Risk management

Part of the banking business is to accept risks. The LLB Group actively manages risks according to strategic targets and applies a conservative balance sheet and financing structure.

We had already revised the risk policy guidelines in 2011 and adapted them to the changed market conditions, the new regulatory requirements (Basel III) as well our corporate structure. We updated and established detailed qualitative and quantitative standards for risk responsibility, risk management and risk control. Furthermore, the position of a Group Chief Financial Officer (Group CFO, additional function as Group Chief Risk Officer) was integrated into the Group Executive Board and the position of Head of Group Risk Management was created. These steps emphasize the importance of our company’s financial and risk management.

The new structure strengthens the organization of risk management by creating new controlling bodies as well as investing the risk committees with clear tasks and competences. In 2012, we not only reviewed the organizational structure but also Group Credit Management processes. Credit competences have been re-assigned according to different levels and types of credit. The authority to grant credit has been given to Group Credit Management and the Credit Committees, with the exception of standard business transactions that are limited in amount. This ensures that credit decisions are made independently of market pressures and market objectives.

Group Credit Management now comprises three main areas:

  • Group Credit Office analyses, structures and prepares complicated credit applications for submission to the decision-making bodies. At the same time, Group Credit Office is responsible for the monitoring of the provisions of the Credit Committees and risk-oriented credit monitoring. It advises employees of the market divisions about the structuring of complex credits. The employees of Group Credit Office as well as the Head of Group Credit Management have credit competence which is limited in amount and which, depending on the credit product, varies.
  • Group Credit Control & Monitoring is responsible for the formal examination of credit applications and data collection. One of its central tasks is the daily monitoring and, if necessary, reporting of credit violations as well as credit documentation. At the same time, Group Credit Control & Monitoring is responsible for the development and the maintenance of the methodology used for assessing the collateral value of securities for Lombard loans as well as for checking the collateral value applied to single items.
  • Group Recovery supervises risk-related items for all Group companies and examines allowances as well as the realization of assets.

The LLB Group uses adequate organizational and methodical parameters for specifying and managing risks. Our «Internal Capital Adequacy Assessment Process» (ICAAP) ensures that there is always adequate capital to cover all essential risks. In addition, risk strategy and risk propensity are defined, all essential risks are evaluated and the processes and control mechanisms are specified (see following table).

The ICAAP framework

(XLS:)

Risk strategy and risk tendency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital planning and management

 

 

Capital assessment models

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic perspective of risk assessment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit risk

 

 

Market
price risk

 

 

Interest rate luctuation risk

 

 

Currency risk

 

 

Liquidity and
refinancing risk

 

 

Operational
risk

 

 

Strategic risk and business risk

 

 

 

Group
perspective

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LLB Vaduz

Risk monitoring and management information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank Linth

Risk concentration, risk control, limit system

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LLB Switzerland

Processes, scenario analyses and stress tests, risk aggregation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LLB Österreich

Risk modelling

 

 

 

Other Group
companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Overall
credit risk

 

 

Overall
market
price risk

 

 

Overall
interest rate
fluctuation risk

 

 

Overall
currency risk

 

 

Overall
liquidity risk

 

 

Overall
operational risk

 

 

Overall
strategic risk and
business risk

 

 

 

Overall
risk of the
LLB Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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