Disclosures under the New Capital Adequacy Framework Guidelines- Basel III (Pillar 3)-September 2013 Table DF-1: Scope of Application Corporation Bank (i) Qualitative Disclosures: a. List of group entities considered for consolidation Name of the entity / Country of incorporation Whether the entity is included under accounting scope of consolidatio n (yes / no) Explain the method of consolidation Whether the entity is included under regulatory scope of consolidation (yes / no) Explain the method of consolidation Explain the reasons for difference in the method of consolidation Explain the reasons if consolidated under only one of the scopes of consolidation 16 No Such Entity b. List of group entities not considered for consolidation both under the Accounting and Regulatory scope of Consolidation. Name of the entity / country of incorporation Corp Bank Securities Ltd Principle activity of the entity Trading in Securities Total balance sheet equity (as stated in the accounting balance sheet of the legal entity) % of bank s holding in the total equity Regulatory treatment of bank s investments in the capital instruments of the entity 75.00 100% Fully Deducted from Tier I and Tier II capital of the Bank Total balance sheet assets (as stated in the accounting balance sheet of the legal entity) 115.50
(ii) Quantitative Disclosures: c. List of group entities considered for consolidation Name of the entity / country of incorporation (as indicated in (i)a. above) Principle activity of the entity No Such Entity Total balance sheet equity (as stated in the accounting balance sheet of the legal entity) Total balance sheet assets (as stated in the accounting balance sheet of the legal entity) d. The aggregate amount of capital deficiencies 17 in all subsidiaries which are not included in the regulatory scope of consolidation i.e. that are deducted: Name of the subsidiaries / country of incorporation Principle activity of the entity Total balance sheet equity (as stated in the accounting balance sheet of the legal entity) % of bank s holding in the total equity Capital deficiencies There is no capital deficiency in the subsidiary E. The aggregate amounts (e.g. Current book value) of the bank s total interests in Insurance entities, which are risk-weighted: Name of the insurance entities / country of incorporation Principle activity of the entity Total balance sheet equity (as stated in the accounting balance sheet of the legal entity) % of bank s holding in the total equity / proportion of voting power Quantitative impact on regulatory capital of using risk weighting method versus using the full deduction method No Such Entity F. Any restrictions or impediments on transfer of funds or regulatory capital within the banking group: Not Applicable.
DF-2 Capital Adequacy- Qualitative Disclosure The Bank actively manages it s capital requirement by taking in to account the current and future Business growth of the Bank. Stress tests are used as a part of Internal Capital Adequacy Assessment Process (ICAAP) to evaluate the impact on the bank s capital under extreme stress scenario and to ensure that the capital base can with-stand the adverse impact of uncertain events. The bank is guided by the philosophy of optimal utilisation of the capital so as to increase the return on capital and increase shareholders value in the long run. 2.1 Organisational set up The Bank has put in place an Internal Capital Adequacy Assessment Committee (ICAAC) which is a Board level Committee charged with the overall responsibility of implementing the ICAAP. The Board of Directors maintains active oversight over Bank s Capital levels so as to ensure that Bank continues to operate above the minimum regulatory capital requirement all the times. The Bank has also set up Credit Risk Management Committee (CRMC), Market Risk Management Committee/ALCO and Operational Risk Management Committee (ORMC) for a better and more focused approach towards each major area of Risk Management. 2.2 In line with the Reserve Bank of India (RBI) Guidelines, the bank has adopted following approaches for implementation of New capital Adequacy Framework Basel II. - Standardised Approach for Credit Risk. - Standardised Duration Approach for Market Risk. - Basic Indicator Approach for Operational Risk. 2.3 The Bank is in the process of migration to advanced approaches for Credit, Market and Operational Risk. 3.0 Capital Adequacy Qualitative Disclosures: 3.1. The Bank actively manages its credit risk and has implemented rating cum appraisal system for borrowers enjoying credit facilities of Rs 10 lakhs and above. The borrowers are rated based on the financials, the project viability, collaterals offered etc. Risk Managers level has been also introduced in to the hierarchy of credit appraisal process which ensures that the rating assigned by the users are independently verified by the Risk Manager at different levels of sanction. There are 8 rating grades for standard borrowers and 1 rating grade for defaulted borrower respectively. The Group Credit Policy has defined the hurdle rate i.e. the minimum rating that the borrower should get in case of new/takeover proposals. The Bank has been steadily building data through the rating system which will help the bank in migrating towards the advanced approach in Risk Management. 3.4 In order to quicken the processing of Retail Loans and maintain quality in appraisal, Retail Hubs for processing of retail loans has been set up across the country. The Retail hubs have enabled the bank for speeding up the processing of Retail Loans and to also process the appraisal note of retail obligors keeping in view Risk Perspective. 3.5 In line with the Finance Ministry Directive Bank has formed Zonal level Credit Committee (ZLCC), Circle Level; Credit Committee (CLCC),Head Office Level Credit Committee (HLCC) and Credit Approval Committee of Board (CAC) for according sanctions to credit proposals.
