Credit risk means uncertainty about the Client’s compliance with the financing agreements concluded with the Group i.e. repayment of the principal and interest in the specified time, which may cause a financial loss to the Group.
The credit policy pursued in the Group is based on a set of principles such as:
- centralization of the credit decision process;
- using specific scoring/rating models for each Client segment/type of products;
- using IT information (workflow) in order to support the credit process at all stages;
- existence of specialized credit decisions departments for particular Client segments;
- regular credit portfolio monitoring, both at the level of each transaction in the case of major exposures, and at credit sub-portfolio level (by the Client segment, type of product, distribution channels, etc.);
- using the structure of limits and sub-limits for credit exposure in order to avoid credit concentration and promote the effects of credit portfolio diversification;
- separate unit responsible for granting rating to corporate Client, thus separating the credit capacity assessment and credit transaction granting from his creditworthiness assessment.
In the area of credit risk, the Group focused in 2016 year on adjustment of credit policy to changing economic conditions and improved the tools and credit risk management frameworks, in particular:
- updated the Risk Strategy, for the years 2017-2019;
- developed of a new rating model for corporate customers;
- updated sector risk classification and limits;
- optimised the methodology, tools, and processes of credit risk management for retail clients
During 2016 the Bank sold PLN 315 million on balance sheet impaired receivables and PLN 110 million off balance (written off in charge of provisions), with higher than average coverage ratio. The balance sale included corporate portfolio (PLN 187 million) and retail portfolio (PLN 128 million).