Credit risk management in banks is a complex process that involves identifying, measuring, monitoring, and controlling risks associated with a bank's lending activities. The document discusses several key aspects of credit risk management:
1) It outlines various methods used by banks to assess credit risk when lending such as cash flow analysis, balance sheet analysis, and assessing repayment capacity.
2) It discusses the importance of proper credit appraisal, monitoring existing loans, and having standards for security, documentation, and loan renewals.
3) It notes that credit risk arises from both internal factors like faulty underwriting and external factors like changes in government policy or industry conditions. Managing this risk requires tools like exposure limits, risk ratings, and regular
This document discusses credit risk modeling and provides an outline for a course on the topic. It introduces statistical, structural, and reduced form models for analyzing default probability. Key aspects covered include probability of default, loss given default, credit ratings, factors that affect default, and using logistic regression to estimate credit scores and map them to default probabilities and rating classes. The document also lists relevant textbooks and academic papers on credit risk modeling.
This document discusses credit risk and credit ratings. It provides an overview of credit risk modeling, key determinants of credit risk like probability of default and loss given default, and the major credit rating agencies and their rating scales. It also describes the credit rating process, which involves both quantitative financial analysis and qualitative assessments, and results in an opinion on the issuer's ability to repay debt. Regulators require banks to measure and manage credit risk using models and capital requirements.
Banking credit concentration management -limiting setting Eric Kuo
The document discusses concentration risk management through implementing credit limit boundaries based on a bank's risk appetite. It proposes that credit limits should be set not just based on expert judgment but also using risk metrics like PD, LGD and EAD. Concentration risk can arise from large exposures to individual counterparties, related groups, or from concentrations in specific industries, regions or activities. Banks tend to have exposures concentrated in their largest customers and industries, so limits are needed to control this risk and protect banks from unexpected losses that could threaten their credit ratings and market capitalization.
This document provides an overview and copyright information for the book "Risk Management in Banking" by Joel Bessis. It discusses the rationale for risk-based practices in banking, including the need for quantified risk measures to balance risk and return from a management perspective and comply with increasingly stringent regulations. It also notes that while quantitative models provide a foundation for risk modeling, bridging the gap between concepts and practical risk management tools and processes for banks remained a challenge. The document contains basic publication details such as the publisher, copyright, and cataloguing information.
Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks Infosys Finacle
This document discusses the need for banks to take a holistic approach to managing reputation risk. Currently, most banks silo each type of risk (e.g. credit, market, operational) without considering how they interconnect and impact reputation. The document advocates looking beyond individual risk departments to foster a culture where all employees understand how their actions can affect reputation risk. It also suggests learning from other industries' reputation risk practices and using new technologies like analytics and social media monitoring to proactively manage this critical intangible asset.
This document provides an agenda and overview for a presentation on interest rate risk modeling and management. It discusses supervisory expectations, capabilities of the ALM5 tool, how the tool can be used for risk management versus compliance, key issues in interest rate risk architecture, and concludes with a summary review. The presentation aims to help financial institutions better understand balance sheet management and interest rate risk modeling.
The document discusses the challenges that banks face in meeting new regulatory requirements for stress testing and capital planning. It notes that existing risk and finance systems are not well-suited to the more rigorous analysis now required, and that banks must improve data management, analytical models, and reporting in order to "break the black box" and increase transparency. The document outlines the complex data, modeling, and reporting needs to conduct comprehensive, forward-looking stress tests that meet regulatory expectations and can be useful for bank management.
Credit risk management in banks is a complex process that involves identifying, measuring, monitoring, and controlling risks associated with a bank's lending activities. The document discusses several key aspects of credit risk management:
1) It outlines various methods used by banks to assess credit risk when lending such as cash flow analysis, balance sheet analysis, and assessing repayment capacity.
2) It discusses the importance of proper credit appraisal, monitoring existing loans, and having standards for security, documentation, and loan renewals.
3) It notes that credit risk arises from both internal factors like faulty underwriting and external factors like changes in government policy or industry conditions. Managing this risk requires tools like exposure limits, risk ratings, and regular
This document discusses credit risk modeling and provides an outline for a course on the topic. It introduces statistical, structural, and reduced form models for analyzing default probability. Key aspects covered include probability of default, loss given default, credit ratings, factors that affect default, and using logistic regression to estimate credit scores and map them to default probabilities and rating classes. The document also lists relevant textbooks and academic papers on credit risk modeling.
This document discusses credit risk and credit ratings. It provides an overview of credit risk modeling, key determinants of credit risk like probability of default and loss given default, and the major credit rating agencies and their rating scales. It also describes the credit rating process, which involves both quantitative financial analysis and qualitative assessments, and results in an opinion on the issuer's ability to repay debt. Regulators require banks to measure and manage credit risk using models and capital requirements.
Banking credit concentration management -limiting setting Eric Kuo
The document discusses concentration risk management through implementing credit limit boundaries based on a bank's risk appetite. It proposes that credit limits should be set not just based on expert judgment but also using risk metrics like PD, LGD and EAD. Concentration risk can arise from large exposures to individual counterparties, related groups, or from concentrations in specific industries, regions or activities. Banks tend to have exposures concentrated in their largest customers and industries, so limits are needed to control this risk and protect banks from unexpected losses that could threaten their credit ratings and market capitalization.
This document provides an overview and copyright information for the book "Risk Management in Banking" by Joel Bessis. It discusses the rationale for risk-based practices in banking, including the need for quantified risk measures to balance risk and return from a management perspective and comply with increasingly stringent regulations. It also notes that while quantitative models provide a foundation for risk modeling, bridging the gap between concepts and practical risk management tools and processes for banks remained a challenge. The document contains basic publication details such as the publisher, copyright, and cataloguing information.
Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks Infosys Finacle
This document discusses the need for banks to take a holistic approach to managing reputation risk. Currently, most banks silo each type of risk (e.g. credit, market, operational) without considering how they interconnect and impact reputation. The document advocates looking beyond individual risk departments to foster a culture where all employees understand how their actions can affect reputation risk. It also suggests learning from other industries' reputation risk practices and using new technologies like analytics and social media monitoring to proactively manage this critical intangible asset.
This document provides an agenda and overview for a presentation on interest rate risk modeling and management. It discusses supervisory expectations, capabilities of the ALM5 tool, how the tool can be used for risk management versus compliance, key issues in interest rate risk architecture, and concludes with a summary review. The presentation aims to help financial institutions better understand balance sheet management and interest rate risk modeling.
