Daiwa Securities Group Annual Report 2012 Corporate Summary Executive Messages Business Strategy Management Systems & CSR Financial Section Other Information 98 11. Interest Rate Risk Under Non Trading Accounts A). Overview of risk management policies and procedures In regard to non trading accounts of the Group, most interest rate  risk arises from the assets and liabilities held by Daiwa Next Bank,  Ltd. Daiwa Next Bank, Ltd. complies with management rules of  market risk and manages the risk of incurring losses from changes  in the value of assets and liabilities or in the net incomes. Middle and back offices, which are independent from front  office, are set, and it acts as a system of checks and balances. In  addition, the ALM committee is periodically held and discussed  regarding the management and operation of market and liquidity  risks as well as the management of assets, liabilities, and capital  efficiencies. B). Overview of management’s method for measuring interest  rate risk under non trading accounts i. Financial assets and liabilities (exclude financial assets and  liabilities held by subsidiaries engaged in the banking  business) ii. Financial assets and liabilities held by subsidiaries engaged  in the banking business Financial assets and liabilities that are resulted by interest rate  risk are bonds and notes and long-term borrowings. The  change in fair value is calculated under assumption of changes  in interest rate for 10 basis points (0.1%). For the financial assets and liabilities in the subsidiaries  engaged in the banking business, market risk amount is mea- sured in a change of economic value used the 99th percentile  of observed interest rate changes using a year holding period  and 5 years of observations. It is used for quantitative analysis  to manage risk of change in an interest rate. For calculating the  amount of changes, the balances of the financial assets and  liabilities are classified in each period. The changes of interest  rate in each period are applied.