NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2016
37.
Financial risk management (cont.)
(b)
Credit risk (cont.)
Form B05/TCTD-HN
Credit risk management
The Group creates the credit function structure based on control and balance system, business units are separated completely from the credit approval unit. Except for delegated authority to Branch Directors in approving small value and low risk transactions, credit approval is centralised. Policies for significant credit risk are developed and approved by the Board of Directors. The Group has established credit risk management and control system, as follows:
Business units are separated completely with the risk management, collateral valuation and credit approval units.
Business units propose credit facility and perform initial collateral valuations.
Risk management units are independent from units proposing initially credit facility and perform review and evaluation the proposal of business units.
Except for the approvals for small and low risk transactions under authorised limit of branch director, the credit approval authority is centralised at the Head Office. All policies and relevant credit risk management regulations are approved accordingly by the Board of Directors and Board of Management, including: *
Credit Policy;
*
Regulation on debt classification, allowance for credit losses and utilisation of allowance for credit losses;
*
Regulation on collaterals and valuation of collaterals;
*
Regulation on the internal credit rating system;
*
Guidance on the credit limit for counterparty;
*
Credit procedures;
*
Regulation on procedures and content of reviewing, before, during, and after credit extension; and
*
Regulation on operations, functions and responsibilities of the Risk Handling Committee.
Risk management units send periodic risk reports to the Board of Management, Risk Management Committee, the Board of Directors, this risk report includes loan groups credit growth, credit quality, credit distribution according to the new credit risk rating system, allowance for credit losses, problematic loans, customer review monitoring, loans by sector, loan groups and credit concentration.
Internal audit conducts audit and regular examination to ensure compliance and the effectiveness of policies and business procedures.
Collaterals
Collaterals are valued by an unit independent from the business units based on the market value at valuation date. The collateral valuation is regularly updated. The main types of collaterals obtained are real estates, machinery and equipment, inventories and valuable papers. Guidance for valuation of movable assets and real estates is being reviewed and updated to comply with the regulations of the SBV. Commitments and guarantees
To meet the financial needs of customers, the Group enters into various irrevocable commitments and contingent liabilities. Commitments and guarantees are also subject credit risk reclasification.
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ANNUAL REPORT 2016 www.eximbank.com.vn