Risk management has become a key factor in assessing the future performance and condition of a bank and the effectiveness of management. Disclosures may include discussions of overall risk management philosophy, overall policy and methodologies, how risks arise, how risks are managed and controlled, and whether and how derivatives are used to manage risks.
Interest rate risk is the risk of loss resulting from changes in interest rates. It is controlled primarily through the limit structure described in above. Exposure to interest rate movements can be expressed for all interest rate sensitive positions, whether marked to market or subject to accrual accounting, as the impact on their fair values […]
We have created what we call our «Funding Matrix», on which we have mapped all of our funding relevant assets and liabilities in time buckets corresponding to their maturities. Given that trading assets are typically more liquid than their contractual maturities suggest, we have divided them into liquids (assigned to the time bucket one year […]
Disclosure of financial position provides information on the bank’s ability to meet its obligations and commitments. It is a picture of the nature and amount of assets, liabilities, shareholders’ funds by type. It typically includes the balance sheet, information about an off-balance sheet items and statement of changes in shareholders’ equity.
The internal audit function is part of the ongoing monitoring of the system of internal controls because it provides another assessment of the adequacy of, and compliance with the bank’s established policies and procedures.
Good decisions begin with good information. A bank’s Supervisory Council needs concise, accurate, and timely reports to help it perform its fiduciary responsibilities. This section of the material provides a detailed guidance on the examples of the information, generally found in reports to the members of Supervisory Council of the commercial bank.
When evaluating liquidity, members of Council compare the current level of liquidity, plus liquidity that would likely be available from other sources, with funding needs, and they determine whether funds management practices are adequate. Bank management should be able to manage unplanned changes in funding sources, as well as react to changes in market conditions […]
Members of Supervisory Council should also look at the effect of growth on the bank’s asset quality, earnings, capital, liquidity, and exposure to risk. Rapid growth may harm the bank as the bank may assume more risk than expected. Managing additional risk or a new risk profile can be costly and strain resources. In a […]
Normally, the most readily available information for members of Supervisory Council concerning loan quality comes from management ‘s internal risk rating reports, reports on past-due and nonaccrual loans, renegotiated and restructured loan reports, and policy exception reports. Reviewing these reports can help members of Supervisory Council identify negative trends early.
Effective liquidity risk management requires an informed Council, capable management, and appropriate staffing. The Supervisory Council and senior management are responsible for understanding the nature and level of liquidity risk assumed by the bank and the tools used to manage that risk.