The document discusses the challenges that banks face in meeting new regulatory requirements for stress testing and capital planning. It notes that existing risk and finance systems are not well-suited to the more rigorous analysis now required, and that banks must improve data management, analytical models, and reporting in order to "break the black box" and increase transparency. The document outlines the complex data, modeling, and reporting needs to conduct comprehensive, forward-looking stress tests that meet regulatory expectations and can be useful for bank management.
Counterparty risk in a post Lehmans World -- January, 2010catelong
Results from joint Credit/FitchSolutions survey shows most buy-side firms do not hedge counterparty risk.
Those surveyed cited hedging as too expensive.
The presentation suggest using CDS as early market systems of increasing risk from counterparties.
Given the recent financial crisis and the extended impact on global credit market and liquidity, it is imperative that financial institutions strengthen their market risk management capabilities to effectively meet compelling business objectives and challenges which include portfolio pricing and portfolio exposure management
This document discusses credit risk management and debt servicing management. It begins with an agenda and overview of risk, credit risk, historical credit risk management practices in India, why credit risk management is important, and the tasks of a credit risk department. It then covers the risk management process/cycle and building blocks of credit risk management. Various types of risks for financial institutions are defined including market, operational, credit, and portfolio risks.
How do you monitor your Basel III compliance? Pactera_US
This document discusses Basel III compliance and operational risk measurement and reporting requirements for banks. It summarizes the key principles for effective risk data aggregation and reporting established by the Basel Committee on Banking Supervision. These include governance, data accuracy and integrity, completeness, timeliness, and adaptability of risk reporting. The document also provides examples of operational risk activity and business reporting, highlighting the largest losses come from retail banking and external fraud. It concludes with best practices for a pragmatic approach to risk detection and transparent, understandable reporting to improve risk management.
What are risks facing commercial banking institution sector by hamze dalhahamzedalha
Risks facing commercial banks include credit risk, market risk, operational risk, liquidity risk, and reputational risk. Credit risk is the potential failure of borrowers to repay loans. Market risk includes the possibility of losses from changes in interest rates, stock prices, and exchange rates. Operational risk arises from inadequate internal processes and people. Liquidity risk is the inability to meet short-term obligations. Reputational risk damages a bank's public image. Understanding and managing these risks is essential for banking institutions.
The document discusses CAMELS ratings, which are assessments by bank regulators of financial institutions' overall financial condition and operations. CAMELS ratings range from 1 to 5 based on evaluations of Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. Lower CAMELS ratings, especially a composite score of 3 or below, can subject banks to regulatory enforcement actions. The document urges bank directors to understand CAMELS ratings and their impact, as ratings influence access to capital, insurance costs, and talent recruitment.
Enterprise risk management is not just a process credit unions utilize to mitigate and manage the negative consequences of normal business operations, it is a practice of balancing risk and profitability. By understanding and managing the critical uncertainties that affect day-to-day business, credit unions can execute the proper strategies to achieve their performance goals in a post-financial crisis era. In this 2011 NAFCU Annual Conference session you learn how to apply ERM to your corporate strategies, assure management that risks are properly identified and balance risk management and business objectives.
Presented by Radu Miclaus, Senior Analytics Solution Architect, SAS Institute, Inc.
More info at http://www.nafcu.org/sas
Financial Risk Management: Integrated Solutions to Help Financial Institution...IBM Banking
IBM’s integrated risk management solutions enable financial institutions to: Understand market and credit risk exposure across multiple silos to make financial and risk decisions consistent with business objectives; Secure all transactions and forms of interaction; proactively prevent increasingly sophisticated internal and external prohibited activities and effectively manage detected events; Proactively manage potential risks from events impacting operations, processes and applications - both from internal & external and business & IT; Understand and manage compliance across a dynamic set of voluntary and mandatory requirements imposed by multiple regulatory bodies, across operating jurisdictions, at an optimal cost for value.
This document discusses risk management in banks. It outlines the three main categories of risks banks face: credit risk, market risk, and operational risk. It then discusses each of these risks in more detail. Credit risk is the potential that a borrower may default on obligations. Market risk relates to changes in market prices. Operational risk involves losses from inadequate internal processes or systems. The document also mentions regulatory risk and environmental risk as other risks banks face. It discusses tools for managing different types of risks and the importance of capital adequacy requirements.
The document discusses risk management and insurance for banks. It covers the following key points in 3 sentences:
The document provides an overview of risk management and insurance for banks, including the importance of identifying risks, implementing controls, and determining whether to retain or transfer risks through various insurance options. It discusses various types of insurance available to banks, with a focus on fidelity bonds which cover losses from employee dishonesty, robbery, and other risks. Procedures for examiners are outlined to assess the adequacy of banks' risk management and insurance programs based on their specific risk exposures and attempts to obtain necessary coverage.
1. Over the next ten years, risk management in banks will likely undergo a fundamental transformation driven by six key trends: continued expansion of regulation, changing customer expectations, evolving risk types, advances in technology and analytics, cost pressure, and the need for cultural change.
2. Regulations will broaden and deepen in scope in response to increasing public intolerance for bank failures and misconduct. Customer expectations will rise as technology adoption increases and new competitors emerge.
3. To prepare, banks need to start transforming their risk functions now through initiatives that balance short-term benefits with enabling the target vision for 2025, which may include automated processes, advanced analytics, and changes to recruiting and culture.
The document discusses the roles and responsibilities of a Chief Risk Officer (CRO). It states that the CRO's main roles are to create a culture of risk awareness, formally consider risk in strategic decision making, and communicate about risk internally and externally. The CRO is responsible for developing the risk governance framework and coordinating with business lines on risk training, assessment, and metrics. Key skills for a CRO include analytical and quantitative skills, understanding business issues and supply chains, and strong communication abilities. The CRO reports regularly to the board, senior management, shareholders, and regulators on risk exposures and risk management activities.
This document discusses credit risk management. It defines credit risk and outlines approaches to credit risk management including using credit ratings from external agencies under the standardized approach or developing internal rating systems under the foundation and advanced internal ratings-based approaches. Key elements of credit risk management include probability of default, exposure at default, loss given default, expected loss, and unexpected loss.
1) Operational risk management in the banking sector is important due to increased complexity from globalization, deregulation, technology advances and more. It involves identifying, assessing, measuring, monitoring and controlling risks from failures in internal processes, people, systems or external events.
2) Key types of operational risks for banks include internal and external fraud, employment practices, damage to assets, business disruptions, and errors in processes.
3) The operational risk management process involves identifying inherent risks, assessing vulnerabilities, measuring exposures, monitoring risk levels and indicators, and controlling risks through controls, mitigation efforts, and business continuity plans.
