UBI Banca Group

3 BANKING GROUP - LIQUIDITY RISK
Qualitative information
A. General aspects, processes for the management and methods for the measurement of
liquidity risk
Liquidity risk is defined in the UBI Group as the risk of the failure to meet payment obligations,
which can be caused either by an inability to raise funds, by raising them at higher than market
costs (funding liquidity risk), or by the presence of restrictions on the ability to sell assets (market
liquidity risk) with losses incurred on capital account.
Structural liquidity risk is defined as the risk resulting from a mismatch between the sources of
funding and lending.
The primary objective of the liquidity risk management system is to enable the Group to meet its
payment obligations and to raise additional funding at a minimum cost and without prejudice to
potential future income.
The general principles on which liquidity management within the Group is based are as follows:
• the adoption of a centralised management system run by Group Treasury;
• diversification of the sources of funding and limits on exposure to institutional counterparties;
• protection of Group capital in liquidity crisis situations;
• a proper financial balance between assets and liabilities;
• a proper level of eligible and/or liquid assets, sufficient to meet liquidity requirements even under
stress conditions.
The reference framework for the measurement, monitoring and management of exposure to liquidity
risk is defined annually as part of the Policy to Manage Financial Risks of the UBI Banca Group and
the relative regulations to implement it and the document setting operational limits approved by the
corporate governance bodies.
Corporate risk policies are supplemented by a contingency funding plan (CFP), an emergency plan for
liquidity management, the main aim of which is to protect the Bank’s assets in situations of liquidity
drainage, by putting in place crisis management strategies and procedures to find sources of funding
in cases of emergency.
In 2011 both the system for monitoring liquidity risk and the relative structural balance between
assets and liabilities was revised in order to incorporate the developments and recommendations of
the international process in progress to revise the regulations governing liquidity risk.
These documents set out rules for the pursuit and maintenance of an adequate degree of
diversification in the sources of funding and a proper structural balance between the sources and
uses of funds for the network banks and the product companies, through the pursuit of co-ordinated
and efficient funding and lending policies.
The following are responsible for liquidity risk management:
• the Finance Macro Area (1 st level management), which monitors liquidity daily and manages risk
on the basis of defined limits;
• the Risk Management Area (2 nd level management), responsible for periodically verifying that limits
are observed.
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