Green Dot 2014 Annual Report Download - page 57

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million change in our annual interest expense. We actively monitor our interest rate exposure and our objective is to
reduce, where we deem appropriate to do so, fluctuations in earnings and cash flows associated with changes in
interest rates. In order to accomplish this objective, we may enter into derivative financial instruments, such as forward
contracts and interest rate hedge contracts only to the extent necessary to manage our exposure. We do not hold or
enter into derivatives or other financial instruments for trading or speculative purposes.
Credit and liquidity risk
We do have exposure to credit and liquidity risk associated with the financial institutions that hold our cash and
cash equivalents, restricted cash, available-for-sale investment securities, settlement assets due from our retail
distributors that collect funds and fees from our customers, and amounts due from our issuing banks for fees collected
on our behalf.
We manage the credit and liquidity risk associated with our cash and cash equivalents, available-for-sale investment
securities and amounts due from issuing banks by maintaining an investment policy that restricts our correspondent
banking relationships to approved, well capitalized institutions and restricts investments to highly liquid, low credit risk
assets. Our policy has limits related to liquidity ratios, the concentration that we may have with a single institution or
issuer and effective maturity dates as well as restrictions on the type of assets that we may invest in. The management
Asset Liability Committee is responsible for monitoring compliance with our Capital Asset Liability Management policy
and related limits on an ongoing basis, and reports regularly to the audit committee of our board of directors.
Our exposure to credit risk associated with our retail distributors is mitigated due to the short time period, currently
an average of two days that retailer settlement assets are outstanding. We perform an initial credit review and assign
a credit limit to each new retail distributor. We monitor each retail distributor’s settlement asset exposure and its
compliance with its specified contractual settlement terms on a daily basis and assess their credit limit and financial
condition on a periodic basis. Our management's Enterprise Risk Management Committee is responsible for monitoring
our retail distributor exposure and assigning credit limits and reports regularly to the audit committee of our board of
directors.
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