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LLB Annual Report 2020 de

Risk management

Information checkedInformation geprüft Risk management

Principles of risk management

One of the core competences of a financial institute is to consciously accept risks and manage them profitably. In its risk policy, the LLB Group defines qualitative and quantitative standards of risk responsibility, risk management and risk control. Furthermore, the organisational and methodical parameters for the identification, measurement, control and monitoring of risks are specified. The proactive management of risk is an integral part of corporate policy and safeguards the LLB Group’s ability to bear and accept risk.

Organisation and responsibilities

Group Board of Directors

The Board of Directors of the LLB Group is responsible for stipulating risk management principles, as well as for specifying responsibilities and procedures for approving business transactions entailing risk. In fulfilling its tasks and duties, the Group Board of Directors is supported by the Group Risk Committee.

Group Executive Board

The Group Executive Board is responsible for the overall management of risk readiness within the parameters defined by the Group Board of Directors and for the implementation of the risk management processes. It is supported in this task by various risk committees.

Group Credit & Risk Management

Group Credit & Risk Management identifies, assesses, monitors and reports on the principal risk exposure of the LLB Group and is functionally and organisationally independent of the operative units. It supports the Group Executive Board in the overall management of risk exposure.

Risk categories

The LLB Group is exposed to various types of risks. It differentiates between the following risk categories:

Market risk

The risk of losses arises from unfavourable changes in interest rates, exchange rates, security prices and other relevant market parameters.

Liquidity and refinancing risk

Represents the risk of not being able to fulfil payment obligations on time or not being able to obtain refinancing funds on the market at a reasonable price to fulfil current or future payment liabilities.

Credit risk

Credit or counterparty risk includes the danger that a client or a counterparty cannot or cannot completely fulfil their obligations vis à vis the LLB Group or an individual Group company. This can result in a financial loss for the LLB Group.

Operational risk

Is the danger of losses due to the unsuitability or failure of internal procedures, people or systems, or as a result of external events.

Strategic risk

Arises as a result of decisions taken by the Group Executive Board which have a negative influence on the survival, development ability or independence of the LLB Group.

Reputation risk

If risks are not recognized, reasonably controlled and monitored, this can lead to considerable financial losses and damage to the company's reputation.

Risk categories
Risk management process

The implementation of an efficient risk management process is essential to enable risks to be identified, assessed, controlled and monitored, and should create a culture of risk awareness at all levels of the LLB Group. The Group Board of Directors specifies the risk strategy, which provides the operative units with a framework for the treatment of risk exposure. Depending on the type of risk, not only the stipulation of upper limits for losses may be required, but also a detailed set of regulations which stipulate which risks may be accepted under what conditions, and when measures to control risks are to be implemented.

The following process diagram shows the control loop of the LLB Group’s risk management process.

Risk management process
Internal Capital Adequacy Assessment Process (ICAAP)

For the purposes of ensuring a continual capital adequacy, the LLB Group has in place sound, effective and comprehensive strategies and processes. The bank’s internal capital adequacy process is an important instrument of risk management for the LLB Group. Its goal is to make a significant contribution to the continued existence of the LLB Group by measuring and safeguarding the bank’s capital adequacy from various perspectives.

From the normative internal perspective, an assessment is made of the extent to which the LLB Group is in a position over the medium term to fulfil its quantitative regulatory and supervisory capital requirements and targets, as well as other external financial constraints.

The normative internal perspective is supplemented by an economic internal perspective, within the scope of which all major risks are identified and quantified which, from an economic viewpoint, could cause losses and substantially reduce the amount of internal capital. In conformity with the economic perspective, the LLB Group ensures all its risks are adequately covered by the availability of internal capital.

The adequacy of the Group’s capital resources from the individual perspective has to be tested using internal methods. The quantified risks arising from the individual risk categories are aggregated in an overall risk potential and are compared with the capital available to cover these potential losses. It is then determined to what extent the LLB Group is in a position to bear potential losses.

The LLB Group’s financial strength should remain unimpaired by fluctuations on the capital markets. Scenario analyses and stress tests are employed to simulate external influences and assess their impact on equity capital. Where necessary, measures are implemented to mitigate risks.

The ICAAP is documented in internal regulations and guidelines and is reviewed and revised annually.

1 Market risks

Market risk is the risk that arises from changes in interest rates, exchange rates and security prices in the financial and capital markets. A differentiation is made between market risks in the trading book and market risks in the banking book. The potential for losses exists primarily in the impairment of the value of an asset or the increase in the value of liabilities (market value perspective) as well as in secondary capacity in the diminution of current earnings or an increase in current expenditures (earnings perspective).

1.1 Market risk management

The LLB Group has in place a differentiated risk management and risk control system for market risks. The market risk control process comprises a sophisticated framework of rules involving the identification and the uniform valuation of market risk-relevant data as well as the control, monitoring and reporting of market risks.

Trading book

The trading book contains own positions in financial instruments which are held for short-term further sale or repurchase. These activities are closely associated with the needs of our clients for capital market products and are regarded as being supporting activities for our core business.

The LLB Group conducts relatively small-scale trading book activities in accordance with Article 94 (1) of the Capital Requirements Regulation (CRR). A limits system is in operation to ensure compliance and is monitored by Group Risk Management. Due to the lack of materiality, the trading book is no longer explained in detail.

Banking book

In general, the holdings in the banking book are employed to pursue long-term investment goals. These holdings include assets, liabilities, and off-balance sheet positions, which are the result, on the one hand, of classical banking business and, on the other, are held to earn revenue over their life.

Market risks with the banking book mainly involve interest rate fluctuation risk, exchange rate risk and equity price risk.

Exchange rate risk

This relates to the risks arising in connection with the uncertainties regarding future exchange rate trends. The calculation of these risks takes into consideration all the positions entered into by the bank.

Interest rate fluctuation risk

This is regarded as the adverse effects of changes in market interest rates on capital resources or current earnings. The different interest maturity periods of claims and liabilities from balance sheet transactions and derivatives represent the most important basis.

Equity price risk

This is understood to be the risk of losses due to adverse changes in the market prices of equities.

1.2 Valuation of market risks

Sensitivity analysis

In sensitivity analysis a risk factor is altered. Subsequently, the effects of the alteration of the risk factor on the portfolio concerned are estimated.

Value at Risk

The value-at-risk concept measures the potential loss under normal market conditions over a given time interval.

Scenario analysis

While the value-at-risk concept supplies an indication of possible losses under normal market conditions, it cannot provide information about potential losses under extreme conditions. The aim of the scenario analyses of the LLB Group is to simulate the effects of normal and stress scenarios.

1.3 Management of market risks

Within the specified limit parameters, the individual Group companies are at liberty to manage their interest rate risks as they wish. Interest rate swaps are employed mainly to control interest rate risks. Risks are restricted by means of value-at–risk models and sensitivity limits.

In client business, currency risks are basically controlled by making investments or obtaining refinancing in matching currencies. The residual currency risk is restricted by means of sensitivity limits.

Investments in equities are limited by the imposition of nominal limits.

1.4 Monitoring and reporting of market risks

Group Credit & Risk Management monitors the observance of market risk limits and is also responsible for reporting market risks.