Risk Management Architecture Credit Risk: Credit Risk is defined as a potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximize a bank's risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Credit Risk Management: The Credit Risk Management Committee (CRMC) looks after the credit risk areas and in turn reports to the Risk Management Committee of Board (RMCB). The RMCB reports to the Board. Market Risk: Market risk is defined as the risk of losses in on-balance sheet and off-balance sheet positions arising from movements in market prices. Market Risk Management: The Bank has set up an independent Mid Office at its Trading & Investment Division in Mumbai. Mid office acts as extended arm of the Integrated Risk Management Division and is entrusted with the responsibility of monitoring the adherence of various risks limits set such as Trading limits, Counterparty exposure limits etc. The Mid Office calculates the Value At Risk on a daily basis and reports the same to the Integrated Risk Management Division on a daily basis, any breach of limits is immediately brought to the attention of Top management and necessary actions are taken wherever required. The Market Risk Management Committee (MRMC) looks after the Market Risk areas and in turn reports to the Risk Management Committee of Board (RMCB). The RMCB reports to the Board. Operational Risk: Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risk. The Operational Risk Management Committee (ORMC) is entrusted with Operational Risk Management areas and in turn reports to the Risk Management Committee of Board (RMCB). The RMCB reports to the Board.
Capital Adequacy Qualitative Disclosures Capital requirements for credit risk: - Portfolio Subjected to Standardised Approach @9% - Securitisation Exposure Capital Requirement for Market Risk - Standardized Duration Approach - Interest Rate Risk 589.98 - Foreign Exchange Risk (including Gold) 3.69 - Equity Position Risk 135.38 - CVA 8.49 Capital requirement for Operational Risk Amt in crores 10,298 Nil 737.14 667.66 - Basic Indicator Approach - The Standardised Approach 667.66 Not Applicable Capital Adequacy Ratio under Basel III 10.55% Tier 1 (including AT 1 capital) 7.06% Tier 2 3.49% Capital Adequacy Ratio Under Basel II 11.24% Of which: Tier I 7.36% Tier II 3.88% DF 4: Credit Risk General Disclosures for all Banks 4.1.The Bank has adopted the definition of the past due and impaired assets (for accounting purposes) as defined by the regulator for income recognition and asset classification norms. 4.2. The Bank has put in place Board approved Group Credit Policy. The objectives of the policy are to ensure that the operations are in line with the expectation of the Management / Regulator so that strategies of the top management are translated into meaningful and desired outcomes at operational level. The policy stipulates prudential limits on large credit exposure, standards for loan collateral, portfolio management, risk concentration, risk monitoring and evaluation, provisioning and regulatory / legal compliance. 4.3 The Bank identifies the risks to which it is exposed and applies suitable techniques to measure, monitor and control these risks. 4.4 Various Risk Management Committees monitors implementation of these policies and strategies approved by the Board and monitors credit risks and ensures compliance of risk limits. 4.5 The Bank monitors the risk concentration by analyzing the actual exposure Vis-à-vis exposure limits fixed for single and group borrowers, rating grade wise limits, Industry wise exposure limits and analyzing the geographical distribution of credit across the Zones / States etc.
