MANAGEMENT OF KEY RISK AREAS
Credit risk management overview
Credit risk is the risk arising from any failure by a borrower or counterparty to fulfil its financial obligations as and when they fall due. The effective management of risk is fundamental to activities as the Group remains committed to manage the business in a way that is consistent with the agreed risk appetite.
The credit risk that AfrAsia Bank Limited faces arises mainly from direct lending (wholesale and retail loans and advances), trade finance activities including debt securities; settlement balances with market counterparties, available-for-sale assets and reverse repurchase loans, together with the counterparty credit risk arising from derivative contracts entered into with its clients.
Credit risk management objectives are to:
- maintain a well-defined portfolio management
- ensure that an effective risk management infrastructure is in place
- monitor risk portfolio against agreed limits
- maximise the stakeholders’ value.
Organisation and structure
The Bank has structured the responsibilities of credit risk management so that decisions are taken as close as possible to the business, whilst ensuring that there are an adequate internal control mechanism and up-to-date and comprehensive risk policies which adhere to legal and regulatory requirements.
In designing credit policies and the credit process, due consideration is given to the Bank’s commitment to:
- create, monitor and manage credit risk in a manner that complies with the Bank of Mauritius guidelines and AfrAsia Bank Limited’s credit
- identify credit risk in each investment, loan or other activity of the Bank
- utilise appropriate, accurate and timely tools to measure credit risk, and
- set acceptable risk parameters.
The responsibilities of the credit risk management teams in the business include: sanctioning new sources of risk; monitoring risk against limits and other parameters; ensuring all elements of post sanction fulfilment are completed in line with terms of the sanction; maintaining robust systems, data gathering, quality, storage and reporting methods for effective credit risk management; and performing effective turnaround and workout scenarios via dedicated restructuring and recoveries teams.
Credit risk approval is undertaken by experienced credit risk professionals operating within a clearly defined delegated authority framework, with only the Head of the department entrusted with the higher levels of delegated authority.
An overview of the credit approval process and procedures is depicted below;