• Risk management framework at
    Saxo Bank Group

Risk management

Saxo Bank Group´s overall risk framework is established by the Board of Directors and based on recommendations from the Board appointed Board Risk Committee.

Saxo Bank’s risk management framework is contained in various instructions and policies that set the limits of Saxo Bank’s risk taking activities.

The Board Instructions specifically determine Saxo Bank’s risk appetite on credit, market, operational, liquidity and business risks.
In addition, the Board has issued a market risk policy, which establishes guidelines for market exposure and a credit risk policy, which establishes guidelines for managing counterparties and credit limits.

Saxo Bank applies the principle of three lines of defence to establish a sound risk management practice within the organisation.

Saxo Bank carries out the following main activities

  • Online trading and investment and other investment services within capital markets to retail clients, corporations, financial institutions and white label clients
  • Professional portfolio, fund and asset management to retail and professional clients
  • Classic bank services in Denmark, primarily to retail clients, including bank accounts and debit/credit cards, mortgage credit, bank advice services and pension products.

Saxo Bank is exposed to a number of risk types arising from these activities, which can be categorised as follows:

  • Credit risk: the risk that counterparties or clients of Saxo Bank fail to fulfil their obligations.
  • Market risk: the risk of loss due to movements in market risk factors.
  • Operational risk: the risk of loss resulting from inadequate or failed processes, people or systems, inaccuracy and improper disclosure of data (including legal and information security risk).
  • Liquidity risk: the risk of loss resulting from lack of liquidity.
  • Business risk: reflects the risk of direct or indirect loss, or damaged reputation as a result of changes in external circumstances or events.

ICAAP and risk reports

Saxo Bank’s Risk Reports for more detail on the Bank’s financial risks and policies and the calculation of Pillar I and Pillar II capital requirements.

Read ICAAP and risk reports on SaxoBank.com

Protection of Client Funds

The Danish Guarantee Fund for Retail Client Funds

Saxo Bank A/S is a member of the Danish Guarantee Fund for Depositors and Investors. Should a Danish bank (including Saxo Bank) suspend its payments or go into bankruptcy, client deposits are guaranteed by the Fund with up to EUR 100,000 for cash deposits. Cash deposits are calculated as the net free deposit after deduction of any debt to the bank.

As a general rule, securities will not be affected by the suspension of payment or compulsory winding-up and will be returned to the client.

In the event that a Danish bank (including Saxo Bank) is unable to return securities held in safe-custody, administered or managed, the Guarantee Fund will cover with up to EUR 20,000 per client.

Read more on protection of client funds on SaxoBank.com

Protection and Handling of Institutional Client Funds

Risks linked to securities and derivatives are managed within the limits approved by top management. Saxo Bank controls the default risk of all open positions on an on-going basis and has adequate procedures in place.

Client funds are protected and handled as follows:

Institutional clients are, due to their status as licensed financial institutions, not covered for cash in case of Saxo Bank’s default. Cash in this regard includes the netted value of derivative positions.

All securities held with Saxo Bank will be returned to the Institutional Client if they are retrievable from Saxo Bank’s custodian. That the securities are retrievable is ensured by section 72 of the Danish Financial Business Act on Financial Services, which imposes on Danish banks to ensure that, the client’s rights to their securities are at all times protected, also in case of a default.

Saxo Bank uses a number of different banks to hold client’s cash. Depending on the client’s residence they fund their accounts at Saxo Bank by transfer to the relevant bank in accordance with the settlement instructions for payments visible on Saxo Bank’s website.

Saxo Bank mainly uses one global custodian, currently Citi Bank, for securities and exceptionally other custodians on a few exchanges where local conditions call for it.

Saxo Bank holds client securities segregated from proprietary securities. When a client wishes to transfer securities to Saxo Bank, the client authorizes Saxo Bank to request the securities from the third party bank where the securities are held and ensures a transfer to the relevant custodian depending on the credentials of the security.

Protection of client funds with other Saxo Bank Group entities is covered by local regulations.