2. Organisational Structure of Risk Management
For credit risk management, the organisational structure of the Group parent company (Bank) includes the following organisational units:
- Supervisory Board of the Bank,
- Management Board of the Bank together with the Credit Policy Committee that approve certain internal credit risk-related normative acts as part of their powers,
- Credit Risk Policy Department,
- Credit Risk Modelling Department,
- Credit Risk Reporting Department,
- Central Credit Risk Department
- Regional Credit Risk Department,
- Monitoring and Collection Department,
- Corporate Credit Restructuring Department,
- Credit Risk Inspection Department.
The mission of these units is to ensure proper balance between the commercial objectives of the Group and a risk appetite level that is acceptable for the Group, while taking account of the existing economic environment.
This objective is achieved by taking the following actions:
- developing the principles of credit policy, as well as processes and procedures for acceptance of the permissible credit risk level towards entrepreneurs and business partners; supporting the development of tools for risk identification and measurement; enforcing the implementation of credit decisions; establishing provisions for credit risk, and initiating changes that may be necessary to manage the credit process,
- conducting credit analysis and taking credit decisions,
- raising the level of credit- and counterparty risk awareness among the Bank’s employees in order to mitigate those risks,
- managing problem loans to minimize the risk and losses of the Bank,
- independent and objective assessment of efficiency, adequacy and effectiveness of actions of the crediting units and units assessing credit risk owing to regular inspections in those units.
The commercial functions are separated from the functions assessing the transaction- and client risk (the four-eye control principles).
In view of the character of operations, the credit risk management is applicable mainly to ING Commercial Finance Polska S.A. and ING Lease Polska Sp. z o.o. Organisational structure and the credit risk management process in subsidiaries are outlined further in this Chapter in item 8 Credit Risk Management in Group Companies.
Presented below in more detail are the roles and responsibilities of the individual organisational units involved in the credit risk management process at the Group parent company.
2.1. Supervisory Board
The Supervisory Board of ING Bank Śląski S.A.:
- sets the key credit risk limits (RAS),
- approves the annual planning documents, including the risk strategy,
- assess on a periodic basis the accomplishment by the Management Board of the Bank’s credit risk management strategy,
- approves the documents related to the credit risk management, if the status of the given policy requires the approval on the Supervisory Board level.
2.2. Management Board
The Management Board of ING Bank Śląski S.A.:
- approves the Credit Policy that defines the strategic approach to credit risk and the acceptable risk level, including these credit risk limits (RAS), which are not reserved to the approval competencies of the Supervisory Board,
- appoints and approves the composition of the Credit Policy Committee through which it ensures ongoing oversight of the credit risk management process,
- provides periodic reports, at least once a year, to the Bank’s Supervisory Board regarding the risk level and profile, as well as amendments to the Credit Policy,
- promotes implementation and execution of the Credit Policy by actions taken by the individual members of the Management Board in charge of their respective subordinate areas; among the members of the Management Board, there is a Chief Risk Officer who oversees the credit- and market risk management,
- reviews the efficiency of methods used for identifying impaired credit exposures and defining the related write-offs; assesses the adequacy and sensitivity of the methods to changes of external conditions,
- reviews the processes and the methods of monitoring the quality of credit exposures.
The following permanent committees are in place at the Bank and their powers include the credit risk areas:
- Credit Policy Committee (or KPK) whose key objective is to oversee the implementation and control the adherence of the organisational units of ING Bank Śląski S.A. to the “Credit Policy Rules” and RAS limits,
- Credit Committees:
- of ING Bank Śląski S.A. (the Bank Credit Committee),
- the Restructuring Committee,
taking the credit decisions within the powers defined in the internal regulations of the Bank.
In the strategic clients area decisions are taken by two individuals authorised by the KPK. The similar process of taking credit decisions by two Approval Signatories (SAP) is used to these transactions granted to the corporate network clients, for which the lower level of credit approval authorities is required than the powers reserved for the Bank Credit Committee.
2.4. Credit- and Market Risk Management Division
There is a separate division for the credit- and market risk management in the organisational structure of the Bank. In 2014, two areas were separated within this Division:
- corporate clients transactional risk area,
- non-transactional risk area involving credit risk policy, modelling and reporting.
Furthermore, the credit risk policy, modeling and reporting functions, previously performed by separate organizational units in relation to the retail and corporate credit portfolio, were merged under the relevant departments in order to strengthen the coherence and obtain the synergy effect in the field of credit risk management of both areas.
The mission of the Credit- and Market Risk Management Division is to maintain an adequate level of the credit- and market risk at the Bank. The division is headed by 2 Executive Directors of the Bank, respectively supervising transactional risk area and the non-transactional risk area. Both Executive Directors are subordinated and reporting to the Chief Risk Officer.
The Executive Director responsible for the transactional risk area oversees the following departments:
- Central Credit Risk Department,
- Regional Credit Risk Department,,
- Corporate Credit Restructuring Department.