Economic capital Management Experience SharingEric Kuo
1. Economic capital is used to gauge unexpected loss in a bank's credit portfolio by taking into account diversification and concentration effects.
2. Key applications of economic capital include risk governance to determine a bank's risk appetite, internal capital allocation, and external communication with regulators and investors.
3. Implementing and promoting the use of economic capital faces challenges of encouraging buy-in from regulators, rating agencies, and analysts through ongoing communication.
The document provides an overview of risk management in the Indian banking sector. It discusses various types of risks banks face, including credit, market, liquidity, operational, and solvency risks. It describes the risk management process and approaches to capital allocation for operational risk under the Basel accords. The document aims to educate readers on identifying and mitigating risks to enhance efficiency and governance in Indian banks.
Instilling the Right Credit Risk CultureLibby Bierman
As the Comptroller's Handbook states, "a bank’s first defense against excessive credit risk is the initial credit-granting process, sound underwriting standards, an efficient, balanced approval process, and a competent lending staff." The start of a new year is the perfect time to review and improve your credit risk culture.
Garrett Morris, director of consulting at Sageworks, discussed the key elements of a strong credit risk culture, including:
-Three Ps of credit analysis
-Five Cs of credit
-Five Cs of data collection
-12 questions to ask at your institution
Quantifi whitepaper how the credit crisis has changed counterparty risk man...Quantifi
This paper will explore some of the key changes to internal counterparty risk management processes by tracing typical workflows within banks before and after CVA desks, and how increased clearing due to regulatory mandates, affects these workflows. Since CVA pricing and counterparty risk management workflows require extensive amounts of data, as well as a scalable, high-performance technology, it is important to understand the data management and analytical challenges involved.
• Current trends and best practices
• Key data and technology challenges
The document outlines 14 risk management principles for electronic banking put forth by the Basel Committee on Banking Supervision. The principles are divided into three categories: board and management oversight, security controls, and legal and reputational risk management. They address issues like authentication, non-repudiation, privacy, authorization controls, audit trails, and incident response planning to help banks effectively manage the risks associated with e-banking activities.
From a presentation that I gave at the IRM BPM conference in London, September 2010, and at the Business Rules Forum/Building Business Capabilities conference in DC, October 2010.
This document provides an overview of the domains of data science and resources for learning about them. It discusses topics including data science, statistics, programming languages, machine learning, data mining, text mining, natural language processing, data visualization, big data, and streaming data. It also lists online courses, tutorials, and certifications available in each of these areas from providers like Coursera, edX, Udacity, and individual companies like Cloudera, Hortonworks, and MapR.
Counterparty risk in a post Lehmans World -- January, 2010catelong
Results from joint Credit/FitchSolutions survey shows most buy-side firms do not hedge counterparty risk.
Those surveyed cited hedging as too expensive.
The presentation suggest using CDS as early market systems of increasing risk from counterparties.
Given the recent financial crisis and the extended impact on global credit market and liquidity, it is imperative that financial institutions strengthen their market risk management capabilities to effectively meet compelling business objectives and challenges which include portfolio pricing and portfolio exposure management
This document discusses credit risk management and debt servicing management. It begins with an agenda and overview of risk, credit risk, historical credit risk management practices in India, why credit risk management is important, and the tasks of a credit risk department. It then covers the risk management process/cycle and building blocks of credit risk management. Various types of risks for financial institutions are defined including market, operational, credit, and portfolio risks.
How do you monitor your Basel III compliance? Pactera_US
This document discusses Basel III compliance and operational risk measurement and reporting requirements for banks. It summarizes the key principles for effective risk data aggregation and reporting established by the Basel Committee on Banking Supervision. These include governance, data accuracy and integrity, completeness, timeliness, and adaptability of risk reporting. The document also provides examples of operational risk activity and business reporting, highlighting the largest losses come from retail banking and external fraud. It concludes with best practices for a pragmatic approach to risk detection and transparent, understandable reporting to improve risk management.
What are risks facing commercial banking institution sector by hamze dalhahamzedalha
Risks facing commercial banks include credit risk, market risk, operational risk, liquidity risk, and reputational risk. Credit risk is the potential failure of borrowers to repay loans. Market risk includes the possibility of losses from changes in interest rates, stock prices, and exchange rates. Operational risk arises from inadequate internal processes and people. Liquidity risk is the inability to meet short-term obligations. Reputational risk damages a bank's public image. Understanding and managing these risks is essential for banking institutions.
The document discusses CAMELS ratings, which are assessments by bank regulators of financial institutions' overall financial condition and operations. CAMELS ratings range from 1 to 5 based on evaluations of Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. Lower CAMELS ratings, especially a composite score of 3 or below, can subject banks to regulatory enforcement actions. The document urges bank directors to understand CAMELS ratings and their impact, as ratings influence access to capital, insurance costs, and talent recruitment.
Enterprise risk management is not just a process credit unions utilize to mitigate and manage the negative consequences of normal business operations, it is a practice of balancing risk and profitability. By understanding and managing the critical uncertainties that affect day-to-day business, credit unions can execute the proper strategies to achieve their performance goals in a post-financial crisis era. In this 2011 NAFCU Annual Conference session you learn how to apply ERM to your corporate strategies, assure management that risks are properly identified and balance risk management and business objectives.
Presented by Radu Miclaus, Senior Analytics Solution Architect, SAS Institute, Inc.
More info at http://www.nafcu.org/sas
Financial Risk Management: Integrated Solutions to Help Financial Institution...IBM Banking
IBM’s integrated risk management solutions enable financial institutions to: Understand market and credit risk exposure across multiple silos to make financial and risk decisions consistent with business objectives; Secure all transactions and forms of interaction; proactively prevent increasingly sophisticated internal and external prohibited activities and effectively manage detected events; Proactively manage potential risks from events impacting operations, processes and applications - both from internal & external and business & IT; Understand and manage compliance across a dynamic set of voluntary and mandatory requirements imposed by multiple regulatory bodies, across operating jurisdictions, at an optimal cost for value.
This document discusses risk management in banks. It outlines the three main categories of risks banks face: credit risk, market risk, and operational risk. It then discusses each of these risks in more detail. Credit risk is the potential that a borrower may default on obligations. Market risk relates to changes in market prices. Operational risk involves losses from inadequate internal processes or systems. The document also mentions regulatory risk and environmental risk as other risks banks face. It discusses tools for managing different types of risks and the importance of capital adequacy requirements.
