ICICI Bank 2012 Annual Report Download - page 43

Annual Report 2011-2012 41
witnessed significant decline in the first three quarters of the year due global and domestic economic
developments. However, subsequent to the easing of Eurozone concerns and increasing portfolio
investment inflows, equity markets recovered in the last quarter of fiscal 2012. Foreign exchange
markets were also volatile and the rupee recorded a sharp fall of 14.6% against the dollar during 2011.
Corporate bond spreads also remained volatile throughout the year amid bearish market sentiment.
The proprietary trading group witnessed subdued activity in view of the market scenario. However,
the Bank continued to focus on the corporate bonds segment and ranked first in league table rankings
for debt private placement according to the Prime database. Over the last year, we strengthened our
relationship with key issuers and focused on increasing our distribution coverage. The Bank also won
the IFR Asia 2011 Award in the “India Bond House of the Year” category.
In its customer related business, the Bank provides foreign exchange and derivative solutions to clients
and has continued to be a major player in this segment. These products and services are aimed at
managing customers’ foreign exchange and risk hedging needs through forwards, swaps, options and
bullion services. The Bank hedges market risks related to these products with banking counterparties.
The balance sheet management function continued to actively manage the Bank’s liquidity and the
government securities portfolio held for compliance with Statutory Liquidity Ratio (SLR) norms to
optimise the yield on this portfolio, while maintaining an appropriate portfolio duration given the volatile
interest rate environment.
RISK MANAGEMENT
Risk is an integral part of the banking business and we aim at delivering superior shareholder value by
achieving an appropriate trade-off between risk and returns. Key risks include credit, market, liquidity,
operational, legal, compliance and reputation risks. Our risk management strategy is based on a clear
understanding of various risks, disciplined risk assessment & measurement procedures and continuous
monitoring.
The key principles underlying our risk management framework are as follows:
The Board of Directors has oversight on all the risks assumed by the Bank. Specific Committees of the
Board have been constituted to facilitate focused oversight of various risks. Policies approved from
time to time by the Board of Directors/Committees of the Board form the governing framework for each
type of risk. The business activities are undertaken within this policy framework. Independent groups
and sub-groups have been constituted across the Bank to facilitate independent evaluation, monitoring
and reporting of various risks. These groups function independently of the business groups.
Our Risk Committee approves, every year, a detailed calendar of reviews. The calendar of reviews
includes reviews of risk management policies in relation to various risks, risk profile of the Bank, its
overseas banking subsidiaries and key non-banking subsidiaries, assessment of capital adequacy based
on the risk profile of the balance sheet, status with respect to implementation of advanced approaches
under the Basel framework and review of regulatory compliance issues. Our Credit Committee also
approves every year a detailed calendar of reviews covering the Bank’s exposure to particular industries
and outlook for those industries, analysis of non-performing loans, overdues, incremental sanctions
and specific review of each portfolio. A summary of the reviews carried out by the Credit Committee
and Risk Committee is reported to the Board of Directors. Our Asset Liability Management Committee
is responsible for managing the balance sheet within the risk parameters laid down by the Board/Risk
Committee and reviewing our asset-liability position.
We have dedicated groups, namely the Risk Management Group, Compliance Group, Corporate Legal
Group, Internal Audit Group and Financial Crime Prevention & Reputation Risk Management Group, with
a mandate to identify, assess and monitor the Bank’s principal risks in accordance with well-defined
policies and procedures. These groups are independent of all business operations and coordinate with
representatives of the business units to implement ICICI Bank’s risk management methodologies. The
Internal Audit Group and Compliance Group are responsible to the Audit Committee of the Board.