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In line with supervisory law requirements and recommendations,
as well as potential operational benefits, Raiffeisen-Landesbank
Tirol AG has set itself the goal of continuously developing and
improving its risk management processes as well as its risk
evaluation and monitoring methods.
Market risk
Market risk is the risk of interest rate, exchange rate, price and
spread changes adversely affecting securities, interest and currency
positions. Market risk is generated by both bank book and trading
book transactions.
Raiffeisen-Landesbank Tirol AG uses a combination of risk measure-
ment parameters to manage market risks and set associated limits.
The treasury department manages market risk, systematically
compiling all interest-, currency- and price-sensitive positions and
controlling them in line with the prevailing market situation. Along-
side the credit business, the bank’s own account trading
constitutes another core line of business.
The risk management department supports the treasury depart-
ment in controlling market risks. The measurement and monitor-
ing of market risk and regular reporting are the central tasks in
this respect. The dynamic risk-monitoring process involves giv-
ing particular emphasis to the systematic monitoring of strategic
and hedging positions. Daily risk and performance analyses and
reports ensure that the treasury department provides appropriate
steering impetus.
Liquidity risk
At Raiffeisen-Landesbank Tirol AG, we set great store by refinancing
with matching maturities, and this policy is supported by a key
liquidity figures system and associated limits, duly distinguishing here
between short-term operational and longer-term structural liquidity
management and also liquidity price risk. The unexpected withdrawal
of customer deposits is classified as short-term liquidity risk, and
increased own refinancing costs as a result of the refinancing
structure are classified as structural liquidity risk or liquidity price risk.
Compliance with limits is monitored by the risk management
department. Various liquidity scenarios are used to simulate ade-
quate supplies of short- and long-term liquidity during hypothetical
financial squeezes. To reinforce liquidity, Raiffeisen-Landesbank
Tirol AG gives great weight to factors such as issuance activity and
available refinanceable collateral. Moreover, additional steering
instruments are continuously being developed in furtherance of
proactive liquidity steering, something which will increase in
importance with the implementation of Basel III.
Investment risk
Investment risk is steered by the management board, measured
by the risk management department and monitored by the finance
department.
An expert approach ensures the appropriate assessment of
potential risk.
Operational risk
The management of operational risk is the task of the Organisa-
tion & IT department. All potential risks that can result from sys-
tem or process failures, mistakes by employees and external
events are analysed and evaluated with a view to devising
suitable countermeasures.
The resources needed to combat operational risk are deter-
mined via a base indicator approach, and modern IT systems
are used to portray and manage risk. This process is backed up
by regular internal audits and periodic reporting to ensure that
operational risk is tackled vigorously.
Risk-bearing capacity
In the process of steering overall risk, our capacity to cover risk
is tallied against all significant risks identified using appropriate
methods and systems suitable for this purpose.
The planned annual risk exposure represents the limitation of
the aggregated overall bank risk, taking into account not
just the risks actually identified and quantified but also
other non-quantifiable risks by putting in place a risk buffer.
All risk-relevant information is fed into monthly risk-bearing
capacity reports, which are discussed in depth by the risk
committee. Various different scenarios are used to determine
overall bank risk in order to ensure that sufficient capital would
be available to cope with a range of problematic and extreme
situations.
At Raiffeisen-Landesbank Tirol AG, greater attention is given to
the credit, market and liquidity risk management processes due
to the fact that the focus of the bank’s activities is on private and
commercial customers as well as treasury business. Credit risk
is calculated on the basis of default probabilities, and trading
book and banking book market risk and liquidity risk are
calculated via key sensitivity figures. Aside from the market-
dependent risks, the overall bank-steering process also involves
calculating investment risk and macroeconomic risk in order to
both represent all risks and take into account the ever-growing
supervisory requirements.
The risk capacity analysis thus forms the starting point for
keeping risky activities down to a reasonable level in order to
ensure the trouble-free continuing existence of Raiffeisen-
Landesbank Tirol AG while also fully exploiting its revenue
potential.
The consequences of events which cannot be accounted for
adequately or at all via conventional risk assessment methods
are identified by conducting regular stress tests. This involves
defining stress scenarios for each of the principal risk
categories and analysing the impact of these exceptional
situations on our capital adequacy and risk-bearing ability.
Management report