The document discusses risk management and insurance for banks. It covers the following key points in 3 sentences:
The document provides an overview of risk management and insurance for banks, including the importance of identifying risks, implementing controls, and determining whether to retain or transfer risks through various insurance options. It discusses various types of insurance available to banks, with a focus on fidelity bonds which cover losses from employee dishonesty, robbery, and other risks. Procedures for examiners are outlined to assess the adequacy of banks' risk management and insurance programs based on their specific risk exposures and attempts to obtain necessary coverage.
1. Over the next ten years, risk management in banks will likely undergo a fundamental transformation driven by six key trends: continued expansion of regulation, changing customer expectations, evolving risk types, advances in technology and analytics, cost pressure, and the need for cultural change.
2. Regulations will broaden and deepen in scope in response to increasing public intolerance for bank failures and misconduct. Customer expectations will rise as technology adoption increases and new competitors emerge.
3. To prepare, banks need to start transforming their risk functions now through initiatives that balance short-term benefits with enabling the target vision for 2025, which may include automated processes, advanced analytics, and changes to recruiting and culture.
The document discusses the roles and responsibilities of a Chief Risk Officer (CRO). It states that the CRO's main roles are to create a culture of risk awareness, formally consider risk in strategic decision making, and communicate about risk internally and externally. The CRO is responsible for developing the risk governance framework and coordinating with business lines on risk training, assessment, and metrics. Key skills for a CRO include analytical and quantitative skills, understanding business issues and supply chains, and strong communication abilities. The CRO reports regularly to the board, senior management, shareholders, and regulators on risk exposures and risk management activities.
This document discusses credit risk management. It defines credit risk and outlines approaches to credit risk management including using credit ratings from external agencies under the standardized approach or developing internal rating systems under the foundation and advanced internal ratings-based approaches. Key elements of credit risk management include probability of default, exposure at default, loss given default, expected loss, and unexpected loss.
1) Operational risk management in the banking sector is important due to increased complexity from globalization, deregulation, technology advances and more. It involves identifying, assessing, measuring, monitoring and controlling risks from failures in internal processes, people, systems or external events.
2) Key types of operational risks for banks include internal and external fraud, employment practices, damage to assets, business disruptions, and errors in processes.
3) The operational risk management process involves identifying inherent risks, assessing vulnerabilities, measuring exposures, monitoring risk levels and indicators, and controlling risks through controls, mitigation efforts, and business continuity plans.
Economic capital Management Experience SharingEric Kuo
1. Economic capital is used to gauge unexpected loss in a bank's credit portfolio by taking into account diversification and concentration effects.
2. Key applications of economic capital include risk governance to determine a bank's risk appetite, internal capital allocation, and external communication with regulators and investors.
3. Implementing and promoting the use of economic capital faces challenges of encouraging buy-in from regulators, rating agencies, and analysts through ongoing communication.
The document provides an overview of risk management in the Indian banking sector. It discusses various types of risks banks face, including credit, market, liquidity, operational, and solvency risks. It describes the risk management process and approaches to capital allocation for operational risk under the Basel accords. The document aims to educate readers on identifying and mitigating risks to enhance efficiency and governance in Indian banks.
Instilling the Right Credit Risk CultureLibby Bierman
As the Comptroller's Handbook states, "a bank’s first defense against excessive credit risk is the initial credit-granting process, sound underwriting standards, an efficient, balanced approval process, and a competent lending staff." The start of a new year is the perfect time to review and improve your credit risk culture.
Garrett Morris, director of consulting at Sageworks, discussed the key elements of a strong credit risk culture, including:
-Three Ps of credit analysis
-Five Cs of credit
-Five Cs of data collection
-12 questions to ask at your institution
Quantifi whitepaper how the credit crisis has changed counterparty risk man...Quantifi
This paper will explore some of the key changes to internal counterparty risk management processes by tracing typical workflows within banks before and after CVA desks, and how increased clearing due to regulatory mandates, affects these workflows. Since CVA pricing and counterparty risk management workflows require extensive amounts of data, as well as a scalable, high-performance technology, it is important to understand the data management and analytical challenges involved.
• Current trends and best practices
• Key data and technology challenges
The document outlines 14 risk management principles for electronic banking put forth by the Basel Committee on Banking Supervision. The principles are divided into three categories: board and management oversight, security controls, and legal and reputational risk management. They address issues like authentication, non-repudiation, privacy, authorization controls, audit trails, and incident response planning to help banks effectively manage the risks associated with e-banking activities.
From a presentation that I gave at the IRM BPM conference in London, September 2010, and at the Business Rules Forum/Building Business Capabilities conference in DC, October 2010.
This document provides an overview of the domains of data science and resources for learning about them. It discusses topics including data science, statistics, programming languages, machine learning, data mining, text mining, natural language processing, data visualization, big data, and streaming data. It also lists online courses, tutorials, and certifications available in each of these areas from providers like Coursera, edX, Udacity, and individual companies like Cloudera, Hortonworks, and MapR.
Big Data, Bigger Campaigns: Using IBM’s Unica and Netezza Platforms to Increa...graemeknows
Is your organization challenged by the explosion of data and increasing expectations for results? Unica Campaign Management and IBM Netezza appliances can provide capabilities to address and overcome them. This presentation offers customer case histories and performance studies that provide insights in today's world where digital and traditional channels are increasingly intertwined.
This document outlines the selection and onboarding process for new employees. It discusses the typical stages of recruitment, selection, onboarding, and provides details about each step. Selection involves identifying candidates through tests and interviews to evaluate competency and commitment. Onboarding aims to integrate and acculturate new employees and includes placement, orientation, induction, mentorship development, and employee engagement programs. The goal is for new employees to become successful and productive members of the organization.
This document outlines principles and techniques for ideation and design workshops. It discusses constraints to consider in design like technology, business needs, and materials. It then describes a research plan involving observations, insights, and prototyping. Brainstorming rules are outlined emphasizing quantity over quality. Specific brainstorming techniques are also presented like brainwriting, rule breaking, and questioning. The document concludes with examples of design principles for different products focusing on being short, memorable, and differentiating.
The document discusses best practices for capturing data requirements for projects that are data-rich. It emphasizes the importance of taking a top-down requirements approach and maintaining traceability between requirements. While use cases are useful, they often do not fully capture data needs. The document advocates looking beyond immediate needs to plan for business intelligence by capturing additional relevant data elements upfront.
This hymn asks God to breathe on the singer and fill them with new life so that they may love what God loves, do God's will, and have a pure heart and will that is one with God's. The singer wants God's breath to make their earthly self glow with God's divine fire so that they may live the perfect eternal life with God and never die.