1.5 Sensitivities by risk categories

Currency sensitivity affects both interest rate sensitive and non-interest rate sensitive instruments. The sensitivity of instruments in foreign currencies is determined by multiplying the CHF market value by the assumed exchange rate fluctuation of + / – 10 per cent.

Interest rate sensitivity measures the market change on interest rate-sensitive instruments for the LLB Group caused by a linear interest rate adjustment of + / – 100 basis points.

The equity price risks are measured assuming a price fluctuation of + / – 10 per cent on the equity market.

1.6 Effects on Group net profit

Exchange rate risk

The price gains resulting from the valuation of transactions and balances are booked to profit and loss. The price gains resulting from the transfer of the functional currency into the reporting currency are booked under other comprehensive income without affecting profit and loss.

Interest rate fluctuation risk

The LLB Group recognises client loans in the balance sheet at amortised cost. This means that a change in the interest rate does not cause any change in the recognised amount and therefore to no significant recognition affecting profit and loss of the effects of interest rate fluctuation. However, fluctuations in interest rates can lead to risks because the LLB Group largely finances long-term loans with client assets. Within the scope of financial risk management, these interest rate fluctuation risks in the balance sheet business of the LLB Group are hedged mainly by means of interest rate swaps. If the IFRS hedge accounting criteria for hedging instruments (interest rate swaps) and underlying transactions (loans) are met, the hedged part of the loans to clients is recognised in the balance sheet at fair value. Further information regarding recognition and measurement is provided in the chapter “Accounting principles”.

Equity price risk

The valuation is carried out at current market prices. The equity price risk resulting from the valuation at current market prices is reflected in the income statement and in other comprehensive income.

Sensitivities

 

31.12.2020

31.12.2019

in CHF thousands

Sensitivity

Sensitivity

Currency risk

26'343

30'798

of which affecting net income

324

958

of which not affecting net income

26'019

29'840

 

 

 

Interest rate risk

72'066

83'843

of which affecting net income

8'701

11'398

of which not affecting net income

63'365

72'445

 

 

 

Equity price risk

8'949

7'706

of which affecting net income

230

252

of which not affecting net income

8'719

7'454

Exchange rate risk by currency

 

31.12.2020

31.12.2019

in CHF thousands

Sensitivity

Sensitivity

Currency risk

26'343

30'798

of which USD

312

934

of which EUR

26'019

29'840

of which others

12

23

1.7 Currency risks

Currency exposure as at 31 December 2019

in CHF thousands

CHF

USD

EUR

Others

Total

Assets

 

 

 

 

 

Cash and balances with central banks

4'287'978

279

1'159'125

259

5'447'642

Due from banks

250'686

454'862

365'002

281'788

1'352'338

Loans

11'840'858

354'199

693'028

72'440

12'960'524

Derivative financial instruments

110'339

1'936

168

356

112'798

Financial investments

822'071

723'191

623'113

0

2'168'375

Non-current assets held for sale

12'624

0

6'376

0

19'000

Investment in associates and joint venture

28

0

3

0

31

Property and equipment

137'898

0

21'026

0

158'923

Investment property

15'000

0

0

0

15'000

Goodwill and other intangible assets

133'571

0

156'531

0

290'102

Current tax assets

0

0

819

0

819

Deferred tax assets

14'943

0

595

0

15'538

Accrued income and prepaid expenses

42'114

7'295

11'585

806

61'800

Other assets

11'334

128

1'681

45'856

58'999

Total assets reported in the balance sheet

17'679'443

1'541'889

3'039'052

401'505

22'661'890

Delivery claims from forex spot, forex futures and forex options transactions

3'648'743

5'556'047

5'733'944

2'025'925

16'964'660

Total assets

21'328'187

7'097'937

8'772'997

2'427'430

39'626'549

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Due to banks

1'371'134

10'137

140'091

4'946

1'526'308

Due to customers

10'778'176

2'253'521

3'296'012

636'408

16'964'118

Derivative financial instruments

175'024

3'814

871

356

180'065

Debt issued

1'582'991

0

0

0

1'582'991

Non-current liabilities available for sale

2'261

0

0

0

2'261

Current tax liabilities

13'752

0

0

0

13'752

Deferred tax liabilities

16'245

0

14'701

0

30'946

Accrued expenses and deferred income

35'211

6'274

18'839

1'431

61'754

Provisions

10'011

133

4'760

3

14'907

Other liabilities

182'259

1'987

40'317

130

224'692

Share capital

154'000

0

0

0

154'000

Share premium

– 22'432

0

0

0

– 22'432

Treasury shares

– 23'574

0

0

0

– 23'574

Retained earnings

1'866'121

0

0

0

1'866'121

Other reserves

– 44'803

0

0

0

– 44'803

Non-controlling interests

130'785

0

0

0

130'785

Liabilities and equity reported in the balance sheet

16'227'160

2'275'865

3'515'591

643'273

22'661'890

Delivery liabilities from forex spot, forex futures and forex options transactions

5'421'386

4'812'729

4'959'004

1'783'923

16'977'042

Total liabilities and equity

21'648'546

7'088'594

8'474'595

2'427'195

39'638'931

 

 

 

 

 

 

Net position per currency

– 320'359

9'342

298'401

234

– 12'382

Currency exposure as at 31 December 2020

in CHF thousands

CHF

USD

EUR

Others

Total

Assets

 

 

 

 

 

Cash and balances with central banks

5'184'989

107

1'530'514

1

6'715'610

Due from banks

319'196

47'691

115'657

208'468

691'011

Loans

12'211'414

218'606

685'288

114'622

13'229'931

Derivative financial instruments

194'622

2'249

2'191

571

199'634

Financial investments

877'053

685'779

629'479

0

2'192'312

Non-current assets held for sale

1'750

0

5'063

0

6'813

Investment in associates and joint venture

25

0

5

0

30

Property and equipment

130'586

0

18'309

0

148'895

Investment property

15'000

0

0

0

15'000

Goodwill and other intangible assets

127'224

0

151'065

0

278'289

Current tax assets

0

0

1'290

0

1'290

Deferred tax assets

10'896

0

587

0

11'483

Accrued income and prepaid expenses

36'863

16'163

6'615

960

60'601

Other assets

3'243

320

5'516

15'009

24'087

Total assets reported in the balance sheet

19'112'861

970'914

3'151'580

339'630

23'574'986

Delivery claims from forex spot, forex futures and forex options transactions

4'439'307

7'302'542

6'459'225

1'993'412

20'194'486

Total assets

23'552'169

8'273'456

9'610'805

2'333'042

43'769'472

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Due to banks

1'090'786

35'925

189'691

9'769

1'326'170

Due to customers

11'132'309

2'469'147

3'385'035

765'708

17'752'199

Derivative financial instruments

242'858

4'322

1'425

571

249'176

Debt issued

1'794'317

0

0

0

1'794'317

Non-current liabilities available for sale

2'250

0

0

0

2'250

Current tax liabilities

10'090

0

3'435

0

13'525

Deferred tax liabilities

13'927

0

15'065

0

28'992

Accrued expenses and deferred income

28'232

17'871

16'226

1'068

63'398

Provisions

8'342

0

2'856

0

11'199

Other liabilities

145'652

5'957

44'329

229

196'167

Share capital

154'000

0

0

0

154'000

Share premium

– 13'177

0

0

0

– 13'177

Treasury shares

– 18'663

0

0

0

– 18'663

Retained earnings

1'902'316

0

0

0

1'902'316

Other reserves

– 20'911

0

0

0

– 20'911

Non-controlling interests

134'029

0

0

0

134'029

Liabilities and equity reported in the balance sheet

16'606'357

2'533'222

3'658'062

777'345

23'574'986

Delivery liabilities from forex spot, forex futures and forex options transactions

