2011, the Parent,
UBI Banca, was subject to a pre-validation inspection by the Bank of Italy and, subsequently, in
meetings held on 15 th December 2011, the Management Board and the Supervisory Board approved
the filing of an official application to the Supervisory Authority for authorisation to use the AIRB
approach for the calculation of the capital requirement for credit risk. In the meeting just mentioned
the Supervisory Board therefore certified compliance by the Group, both at consolidated and
individual company level, with the minimum regulatory requirements set for the AIRB approach.
Similarly, procedures were set in motion for authorisation to use the advanced internal method for
the calculation of the capital requirement for operational risks (the advanced measurement approach
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