Credit Risk. Loss on default = D x E x (1-R) Where D is default percentage, E is exposure value and R is recovery rate.
|
|
- Daniella Ramsey
- 2 years ago
- Views:
Transcription
1 Credit Risk Bank operations involve sanctioning of loans and advances to customers for variety of purposes. These loans may be business loans for short or long term commitments and consumer finance for purchase of durables, property and vehicles. Other types of loans provided by banks are micro credit for small borrowers and contingent obligations that are off balance sheet transactions. The loan sanctioning process commences when the bank receives a loan proposal from the customer. The loan requirement may be for equipment purchase or for working capital finance requirements. If it is for equipment purchase the amount will be paid directly to the supplier. If it is a working capital requirement, an operational bank account in the name of the customer will be opened and permission will be granted to draw the amount as and when required. The loan proposal will be evaluated using an internal rating system or the credit rating offered by external rating agencies. After the loan sanction the bank needs to follow up and monitor the loan accounts. The loan sanctioned may become a default or a bad loan if the outstanding payments (either interest or installment of the principle amount) are overdue by 90 days. Thus credit life cycle involves four stages, credit opportunity, credit assessment, credit management and credit implication. Credit worthiness of the borrowers will influence loan commitment by the bank. The pre requisites for the loan sanctioned depends on the credit worthiness of the borrower. The requirement of credit worthiness varies depending on type of credit and quantum of loan offered to borrowers. Besides personal credit worthiness the bankability of the proposal is to be evaluated in terms of projected cash flows, projected investment and past performance of the borrower. Risk exposure for banks is computed considering three factors. The criteria are the default percentage, exposure value for the bank and the estimated recovery rate. Loss on default = D x E x (1-R) Where D is default percentage, E is exposure value and R is recovery rate. Example of a credit evaluation process is given below. Credit Risk Evaluation Information Requirement by Banks Details of Applicants Name of the entity Registered office address Name of the contact person Address of factory / establishment Address for correspondence Office contract details Date of incorporation Date business commenced Date of formation Details of Applicants Account number Date of account opening Branch of applicant account Whether existing borrowing customer Line of business Nature of product / service offered Type of constitution of the business Existing activity of the business entity Proposed activity of the business entity Name of parent company if any
2 Purpose of Loan Expected source of funds Business owner Expected account turnover Return on investment Sale proceeds Details of Director Details of the Board Principal shareholders of the company and their address Purpose of Loan Exposure of the borrowing entity with other bank groups Credit facility availed Credit facility applied Type of facility Amount Purpose Tenor Primary security Collateral security Currency of security Land Tools Electrical Machinery Other assets Details of Assets Information on each type of Assets Purpose of asset Imported / Indigenous Supplier Total cost Promoters contribution Loan required Business Information Details of collateral Details of customers of business Currencies in which business is conducted Number of employees Existing Credit Facility Details Types of facility Limits (value) Outstanding as on the previous accounting date Names of banks presently working with Security lodged Rate of interest Repayment terms Past Performance (Two years) Net Sales Net profit Capital (net worth) Total debt Imports Exports Future Estimate (Current year and next year) Net Sales Net profit Capital (net worth) Total debt Imports Exports
3 Business and Agricultural Loans The loans sanctioned by banks for business may be broadly classified into two categories namely working capital advances and project loans. Loan sanction by banks can be based on several methods. Turnover method focuses on projected sales, trade terms, cash flows and business cycle of the proposal. Based on the assessment a credit limit will be sanctioned. Cash flow method will consider industry capacity, sector projections and regional performance of the project in determining the credit limits of the business. Cash budget method uses sales forecast, market forecast, investment forecast, loan commitment expenses, administrative commitments and project expense estimates. Projected balance sheet method deals with total performance of the business by analyzing asset structure, investment structure, borrowing structure and capital structure. Projects of these balance sheet criteria in terms of liquidity and cash flows identify the credit limit for the business. Net owned fund method uses risk estimates, capital commitment of the borrower, security requirements, guarantee requirements and the quality of net owned funds of the borrower. On the basis of these estimates a decision on loan proposal will be taken by the banks. While sanctioning business loans, a bank follows a standard set of procedures which includes application of analytical tools, choice of appraisal methods, manner of delivery of credit, monitoring of account and scheduling of payments. Similarly for export and import loans a separate set of standard procedures are followed. Additional loan exposures and loan restructuring proposals are considered by banks on a case to case basis considering specific justification for the proposal. Agricultural loans are sanctioned by banks during Kharif and Rabi seasons. These loans may be for the purchase of equipment, for irrigation facilities, for the purchase of fertilizers or seeds and other purposes such as land development. Micro Finance Mr. Mohammud Yunus is credited with micro finance movement in Bangladesh. Micro finance aims at developing banking habits among poor sections of the economy and to extend bank credit to sections that are traditionally neglected as un bankable. Micro finance schemes provide small loans without collateral. It encourages small savings deposits from the borrowers. Micro credit is often associated with a group of borrowers such as self help groups. Micro finance also aims at empowering women to achieve self reliance. The special features of micro finance include (1) supply leading finance principle which means it is the supplier of money who takes initiative to identify the borrower for lending purposes. (2) Imperfect information paradigm which implies that the borrowers are neglected weaker sections of
