صفحه 1:
صفحه 2:
VARGO
aE yc
2 Risk
Se اس ان ۴
سس | سا
صفحه 3:
صفحه 4:
صفحه 5:
۳1060۵0416 00 ۳۹60016 ۵
06۵60۵1۵۵ ۵
CYGTOOOMO RICK
REOIT RIG! DBRKET RIGK
۳0۲۳۱۵۵۷
ای هه ۵۵0۱ ۱۳۵
71/۵۵۵۵
EE ۳۵۵/۵0۵۵۷
FPORTEOLO OK
صفحه 6:
ی اش ون
Rigs inci ine pou
as rec ra سس
صفحه 7:
۱۹ تا سیک سم
Risk Pet, wheo chooges fo the ioterest rote stouctude put
Pine aren
صفحه 8:
Sacenoaoe =
tee سا ما
perenne ا
purrs or dewawvards, result cies ooo paricdar trenerarioa.
eG و
ee ee eee eee
ا ا ا ا ا ا
ee ee ee ee eee
Dnata ten ned ae NU ا ا
صفحه 9:
0 es ee eS A ac cca
۱ ASN aca Cee
ا ۱
Bae سن ssa قفا وی ریت با رهب
صفحه 10:
صفحه 11:
lis هر
همم رت سم
: 80160 / REOCOOL : 15 NS Oe
ی eee RN nea! ا ol EAs CAC cece
صفحه 12:
= Hee eee GOICOPIFIO
PRICTIOG? bidkieg looa prictry to expected lose
BOCK OM OR UCU CECT EC Oe na
Nhe ا aot و eae ea cee cr Ct Cac
Renae a CaN a cal Ua AS AAS Sm
۱ 2
5 ai, tena aaa
صفحه 13:
اه کی رگ کر ۱۱
و
Lear ا ا ا ل لل
٠ asc مه aA rene
صفحه 14:
بر ۳۳ و( ۲ wigrated وا جوا را
Pravework, که ی مه
pig ا الكت 0ك oars cca ce cie esc ee
۱ PAR ا ال ل coe
tue Cyr acacia ne Oss = و9 لمه بعنظ) یگ
صفحه 15:
eins ا Vez cara (DCL 4 رسب بح
ام سم ace ار هم Fa
| ی تم و یت ac BS ca (NSS DNS can 0
2s LO) (ea ا م ا cae 00000
وگ ی ا مت Dre esa A NI CaS NaS
لام Ng es Aad eae اا 2
صفحه 16:
220017001110001
ماك لو فنص ) ۵00 او (هج مس
ee Toe ۳ fe سح
pila horquasiiratizer rf rc)
۷ No z= Ppa
1 ۱ (PLM), Or
ف
1ر25 2 الشانهار )|
ata, ايو در
١ ae 1
0
8
ل 2007
م
0 tes r=
ict ain yA tres
یا فا ۱2
0
۳ ۳
[7
صفحه 17:
ae DRO ۳
ال ی ۳ سس سس ved post-scariica
ار aS VA Nica EDS Sn a ASC
117 7 ۰
۱ Oe ravens deer exer (POG): 4 أصصا
صفحه 18:
PNET
ا 2 410 115 ينا
> له | ۱۱ ۳ ATS)
ae
٩ ورن
صفحه 19:
22 ج222
یر rie ا ا ا DA
weusures lite ال exposure ia high rsh
we, Pe wphesisiy wore vo the prowisiny
Trl a ee CANE cae a ica eZ DZ ا
PAS race Cl DELANO تس ص تص ل
صفحه 20:
Risk Management Systems
in Banks
Genesis, Significance and Implementation
ANUPAMA K
JAYA NAIR
ANUPAMA S
MANJU
JAYSHREE
CONTENTS
What is Risk?
Classification of Risk
Objectives of Risk Management
Tools for Managing Risk
Risk Management in PNB
The potential loss an asset or a
portfolio is likely to suffer due to
a variety of reasons.
Survival of the organization
Efficiency in Operations
Uninterrupted Operations
Identifying and achieving acceptable level of risk
Earning Stability
Continued and sustained Growth
RISKS
FINANCIAL RISK
NON FINANCIAL RISK
OPERATING RISK
CREDIT RISK
MARKET RISK
SYSTEMATIC RISK
POLITICAL RISK
TRANSACTION RISK
INTEREST RATE RISK
HUMAN RISK
PORTFOLIO RISK
LIQUIDITY RISK
TECHNOLOGY RISK
FOREX RISK
CREDIT RISK
Risk that the counterparty will fail to perform or meet the
obligation on the agreed terms .
TYPES OF CREDIT RISKS
Transaction Risk
Risk relating to specific trade transactions, sectors or
groups.
Portfolio Risk
Risk arising from lending to sectors non related to the
core competencies of the Bank / concentrated credits to
a particular sector / lending to a few big borrowers.
MARKET RISK
Market risk is the risk to a bank’s financial condition that could result
from adverse movements in market price.
TYPES OF MARKET RISK
Interest Rate Risk
Risk felt, when changes in the interest rate structure put
pressure on the net interest margin of the Bank.
Liquidity Risk
Risk arising due to the potential for liabilities to drain from
the Bank at a faster rate than assets.