7'219'009

5'737'116

5'692'554

1'555'577

20'204'255

Total liabilities and equity

23'825'366

8'270'338

9'350'616

2'332'922

43'779'241

 

 

 

 

 

 

Net position per currency

– 273'197

3'119

260'189

120

– 9'769

1.8 Interest rate repricing balance sheet

In the fixed-interest-rate repricing balance sheet, asset and liability surpluses from fixed-interest rate positions as well as from interest- rate-sensitive derivative positions in the balance sheet are calculated and broken down into maturity ranges (cycle times). The positions with an unspecified duration of interest rate repricing are allocated to the corresponding maturity ranges (cycle times) on the basis of a replication.

Interest commitments of financial assets and liabilities (nominal)

in CHF thousands

Within 1 month

1 to 3 months

4 to 12 months

1 to 5 years

Over 5 years

Total

31.12.2019

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

Cash and balances with central banks

5'380'402

0

0

0

0

5'380'402

Due from banks

1'128'000

100'617

58'360

0

0

1'286'977

Loans

2'501'721

1'761'725

1'626'978

5'161'514

1'897'657

12'949'595

Financial investments

73'886

105'065

164'885

1'465'361

183'561

1'992'758

Total financial assets

9'084'008

1'967'408

1'850'222

6'626'876

2'081'218

21'609'732

Derivative financial instruments

90'854

495'000

970'000

325'854

0

1'881'708

Total

9'174'862

2'462'408

2'820'222

6'952'730

2'081'218

23'491'440

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

Due to banks

920'091

247'376

294'959

65'006

0

1'527'433

Due to customers

7'840'987

1'452'380

2'787'565

4'723'896

25'050

16'829'878

Debt issued

3'505

53'235

87'466

533'390

900'703

1'578'299

Total financial liabilities

8'764'584

1'752'990

3'169'991

5'322'292

925'753

19'935'610

Derivative financial instruments

30'854

40'000

530'000

755'000

525'854

1'881'708

Total

8'795'438

1'792'990

3'699'991

6'077'292

1'451'607

21'817'318

 

 

 

 

 

 

 

Interest rate repricing exposure

379'425

669'417

– 879'769

875'437

629'611

1'674'122

 

 

 

 

 

 

 

31.12.2020

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

Cash and balances with central banks

6'653'651

0

0

0

0

6'653'651

Due from banks

548'492

30'439

0

0

0

578'930

Loans

3'015'684

1'344'985

1'543'329

5'043'164

2'282'525

13'229'688

Financial investments

52'032

159'230

317'452

1'274'822

208'106

2'011'641

Total financial assets

10'269'858

1'534'654

1'860'781

6'317'986

2'490'631

22'473'910

Derivative financial instruments

110'802

545'000

1'035'802

355'000

0

2'046'604

Total

10'380'660

2'079'654

2'896'583

6'672'986

2'490'631

24'520'514

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

Due to banks

817'160

59'500

265'500

184'010

0

1'326'170

Due to customers

7'964'308

1'467'578

2'998'198

5'108'648

14'150

17'552'882

Debt issued

33'878

43'607

97'083

521'773

1'097'976

1'794'317

Total financial liabilities

8'815'346

1'570'685

3'360'781

5'814'431

1'112'126

20'673'368

Derivative financial instruments

50'802

120'000

565'000

660'000

650'802

2'046'604

Total

8'866'148

1'690'685

3'925'781

6'474'431

1'762'928

22'719'972

 

 

 

 

 

 

 

Interest rate repricing exposure

1'514'513

388'969

– 1'029'198

198'555

727'703

1'800'542

2 Liquidity and refinancing risk

Liquidity risk is defined as a situation where present and future payment obligations cannot be fully met or met on time, or in the event of a liquidity crisis refinancing funds may only be available at increased market rates (refinancing costs) or assets can only be made liquid at markdowns to market rates (market liquidity risk).

2.1 Internal Liquidity Adequacy Assessment Process (ILAAP)

For the purposes of continually evaluating and adequately ensuring a reasonable liquidity base, the LLB Group has in place sound, effective and comprehensive strategies and processes. The bank’s internal liquidity adequacy assessment process is an important instrument of risk management for the LLB Group. Its goal is to make a significant contribution to the continued existence of the LLB Group by measuring and safeguarding the bank’s liquidity adequacy from various perspectives.

The goal of liquidity risk management at the LLB Group encompasses the following points:

  • Ensuring the ability to meet financial obligations at all times
  • Compliance with regulatory provisions
  • Optimising of refinancing structure
  • Optimising of payment streams within the LLB Group

From the normative internal perspective, an assessment is made over a period of several years of the extent to which the LLB Group is in a position to fulfil its quantitative regulatory and supervisory liquidity requirements and targets, as well as other external financial constraints. All aspects are considered, which could affect the relevant supervisory quotas during the planning period.

Within the scope of the economic internal perspective it has to be ensured that internal liquidity is continually adequate to cover the risks and expected outflows, as well as to support the Group’s strategy. All the risks are taken into account, which could have a significant effect on the liquidity positions.

The LLB Group’s liquidity adequacy should remain unimpaired by fluctuations on the markets. Scenario analyses and stress tests are employed to simulate external influences and assess their impact on liquidity adequacy. Where necessary, measures are implemented to mitigate risks.

The ILAAP is documented in internal regulations and guidelines and is reviewed and revised annually.

2.2 Valuation of liquidity risks

In our liquidity risk management concept, scenario analysis plays a central role. This includes the valuation of the liquidity of assets, i.e. the liquidity characteristics of our asset holdings in various stress scenarios.

2.3 Contingency planning

The LLB Group’s liquidity risk management encompasses a contingency plan. The contingency plan includes an overview of emergency measures, sources of alternative financing and governance in stress situations.

2.4 Monitoring and reporting of liquidity risks

Group Credit & Risk Management monitors compliance with liquidity risk limits and is responsible for reporting on liquidity risks.

The following tables show the maturities according to contractual periods, separated according to derivative and non-derivative financial instruments as well as off-balance sheet transactions. The values of derivative financial instruments represent replacement values. All other values correspond to nominal values, i.e. possible interest and coupon payments are included.

