CREDIT RISK
IIB manages its credit risk through establishing exposure limits for single
borrowers, groups of borrowers and industry and geographical segments, which are
set by the CC, as well as by complying with exposure limits established by the
CBR. IIB also mitigates its credit risk by conducting thorough reviews of
prospective borrowers, obtaining collateral, corporate and personal guarantees
and ongoing credit monitoring. Credit risk is also reduced by setting
appropriate allowances for loan impairment.
IIB reviews exposure limits for single borrowers and groups of related
borrowers on a case-by-case basis.
The Risk Management Department and the
back offices of the Credit Department and the Treasury monitor exposure limit
compliance on a daily basis.
The ALCO sets exposure limits for off-balance sheet exposures and
counterparty limits for off-balance sheet transactions with banks and other
financial institutions, including foreign currency position limits and
documentary transaction limits, reviews transactions that would exceed these
limits and, if necessary, adjusts the limits. The Risk Management Department
monitors IIB’s off-balance sheet commitments on a weekly basis. IIB’s back
office departments monitor compliance with exposure limits for off-balance sheet
transactions with corporate clients and banks on a daily basis.
The ALCO sets risk premiums for each borrower risk group, which are added to
the base interest rate set by the ALCO for the relevant loan category.
Additional risk premiums may be added by the CC and/or the Credit Department for
certain loans.
Once a loan is made, the Credit Department monitors the financial condition
of all corporate borrowers, the value of the collateral and the financial
condition of any guarantors on a quarterly basis throughout the life of the
loan. If the financial position of the borrower or any guarantor worsens and/or
the market value of collateral declines, IIB requests additional collateral or
guarantees.
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