1 Market risks
audited information

Market risk is the risk that arises from changes in interest rates, exchange rates and security prices in the financial and capital markets. A differentiation is made between market risks in the trading book and market risks in the banking book. The potential for losses exists primarily in the impairment of the value of an asset or the increase in the value of liabilities (market value perspective) as well as in secondary capacity in the diminution of current earnings or an increase in current expenditures (earnings perspective).

1.1 Market risk management

The LLB Group has in place a differentiated risk management and risk control system for market risks. The market risk control process comprises a sophisticated control loop involving the identification and the uniform valuation of market riskrelevant data as well as the control, monitoring and reporting of market risks.

Trading book

The LLB Group enters into no significant risks in its trading book.

Banking book

Market risks with the banking book mainly involve interest rate fluctuation risk, exchange rate risk and equity price risk.

Interest rate fluctuation risk

This is regarded as the adverse effects of changes in market interest rates on capital resources or current earnings. The different interest maturity periods of claims and liabilities from balance sheet transactions and derivatives represent the most important basis.

Exchange rate risk

This relates to the risks arising in connection with the uncertainties regarding future exchange rate trends. The calculation of these risks takes into consideration all the positions entered into by the bank.

Equity price risk

This is understood to be the risk of losses due to adverse changes in the market prices of equities.

1.2 Valuation of market risks

Value-at-risk

The value-at-risk concept measures the potential loss under normal market conditions over a given time interval.

Scenario analysis

While the value-at-risk concept supplies an indication of possible losses under normal market conditions, it cannot provide information about potential losses under extreme conditions. The aim of the scenario analyses of the LLB Group is to simulate the effects of normal and stress scenarios.

1.3 Distribution of market risks

The individual Group companies distribute their interest rate risks within the specified limits at their own discretion. Interest rate swaps are employed to distribute the risks associated with changes in interest rates. The scope of risk is restricted by means of sensitivity limits. In client business, currency risks are basically invested or refinanced in matching currencies. The remaining currency risk is limited using sensitivity limits. Equity investments are limited by means of nominal limits.

1.4 Risk monitoring

Group Risk Controlling monitors the observance of market risk limits and is also responsible for reporting market risks.

1.5 Value-at-risk and sensitivities by risk categories

Value-at-risk

The value-at-risk is an estimate of the potential loss under normal market conditions and is calculated at the LLB Group on the basis of a confidence level of 95 percent and a holding period of four weeks.

Sensitivities

Interest rate sensitivity measures the loss in value for the LLB Group caused by an increase in the interest rate level of 100 basis points. Currency risks are measured by a sensitivity analysis assuming a rise in the exchange rate of the Swiss Franc of ten percent relative to the other currencies, and equity price risks are measured assuming a price fall of ten percent on the equity market.

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in CHF thousands

31.12.2009

31.12.2008

 

Value-at-risk

Sensitivity

Value-at-risk

Sensitivity

Currency risks

 

17'866

 

13'105

Interest rate risks

22'049

76'049

21'273

67'325

Equity price risks

 

11'487

 

10'826

1.6 Currency risks



Balance sheet by currency

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in CHF thousands

31.12.2009

 

CHF

USD

EUR

Others

Total

Assets

 

 

 

 

 