Maturity structure of derivative financial instruments

 

 

 

 

 

 

 

 

 

 

 

 

Term to maturity within 3 months

Term to maturity 4 to 12 months

Term to maturity 1 to 5 years

Term to maturity after 5 years

Total

in CHF thousands

PRV *

NRV *

PRV *

NRV *

PRV *

NRV *

PRV *

NRV *

PRV *

NRV *

31.12.2019

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments in the trading portfolio

Interest rate contracts

 

 

 

 

 

 

 

 

 

 

Swaps

0

0

0

4'502

0

28'618

33

0

33

33'120

Forward contracts

68

584

72

363

0

0

0

0

140

947

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 

 

 

 

 

 

 

 

 

Forward contracts

67'717

88'728

34'606

32'676

927

851

0

47

103'250

122'303

Options (OTC)

57

61

2'266

2'266

2'656

2'656

0

0

4'978

4'983

 

 

 

 

 

 

 

 

 

 

 

Precious metals contracts

 

 

 

 

 

 

 

 

 

 

Options (OTC)

17

17

0

0

0

0

0

0

17

17

 

 

 

 

 

 

 

 

 

 

 

Equity instruments / Index contracts

 

 

 

 

 

 

 

 

 

 

Options (OTC)

345

345

0

0

0

0

0

0

345

345

 

 

 

 

 

 

 

 

 

 

 

Total derivative financial instruments in the trading portfolio

68'204

89'735

36'944

39'807

3'582

32'125

33

47

108'764

161'714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments for hedging purposes

Interest rate contracts

 

 

 

 

 

 

 

 

 

 

Swaps (fair value hedge)

0

0

43

0

2'462

2'278

1'529

16'073

4'034

18'350

 

 

 

 

 

 

 

 

 

 

 

Total derivative financial instruments for hedging purposes

0

0

43

0

2'462

2'278

1'529

16'073

4'034

18'350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total derivative financial instruments

68'204

89'735

36'988

39'807

6'044

34'402

1'562

16'120

112'798

180'065

* PRV: Positive replacement values; NRV: Negative replacement values

 

 

 

 

 

 

 

 

 

 

 

 

Term to maturity within 3 months

Term to maturity 4 to 12 months

Term to maturity 1 to 5 years

Term to maturity after 5 years

Total

in CHF thousands

PRV *

NRV *

PRV *

NRV *

PRV *

NRV *

PRV *

NRV *

PRV *

NRV *

31.12.2020

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments in the trading portfolio

Interest rate contracts

 

 

 

 

 

 

 

 

 

 

Swaps

0

519

0

1'655

0

18'125

0

0

0

20'299

Forward contracts

175

172

71

83

17

0

0

0

263

255

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 

 

 

 

 

 

 

 

 

Forward contracts

139'510

151'017

48'463

47'982

715

699

0

62

188'688

199'761

Options (OTC)

2'213

2'213

3'697

3'697

64

64

0

0

5'975

5'975

 

 

 

 

 

 

 

 

 

 

 

Precious metals contracts

 

 

 

 

 

 

 

 

 

 

Options (OTC)

9

9

0

0

37

37

0

0

46

46

 

 

 

 

 

 

 

 

 

 

 

Equity instruments / Index contracts

 

 

 

 

 

 

 

 

 

 

Options (OTC)

469

469

0

0

0

0

0

0

469

469

 

 

 

 

 

 

 

 

 

 

 

Total derivative financial instruments in the trading portfolio

142'377

154'400

52'231

53'418

833

18'925

0

62

195'441

226'805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments for hedging purposes

Interest rate contracts

 

 

 

 

 

 

 

 

 

 

Swaps (fair value hedge)

9

0

692

3

1'944

8'550

1'547

13'818

4'193

22'371

 

 

 

 

 

 

 

 

 

 

 

Total derivative financial instruments for hedging purposes

9

0

692

3

1'944

8'550

1'547

13'818

4'193

22'371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total derivative financial instruments

142'386

154'400

52'923

53'421

2'778

27'475

1'547

13'881

199'634

249'176

* PRV: Positive replacement values; NRV: Negative replacement values

Maturity structure of non-derivative financial instruments and off-balance sheet transactions

in CHF thousands

Demand deposits

Callable

Due within 3 months

Due between 3 months to 12 months

Due between 12 months to 5 years

Due after 5 years

Total

31.12.2019

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

Cash and balances with central banks

5'379'925

0

0

0

0

0

5'379'925

Due from banks

542'213

0

653'124

94'700

0

0

1'290'038

Loans

483'843

211'714

2'429'318

2'110'783

6'099'997

2'030'896

13'366'551

Financial investments

0

0

102'057

197'590

1'582'713

193'362

2'075'722

Accrued income and prepaid expenses

0

0

61'800

0

0

0

61'800

Total financial assets

6'405'981

211'714

3'246'299

2'403'073

7'682'710

2'224'258

22'174'036

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

Due to banks

299'811

0

866'604

294'160

65'108

0

1'525'684

Due to customers

11'131'175

4'280'597

626'930

447'450

321'757

25'108

16'833'017

Lease liabilities

0

0

747

3'624

16'772

20'161

41'304

Debt issued

0

0

59'614

93'267

551'909

906'959

1'611'748

Accrued expenses and deferred income

0

0

61'754

0

0

0

61'754

Total financial liabilities

11'430'986

4'280'597

1'615'650

838'501

955'546

952'228

20'073'508

 

 

 

 

 

 

 

 

Net liquidity exposure

– 5'025'005

– 4'068'883

1'630'650

1'564'572

6'727'164

1'272'030

2'100'528

 

 

 

 

 

 

 

 

Off-balance-sheet transactions

593'859

0

0

0

0

0

593'859

Contingent liabilities

66'944

0

0

0

0

0

66'944

Irrevocable commitments

512'732

0

0

0

0

0

512'732

Deposit and call liabilities

14'183

0

0

0

0

0

14'183

in CHF thousands

Demand deposits

Callable

Due within 3 months

Due between 3 months to 12 months

Due between 12 months to 5 years

Due after 5 years

Total

31.12.2020

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

Cash and balances with central banks

6'653'651

0

0

0

0

0

6'653'651

Due from banks

298'348

0

280'497

0

0

0

578'845

Loans

513'834

170'059

3'350'914

2'124'626

5'086'275

2'382'251

13'627'958

Financial investments

0

0

145'952

358'942

1'348'575

216'915

2'070'385

Accrued income and prepaid expenses

0

0

60'601

0

0

0

60'601

Total financial assets

7'465'833

170'059

3'837'964

2'483'568

6'434'850

2'599'166

22'991'440

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

Due to banks

250'424

0

625'876

265'083

184'105

0

1'325'489

Due to customers

12'675'597

3'757'386

492'570

397'552

217'238

14'231

17'554'573

Lease liabilities

0

0

726

3'545

15'651

17'176

37'097

Debt issued

0

0

79'734

102'250

538'762

1'104'825

1'825'571

Accrued expenses and deferred income

0

0

63'398

0

0

0

63'398

Total financial liabilities

12'926'021

3'757'386

1'262'304

768'430

955'756

1'136'232

20'806'129

 

 

 

 

 

 

 

 

Net liquidity exposure

– 5'460'188

– 3'587'327

2'575'660

1'715'138

5'479'093

1'462'934

2'185'311

 

 

 

 

 

 

 

 

Off-balance-sheet transactions

774'368

0

0

0

0

0

774'368

Contingent liabilities

62'416

0

0

0

0

0

62'416

Irrevocable commitments

696'915

0

0

0

0

0

696'915

Deposit and call liabilities

15'036

0

0

0

0

0

15'036

3 Credit risk

Within the scope of credit risk management, vital importance is attached to the avoidance of credit losses and the early identification of default risks. In addition to systematic risk / return management at the individual loan level, the LLB Group proactively manages its credit risks at the credit portfolio level. The primary objective is to reduce the overall level of risk through diversification and a stabilisation of expected returns.