The document is a song about wanting to walk closely with Jesus each day and asking him to guide the singer safely through life and into heaven. It expresses a desire for a daily close relationship with Jesus, asking him to keep the singer from sin and share their burdens, and for protection in this world until death, when Jesus can guide the singer to heaven.
This 3 line song encourages the listener to walk with justice, mercy and God's humble care when leaving a place. It tells them to take these virtues with them as they go on their way. The song is written by Linnea Good and comes from her album Stickpeople & The Good Book.
This Xhosa song from South Africa gives praise to God, with the title translating to "Amen, we praise you". Sung in the Xhosa language, the lyrics repeat variations of "Amen, we praise your name, O God" throughout, expressing gratitude and worship to God. The song was written by S.C. Molefe and is used with permission from the Lumko Institute for its lyrics and music.
This document describes a medical gown called the Running Wild Model. It has buttons down the sides and elastic straps over the shoulders. The gown can be adjusted from the bottom up or unbuttoned into two pieces to expose only the necessary areas of the body for exams while protecting other areas. It is designed with wheelchair patients in mind and allows flexibility in how much of the torso is exposed.
Jesus comes to the lakeshore looking not for the wealthy or wise, but asking a fisherman to follow him. The fisherman leaves his boat on the shore and will seek other seas at Jesus' side, as Jesus knows the fisherman's possessions contain only nets and tools for his labor, but Jesus needs the fisherman's hands and love to care for others.
The document provides the program for an Erasmus staff week being held in Bremen, Germany from June 6-10, 2011. The program includes workshops and presentations on regional and international cooperation models at various academic institutions in and around Bremen. It will cover topics like language center cooperation, research collaborations, student exchanges, and campus tours. Events will take place at venues like Haus der Wissenschaft, the University of Bremen, the University of Applied Sciences Bremerhaven, and Jacobs University Bremen. The goal is to discuss keys to cooperation between higher education institutions.
This 3 line poem is a prayer asking Jesus to come to the table as their host and bless all who gather. It asks that they see Jesus' face in everyone they meet and that others see Jesus' face in them as a welcome guest.
The document is a song that references the Beatitudes from the Bible and uses the metaphor of an unmoving tree to represent remaining steadfast. It repeats the refrain "We shall not be moved" and describes those who are blessed for living with trust, humility, hungering for righteousness, and weeping as being rooted and unable to be moved from their place, like a tree beside water.
The BMW Z4 has standard equipment including airbags, stability control, parking sensors, run flat tires, and leather steering wheel. It also has optional equipment such as automatic climate control, ambient lighting, storage compartments, and a rearview camera. Safety features include ABS, traction control, and side impact protection.
Sound Credit Risk Experience Sharing Vietnam Fsa And BankEric Kuo
The document discusses credit risk management and can be grouped into 3 important parts: credit rating, underwriting, and management. It provides examples of rating models that focus on different business segments and discusses factors to consider in building an internal rating system, emphasizing the importance of data. It also covers credit risk measurement standards outlined in Basel II and the process of mapping internal ratings to external ratings.
The document discusses asset liability management (ALM) in banking. It covers several key topics in 3 paragraphs:
1) ALM refers to managing a bank's balance sheet to allow for different interest rate and liquidity scenarios. This involves assessing risks from changes in interest rates, exchange rates, and liquidity. ALM aims to quantify these risks and provide strategies to make credit, interest, and liquidity risks acceptable.
2) Common ALM techniques include gap analysis, duration analysis, scenario analysis, simulation, and value-at-risk to measure risks. Interest rate risk is a major focus, and tools like gap and duration analysis examine how changes in rates impact profits and asset values.
3)
This document discusses operational risk and provides details on its definition, measurement, and management. It defines operational risk as losses resulting from inadequate or failed internal processes, people, and systems or from external events. It describes the Basic Indicator Approach, Standardized Approach, and Advanced Measurement Approach for calculating operational risk capital charges under Basel II. It also outlines the data elements, risk categories, and tools used to measure and manage operational risk.
Asset liability management-in_the_indian_banks_issues_and_implicationsVikas Patro
This document discusses asset-liability management (ALM) in Indian banks. It provides background on the evolution of risk management practices in Indian banks over time in response to deregulation and other changes. It describes various types of risks banks face, such as interest rate risk, liquidity risk, and credit risk. Effective ALM is important for banks to manage these risks and balance risks with profits. The document outlines objectives to study the current status and impact of ALM practices in Indian banks.
The document discusses integrated risk management (IRM) in banking. It outlines drivers for IRM including convergence of marketing, risk, and financial data and external regulatory pressures. It describes the desired evolution from siloed risk views to an integrated risk landscape. It also discusses building IRM capabilities in Indian banks through developing people, analytics, data resources, and preparing for sophisticated markets and instruments over time while following regulatory directives.
Credit scoring is a statistical technique used to evaluate credit risk by assigning a score based on a borrower's credit history and other data. It allows lenders to consistently evaluate large numbers of loan applications and distinguish higher and lower risk applicants. Statistical scoring models are more accurate and objective than judgment-based decisions. While credit scoring improves lending processes, concerns remain that some populations like minorities may be disadvantaged. Overall, credit scoring provides an effective way for lenders to balance risk and returns when granting loans.
Pinnacle Training Group: SME credit masterclass - Lending & financial analysi...George Staicu
A two days intensive masterclass on
SME lendng and financial analysis presented by George Staicu.