4 the society whose level of education and awareness are low. (3) Informal credit markets wherein sanctioning of loans is not based on traditional prudential norms but on the basis of borrower welfare. (4) Encouraging savings of the poor is another fundamental micro finance initiative. Micro finance concept has been extended to adapt to changing needs in changing economies. Micro finance has been extended by commercial banks adopting group lending methods. Loans are sanctioned to a group of borrowers who register themselves as a group for borrowing purposes. The borrowers are of similar economic status and they may use the credit both for personal use as well as an economic or business activity. No collaterals are insisted while sanctioning loans. Micro finance is seen more as a developmental intervention than a traditional bank lending activity. Credit Evaluation Credit evaluation begins with submission of loan proposal by the borrower. Banks follow a comprehensive approach for credit evaluation. First the project for which loan is sought will be evaluated in terms of capital adequacy, projected cash flows, current performance, past performance of the borrower in terms of repayments and adherence to banking procedures. Besides these banks follow an internal credit rating system based on predetermined criteria or they may depend on external credit rating offered by reputed credit rating agencies. After assessing the project, the next issue will be evaluation of securities offered as collateral for the loan. Next in the assessment will be the history of the borrower, the present management and its competence and other qualitative parameters obtained through reports from various sources such as other banks having business relationship with the borrower, suppliers of the borrower and other credit information agencies. Once a loan decision has been made, the bank staff will have to monitor and take up necessary follow up action. Banks insist on receiving periodical reports from the borrower and also conduct field visits to the premises of the borrower to ascertain the progress and utilization of loan amount. Banks usually compute certain key ratios and analyze the cash flow position of the borrower besides proper valuation of securities for accessing the credit worthiness of the proposal. Reserve Bank of India has provided guidelines for loan appraisal and evaluation and insists on adoption of Know Your Customer Norms (KYC) from the borrowers. Some of the hindrances in proper credit evaluation in banks include the administrative procedures, competence of the staff and non integration of credit sanction and follow up procedures. Non adherence to prudential norms suggested by RBI is another deterrent in the credit evaluation process. Hindrances in Credit Evaluation Focus on asset based lending than cash flow based lending. Industry specific evaluation tools not being used. RBI guidelines on committee approval for credit sanction not being followed fully since the
5 committee members do not beet frequently as and when required. Additional evaluations required in case of sensitive sectors such as funding of capital market securities or real estate proposals or commodity markets. Computation of credit risk Credit risk is inherent in the bank lending process. Therefore banks have to meticulously plan, understand and apply risk measures. All personnel and departments involved in credit management must have a thorough understanding of credit risk. Banks follow systematic methods of risk computation and apply them for loan decisions. They develop and organize credit information for this purpose. The internal rating system followed by banks requires both financial as well as qualitative information on the project and the borrower. Certain key ratios and cash flow projections are the basis for the quantitative measurement of risk. The risk measures computed by banks could be a one time measure for a borrower or a measure that is monitored throughout the loan servicing period. These methods are known as point in time measure and life cycle measure. Any method or model adopted by the bank needs to be evaluated as to its reliability. Usually past borrower data will be used to examine the reliability of models developed for credit risk analysis. By constant review and updating of the error probability of these models that banks will be able to reduce risk substantially and make them desirable for application. Besides internal rating system banks also depend on information provided by rating agencies. Based on credit analysis the loan proposals will be rated and graded. These ratings and grades may undergo change on account of new developments or changes affecting the business of the borrower. Accordingly the probability of default and the probability of loss will have to be kept flexible and needs review periodically. Type of factor Size of operation Safety Profitability Others Examples Amount of capital and net assets Current ratio, capital adequacy ratio, and current account balance ratio Return on assets, operating profits, years required to pay back interest bearing liabilities, and interest coverage ratio Rate of growth in sales and profits Industry Firm Type of factor Examples Growth potential size of market fluctuations, and entry barriers Ownership relations with parent companies or affiliate firms, the management s ability, and existence of an external audit system
6 Type of Factor Quantitative Qualitative Real Estate Finance Credit extension period, loan to value (LTV), and debt service coverage ratio (DSCR) Characteristics of real estate, e.g., locations and other conditions, adequacy of cash flow schedule, and risks attached to sponsors of the project Project Finance Credit extension period and DSCR Risk attached to the project, e.g., risks attached to sponsors and operators of the project, the risk of being unable to complete the project, and transfer risk Credit risk measurement involves computation of probability of default, loss given default and exposure at default. The evaluation process identifies expected and unexpected loss from credit risk. While expected loss is easily measurable through the credit risk models, unexpected losses are difficult since the frequency of occurrence of such events is less. Several other measures besides credit modeling such as Monte Carlo simulation have to be applied by the banks to estimate the unexpected loss.