Quantitative Disclosures: 4.6 Total Gross credit risk exposures, Fund Based and Non-fund based as on 30 th Sept 2013 Gross Credit Risk Exposures Fund Based Amount Advances 91,671.15 Investments 9,380.15 Other Assets 1,485.84 Total Fund Based 1,02,537.14 Non Fund Based Market Related & Non- Market Related 11,885.60 Total Credit Risk Exposure 1,14,422.74 4.7 Geographical Distribution of Exposures as on 30 th Sept 2013. STATES Exposure CREDIT Non-SLR TOTAL ANDHRA PRADESH 7,601.30 135.43 7,736.73 ASSAM 72.32 0.00 72.32 BIHAR 142.21 0.00 142.21 CHANDIGARH 372.78 0.00 372.78 CHATTISGARH 514.68 0.00 514.68 DELHI 17,691.87 10,941.27 28,633.14 GOA 1,239.07 4.63 1,243.70 GUJARATH 5,473.62 69.46 5,543.08 HARYANA 2,275.11 0.00 2,275.11 HIMACHAL PRADESH 74.67 0.00 74.67 JAMMU & KASHMIR 12.92 0.00 12.92 JHARKHAND 157.35 0.00 157.35 KARNATAKA 18,249.78 132.90 18,382.68 KERALA 3,224.23 20.00 3,244.23 MADHYA PRADESH 909.06 0.00 909.06 MAHARASHTRA 34,705.74 1,027.57 35,733.31 MEGHALAYA 6.39 0.00 6.39 ORISSA 994.23 0.00 994.23 PONDICHERY 152.36 0.00 152.36 PUNJAB 2,656.47 0.00 2,656.47 RAJASTHAN 2,628.73 0.00 2,628.73 SIKKIM 32.38 0.00 32.38 TAMILNADU 13,852.76 458.94 14,311.70 UTTAR PRADESH 3,963.46 0.00 3,963.46 UTTARANCHAL 156.08 0.00 156.08 WEST BENGAL 3,894.58 133.78 4,028.36 DAMAN DIU 2.07 0.00 2.07 TRIPURA 1.38 0.00 1.38 DADRA NAGAR HAVELI 9.57 0.00 9.57 Total 121,067.17 12,923.98 133,991.15
4.8 Industry Wise distribution as on 30 th September 2013 Sl.No. Industry Credit ( Rs) Exposure Non- SLR Total 1 Mining and Quarrying [including Coal ] 143.89 31.75 175.64 Food Processing 2.1 Sugar 607.45 3.73 611.18 2 2.2 Edible Oils and Vanaspati 220.02 0.00 220.02 2.3 Tea 16.89 0.08 16.97 2.4 Others 2,100.73 0.00 2,100.73 Total 2,945.09 3.81 2,948.90 3 Beverage & Tobacco 890.65 0.00 890.65 Textiles 4.1 Cotton Textiles 3,041.40 1.06 3,042.46 4 4.2 Jute Textiles 2.36 0.00 2.36 4.3 Man-Made Textiles 40.88 0.00 40.88 4.4 Other Textiles 2,219.74 68.96 2,288.70 Total 5,304.38 70.02 5,374.40 5 Leather & Leather Products 164.61 0.00 164.61 6 Wood & Wood Products 852.59 0.00 852.59 7 Paper & Paper Products 409.34 0.00 409.34 8 Petroleum, Coal Products and Nuclear Fuels 736.11 7.69 743.80 Chemicals & Chemicals Products 9.1 Fertilizer 857.27 0.00 857.27 9 9.2 Drugs & Pharmaceuticals 1,283.96 61.63 1,345.59 9.3 Petro-Chemicals 936.28 35.20 971.48 9.4 Others 635.09 10.05 645.14 Total 3,712.60 106.88 3,819.48 10 Rubber, Plastic & their Products 705.82 0.00 705.82 11 Glass and Glassware 91.03 0.00 91.03 12 Cement and Cement Products 1,215.52 10.00 1,225.52 Basic Metal and Metal Products 13 13.1 Iron and Steel 4,231.04 169.29 4,231.04 13.2 Other Metal and Metal Products 1,428.21 0.00 1,428.21 Total 5,659.25 169.29 5,659.25 All Engineering 14 14.1 Electronics 2,128.82 0.00 2,128.82 14.2 Others 1,884.61 78.83 1,884.61 Total 4,013.43 78.83 4,092.26 15 Vehicles, Vehicle Parts and Transport Equipments 2,559.74 36.35 2,596.09
16 Gems & Jeweler 3,732.23 0.00 3,732.23 17 Construction 617.52 66.99 684.51 Infrastructure 18.1 Power 11,934.55 561.42 12,495.97 18.2 Telecommunications 3,119.21 31.73 3,150.94 18 18.3 Roads & Ports 3,785.03 19.52 3,804.55 18.4 Other Infrastructure 1,526.93 129.54 1,656.47 Total 20,365.72 742.21 21,107.93 19 Airline Industries 1,247.64 15.00 1,262.64 20 Other Industries [Including IT & computer software] 10,095.12 76.91 10,172.03 TOTAL 65,462.28 1,415.73 66,878.01 4.9 Amount of NPAs (Gross) as on 30 th September 2013: Sl.No. Category Amount i. Sub Standard 2216.89 ii. Doubtful 1 1030.45 iii. Doubtful 2 380.78 iv. Doubtful 3 43.71 v. Loss 207.85 vi. Total NPA [Gross] 3879.68 4.10 Net NPA as on 30 th September 2013 Rs. 2668.02 Crores 4.11 NPA Ratios as on 30 th Sept 2013 Sl.No. Category % i. Gross NPA to Gross Advances 3.17 ii. Net NPA to Net Advances 2.20
