ICICI Bank 2009 Annual Report Download - page 174

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F100
Risk management objectives
The Bank manages its market risk with the broad objectives of:
1. Optimizing interest rate & liquidity risk in the banking book to achieve desired duration of equity.
2. Management of interest rate risk and currency risk of the investment portfolio.
3. Proper classification, valuation and accounting of investment portfolio.
4. Adequate and proper reporting of investments and derivative products.
5. Compliance with regulatory requirements.
6. Effective control over the operation and execution of market related transactions.
Structure and organisation of the market risk management function
The Board approved committees review and approve the policies for the management of market risk. These
committees lay down the policies for the market risk and the interest rate risk/liquidity risk on the balance
sheet within the broad guidelines approved by the Board.
The market risk management group, which is an independent function, reports to head of GRMG. The market risk
management group within GRMG exercises independent control over the process of market risk management
and recommends changes in processes and methodologies for measuring market risk.
To comply with the home and host country regulatory guidelines and to have independent control groups
there is clear functional separation of:
Trading i.e. front Office,
Monitoring & control i.e. middle office and
Settlements.
Strategies and processes
Internal control system
Treasury operations warrant elaborate control procedures. Keeping this in view, the following guidelines are
followed for effective control of the treasury operations:
1. Delegation
Suitable delegation of administrative powers has been put in place for treasury operations. All investment
decisions are vested in the sub-committees of the Board. However, keeping in view the size of the
investment portfolio and the variety of securities that the Bank has been dealing in, authority for investment
decisions has been delegated to various dealers depending on exigencies of business.
Treasury Middle Office Group (TMOG) is responsible for an independent check of the transactions entered
into by the front office. It also monitors the various limits, which have been laid down in the Investment
Policy.
2. System controls
The systems facilitate straight through processing of deals and have adequate data integrity controls.
The deal slips generated from the systems contain names of the dealers along with other relevant deal
details. These are used for audit and control purpose.
3. Exception handling processes
The Investment Policy sets out deal-size limits for various products. Various coherence checks have
been inserted in the system for ensuring that the appropriate deal size limits are enforced to minimize
exceptions.
The scope and nature of risk reporting and/or measurement systems
Reporting
The Bank periodically reports on the various investments and their related risk measures to the senior
management and the committees of the Board. The Bank also periodically reports to its various regulators in
compliance with regulatory requirements.
BASEL II – Pillar 3 Disclosures (Consolidated)