The Executive Director responsible for the non-transactional risk area oversees the following departments:
- Credit Risk Policy Department,
- Credit Risk Modelling Department,
- Credit Risk Reporting Department.
The area of competence of all above mentioned departments includes system management of the credit risk in the Bank.
The tasks of the individual Departments involved in the credit risk management process are as follows:
2.5. Credit Risk Policy Department
- to develop effective systems for credit risk management by maintenance and expansion of the credit policy principles and description of processes and procedures in order to ensure a proper balance between the current commercial objectives of the Bank and the adequate awareness level/ risk appetite level, while taking into account of the market conditions in Poland,
- to ensure effective functioning of the risk area and process, in line with the current conditions, by management, participation in projects, delivering opinions to the proposed modifications, modelling the organisation, review of processes, reacting to the needs of the units within the Corporate Sales Network, Strategic Clients Division, Retail Banking Division and Operations Division, implementation of the requests of the Bank Management Board and ING Group Head Office,
- raising the credit risk awareness among the employees of the Bank and opportunities and methods of limiting it.
2.6. Credit Risk Modelling Department
- creating, maintenance and development of models for measuring and controlling of credit risk, including in particular the regulatory models, in all business segments of the Bank,
- development and updating of client capacity calculation models,
- initiating of the preparation and updating of the statistical acceptance models,
- supporting the credit risk and counterparty risk management process by developing tools for risk identification and measurement, making the recommendations concerning provisions for credit risk,
- regular verification of the compliance of internal methodologies and procedures with supervisory requirements and ING Group standards related for the construction of models and estimation of the capital requirements,
- supporting of credit risk management and counterparty risk units in the interpretation of the regulation and supervision recommendations.
2.7. Credit Risk Reporting Department
- developing of the credit risk reporting principles,
- execution of tasks in the field of measurement and reporting of credit risk, including the method of calculation of collective impairment provisions and capital requirements for credit risk,
- development, maintenance and support of tools and support systems for credit risk management,
- implementation of credit risk models, including models for calculating of impairment provisions and models for estimating capital requirements for credit risk,
- planning and forecasting the level of provisions under the collective method and capital requirements for credit risk,
- to carry out assessments of the credit risk monitoring process on the basis of the reports.
2.8. Central Credit Risk Department / Regional Credit Risk Department
- approval of rating and approval of credit risk connected with transactions
- for corporate clients,
- to manage the credit risk related to client funding by providing advice in respect of the risk in the process of taking credit decisions, executing credit decisions, recommending required changes in the credit process management,
- to supply important data for the credit policy principles as well as processes and procedures in order to accept the acceptable level of the client risk,
- to raise the level of credit- and counterparty risk awareness among the Bank’s employees in order to mitigate those risks,
- to recommend and providing opinions to the necessary changes in the management of credit processes and defining products and credit policy in order to mitigate the risk.
2.9. Monitoring and Collection Department
- managing of exposures to retail customers and small businesses customers in the way of monitoring of the timeliness of payments, verification of the collateral and conducting on demand action against the debtor in order to minimize the credit risk and losses of the Bank,
- restructuring and negotiating the terms of repayment and collection of credit debts,
- verification of collateral value, taking over and sales of collateral taken to the loans,
- cooperation with external debt collection companies and the legal councils leading the debtor’s collection process.
2.10. Corporate Credit Restructuring Department
- management of corporate problem loans oriented toward minimising the risk and Bank’s losses resulting from the irregular portfolio, i.e.:
- comprehensive restructuring and collection of problem loans,
- risk rating setting and identification of credit exposure’s impairment for irregular customers,
- estimation of provisions calculated with discounted cash flow method for customers with the biggest impaired exposure,
- identification of forbearance regarding credit process of irregular customers,
- participation in the Watch List portfolio reviews,
- defining regulations related to problem loans management in order to mitigate risks and reduce losses,
- analysis and reporting of corporate problem loans portfolio,
- co-operation with the auditor, banking supervision authorities, inter-bank organizations and appropriate organisational units of the ING Group in respect of problem corporate loans management and loan loss provisioning,
- participation in projects connected with credit risk management, especially referring to problem loans management and loan loss provisioning, including issuing opinions and recommendations for changes in said areas.
- to verify on a regular basis the credit documentation and assess the functioning of the credit process at Group of ING Bank Śląski S.A. at the front-office and back-office levels (the ability to recommend changes to the existing policies and processes to the Credit Policy Committee),
- to analyse selected loans and adequacy of local Risk Management during regular inspections at the Bank organisational units,
- to identify potentially problematic areas and respond to the signals coming from the organisation,
- to control the adherence to the transaction approval criteria, the process of loan disbursement; behaviour pattern / statistics regarding repayments, statistics of overdue repayments, adequacy of monitoring of exposures and risk categories and correctness of the credit data entered in the IT system and debt collection.