4.12 Movement of NPA s (Gross) Sl.No. Category Amount i. Opening balance at the beginning of the year 1 st April 2048.23 2013 ii. Additions during the Year till 30 th September 2013 2047.24 iii. Reductions during the Year till 30 th September 2013 215.77 iv. Closing balance as on 30 th September 2013 3879.70 4.13 Movement of Provisions for NPA Sl.No. Category Amount i. Opening balance at the beginning of the year 1 st April 2013 575.74 ii. Provisions made during the year till 30 th September 2013 613.91 iii. Written off during the current year till 30 th September 2013 3.73 iv. Write back of excess provision made during the year till 30 th 34.67 September 2013 v. Closing balance as on 30 th September 2013 1151.25 4.14 Amount of Non-Performing Investment as on 30 th September 2013 is Rs 37.20 Cr 4.15 Provision held as on 30 th September 2013 for non-performing investment Rs 36.40 Cr. 4.16 Movement of Provisions for Depreciation on Investments. Sl.No. Category Amount i. Opening balance at the beginning of the year 1 st April 2013 26.63 ii. Provisions made during the year till 30 th September 2013 9.77 iii. Less write-off Write-back of excess provision during the year till 30th September 2013 - iv. Closing balance as on 30 th September 2013 36.40
DF-5 Credit Risk: Disclosure of portfolios subject to the Standardised Approach. Qualitative Disclosures The Bank is using the ratings assigned by the following international credit rating agencies, approved by the RBI, for risk weighting: 1. Crisil 2. Care 3. ICRA 4. Fitch 5. Brickworks Rating Agency 6. SMERA Types of exposures for which each agency is used The Bank has used the solicited ratings assigned by the above approved credit rating agencies for all eligible exposures, both on balance sheet and off balance sheet, whether short term or long term, in the manner permitted in the RBI guidelines on the New Capital Adequacy Framework (NCAF). The Bank has not made any discrimination among ratings assigned by these agencies nor has restricted their usage to any particular type of exposure. Public issue ratings transferred onto comparable assets The Bank has, in accordance with RBI guidelines on the NCAF, transferred public ratings on to comparable assets in the banking books in the following manner: Issue Specific Ratings All long term and short term ratings assigned by the credit rating agencies specifically to the Bank s long term and short term exposures respectively are considered by the Bank as issue specific ratings. For assets in the Bank s portfolio that have contractual maturity less than or equal to one year, short term ratings accorded by the chosen credit rating agencies are considered relevant. For other assets, which have a contractual maturity of more than one year, long term ratings accorded by the chosen credit rating agencies are considered relevant. Long term ratings issued by the chosen domestic credit rating agencies have been mapped to the appropriate risk weights applicable as per the Standardised approach under the NCAF. The rating to risk weight mapping furnished below was adopted for domestic corporate exposures, as per RBI guidelines Long Term Rating Risk Weight AAA AA A BBB BB & Unrated Below 20% 30% 50% 100% 150% 100%
