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 2018 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 2019-2021;
- optimised the methodology, tools and processes of credit risk management for retail clients;
- rebuilding rating models using new data sources to increase their discriminatory power;
- developed of a new rating model for corporate customers;
- updated sector risk classification and limits.
In retail segment particular attention was focused on the implementation of changes in the area of consumer lending policy, but also on development in the area of mortgage loans. The new solutions concerned, among others:
- scope and sources of information and documentation obtained from clients in the process of granting consumer loans;
- the rules for granting credit products to customers with a relationship with Bank Millennium;
- improvements in the area of making credit decisions in the mortgage process;
- new processes in electronic sales channels.
In the corporate segment, the Group focused on adapting its lending policies and regulations to changing legal conditions (particularly restructuring and bankruptcy law) and on measures to streamline and accelerate credit processes. The new rating model has been introduced, including behavioral data in addition to financial and qualitative data. The industry policy and risk tolerance for particular sectors were also updated. As in previous periods, work was continued on the improvement of IT tools supporting processes, particularly the monitoring process and the extension of credit offer.
All the changes mentioned above should allow the Group to achieve the defined goals referring to the growth dynamics of corporate portfolio while maintaining the level of risk at an acceptable level as defined in the Risk Strategy.