7 Credit Risk Management For effective credit risk management, banks have to establish an integrated credit risk management system. In this executives at Board level as well as bank staffs dealing in credit risk at branch level are to be involved. Proper procedures, documentation, methods of appraisal and credit audit are to be incorporated in the system. Credit risk involves probability of loss of loan sanctioned. This loss comprises nonpayment of interest or principle, counter party obligations not met, settlement claims not met, default on account of restrictions imposed, foreign exchange remittances and inability of the borrower to meet contingent expenditures. Credit risk is affected by bank specific internal factors or external factors such as changes in the economy. Internal risk factors can be managed by adopting a systematic credit risk management policy and procedure. Managing external factors involves diversification of credit among different industry groups and different borrowers. Prudential norms for credit risk management calls for a comprehensive policy framework laying down strategies, organizational structure, system support, credit risk rating framework, credit risk limits, credit risk modeling, credit risk pricing, risk mitigation, low review mechanism and credit audit. Banks have several choices regarding the model for credit risk computation. Certain popular models in use are Altman s model, credit metrics model, value at risk model and KMV model. Depending on the suitability and the requirements of banks a model can be chosen and adopted for credit risk measurement. The main aim of credit risk management is not only quantifying risk but also reducing exposure of credit risk by adopting safety measures through collateral securities, guarantees, credit derivatives and balance sheet netting. RBI guidelines on credit exposure and management call for adoption of prudential norms. This specifies both quantitative and qualitative restrictions on loan sanctions. Questions 1. What is credit risk? What factors influence credit risk? 2. Explain the procedure followed by banks for credit risk management. 3. Discuss the essential features of an integrated credit risk management system. 4. What is internal credit rating system? 5. Explain the methods of credit risk measurement. 6. Suggest an ideal policy framework for credit risk management in banks. 7. What are the models for credit risk computation? Briefly explain their features. 8. What is credit risk mitigation? 9. How do banks reduce losses on account of credit risk? 10. Explain the guidelines of RBI in terms of credit risk management. 11. What are the various types of business loans sanctioned by banks? 12. What is micro credit? 13. What are the objectives of micro credit institutions? 14. What are the methods of sanctioning business loans?
8 15. Discuss the different approaches / models for micro credit.
Business and Agricultural Loans
Business and Agricultural Loans Business Loan Proposals Fund based business requirements. Non fund based business requirement. Classification of Loans based on Loan Pricing Sub-PLR (Prime Lending Rate)
EASTERN CARIBBEAN CENTRAL BANK
EASTERN CARIBBEAN CENTRAL BANK GUIDELINES ON CREDIT RISK MANAGEMENT FOR INSTITUTIONS LICENSED TO CONDUCT BANKING BUSINESS UNDER THE BANKING ACT Prepared by the BANK SUPERVISION DEPARTMENT May 2009 TABLE
Risk Management Transparency Report - 2012
Risk Management Transparency Report TRANSPARENCY REPORT On May 23, 2011, the Argentine Central Bank (BCRA) issued Communication A No. 5203, which states risk management guidelines for domestic financial
Risk Management. Special Feature. The Daiwa Bank, Limited Annual Report 2000
Management Special Feature The Daiwa Bank, Limited Annual Report 2000 Management Policy Daiwa Bank has positioned the establishment of strong internal supervisory systems as a key management objective,
RISK FACTORS AND RISK MANAGEMENT
Bangkok Bank Public Company Limited 044 RISK FACTORS AND RISK MANAGEMENT Bangkok Bank recognizes that effective risk management is fundamental to good banking practice. Accordingly, the Bank has established
1) What kind of risk on settlements is covered by 'Herstatt Risk' for which BCBS was formed?
1) What kind of risk on settlements is covered by 'Herstatt Risk' for which BCBS was formed? a) Exchange rate risk b) Time difference risk c) Interest rate risk d) None 2) Which of the following is not
Risk Management. Risk Charts. Credit Risk
Risk Management Risk Management Sumitomo Bank sees tremendous business opportunities developing in concert with the current liberalization and internationalization of financial markets, advancement of
Application for Business Credit
Application for Business Credit Please complete all relevant sections of the Application form and attach copies of requested information to ensure we are in the best possible position to assess your lending
S t a n d a r d 4. 4 a. M a n a g e m e n t o f c r e d i t r i s k. Regulations and guidelines
S t a n d a r d 4. 4 a M a n a g e m e n t o f c r e d i t r i s k Regulations and guidelines THE FINANCIAL SUPERVISION AUTHORITY 4 Capital adequacy and risk management until further notice J. No. 1/120/2004
ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION
ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION OCTOBER 2006 Table of Contents 1. INTRODUCTION... 3 2. FINANCIAL RATIOS FOR COMPANIES (INDUSTRY - COMMERCE - SERVICES) 4 2.1 Profitability Ratios...4 2.2 Viability
Market Risk. Market Risk Group
Market Risk Market risk refers to possibility of loss due to changes in the market factors such as interest rate, currency values, equity market rates, commodity market prices and changes in legal and
Preparing Agricultural Financial Statements
Preparing Agricultural Financial Statements Thoroughly understanding your business financial performance is critical for success in today s increasingly competitive agricultural environment. Accurate records
Risk Management Programme Guidelines
Risk Management Programme Guidelines Submissions are invited on these draft Reserve Bank risk management programme guidelines for non-bank deposit takers. Submissions should be made by 29 June 2009 and
The Bank believes that a strong and integrated. Risk Management
34 RISK MANAGEMENT The Bank believes that a strong and integrated risk management system is one of the critical success factors that form an essential element in sustaining the Bank s profitability while
STATE BANK OF INDIA BRANCH. Interview Form For Loans above Rs.25,000/- (To be submitted to the Sanctioning Authority along with the Application Form)
Annexure-SBF/3 STATE BANK OF INDIA BRANCH SMALL BUSINESS FINANCE Interview Form For Loans above 25,000/- (To be submitted to the Sanctioning Authority along with the Application Form) To be used for :
Federal Reserve Bank of Atlanta. Components of a Sound Credit Risk Management Program
Federal Reserve Bank of Atlanta Components of a Sound Credit Risk Management Program LOAN POLICY The loan policy is the foundation for maintaining sound asset quality because it outlines the organization
Ethiopian Institute of Financial Studies (EIFS) PROJECT FINANCE
PROJECT FINANCE With the growth in the economy and the revival in the industrial sector coupled with the increasing role of private players in the field of infrastructure, more and more Ethiopian banks
As of July 1, 2013. Risk Management and Administration
Risk Management Risk Control The ORIX Group allocates management resources by taking into account Group-wide risk preference based on management strategies and the strategy of individual business units.
