Bank of Scotia: Integrating Risk into Corporate Strategy

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Excerpts

Credit risk was the possibility of loss due to the failure of a borrower or counterparty to honour its financial or contractual obligations. Credit risk arose both in direct lending operations and in funding, investment and trading activities, where counterparties had repayment or other obligations to the Bank...

Market risk referred to the possibility of loss due to changes in interest rates, foreign exchange rates, market prices and volatilities that arose from the Bank's funding, investment and trading activities...

Liquidity risk referred to the possibility of not being able to obtain funds at a reasonable price within a reasonable time period to meet obligations as they became due. The Board of Directors approved Scotia's liquidity and funding management policies and established limits to control the Bank's global net cumulative cash flow gap and minimum core liquid assets for key global currencies...

Operational risk was the possibility of loss due to inadequate or failed internal processes, human behaviour and systems, or external events. Operational losses were divided into different categories:
• Errors or breakdowns in transaction processing, including compensation paid to customers, and disbursements made to incorrect parties and not recovered...

Exhibit I: Geographic Distribution of Earning Assets
Exhibit II: Cross-Border Exposure to Select Geographic Areas

Exhibit III: 10-Day Var by Risk Factor (Average, In $ Millions)
Exhibit IV: Medium-Term Note Maturities ($ Millions)
Exhibit V: Interest rate gap
Exhibit VI: Liquidity
Exhibit VII: Loans and Acceptances by Geography

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