Page 217 - ACCESS BANK ANNUAL REPORTS_eBook

RISK RATING PROCESS The risk rating scale runs from 1 to 8. Rating 1 represents
In Access Bank, all businesses must have a documented the best obligors and facilities and rating 8 represents the
and approved risk rating process for deriving risk ratings worst obligors and facilities. The risk rating scale incorpo-
for all obligors and facilities (including those covered un- rates sub-grades and full grades reflective of realistic credit
der Credit Programs). The Risk Rating Process is the end- migration patterns.
to-end process for deriving ORRs and FRRs and includes The risk rating scale and the external rating equivalent is de-
models, guidelines, support adjustments, collateral adjust- tailed below:
ments, process controls, as well as other defined processes
that a business undertakes in order to arrive at ORRs and
FRRs. Risk rating process of each business must be in com- Access External Rating Grade
pliance with the Bank’s Risk Rating Policy and deviations Bank risk
must be explicitly approved. Rating

1 AAA Investment Grade
Establishing the risk rating process is the joint responsibility
of the Business Manager and the Credit Risk Manager as- 2+ AA
sociated with each business. The process must be docu- 2 A
mented and must be approved by the Management Credit 2- BBB
Committee.
3+ BB+ Standard Grade
The risk rating process for each business must be reviewed 3 BB
and approved every three years, unless more frequent re- 3- BB-
view is specified as a condition of the approvals. Interim 4 B Non-Investment Grade
material changes to the risk rating process, as determined
by the Credit Risk Manager for the business, must be re-ap- 5 B-
proved. 6 CCC
7 C
Risk Rating Scale and external rating equivalent 8 D
Access Bank operates a 12-grade numeric risk rating scale.

CREDIT RISK CONTROL & MITIGATION

POLICY

AUTHORITY LIMITS ON CREDIT income volatility, such derivatives are used in a controlled
manner with reference to their expected volatility.
The highest credit approval authority is the Board of Direc- Collateral is held to mitigate credit risk exposures and risk
tors, supported by the Board Credit and Finance Commit- mitigation policies determine the eligibility of collateral
tee and followed by the Management Credit Committee. types. This structure gives Access Bank the opportunity to
Individuals are also assigned credit approval authorities in incorporate much needed local expertise, but at the same
line with the Bank’s criteria for such delegation set out in its time manage risk on a global level. Local Credit Committees
Credit Risk and Portfolio Managament Plan. The principle of of the Bank’s subsidiaries are thus able to grant credits, but
central management of risk and decision authority is main- the sum total of the exposure of the applicant and financial-
tained by the Bank. The maximum amount of credit that ly related counterparties is limited, most commonly by the
may be approved at each subsidiary is limited, with amounts subsidiary’s capital. All applications that would lead to expo-
above such limit being approved at the Head Office. sures exceeding the set limit are referred to the appropriate
Potential credit losses from any given account, customer or approval authority in the Head Office.
portfolio are mitigated using a range of tools such as collat-
eral, credit insurance, credit derivatives and other guaran- The credit approval limits of the principal officers of the
tees. The reliance that can be placed on these mitigants is Group are shown in the table below
carefully assessed in light of issues such as legal certainty
and enforceability, market valuation correlation and coun- In addition, approval and exposure limits based on internal
terparty risk of the guarantor. Obligor Risk Ratings have been approved by the Board for
Where appropriate, credit derivatives are used to reduce the relevant credit committees as shown in the second
credit risks in the portfolio. Due to their potential impact on table below

Access BAnk Plc 217
Annual Report & Accounts 2017