TYPES OF MARKET RISK
(continued)
FOREX RISK
This risk can be classified into three types.
Transaction Risk is observed when movements in price of a currency
upwards or downwards, result in a loss on a particular transaction.
Translation Risk arises due to adverse exchange rate movements and
change in the level of investments and borrowings in foreign currency.
Country Risk. The buyers are unable to meet the commitment due to
restrictions imposed on transfer of funds by the foreign govt. or regulators.
When the transactions are with the foreign govt. the risk is called as Sovereign
Risk.
NON-FINANCIAL RISKS
Operational Risk arises as a result of failure of operating
system in the bank due to certain reasons like fraudulent
activities, natural disaster, human error, omission or
sabotage etc.
Systemic Risk is seen when the failure of one financial
institution spreads as chain reaction to threaten the financial
stability of the financial system as a whole.
Political Risk arises due to introduction of Service tax or
increase in income tax, freezing the assets of the bank by
the legal authority etc.
Human Risk Labour unrest, lack of motivation, inadequate
skills, problems faced by the bank after implementation of
VRS lead to Human Risk.
Technology
Risk
Obsolescence,
mismatches,
breakdowns, adoption of latest technology by competitors,
etc, come under technology risk
MANAGEMENT OF
CREDIT RISK
Measurement through Credit Rating /
scoring
Quantification through estimate of expected
loan losses
Pricing on a scientific basis
Controlling through Effective loan review
mechanism and portfolio management
TOOLS OF CREDIT RISK
MANAGEMENT
EXPOSURE CEILINGS :Setting
of prudential
norms related to the Bank’s exposure to a single borrower / group
borrowers / sectorial borrowers
REVIEW / RENEWAL :
This involves multi-tier
credit approving authority, constitution wise delegation of powers,
higher delegated powers for better rated borrowers, discriminatory
time for credit review / renewal, hurdle rates / benchmarks for
fresh exposures & periodicity for renewal based on risk rating.
COMPREHENSIVE RISK RATING
MODELS
RISK
BASED
SCIENTIFIC
PRICING: Linking loan pricing to expected loss
PORTFOLIO MANAGEMENT :
Stipulate
quantitative ceiling on specific rating categories, distribution of
borrowers in various industries / business groups , rapid portfolio
reviews, on-going system for identification of credit weaknesses
well in advance, initiate steps to preserve the desired portfolio quality
and integrate portfolio reviews with credit decision making process.
TOOLS OF CREDIT RISK
MANAGEMENT
LOAN REVIEW MECHANISM : This
should be done independent of credit operations
& administration and cover all the loans above
certain cut-off limit ensuring that at least 30 –
40% of the portfolio is subjected to LRM in a
year.
RISK MANAGEMENT IN
PNB
New Capital Adequacy Framework:
Bank has migrated to New Capital Adequacy
Framework, popularly known as BASEL II w.e.f.
from March 2008. The approaches prescribed by
the 'Regulator', namely Standardised Approach under
Credit Risk and Basic Indicator Approach under
Operational Risk have been implemented.The Bank had
adopted Standard Duration Approach for Market Risk,
since March 2006.
RISK MANAGEMENT IN
PNB(contd)
Bank has already placed credit risk rating models on
central server based system ‘PNB TRAC’, which
provides a scientific method for assessing credit risk rating
of a client. The Bank has developed and placed on central
server score based rating model ‘PNB SCORE’ in
respect of retail loans and traders up to total limits of Rs
50 lacs. “Accept/Reject” decisions are also based on the
score obtained. Scoring models for remaining sectors like
SME segments have been developed and are under
testing stage.
Bank is also developing framework for estimating LGD (Loss
Given Default) and EAD ( Exposure at Default) and also
framework for identifying concentration risk. A data warehouse
is being established for effective data management and use of
application tools for quantification of risks.
For the Market risk bank has a Mid-Office with separate desks
for Treasury & Asset Liability Management (ALM). Asset
Liability Management Committee (ALCO) is primarily responsible
for establishing the market Risk Management, asset liability
management of the bank, implementing the risk management of
the bank. The policies for hedging and mitigating risk are
discussed in ALCO.
A separate independent Division known as Credit
Audit & Review Division has been formed to
ensure LRM implementation. LRM examines
compliance with extant sanction and post-sanction
process/procedures laid down by the Bank from
time to time.
Preventive Monitoring System (PMS): It is a tool
used by bank for detection of early warning
signals with a view to prevent/minimize the loan
losses.
Liquidity Risk of bank is assessed through gap analysis
for maturity mismatch based on residual maturity in
different time buckets & management of same is done
through prudential limits fixed thereon.
Bank is also monitoring the liquidity through various stock
options.
The Bank is proactively using duration gap and interest
rate forecasting to minimize impact of interest rate
changes.
Advance techniques such as Stress testing, simulation,
sensitivity analysis etc, are conducted at regular intervals to
draw contingency funding plan under different liquidity
scenarios.
CONCLUSION
In the Banking industry where risk is the norm ,
rather than the exception, we have to adopt many
measures like reducing exposure in high risk
areas, emphasising more on the promising
industries, optimising the return by striking a
balance between the risk and the return on the
assets.
Our motto should be
effective
management of risks towards ensuring quality
credit portfolio.
Hope you have enjoyed our presentation.
Thank you
