Ally Bank 2011 Annual Report Download - page 87

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10−K
The following table lists all countries in which cross−border outstandings exceed 1.0% of consolidated assets.
($ in millions) Banks Sovereign Other
Net
local country
assets Derivatives
Total
cross−border
outstandings
2011 (a)
Canada $ 343 $ 250 $ 451 $ 3,746 $ 20 $ 4,810
Germany 47 32 5 3,219 576 3,879
United Kingdom 311 6 13 962 1,356 2,648
2010
Canada $ 343 $ 361 $ 349 $ 4,678 $ 19 $ 5,750
Germany 587 40 111 3,485 76 4,299
United Kingdom 627 9 37 1,133 83 1,889
(a) As of December 31, 2011, our total cross−border exposure to Portugal, Ireland, Italy, Greece, and Spain was $327 million, all of which was nonsovereign exposure.
Market Risk
Our automotive financing, mortgage, and insurance activities give rise to market risk representing the potential loss in the fair value of assets or
liabilities and earnings caused by movements in market variables, such as interest rates, foreign−exchange rates, equity prices, market perceptions of credit
risk, and other market fluctuations that affect the value of securities and assets held−for−sale. We are primarily exposed to interest rate risk arising from
changes in interest rates related to financing, investing, and cash management activities. More specifically, we have entered into contracts to provide
financing, to retain mortgage servicing rights, and to retain various assets related to securitization activities all of which are exposed in varying degrees to
changes in value due to movements in interest rates. Interest rate risk arises from the mismatch between assets and the related liabilities used for funding.
We enter into various financial instruments, including derivatives, to maintain the desired level of exposure to the risk of interest rate fluctuations. Refer to
Note 24 to the Consolidated Financial Statements for further derivative information.
We are also exposed to foreign−currency risk arising from the possibility that fluctuations in foreign−exchange rates will affect future earnings or asset
and liability values related to our global operations. We may enter into hedges to mitigate foreign exchange risk.
We also have exposure to equity price risk, primarily in our Insurance operations, which invests in equity securities that are subject to price risk
influenced by capital market movements. We enter into equity options to economically hedge our exposure to the equity markets.
Although the diversity of our activities from our complementary lines of business may partially mitigate market risk, we also actively manage this risk.
We maintain risk management control systems to monitor interest rates, foreign−currency exchange rates, equity price risks, and any of their related hedge
positions. Positions are monitored using a variety of analytical techniques including market value, sensitivity analysis, and value at risk models.
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