By the end of this course, participants will:
• Understand the nature of financial risk, how and why banks take risk,
how it is measured, and how it is applied to SME borrowers;
• Appreciate how "Tops Down" analysis and detailed financial and credit analysis of the borrower interrelate and impact SME borrowers;
• Know how to read, adjust and understand SME financial statements, and to apply that understanding to the objectives of their credit analysis of a borrower;
• Be able to determine the relationship between credit analysis and the type of facility to be recommended for SME borrowers, and the key issues in determining what documentation and security should support
that facility;
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RMPG Learning Series CRM Workshop Day 1 session 3
1. Agenda for Day 1
Introduction of Participants
Introduction to Credit Risk
Overview of Basel Guidelines
Lunch Break
Framework for Credit Risk Management
Open Session/ Q&A
IM aCS 2010
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2. A loan creation planning process in a bank
Credit Credit Lending
Strategy Policy Policy
Focus Volume / Risk-Return / Client-base Norms/ Ratios
• Business targets • Characteristics of
• Basis
preferred borrowers
• Risk-return relationship
• Corporate objectives
• Customer base
• Thrust areas • Concentration Norms
The above aspects are captured in Business Plan,
Credit Policy, Manual of Instructions, Circulars
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3. Credit Risk defined
Manifestation of Credit Risk Likely Causes
Credit risk is the possibility that Inability to pay
payments would not happen as Short term cash flow or
per agreed terms – uncertainty in liquidity problems
amount and timeliness of Longer term solvency issues
repayments Delays in payment due to
Inadequate repayments operational issues with the
Untimely repayments treasury function
Default risk is the risk that the Unwillingness to pay
repayments stop all together
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4. Sources of Credit Risk
• Repayment inability due to bad financial performance,
Asset Based point in the business cycle, poor management quality
lending • Unwillingness on part of obligor to make repayments on
time
• Delays in completion
• Uncertain cash flows during operation due to lower PLFs,
Cash flow price risk, offtaker credit risk
based lending • Sponsor and Technology risks
• Force Majeure
• Political risks
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5. Assessing and Managing Credit Risk
Effects of credit Measurement of Management of
risk credit risk credit risk
• Potential inability of the • Appraisal and assessment. • Identification potential
organization to meet the • Use of internal and venerable credit
liabilities as they become external rating • Assessment of potential
due risk
• Borrowing under • Monitoring and follow up
unfavorable terms and • Control and mitigation
conditions like collaterals.
• Distress asset sale
• Reputational risk
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6. Credit Risk Management Process has to be installed
Identification Identification of products (e.g. loan product, derivative, forex, guarantees),
geographical locations (e.g. country risk), industry sectors (e.g. real estate,
NBFCs) from where the credit risk is originating
Analyse past credit trends, macro-economic factors and expected trends
Measurement Measuring credit risk using validating scoring / rating models
Estimating historical probability of default and recovery rates and loan loss
rates to bank
Linking risk scoring with quantification of risk
Control Limits on individual / group exposure, specific sectors like real estate,
unsecured exposure etc.
Eligible collaterals and their frequent valuations
Loan Review Mechanism
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7. Credit risk management function at Bank
Credit Risk
Management
Function
Quantification Management
Management Monitoring
Quantification
Tools
Policy Organization Tools Processes
Processes and Control
The Board of Directors has the overall responsibility for the credit risk management and shall approve the
credit risk management policy, procedures and set prudential and other limits.
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8. Policy Guidelines of Bank
Structure of Credit guidelines of banks
1. Credit objectives 6. Credit appraisal
2A. Quality of asset base (Industry 7. Assessment of limits
Exposure)
8. Pricing
2B. Quality of asset base (Selection
9. Credit monitoring
of Borrower)
10. Delegation of authority
3. Exposure norms
11. Recovery and exit policy
4. Tenure of credit
5. Credit acquisition 12. Internal Audit
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9. Prudential limits for Individual and Group exposure
Prudential limits Exposure ceiling
Individual Exposure Exposure of its owned fund
Lending ≤ 35 %
Group exposure
Lending ≤ 35 %
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10. Credit risk management function at Bank
Credit Risk
Management
Function
Quantification Management
Management Monitoring
Quantification
Tools
Policy Organization Tools Processes
Processes and Control
The Board of Directors has the overall responsibility for the credit risk management and shall approve the
credit risk management policy, procedures and set prudential and other limits.
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11. Organization structure
•Overall risk management
•Decide the risk management Policy
Board •Loan Sanction
•Setting up internal limit for portfolio management
•Implementation of policy
•Adherence to limits set by the Board
• Recommendation of ceiling for various types of internal limits to the Board
for effective portfolio management.
RMC •Monitoring and reporting of risk levels
•Review the risk based pricing
• Review the appraisal note , results and trends
•Preparation and presentation of appraisal note
• Objective assessment of the credit risks involved
Credit Officer • Ensuring the validity and accuracy of the data used for Credit decision
IM aCS 2010
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12. Comprehensive risk management structure
Organisation Structure
Internal Documents
Board of Directors
Risk Management Policy
Risk Management Committee of Board
Asset Liability
Policies for Credit Risk Management Operational Risk
Management Committee Management
Committee (CRMC) Committee (ORMC)
Risk (ALCO)
Management Business Unit
•Business units
unit
RM
Policies for Policies Policies for
Department
management Different Different
of different business operations
risks units procedures
RM interacts and functions with
business units IM aCS 2010
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13. A Board level Risk Management Committee should be put in place to
implement risk management across the bank
Desirable • Managing Director / Chief Executive Officer, Executive Directors ,
Composition Heads of Credit and Head of Risk.
Reporting • Board of Directors
Supported By • Credit
Risk Management Committee, Asset Liability Management
Committee and Operational Risk Management Committee
Frequency • At minimum quarterly intervals
Roles • Devisingpolicy and strategy for integrated risk management
containing various risk exposures
• Providing guidance to various risk management committees operating
under it
• Oversee the identification, measuring and monitoring the risk profile
of the Bank IM aCS 2010
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14. Bank should set up multiple risk management committees to create
focus and handle different constituents of risk
CRMC ALCO ORMC
Should be headed by Should be headed by Should be headed by
Desirable Chairman/Executive Chairman/ED/CEO Chairman/ED/CEO
Composition Director/Chief Executive and comprises of and comprises of
Officer (CEO) and heads of Credit, heads of Credit,
comprises of heads of Investment, Treasury, Information
Credit and Risk Resource and Technology, Human
Management Dept & International Banking Resource and Risk
Chief Economist Management
Reporting Risk Management Committee of Board
Supported By Credit Risk ALCO Cell / Middle Operational Risk
Management Office Management
Department Department
IM aCS 2010
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15. The committees should meet at frequent intervals to discuss to
monitor various aspects of risk
CRMC ALCO ORMC
Frequency of
Meeting At Frequent Intervals (Minimum Monthly)
Supported By Risk Management Department
Roles Measure, Control and Measure, Control and Formulation of Bank
Manage Bank wide Manage Bank wide risk wide Operational
Credit Risk on liquidity, interest Risk Policy
Compliance with rates and foreign Act as agency for
lending and credit risk exchange creating awareness on
management policy Product Pricing for operational risk in the
Enforce compliance Deposits & Advances Bank
with prudential limits Strategy for Resources Development of
Mobilisation Operational Risk
Management tools
IM aCS 2010
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16. Bank should install an independent risk management
department housed in the Head Office
Location At Head Office / Corporate Office
Headed By An officer with a minimum rank of General Manager, having expert
knowledge of banking business and credit, market and operational risk
management
Supported By Minimum of 3/4 persons on current scale of operations and shall be
increased with the enlargement of operations
Desired Chartered Accountants, MBA, Cost Accountant, CFA, M. Sc. –
Qualifications Statistics and any other equivalent degree
IM aCS 2010
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17. Credit risk management function at Bank
Credit Risk
Management
Function
Quantification
Quantification Management
Management Monitoring
Policy Organization Tools Processes and Control
Tools Processes
The Board of Directors has the overall responsibility for the credit risk management and shall approve the
credit risk management policy, procedures and set prudential and other limits.
