Risk Management

Risk Management is fundamental to IMB Group’s business and is an essential element of the Group’s operations. The main risks inherent to the Group’s operations are those related to credit exposure, liquidity and market movements in interest rates, and foreign exchange rates. The primary objectives of IMB Group’s Risk Management Department are to to assist it in achieving an optimal level of risk-return in connection with its various transactions  and to prevent the IMB Group from taking on risks that could have a negative impact on earnings or on future operating conditions.

 

Liquidity Risk

 

Liquidity risk refers to the availability of sufficient funds to meet the growth demands of both the mortgage and consumer finance portfolio, deposit withdrawals and other financial commitments with financial instruments as they actually fall due.

 

The Assets and Liabilities Committee (“ALCO”) controls this category of risks by means of Gap analysis, Interest rate risk analysis, Cash monitoring and Balance Sheet Structure Analysis.  Current liquidity is managed by Treasury Department, which deals in the money markets for current liquidity support and cash flow optimization. International Mortgage Bank’s Risk Management Department independently of Treasury Department performs daily reporting to the National Bank of Ukraine to ensure that all banking norms are complied with on a daily, weekly, and monthly basis.

 

 

Cash flow interest rate risk is the risk that the future cash flow of a financial instrument will fluctuate because of changes in market interest rate.

 

The Risk Management Department also manages interest rate and market risks by matching the Bank’s interest rate position, which provides the Bank with a positive interest margin. Interest rates are set by the Risk, Finance and Marketing Departments, approved by ALCO and reviewed at least quarterly.

 

 

Currency risk is defined as the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Bank is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.

 

ALCO controls currency risk by management of the open currency position on the estimated basis of UAH devaluation and other macroeconomic indicators, which gives the Bank the opportunity to minimize losses from significant currency rates fluctuations toward its national currency. The Risk Management Department performs daily monitoring of the Bank’s

 

 

The Bank is exposed to credit risk which is the risk that one party to a financial instrument will fail to discharge an obligation and cause other party to incur a financial loss.

 

Risk management and monitoring is performed within set limits of authority, by the Credit Committee and the Management Board. Before any application is made by the Credit Committee, all recommendations on credit processes (borrower’s limit approved, or amendments made to loan agreement, etc.) are reviewed and approved by the Department on Servicing and Monitoring of Clients.

 

The Bank structures the level of credit risk it undertakes by placing limits on the amount of risk accepted in relation to the Bank’s borrowers, products and other segments. Limits on structure of loan portfolio are set by the Risk Management Department and are approved by the ALCO. Actual exposures against limits are monitored daily.