Fannie Mae 2009 Annual Report Download - page 188

Table 56: Interest Rate Sensitivity of Financial Instruments
(1)
Estimated
Fair Value -100 -50 +50 +100
Change in Interest Rates
(in basis points)
Pre-tax Effect on Estimated Fair
Value
As of December 31, 2009
(Dollars in billions)
Trading financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 111.9 $ 2.7 $ 1.6 $(1.9) $(4.0)
Guaranty assets and guaranty obligations, net
(2)
. . . . . . . . . . . . . . . . . . . . (149.3) 11.3 5.7 (6.0) (4.3)
Other financial instruments, net
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72.5) (2.2) (1.1) 1.2 2.7
Estimated
Fair Value -100 -50 +50 +100
Change in Interest Rates
(in basis points)
Pre-tax Effect on Estimated Fair
Value
As of December 31, 2008
(Dollars in billions)
Trading financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90.8 $ 1.4 $ 0.8 $(1.0) $(2.0)
Guaranty assets and guaranty obligations, net
(2)
. . . . . . . . . . . . . . . . . . . . (91.0) 11.9 5.6 (6.7) (7.6)
Other financial instruments, net
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (131.9) (1.6) (0.4) (0.9) (1.8)
(1)
Excludes preferred stock.
(2)
Consists of the net of “Guaranty assets” and “Guaranty obligations” reported in our consolidated balance sheets. In
addition, includes certain amounts that have been reclassified from “Mortgage loans” reported in our consolidated
balance sheets to reflect how the risk of the interest rate and credit risk components of these loans are managed by
our business segments.
(3)
Consists of the net of all other financial instruments reported in “Note 19, Fair Value.”
Liquidity Risk Management
We are exposed to liquidity risk when the markets in which we operate become subject to less purchasing
activity by market participants. Our liquidity could be negatively impacted by a variety of circumstances
including: downgrades of the credit rating on our senior unsecured debt; sudden unexpected cash outflows; or
other events that cause counterparties to avoid trading with or lending to us. For a description of how we
manage and monitor liquidity risk, refer to “Liquidity and Capital Management.”
Operational Risk Management
We have made a number of changes in our Operational Risk Management efforts in 2009 including our
leadership, organizational structure, business focus and policies. Our goal is to keep our operational risk at
appropriate levels relative to the nature of our business activities and the markets in which we operate, our
capital and liquidity requirements, the economic environment and the regulatory environment.
Our Corporate Operational Risk Framework is based on the Basel Committee guidance of sound practices for
the management of operational risk broadly adopted by U.S. Commercial banks comparable in size to Fannie
Mae. Our framework is intended to provide a methodology to identify, assess, mitigate, control and monitor
operational risks across the company. Included in this framework is a requirement and plan for the
development of a new system for tracking and reporting of operational risk incidents. The framework also
includes a methodology for business owners to conduct risk control self assessments to self identify potential
operational risks and points of execution failure, the effectiveness of associated controls, and document
corrective action plans to close identified deficiencies. This methodology is in its early stage of execution and
the success of our operational risk effort will depend on our ability to complete these reviews and to address
the gaps identified in this work.
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