Annual report 2004 (PDF, 4141 kB) - Unicredit Bank

Risk Management
The risk management process is an integral part of activities of the Bank and a basic tool to
ensure its sound operation. A need to deepen and improve risk management processes has
resulted from the fact that the Bank is exposed to various risks in its dealing with clients,
namely credit risk, market risk, liquidity and operational risk. Živnostenská banka pays great
attention to the risk management processes and has reduced individual risks to an acceptable
level, mainly by identifying risks timely, by their monitoring and measuring, and also due to a
sophisticated structure of internal limits for individual types of risks and products. This has
been proved by a relatively low volume of classified loans and by general business results of
the Bank.
Risk management organization
The risk management process is independent of all types of commercial activities of the Bank.
Responsibility for the risk management in Živnostenská banka lays on the following
divisions:
• Risk Management Division is responsible mainly for market and operational risks and
for a credit risk on a global/portfolio basis
• Credit Division is responsible for credit risk on an individual client basis
Both these divisions are directly accountable to Chief Operating Officer. The Board of
Directors cover the whole risk management process and report regularly to the Supervisory
Board.
The decision-making authority in the risk management area is in hands of respective
committees, i.e. “Asset and Liabilities Committee” and “Credit Committee” permanent
members of which are also Directors of the Board.
In 2004, the Bank had been making preparations for changes in the sphere of banking
regulation with respect to expected requirements of the Basel Committee for banking
supervision and this process will continue also in the years to come. Representatives of the
Bank charged with individual spheres of the risk management participate in the mutual
project developed jointly with representatives of the ČNB, Banking Association, Chamber of
Auditors and with other banks and improve their qualification in various seminars.
The Bank is trading on OTC markets and uses following financial derivatives for risk
management purposes:
• Interest rates swaps (subdivided to hedging and trading purposes)
• Currency swaps
• Currency forwards
• Forward rate agreements
Operational risks
Operational risks are such to which the Bank is exposed and which cannot be qualified as
market, credit or liquidity risks. In 2003, the operational risk in Živnostenská banka was
monitored mainly on the level of individual organisational divisions. During 2003, a project
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