1. Definition of Credit Risk
Credit risk is the possibility of non-collection of amounts due to the Group under extended credit facilities, leading to lack of income and/or a financial loss.
The credit losses are a derivative of risk and actions taken by the Group to reduce them. The Group influences the level of losses by the level of risk it accepts, the amount of exposure at risk, the security against the risk borne and also – in case of risk materialisation – by direct actions taken to minimise the losses.
Aiming to maintain the balance between the economic value creation and the business activity long-term development the Bank is striving to apply the profitability determining principles and pricing policy rules that are based on the concept of return on risk-weighted assets (RWA). With this end in view, the Bank uses a tool enabling to set the risk premium (level of income to be generated on a transaction/client) depending on the client and transaction risk profile (among others: risk rating, collateral quality). The basis for calculating this premium is the relation of income (less the cost of funding) to risk-weighted assets (RWA).
As part of planning and defining its credit strategy the Bank sets the portfolio risk appetite limits (RAS = Risk Appetite Statement), including, in particular, maximum risk levels linked to the credit portfolio PD and LGD parameters.
In view of the above, credit risk management covers the following elements:
- risk identification and assessment,
- risk measurement and monitoring,
- risk mitigation and prevention,
- development of tools supporting risk identification and measurement,
- provisioning policy.
Credit risk management system in place in ING Bank Śląski S.A., including organizational structure, credit process organization, system of internal regulations, used tools and models – are subject to on-going verification and adjustment in order to ensure implementation of the Bank’s strategy, including the risk appetite. The goal is to simultaneously maintain the adequacy of the risk bearing activity in the scope of identification, evaluation, measurement, control and management of the credit activity and to maintain the consistency and compliance with the regulatory requirement.
The credit risk management area refers to: the preparation and launch of a credit product, the end-to-end lending process and all units involved in those processes.
Maximum exposure to credit risk
|end of 2014||end of 2013|
|Loans and receivables to other banks||1,838.3||1,399.8|
|Financial assets measured at fair value through profit and loss||1,856.8||1,951.4|
|Valuation of derivatives||2,412.3||1,471.4|
|Derivative hedge instruments||2,983.8||1,051.9|
|Loans and receivables to customers||61,054.8||52,237.9|
|Receivables from customers due to repo transactions||106.6||638.8|
|Receivables presented in other assets||129.7||86.9|
|Off-balance sheet liabilities granted, including:||23,802.6||19,046.8|
|- unused credit facilities||18,940.1||14,751.9|
|- unused overdraft facilities||302.8||485.6|
|- credit card limits||844.6||764.1|
|- letters of credit||321.9||381.7|