G O
VER N
A N
C E
ThetablebelowshowsDBS’encumberedandunencumberedliquidassetsbyinstrumentandcounterpartyagainstotherassetsinthesame categoryunderthebalancesheet.Figuresarebasedonthecarryingamountasatthebalancesheetdate.
Liquid Assets Others
d
Total In SGD million
Encumbered Unencumbered Total Average
c
[1] [2]
[1] + [2]
As at 31 Dec 2014 Cash and balances with central banks
a
7,666
7,347 15,013
13,633 4,504
19,517
Due from banks
b
-
12,563 12,563
11,478 29,700
42,263
Government securities and treasury bills
2,093 27,331
29,424 31,032
270 29,694
Banks and corporate securities
623 23,300
23,923 22,405
13,840 37,763
Total
10,382 70,541
80,923 78,548
48,314 129,237
a Unencumbered balances with central banks comprise holdings that are unrestricted and available overnight. The encumbered portion represents the mandatory
balances held with central banks b Liquid assets comprise nostro accounts and eligible certificates of deposits
c Total liquid assets reflected on an average basis over the four quarters in 2014 d ‘Others’ refer to assets that are not recognised as part of the available pool of liquid assets for liquidity management under stress due to but not limited to
inadequate or non-rated credit quality, operational challenges in monetisation for example, holdings in physical scrips, among other considerations
Inadditiontotheabovetable,collateralreceivedinreverserepotransactionsamountingtoSGD4,001millionarerecognisedforliquidity managementunderstress.
Ascanbeobservedfromthetable,DBS’fundingstrategyinthenormalcourseofitsbusinessdoesnotrelyoncollaterisedwholesale funding.Instead,liquidassetsaremaintainedasasourceofcontingentfundstomeetpotentialshortfallsthatmayariseundertimes
ofstress,asassessedunderregulatorystandardsandourinternalmeasures.
7.4 Regulatory Requirements
On28November2014,theMASpublishedMAS’NoticetoBanksNo.649“MinimumLiquidAssetsMLAandLiquidityCoverageRatio LCR”MASNotice649,whichsetsouttheimplementationoftheBaselIIILCRinSingapore.DBS,asabankincorporatedand
headquarteredinSingapore,isrequiredtocomplywiththeLCRstandardsunderMASNotice649from1January2015.Wearewell abovetheminimumLCRrequirementsunderMASNotice649.
BasedonourinternalassessmentandparticipationintheQuantitativeImpactStudiesbytheBaselCommitteeonBankingSupervision, DBSiswell-positionedtomeettheminimumstandardsoftheBaselIIINetStableFundingRatioNSFR.Theinternationaltimelinetargeted
forimplementationisJanuary2018.
8 OPERATIONAL RISK
Operationalriskincludesprocessingerrors,fraudulentacts,inappropriatebehaviourofstaff,vendors’misperformance,systemfailureand naturaldisasters.OperationalriskisinherentinmostofDBS’businessesandactivities.
Ourobjectiveistokeepoperationalriskatappropriatelevels,takingintoaccountthemarketsDBSoperatesin,thecharacteristicsofthe businessesaswellasthecompetitiveandregulatoryenvironmentwearesubjectto.
8.1 Operational Risk Management at DBS
DBS’ framework for operational risk management comprises the following building blocks:
POLICIES RISK METHODOLOGIES
PROCESSES, SYSTEMS AND REPORTS
POLICIES Togovernoperationalriskmanagementpracticesinaconsistent
manner,theGroupOperationalRiskManagementFramework includesasetofCoreOperationalRiskStandardswhichprovides
guidanceonthebaselinecontrolstoensureacontrolledandsound operatingenvironment.Therearealsocorporateoperationalrisk
policieswhichareownedbytherespectivecorporateoversight functionsandincludekeysubject-speciicpoliciessuchas
TechnologyRiskManagementFramework,GroupCompliance Policy,FraudManagementPolicyandGroupAnti-Money
Laundering,CounteringtheFinancingofTerrorismandSanctions Policy,NewProductApprovalPolicyandOutsourcingRiskPolicy.
RISK METHODOLOGIES DBSadoptsthestandardisedapproachtocomputeoperationalrisk
regulatorycapital.Tomanageandcontroloperationalrisk,thereare varioustoolsincludingriskandcontrolself-assessment,operational
riskeventmanagementandkeyriskindicatorsmonitoring.Riskand controlself-assessmentisusedbyeachbusinessorsupportunitto
identifykeyoperationalriskandassessthedegreeofeffectiveness oftheinternalcontrols.Forthosecontrolissuesidentiied,theunits
areresponsiblefordevelopingactionplansandtrackingthetimely resolutionoftheseissues.Operationalriskeventsareclassiied
inaccordancewithBaselstandards.Suchevents,includingany signiicantincidentsthatmayimpactDBS’reputation,arerequired
tobereportedbasedoncertainestablishedthresholds.Keyrisk indicatorswithpre-deinedescalationtriggersareemployedto
facilitateriskmonitoringinaforward-lookingmanner.
