ANNUAL REPORT 2006 - DG Hyp

RISK REPORT
I) Risk management – objectives and organisation
a) Objectives of risk management
DG HYP’s risk management process is geared towards
exploiting the business potential within the scope of the
bank’s capacity to carry and sustain risk, emphasising profitability.
Within this context, we follow the guidelines of
optimising the risk/return profile of the lending business,
with respect to individual transactions as well as within the
framework of active management of the entire portfolio.
The individual types of risk in the lending and securities
business are standardised to permit comparison, in order to
provide a basis on which capital allocation throughout the
entire bank is managed, with an emphasis on risk and
return.
b) Responsibilities
The organisation and assignment of responsibilities for
DG HYP’s risk management is focused on the requirements
of the bank’s business model, within the framework of
applicable regulatory requirements, in particular, the Minimum
Requirements for Risk Management (Mindestanforderungen
an das Risikomanagement – “MaRisk”).
DG HYP has also developed and implemented risk management
and risk controlling systems that take into
account all market and competitive requirements. This
forms the basis that ensures the proper operation and
efficiency of the risk management process.
Management Board. All members of the Management
Board are jointly responsible for risk management
at DG HYP. The Management Board determines the risk
policy with regard to defining the business and risk
strategies, determining the types of business pursued, and
defining the justifiable overall risk level, in line with the
bank’s capacity to carry and sustain risk.
Risk/Return Management Committee. The Risk/
Return Management Committee is the central body for risk
management across the entire bank. Besides including the
members of the Management Board as committee members
carrying voting rights, the heads of Finance/Controlling,
Credit Treasury and Treasury are also members of the
Committee, but have no voting rights. The Committee
generally convenes fortnightly, and concerns itself in particular
with the management of the risks of the entire bank
at a portfolio level as well as the allocation of capital.
34 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2006
Management Report
Credit Committee. The Credit Committee is responsible
for managing and monitoring all of DG HYP’s credit
risks. It comprises the entire Management Board and the
heads of Front Office, Back Office and Finance/Controlling.
The Credit Committee deals with individual credit decisions
and fundamental issues regarding the bank’s lending
business. In addition, the Credit Committee is responsible
for dealing with strategic credit issues. These include, in
particular, the credit risk strategy, current risk events and
risk provisioning, credit portfolio management and income
optimisation as well as credit workflow optimisation.
Risks and Participations Committee of the Supervisory
Board. This Committee comprises up to four of the
bank’s twenty-one Supervisory Board members. It is
responsible for the decision-making regarding certain loan
exposures, portfolio transactions and participating interests
which – in line with the Internal Rules of Procedure – are
not within the remit of the Management Board.
Supervisory Board. The entire Supervisory Board
decides on the acquisition or disposal of participating interests
in the event of changes exceeding € 500,000 in the
carrying amount of such interests, as well as on the
establishment or disposal of business lines, establishing
branches and representative offices, the internal rules of
procedure of the Management Board, the business distribution
plan, and on material issues related to loans or
participations that are not explicitly assigned to the Risk
and Participations Committee of the Supervisory Board.
c) Functions
Risk Planning. Planning, as a bank-wide exercise,
comprises the planning of income and costs, as well as
the risks associated with DG HYP’s individual business
activities. Based on the strategic business orientation as
part of a 5-year plan, the bank carries out operative
planning on an annual basis. Within this planning process,
risk limits and earnings projections are determined in
the respective business units on the basis of the bank’s
capacity to carry and sustain risk.
Risk Management. Risk Management is structured in
line with the front office. As part of the credit risk strategy
defined in each case, the credit risk management departments
are responsible for managing the risk of counterparty
default for an individual exposure and at portfolio level.
This comprises both the implementation and active management
of provisions within the scope of the credit risk