Letno poročilo 2009.pdf - UniCredit Banka Slovenija dd

and correlations of a three-year time series of risk factors.The limit utilization is the maximum of the 97.5 % quantiles of each grid point.The 2009 year end exposures show a significant decrease in counterparty risk of the Bank compared to 2008 data due to improvements in thegeneral financial markets situation reflected in lower current market values of derivatives and lower risk factor volatilities.Counterparty risk exposures of UniCredit Banka Slovenija d.d. by rating categoryRating classCounterparty risk exposure (in Million EUR)31. 12. 2009 31. 12. 2008Standard (A) 127.68 195.82Watch (B) 0.00 0.00Substandard (C) 2.91 0.00Doubtful (D) 0.00 0.00Loss (E) 0.00 0.00TOTAL 130.59 195.82Market RiskUniCredit Banka Slovenija d.d. takes on exposures to market risks, which is the risk that fair value or future cash flows of a financial instrumentwill fluctuate because of changes in market prices.Market risks arise from open positions in interest rate, currency, credit spread, and commodity and equity products. All of these are exposedto general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads,foreign exchange rates, and commodity and equity prices.MARKET RISK MANAGEMENT TECHNIQUESMarket risk management includes all activities in connection with the Banks’ treasury operations and management of the balance sheetstructure. Risk positions are aggregated at least daily, analyzed by the independent market risk management unit and compared with the risklimits set by the ALCO committee.At UniCredit Banka Slovenija d.d., market risk management includes ongoing reporting on the risk position, limit utilization, and the dailypresentation of results of treasury operations.The ALCO sets the risk limits for the Bank’s market risk activities at least once a year in close cooperation with the respective units atUniCredit Bank Austria AG, Vienna. The entire set of rules for treasury operations and market risk management is laid down in the FinancialMarkets Rulebook and is divided into three parts (General Part, Specific Part and Unit Part). Only authorized risk-takers are permitted to enterinto risk positions.UniCredit Banka Slovenija d.d. uses for its market risk management the ‘NORISK’ risk model which was developed by the Strategic RiskManagement unit of UniCredit Bank Austria AG, Vienna and has been used for several years by UniCredit Banka Slovenija d.d.Several years ago, the variance-covariance approach of the system was extended to include a simulation approach. Ongoing refinement workwhich is done by the abovementioned Strategic Risk Management unit in Vienna which includes reviewing the model as part of back-testingprocedures, integrating new products and adjusting the system to general market developments.In this context, at UniCredit Banka Slovenija d.d., a product introduction process has been established in which the Risk Management unitplays a decisive role in approving new products together with the sales units.Based on aggregated data, the ‘NORISK’ risk management system provides the major risk parameters for treasury operations once a day.UniCredit Bank · 2009 Annual Report 211