eTrade 2012 Annual Report Download - page 68

As of December 31, 2012, the Company had $0.3 billion of unused lines of credit available to customers
under home equity lines of credit and $0.3 billion of unused consumer and other lines. As of December 31, 2012,
the Company had no commitments to purchase or originate loans and had a commitment to sell mortgage loans
of $1.0 million. The Company had a commitment to purchase and sell securities of $335.1 million and
$282.2 million, respectively. The Company also had $4.4 million in commitments to fund low income housing
tax credit partnerships and other limited partnerships as of December 31, 2012. Additional information related to
commitments and contingent liabilities is detailed in Note 19—Commitments, Contingencies and Other
Regulatory Matters of Item 8. Financial Statements and Supplementary Data.
RISK MANAGEMENT
As a financial services company, our business exposes us to certain risks. The identification, mitigation and
management of existing and potential risks are key to effective enterprise risk management. There are certain
risks that are inherent to our business (e.g. execution of transactions) whereas other risks will present themselves
through the conduct of that business. We seek to monitor and manage our significant risk exposures through a set
of board approved limits as well as Key Risk Indicators (“KRIs”) or metrics. We have in place a governance
framework that regularly reports metrics, major risks and exposures to senior management and the Board of
Directors. In 2013, we will continue to enhance our risk culture and capabilities while complying with evolving
regulatory guidelines and expectations.
We developed a Board-approved Risk Appetite Statement (“RAS”) which was disseminated to all
employees and specifies the significant risks we are exposed to and our tolerance of those risks. As described in
the RAS, our business exposes us to the following eight major categories of risk:
•Credit Risk—the risk of loss arising from the inability or failure of a borrower or counterparty to meet
its credit obligations.
•Interest Rate Risk—the risk of loss of income or value of future income due to changes in interest rates
arising from the Company’s balance sheet position. This includes convexity risk, which arises from
optionality in the balance sheet, related to deposit flows or to prepayments in mortgage assets.
•Liquidity Risk—the potential inability to meet contractual and contingent financial obligations either
on- or off-balance sheet, as they come due.
• Market Risk—the risk that asset values or income streams will be adversely affected by changes in
market prices.
•Operational Risk—the risk of loss due to failure of people, processes and systems, or damage to
physical assets caused by unexpected events.
•Strategic Risk—sometimes called business risk, is the risk of loss of market size, market share or
margin in any business.
•Reputational Risk—the potential that negative perceptions regarding our conduct or business practices
will adversely affect valuation, profitability, operations or customer base or require costly litigation or
other measures.
•Legal, Regulatory and Compliance Risk—the current and prospective risk to earnings or capital arising
from violations of, or non-conformance with, laws, rules, regulations, prescribed practices, internal
policies, and procedures, or ethical standards.
We are also subject to other risks that could impact our business, financial condition, results of operations or
cash flows in future periods. See Part I—Item 1A. Risk Factors.
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