LIFE INSURANCE RATING METHODOLOGY CREDIT RATING AGENCY OF
LIFE INSURANCE RATING METHODOLOGY CREDIT RATING AGENCY OF BANGLADESH LIMITED 1 CRAB S RATING PROCESS An independent and professional approach of the CRAB is designed to ensure reliable, consistent and
Dumfries Mutual Insurance Company Financial Statements For the year ended December 31, 2010
Dumfries Mutual Insurance Company Financial Statements For the year ended December 31, 2010 Contents Independent Auditors' Report 2 Financial Statements Balance Sheet 3 Statement of Operations and Unappropriated
Financial Status, Operating Results and Risk Management
Financial Status, Operating Results and Risk Management 87 Financial Status 88 89 90 90 90 95 95 Operating Results Cash Flow Effects of Major Capital Expenditures in the Most Recent Fiscal Year on Financial
Key matters in examining Liquidity Risk Management at Large Complex Financial Groups
Key matters in examining Liquidity Risk Management at Large Complex Financial Groups (1) Governance of liquidity risk management Senior management of a large complex financial group (hereinafter referred
Man Group plc ( the Company ) Appendix 1. Schedule of matters reserved for Board decision (July 2016)
Man Group plc ( the Company ) Appendix 1 Schedule of matters reserved for Board decision (July 2016) The Board delegates all decision making on and management of the business to the Chief Executive Officer
Feasibility Study Requirements. Qatar Development Bank
Feasibility Study Requirements Qatar Development Bank i. Feasibility Study Requirements The Feasibility study should ideally encompass the following areas / sections A. Executive Summary. B. Project details
DECISION On Minimum Standards for Risks Management in Micro-Credit Financial Institutions. 1. General Provision. Subject matter
Pursuant to Article 17, paragraph 1, point 2 of the Central Bank of Montenegro Law (OGRM 52/00, 47/01) and Article 157, paragraph 2 of the Banking Law (OGRM 17/08), the Council of the Central Bank of Montenegro,
Credit Analysis. A comprehensive e-learning product covering ratio analysis and cash flow analysis. After completing this course, you will be able to:
e-learning and reference solutions for the global finance professional Credit Analysis A comprehensive e-learning product covering ratio analysis and cash flow analysis After completing this course, you
Rating Methodology by Sector. Life Insurance
Last Updated: March 26, 2012 Rating Methodology by Sector Life Insurance *This rating methodology is a modification of the rating methodology made public on July 13, 2011, and modifications are made to
STATUTORY INSTRUMENTS 2005 No. 43.
STATUTORY INSTRUMENTS SUPPLEMENT No. 18 27th May, 2005 STATUTORY INSTRUMENTS SUPPLEMENT to The Uganda Gazette No. 28 Volume XCVIII dated 27th May, 2005 Printed by UPPC, Entebbe, by Order of the Government.