Cash and balances with central banks

372'886

791

21'461

689

395'827

Due from banks

2'493'143

1'661'985

3'526'705

458'030

8'139'863

Due from customers

8'575'251

381'901

330'463

36'827

9'324'442

Trading portfolio assets

3'021

0

555

0

3'576

Derivative financial instruments

126'104

871

1'900

50

128'925

Financial investments at fair value
through profit and loss

650'315

2'473'709

865'302

8'731

3'998'057

Investments in associates

267'411

0

0

0

267'411

Property and equipment

151'196

0

1'137

0

152'333

Investment property

29'358

0

0

0

29'358

Goodwill and other intangible assets

286'270

0

0

0

286'270

Deferred tax assets

25'559

0

0

0

25'559

Accrued income and prepaid expenses

24'195

3'148

9'536

1'096

37'975

Other assets

45'992

28'552

21'932

23'506

119'982

Total assets reported in the balance sheet

13'050'701

4'550'957

4'778'991

528'929

22'909'578

Delivery claims from forex spot,
forex futures and forex options transactions

1'578'183

1'581'337

769'790

444'588

4'373'898

Total assets

14'628'884

6'132'294

5'548'781

973'517

27'283'476

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Due to banks

277'826

15'215

164'976

35'503

493'520

Due to customers

8'710'877

1'881'791

3'543'584

471'284

14'607'536

Liabilities from insurance contracts

2'026

98'717

31'910

234

132'887

Financial liabilities at fair value through profit and loss

51'816

2'524'442

816'028

5'981

3'398'267

Derivative financial instruments

112'369

373

1'927

2

114'671

Debt issued

1'921'954

0

79'472

0

2'001'426

Current tax liabilities

40'608

0

0

0

40'608

Deferred tax liabilities

56'555

0

0

0

56'555

Accrued expenses and deferred income

51'009

1'566

4'331

615

57'521

Other liabilities

239'163

1'833

634

18

241'648

Provisions

1'598

0

0

0

1'598

Share capital

154'000

0

0

0

154'000

Less treasury shares

–199'704

0

0

0

–199'704

Capital reserve

49'744

0

0

0

49'744

Retained earnings

1'684'453

0

0

0

1'684'453

Other reserves

–22'274

0

0

0

–22'274

Non-controlling interests

97'122

0

0

0

97'122

Liabilities and equity
reported in the balance sheet

13'229'142

4'523'937

4'642'862

513'637

22'909'578

Delivery liabilities from forex spot,
forex futures and forex options transactions

1'578'403

1'579'978

770'044

445'473

4'373'898

Total liabilities and equity

14'807'545

6'103'915

5'412'906

959'110

27'283'476

 

 

 

 

 

 

Net position per currency

–178'661

28'379

135'875

14'407

0

Balance sheet by currency

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in CHF thousands

31.12.2008

 

CHF

USD

EUR

Others

Total

Assets

 

 

 

 

 

Cash and balances with central banks

301'267

775

31'444

502

333'988

Due from banks

3'217'950

1'494'714

4'211'914

514'552

9'439'130

Due from customers

8'101'017

686'678

353'970

26'350

9'168'015

Trading portfolio assets

2'671

0

2'085

49

4'805

Derivative financial instruments

161'050

7'916

35'901

8'007

212'874

Financial investments at fair value
through profit and loss

506'619

1'983'889

669'442

4'074

3'164'024

Investments in associates

236'502

0

0

0

236'502

Property and equipment

157'147

0

0

0

157'147

Investment property

31'525

0

0

0

31'525

Goodwill and other intangible assets

257'465

0

0

0

257'465

Deferred tax assets

19'592

0

0

0

19'592

Accrued income and prepaid expenses

35'844

10'926

24'914

2'870

74'554

Other assets

32'364

32'095

21'217

17'180

102'856

Total assets reported in the balance sheet

13'061'013

4'216'993

5'350'887

573'584

23'202'477

Delivery claims from forex spot,
forex futures and forex options transactions

1'331'173

1'287'500

509'974

256'439

3'385'086

Total assets

14'392'186

5'504'493

5'860'861

830'023

26'587'563

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Due to banks

321'866

73'284

442'423

38'734

876'307

Due to customers

8'358'905

1'845'544

3'972'431

513'955

14'690'835

Liabilities from insurance contracts

1'476

74'208

22'744

129

98'557

Financial liabilities at fair value through profit and loss

42'548

2'139'519

655'752

3'705

2'841'524

Derivative financial instruments

67'230

82'987

12'256

30'533

193'006

Debt issued

2'288'450

0

92'434

0

2'380'884

Current tax liabilities

27'614

0

0

0

27'614

Deferred tax liabilities

69'225

0

0

0

69'225

Accrued expenses and deferred income

58'115

6'030

15'002

1'864

81'011

Other liabilities

260'980

10'834

522

1'287

273'623

Provisions

2'334

0

0

0

2'334

Share capital

154'000

0

0

0

154'000

Less treasury shares

–201'848

0

0

0

–201'848

Capital reserve

49'768

0

0

0

49'768

Retained earnings

1'609'671

0

0

0

1'609'671

Other reserves

–39'576

0

0

0

–39'576

Non-controlling interests

95'542

0

0

0

95'542

Liabilities and equity
reported in the balance sheet

13'166'300

4'232'406

5'213'564

590'207

23'202'477

Delivery liabilities from forex spot,
forex futures and forex options transactions

1'356'940

1'242'337

537'856

247'953

3'385'086

Total liabilities and equity

14'523'240

5'474'743

5'751'420

838'160

26'587'563

 

 

 

 

 

 