3.1 Credit risk management

Processes and organisational structures ensure that credit risks are identified, uniformly evaluated, controlled, monitored and included in risk reporting.

Basically, the LLB Group conducts its lending business for private and corporate clients on a secured basis. The process of granting a loan is based on a thorough evaluation of the borrower’s creditworthiness, the possible impairment and the legal existence of collateral, as well as risk classification in a rating process performed by experienced credit specialists. The granting of loans is subject to a specified assignment of authority. A major characteristic of the credit approval process is the separation between front and back office functions.

In addition, the LLB Group conducts lending business with banks on a secured and unsecured basis, whereby individual risk limits are approved for every counterparty.

3.2 Evaluation of credit risks

The consistent evaluation of credit risks represents an essential prerequisite of successful risk management. The credit risk can be broken down into the components: probability of default, loss given default and the expected exposure at the time point of the default.

Probability of default

The LLB Group assesses the probability of default of individual counterparties by means of an internal rating system. The different rating procedures are adapted to suit the different characteristics of borrowers. The credit risk management ratings employed for banks and debt instruments are based on external ratings from recognised rating agencies.

The reconciliation of the internal rating with the external rating is carried out in accordance with the following master scale.

Loss given default

The loss given default is influenced by the amount of collateralisation and the costs of realising the collateral. It is expressed as a percentage of the individual commitment.

The potential loss at portfolio level is broken down as follows at the LLB Group:

Rating classes (master scale)

LLB rating

Description

External rating **

1 to 4

Investment grade

AAA, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3

5 to 8, not rated *

Standard monitoring

Ba1, Ba2, Ba3, B1, B2

9 to 10

Special monitoring

B3, Caa, Ca, C

11 to 14

Sub-standard

Default

* Non-rated loans are covered and subject to limits.

** For the securitisation of credit risks in the standard approach, the LLB Group employs solely the external ratings of the recognised rating agency Moody's (for the segments: due from banks, finance companies and securities firms, due from companies and due from international organisations).

Expected loss

Expected loss is a future-related, statistical concept that permits the LLB Group to estimate the average annual costs. It is calculated on the basis of the default probability of a counterparty, the expected credit commitment made to this counterparty at the time of the default, and the magnitude of the loss given default. The concept of expected loss is also applied within the scope of IFRS 9 / ECL. See chapter “Accounting principles”.

Value-at-risk concept

The value-at-risk approach aims at computing the size of fluctuations in credit losses incurred by means of a statistical model and to show the change in the risk status of the credit portfolio.

Scenario analysis

The modelling of external credit losses is performed on the basis of stress scenarios, which enable us to evaluate the effects of fluctuations in the default rates of the assets pledged as collateral taking into consideration the existing risk concentration in every portfolio.

3.3 Controlling credit risk

Credit risk management has the task of actively influencing the risk situation of the LLB Group. This is carried out using a limits system, risk-adjusted pricing, through the possibility of using risk hedging instruments and the specific repayment of credit commitments. Risk management is conducted both at the individual loan and at the portfolio level.

Risk restriction

The LLB Group has in place a comprehensive limits system to restrict credit risk exposure. In addition to the limitation of individual credit risks, to prevent risk concentrations, the LLB Group assigns limits for regions and sectors.

Risk mitigation

To mitigate credit risk exposure, the LLB Group takes security mainly in the form of pledged assets and financial collateral. In the case of financial collateral in the form of marketable securities, we determine their collateral value by applying a schedule of reductions, the size of which is based on the quality, liquidity, volatility and complexity of the separate instruments.

Derivatives

The LLB Group may employ credit derivatives to reduce risks. This possibility has not been utilised in recent years.

3.4 Monitoring and reporting of credit risks

The organisational structure of the LLB Group ensures that departments which cause the risks (front office) and those that evaluate, manage and monitor them (back office) are completely separated.

Individual credit risks are monitored by means of a comprehensive limits system. Infringements are immediately reported to the senior officer responsible.

3.5 Risk provisioning

Overdue claims

A claim is deemed to be overdue if a substantial liability from a borrower to the bank is outstanding. The overdraft begins on the date when a borrower exceeds an approved limit, has not paid interest or amortisation, or has utilised an unauthorised credit facility.

For claims that are more than 90 days overdue, individual value allowances are made in the amount of the expected credit loss.

Default-endangered claims

Claims are regarded as being in danger of default if, on the basis of the client’s creditworthiness, a loan default can no longer be excluded in the near future.

Impairments

Basically, an impairment is calculated and a provision set aside for all positions which are subject to a credit risk. Essentially, the credit quality determines the scope of the impairment. If the credit risk has not risen significantly since initial recognition, the expected credit loss is calculated over a year (credit quality level 1). However, if a significant increase in the credit risk has occurred since initial recognition, the expected loss is calculated over the remaining term to maturity (credit quality level 2). In the case of defaulted credit positions – a default in accordance with the Capital Requirements Regulation (CRR) Art. 178 – a specific value allowance is determined and recognised by the Group Recovery Department. The expected credit loss is calculated over the loan’s remaining term to maturity (credit quality level 3).

3.6 Country risks

A country risk arises if specific political or economic conditions in a country affect the value of a foreign position. Country risk is composed of transfer risk (e.g. restrictions on the free movement of money and capital) and other country risks (e.g. country-related liquidity, market and correlation risks).

Country risks are controlled on the basis of a limits system and are continually monitored. Ratings provided by a recognised rating agency are utilised for certain individual countries.

3.7 Risk concentration

The largest credit risk for the LLB Group arises from loans made to banks and loans made to customers. In the case of loans to customers, the majority of loans are secured by mortgages, which are granted to clients having first-class creditworthiness within the scope of the LLB Group’s lending policy. Thanks to the diversified nature of the collateral portfolio, containing properties primarily in the Principality of Liechtenstein and in Switzerland, the risk of losses is reduced to a minimum. The LLB Group undertakes bank investments on both a secured and an unsecured basis. The risk of losses with loans to banks is restricted, on the one hand, through a broad distribution of risks and, on the other, by the strict minimum lending requirements applied to the counterparties.

Maximal credit risk by region without considering collateral

in CHF thousands

Liechtenstein / Switzerland

Europe excl. FL / CH

North America

Asia

Others *

Total

31.12.2019

 

 

 

 

 

 

Credit risks from balance sheet transactions

 

 

 

 

 

 

Due from banks

886'193

365'293

68'212

22'507

10'264

1'352'469

Loans

 

 

 

 

 

 

Mortgage loans

11'204'421

73'422

1'882

13'043

6'092

11'298'860

Loans to public institutions

76'406

0

0

0

0

76'406

Miscellaneous loans

653'225

362'041

914

316'958

259'437

1'592'575

Derivative financial instruments

47'860

64'426

0

36

477

112'798

Financial investments

 

 

 

 

 

 

Debt instruments

514'341

899'585

491'024

101'359

85'000

2'091'310

Total

13'382'446

1'764'767

562'033

453'903

361'269

16'524'418

 

 

 

 

 

 

 

Credit risks from off-balance sheet transactions

 

 

 

 

 

 

