Mizuho Bank Europe Annual Report 2018

65 2018 ANNUAL REPORT Credit Risk Of the Basel Pillar 1 risks, credit risk constitutes MBE’s most significant risk (category). Credit risk is defined as the risk that a counterparty cannot fulfill its obligations to the bank. MBE calculates credit risk for its capital requirements in accordance with the Standardized Approach (SA). MBE’s policy on credit risk revolves primarily around the counterparty risks associated with lending to corporate clients. Strict selection criteria for new clients and active credit management for existing clients safeguard our quality of the loan portfolio. Credit risk on positions with governments and financial institutions arises from the investment activities, international payment transactions, and cash management. We perform on-going credit evaluations of our customers’ financial conditions, both at the MHBK group level and in the local operations. Consequently, MBE’s parent is to a large extent involved in monitoring the creditworthiness of customers. The frequency of these reviews may differ depending on the individual borrower’s risk profile, but takes place at least once a year. At the portfolio level, the relevant developments are discussed on a monthly basis at the Portfolio Management Committee. Any negative trend identified in the risk profile with respect to a particular client (segment), a particular sector, or type of loan can lead to the adjustment of MBE’s applicable lending policy. The maximum credit risk for the balances with central banks, loans and advances to banks, and loans and advances to customers also include the accrued interest. For loans and advances to banks, the maximum credit risk amount includes the credit risk mitigation related exposures. The credit exposure for the derecognized assets is valued at nil. (in €’000) Maximum credit risk 31/12/2018 Risk weighted amount Maximum credit risk 31/12/2017 Risk weighted amount Governments and Central banks 1,355,979 7,010 778,655 8,850 Loans and advances to banks 477,849 455,096 623,796 527,787 Loans and advances to customers 2,319,029 1,555,367 2,080,398 1,205,580 Debt securities - - 104,177 - Contingent liabilities 722,080 78,663 633,369 123,279 Commitments 736,349 323,585 855,144 364,878 5,611,286 2,419,721 5,075,539 2,230,374 Derivatives Foreign currency contracts 101,145 65,986 78,779 54,745 Cross currency swaps 21,488 12,434 37,922 30,662 Interest rate swaps 48,846 25,315 60,605 30,942 Interest rate caps - - 1,050 737 171,479 103,735 178,356 117,086 Total 5,782,765 2,523,456 5,253,895 2,347,460