General description of risk management

Nowadays, the activity of the banking system is directed towards the development of the business, increase in the capital and towards the development of infrastructure. Also, it focuses on the security of assets, on the promotion of innovative products and of course on the creation of a corporative management system that would correspond to the contemporary requests of the society and business. Having enumerated all the key objectives of a bank, there must also mentioned a clear and effective mechanism of decision taking process, in order to properly react to the risks. This mechanism must allow the bank’s management to evaluate what risks and in what volume the bank can assume, must give the possibility to determine does the bank’s profitability justify the assumed risks.

The activity of the banks is accompanied by the following basic types of the risks:

  1. Credit risk.
  2. Risk of the diversification of portfolio.
  3. Market risks (currency, interest rates).
  4. Risk of liquidity.
  5. Risk of operating activity.
  6. Risk of the loss of image.
  7. Political and regional risk, etc.

Banca de Economii S.A. has an internal system of definition, estimation, control, monitoring and administration of bank risks, which enables the Bank to strengthen or to weaken the influence of the active factors, all of them adjusted to the regulatory legal previsions.

For the successful functioning of this system, the bank provides the effective solution of the following tasks:

  1. Optimization of the correlation between the potential possibilities, risks of the bank and the increase of the capital, rhythm of the bank development.
  2. Realization of the integral approach to the system, by means of estimation and administration of the risks.
  3. Coordination of risks and the potential possibilities to achieve good results.
  4. Introduction of the system of estimation and control of risks in the process of decision taking.
  5. The perfection of the system of control over the risks for the improvement of bank management.

In its activity Banca de Economii S.A. strives for the maintenance of optimal level of liquidity, for the balanced structure of assets and liabilities (periods, currencies), for the guarantee of an adequate level of diversification of assets and liabilities, according to the type of clients, picking out the main purpose of maximization of the values of bank, by increasing the profitability of the bank and the correct determination of the risk limits.

According to the above mentioned arguments, the risks of liquidity, of currency, of interest rate must be forecasted and daily tracked, permanently analyzed. Also, the financial situation must be monitored: balance and the account of profits and losses.

Taking into account the increase in the volume of credit operations, the bank pays special attention to the administration of credit risk. Control over the credit risk includes a number of strict principles, established according to the estimation of solvency of potential borrowers, according to the effectiveness of the control upon the quality of credits.

For the purpose of an increase in the effectiveness of the risk administration, the bank founded the Committees for Risk Administration: Credit Committee and Asset and Liabilities Committee.

In order to monitor and prevent the risks, the bank introduced the procedures of internal control, that are accomplished in the branches of the bank  by means of various forms of control and injection of the system of account at all levels. A special attention is paid to the provision and the exception of the operating risks connected to human factor, with the possibility of swindle, with difficulties in the operation of bank programs and procedures of control and estimation of risks.

With the coming into force of the Law reading the prevention of money laundering, Banca de Economii S.A., being regulated by this law, made its activity completely corresponding to the law’s requirements. Banca de Economii S.A. undertook a number of actions directed towards the decrease and avoidance of the risk of money laundering, creating the effective algorithm of determination of the suspicious transactions and conducting the regular instructing of personnel. Procedures and instructions created by the Banca de Economii S.A., have to become an effective guide in the work process.