PRAKAS ON ASSET CLASSIFICATION AND PROVISIONING IN BANKING AND FINANCIAL INSTITUTIONS
PRAKAS ON ASSET CLASSIFICATION AND PROVISIONING IN BANKING AND FINANCIAL INSTITUTIONS The Governor of the National Bank of Cambodia - With reference to the Constitution of the Kingdom of Cambodia; Unofficial
Form. Account Disclosure Document for Licensed Corporation
Form (Made for the purposes of compliance with the requirements of section 156(1) of the Securities and Futures Ordinance (Cap.571) as amplified in section 3(1) of the Securities and Futures (Accounts
Annual Disclosures (Banks, Foreign Bank Branches, Federally Regulated Trust and Loan Companies, and Cooperative Credit Associations)
Guideline Subject: (Banks, Foreign Bank Branches, Federally Regulated Trust and Loan Companies, and Cooperative Credit Associations) Category: Accounting No: D-1 Date: July 1997 Revised: July 2010 Introduction
GUIDANCE NOTE FOR DEPOSIT TAKERS. Foreign Exchange Risk Management. May 2009 (updated March 2011 and January 2012)
GUIDANCE NOTE FOR DEPOSIT TAKERS Foreign Exchange Risk Management May 2009 (updated March 2011 and January 2012) Version 1.2 Contents Page No. Part 1 Deposit takers incorporated in the Isle of Man 1 Rationale
ICRA Lanka s Credit Rating Methodology for Non-Banking Finance Companies
ICRA Lanka s Credit Rating Methodology for Non-Banking Finance Companies Non-Banking Finance Companies (NBFCs) play an important role in the Sri Lankan financial market. While the Central bank of Sri Lanka
Bank of America NA Dublin Branch Market Discipline. Basel II - Disclosures
Bank of America NA Dublin Branch Market Discipline Basel II - Disclosures Disclosure 1 - Scope of application The Basel II disclosures contained herein relate to Bank of America, NA Dublin Branch herein
Risk Management. Risk Policy and Procedures. Risk Management Framework
Risk Management Risk Policy and Procedures Risk management is attempting to identify and then manage threats that could severely impact or bring down the organization. Generally, this involves reviewing
RMA Commercial & Business Banking
RMA Commercial & Business Banking The Commercial Real Estate Lending Decision Process The Commercial Real Estate Lending Decision Process, authored by The Risk Management Association and brought to you
Risk Management Programme Guidelines
Risk Management Programme Guidelines Prudential Supervision Department Non-bank deposit takers Issued: July 2009 2 CONTENTS Part 1 Introduction... 3 1. Purpose of this document... 3 2. Meaning of risk...
Supervision and Follow-up of Advances
Supervision and Follow-up of Advances Jyoti Kumar Pandey Deputy General Manager & Member of Faculty College of Agricultural Banking Reserve Bank of India Pune Credit Life Cycle Theory Credit Opportunity
General Bank of Canada. Pillar Three Disclosures
General Bank of Canada Pillar Three Disclosures The Basel Committee of Banking Supervision sets out expectations for the public qualitative disclosure of a bank s risk management objectives and policies,
1. Tally the balances in the various elements from the audited accounts
Illustrative Audit Checklist for Basel II Audit Procedures Tier I and Tier II Capital 1. Tally the balances in the various elements from the audited accounts 2. Check whether the various instruments comply
FOREIGN EXCHANGE RISK MANAGEMENT
CHAPTER - VII CHAPTER - VII FOREIGN EXCHANGE RISK MANAGEMENT INTRODUCTION DEFINITION & MEANING EXPOSURE IN FOREIGN EXCHANGE > TRANSACTION EXPOSURES > TRANSLATION EXPOSURES > OPERATING EXPOSURES MANAGING
Risk Management. Credit Risk Management
Risk Management In response to market changes, the Bank intensified proactive risk management to improve the Group s overall risk control capability. Credit Risk Management The Bank made deeper adjustments
20 April 2006. To Manager All Commercial Banks*
Unofficial Translation by the courtesy of The Foreign Banks' Association This translation is for the convenience of those unfamiliar with the Thai language. Please refer to the Thai text for the official
ARAB NATIONAL BANK BASEL III LIQUIDITY COVERAGE RATIO QUALITATIVE DISCLOSURE
ARAB NATIONAL BANK BASEL III LIQUIDITY COVERAGE RATIO QUALITATIVE DISCLOSURE JUNE 2015 1 Table of Contents Liquidity Coverage Ratio Qualitative Disclosure... 3 Liquidity Risk Management... 3 Funding strategy...
IGAS 3. Cash Flow Statements. Government Accounting Standards Advisory Board. Contents
Cash Flow Statements Government Accounting Standards Advisory Board Contents Description Page Number 1. Introduction 3 2. Objective 3 3. Scope 3 4. Benefits of Cash Flow Information 4 5. Definitions 4
Reporting Form ARF 731.4: International Banking Statistics - Balance Sheet Items Instructions
Reporting Form ARF 731.4: International Banking Statistics - Balance Sheet Items Instructions These instructions assist in the completion of the Reporting Form ARF 731.3a International Banking Statistics-
PROJECT FINANCE & LOAN SYNDICATIONS. Theories, Procedures & Techniques
PROJECT FINANCE & LOAN SYNDICATIONS Theories, Procedures & Techniques What is Project Finance? A Project Finance transaction involves the mobilization of debt, equity, contingent equity, hedges and a variety
USAID-Funded Economic Governance II Project Credit Risk Workshop - Intermediate March 2006. The Credit Process. Funded by: 2006 BearingPoint, Inc.