In respect of the issue specific short term ratings the following risk weight mapping has been adopted by the Bank, as provided in the NCAF: Long Term Rating Risk Weight A1+ A1 A2 A3 A4&D Unrated 20% 30% 50% 100% 150% 100% Quantitative Disclosure Below 100% Risk 100% Risk Weight More than 100% weight Risk Weight Total Book Book Book Book Particulars Value RWA Value RWA Value RWA Value RWA Fund Based Loans & 54055.33 26170.92 35328.20 31639.40 31683.65 33860.62 121067.18 91670.94 Advances Investments 40910.17 0.00 9284.25 9284.25 63.94 95.90 50258.36 9380.15 Other Assets 233.43 46.69 1439.15 1439.15 0.00 0.00 1672.58 1485.84 Non Fund Based Non Market 14601.51 2269.42 9333.28 3261.19 5472.21 3487.23 29407.00 9017.84 Related Market Related 35212.19 2867.96 0.00 0.00 0.00 0.00 35212.19 2867.96 DF-6 Credit Risk Mitigation: Disclosures for standardized Approaches The Bank has a Board approved collateral management policy. The policy covers aspects on the nature of risk Mitigants/collaterals acceptable to the Bank, the documentation and custodial arrangement of the collateral, the valuation manner and periodicity etc. For purposes of computation of capital requirement for Credit Risk, the Bank recognizes only those collaterals that are considered as eligible for risk mitigation in RBI guidelines, which are as follows: Cash deposit with the Bank Gold, including bullion and jewelry Kisan Vikas Patra / LIC Policies/ NSC/ Government Securities.
The Bank uses the comprehensive approach in capital assessment. In the comprehensive approach, when taking collateral, the Bank calculates the adjusted exposure to counterparty for capital adequacy purposes by netting off the effects of that collateral. For purposes of capital calculation, the Bank recognizes the credit protection given by the following entities, considered eligible as per RBI guidelines: Export Credit Guarantee Corporation of India (ECGC) and Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), and Guarantees given by Central and State Government. The credit risk mitigation taken is largely in the form of cash deposit with the Bank and thus the risk (credit and market) concentration of the Mitigants is low. Quantitative Disclosure Eligible financial collateral Capital Relief Availed Deposits Rs 464.55 Cr Gold jewels Rs 420.64 Cr KVP/NSC/LIC/Govt Securities Rs 22.85 Cr Table DF- 7 Securitization: Disclosure for Standardized approach- Nil. Table DF-8 Market Risk in Trading Book 8.1 Bank has adopted the Standardized Duration Approach as prescribed by RBI for computation of capital charge to market risk. 8.2 Market Risk: Market risk is defined as the risk of losses in on-balance sheet and off-balance sheet positions arising from movements in market prices. 8.3 Market Risk Management: The Bank has set up an independent Mid Office at its Trading & Investment Division in Mumbai. Mid office acts as extended arm of the Integrated Risk Management Division and is entrusted with the responsibility of monitoring the adherence of various risks limits set such as Trading limits, Counterparty exposure limits etc. The Mid Office calculates the Value At Risk on a daily basis and reports the same to the Integrated Risk Management Division on a daily basis, any breach of limits is immediately brought to the attention of Top management and necessary ratifications and actions are taken wherever required. 8.4 The Market Risk Management Committee (MRMC) looks after the Market Risk areas and in turn reports to the Risk Management Committee of Board (RMCB). The RMCB reports to the Board.
