Risk governance structure

 

Under the supervision of the Managing Board and the Risk Policy Committee of the Supervisory Board, formal authority and ultimate decision-making in respect of risk management matters is the responsibility of four committees: the Risk Management Committee, the Asset & Liability Committee, the Transaction Committee and the Investment Committee. These committees are chaired by the CRO and they ensure that assessment and acceptance of credit, market, investment and liquidity risk exposure is made independently of the business originators within the operating segments.

 

The Risk Management Committee (RMC) determines the overall risk appetite and risk profile at a strategic level, evaluates the risk management elements of new activities and products as well as reviews risks at portfolio level, sets country risk and sector limits, approves acceptance policies and guidelines and approves the risk policies and manuals. Three members of the Managing Board are members of the RMC, which also includes representatives from the Transaction Committee and the Asset & Liability Committee. As necessitated by the topics to be discussed, specialists in certain areas are also invited to the meetings of the RMC. The RMC meets monthly.

 

The Asset & Liability Committee (ALCO) monitors the development of NIBC’s balance sheet and market risk profile. The ALCO monitors traded market risks, exposure to interest rates and currency risks, the capital structure and liquidity position. The ALCO also approves large transactions such as securitisations and sets overall limits on risk exposures. The ALCO receives reports on all breaches of risk limits. Three members of the Managing Board are members of the ALCO. The ALCO meets once every two weeks.

 

The Transaction Committee (TC), NIBC’s credit committee, makes decisions on individual senior debt transactions, including credit conditions and parameters and lending and underwriting strategies, as well as evaluating opportunities for potential subsequent distribution of the asset. The TC sets credit limits, monitors exposure and decides on impairments. Three members of the Managing Board are members of the TC. Meetings of the TC take place twice a week.

 

The Investment Committee (IC) is responsible for investment risk. The IC approves transactions with respect to equity, Investment Management loans and subordinated debt exposures as well as impairments and revaluations for these assets. Two members of the Managing Board are members of the IC. The IC meets, in principle, on a weekly basis. Investment decisions of the Funds managed by Investment Management are made by the Investment Committees of the various Funds.

 

In addition to the above risk management committees, there is also the Engagement and Compliance Committee (ECC), which is responsible for the prevention of potential commercial conflicts of interest and compliance issues in evaluating potential assignment for clients. All five members of the Managing Board are members of the ECC.

 

Finally, matters concerning operational risk are periodically discussed in the Managing Board. The Operational Risk Manager functionally reports to the CRO and is aligned with activities of the Internal Audit department.

 

Overlap of committee membership among Managing Board members contributes to consistency in communication and decision-making. In all risk management committees, at least two members are members of the Managing Board.

 

The CRO is supported by centralised risk management functions, which consist of three risk management departments, the Credit Risk Management department (CRM), the Asset & Liability Management (ALM) and Market Risk department (MR), the Financial Markets Credit Risk (FMCR) and Risk Policy department (RP). These departments support the various risk management committees dedicated to monitoring the different risk categories NIBC faces.

 

CRM is responsible for the credit risk management of the Corporate Loan portfolio. CRM develops and implements policies and procedures regarding credit risk, advises on credit proposals and reviews potential impairments. The Distressed Assets department (DA) is a sub-department of CRM. DA manages assets which are impaired, or at significant risk of becoming impaired. Credit risk management of the Investment Management loans, as well as investment risk management of the private equity positions, is the responsibility of the IC or the Investment Committee of one of the NIBC Funds (depending on whether the specific Investment Management loan or equity position is part of NIBC’s direct portfolio or part of one of the NIBC Funds).

 

ALM manages balance-sheet and liquidity risk and supports NIBC’s asset and liability management policies, as established by the ALCO. Additionally, ALM is responsible for the market risk management of the Residential Mortgage portfolio, contacts with rating agencies, model validation and parts of quantitative risk modelling.

 

The MR department is responsible for monitoring the market risk of the Treasury activities, both inside and outside the trading book. MR also manages the bank-wide currency position and co-ordinates the ongoing compliance with the Basel II regulation, including new legislation.

 

FMCR is responsible for managing issuer and counterparty credit risk resulting from NIBC’s Treasury activities and financial market product execution, such as Over The Counter (OTC) derivatives with financial institutions and corporate entities. FMCR develops and implements policies and procedures regarding credit risk related to financial markets products, and advises on counterparty credit limits and issuer limits for financial institutions and corporate entities.

 

RP is a sub-department of FMCR and monitors risk on portfolio level. RP develops policies and methods for measuring risk, notably the credit rating system used to evaluate probability of default and loss given default in NIBC’s credit portfolio. RP is also responsible for the reporting of credit portfolio information to the various users within NIBC. The RP department is pivotal in NIBC’s Basel II process and also performs parts of quantitative risk modelling.