USAID-Funded Economic Governance II Project Credit Risk Workshop - Intermediate March 2006 The Credit Process Funded by: 2006 BearingPoint, Inc. Table of Contents MODULE 2: THE CREDIT PROCESS OVERVIEW...1
Analyzing Cash Flows. April 2013
Analyzing Cash Flows April 2013 Overview Introductions Importance of cash flow in underwriting decisions Key attributes to calculating cash flow Where to obtain information to calculate cash flows Considerations
LONG FORM AUDIT REPORT Of.. LIMITED For the year ended.. Ashad 206 (Corresponding to..july 20 ) Auditor:
cg';"rl @!=& LONG FORM AUDIT REPORT Of.. LIMITED For the year ended.. Ashad 206 (Corresponding to..july 20 ) Auditor: M/s. 1 1. AUDIT APPROACH 1.1 Brief description of the Audit plan with focus on the
Chapter 11 ALLOWANCE FOR LOAN AND LEASE LOSSES TABLE OF CONTENTS
Chapter 11 ALLOWANCE FOR LOAN AND LEASE LOSSES TABLE OF CONTENTS ALLOWANCE FOR LOAN AND LEASE LOSSES... 11-1 Examination Objectives... 11-1 Associated Risks... 11. 1 Overview... 11. 1.. Definitions...
DISCLOSURE ON CAPITAL ADEQUACY & MARKET DISCIPLINE (CAMD)
DISCLOSURE ON CAPITAL ADEQUACY & MARKET DISCIPLINE (CAMD) A) Scope of Application : (a) This guidelines applies to Delta Brac Housing Finance Corporation Ltd. (b) (c) DBH has no subsidiary companies. Not
Assessing Credit Risk
Assessing Credit Risk Objectives Discuss the following: Inherent Risk Quality of Risk Management Residual or Composite Risk Risk Trend 2 Inherent Risk Define the risk Identify sources of risk Quantify
C&I LOAN EVALUATION UNDERWRITING GUIDELINES. A Whitepaper
C&I LOAN EVALUATION & UNDERWRITING A Whitepaper C&I Lending Commercial and Industrial, or C&I Lending, has long been a cornerstone product for many successful banking institutions. Also known as working
Basel Committee on Banking Supervision
Basel Committee on Banking Supervision Liquidity coverage ratio disclosure standards January 2014 (rev. March 2014) This publication is available on the BIS website (www.bis.org). Bank for International
Credit Risk Management System Checklist and Manual
Credit Risk Management System Checklist and Manual Credit risk is the risk that a financial institution will incur losses because the financial position of a borrower has deteriorated to the point that
RATING METHODOLOGY FOR STOCK BROKING FIRMS
RATING METHODOLOGY FOR STOCK BROKING FIRMS Stock Broking Firms perform an important role in the capital market by facilitating trades for all categories of investors. The role of intermediaries like Stock
3. Market risks and derivatives. Foreign currency risk management
3. Market risks and derivatives The Company is exposed to a variety of financial risks: market risks (including foreign currency exchange risk and interest rate risk), credit risk, liquidity and capital
BASEL DISCLOSURES DOCUMENT AS ON 31 st December 2014 TABLE DF-3 CAPITAL ADEQUACY
BASEL DISCLOSURES DOCUMENT AS ON 31 st December 2014 Qualitative Disclosures (a) A summary discussion of the Bank s approach to assessing the adequacy of its capital to support current and future activities.
Operational Risk. Operational Risk Policy
Operational Risk Operational risk can be defined as a risk arising from direct or indirect loss to the bank. The causes of loss can be associated with inadequate or failed internal process, people and
Blueprint Dental Equipment Limited
Registered number 05055354 Abbreviated Accounts 31 March 2014 Registered number: 05055354 Abbreviated Balance Sheet as at 31 March 2014 Notes 2014 2013 Fixed assets Tangible assets 2 42,974 28,921 Current
Basel II, Pillar 3 Disclosure for Sun Life Financial Trust Inc.
Basel II, Pillar 3 Disclosure for Sun Life Financial Trust Inc. Introduction Basel II is an international framework on capital that applies to deposit taking institutions in many countries, including Canada.
