Risk taking is a core component of the business of VTB Group and, therefore, risk management is a core control function.
The principal risks facing our business are:
- credit risk,
- liquidity risk,
- market risk,
- operational risk.
Risk management at the Group level includes risk evaluation and monitoring, control over the size and distribution of risks, and the identification of efficient methods to optimise the balance between the risks and benefits of operations.
The main risk management principles that we have adopted are:
- The analysis and management of our financial risks on a consolidated basis, covering all the Group’s Russian and international subsidiary banks and key financial and non-financial companies;
- The delineation of Group members’ levels of competency, and the clear allocation of responsibilities among collective bodies and individual officers/managers in the decision‐making process;
- The independence of risk assessment and control functions from business and operational banking functions;
- The application of state‐of‐the‐art risk assessment methods and models;
- A rigorous reporting system at each level of management.
The standard organizational structures of the Head Bank (OJSC VTB Bank) and its each subsidiary bank include a Chief Risk Officer and Risk division responsible for risk management in the bank. In the subsidiary financial companies whose activity implies assumption of financial risks (such as OJSC VTB Leasing, VTB Factoring Ltd) the general principles of risk management organization are the same as in the subsidiary banks. In the frames of group-wide integration principles, the risk management policies and procedures may vary from company to company depending on the country in which the Group company (bank or non-banking financial entity) operates and the applicable laws and regulations of such country, the magnitude and character of a company’s activity and the specialization of a given company, for example, VTB24’s specialization in retail banking. In this context the differentiation of some risk management elements is also stipulated by business model of VTB Group which is managed essentially by two global business lines (Corporate & Investment Banking and Retail Banking) including specific risk issues associated with each line.
In the process of integrating management activities across the Group the Group-wide strategy statements with respect to each area of risk management were adopted. In order to support and co-ordinate the process of unifying the risk management systems within the Group and facilitate a timely exchange and analysis of information, as well as to improve risk management procedures and implement effective methods of consolidated risk control, a number of collective bodies function under VTB Group’s Management Committee (a high-level body), in particular:
- The Group Risk Committee and its Risk Implementation Sub-Committee;
- The Group Credit Committee;
- The Assets and Liabilities Management Sub-Committee.
In addition, in OJSC VTB Bank the Consolidated Risk Analysis Division and the Risks Strategy and Methodology Division operate to ensure the efficient functioning and development of consolidated risk analysis and management systems at the Group level as well as to elaborate upon and develop the conceptual and methodological bases of such systems. These two divisions report to Global Chief Risk Officer of VTB Group.
The consolidated risk management system in VTB Group also includes setting of consolidated limits (for example, credit risk limits on common counterparties / groups of related counterparties, on countries and industry sectors), assessment of economic capital (Capital-at-Risk or CaR) and consolidated management reporting on risks of the Group. The special attention is paid to the tasks concerning the preparation of VTB Bank and the Group more generally for the introduction of Basel II standards in Russia.
A detailed review of the risk management system and risk profile of VTB Group is included in the Group’s Annual Reports which are also available under the Investor Relations section of this website.