UBI Banca Group

Credit risk management policy
A process to adopt a credit risk management policy was concluded in the first quarter of 2011,
together with the completion of the relative regulations to implement it and the documents to set
limits both for the Group and for single banks and companies. The process allows a common
approach to be followed for the assumption of risk and procedures to manage it across the entire
Group and it standardises risk indicators, while taking account of the specifics of each class of risk.
The policy gives details of limits and it regulates the procedures for assuming risk for the following
types of risk:
- credit risk (including counterparty risk): the risk of incurring losses resulting from the default of a
counterparty with whom a position of credit exposure exists. Credit risk can be divided into the
following two types:
- credit risk relating to business with ordinary customers, with a specific focus on:
credit risk relating to Centrobanca’s business involving structured finance;
credit risk relating to Centrobanca’s private equity business;
- credit risk relating to business with institutional customers and with ordinary customers
resident in high risk countries;
- concentration risk: risk resulting from the existence of large exposures to single counterparties (or
groups) or resulting from exposures to groups of counterparties which operated in the same
economic sector or which are located in the same geographical area. Concentration risk is divided
into two types:
single name concentration risk;
sector concentration risk.
Ordinary customers
Standards, principles and limits to manage credit risk are set for ordinary customers both at
consolidated level and for individual legal entities, on the basis of the availability of risk drivers
generated by the internal rating model (rating class, probability of default and loss given default). The
definition of the limits is based on a series of indicators expressed in terms of: capital allocation,
values for maximum risk (i.e. target and maximum expected loss and cost of credit), limits on the
assumption of risks in terms of the distribution of exposures by credit rating class and the
management of credit quality.
The Credit Risk Management Service prepares quarterly reports on compliance with the indicators set
for all the Areas concerned and for the governing bodies of the Parent and the individual banks and
companies in the Group.
Structured finance
A specific focus was placed on structured finance business performed by Centrobanca.
The term structured finance operations refers to non standard finance operations, formulated on the
basis of the specific requirements of customers, usually performed for industrial or infrastructure
investments, or to acquire listed and unlisted companies. It may be promoted by institutional
investors.
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