Nepal Rastra Bank. Risk Management Guidelines
Nepal Rastra Bank Risk Management Guidelines Nepal Rastra Bank Bank Supervision Department July, 2010 TABLE OF CONTENTS Risk Management Guidelines 1. Risk Management Guidelines 1-3 1.1 Overview 1 1.2 Risk
EASY FOREX TRADING LTD DISCLOSURE AND MARKET DISCIPLINE IN ACCORDANCE WITH CAPITAL ADEQUACY AND THE REQUIREMENTS ON RISK MANAGEMENT
EASY FOREX TRADING LTD DISCLOSURE AND MARKET DISCIPLINE IN ACCORDANCE WITH CAPITAL ADEQUACY AND THE REQUIREMENTS ON RISK MANAGEMENT 31 st December 2012 Introduction For the purposes of Directive DI144-2007-05
BANK BRANCH AUDIT PLANNING
BANK BRANCH AUDIT PLANNING Banking Industry in India is developing and expanding day by day. The basic work culture in banks in India is fairly different as compared to banks in other countries. The customers
SAMA GENERAL DEPARTMENT OF FINANCE COMPANIES CONTROL. Prudential Returns Handbook (Finance Companies)
SAMA GENERAL DEPARTMENT OF FINANCE COMPANIES CONTROL Prudential Returns Handbook (Finance Companies) 1. Introduction Submission schedule All licensed finance companies in Saudi Arabia are required to submit
CITIGROUP INC. BASEL II.5 MARKET RISK DISCLOSURES AS OF AND FOR THE PERIOD ENDED MARCH 31, 2013
CITIGROUP INC. BASEL II.5 MARKET RISK DISCLOSURES AS OF AND FOR THE PERIOD ENDED MARCH 31, 2013 DATED AS OF MAY 15, 2013 Table of Contents Qualitative Disclosures Basis of Preparation and Review... 3 Risk
Supervisory Letter. Current Risks in Business Lending and Sound Risk Management Practices
Dollars in Billions Supervisory Letter Current Risks in Business Lending and Sound Risk Management Practices The September 2009 Financial Performance Report data reflects an increasing portion of loans
Additional Revision to Brief Report of Settlement of Accounts for Full Fiscal Year Ending March 31, 2007
June 22, 2007 Company Name: ARUZE CORP. Name and Title of Representative: Kunihiko Yogo Representative Director and CEO (JASDAQ Code: 6425) Contact: Norihisa Kiriu General Manager Finance and Accounting
@ HONG KONG MONETARY AUTHORITY
., wm~i!l1f~nu CR G 3 Credit Administration, Measurement V. 1-19.01.01 This module should be read in conjunction with the Introduction and with the Glossary, which contains an explanation of abbreviations
Policy on the Management of Country Risk by Credit Institutions
2013 Policy on the Management of Country Risk by Credit Institutions 1 Policy on the Management of Country Risk by Credit Institutions Contents 1. Introduction and Application 2 1.1 Application of this
GUIDANCE FOR MANAGING THIRD-PARTY RISK
GUIDANCE FOR MANAGING THIRD-PARTY RISK Introduction An institution s board of directors and senior management are ultimately responsible for managing activities conducted through third-party relationships,
DFA INVESTMENT DIMENSIONS GROUP INC.
PROSPECTUS February 28, 2015 Please carefully read the important information it contains before investing. DFA INVESTMENT DIMENSIONS GROUP INC. DFA ONE-YEAR FIXED INCOME PORTFOLIO Ticker: DFIHX DFA TWO-YEAR
Rating Criteria for Finance Companies
The broad analytical framework used by CRISIL to rate finance companies is the same as that used for banks and financial institutions. In addition, CRISIL also addresses certain issues that are specific
Office of the Comptroller of the Currency Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation Concentrations in Commercial Real Estate Lending, Sound Risk Management
RANBAXY EGYPT COMPANY (L.L.C.) FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015 TOGETHER WITH AUDITOR S REPORT
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015 TOGETHER WITH AUDITOR S REPORT Translation of Auditor s report AUDITOR S REPORT TO THE SHAREHOLDERS OF Report on the Financial Statements We have audited
AMERIABANK CJSC TERMS OF MORTGAGE LOANS* (where the loan is secured by property other than the real estate to be bought)
Approved by Management Board decision 123/06/11 as of October 19, 2011 Chairman of the Management Board General Director Artak Hanesyan Effective since November 10, 2011 AMERIABANK CJSC TERMS OF MORTGAGE
SUPERVISION GUIDELINE NO. 9 ISSUED UNDER THE AUTHORITY OF THE FINANCIAL INSTITUTIONS ACT 1995 (NO. 1 OF 1995) RISK MANAGEMENT
SUPERVISION GUIDELINE NO. 9 ISSUED UNDER THE AUTHORITY OF THE FINANCIAL INSTITUTIONS ACT 1995 (NO. 1 OF 1995) RISK MANAGEMENT Bank of Guyana July 1, 2009 TABLE OF CONTENTS 1.0 Introduction 2.0 Management
BOM/BSD 12/December 2003 BANK OF MAURITIUS. Guideline on Credit Risk Management
BOM/BSD 12/December 2003 BANK OF MAURITIUS Guideline on Credit Risk Management December 2003 CONTENTS 1.0 Introduction. 2 2.0 Purposes. 3 3.0 Interpretation... 4 4.0 Establishment Credit Risk Policy. 4
RISK ASSESSMENT FOR SMALL BUSINESS. Terry S. Campbell, Community Development Officer Department of Development & Technology
RISK ASSESSMENT FOR SMALL BUSINESS Terry S. Campbell, Community Development Officer Department of Development & Technology Date: March 25, 2004 1 Counseling Tool Outline - Cover Page - Outline - Introduction
FINANCING E.E. PROJECTS LENDER S PERSPECTIVE & CONCERNS
FINANCING E.E. PROJECTS LENDER S PERSPECTIVE & CONCERNS State Bank of India, New Delhi What we understand is an Energy Efficiency Project Improving Energy Efficiency means use of less energy for achieving
Unofficial Translation with the courtesy of The Foreign Banks' Association ------------------------------------------------------------------------
Unofficial Translation with the courtesy of The Foreign Banks' Association This translation is for the convenience of those unfamiliar with the Thai language. Please refer to the Thai text for the official
HOCH CAPITAL LTD PILLAR 3 DISCLOSURES As at 1 February 2015
HOCH CAPITAL LTD PILLAR 3 DISCLOSURES As at 1 February 2015 TABLE OF CONTENTS 1. Overview / Background 1.1 Introduction 1.2 Frequency of disclosure 1.3 Location and verification of disclosure 1.4 Scope
Investa Funds Management Limited Funds Management Financial Risk Management. Policies and Procedures
Investa Funds Management Limited Funds Management Financial Risk Management Policies and Procedures August 2010 Investa Funds Management Limited Funds Management - - - Risk Management Policies and Procedures
Claims Paying Ability / Financial Strength Rating Methodology for Insurance Companies
Claims Paying Ability / Financial Strength Rating Methodology for Insurance Companies CRAF s Claims Paying Ability (CPA) / Financial Strength Rating (FSR) is an opinion on an insurance company s financial
Guidelines for monitoring customers and early warning systems (EWSs) for increased credit risk (valid from May 22 nd 2015)
Guidelines for monitoring customers and early warning systems (EWSs) for increased credit risk (valid from May 22 nd 2015) General information about the EWS In addition to the early warning of increased
Market risk consists of market price risk, currency risk and interest rate risk.
