I. QUALITATIVE INFORMATION

In order to have a bigger competition level and considering the growing complexity and volatility of the Financial Markets, Casa de Bolsa Finamex, has reinforced its Risks Analysis structure.

We have implemented control systems to supervise and to opportune and completely optimize the relationship risk-yield, settling down polices, limits and controls for the different business lines, and determining the necessary capital to be protected.

The risks’ control is managed by the following inner organs:

1.- ADMINISTRATION COUNSEL

• Authorizes the methodology and maximum risk’s tolerance levels.
• Checks positions and risk’s quantifications quarterly.

2.- RISKS’ COMMITTEE

• Sessions monthly.
• Proposes methodology and maximum tolerance levels.
• Authorizes the credit lines and of counterpart.
• Supervises the risk’s tolerance levels and limits.

3.- RISKS ADMINISTRATION UNIT

• Identifies, quantifies and reports daily the risk’s exposition.
• Supervises and uphold daily the authorized risks’ limits to each executive an in the aggregated.

The risk’s quantification is done using the “Risk Watch” and “VaR Global” technological tools together with a data base and a risk’s factors matrix.

CHECKING METHODOLOGY PER MARKET’S RISKS’ TYPE

The quantification and measurement methodology of Market Risks is based on three processes:

1.- VALUE AT RISK - VAR

VaR is the methodology used to obtain the risk market of Casa de Bolsa Finamex. It is the loss level over 1 day, that we are  99%  certain will not be exceeded. We obtain that daily mesurement by Montecarlo methodology and monthly by historical simulation both considering 1100 scenarios.

2.- SENSIBILITY ANALYSIS
Calculated once every two weeks, using specific scenarios for one week horizon.

3.- STRESS ANALYSIS
Calculated monthly. Historic variations are used for horizons from one and five days, from an eight years data base, giving the potential bigger loss, considering all the risks factors of the period.

The Risks Committee establishes risks’ limits for VAR and for STRESS as is provided the Accounting Capital and the Global Capital of the Institution.

4.- BACK TESTING

Calculated daily. The risk estimations calculated a priori from the Value in Risk model are compared with the results observed (a posteriori) for each instrument/market at a 99% trust level, valuating the set observed really does not exceed the VAR at 1% of the total of the observations.

The results are rendered monthly to the Risks Committee.

CREDIT RISK

Finamex uses parametric models based on the Credit and Financial Information Qualifications of the analyzed institutions.

There are global limits of counterpart for the intermediates with which the Money Market, Derivatives and Changes operations are performed, which are captured, validated and controlled by the systems.

The credit lines and of counterpart are authorized by the Risks Committee.

LIQUIDITY RISKS

The Risks Committee settles down limits to the maximum potential loss under stress scenarios as Brokerage House Global Capital proportion, since the Liquidity Risk Valuation is approached establishing that the probability of occurrence of the Liquidity Risk is much bigger in stress circumstances in the risk factors that when there is stability in the markets. Additionally, limits has been established regarding the Brokerage House Global Capital related with the potential losses under stress scenarios limiting the Funding Risk of positions in situations that represent important disadvantages.

OPERATIONAL RISK

The risks that might be caused derived from the daily operation are controlled as follows:

1. Internal Audit Revisions which work program is authorized by the Administration Board, and keeps a registration of each one of the observations, recommendations and of its execution level.
2. Operative manuals for all the Brokerage House’s relevant areas.
3. Contingency plans to solve a great deal of extraordinary situations.
4. Documentation of the excesses, errors and legal problems.

II. QUANTITATIVE INFORMATION

The next table is calculated by the Risk Management department and it shows the market risk, liquidity risk and operational risk obtained every three months.

Nowadays we use binnacles to identify, prevent, resolve and document the operational risks implicit to the daily operation. These risks haven´t been real loses, because they have been indentified at the moment of their register and corrected immediately.