Commodity price risk management
Definition – Commodity price risk is the risk of incurring a loss due to changes in commodity prices, generated by maintaining open positions on particular types of goods.
Management objective – The objective of commodity price risk management is to reduce potential losses resulting from changes in commodity prices to the acceptable level by shaping the appropriate structure of these items.
Risk identification and measurement – In respect of the measurement of the prices of commodities, information on the positions taken by the Group in particular commodities is utilized, and stress-test analyses are performed.
Control – Control of commodity prices risk covers determining the respective limits and threshold tailored to the scale and complexity of the Group’s operations.
Forecasting and monitoring – In respect of the commodity price risk, the Group regularly monitors, in particular: open commodity positions, the outcome of stress-tests and utilization of internal risk limits.
Reporting – Reports on commodity price risks are prepared on a daily, weekly, monthly and quarterly basis.
Management actions – Commodity price risk is managed by imposing limits on instruments generating the commodity price risk, monitoring their use and reporting the risk level. The effect of commodity price risk on the Group’s financial position is immaterial.
Management of the equity securities price risk
Definition – The risk of equity securities price is the risk of losses being incurred as a result of changes in the prices of equity securities on the public market, or stock exchange indices, generated by maintaining open positions in instruments sensitive to changes in these market parameters. The risk results from operations conducted as part of trading activities of the Brokerage House of the Bank, investing activities and from other operations as part of banking activities which generate positions in equity securities.
Management objective – Managing the risk of equity securities prices is aimed at limiting potential losses resulting to changes in the prices of equity securities on the public market or stock exchange indices to an acceptable level, by optimizing the positions taken in instruments sensitive to changes in these market parameters.
Risk identification and measurement – For the purpose of equity securities price risk management the Group utilizes:
- analyses of stress tests, taking into account the changes in market prices of the underlying instruments and changes in their volatility;
- information on the utilization of limits adopted for positions taken in the equity securities portfolio.
Control – Control over equity securities price risk consists of determining equity securities risk limits and thresholds tailored to the scale and complexity of the Group’s operations.
Forecasting and monitoring – The Group regularly monitors the level of equity securities price risk and the utilization of the limits on positions taken in the equity securities portfolio.
Reporting – Reports on the risk of equity securities prices are prepared on a monthly and quarterly basis.
Management actions – The risk is managed by imposing limits on the activities of the Brokerage House of the Bank and by monitoring the utilization thereof. The effect of the equity securities prices risk on the financial position of the Group was assessed as immaterial. The positions taken in equity securities and index instruments are being limited, and are not expected to increase significantly.
Other price risks
Taking into consideration other price risks, as at the end of 2017 and 2016, the Group was exposed to the price risk of participation units in collective investment funds. The impact of this risk to the Group’s financial situation is immaterial.