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Financial Institution Risk Assessment in Liechtenstein: LLB AG Takes Proactive Approach

LLB AG, one of Liechtenstein’s leading financial institutions, has implemented a robust risk management framework to mitigate potential risks. This proactive approach complies with the country’s banking regulations and adheres to international standards.

Risk Management Framework

The bank’s risk policy is governed by:

  • Liechtenstein Banking Law: A comprehensive legal framework that outlines the requirements for financial institutions in Liechtenstein.
  • Banking Ordinance: A set of rules that regulate the activities of banks in Liechtenstein.
  • Basel Committee for Banking Supervision Principles: International standards for risk management and banking supervision.

The ultimate responsibility for basic risk policy and ongoing monitoring of risk exposure lies with:

  • Board of Directors: The top decision-making body of the bank, responsible for setting the overall direction and strategy.
  • Risk Committee: A specialized committee that provides guidance on risk management and oversight.

Market Risks

LLB AG manages market risks through:

  • Sensitivity analysis: Identifying potential impact of interest rate fluctuations, share price movements, and currency risks on the bank’s portfolio.
  • Value-at-risk (VaR) analysis: Quantifying the potential losses due to market risks.

Credit Default Risks

The bank mitigates credit default risks through:

  • Conservative collateral lending policy: Requiring sufficient collateral to secure loans.
  • Strict credit approval procedures: Carefully assessing borrowers’ creditworthiness before approving loans.
  • Internal rating system: Determining risk-related terms and conditions based on the borrower’s credit rating.

LLB AG manages operational and legal risks through:

  • Internal regulations and directives: Establishing clear guidelines for organization and controls.
  • Compliance checks: Regularly reviewing adherence to internal regulations by Group Compliance, Group Operational Risk / ICS departments, and Group Internal Audit.
  • External expert advice: Engaging external legal experts as needed to control and manage legal risks.

Liquidity Risks

The bank monitors and manages liquidity risks in accordance with banking law provisions. Additionally, it employs a business policy concerning the use of derivative financial instruments, including:

  • Interest rate swaps: Hedging against interest rate fluctuations.
  • Client transactions involving standardised and OTC derivatives: Managing risk associated with these types of transactions.

Conclusion

Through its proactive approach to risk management, LLB AG demonstrates its commitment to maintaining a stable and secure financial environment for its clients, stakeholders, and regulators.