Net position per currency

–131'054

29'750

109'441

–8'137

0

1.7 Interest rate risks

Interest rate fluctuation risk by currencies

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Increase per 100 basis points
in CHF thousands

Within
1 month

1 to 3
months

3 to 12
months

1 to 5
years

Over
5 years

Total

31.12.2009

 

 

 

 

 

 

CHF

–4

819

–3'722

–56'006

–15'459

–74'372

EUR

20

–1'103

–842

1'280

–30

–675

USD

9

–584

–748

489

–230

–1'064

Other currencies

0

–16

–102

248

–68

62

All currencies

25

–884

–5'414

–53'989

–15'787

–76'049

 

 

 

 

 

 

 

31.12.2008

 

 

 

 

 

 

CHF

520

1'002

–2'644

–57'624

–10'617

–69'363

EUR

–677

509

705

–312

–1

224

USD

–303

201

469

1'554

0

1'921

Other currencies

–78

–19

–50

39

0

–108

All currencies

–538

1'693

–1'520

–56'343

–10'618

–67'326

Interest rate repricing balance sheet

In the interest rate repricing balance sheet excess assets, equity and liability are calculated using fixed interest rate and derivative positions in the balance sheet and broken down into cycle times. The positions within an unspecified duration of interest rate repricing are allocated to the corresponding cycle times on the basis of a replication.

Interest commitments of financial assets and liabilities (nominal)

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in CHF thousands

Within
1 month

1 to 3
months

3 to 12
months

1 to 5
years

Over
5 years

Total

31.12.2009

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

Cash and balances
with central banks

395'827

0

0

0

0

395'827

Due from banks

5'053'871

1'489'115

1'170'289

158'295

0

7'871'570

Due from customers

1'639'548

995'597

1'408'823

4'591'218

597'685

9'232'871

Trading portfolio assets

69

0

1'190

638

1'669

3'566

Financial investments

56'244

41'623

57'731

361'114

94'719

611'431

Total financial assets

7'145'559

2'526'335

2'638'033

5'111'265

694'073

18'115'265

Derivative financial instruments

191'413

180'357

393'137

651'413

34'780

1'451'100

Total

7'336'972

2'706'692

3'031'170

5'762'678

728'853

19'566'365

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

Due to banks

255'264

72'687

113'401

40'000

0

481'352

Due to customers

9'074'479

1'078'953

1'767'781

2'521'935

20'000

14'463'148

Debt issued

89'679

97'541

387'295

1'176'625

248'245

1'999'385

Total financial liabilities

9'419'422

1'249'181

2'268'477

3'738'560

268'245

16'943'885

Derivative financial instruments

81'413

224'357

804'137

176'413

164'780

1'451'100

Total

9'500'835

1'473'538

3'072'614

3'914'973

433'025

18'394'985

 

 

 

 

 

 

 

Interest rate
repricing exposure

–2'163'863

1'233'154

–41'444

1'847'705

295'828

1'171'380

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in CHF thousands

Within
1 month

1 to 3
months

3 to 12
months

1 to 5
years

Over
5 years

Total

31.12.2008

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

Cash and balances
with central banks

120'797

0

0

0

0

120'797

Due from banks

6'893'841

1'282'194

650'162

157'066

50'150

9'033'413

Due from customers

2'760'211

836'275

1'395'483

3'694'796

462'476

9'149'241

Trading portfolio assets

0

0

196

1'280

1'460

2'936

Financial investments

52'300

15'900

55'575

271'748

82'224

477'747

Total financial assets

9'827'149

2'134'369

2'101'416

4'124'890

596'310

18'784'134

Derivative financial instruments

251'633

206'409

448'980

901'120

34'980

1'843'122

Total

10'078'782

2'340'778

2'550'396

5'026'010

631'290

20'627'256

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

Due to banks

550'181

172'470

81'530

60'000

0

864'181

Due to customers

9'566'071

1'969'146

1'562'458

1'446'123

20'000

14'563'798

Debt issued

66'976

110'198

490'316

1'538'339

172'801

2'378'630

Total financial liabilities

10'183'228

2'251'814

2'134'304

3'044'462

192'801

17'806'609

Derivative financial instruments

141'633

400'409

864'980

221'120

214'980

1'843'122

Total

10'324'861

2'652'223

2'999'284

3'265'582

407'781

19'649'731

 

 

 

 

 

 

 

Interest rate
repricing exposure

–246'079

–311'445

–448'888

1'760'428

223'509

977'525

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