IM aCS 2010
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18. The Policy would enable a structured assessment of risks,
mitigants enabling credit and pricing decision
Assessment of risks
Financial Parameters Qualitative Parameters
Assessment of mitigants on offer for the proposed transaction
Contractual arrangements in a project Financial collaterals, guarantees etc. for asset
based lending
Credit Decision
Additional collaterals, covenants, higher
Approve / Reject
pricing
Portfolio Risk Management
Monitoring, Oversight and Governance
Exposure Limits IM aCS 2010
For Classroom discussion only Structure Printed 11-M ay-11
Page 18
19. Structure of rating model for balance sheet based lending
Financial
Risk Project evaluation
and status
Business Risk
Final Borrower
Borrower +
Industry Risk Risk Score
Risk Score
Management
Risk Account
conduct
Credit rating model enables to view the borrowers with the risk perspective based on grades.
IM aCS 2010
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20. Multiple components of model* and multiple parameters for
each component
* Slide provides an outline of a rating
model for Corporate Customers
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21. Key Risks that need to be assessed for a project
Market /
Construction Technology
Revenue
risk risk
Risk
Sponsor Risk O& M Risk
DSCR, IRR
Financial
Overall Fuel supply
Best Case project
Risk risk
Worst Case risk
Equity
Contribution
IM aCS 2010
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22. Bank would need to finalise an approach for
implementing robust risk rating models
Financial
Risk Score W1
Collateral
Basic Structuring
Management W2
Borrower
Risk Score Risk Score
W3 Modified Transaction
PLUS Risk Score
Score
Industry Risk Conduct of
Score account Risk
Score
Calibration and
Validation Robust & Acceptable
Risk Scoring Model
IM aCS 2010
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23. Estimation of Loss Given Default (LGD)
Security Type
Market Value of Present Value
security of Recovery LGD=(1 -RR)
Rate (RR)
Loan Outstanding
at Default
IM aCS 2010
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24. Assessment of risks would also enable risk based pricing besides
building a good quality portfolio
Aligns the incentive to balance risk with return
Pricing is a tool to maintain proactive provisioning
Necessary for value creation and preservation
Loan
Price
Credit Overhead &
(Interest
Cost of Funds
Rate and = + Charge + Operating
fee income) Risk
IM aCS 2010
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25. Credit risk management function at Bank
Credit Risk
Management
Function
Quantification Management
Management Monitoring
Quantification
Tools
Policy Organization Processes and Control
Tools Processes
The Board of Directors has the overall responsibility for the credit risk management and shall approve the
credit risk management policy, procedures and set prudential and other limits.
IM aCS 2010
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26. Bank would need to install a three tier structure for
Lending process loan management
. Front Office Mid Office Back Office
Origination/Renew Credit Risk Analysis Post disbursement
al • Assessment •Monitoring
Regulatory Reporting
Sales/Acquisition •Sanction • Support to front and
• Pre disbursement mid office
Borrower
formalities •NPA Management
Evaluation •Disbursement
Collect and review
data
Risk Management Sanctioning Authority Audit and Control
IM aCS 2010
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27. Lending Process in Banks: Origination
DSA/DMA convert
prospective loan
RM/Branch
seekers into loan
applicant
Front office checks whether all documents are in order
and as per norms
CPU
Check whether file has been Check MIS to know the status of the file and
already logged Yes if declined, reasons for decline
No No
Refer to Credit
File is processed by Yes
CPU as per policy
Initiate Contact point verification (send details of the applicant
containing customer number, residence address, residence
telephone no. , employer name ,office address, telephone no. etc.)
and income document verification
Initiate contact point verification and
income document verification
Prepare CAM (Credit Appraisal Memorandum) by leaving column
blank for remarks about Income document verification
Check for discrepancies and email the IM aCS 2010
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same to RM For Classroom discussion only Page 27
28. Lending Process: Assessment , Risk Management and
Sanction
Update the status of Income document verification, on receipt of the same in CAM (Credit
Appraisal Memorandum) and MIS and complete the credit .Valuation and assessment of
guarantor will also be done based on prescribed guidelines
Credit officer adds the remarks on the basis of
deviation observed and credit process checks
Credit and Risk Department assesses the case based on score card /
internal rating model for quantification of Risk
In case Personal discussion felt necessary conduct
the same Note: Please refer to credit process checks
and policy for requirement to conduct the personal
discussion
Approved Hold Declined
Communicate For want of
Subject to
to Br/RM conditions
signinging Communicate to Br/RM
deviation so that the customer can
Br/RM collects PDC Communicate to Communicate to be informed
,loan agreement and Br/RM so that the Br/RM so that the
other documents conditions can be conditions can be
fulfilled fulfilled
Inspection officer Operation for
Verifies Communicate approval Disbursement/Post
disbursal activities
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29. Lending Process: Pre disbursement and disbursal
Creation of
Review of security documents, execution of new set of prescribed mortgage and
loan document as advised by Legal department and entry of details
into document execution register.
charges in
Register of
Charges
Collection of Post Dated cheques (PDC)
Customer has bank
account with cheque
book facility.
No
Customer will have to
Yes open savings account and
PDC will be issued
thereafter
Creation of account into CBS by following extant guidelines issued
with respect to KYC norms and setting up of limits
Update Drawing Power limit, Recovery of margin money and recovery of fees
and charges ,if any . Creation of insurance on financed assets, issue of cheque
book in the case of revolving credit,
Send copy of all executed document to CPU for disbursal clearance
Disbursal IM aCS 2010
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30. Lending Process: Post disbursal
Calculation of DP will be done at
regular interval based on submitted • Closure of Account
stock and debtors statement and the • Returned securities
same will be allowed in CBS. documents and
unused PDC End
Revolving • All loan documents
Credit marked as cancelled
and closed
Credit admin
Foreclosure and
Post officer
loan maturity
disbursal regularly
Loan Servicing
checks monitor Yes
activities in
loan account
Monitoring of
• Repayment
• Penalties & charges Loan account
• Change in interest rate performance as
• Revival of time bared per agreement
documents and pre decided
• Collection of required terms
additional PDC and
No
extension of ECS mandate
period
Triggers and early IM aCS 2010
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For Classroom discussion only warning signals Page 30
31. Credit risk management function at Bank
Credit Risk
Management
Function
Quantification Management
Quantification
Tools Monitoring
Policy Organization Processes
Tools Processes and Control
The Board of Directors has the overall responsibility for the credit risk management and shall approve the
credit risk management policy, procedures and set prudential and other limits.
