ICICI Bank 2013 Annual Report Download - page 200

F122
Operational risk management in overseas branches and banking subsidiaries
ORMG is responsible for design, development and continuous enhancement of the operational risk
management framework across the Bank including overseas banking subsidiaries and overseas branches.
While the common framework is adopted, suitable modifications in the processes are carried out depending
upon the requirements of the local regulatory guidelines. ORMG exercises oversight through the process of
periodic review of operational risk management in the international locations.
Operational risk management in other subsidiaries
The Bank has designed Group Operational Risk Management Policy. The Policy document describes the
approach towards the management of operational risk within ICICI Group. While the common framework
is adopted, suitable modifications in the processes are carried out depending upon the requirements of the
regulatory guidelines of the respective companies.
b. Capital requirement for operational risk (March 31, 2013)
As per the RBI guidelines on Basel II, the Bank has adopted Basic Indicator approach for computing capital
charge for operational risk. The capital required for operational risk at March 31, 2013 was ` 27.49 billion.
11. INTEREST RATE RISK IN THE BANKING BOOK (IRRBB)
a. Risk Management Framework for IRRBB
Interest rate risk is the risk of potential variability in earnings and capital value resulting from changes in
market interest rates. IRRBB refers to the risk of deterioration in the positions held on the banking book of an
institution due to movement in interest rates over time. The Bank holds assets, liabilities and off balance sheet
items across various markets with different maturity or re-pricing dates and linked to different benchmark
rates, thus creating exposure to unexpected changes in the level of interest rates in such markets.
Organisational set-up
ALCO is responsible for management of the balance sheet of the Bank with a view to manage the market
risk exposure assumed by the Bank within the risk parameters laid down by the Board of Directors/Risk
Committee. The Asset Liability Management Group (ALMG) at the Bank monitors and manages the risk
under the supervision of ALCO. Further, the Asset Liability Management (ALM) groups in overseas branches
manage the risk at the respective branches, in coordination with the Bank’s ALMG.
The ALM Policy of the Bank contains the prudential limits on liquidity and interest rate risk, as prescribed
by the Board of Directors/Risk Committee/ALCO. Any amendments to the ALM Policy can be proposed by
business group(s), in consultation with the market risk and compliance teams and are subject to approval
from ALCO/Risk Committee/Board of Directors, as per the authority defined in the Policy. The amendments
so approved by ALCO are presented to the Board of Directors/Risk Committee for information/approval.
TMOG is an independent group responsible for preparing the various reports to monitor the adherence to
the prudential limits as per the ALM Policy. These limits are monitored on a regular basis at various levels of
periodicity. Breaches, if any, are duly reported to ALCO/Risk Committee/Board of Directors, as may be required
under the framework defined for approvals/ratification. Upon review of the indicators of IRRBB and the impact
thereof, ALCO may suggest necessary corrective actions in order to realign the exposure with the current
assessment of the markets.
Risk measurement and reporting framework
The Bank proactively manages impact of IRRBB as a part of its ALM activities. ALM policy defines the different
types of interest rates risks that are to be monitored, measured and controlled. ALCO decides strategies for
managing IRRBB at the desired level. Further, ALCO periodically gives direction for management of interest
BASEL II – PILLAR 3 DISCLOSURES (CONSOLIDATED)
at March 31, 2013