Market Risk Market risk consists of market price risk, currency risk and interest rate risk. Market price risk the risk to incur losses due to the revaluation of balance sheet and off-balance sheet items,
News Release January 28, 2016. Performance Review: Quarter ended December 31, 2015
News Release January 28, 2016 Performance Review: Quarter ended December 31, 20% year-on-year growth in total domestic advances; 24% year-on-year growth in retail advances 18% year-on-year growth in current
Reserve Bank of Fiji Banking Supervision Policy Statement No. 19
Reserve Bank of Fiji Banking Supervision Policy Statement No. 19 NOTICE TO LICENSED FINANCIAL INSTITUTIONS UNDER THE BANKING ACT 1995 MINIMUM REQUIREMENTS FOR THE MANAGEMENT OF MARKET RISK FOR LICENSED
Regulation for Establishing the Internal Control System of an Investment Management Company
Unofficial translation Riga, 11 November 2011 Regulation No. 246 (Minutes No. 43 of the meeting of the Board of the Financial and Capital Market Commission, item 8) Regulation for Establishing the Internal
Best Practices for Credit Risk Management. Rules Notice Guidance Notice Dealer Member Rules
Rules Notice Guidance Notice Dealer Member Rules Please distribute internally to: Credit Institutional Internal Audit Legal and Compliance Operations Regulatory Accounting Retail Senior Management Trading
WORKING CAPITAL MANAGEMENT
CHAPTER 9 WORKING CAPITAL MANAGEMENT Working capital is the long term fund required to run the day to day operations of the business. The company starts with cash. It buys raw materials, employs staff
NATIONAL BANK OF THE REPUBLIC OF MACEDONIA
NATIONAL BANK OF THE REPUBLIC OF MACEDONIA Pursuant to Article 64, paragraph 1, item 22 of the Law on the National Bank of the Republic of Macedonia ("Official Gazette of RM" No. 3/2002, 51/2003, 85/2003,
Guidance Note: Stress Testing Class 2 Credit Unions. November, 2013. Ce document est également disponible en français
Guidance Note: Stress Testing Class 2 Credit Unions November, 2013 Ce document est également disponible en français This Guidance Note is for use by all Class 2 credit unions with assets in excess of $1
Corporate Loan Creation Version-11.0 9NT1316-ORACLE FCUBS V.UM 11.0.0.0.0.0.0 [January] [2010] Oracle Part Number E51712-01
Corporate Loan Creation Version-11.0 9NT1316-ORACLE FCUBS V.UM 11.0.0.0.0.0.0 [January] [2010] Oracle Part Number E51712-01 Document Control Author: Documentation Team Created on : October 01, 2008 Group:
EATON VANCE HEXAVEST GLOBAL EQUITY FUND Supplement to Summary Prospectus dated December 1, 2015
EATON VANCE HEXAVEST GLOBAL EQUITY FUND Supplement to Summary Prospectus dated December 1, 2015 1. The following replaces Fees and Expenses of the Fund : Fees and Expenses of the Fund This table describes
Managing Risk at Bank of America Corporation. Overview
Managing Risk at Bank of America Corporation Overview Risk is inherent in every material business activity that we undertake. Our business exposes us to strategic, credit, market, liquidity, compliance,
FOR FINANCE LEASING INSTITUTIONS
OPERATING GUIDELINES FOR FINANCE LEASING INSTITUTIONS BANKING SUPERVISION DEPARTMENT BANK OF SIERRA LEONE FREETOWN JANUARY 2011 Table of Content No. Heading Page 1 Authority 1 2 Definition 1 3 Application
Axis Bank Ltd. Policy for lending to Micro and Small Enterprises (MSEs)
Axis Bank Ltd. Policy for lending to Micro and Small Enterprises (MSEs) Introduction: The Micro and Small Enterprise (MSE) sector contributes significantly to manufacturing output, employment and exports
How Bankers Think. Build a sound financial base to support your company for future growth
How Bankers Think Build a sound financial base to support your company for future growth Presented by: Lisa Chapman Business Planning, Social Media Marketing & SEO 615-477-8412 Questions to Consider First