Notes to Financial Statements - BDO

Notes to Financial StatementsDECEMBER 31, 2008, 2007 AND 2006(Amounts in Millions Except Per Share Data)risk-reward balance and maximize return on the Group’s capital. The Group’s Risk Management Committee (RMC) has overall responsibilityfor the Group’s risk management systems and sets risks management policies across the full range of risks to which the Group is exposed.Specifically, the Group’s RMC places trading limits on the level of exposure that can be taken in relation to both overnight and intra-daymarket positions. With the exception of specific hedging arrangements, foreign exchange and interest rate exposures associated with thesederivatives are normally offset by entering into counterbalancing positions, thereby controlling the variability in the net cash amounts requiredto liquidate market positions.Within the Group’s overall risk management system, the Assets and Liabilities Committee (ALCO) is responsible for managing the Group’sstatement of condition, including the Group’s liquidity, interest rate and foreign exchange related risks. In addition, ALCO formulates investmentand financial policies by determining the asset allocation and funding mix strategies that are likely to yield the targeted financial results.Separately, the Risk Management Group (RMG) is mandated to adequately and consistently evaluate, manage, control, and monitor the overallrisk profile of the Bank’s activities across the different risk areas (i.e., credit, market, liquidity, and operational) to optimize the risk-rewardbalance and maximize return on capital. RMG has responsibility for the setting of risk policies across the full range of risks to which the Groupis exposed to.In the performance of its function, RMG observes the following framework:• It is responsible for policy formulation in coordination with the relevant businesses/functions and ensures that proper approval for themanuals/policies is obtained from the appropriate body.• It then disseminates down the approved policies to the relevant businesses/functions after which, pertinent authorities are delegateddown to the businesses/functions to guide them in the conduct of their businesses/functions. RMG then performs compliance monitoringand review to ensure approved policies are adhered to.• It is responsible for clarifying interpretations of risk policies/guidelines raised by the Business Heads/Units.• When adverse trends are observed in the account/portfolio, RMG is responsible for flagging these trends and ensuring relevant policiesfor problem accounts/portfolio management are properly applied.• RMG is responsible for the direct management of accounts in the Group’s Non-Performing Loan (NPL)/property-related items inlitigations portfolio and ensure that appropriate strategies are formulated to maximize collection and/or recovery of these assets.• It is also responsible for regular review and monitoring of accounts under their supervision and ensuring that the account’s loanclassification is assessed timely and accurately.4.1 Liquidity RiskLiquidity risk is the risk that there could be insufficient funds available to adequately meet the credit demands of the Group’s customers andrepay deposits on maturity. The Group manages liquidity risk by holding sufficient liquid assets of appropriate quality to ensure short-termfunding requirements are met and by maintaining a balanced loan portfolio which is repriced on a regular basis. In addition, the Group seeksto maintain sufficient liquidity to take advantage of interest rate and exchange rate opportunities when they arise.The analysis of the maturity groupings of resources, liabilities and off-statement of condition items as of December 31, 2008 and 2007 inaccordance with account classification of the BSP, are presented below. The amounts disclosed in the maturity analysis are the contractualundiscounted cash flows. Such undiscounted cash flows differ from the amounts included in the statement of condition because the statementof condition amounts are based on discounted cash flows.GroupMoreOne to than three More than Morethree months to one year to than threemonths one year three years years TotalDecember 31, 2008:Resources:Cash P 21,770 P - P - P - P 21,770Loans 230,490 50,656 44,846 165,994 491,986Investments 6,129 8,000 39,274 102,748 156,151Placements 79,722 48 - - 79,770Other resources - 10,642 ( 177 ) 41,890 52,355Total Resources 338,111 69,346 83,943 310,632 802,032Liabilities and Equity:Deposit liabilities 126,270 4,598 14,960 490,926 636,754Bills payable 29,909 13,423 697 27,552 71,581Other liabilities P 3,689 P 29,645 P 2,724 (P 135 ) P 35,923Total Liabilities (Carried Forward) P 159,868 P 47,666 P 18,381 P 518,343 P 744,25826Thinking Ahead To Get You Ahead • Annual Report 2008