Investor Presentaiton
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
46
RISK MANAGEMENT (CONTINUED)
B.
The risk function (continued)
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
46
RISK MANAGEMENT (CONTINUED)
D.
Credit Risk (continued)
Group Risk assists in controlling and actively managing the Group's overall risk profile. The role of the
function is:
To ensure the risk management framework is effectively communicated and implemented across the
Group and is appropriate to the Group's activities;
To exercise direct ownership for various risk types including but not limited to credit, market, country,
operational, reputational risks;
To ensure that the Group's business strategies, risk policies, procedures and methodologies are consistent
with the Group's risk appetite;
To ensure the integrity of the Group's risk/return decisions guaranteeing their transparency;
To ensure that appropriate risk management architecture and systems are developed and implemented.
C.
Risk appetite
The Group Risk Appetite Statement (Group RAS) is an articulation of the risk that the Group would be willing
to accept, underwrite and/or be exposed to in the normal course of its business conduct.
The Group RAS is a critical component and extension of the GRMF. It is a mechanism used by the Group to
proactively establish and subsequently monitor the Group's risk profile using a set of pre-defined key risk
metrics and respective thresholds.
D
Credit risk
Credit risk is the risk of financial loss, should any of the Group's customers, clients or market counterparties
fail to fulfil their contractual obligation to the Group. Credit risk arises mainly from interbank, corporate and
institutional banking and retail banking loans and advances, and loan commitments arising from such lending
activities, but can also arise from credit enhancement provided, such as credit derivatives (credit default
swaps), financial guarantees, letter of credit, endorsement and acceptances.
The Group is also exposed to other credit risks arising from investments in debt securities and other exposures
arising from its trading activities ("trading exposures") including non-equity trading portfolio assets and
derivatives as well as settlement balances with market counterparties and reverse repurchase agreements.
Credit risk management
The Group's approach to credit risk management is based on the foundation of independence and integrity
of risk management. This is ensured through a well-defined and robust organisation structure duly supported
by various risk committees, forums, systems, policies, procedures and processes providing a strong risk
infrastructure and management framework.
The Group's credit policy focuses on the core credit principles, lending guidelines and parameters, control
and monitoring requirements, problem loan identification, management of high-risk counterparties and
provisioning. Standard procedures specific to businesses are in place to manage various types of risks across
different business segments, products and portfolios.
Portfolio performance is periodically measured against RAS parameters and breaches if any are actioned by
the Group's Executive Committee.
Credit risk management (continued)
Corporate and Institutional Banking, Business Banking and Private Banking credit risk management:
Credit facilities are granted based on the detailed credit risk assessment of the counterparty. The
assessment considers amongst other things the purpose of the facility, sources of re-payment, prevailing
and potential macro-economic factors, industry trends, customers' credit worthiness and standing within
the industry.
The credit facility administration process is undertaken by an independent function to ensure proper
execution of all credit approvals, maintenance of documentation and proactive controls over maturities,
expiry of limits and collaterals.
Operations are managed by independent units responsible for processing transactions in line with credit
approvals and standard operating guidelines.
Management of Early Alert (EA), Watch List (WL) & Impaired Non-Performing Loans (NPL) - The Group has
a well-defined process for identification of EA, WL & NPL accounts and dealing with them effectively. There
are policies which govern credit grading of EA, WL & NPL accounts and impairment, in line with IFRS and
regulatory guidelines.
Retail banking credit risk management:
The Group has a structured management framework for retail banking risk management. The framework
enables the Group in identification and evaluation of the significance of all credit risks that the Group faces,
which may have an adverse material impact on its financial position.
In the retail banking portfolio, losses stem from outright default due to inability or unwillingness of a
customer to meet commitments in relation to lending transactions.
The Group's provisioning policy, which is in line with the IFRS and the regulatory guidelines, allows the
Group to prudently recognise impairment on its retail portfolios.
Model risk management and independent validation
The Group has utilised models in many of its financial and business activities from underwriting a credit
facility to reporting expected loss under the IFRS9 accounting standards.
To manage the model risks, the Group has implemented the Group Model Governance Framework
(the Framework). The Framework is a group wide policy and is applicable to models in all entities and
subsidiaries of the Group. According to the Framework, all internally or externally (vendor based) developed
risk quantification models that directly affect the financial reporting, including Expected Loss (EL), Lifetime
Expected Loss (LEL) and Regulatory requirements require independent validation.
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EMIRATES NBD BANK PJSC - GROUP CONSOLIDATED FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2021
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