IM aCS 2010
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32. Lending Process: Monitoring ,Follow-up and NPA
Management
No
Escalate to Head
CPU Credit Performance
officer needs to Credit Admin and Credit Credit officer and improved by
be assigned Officer to analyze unit Admin to examine moratorium, Credit sanctioning
prepare unit and prepare deferment of authority will take
recommendations recommendations interest pay, final decision on
re-assessment recommendation s
If any of
Review Yes, Escalate to put forth by Credit
the defined
and decide Head CPU Yes Officer
triggers or
to escalate Escalation of a
weakness
further/ke Execute remedial case to
observed
ep in view solution and Credit Recovery/NPA cell
than CR
Admin to can happen only
Admin
•Monitor to ensure after review and
Officer
Keep in recommendations are final decision by
escalate the Escalate to
view implemented appropriate
matter to it Credit
•Prepare specific check authority
superior's admin
supervisor Credit Admin and its points during
supervisor to review
If sign of
inspections
unit on a monthly basis deteriorati
for next two months on persist
NO
If unit
End complying Yes
NO
with the
condition
End
IM aCS 2010
and situation Printed 11-M ay-11
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33. Risk monitoring and control
Objectives of monitoring :-
• Improvement in the quality of credit portfolio
• Review of sanction process
• Compliance of due diligence process
• Feedback on regulatory compliance
• Picking-up early warning signals and suggesting remedial measures
• Recommending corrective action to improve credit quality, credit administration and
credit skills of staff etc.
Phase wise monitoring :-
• During construction phase
• During operating phase
IM aCS 2010
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34. Risk mitigation
Collateral securities can be broadly classified into two categories viz. Financial and Non-
financial
Financial collaterals :-
• Cash (including deposits),
• Gold,
• Securities issued by Central and State Government etc.
Non-financial collaterals :-
Land and building,
Raw materials, stock in trade, produce, and other goods
Movable assets such as machineries.
Documents of title to goods etc.
•The other forms of credit mitigation includes various form of guarantees and letter of comfort etc. Few
other mitigation arrangement includes escrow mechanism ,TRA and DSRA
IM aCS 2010
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35. Portfolio concentration needs to be minimised to manage Credit
Risk at the portfolio level
Bank shall aim to diversify exposures through:
Prudential limits for individual and group borrowers
Rating-wise distribution of all the borrowers
Exposure to particular sub-sector
Geographical distribution of borrowers
IM aCS 2010
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For Classroom discussion only Page 35
36. The need for a more comprehensive risk assessment for cash
flow based lending
Limited recourse to the sponsors Extent of risks differ during different phases of
Limited tangible security from the project
the project till the assets are
Need for specific assessment for each phase
created
Highly capital intensive Commissioning
Due to long gestation period of
Risks
power projects repayment of
principals starts after quite some
time. Steady state
operations
Lack of diversification and there
is a single stream of revenue
Financial
Closure
Time
IM aCS 2010
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For Classroom discussion only Page 36
37. Preliminary analysis would help banks optimise effort spent on
detailed appraisal
Minimum information required for evaluation of credit request
Status of land acquisition and statutory clearances
Availability of construction infrastructure and status of fuel linkage.
Status of all contracts e.g. EPC, Package contract and Shareholders agreement are in
place d) Proposed off take mechanism – through long term PPA or merchant sale.
Cost of the project, Debt Equity ratio proposed.
Proposed Shareholding pattern
Promoters’ background and their capability to bring their share of contribution.
Financial projections and ratios like IRR, DSCR of the project worked out by the
applicant.
Principle business of the promoters and their ability to implement the current project.
IM aCS 2010
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38. Assessment of credit risks in cash flow (SPV) based lending…1
Financial Parameters
• Project IRR
• Average DSCR and Minimum DSCR for the base case.
• Sensitivity of DSCR and IRR to the project cost
o Change in Project Cost
o Change in PLF
o Change in Sale rate
o Change in Interest rate
o Change in fuel Cost
• CDM benefit
• Any other project specific critical risk
IM aCS 2010
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39. Assessment of credit risks in cash flow based (SPV) lending…2
Qualitative parameters
• The promoters and Quality & expertise of management.
• Market size, growth prospects and business environment.
• Global market outlook.
• Govt. policies & economic situation.
Risks could arise during the construction phase:
• Non completion of the project or various milestones.
• Time and cost overrun due to delay in completion.
• Cost overrun even though part of the project completed on time.
Risks could arise during the operating phase:
• Fuel risk, Hydrological risk , Technology risk , Revenue risk , O & M risk ,Sponsor
risk and Supplier risk etc
IM aCS 2010
Printed 11-M ay-11
For Classroom discussion only Page 39
40. Assessment of credit risks in balance sheet based lending…1
Financial Parameters
• Quantitative factors:
o Financials, ratios e.g. Sales growth , gearing , ROCE ,Quick ratio , Cash interest
coverage ratio and retained earnings to equity etc.
o Sensitivity analysis.
o Industry inter-firm comparison.
• Sensitivity analysis.
• Industry inter-firm comparison.
Qualitative parameters
• The promoters and Quality & expertise of management.
• Market size, growth prospects and business environment.
• Global market outlook.
• Govt. policies & economic situation.
IM aCS 2010
Printed 11-M ay-11
For Classroom discussion only Page 40
41. Assessment of credit risks in balance sheet based lending…2
Risks could arise during the construction phase:
• Non completion of the project or various milestones.
• Time and cost overrun due to delay in completion.
• Cost overrun even though part of the project completed on time.
Risks could arise during the operating phase:
• Fuel risk, Hydrological risk , Technology risk , Revenue risk , O & M risk
,Sponsor risk and Supplier risk etc
Product fit & pricing.
Credit rating.
Review of account operation.
Collateral offered.
IM aCS 2010
Printed 11-M ay-11
For Classroom discussion only Page 41
42. DISCUSSIONS
IM aCS 2010
Printed 11-M ay-11
For Classroom discussion only Page 42
43. All the contents of the presentation are confidential and
should not be published, reproduced or circulated without the
written consent of IFC, Bangladesh Bank and IMaCS.
IM aCS 2010
Printed 11-M ay-11
For Classroom discussion only Page 43