Contingent liabilities

45'309

6'795

0

750

14'091

66'944

Irrevocable commitments

275'654

133'153

589

770

102'566

512'732

Deposit and call liabilities

14'183

0

0

0

0

14'183

Total

335'145

139'947

589

1'520

116'657

593'859

 

 

 

 

 

 

 

31.12.2020

 

 

 

 

 

 

Credit risks from balance sheet transactions

 

 

 

 

 

 

Due from banks

509'958

132'660

13'579

26'880

8'009

691'086

Loans

 

 

 

 

 

 

Mortgage loans

11'530'874

146'047

1'916

13'166

14'938

11'706'941

Loans to public institutions

78'343

1

0

0

0

78'343

Miscellaneous loans

722'797

314'520

302

179'895

231'384

1'448'898

Derivative financial instruments

56'125

141'590

2

1'346

571

199'634

Financial investments

 

 

 

 

 

 

Debt instruments

520'162

907'544

518'190

97'230

59'692

2'102'817

Total

13'418'258

1'642'361

533'990

318'516

314'594

16'227'718

 

 

 

 

 

 

 

Credit risks from off-balance sheet transactions

 

 

 

 

 

 

Contingent liabilities

41'305

7'575

0

332

13'204

62'416

Irrevocable commitments

429'332

166'476

300

9'774

91'033

696'915

Deposit and call liabilities

15'036

0

0

0

0

15'036

Total

485'673

174'051

300

10'106

104'237

774'368

* CHF 8 million of the total volume of contingent liabilities relates to the Central America region. With all other positions under the item "Others", no individual region exceeds 10 per cent of the total volume.

Maximal credit risk by sector without considering collateral

in CHF thousands

Financial services

Real estate

Private households

Others *

Total

31.12.2019

 

 

 

 

 

Credit risks from balance sheet transactions

 

 

 

 

 

Due from banks

1'352'469

0

0

0

1'352'469

Loans

 

 

 

 

 

Mortgage loans

190'714

2'680'966

7'515'077

912'102

11'298'860

Loans to public institutions

0

0

0

76'406

76'406

Miscellaneous loans

483'498

141'868

683'395

283'815

1'592'575

Derivative financial instruments

108'911

7

2'654

1'226

112'798

Financial investments

 

 

 

 

 

Debt instruments

1'932'290

5'754

0

153'266

2'091'310

Total

4'067'882

2'828'595

8'201'127

1'426'815

16'524'418

 

 

 

 

 

 

Credit risks from off-balance sheet transactions

 

 

 

 

 

Contingent liabilities

14'639

8'525

21'137

22'643

66'944

Irrevocable commitments

180'446

55'165

158'982

118'139

512'732

Deposit and call liabilities

14'183

0

0

0

14'183

Total

209'267

63'690

180'119

140'782

593'859

 

 

 

 

 

 

31.12.2020

 

 

 

 

 

Credit risks from balance sheet transactions

 

 

 

 

 

Due from banks

691'086

0

0

0

691'086

Loans

 

 

 

 

 

Mortgage loans

209'966

2'920'692

7'621'079

955'204

11'706'941

Loans to public institutions

0

0

0

78'343

78'343

Miscellaneous loans

463'679

93'041

525'020

367'157

1'448'898

Derivative financial instruments

190'170

5

8'126

1'333

199'634

Financial investments

 

 

 

 

 

Debt instruments

2'097'595

0

0

5'222

2'102'817

Total

3'652'496

3'013'738

8'154'225

1'407'259

16'227'718

 

 

 

 

 

 

Credit risks from off-balance sheet transactions

 

 

 

 

 

Contingent liabilities

13'820

8'543

13'460

26'594

62'416

Irrevocable commitments

229'573

157'455

196'794

113'092

696'915

Deposit and call liabilities

15'036

0

0

0

15'036

Total

258'429

165'998

210'254

139'686

774'368

* CHF 54 million of the total volume of loans to public institutions relates to the energy supply sector and CHF 13 million to public administration. With all other positions under the item "Others", no individual sector exceeds 10 per cent of the total volume.

3.8 Risk of default for financial instruments not measured at fair value through profit and loss according to the creditworthiness of the borrower

The following tables show the creditworthiness of borrowers with financial instruments, which are measured at amortised cost or at fair value through other comprehensive income, as well as for credit commitments and financial guarantees.

The carrying value of financial instruments, which are measured at fair value through other comprehensive income, is not corrected by means of a value allowance because the impairment is charged directly to other comprehensive income. In the case of credit commitments and financial guarantees, a corresponding provision is set aside.

in CHF thousands

Note

Investment Grade

Standard Monitoring

Special Monitoring

Sub- standard

Total

31.12.2019

 

 

 

 

 

 

Due from banks

12

1'352'338

0

0

0

1'352'338

Loans

13

2'167'925

10'282'030

345'906

164'663

12'960'524

Financial investments

 

 

 

 

 

 

Debt instruments measured at fair value through other comprehensive income

15

1'595'413

0

0

0

1'595'413

Credit risks from balance sheet transactions

 

5'115'677

10'282'030

345'906

164'663

15'908'276

 

 

 

 

 

 

 

Financial guarantees

 

351'758

217'224

5'577

808

575'367

Credit cards

 

707

17'756

29

0

18'491

Credit risks from off-balance sheet transactions

 

352'465

234'980

5'606

808

593'859

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.2020

 

 

 

 

 

 

Due from banks

12

690'073

938

0

0

691'011

Loans

13

2'801'901

10'038'910

274'762

114'359

13'229'931

Financial investments

 

 

 

 

 

 

Debt instruments measured at fair value through other comprehensive income

15

1'809'930

0

0

0

1'809'930

Credit risks from balance sheet transactions

 

5'301'904

10'039'848

274'762

114'359

15'730'872

 

 

 

 

 

 

 

Financial guarantees

 

364'407

378'298

6'214

5'037

753'956

Credit cards

 

973

19'419

20

0

20'412

Credit risks from off-balance sheet transactions

 

365'380

397'716

6'234

5'037

774'368

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

31.12.2019

 

 

 

 

Due from banks

 

 

 

 

Investment grade

1'352'469

0

0

1'352'469

Standard monitoring

0

0

0

0

Special monitoring

0

0

0

0

Sub-standard

0

0

0

0

Total gross carrying value

1'352'469

0

0

1'352'469

 

 

 

 

 

Total value allowances

– 131

0

0

– 131

 

 

 

 

 

Total net carrying value

1'352'338

0

0

1'352'338

 

 

 

 

 

 

 

 

 

 

31.12.2020

 

 

 

 

Due from banks

 

 

 

 

Investment grade

690'147

0

0

690'147

Standard monitoring

938

0

0

938

Special monitoring

0

0

0

0

Sub-standard

0

0

0

0

Total gross carrying value

691'086

0

0

691'086

 

 

 

 

 

Total value allowances

– 74

0

0

– 74

 

 

 

 

 

Total net carrying value

691'011

0

0

691'011

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

31.12.2019

 

 

 

 

Loans

 

 

 

 

Investment grade

2'124'739

44'254

0

2'168'993

Standard monitoring

9'870'249

417'541

0

10'287'791

Special monitoring

244'363

102'032

0

346'395

Sub-standard

0

0

236'257

236'257

Total gross carrying value

12'239'351

563'827

236'257

13'039'435

 

 

 

