Risk governance structure

 

Under the supervision of our Managing Board and the Risk Policy Committee of our Supervisory Board, formal authority and ultimate decision-making in respect of risk management matters is the responsibility of four committees: the Transaction Committee, the Investment Committee, the Asset & Liability Committee and the over-arching Risk Management Committee. These committees are chaired by the CRO and they ensure that assessment and acceptance of credit, market, investment and liquidity risk exposure is made independently of the business originators within the operating segments.

 

Our risk management committees are set out in the following chart:

 

 

 

The Risk Management Committee (RMC) determines our overall risk appetite and risk profile at a strategic level, evaluates the risk management elements of new activities and products as well as reviews risks at portfolio level, sets country risk limits, approves acceptance policies and guidelines and approves the risk policies and manuals. Three members of our Managing Board are members of the RMC, which also includes representatives from the Transaction Committee and the Asset & Liability Committee. As necessitated by the topics to be discussed, specialists in certain areas are also invited to the meetings of the RMC. The RMC meets monthly.

 

The Asset & Liability Committee (ALCO) monitors the development of our balance sheet and market risk profile. The ALCO monitors traded market risks, exposure to interest rates and currency risks, our capital structure and our liquidity position. The ALCO also approves large transactions such as securitisations and sets overall limits on risk exposures. The ALCO receives reports on all breaches of risk limits. Three members of our Managing Board are members of the ALCO. The ALCO meets once every two weeks.

 

The Transaction Committee (TC), NIBC’s credit committee, makes decisions on individual senior debt transactions, including credit conditions and parameters and lending and underwriting strategies, as well as evaluating opportunities for potential subsequent distribution of the asset. The TC sets credit limits and monitors exposure and impairments. Two members of our Managing Board are members of the TC. Meetings of the TC take place twice a week.

 

The Investment Committee (IC) is responsible for investment risk. The IC approves transactions with respect to equity, mezzanine, and subordinated debt exposures as well as impairments and revaluations. Two members of our Managing Board are members of the IC. The IC meets, in principle, on a weekly basis. Investment decisions of the Funds managed by Investment Management are made by the Investment Committees of the various Funds.

 

In addition to the above risk management committees, there is also the Engagement and Compliance Committee (ECC), which is responsible for the prevention of potential commercial conflicts of interest and compliance issues in evaluating potential assignment for our clients. All four members of our Managing Board are members of the ECC.

 

Finally, matters concerning Operational Risk are periodically discussed in the Managing Board. Operational Risk Management is aligned with activities of the Internal Audit department.

 

Overlap of committee membership among Managing Board members contributes to consistency in communication and decision-making. In all our risk management committees, at least two members are members of our Managing Board.

 

The CRO is supported by our centralised risk management functions, which consist of three risk management departments, the Credit Risk Management department (CRM), the Asset & Liability Management and Market Risk department (ALM/MR), and the Risk Policy department (RP). These departments support the various risk management committees dedicated to monitoring the different risk categories we face.

 

CRM is responsible for the credit risk management of the corporate loan portfolios. CRM develops and implements policies and procedures regarding credit risk, advises on credit proposals and reviews potential impairments. The Distressed Assets department (DA) is a sub-department of CRM. DA manages assets which are impaired, or at significant risk of becoming impaired. Credit risk management of the mezzanine investments, as well as investment risk management of the private equity positions is the responsibility of the IC or the Investment Committee of one of the NIBC Funds (depending on whether the specific mezzanine or equity position is part of NIBC’s direct portfolio or part of one of the NIBC Funds).

 

ALM/MR is responsible for managing risks of Treasury and the residential mortgage portfolio. Key risks managed by ALM/MR are market risk (interest rate, foreign exchange and credit spread risk) and, within Treasury, credit risk from Over The Counter (OTC) derivatives. This type of credit risk, despite being classified as a non-market risk, is monitored by ALM/MR as part of its comprehensive management of all financial markets’ risks. On a bank-wide level, ALM/MR is responsible for balance sheet and liquidity risk. ALM/MR maintains the systems we use to measure market and counterparty risk, and supports our asset and liability management policies as established by the ALCO.

 

RP monitors risk at the portfolio level. RP develops policies and methods for measuring risk, notably the credit rating system used to evaluate probability of default and loss given default in our credit portfolio. RP is responsible for the reporting of credit portfolio information to the various users in the bank. The RP department is pivotal in our Basel II process.