Notes to the Consolidated
Annual Financial Statements
Trading name, legal form, registered office
Risk management process
- Risk identification
- Risk measurement and assessment
- Risk management
- Risk monitoring and reporting
- ensure that effective controls are in place at all levels and to ensure that any entering into risks is in line with the risk appetite;
- create the conditions for entering into and systematically managing risks in a deliberate, targeted and controlled manner;
- make the best possible use of risk appetite, i.e. ensure that risks are only entered into if they offer suitable return potential.
- Counterparty risk
- Collateral risk
- Concentration risk
- Country risk
Raiffeisen Switzerland has invested in other companies as part of strategic cooperation partnerships. Details are provided in the information on the balance sheet contained in Note 7.
- Amounts due from banks
- Amounts due from customers
- Financial investments
- Positive replacement value
Methods applied to identify default risks and to establish the required value adjustment
Loans against securities
Expected losses are calculated based on the probabilities of default and loss estimates from the internal risk models used. For methods, data and more information, please refer to the regulatory disclosures under FINMA Circular 2016/1 (in particular Table CRE Raiffeisen Group). When determining expected losses under the FINMA Accounting Ordinance, the following differences apply in comparison to the regulatory calculations (IRB approach):
- no regulatory floors (e.g. on PD or LGD) are used.
- Instead of the one-year probability of default (including conservatism and stress allowances), a residual term approach and hence a lifetime probability of default is taken into consideration. For fixed-term products, the residual term in the individual product agreements is used. For products without a fixed term, a minimum term of one year is used.
- Not all stress premiums are taken into consideration when determining the lifetime probability of default.
- For positions not measured with internal risk models, provisioning is determined by means of expert estimates.
Value of collateral
Loans against securities
Business policy on the use of derivative financial instruments and hedge accounting
Business policy on the use of derivative financial instruments
Use of hedge accounting
Types of hedged items and hedging instruments
|Underlying transaction||Hedged using|
|Risks associated with fluctuating interest rates from interest rate- sensitive receivables and liabilities in the banking book||Interest rate and currency swaps|
|Price risk of foreign currency positions||Currency future contracts|
Composition of the groups of financial instruments
Economic connection between hedged items and hedging instruments
- The hedge is determined to be highly effective both at inception and on an ongoing basis (micro hedges).
- There is a close economic connection between the hedged item and the hedging instrument.
- The changes in the value of the hedged item offset changes in the value of the hedging instrument with respect to the hedged risk.
Consolidation, accounting and valuation principles
Scope of consolidation and consolidation method
Consolidation cut-off date
Accounting and valuation principles
Recording of business events
Liquid assets and borrowed funds
Individual value adjustments for impaired loans
Value adjustments for expected losses on unimpaired loans
Value adjustments for expected losses are recognised using a risk-based method and applying historical default parameters, bearing in mind the residual term (see “Steps involved in determining value adjustments and provisions”).
Receivables and liabilities from securities financing transactions
Securities lending and borrowing
Repurchase and reverse repurchase transactions
Trading portfolio assets and trading portfolio liabilities
Positive and negative replacement values of derivative financial instruments
Treatment in the income statement
Where reclassifications take place between financial investments and equity interests, the financial instruments reclassified are transferred at book value in accordance with Article 17 FINMA AO.
Value adjustments for expected losses
FINMA AO requires value adjustments for expected losses to be recognised on the item “Financial investments (debt securities held to maturity)”. These value adjustments for expected losses are recognised using a risk-based method and applying historical default parameters, bearing in mind the residual term (see “Steps involved in determining value adjustments and provisions”).
Tangible fixed assets
|Estimated useful life of tangible fixed assets||years|
|Real estate||66 years|
|Alterations and fixtures in rented premises||full rental term, maximum 15 years|
|Furniture and fixtures||8 years|
|Other tangible fixed assets||5 years|
|Internally developed or purchased core banking software||10 years|
|IT systems and remaining software||3 years|
Reserves for general banking risks
Contingent liabilities, irrevocable commitments, obligations to make payments and additional contributions
Value adjustments for expected losses on contingent liabilities and irrevocable commitments are recognised using a risk-based method and applying historical default parameters, bearing in mind the residual term (see “Steps involved in determining value adjustments and provisions”).
Changes as against previous year
Since the FINMA Accounting Ordinance came into effect on 1 January 2020, subject to a one-year transitional period value adjustments and provisions for default risks on unimpaired positions now have to be recognised. This is in addition to the value adjustments and provisions recognised on impaired positions. The Raiffeisen Group made use of the transitional period. The resultant need to recognise value adjustments and provisions for expected losses for the first time as of 1 January 2021 was met in the period under review by making a reclassification from the retained earnings reserves in equity. Details can be found in the footnote to the consolidated statement of changes in equity on page 153. The changes resulting from initial recognition in equity were recognised in the income statement under “Changes in value adjustments for default risks and losses from interest operations”.
Events after the balance sheet cut-off date
Because its business model is mainly focused on the Swiss retail market, the Raiffeisen Group is not directly exposed in Russia or Ukraine. The longer-term impact on Switzerland’s economic performance will depend on how the war unfolds from here. It is not possible to form a definitive view at the moment. However, at present Raiffeisen does not expect any major impact on the course of its business.