ICICI Bank 2009 Annual Report Download - page 114

F40
lays down the methodology for computation and monitoring of risk. The Risk Committee of the Board (“RCB”) reviews the
Bank’s risk management policy in relation to various risks (portfolio, liquidity, interest rate, off-balance sheet and operational
risks), investment policies and compliance issues in relation thereto. The RCB comprises of independent directors and the
Managing Director and CEO.
Risk monitoring of the derivatives portfolio other than credit derivatives is done on a daily basis. Risk monitoring of the credit
derivatives portfolio is done on a monthly basis. The Bank measures and monitors risk using Value at Risk (“VAR”) approach
and the relevant greeks for options. Risk reporting on derivatives forms an integral part of the management information
system and the marked to market position and the VAR of the derivatives portfolio other than credit derivatives is reported on
a daily basis. The marked to market position and VAR on the credit derivatives portfolio is reported on a monthly basis.
The use of derivatives for hedging purposes is governed by the hedge policy approved by Asset Liability Management
Committee (“ALCO”). Subject to prevailing RBI guidelines, the Bank deals in derivatives for hedging fixed rate, floating rate
or foreign currency assets/liabilities. Transactions for hedging and market making purposes are recorded separately. For
hedge transactions, the Bank identifies the hedged item (asset or liability) at the inception of the transaction itself. The
effectiveness is assessed at the time of inception of the hedge and periodically thereafter.
Hedge derivative transactions are accounted for pursuant to the principles of hedge accounting. Derivatives for market
making purpose are marked to market and the resulting gain/loss is recorded in the profit and loss account. The premium on
option contracts is accounted for as per Foreign Exchange Dealers’ Association of India guidelines. Derivative transactions
are covered under International Swap Dealers Association (“ISDA”) master agreements with the respective counter parties.
The exposure on account of derivative transactions is computed as per RBI guidelines and is marked against the credit
limits approved for the respective counter parties.
Rupees in million
As on March 31, 2009
Sr.
No. Particulars Currency
derivatives1Interest rate
derivatives2
1. Derivatives (Notional principal amount)
a) For hedging ........................................................................................... 21,807.6 236,802.8
b) For trading ............................................................................................. 1,190,839.4 3,270,348.6
2. Marked to market positions3
a) Asset (+) ............................................................................................... 24,141.6 3,592.7
b) Liability (–) ............................................................................................. — —
3. Credit exposure4 .......................................................................................... 156,118.5 123,036.2
4. Likely impact of one percentage change in interest rate (100*PV01)5
a) On hedging derivatives6 ........................................................................ 212.6 8,902.0
b) On trading derivatives ........................................................................... 2,446.3 1,943.3
5. Maximum and minimum of 100*PV01 observed during the year
a) On hedging6
Maximum .............................................................................................. (194.2) (7,993.6)
Minimum ............................................................................................... (564.4) (11,031.3)
b) On trading
Maximum .............................................................................................. (1,813.7) 5,597.0
Minimum ............................................................................................... (2,710.5) 61.5
1. Options and cross currency interest rate swaps and currency futures are included in currency derivatives.
2. Foreign currency interest rate swaps, forward rate agreements and swaptions are included in interest rate derivatives.
3. For trading portfolio including accrued interest. Represents net positions.
4. Includes accrued interest.
5. Amounts given are absolute values on a net basis, excluding options.
6. The swap contracts entered for hedging purpose would have an opposite and offsetting impact with the underlying
on-balance sheet items.
forming part of the Accounts (Contd.)
schedules