 

 

Total value allowances

– 5'191

– 2'126

– 71'594

– 78'911

 

 

 

 

 

Total net carrying value

12'234'160

561'701

164'663

12'960'524

 

 

 

 

 

 

 

 

 

 

31.12.2020

 

 

 

 

Loans

 

 

 

 

Investment grade

2'779'437

23'214

0

2'802'651

Standard monitoring

9'708'845

333'349

0

10'042'194

Special monitoring

212'832

62'146

0

274'978

Sub-standard

0

0

189'554

189'554

Total gross carrying value

12'701'114

418'709

189'554

13'309'377

 

 

 

 

 

Total value allowances

– 3'149

– 1'102

– 75'195

– 79'446

 

 

 

 

 

Total net carrying value

12'697'965

417'607

114'359

13'229'931

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

31.12.2019

 

 

 

 

Debt instruments measured at fair value through other comprehensive income

 

 

 

 

Investment grade

1'595'413

0

0

1'595'413

Standard monitoring

0

0

0

0

Special monitoring

0

0

0

0

Sub-standard

0

0

0

0

Total carrying value

1'595'413

0

0

1'595'413

 

 

 

 

 

Total value allowances

– 113

0

0

– 113

 

 

 

 

 

 

 

 

 

 

31.12.2020

 

 

 

 

Debt instruments measured at fair value through other comprehensive income

 

 

 

 

Investment grade

1'809'930

0

0

1'809'930

Standard monitoring

0

0

0

0

Special monitoring

0

0

0

0

Sub-standard

0

0

0

0

Total carrying value

1'809'930

0

0

1'809'930

 

 

 

 

 

Total value allowances

– 172

0

0

– 172

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

31.12.2019

 

 

 

 

Financial guarantees

 

 

 

 

Investment grade

351'758

0

0

351'758

Standard monitoring

210'338

6'886

0

217'224

Special monitoring

3'706

1'871

0

5'577

Sub-standard

0

0

808

808

Total credit risk

565'802

8'757

808

575'367

 

 

 

 

 

Total provisions

– 1'050

– 572

– 808

– 2'430

 

 

 

 

 

 

 

 

 

 

31.12.2020

 

 

 

 

Financial guarantees

 

 

 

 

Investment grade

364'407

0

0

364'407

Standard monitoring

372'833

5'464

0

378'298

Special monitoring

5'843

371

0

6'214

Sub-standard

0

0

5'037

5'037

Total credit risk

743'083

5'835

5'037

753'956

 

 

 

 

 

Total provisions

– 990

– 178

– 1'304

– 2'472

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

31.12.2019

 

 

 

 

Credit cards

 

 

 

 

Investment grade

707

0

0

707

Standard monitoring

17'671

85

0

17'756

Special monitoring

24

5

0

29

Sub-standard

0

0

0

0

Total credit risk

18'401

90

0

18'491

 

 

 

 

 

Total provisions

– 7

0

0

– 7

 

 

 

 

 

 

 

 

 

 

31.12.2020

 

 

 

 

Credit cards

 

 

 

 

Investment grade

973

0

0

973

Standard monitoring

19'354

65

0

19'419

Special monitoring

20

0

0

20

Sub-standard

0

0

0

0

Total credit risk

20'347

65

0

20'412

 

 

 

 

 

Total provisions

– 6

0

0

– 6

3.9 Expected credit loss and value allowances

The development of expected credit loss and the value allowances made are shown in the following overview. The following table shows, on an aggregated basis, the values for all balance sheet and off-balance sheet positions for which a calculation of the expected credit loss was made, followed by a complete reconciliation for only the most important positions.

 

 

 

 

 

 

 

 

 

 

in CHF thousands

Note

Gross carrying value

Value allowances

31.12.2019

 

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Financial assets (balance sheet positions)

 

 

 

 

 

 

 

 

 

Financial instruments measured at amortised cost

 

 

 

 

 

 

 

 

 

Due from banks

12

1'352'469

0

0

1'352'469

– 131

0

0

– 131

Loans

13

12'239'351

563'827

236'257

13'039'435

– 5'191

– 2'126

– 71'594

– 78'911

Total

 

13'591'820

563'827

236'257

14'391'904

– 5'322

– 2'126

– 71'594

– 79'042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in CHF thousands

Note

Carrying value

Value allowances

31.12.2019

 

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Financial instruments measured at fair value through other income *

 

 

 

 

 

 

 

 

 

Debt instruments

15

1'595'413

0

0

1'595'413

– 113

0

0

– 113

Total

 

1'595'413

0

0

1'595'413

– 113

0

0

– 113

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in CHF thousands

Note

Credit risk

Value allowance provision

31.12.2019

 

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Commitments and financial guarantees (off-balance sheet positions) **

 

 

 

 

 

 

 

 

 

Financial guarantees

 

565'802

8'757

808

575'367

– 1'050

– 572

– 808

– 2'430

Credit cards

 

18'401

90

0

18'491

– 7

0

0

– 7

Total

 

584'203

8'847

808

593'859

– 1'058

– 572

– 808

– 2'437

* The carrying value corresponds to fair value, no value allowance can be made. The value allowance is made through other comprehensive income.

** The value corresponds to the maximum credit risk. Value allowances are recognised as provisions.

 

 

 

 

 

 

 

 

 

 

in CHF thousands

Note

Gross carrying value

Value allowances

31.12.2020

 

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Financial assets (balance sheet positions)

 

 

 

 

 

 

 

 

 

Financial instruments measured at amortised cost

 

 

 

 

 

 

 

 

 

Due from banks

12

691'086

0

0

691'086

– 74

0

0

– 74

Loans

13

12'701'114

418'709

189'554

13'309'377

– 3'149

– 1'102

– 75'195

– 79'446

Total

 

13'392'200

418'709

189'554

14'000'463

– 3'223

– 1'102

– 75'195

– 79'521

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in CHF thousands

Note

Carrying value

Value allowances

31.12.2020

 

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Financial instruments measured at fair value through other income *

 

 

 

 

 

 

 

 

 

Debt instruments

15

1'809'930

0

0

1'809'930

– 172

0

0

– 172

Total

 

1'809'930

0

0

1'809'930

– 172

0

0

– 172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in CHF thousands

Note

Credit risk

Value allowance provision

31.12.2020

 

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Commitments and financial guarantees (off-balance sheet positions) **

 

 

 

 

 

 

 

 

 

Financial guarantees

 

743'083

5'835

5'037

753'956

– 990

– 178

– 1'304

– 2'472

Credit cards

 

20'347

65

0

20'412

– 6

0

0

– 6

Total

 

763'430

5'900

5'037

774'368

– 996

– 178

– 1'304

– 2'478

* The carrying value corresponds to fair value, no value allowance can be made. The value allowance is made through other comprehensive income.

