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Sustainability Report 2013


Risk Management in Vnesheconombank Group

Risk management forms an integral part of decision making, strategic and day-to-day planning processes in Vnesheconombank Group. This is an integrated continuous process that involves all entities of the Group.

Risk management policy

The Risk Management Policy of Vnesheconombank Group approved in 2013 seeks to build a common consolidated risk management system at all management levels, including Vnesheconombank and the Group’s entities.

The need to develop the Policy was due to a considerable increase in the volume of subsidiary operations associated with financial risks. The common risk management principles will also help Vnesheconombank to streamline the use of its own funds.

The Policy takes into account the requirements and recommendations of the Bank of Russia, supervisory agencies of other countries in which the Group’s entities are based, the Basel Committee on Banking Supervision, international risk management standards COSO, GRC, ISO 31000, and the IFRS as far as disclosure and risk assessment are concerned.

In implementing the Policy, the Group will address the following tasks:

  • set up consolidated approaches to the risk assessment and assumption by Vnesheconombank and all entities of the Group; integrate local risk management systems into a single Group-wide risk management system;
  • address the objectives set out in Vnesheconombank’s Development Strategy while maintaing its financial stability and ability to meet its obligations as they fall due;
  • efficiently limit the risks assumed by Vnesheconombank and the Group’s entities to meet their obligations towards the Group’s lenders and customers as they fall due;
  • efficiently manage the Group’s capital to ensure its break-even operation subject to risks and the accceptable capital adequacy ratio;
  • obtain sufficient compensation for risks assumed on operations of Vnesheconombank and the Group’s entities;
  • comply with Basel II and Basel III guidelines;
  • ensure the transparency of the risk management system of Vnesheconombank and the Group’s entities.

Risk management system of Vnesheconombank Group

Vnesheconombank’s Supervisory Board

Approves the operating procedure of the Internal Control Service, the regulation on the credit policy, the procedure of issuing guarantees, sureties and loans to lending institutions and other legal entities, the guidelines and procedure for calculating credit risk indicators and limits, the guidelines for calculating the Bank’s equity (capital), capital adequacy ratio, the loss provisioning procedure and regulations on the Bank’s governing bodies.

Approves transactions related to acquisition, actual or potential disposal of property by the Bank, the book value of which equals to, or exceeds, 10% of the Bank’s equity, and sets the limit amount allocated to manage free cash (liquidity) of the Bank.

Determines the parameters of the Bank’s investment and financial operations, sets the limits and restrictions for the Bank’s loan portfolio breakdown within its competences granted under the Memorandum on Financial Policies and Federal Law No. 82-FZ “On Bank for Development” dated 17 May 2007.

Management Board of Vnesheconombank

Approves transactions or groups of interrelated transactions related to acquisition, actual or potential disposal of property by the Bank, the book value of which falls within the range between 2% and 10% of the Bank’s equity.

Prepares, and submits to Vnesheconombank’s Supervisory Board for approval, proposals on the Bank’s key business lines, parameters of the Bank’s investment and financial operations, including related to risk management issues.

Chairman of Vnesheconombank

Issues orders and instructions with regard to the Bank’s risk management, approves regulations and technical banking procedures, and makes decisions on other issues related to risk management, except for the issues within the competence of the Supervisory Board and the Management Board of Vnesheconombank.

Credit Committee of Vnesheconombank

A permanent collective governing body of Vnesheconombank that focuses on preparing opinions based on its analysis of proposals to issue loans, guarantees, sureties and financing on a repayable basis, participate in authorised capitals and/or acquire bonds, set limits for counterparties and issuers, and on debt recovery and write-offs.

Asset and Liability Management Committee of Vnesheconombank

A permanent collective governing body of Vnesheconombank that focuses on preparing opinions and recommendations on asset and liability management, including issues related to the management of market and structural risks of the Bank and break-even operation of the Bank.

Internal Control Service of Vnesheconombank

Monitors the operation of the risk management system on an ongoing basis in line with the corporate regulatory documents of the Bank and provides its findings and recommendations based on its inspections to the Bank’s management.

Group Risk Director

Provides Vnesheconombank’s Management Board with consolidated reports on the risks of the Group and Vnesheconombank and information on the status of the Group’s and Vnesheconombank’s risk management system and any system development plans.

Risk Management Department of Vnesheconombank

Develops the guidelines and procedure to assess risks of various types and proposals to limit the risk level. Follows up the implementation of existing risk limits and risk management decisions. Prepares reports by risk type and line of business of the Bank. Follows up the compliance with the risk management principles and policy. Assesses the risks associated with new products and structured transactions. The Department includes units that monitor the risk level by risk type and line of business of the Bank, and a unit that monitors the risks of subsidiary entities.

Financial and non-financial risks




1. Credit risk:

1.1. Counterparty risk

1.2. Project financing risk

1.3. Country and regional risks

2. Market risk:

2.1. Interest risk

2.2. Currency risk

2.3. Stock market risk

3. Liquidity risk

Risk management approaches:

  • monitoring the level of external and internal risk factors;
  • limits;
  • hedging;
  • diversification;
  • provisioning;
  • securing assets exposed to credit risks with a pledge, a guarantee, a surety, etc.;
  • compliance with the requirements to collateral sufficiency;
  • providing the Bank with ongoing access to financial market resources, including maintaining business relations with major financial institutions and regulatory authorities;
  • avoiding transactions with an unacceptable or unassessable risk level;
  • situation modelling;
  • stress testing;
  • VAR methodology

1. Operating risk

2. Legal risk

3. Compliance risk

4. Reputation risk (Social and environmental risks)

5. Strategic risk

Risk management approaches:

  • a system of measures to ensure the Bank’s business continuity;
  • separating the powers and setting up levels of responsibility in making decisions and transactions;
  • the minimum scope of authority for employees;
  • follow-up;
  • clear regulation of all business processes;
  • external risk insurance;
  • monitoring the areas of potential conflicts of interests;
  • measures taken to rule out situations where the Bank and its employees are involved in unlawful activities;
  • using certificated automated information systems;
  • monitoring the operation of the internal control system;
  • standardised business processes;
  • laws monitoring;
  • ensuring that employees have the necessary professional qualification level;
  • follow-up of the compliance with Russian laws;
  • monitoring the business standing of affiliates, subsidiary and dependent companies, counterparties and partners;
  • follow-up of the reliability of information furnished to external users;
  • monitoring public information related to the operations of the Bank and its customers;
  • timely publication of press releases;
  • strategic planning

Risk management system development in Vnesheconombank Group

The Risk Management Policy of Vnesheconombank Group is implemented in line with the action plan approved in 2013. As part of this plan, the Group analysed the risk management policies of all organisations of the Group, updated Vnesheconombank’s regulatory documents on risk management and approved new country and operating risk management documents.

In 2013, at Vnesheconombank’s initiative, the Group also rolled out a software application “Module for Collection, Verification and Analysis of Reports by Subsidiary and Related Banks” which enabled the Group to unify information reported by its entities and expand the range of capabilities for management decision making.

The Bank’s risks are assessed using the methodologies approved by the relevant authorities of the Bank. Losses are assessed based on analysed and processed statistical data on risk factors that have an impact on losses and patterns (models) identified that determine the correlation between changes in risk factors and losses. The Bank also applies stress testing to model “worst-case scenarios” that would take place on occurrence of events with low statistical probability.

To assess and control the aggregate exposure to credit, market and operating risks, the Bank calculates its capital adequacy ratio in line with the methodology approved by the Bank’s Supervisory Board and based on approaches set out in the Bank of Russia’s regulatory acts. The limit capital adequacy ratio is set at 10%.