UBI Banca Group

2. BANKING GROUP - MARKET RISK
2.1 Interest rate risk and price risk – supervisory trading portfolio
Qualitative information
A. General aspects
The considerations that follow relate exclusively to the “trading book”, as defined by supervisory
regulations. Transactions designed to affect sensitivity at Group level and equity investments in other
companies classified as for trading according to IAS are excluded.
Management of Group financial risk is centred in general in the Parent and is performed by the
Finance Macro Area. Exception is made for the portfolio for which management has been delegated to
UBI Pramerica SGR by the Parent and for portfolios managed directly by Centrobanca, IW Bank, BDG
and UBI Banca International.
B. Processes for the management and methods of measurement of interest rate risk and price
risk
The guidelines for the assumption and monitoring of financial risk in the UBI Banca Group are
defined in the Policy to Manage Financial Risks of the UBI Banca Group and in the relative documents
to implement it (Regulations and document setting operational limits) with particular reference to
market risk on the trading book and to interest rate, currency and liquidity risks on the banking
book.
More specifically the policy defines the capital allocated (maximum acceptable loss) to trading book
activities, equal to 1.5% of the available financial resources (with an early warning threshold for
amounts greater than 80% of the capital allocated), and it sets an early warning threshold on VaR,
which must not exceed 20% of the capital allocated.
Within the trading book, the monitoring of the consistency of the risk profiles of Group portfolios with
respect to risk-return objectives is based on a system of limits which involves the combined use of
various indicators. The following are defined for each portfolio of the Group:
mission
maximum acceptable loss limit
VaR limit
possible limits on the type of financial instruments permitted,
possible limits on composition.
Consistent with the limits set by the policy, the Document setting operational limits defines operational
limits for the trading book of the UBI Group in 2011, both at general level and for counterparties and
single portfolios.
The main operational limits for 2011 (including reallocations and any new limits set in the second
half of the year) are as follows:
maximum acceptable loss for the UBI Group trading book €110.47 million
early warning on maximum acceptable loss (MAL) 70% MAL
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