Qualitative information

A. General aspects, management procedures and measurement methods of the interest rate risk and the price risk

In general, the Banca IFIS Group does not tend to assume interest rate risks, as it obtains funds mainly from interbank deposits and from retail customers through the Rendimax current account. Interbank funding transactions are mainly at fixed, short-term rates and only for a residual quota for longer terms, at variable and indexed rates. Deposits from customers in the Rendimax current account are at fixed rates, both on demand deposits and restricted deposits, and can be unilaterally reviewed by the bank. Loans to customers are usually revocable and at variable rates. Interest rates applied to customers are normally indexed (mainly at the 3-month Euribor rate) with automatic adjustment to monetary trends. In the other cases, interest rates are unilaterally modifiable by the bank, in accordance with applicable laws in force. Approximately half of the bond portfolio is made up of bonds whose yields are index-linked to market rates. The remainder consists of fixed-rate, short-term bonds. The average maturity of the overall portfolio is just under six months.

The assumption of interest rate risks connected to treasury funding activities occurs respecting the limits and policies of the Board of Directors and is governed by precise proxies fixing limits of autonomy for individuals authorised to carry out treasury operations.

The business functions that are designed to guarantee the correct management of interest rate risks are: the Treasury Department that directly manages funding and deposits, the Risk Management Office entrusted with the role of selecting the most effective risk indicators and monitoring asset and liability trends to ensure compliance with preset limits and, lastly, Top Management that has the responsibility of putting forward to the Board, on an annual basis, proposals regarding policies on lending and funding and the management of interest rate risks, as well as suggesting opportune interventions during the year in order to ensure that activities are consistent with the risk policies approved by the bank.

More specifically, within Top Management’s current activities and based on indications from the Treasury Department, on interest rate forecasts and on evaluations on development in commitments, Top Management provides the Treasury Department with policies on the use of available lines of financing, with particular reference to those with a duration exceeding 3 months. The purpose of such activity is to support ordinary short-term treasury operations, to take advantage of changes in interest rates on short-term expiries and to monitor interest rate trends in terms of physiological mismatching between assets and liabilities, even if only very short-term.

In order to monitor interest rate risk, senior management receives a daily summary on the overall cash position. The interest rate risk position is also periodically reported upon to the bank’s Board of Directors by means of a quarterly so-called ‘Dashboard’ report prepared by the Risk Management Office for Top Management. The Integrated Treasury and Risk Management System (SIT) provides further tools for assessing and monitoring the main interest rate sensitive credit and debit items.

With reference to the first, complete ICAAP report for 2009, sent to the Supervisory body in April 2010, the interest rate risk falls under the category of second pillar risks. In the final document sent to the Supervisory authorities, as per the applicable regulations (Circular no. 263 of 27 December 2006, Title III, Chapter 1, Annex C), the interest rate risk has been specifically measured in terms of capital absorption. The resulting risk index confirmed that Banca IFIS does not assume such risk: in the face of an attention threshold of 20% of regulatory capital, the indicator for the Banca IFIS Group showed 0.37% as at 31 December 2009.

Due to the limited size of risks taken on, risk-hedging instruments are not used.

With regards to the price risk, the bank does not generally assume risks connected with price fluctuation as its activity is almost exclusively aimed at financing SMEs’ working capital.

In relation to bonds held in the year, most of them are classified under available for sale which creates the risk of the Group’s capital reserves fluctuating as a consequence of the change in the fair value of the bonds. This risk is, nonetheless, relatively limited given the high credit standing of the issuers and the short average maturity of the overall portfolio.

Monitoring the price risk that the group takes on in carrying out its activities is the responsibility of the Risk Management Office. The Integrated Treasury and Risk Management System (SIT), which has become the main tool for assessing and monitoring the bank’s treasury activities, provides suitable tools for assessing price risks. Specifically, the SIT also allows:

  • Management of traditional treasury activities (securities, exchanges, money market and derivatives);

  • Measurement and control of exposure for each market risk type;

  • The continual establishment and monitoring of limits set within the various operational functions;

  • Performance analysis of the various areas against a benchmark.

Quantitative information

1. Banking book: distribution by residual duration (by re-pricing date) of financial assets and liabilities

Currency: Euro

Type/residual duration

on demand

up to 3 months

over 3 months up to 6 months

over 6 months up to 1 year

over 1 year up to 5 years

over 5 years up to 10 years

over 10 years

indefinite duration

1. Cash assets

281,557

1,082,081

217,218

74,508

47,292

6,861

5

-

1.1 Debt securities

-

360,067

104,310

-

-

-

-

-

- with early redemption option

 

 

 

 

 

 

 

 

- other

-

360,067

104,310

-

-

-

-

-

1.2 Loans to banks

101,366

30,127

-

-

-

-

-

-

1.3 Loans to customers

180,191

691,887

112,908

74,508

47,292

6,861

5

-

- current accounts

82,025

30

-

-

-

-

-

-

- other loans

 

 

 

 

 

 

 

 

- with early redemption option

22,075

16,885

-

-

-

-

-

-

- other

76,091

674,972

112,908

74,508

47,292

6,861

5

-

2. Cash liabilities

964,662

742,880

189,086

159,411

-

-

-

-

2.1 Due to customers

892,583

432,337

169,086

159,411

-

-

-

-

- current accounts

570,493

402,737

169,086

159,411

-

-

-

-

- other payables

-

-

-

-

-

-

-

-

- with early redemption option

-

 

 

 

 

 

 

 

- other

322,090

29,600

-

-

-

-

-

-

2.2 Due to banks

72,079

310,543

20,000

-

-

-

-

-

- current accounts

72,079

-

-

-

-

-

-

-

- other payables

-

310,543

20,000

-

-

-

-

-

2.3 Debt securities

-

-

-

-

-

-

-

-

- with early redemption option

 

 

 

 

 

 

 

 

- other

 

 

 

 

 

 

 

 

2.4 Other liabilities

-

-

-

-

-

-

-

-

- with early redemption option

 

 

 

 

 

 

 

 

- other

 

 

 

 

 

 

 

 

3. Financial derivatives

-

-

-

-

-

-

-

-

3.1 With underlying security

-

-

-

-

-

-

-

-

- Options

-

-

-

-

-

-

-

-

+ long positions

 

 

 

 

 

 

 

 

+ short positions

 

 

 

 

 

 

 

 

- Other

-

-

-

-

-

-

-

 

+ long positions

 

 

 

 

 

 

 

 

+ short positions

 

 

 

 

 

 

 

 

3.2 Without underlying security

-

-

-

-

-

-

-

-

- Options

-

-

-

-

-

-

-

-

+ long positions

 

 

 

 

 

 

 

 

+ short positions

 

 

 

 

 

 

 

 

- Other derivatives

-

-

-

-

-

-

-

-

+ long positions

 

 

 

 

 

 

 

 

+ short positions