Folie 1 / Risk Management at Raiffeisenbank a.d. Alexander Witte, Head of Risk Management Division, Raiffeisenbank a.d. Belgrade

Folie 2 / First bank established with 100% foreign capital in the country The Bank‘s shareholders: 90% Raiffeisen International 10% IFC, World Bank Group 1000 employees 30 branches and outlets Universal bank for 3 main client segments: Corporate Retail – Private individuals Retail – SMEs (small & medium enterprises and professionals) RAIFFEISENBANK a.d. Belgrade

Folie 3 / As at: Source: Raiffeisenbank a.d. Belgrade, IAS RAIFFEISENBANK a.d. Belgrade

Folie 4 / TOP 10 BANKS - by total assets As at: in million EUR Source: NBS; prepared by: Raiffeisenbank

Folie 5 / Foreign owned banks by total assets– 30 Sep 2003 (in mio EUR) Banking Industry Development Raiffeisenbank a.d., Belgrade

Folie 6 / TOP 10 BANKS - by loans to customers As at: in million EUR Source: NBS; prepared by: Raiffeisenbank

Folie 7 / Risk Management Mission To optimise the Bank’s risk/return position, i.e. to minimise risk at any targeted level of return to assist in maximising return at any given level of risk

Folie 8 / Prague (24 Branches) Warsaw (29 Branches) Vienna Budapest (35 Branches) Ljubljana Sofia (8 Branches) Bucharest (226 Branches/ Offices) Kiev Moscow (4 Branches) Zagreb (8 Branches) Bratislava (73 Branches) Raiffeisen CEE Network Sarajevo (8 Branches) Belgrade Banca Agricola S.A. (Mostar, 8 Branches)

Folie 9 / Risk Management Which risks do we manage? Credit risks –Corporate -SME -PI -FI -Sovereign Market risks –IR –FX Operational risks

Folie 10 / Who sets the framework? Risk Management Legislator Central Bank Management Market

Folie 11 / Risk Management Risk Management Structures CCALCO

Folie 12 / Credit Risk Management Risk Management Corporate SME Consumers Case-by-case approach Portfolio approach

Folie 13 / Risk Management: Corporate Corporate Credit Risk Guidelines set by HO: –Rating –Spreading system –Collateral valuation Guidelines set locally and approved by HO: –Credit Policy –Underwriting criteria –Portfolio composition

Folie 14 / Risk Management: Corporate Quantitative criteria –Interest cover –Ordinary income margin –EBITDA margin –Equity Ratio –Debt amortisation period Qualitative criteria –Industry –Business environment –Ownership –Management quality –Record with th Bank Developed and introduced by RZB Vienna Unified throughout the entire Raiffeisen system – both in Austria and the 15 CEE subsidiaries 10 rating grades Industry sensitive (manufacturing/trade) Based on portfolio history of RZB Basel II compliant Corporate Rating System

Folie 15 / Risk Management: Corporate Term Sheet approvalall limits Credit Committee Approvalall limits BoD approvallarge limits 3 Stages of Approval Vienna Belgrade

Folie 16 / Risk Management: SME “Corporate SMEs” –“Corporate/Portfolio approach” simplified spreadsheet based on the corporate model Locally developed rating system, validated by HO –Stronger reliance on qualitative information, track record Micro SMEs –Portfolio approach –Locally developed scoring system –Largely automated decision process based on scoring SME Risk Management

Folie 17 / Risk Management: Retail Pure portfolio approach Locally developed generic scorecard, validated by HO –Recently revised based on portfolio data –Diversified by product category (Mortgage Loans, Consumer loans…) Partially decentralised, scoring based automated approval process Centralised portfolio management New products require HO approval Consumer Lending

Folie 18 / Risk Management: Largely analysis and monitoring of counterparty risks FI rating system developed and introduced by HO Local banks rated locally Bank rating based on –Ownership –Management –Capitalisation –Asset quality –Profitability Sovereign risks largely limited to municipality finance FI and sovereign risk management

Folie 19 / Risk Management Main Risks monitored: –FX –IRG –Liquidity Limits set by HO upon local ALCO’s proposal Local monitoring Excesses reported to HO Market Risks

Folie 20 / Risk Management Perhaps the most underestimated risk in most banks The only losses suffered so far by Raiffeisenbank can be attributed to operational risk! Operational Risk is relevant to all areas of a Bank’s operations It is therefore a task for all departments of a bank Main areas to watch are –People –Systems –Processes Operational Risk Management

Folie 21 / Risk Management Groupwide project involving RZB with all its branches and subsidiaries Main objective: efficient, risk adjusted allocation of capital Project duration till 2007 Whatever the local regulations, Raiffeisenbank must become Basel II compliant due to its consolidation into RZB Group Arguably the most important ongoing project in Raiffeisenbank Main impact on –Systems –Processes –Reporting Basel II

Folie 22 / THANK YOU FOR YOUR ATTENTION!