Investor Presentaiton
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
46
RISK MANAGEMENT (CONTINUED)
D.
Credit Risk (continued)
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RISK MANAGEMENT (CONTINUED)
D.
Credit Risk (continued)
Credit risk measurement (continued)
Forward-looking information incorporated in the ECL model
The assessment of SICR and the calculation of ECL both incorporate forward-looking information. The
Group has performed historical analysis and identified key economic variables impacting credit risk and
ECL for each portfolio.
These economic variables and their associated impact on PD, EAD and LGD vary by financial instrument.
Expert judgement has also been applied in this process. Forecast of these economic variables (the "base,
upside and downside economic scenario along with scenario weighting") are obtained externally on a
quarterly basis.
The impact of these economic variables on the PD, EAD and LGD has been determined by performing
statistical analysis to understand the impact changes in these variables have had historically on default
rates and on the components of LGD and EAD.
As with any economic forecasts, the projections and likelihoods of the occurrence are subject to a high degree
of inherent uncertainty and therefore the actual outcomes may be significantly different to those projected.
Credit Risk Monitoring
Corporate and Institutional Banking, Business Banking and Private Banking: the Group's exposures are
continuously monitored through a system of triggers and early warning signals. These are supplemented by
monitoring of account conduct, assessment of collateral and market intelligence and early alerts.
Early Alert accounts are identified based on oversight, vigilance and risk triggers. Account strategy and action
plans on these accounts are regularly monitored and discussed in the Early Alert Committee meetings.
Additionally, for IFRS 9 ECL computation, credit exposures are monitored and reported as per IFRS 9
requirements. Stage migrations, any exceptions to SICR criteria, other credit and impairment related matters
are reviewed and approved by IFRS 9 Governance Forum.
Retail banking: risks of the Group's loan portfolio are continuously assessed and monitored on the basis of
exceptions, management information reports and returns generated by the business and credit units. Credit
risk is also monitored on an ongoing basis with formal monthly and quarterly reporting to ensure that senior
management is aware of shifts in the credit quality of the portfolio along with changing external factors.
Credit risk measurement (continued)
Group credit risk mitigation strategy
The Group operates within prudential exposure ceilings set by the Board in line with UAE Central Bank
guidelines. There are well laid out processes for exception management and escalation.
The Group has adopted measures to diversify the exposures to various sectors. Diversification is achieved
by limiting concentration through setting customer, industry and geographical limits.
The risk transfer in the form of syndicated loans, risk participation agreements with other banks, credit
default swaps and sale of loans are globally accepted practices followed by the Group, where appropriate,
to limit its exposure.
Collateral management
Collaterals and guarantees are effectively used as mitigating tools by the Group. The quality of collateral is
continuously monitored and assessed, and the Group seeks to ensure enforceability of the collateral. Major
categories of collaterals include cash/fixed deposits, inventories, shares, guarantees (corporate, bank and
personal guarantees), immovable properties, receivables, gold and vehicles.
Collaterals are revalued regularly as per the Group's credit policy. In addition, ad hoc valuations are also
carried out depending on the nature of collateral and general economic condition. This enables the Group
to assess the fair market value of the collateral and ensure that risks are appropriately managed. Security
structures and legal covenants are also subject to regular review.
Please refer to Pillar 3 disclosures for additional information on collaterals.
Write offs
Loans and debt securities in corporate and institutional banking are written off (either partially or in full)
when there is no realistic prospect of recovery. This is generally the case when the Group has exhausted
all legal and remedial efforts to recover from the customers. However, financial assets that are written off
could still be subject to enforcement activities in order to comply with the Group's procedures for recovery
of amounts due.
Non-performing consumer loans, except for mortgage facilities and home financing, are written off at
181 days past due. All receivables remain active on the loan management system for recovery and any
legal strategy the Group may deem fit to use.
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EMIRATES NBD BANK PJSC - GROUP CONSOLIDATED FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2021
98
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