Market Risk

Market risk is the risk of a Bank's loss due to adverse change of market prices for financial assets (primarily, securities), exchange rates and interest rates.

Market risks include:

• equity risk (risk of a loss resulting from change in prices of assets circulating in the securities market);
• currency risk (risk of a loss from change in foreign exchange rates);
• interest risk (risk of a loss from change in interest rates).

The Assets and Liabilities Committee determines VTB's market risks policy to limit and mitigate possible losses caused by adverse changes in foreign exchange rates, interest rates and quotations of securities (i.e. currency risk, interest risk and price risk respectively).

In market risk management, JSC VTB Bank follows the requirements set by the Bank of Russia regulations but also uses internal models complying with the recommendations of the Basel Committee on Banking Supervision.

The key elements of the Bank's market risk assessment and management system are:

1. Quantitative assessment based on Value-at-Risk modern concept.
2. Analysis of the Bank's balance sensitivity to changes in market parameters (primarily, interest rates and/or foreign exchange rates) and assessment of the Bank's stability against violent fluctuations (stress testing).
3. Scenario analysis of the Bank's credit and debit operations, setting target values of asset and liabilities structure by volume, maturity, return/value.
4. Setting limits for market risks taken by the Bank and rigid control over compliance:
• net foreign exchange position limits;
• limits for conversion operations and operations with marketable securities by types of operations and instruments;
• stop-loss limits.
5. Assessment of economic capital necessary to cover market risks.