Letno poročilo 2007 - UniCredit Banka Slovenija dd

Risk ReportRisk ReportCredit RiskCredit risk is the risk that a counterparty will cause a financialloss for the Bank by failing to keep its obligations. Credit risk isa significant risk for the Bank’s business, therefore, managementcarefully manages its exposure to credit risk. The credit risk theBank is exposed to is a result of lending activities (loans, advances,guarantees) and derivatives sales (positive market value of atransaction). Credit risk management is centralized for the entirecorporate and business client segment while partially decentralizedin the Retail segment.Credit risk control is centralized. Credit risk management and creditcontrol reports to the board member responsible for risk.Credit Risk measurementsIn measuring credit risk, corporate customers and business clientsare assessed with a rating that reflects the probability of default. Inaddition to rating, also exposure as well as repayment potential isassessed based on the available cash flow projection.The Bank assesses the probability of default as mentioned for allcorporate and business clients based on a system developed forgroup needs but calibrated on local circumstances.Rating is a result of financial data and qualitative factors and warningsignals. The Bank is using ten major rating classifications withadditional sub-classifications. All together there are 28 differentrating classes, starting at 1 and finishing with rating 10.For reporting to national bank, the Bank uses a mapping systempresented in Table 1.Table 1: Bank’s rating structure and mapping to national bank ratingsystemRating classClassificationof exposureNational bankclassification1 Performing A2 Performing A3 Performing A4 Performing A5 Performing A6 Performing A7 Performing B8 Non Performing C9 Non Performing D10 Non Performing EThe Bank is creating impairments based on evidence that a customeris in delay. The portfolio is checked on a monthly basis by the riskcontrol department. In such cases, the Bank prepares expected cashflow calculation and asses needed impairments.Risk limit control and mitigation policiesThe Bank manages limits and controls concentration of credit riskwhenever they are identified, in particular, to individual clients andgroups of related clients.The Bank uses, in the corporate segment, the system of individualapproval of any exposure, while in the business client segment andin retail also a scoring tool is partially used for some credit riskproducts. Approvals are based on cash flow capability of clients torepay loans or other credit risk exposures. The approval process isdefined with the Bank’s decree and delegated approval rights areimplemented. Each exposure in the corporate and business segmentsector is regularly, at least once per year, checked and monitored viaannual reviews.In addition to this, the Bank has established a Credit Risk departmentthat is responsible for monthly monitoring of whole portfoliossegmented on different levels. Such analyses are the basis for furtherdecisions about general credit policy of the Bank.CollateralIn order to mitigate credit risk, the Bank is taking collateral in order190 2007 Annual Report · UniCredit Bank