Rental income
19 Risk management and organisation
19.3.3 Decision making processes Risk management committees
Decisions are made by a majority of the votes present, subject to a quorum set in advance for the relevant committee. In the event of a tie, the chairman decides.
The highest-level risk officer present has a right of veto, and if this right is exercised, the decision making is passed on to the next higher risk committee. Every member of the Group committees has an equal right to vote, and in addition to the voting right, a right to escalate the decision taken within the committee to a higher committee.
In the GRC, decisions can only be taken within the statutory powers allocated to the parties present.
19.4 Risk management departments at SNS REAAL Group level
In order to promote efficiency and uniformity, the risk management departments advise on risk management and report on the risk profile. They act as shared service centers for SNS Bank NV and they are responsible for modelling, measuring, monitoring, reporting and advising on risks. They are not responsible for determining the policy, but have an advisory role in this area. Actual policy determination is the responsibility of the risk management committees authorised to that end.
This advisory role entails a supporting role in defining and implementing policy, and in monitoring the quality of risk control.
At SNS REAAL the following departments are involved in risk management for SNS Bank NV:
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Group Risk Management (GRM)•
Compliance, Security & Operational Risk Management (CS&O)•
Legal Affairs (LA)•
Finance, Risk & Control SNS Bank•
Risk Management SNS Bank•
Group Audit (GA)Group Risk Management (GRM)
GRM supports SNS REAAL in taking on well-considered risks and the monitoring thereof for the benefit of all
stakeholders. GRM’s primary task is to carry out its second-line role based on the ‘three lines of defence’ model used by SNS REAAL.
Within this context, GRM supports the Executive Board, the Management Boards of the business units and other stakeholders in:
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formulating and monitoring the risk profile;•
defining the framework within which the risk owners (can) operate;•
identifying changing market conditions and regulations in the field of Risk Management that are relevant to the strategy and policy;•
ensuring and controlling efficient risk management processes;•
building models;•
model validation (including an escalation line to the CFRO).In addition, GRM gives direction to the areas of attention pertaining to Reinsurance and Economic Capital: advising on policy and framework development, modelling, implementation and monitoring/advising.
Compliance, Security & Operational Risk Management (CS&O)
CS&O advises the Executive Board and the Management Boards of the business units of SNS REAAL on managing non-financial risks. These are risks that are related to human behaviour and structuring of business processes. The main duties of the department are providing recommendations for ethical and controlled business operations, coordinating and promoting operational risk management, security risk management and integrity risk management, formulating policies, giving advice and providing support with regard to issues related to non-financial risks, providing training & awareness programmes, monitoring and reporting in this respect. The scope of non-financial risks is divided into seven themes: employee, client, business process, product, information, risk control, and collaboration. These themes serve as guidance for the risk analyses to be performed and provide the structure for supervision and risk reporting.
Legal Affairs
Legal Affairs (LA) prepares policy and supports operational activities for risk management. The main responsibilities of the department in this area are:
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identifying and advising on present (and future) legislation and regulations;•
advising on products and product documentation;•
handling (impending) legal disputes; and•
advising on cooperation agreements.Finance Risk & Control SNS Bank
Finance Risk & Control (FR&C) SNS Bank NV is responsible for balance sheet management (Asset & Liability Management) at SNS Bank. This includes managing interest income and interest rate risk, the capital and liquidity position and the corresponding liquidity risk. This balance sheet management is conducted within the framework set by Group Risk Management.
In addition, FR&C is responsible for establishing the ex-ante theoretical rates for the commercial banking products such as savings and mortgages. These rates represent the cost price of the products, taking into account the required return on equity. FR&C is also responsible for carrying out the Internal Funds Transfer Pricing (IFTP) process.
Risk Management SNS Bank
Credit risk management is allocated among three separate and independent departments: the acceptance and regular management of mortgages is the responsibility of the Service Center Mortgages. Arrears management and special credits are the responsibility of the Service Center Special Credits. Second line risk management is the responsibility of Risk Management SNS Bank and Group Risk Management.
Effective as of 1 January 2013, the Risk Management activities of Property Finance are separated from Risk Management SNS Bank, leading to a separate Risk Management Property Finance department.
The Service Center Mortgages, Service Center Special Credits and Risk Management SNS Bank play an important role in the following tasks:
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Management of loans in arrears and loans in default. Risk Management SNS Bank:•
Advice on the credit risk policy.•
Independent analysis of advice on credit proposals.•
Approval of commercial items.•
Administering and management of credit facilities and collateral.•
Performing the secretarial duties for the credit committees and approval meetings.•
Quorum member of Credit Risk Committee SNS Retail Bank and Group Credit Risk Committee.•
Reporting on and identifying the risk profile of the mortgage portfolio, consumer loans, corporate and sustainable loans.•
Owner of Basel 2 credit risk models for the purposes of RWA determination, value changes and pricing.•
Advice to credit committees regarding the amount of the credit provision.Risk Management Property Finance
As of 2013, Property Finance has its own Risk Management department. This Risk Management department has a functional line with SNS REAAL’s Group Risk Management (GRM). Risk Management Property Finance’s activities are aimed at managing credit risk. The functional line with GRM has been cancelled as a result of the separation of Property Finance on 31 December 2013.
Group Audit
Group Audit (GA) reports to the chairman of the Executive Board and also has a reporting line to the Audit Committee of the Supervisory Board. In this way, the department is able to perform its activities independently of the business units and the departments of SNS REAAL.
Group Audit primarily carries out its audits on behalf of the Executive Board based on a dynamic risk analysis. This risk analysis is in line with the Banking Code and the Insurance Code and has been discussed with the external auditor and the Dutch Central Bank. The audits focus on the internal risk management and control system, related processes, procedures and (the reliability of) management information.
Group Audit is also responsible for carrying out differentiated internal audit activities on behalf of the Management Board of SNS Bank and line management. These audits focus on the (permanent) effect of control measures included in procedures. In addition, various types of audits are performed at the request of the Management Boards, including certification activities for external parties.