Additionalmethodologiesareinplacetoaddresssubject-speciic risks,includingbutnotlimitedtothefollowing:
Technology Risk InformationTechnologyITriskismanagedinaccordancewith
aTechnologyRiskManagementFrameworkwhichcoversrisk governance,communication,monitoring,assessment,mitigation
andacceptance,supportedbyasetofITpoliciesandstandards, controlprocessesandriskmitigationprogrammes.DBShasalso
establishedpoliciesandstandardstomanageandaddresscyber securityrisk.
Compliance Risk Complianceriskistheriskofimpairmenttoourabilitytosuccessfully
conductourbusinessasaresultofanyfailuretocomplywithlaw, regulatoryrequirement,industrycodeorstandardofprofessional
conductapplicabletotheconductofbusinessintheinancial sector.Thisincludes,inparticular,lawsandregulationsapplicableto
thelicensingandconductofbankingorotherinancialbusinesses, inancialcrimesuchasanti-moneylaunderingandcounteringthe
inancingofterrorism,fraudandbriberycorruption.
Wemaintainacomplianceprogrammedesignedtoidentify, assessandmitigatesuchrisksthroughacombinationofpolicy,
andrelevantsystemsandcontrols,coupledwiththeprovisionof relevanttrainingandtheexecutionofassuranceprocesses.We
alsostronglybelieveintheneedtopromoteastrongcompliance culture.ThisisestablishedthroughtheleadershipofourBoard
andseniormanagementandaimstocomplywiththeletterand spiritofthelawsandregulatorystandardsintheenvironmentin
whichweoperate.
Fraud Risk Wehaveestablishedminimumstandardsforourbusinessand
supportunitstoprevent,detect,investigateandremediate againstfraudandrelatedevents.Thisincludesthecomponents,
keyrolesandtheframeworkoftheFraudManagementProgramme throughwhichthestandardsaretobeimplementedonaunitand
geographicallevel.Thesestandardsaimtoprovideend-to-end managementoffraudandrelatedissueswithinDBS.
Money Laundering, Financing of Terrorism and Sanctions Risks Thereareminimumstandardsforourbusinessandsupportunits
tomitigateandmanageouractualandorpotentialexposure tomoneylaundering,terroristinancing,sanctions,corruption,
orotherillicitinancialactivity.Accountabilitieshavealsobeen establishedfortheprotectionoftheassetsandreputationof
DBSandtheinterestsofcustomersandshareholders.
New Product and Outsourcing Risks Eachnewproductorserviceintroducedoroutsourcinginitiative
issubjecttoariskreviewandsign-offprocesswhererelevantrisks areidentiiedandassessedbydepartmentsindependentofthe
risk-takingunitproposingtheproductorservice.Variationsof existingproductsorservicesandoutsourcinginitiativesarealso
subjecttoasimilarprocess.
Mitigation Programmes BusinessContinuityManagementplaysanintegralroleinDBS’
riskmitigationprogrammetomanagebusinessdisruptions.A robustcrisismanagementandbusinesscontinuitymanagement
programmeisinplacewithinessentialbusinessservicesduring unforeseenevents.Planningforbusinessresilienceincludes
identiicationofkeybusinessprocessesviaBusinessImpact Analysisaswellasthedocumentationandmaintenanceof
BusinessContinuityPlanBCP.OverallBCPobjectivesareaimedat minimisingtheimpactofbusinessinterruptionarisingfromsevere
lossscenariosandtoprovideareasonablelevelofserviceuntil normalbusinessoperationsareresumed.TheCrisisManagement
structureencompassestheincidentmanagementprocessfromthe pointofincidenttocrisisdeclarationandactivationoftherelevant
committeesorteamstomanagethecrisis.Exercisesareconducted annuallytotesttheBCPsandcrisismanagementprotocolsimulating
varyingscenarios.Scenariosincludeincidentssuchastechnology incidentshavingenterprise-wideimpactonessentialbanking
services,naturaldisasterswithwidegeographicalareaimpact, safety-at-riskincidentse.g.terrorismandothereventsleadingto
signiicantbusinessdisruption.Seniormanagementprovidesan attestationtotheBRMConanannualbasisincludingthestateof
businesscontinuityreadiness,extentofalignmenttoregulatory guidelinesanddisclosureofresidualrisks.
Tomitigatelossesfromspeciicunexpectedandsigniicantevent risks,DBSpurchasesgroup-wideinsurancepolicies,underthe
GlobalInsuranceProgramme,fromthird-partyinsurers.These policiescoverfraudandcivilliability,propertydamage,general
liabilityanddirectors’andoficers’liability.
PROCESSES, SYSTEMS AND REPORTS Robustinternalcontrolprocessandsystemareintegralto
identifying,monitoring,managingandreportingoperationalrisk. DBShasimplementedaweb-basedsystemthatsupportsmultiple
operationalriskmanagementprocessesandtoolsincluding operationalriskeventreporting,riskandcontrolself-assessment,
keyriskindicators,trackingofissuesoractionplansandoperational riskreporting.
G O
VER N
A N
C E
8.2 Operational Risk in 2014