Mega Bank Annual Report 2017

25 Annual Report 2017 -25- Item Content „ Exception management: Each transaction has limits and stop-loss rules. If the transaction reaches the stop-loss limit, action shall be taken immediately. If stop-loss is not executed, the transaction unit shall state the reason for not executing stop-loss and the contingency plan, submit to top management for approval, and report to the Risk Management Committee and Board of Directors based on the type of financial products. B. Organization of Market Risk Management 1. The Board of Directors is the Bank ’ s highest supervisory unit for market risk, in charge of the approval of risk strategies and various risk limits, and of the Risk Management Committee which supervises market risk. 2. Conduct Risk Management Committee council regularly, and the Risk Management Department shall submit a report on the management of the Bank ’ s various financial products position for reference by the committee. Besides submitting report on the Bank ’ s management status such as market risk and liquidity risk, the business supervising unit shall submit a special report on the current period ’ s major extraordinary event. 3. Risk Management Department is in charge of establishing risk control mechanism and formulating internal regulations. It compiles and analyzes data such as position, assesses the profit and loss, sensitivity risk factor analysis and stress test of various financial products regularly, and reports to the supervisory top management and Mega Financial Holding Company. 4. Stress test is conducted on market risk factor changes on a monthly basis. Also, the Risk Management Department shall, according to market conditions, set the stress scenario every half a year and submit this to the top management for approval for execution of the stress test. The results are then submitted to the top management for review, and then to the competent authority according to the regulations of the competent authority. 5. Risk Management Department compiles and submits the balances, gains and losses, and market assessments of securities investments and derivative financial products to the (Managing) Board of Directors regularly to enable them to understand the Bank ’ s market risk management status. 6. The Treasury Department, the Direct Investment Department, Offshore Banking Branch, and overseas branches (including subsidiary banks) shall comply with relevant regulations and operating rules on market risks of the Bank and execute risk control based on business characteristics and scales; overseas branches (including subsidiary banks) shall also comply with the regulations of local supervisory authorities. C. Scope and Characteristics of Market Risk Reporting and Measurement 1. The content of the Bank ’ s market risk report includes exchange rate, interest rate, as well as the position, profit and loss assessment and sensitivity factor analysis of financial products such as equity securities, credit default swap, etc. 2. The domestic transaction units shall submit the financial products ’ positions and gain or loss to the management on a daily basis. When positions are near to stop-loss alert indicator, close monitoring of market changes will be carried out. 3. The risk management unit conducts monthly stress test and submits reports to the Risk Management Committee meetings regularly. 4. For non-hedging transactions of derivative financial products, the risk is assessed based on daily market price; for hedging transactions, the risk is assessed twice per month. 5. When stop-loss limits for loss assessment of securities such as shares, mutual funds, bonds, etc. and derivative financial products are reached, stop-loss shall be executed immediately. The transaction unit shall state the reasons for not executing stop-loss and the response measures, and submit to the top management for approval. When these products exceeded a certain amount of loss, such incident shall be reported to the Risk Management Committee and Board of Directors based on the type of financial product.