Risk management (corporate governance)

The Board of Directors receives a quarterly report from the Risk Control department containing information on the major risks and the main controls carried out during the quarter. The Board of Directors reviews the principles governing the «Risk policy» at least annually.

The Bank’s exposure to credit risk is defined by the framework of internal limits, set according to criteria of extreme prudence and are subject to continuous monitoring. The Bank’s «Regulation of organisation» and «Risk policy« define authorities, limits and financing margins. Amounts due from customers are generally collateralised by securities held by the Bank. The exposure to other banking institutions is restricted to leading market counterparts. Under the risk policy, no significant positions are taken towards high-risk countries without prior authorisation from the Board of Directors.

Exposure to market risks is also regulated under the «Risk policy» document. It is worth noting that the Parent Company has substantial investments in non-traditional funds («Hedge funds and funds of hedge funds»). Compliance with limits in investments subject to price fluctuations and the risk arising from foreign currency positions are constantly monitored. Exposure to interest rate risk is marginal and mainly associated with investment in bonds.

The balance-sheet exposure of subsidiaries is limited to the management of their respective liquidity and is constantly monitored. Liquidity risk is related to the potential inability of the Bank to meet its obligations as they come due. The Liquidity Coverage Ratio (LCR) is calculated monthly and stress tests are performed quarterly for the purpose of determining potentially critical situations. Regulatory requirements for liquidity LCR and cash liquidity (Ordinance on the Swiss National Bank) are properly monitored. The management of liquidity risk is governed by an internal guideline.

Operational risks are limited by control procedures, segregation of duties and internal guidelines. The Risk Control department is responsible for the identification, assessment and monitoring of operational risks.

Regarding the management of the legal, reputational and more generally, compliance risks, the Legal and Compliance department of the Bank fulfils oversight, staff training and monitoring functions to ensure that banking activities comply with the legal framework, the guidelines of the supervisory authority and the recommendations of the banking sector.