ICICI Bank 2011 Annual Report Download - page 193

F115
Hedging and mitigation
Limits on positions that can be maintained are laid out in the relevant policies. All business groups are required to
operate within these limits.
Hedge transactions for banking book transactions are periodically assessed for hedge effectiveness.
Frameworks in overseas banking subsidiaries
Frameworks that are broadly similar to the above framework have been established at each of the overseas banking
subsidiaries of the Bank to manage market risk. The frameworks are established considering host country regulatory
requirements as applicable.
b. Capital requirements for market risk
The capital requirements for market risk (general and specific) at March 31, 2011 were:
` in billion
Amount
Capital required 34.02
- for interest rate risk1 27.65
- for foreign exchange (including gold) risk 0.92
- for equity position risk 5.45
1. Includes capital required of ` 0.65 billion for securitisation exposure.
10. OPERATIONAL RISK
a. Operational risk management framework
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or
from external events. Operational risk includes legal risk but excludes strategic and reputation risk. Operational
risk is inherent in the Bank’s business activities in both domestic as well as overseas operations and covers a wide
spectrum of issues.
Objectives
The objective of the Bank’s operational risk management is to manage and control operational risks in a cost
effective manner within targeted levels of operational risk consistent with the Bank’s risk appetite as specified in
the Operational Risk Management Policy (the Policy). The Policy aims to:
• Define Bank level operational risk appetite;
• Establish clear ownership and accountability for management and mitigation of operational risk;
• Help business and operations to improve internal controls, reduce likelihood of occurrence of operational risk
incidents and minimise potential impact of losses;
• Minimise losses and customer dissatisfaction due to failure in processes; and
• Develop comprehensive operational risk loss database for effective mitigation.
Operational risk management governance and framework
In line with the RBI guidelines, an independent Operational Risk Management Group (ORMG) was set up in 2006.
The Bank’s operational risk management governance and framework risk is defined in the Policy. While the Policy
provides a broad framework, detailed standard operating procedures for operational risk management processes
are established. For the purpose of robust quality of operational risk management across the Bank, the operational
risk management processes of the Bank have been certified for ISO 9001:2008 standard.
The Policy specifies the composition, roles and responsibilities of Operational Risk Management Committee (ORMC).
ORMC is responsible for overseeing all material operational risks, responses to risk issues and the adequacy and
effectiveness of controls within a given operational risk control area.
BASEL II – PILLAR 3 DISCLOSURES (CONSOLIDATED)
at March 31, 2011