PNC Bank 2015 Annual Report Download - page 87

payments or loan repurchases; however, on occasion we may
negotiate pooled settlements with investors. In connection
with pooled settlements, we typically do not repurchase loans
and the consummation of such transactions generally results in
us no longer having indemnification and repurchase exposure
with the investor in the transaction.
An indemnification and repurchase liability for estimated
losses for which indemnification is expected to be provided or
for loans that are expected to be repurchased was established
at the acquisition of National City. Management’s evaluation
of these indemnification and repurchase liabilities is based
upon trends in indemnification and repurchase claims, actual
loss experience, risks in the underlying serviced loan
portfolios, current economic conditions and the periodic
negotiations that management may enter into with investors to
settle existing and potential future claims.
Indemnification and repurchase liabilities, which are included
in Other liabilities on the Consolidated Balance sheet, are
evaluated by management on a quarterly basis. Initial
recognition and subsequent adjustments to the indemnification
are recognized in Other noninterest income on the
Consolidated Income Statement. For more information
regarding our Home Equity Loan/Line of Credit Repurchase
Obligations, see Note 21 Commitments and Guarantees in the
Notes To Consolidated Statements in Item 8 of this Report.
R ISK M ANAGEMENT
Enterprise Risk Management
PNC encounters risk as part of the normal course of operating
our business. Accordingly, we design risk management
processes to help manage this risk. PNC manages risk in light
of our risk appetite to optimize long term shareholder value
while supporting our employees, customers, and communities.
This Risk Management section describes our risk framework,
including risk appetite and strategy, culture, risk organization
and governance, risk identification and quantification, risk
controls and limits and risk monitoring and reporting. The
overall Risk Management section of this Item 7 also provides
an analysis of our key areas of risk, which include but are not
limited to credit, operational, compliance, market, liquidity
and model. Our use of financial derivatives as part of our
overall asset and liability risk management process is also
addressed within the risk management section.
PNC operates within a rapidly evolving regulatory
environment. Accordingly, we are actively focused on the
timely adoption of regulatory pronouncements within our
Enterprise Risk Management (ERM) Framework.
We view risk management as a cohesive combination of the
following risk elements which form PNC’s ERM Framework:
Risk Organization &
Governance
Risk
Monitor-
ing &
Reporting
Risk
Identi-
fication &
Quanti-
fication
Risk Controls &
Limits
Risk
Appetite
Statement
Risk Capacity,
Appetite &
Strategy
R
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k
C
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Risk Appetite and Strategy
PNC’s risk appetite represents the organization’s desired
enterprise risk position, set within our capital-based risk and
liquidity capacity to achieve our strategic objectives and
business plans. Reviewed periodically through the risk
reporting and Strategic Planning processes, the risk appetite
serves as an operating guide for making balanced risk
decisions that support our business strategies; it will adjust
over time to reflect the current and anticipated economic
environment, growth objectives, risk capacity and our risk
profile.
We establish guiding principles for each of the risks within
our taxonomy to support the Risk Appetite Statement. The
guiding principles are qualitative statements that guide risk-
taking activities and are supported by quantitative metrics, risk
limits, and risk appetite descriptions as defined in policy and
managed through the ERM framework.
Risk Culture
All employees are considered risk managers, and are
responsible for understanding PNC’s Risk Appetite Statement,
guiding principles and ERM framework and how they apply to
their respective roles. PNC’s governance structure establishes
clear roles and responsibilities for risk management throughout
the organization. All employees are encouraged to collaborate
across groups to identify and mitigate risks and elevate issues as
required. PNC reinforces risk management responsibilities
through a performance management system where employee
performance goals include risk management objectives and
incentives for employees to reinforce balanced measures of risk
adjusted performance.
Proactive communication, between groups and up to the Board
of Directors, facilitates timely identification and resolution of
risk issues. PNC’s multi-level risk committee structure provides
a formal channel to identify, decision, and report risk. Risk
The PNC Financial Services Group, Inc. – Form 10-K 69