Page 60 - GTBank Annual Report 2020 eBook

Loans and Advances business lines, rating grade and geographical
area.
Models have been used to estimate the amount
of credit exposures, as the value of a product The Bank adopted obligor limits as set by the
varies with changes in market variables, regulators and it is currently at 25% of the Bank’s
expected cash flows and time. The assessment shareholders’ funds. The obligor limit covers
of credit risk of a portfolio of assets entails exposures to counterparties and related parties.
further estimations as to the likelihood of The Bank imposes industry/economic sector
defaults occurring, of the associated loss ratios limits to guide against concentration risk as a
and of default correlations between parties. result of exposures to sets of counterparties
Ratings and scoring models are in use for all key operating in a particular industry. The industry
credit portfolios and form the basis for measuring limits are arrived at after rigorous analysis of the
default risks. risks inherent in the industry/economic sectors.
In measuring credit risk of loans and advances at
a counterparty level, the Bank considers three The limits are usually recommended by the
components: Bank’s Enterprise Risk Management Unit and
approved by the Board. The limits set for each
(i) The ‘probability of default’ (PD) industry or economic sector depend on the
(ii) Exposures to the counterparty and its likely historical performance of the sector as well as the
future development, from which the Bank derive intelligence report on the outlook of the sector.
the ‘exposure at default’ (EAD); and During the year, limits can be realigned (by way
(iii) The likely recovery ratio on the defaulted of outright removal, reduction or increase) to
obligations (the ‘loss given default’) (LGD). meet the exigencies of the prevailing
The models are reviewed regularly to monitor macroeconomic events.
their robustness relative to actual performance
and amended as necessary to optimize their The Bank also sets internal credit approval limits
effectiveness. for various levels of officers in the credit process.
Approval decisions are guided by the Bank’s
Risk Limit Control and Mitigation Policies strategic focus as well as the stated risk appetite
and the other limits established by the board or
The Bank applies limits to control credit risk regulatory authorities such as Aggregate Large
concentration and diversification of its risk assets Exposure Limits, Single Obligor Limits,
portfolio. The Bank maintains limits for individual Geographical Limits, Industry / Economic sector
borrowers and group of related borrowers,
limits etc.

The lending authority in the Bank flows through the management hierarchy with the final authority residing
with the Board of Directors as indicated below:

Designation Limit
Up to the single obligor limit as advised by the regulatory
Board of Directors Authorities from time to time but currently put at 25% of
shareholders’ funds (total equity)
Management Credit Committee Up to GMD3Million
Managing Director Up to GMD2Million
Executive Directors Up to GMD50,000
Other Approving Officers As delegated by the managing director

The above limits are subject to the following overriding approvals. Except where a facility is cash
collateralized, all new facilities below GMD3 million require the approval of the Credit Committee. Annual Report 2020

Guaranty Trust Bank Gambia Limited www.gtbankgambia.com 58