The ALCO is the body responsible for setting market risk policies and monitoring the bank’s adherence to them. Market risk is monitored daily by the Risk department. Market risk is the risk of losses in positions arising from movements in market prices. From a market risk perspective FMO is subject to interest rate risk, currency risk and price risk connected to the bank’s liquidity portfolio. However, FMO ensures that it does not have trading positions and it mitigates market risks as much as possible.
The interest position is managed via a Price Value per Basis Point (PVBP) limit framework and the bank’s Duration of Equity. We stayed within our defined PVBP limit range. The duration of FMO’s equity is steered at a level of around 4 years. This ensures the generation of stable levels of interest income. FX positions are managed on a daily basis. FX results from equity investments are not reported as FX results, but are reported in the overall return on the investments. FX exposures from the loan portfolio, funding and other treasury activities are hedged. For operational purposes the limits for the daily monitored currency positions are set within a small bandwidth.