** The value corresponds to the maximum credit risk. Value allowances are recognised as provisions.

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

Loans

 

 

 

 

Gross carrying amount as at 1 January 2019

12'421'009

314'309

199'015

12'934'332

Transfers

 

 

 

 

from Stage 1 to Stage 2

– 335'896

335'896

0

0

from Stage 2 to Stage 1

94'599

– 94'599

0

0

from Stage 2 to Stage 3

0

– 74'104

74'104

0

from Stage 3 to Stage 2

0

15'204

– 15'204

0

Additions from changes to scope of consolidation

0

0

0

0

Additions due to issuing loans and interest

4'128'605

141'899

3'421

4'273'925

Disposals due to redemption of loans / waiving of claims

– 4'065'862

– 74'778

– 24'654

– 4'165'294

Foreign currency influences

– 3'103

0

– 425

– 3'528

Gross carrying amount as at 31 December 2019

12'239'351

563'827

236'257

13'039'435

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

Loans

 

 

 

 

Valuation allowance as at 1 January 2019

– 7'958

– 1'982

– 71'851

– 81'791

Transfers

 

 

 

 

from Stage 1 to Stage 2

209

– 209

0

0

from Stage 2 to Stage 1

– 612

612

0

0

from Stage 2 to Stage 3

0

2

– 2

0

from Stage 3 to Stage 2

0

0

0

0

Net revaluation effect from transfers

548

– 669

– 7'295

– 7'416

Additions from changes to scope of consolidation

0

0

0

0

Addition on account of new loans to customers / interest / reduction of existing collateral

– 603

– 841

– 10'357

– 11'801

Disposals due to redemption of loans / waiving of claims

2'207

886

17'372

20'466

Foreign currency influences

2

0

425

427

Changes due to adjusted risk parameters and due to maturity effect

1'014

75

115

1'205

Valuation allowance as at 31 December 2019

– 5'191

– 2'126

– 71'594

– 78'911

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

Loans

 

 

 

 

Gross carrying amount as at 1 January 2020

12'239'351

563'827

236'257

13'039'435

Transfers

 

 

 

 

from Stage 1 to Stage 2

– 416'243

416'243

0

0

from Stage 2 to Stage 1

179'442

– 179'442

0

0

from Stage 2 to Stage 3

0

– 43'533

43'533

0

from Stage 3 to Stage 2

0

39'730

– 39'730

0

Additions from changes to scope of consolidation

0

0

0

0

Additions due to issuing loans and interest

5'031'968

57'788

6'034

5'095'789

Disposals due to redemption of loans / waiving of claims

– 4'331'803

– 435'903

– 56'481

– 4'824'187

Foreign currency influences

– 1'601

0

– 59

– 1'660

Gross carrying amount as at 31 December 2020

12'701'114

418'709

189'554

13'309'377

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

Loans

 

 

 

 

Valuation allowance as at 1 January 2020

– 5'191

– 2'126

– 71'594

– 78'911

Transfers

 

 

 

 

from Stage 1 to Stage 2

960

– 960

0

0

from Stage 2 to Stage 1

– 980

980

0

0

from Stage 2 to Stage 3

0

47

– 47

0

from Stage 3 to Stage 2

0

– 1'230

1'230

0

Net revaluation effect from transfers

948

1'015

– 17'270

– 15'308

Additions from changes to scope of consolidation

0

0

0

0

Addition on account of new loans to customers / interest / reduction of existing collateral

– 2'336

721

– 3'771

– 5'386

Disposals due to redemption of loans / waiving of claims

1'646

276

15'318

17'240

Foreign currency influences

0

0

1'229

1'229

Changes due to adjusted risk parameters and due to maturity effect

1'804

174

– 289

1'689

Valuation allowance as at 31 December 2020

– 3'149

– 1'102

– 75'195

– 79'446

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

Financial guarantees

 

 

 

 

Credit risk as at 1 January 2019

559'347

3'196

1'701

564'244

Transfers

 

 

 

 

from Stage 1 to Stage 2

– 3'114

3'114

0

0

from Stage 2 to Stage 1

159

– 159

0

0

from Stage 2 to Stage 3

0

0

0

0

from Stage 3 to Stage 2

0

51

– 51

0

Additions from changes to scope of consolidation

0

0

0

0

Addition due to granting of new financial guarantees

150'094

3'752

448

154'294

Disposal due to withdrawal of financial guarantees

– 140'004

– 1'197

– 1'290

– 142'492

Foreign currency influences

– 679

0

0

– 679

Credit risk as at 31 December 2019

565'802

8'757

808

575'367

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

Financial guarantees

 

 

 

 

Provision on 1 January 2019

– 1'128

– 450

– 1'701

– 3'279

Transfers

 

 

 

 

from Stage 1 to Stage 2

31

– 31

0

0

from Stage 2 to Stage 1

– 74

74

0

0

from Stage 2 to Stage 3

0

0

0

0

from Stage 3 to Stage 2

0

– 51

51

0

Net revaluation effect from transfers

72

– 207

0

– 136

Additions from changes to scope of consolidation

0

0

0

0

Addition due to granting of new financial guarantees

– 275

8

– 448

– 716

Disposal due to withdrawal of financial guarantees

199

28

1'290

1'517

Foreign currency influences

6

0

0

6

Changes due to adjusted risk parameters and due to maturity effect

119

59

0

178

Provision as at 31 December 2019

– 1'050

– 572

– 808

– 2'430

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

Financial guarantees

 

 

 

 

Credit risk as at 1 January 2020

565'802

8'757

808

575'367

Transfers

 

 

 

 

from Stage 1 to Stage 2

– 3'137

3'137

0

0

from Stage 2 to Stage 1

2'027

– 2'027

0

0

from Stage 2 to Stage 3

0

– 2'285

2'285

0

from Stage 3 to Stage 2

0

56

– 56

0

Additions from changes to scope of consolidation

0

0

0

0

Addition due to granting of new financial guarantees

367'611

630

2'319

370'560

Disposal due to withdrawal of financial guarantees

– 188'061

– 2'432

– 319

– 190'812

Foreign currency influences

– 1'159

0

0

– 1'159

Credit risk as at 31 December 2020

743'083

5'835

5'037

753'956

 

Stage 1

Stage 2

Stage 3

 

in CHF thousands

Expected 12-month credit loss

Credit losses expected over the period without impairment of creditworthiness

Credit losses expected over the period with impairment of creditworthiness

Total

Financial guarantees

 

 

 

 

Provision on 1 January 2020

– 1'050

– 572

– 808

– 2'430

Transfers

 

 

 

 

from Stage 1 to Stage 2

8

– 8

0

0

from Stage 2 to Stage 1

– 231

231

0

0

from Stage 2 to Stage 3

0

0

0

0

from Stage 3 to Stage 2

0

– 56

56

0

Net revaluation effect from transfers

220

– 37

0

183

Additions from changes to scope of consolidation

0

0

0

0

Addition due to granting of new financial guarantees

– 694

– 6

– 871

– 1'572

Disposal due to withdrawal of financial guarantees

307

24

320

650

Foreign currency influences

11

0

0

11

Changes due to adjusted risk parameters and due to maturity effect

440

245

0

686

Provision as at 31 December 2020

– 990

– 178

– 1'304

– 2'472

3.10 Collateral and positions with impaired credit rating

Chapter 3.7 “Risk concentration” shows the maximum credit risk without considering possible collateral. The LLB Group pursues the goal of reducing credit risks where possible. This is achieved by obtaining collateral from the borrower. The LLB Group predominantly holds collateral against loans to clients and banks.

The types of cover for loans to clients and due from banks are shown in the following tables.

Types of cover for loans

in CHF thousands

31.12.2020

31.12.2019

+ / – %