Quantitative Disclosures The capital requirements for market risk as on 30 th Sept are as under: Risk Category i) Interest Rate Risk 589.58 ii) Equity Position Risk 135.38 iii) Foreign Exchange Risk (including Gold ) 3.69 iv) CVA 8.49 iv)total capital charge for market risks under 737.14 Standardised duration approach (i+ii+iii) Table DF-9 Operational Risk The Bank is following Basic Indicator Approach for calculation of capital for Operational Risk. The Capital Charge required to be maintained for Operational Risk under Basic Indicator Approach is Rs. 667.66 Crores as on 30 th September 2013. Table DF-10 Table DF-10 Interest rate risk in the banking book (IRRBB) Qualitative Disclosures Interest Rate Risk in the Banking Book (IRRBB) refers to the potential adverse financial impact on the Bank s banking book from changes in interest rates. The banking book is comprised of assets and liabilities that are contracted on account of relationship or for steady income and statutory obligations and are generally held till maturity. The Bank carries various assets, liabilities and offbalance sheet items across markets, maturities and benchmarks exposing it to risks from changing interest rates. Structure and Organization The IRRBB risk management process of the Bank operates in the following hierarchical manner: Board of Directors The Board has the overall responsibility for management of risks. The Board decides the risk management policy of the Bank and also sets limits for interest rate risk.
MRMC/ALCO This Committee monitors the Bank s credit and market risk policies and procedures, approves and reviews dealing authorities / limits for the Bank s treasury operations and reviews its risk monitoring systems and risk reporting procedures. Asset Liability Committee (ALCO) ALCO is a decision-making Management committee responsible for balance sheet planning from risk-return Perspective including strategic management of interest rate risks. The role of the ALCO includes the following: i. Product pricing for deposits and advances ii. Deciding the desired maturity profile and mix of incremental assets and liabilities iii. Articulating interest rate view of the Bank and deciding on the future business strategy iv. Reviewing and articulating funding policy v. Ensuring the adherence to the limits set by the Board of Directors vi. Determining the structure, responsibilities and controls for managing liquidity and interest rate risk vii. Ensuring operational independence of risk management function viii. Reviewing stress test results ix. Deciding on the transfer pricing policy of the Bank Quantitative Disclosures 1. Earnings at Risk for 100 bps interest rate shock as on assets and liabilities is (+/-) Rs. 73.72 Crores 2. Change in the Market Value of Equity for 200 bps interest rate shock is 16.69% DF-11 General Disclosure for Exposures related to Counter Party Credit Risk. Counterparty Credit Risk The Bank deals in two groups of derivative transactions within the framework of RBI guidelines. i) Over the Counter Derivatives ii) Exchange traded Derivatives The Bank presently deals in Interest Rate and Currency Derivatives. The Bank undertakes derivative transactions for proprietary trading/market making, hedging own balance sheet and for offering to customers, who use them for hedging their risks within the prevalent regulations. Exposures Related To Counterparty Credit Risk Counterparty Credit Risk (CCR) is the risk of default by the counterparty towards settlement of the transaction before or at maturity.
Policies with respect to wrong-way risk exposures Wrong way risk arises if the exposure tends to increase when the counterparty credit quality gets worse. The Bank will evaluate quantitative measures to compute the wrong way risk when it feels there is a significant risk to the portfolio. Quantitative Disclosures as on 30.09.2013 Sr.no Particulars Currency Derivatives Interest Rate Derivatives (Notional Value) (Notional Value) 1 For Hedging NIL NIL 2 For Trading NIL 1,750 Marked to Market Positions Sr.no Particulars Currency Derivatives Interest Rate Derivatives 1 For Hedging NIL NIL 2 For Trading NIL (-) 6.31 Crores