Page 42 - Agib Bank Limited Annual Report 2021

The Bank considers all elements of credit risk The internal audit function performs regular audits
exposure such as counterparty default risk, making sure that the established controls and
geographical risk and sector risk for risk procedures are adequately designed and
management purposes. implemented.

ii. Significant increase in credit risk
i. Credit risk management

The Bank’s credit committee is responsible for The Bank monitors all financial assets that are
managing the Bank’s credit risk by: subject to impairment requirements to assess
whether there has been a significant increase in
• Ensuring that the Bank has appropriate credit risk credit risk since initial recognition. If there has been
practices, including an effective system of internal a significant increase in credit risk the Bank will
control, to consistently determine adequate measure the loss allowance based on lifetime rather
allowances in accordance with the Bank’s stated than 12-month ECL.
policies and procedures, IFRS and relevant
supervisory guidance.
iii. Internal credit risk rating
• Identifying, assessing and measuring credit risk
across the Bank, from an individual instrument to a
portfolio level. In order to minimise credit risk, the Bank has tasked
its credit management committee to develop and
• Creating credit policies to protect the Bank against maintain the Bank’s credit risk grading to categorise
the identified risks including the requirements to exposures according to their degree of risk of
obtain collateral from borrowers, to perform robust default. The Bank’s credit risk grading framework
ongoing credit assessment of borrowers and to comprises ten categories. The credit rating
continually monitor exposures against internal risk information is based on a range of data that is
limits. determined to be predictive of the risk of default and
• Limiting concentrations of exposure by type of applying experienced credit judgement.
asset, counterparties, industry, credit rating, The nature of the exposure and type of borrower are
geographic location etc. taken into account in the analysis. Credit risk grades

• Establishing a robust control framework regarding are defined using qualitative and quantitative factors
the authorisation structure for the approval and that are indicative of risk of default.
renewal of credit facilities. The credit risk grades are designed and calibrated
• Developing and maintaining the Bank’s risk to reflect the risk of default as credit risk deteriorates.
grading to categorise exposures according to the As the credit risk increases the difference in risk of
degree of risk of default. Risk grades are subject to default between grades changes. Each exposure is
regular reviews. allocated to a credit risk grade at initial recognition,
based on the available information about the
• Developing and maintaining the Bank’s processes counterparty.
for measuring ECL including monitoring of credit
risk, incorporation of forward looking information All exposures are monitored and the credit risk
and the method used to measure ECL. grade is updated to reflect current information. The
monitoring procedures followed are both general
• Ensuring that the Bank has policies and and tailored to the type of exposure.
procedures in place to appropriately maintain and
validate models used to assess and measure ECL. The following data are typically used to monitor the
Bank’s exposures:
• Establishing a sound credit risk accounting
assessment and measurement process that • Payment record, including payment ratios and
provides it with a strong basis for common systems, ageing analysis;
tools and data to assess credit risk and to account • Extent of utilisation of granted limit;
for ECL. Providing advice, guidance and specialist Annual Report and IFRS Financial Statements
skills to business units to promote best practice • Forbearances (both requested and granted);
throughout the Bank in the management of credit
risk. • Changes in business, financial and economic
conditions;

Agib Bank Annual Report 2021 www.agib.gm 42