Market Risk Management at ABN AMRO

Abstract

Holland’s leading bank, ABN AMRO operates more than 800 offices at home and another 2,600 in 75 other countries. In the US, ABN AMRO owns Chicago-based LaSalle Bank and Standard Federal Bank, one of Michigan's largest banks. The bank faces many risks on account of market fluctuations. ABN AMRO’s goal is to identify and analyze risks at an early stage. The case discusses in detail how market risk is being managed at ABN AMRO.

INTRODUCTION

Holland’s leading bank, ABN AMRO operated more than 800 offices at home and another 2,600 in 75 other countries. In the US, ABN owned Chicago-based LaSalle Bank and Standard Federal Bank, one of Michigan's largest banks.

ABN also had a large presence in Brazil (through its ownership of Banco Real and Paraiban) and Malaysia (where it had operated for more than 100 years). The bank was expanding its presence in the Philippines, India, Singapore, Taiwan, and Thailand. ABN had three major business segments: private clients & asset management, consumer and commercial clients, and wholesale clients, but its strategic focus was on the mid-market segment. The bank believed it had a strong and distinctive competitive advantage in this segment, where it felt it could be most profitable in the future.

Market risk referred to the risk that movements in financial market prices, such as foreign exchange, interest rates, credit spread, equities and commodities, would change the value of the bank’s portfolios. ABN was exposed to market risk through its trading activities, which were carried out both for customers and on its own account.

In trading activities, risk arose both from open positions and from imperfect correlation between market positions that were intended to offset one another. Effective and efficient management of market risk was essential for both the competitiveness and profitability of the bank...

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        Case Code   FINA022
   Case Length    11 Pages
              Period    -
 Organization     -
        Pub Date     2005
Teaching Note    Not Available
     Countries    Netherlands
      Industry    Banking & Financial Services

Issues

How ABN AMRO Manages its Market Risks

ABN AMRO, Market Risks at ABN AMRO, Holland’s Leading Bank, Netherlands’ largest financial firm, Value at risk, Stress test scenarios, Asset & Liability Management at ABN AMRO, Interest rate risks at ABN AMRO, Currency risks at ABN AMRO and Liquidity risks at ABN AMRO

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.