Market Risk Management & Compliance

Market-related risk refers to the risk of incurring losses from fluctuation in profits arising from assets and liabilities and the risk of incurring losses from fluctuation in the value of assets and liabilities (including those off balance sheet) due to fluctuations in market risk factors such as interest rates, exchange rates and share prices.

Banks establish a framework, system, and procedures in accordance with its market risk management standards. Using value at risk (VaR) analysis to measure maximum losses in worst case scenarios as well as simulation analysis, banks determine and properly manage risk from multiple perspectives. Moreover, using back and stress tests, it confirms the appropriateness and effectiveness of its calculation and management methods.

Trading limits and loss limits would be set for trading operations, the goal of which is to earn trading profit from buying and selling securities in market operations. These are managed to ensure that losses in excess of a certain amount do not occur. Banking operations (investment securities and deposit services) are managed for risk by taking the risk-return balance into consideration through ALM analysis, VaR analysis and other means to ensure stable profits over the medium to long term. Established systems for the flexible management of market risk as well as credit risk and liquidity risk related to market operations.

Market risk management for the entire bank, including lending and deposit services, is carried out by analyzing risk from multiple aspects, such as the calculation of interest rate risk. The ALM Committee discusses the overall management of assets and liabilities and considers management and lending policies.