Managing risks: the bank’s risk management system

Accepting risk isa crucial feature of VTB Group business model, therefore risk management is regarded as a key control and management function.

The most significant risks for VTB Group include:

  • credit risk
  • liquidity risk
  • market risk
  • operational risk

Risk management function at the Group level comprises identifying, assessing and monitoring risks, evaluating their levels and concentration, developing effective measures to maintain a balanced risk-reward ratio, and disclosing information on risks as well as risk and capital management procedures at VTB Bank and VTB Group.

Risk management principles of VTB Group:

  • Analysis and management of the Group’s consolidated financial risks across its Russian and foreign subsidiaries and the Group’s key financial companies;
  • The distinction of levels of competence of different units within the group, clear definition of the assigned responsibilities of collegial bodies and decision makers;
  • independence of the units entrusted with risk assessment and control from the units initiating the respective operations;
  • cutting-edge methods and models of risk assessment;
  • a rigorous reporting system at each management level.
  • The structure of VTB Bank (the Group’s parent company) and each of its subsidiary banks usually provides for the appointment of a special representative of the management responsible for integrated risk management and includes specialised structural units for risk management.

    In non-banking subsidiaries whose operations directly involve the assumption of financial risks (VTB Leasing, VTB Factoring, etc.), the general principles of risk management are essentially the same as those at the Group’s banks. Under the unified principles of group-wide integration, the structure and procedures of risk management may differ between individual units of the Group, depending on the specifics of legislation and regulations in the countries where the Group companies (banks or non-banks) operate, the nature and scope of their operations, and the specialisation of the companies.

    The Group’s risk management system is structured in accordance with its global business lines (including corporate investment, SMEs, and retail) and by the type of risk, taking into account the specific risks inherent in each business line and their management methods.
    VTB Group has approved the strategic initiatives, goals, and objectives for the development and improvement of the risk management system as part of the Group’s broader development strategy.

    The VTB Group Management Committee guarantees the coordination of risk management strategy, policies and methods across the Group, the implementation and improvement of its consolidated risk control procedures jointly with collegial working bodies

    The VTB Group Risk Management Committee and its Risk Implementation and Risk Management Commission;

    The VTB Group Credit Committees (as part of its corporate investment and SME business lines);

    The VTB Group Financial Committee, including its Asset and Liability Management Commission.

    The Risk Department is the main structural unit of the Group’s parent bank, responsible for risk management at the Group level and it reports directly to the respective member of the Management Board (the Global Risk Manager of the Group). The Risk Department is responsible for the functioning and development of systems of consolidated management of corporate credit, market and operational risks assumed by the Group that meet the requirements of supervisory authorities and best practices. At the Group level, the Risk Department also participates, alongside specialised divisions of the Financial Department, in the management of the liquidity risks and credit risks assumed by the financial institutions.

    The consolidated risk management system at VTB Group includes the establishment of consolidated limits (such as credit risk limits for general counterparties of VTB Group, for a group of related borrowers, for countries or industries), economic capital assessment, risk appetite, stress testing and preparation of the Group’s consolidated risk management statements for submission to the management bodies. Particular attention is paid to tasks relating to the implementation of the Basel II standards.

    Detailed reviews of VTB Group’s risk management system and information on the level and structure of the risks assumed by the Group are contained in the published reports and materials that can be found on the relevant pages of the Investor Relations section of the VTB Group website (including Consolidated Risk Information and Disclosure subsections).