Page 14 - OeEB-AnnualReport_2013

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OeEB Annual Report 2013
14
Risk types considered in bank-wide risk management
Management report
n
Credit risk
Credit risk is the risk of unexpected loss as a result
of a counterparty’s default or deterioration in credit
quality. To a degree consistent with the nature of its
business activities and with its size, OeEB observes
the “FMA Minimum Standards for Lending and Other
Transactions Subject to Default Risks” issued by the
Austrian Financial Market Authority in 2005. In the
light of its business structure, OeEB distinguishes
the following types of credit risk:
– Counterparty risk/default risk:
the risk of loss from a borrower’s failure to honour its
payment obligations or from the default of a counter-
party (such as a borrower).
– Concentration risk:
the risk of loss as a result of high credit exposure to
individual borrowers or to groups of related borrowers.
Country limits and customer limits are in effect and
are reviewed quarterly.
n
Market risk
Market risk is the risk of loss as a result of changes in
market parameters. It can be subdivided into interest
rate risk, currency risk, equity risk and other price
risks.
n
Liquidity risk
Liquidity risks can be divided into term liquidity risk
and withdrawal/call risk, as well as structural risk
(funding liquidity risk).
Liquidity is currently managed and made available on a
project basis in coordination between OeEB and OeKB.
Term liquidity risk is the risk of change in the length of
time for which capital is committed to or by OeEB.
Withdrawal/call risk is the risk that deposits received
are unexpectedly withdrawn or that loan commitments
to borrowers are unexpectedly utilised. Both term
liquidity risks and withdrawal/call risks are low as a
result of OeEB’s business structure and contractual
arrangements. Liquidity is monitored and controlled
with the aid of weekly cash flow projections.
As OeEB’s funding is obtained largely through OeKB,
the latter’s standing in the market facilitates the
availability of financing to OeEB at any time.