Annual report 2008-OK-B-up.qxp - Canadia Bank Plc.

NOTES TO THE FINANCIAL STATEMENTS
32. FINANCIAL RISK MANAGEMENT (CONTINUED)
32.1 Credit risk (continued)
b) Risk limit control and mitigation policies
The Bank operates and provides loans and advances to individuals or enterprises within the Kingdom of
Cambodia. The Bank manages, limits and controls the concentration of credit risk whenever it is identified.
Large exposure is defined by the Central Bank as overall credit exposure to any individual beneficiary
which exceeds 10% of the Bank's net worth.
The Bank is required, under the conditions of Prakas No. B7-06-226 of the Central Bank, to maintain at all
times a maximum ratio of 20% between the Bank's overall credit exposure to any individual beneficiary
and the Bank's net worth. The aggregation of large credit exposure must not exceed 300% of the Bank's
net worth.
The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is
the taking of security in the form of collateral for loans and advances to customers, which is common
practice. The Bank implements guidelines on the acceptability of specific classes of collateral or credit risk
mitigation. The principal collateral types to secure for loans and advances to customers are:
• Mortgages over residential properties (land, building and other properties);
• Charges over business assets such as land and buildings; and
• Cash in the form of margin deposits.
c) Impairment and provisioning policies
The Bank is required to follow the mandatory credit classification and provisioning in accordance with
Prakas No. B7-00-51 dated 17 February 2000 on the classification and provisioning for bad and doubtful
debts and Prakas No B7-02-145 dated 7 June 2002 on the amendment of Prakas No B7-00-51 of the Central
Bank. The Central Bank requires commercial banks to classify their loan portfolio into four classes and the
minimum mandatory level of specific provision is made depending on the classification concerned and
regardless of the assets (except for cash) pledged as collateral, as follows:
2008 2007
Standard 0% 0%
Substandard 10% 10%
Doubtful 30% 30%
Loss 100% 100%
Annual Report 2008 57