Market Risk Management at ABN AMRO (Page 2)

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 contd...

There were several major types of market risk: interest rate risk, foreign exchange risk, equity price risk, commodity price risk, credit spread risk, and volatility and correlation risks. For each risk type there were specific risk factors. Market risk exposure was quantified by identifying relevant risk factors and calculating appropriate risk measures. The risk measures for each risk factor were then used to set market risk limits, to run scenario and sensitivity analyses, and as inputs to various risk measurement models, such as Value-at-Risk (VaR).

Market Risk Management

Market Risk contained three major functions: Market Risk Management, Market Risk Policy, and Market Risk Reporting & Control. Market Risk Management (MRM) ensured that the authority delegated by the Group Asset Management and Liability Committee (ALCO) and Group Risk Committee (GRC) with regard to market risk resulting from the bank’s trading activities was exercised effectively, and that exposures were efficiently monitored and managed.

MRM limited and monitored the potential impact of specific pre-defined market movements on the profit & loss of trading positions. MRM also monitored the market risk of ALCO portfolios maintained by Group functions.....

More....

VALUE-AT-RISK

STRESS TEST SCENARIOS

ASSET AND LIABILITY MANAGEMENT

INTEREST RATE RISK

INTEREST RATE RISK ASSOCIATED WITH US RESIDENTIAL MORTGAGE BUSINESS

CURRENCY RISK

LIQUIDITY RISK

EXHIBIT 1 : REVENUES IN 2004 PER SBU IN %

EXHIBIT 2 : TOTAL REVENUE

EXHIBIT 3 : FINANCIAL HIGHLIGHTS

EXHIBIT 4 : RISK GOVERNANCE ORGANIZATIONAL STRUCTURE

EXHIBIT 5 : VAR PER RISK CATEGORY

EXHIBIT 6 : VAR V/S HYPOTHETICAL PROFIT & LOSS FOR TRADING PORTFOLIOS FOR 2004

BIBLIOGRAPHY

        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.