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    L1 - Credit Management

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    hansiperera
    This document provides an introduction to credit risk management. It discusses key topics such as the goals of credit risk management, types of credit risk, credit risk principles, and credit risk governance. It also defines various credit-related terms and outlines the segmentation and categorization of different types of credit exposures, clients, and facilities.

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    L1 - Credit Management

    Uploaded by

    hansiperera
    30 views21 pages
    This document provides an introduction to credit risk management. It discusses key topics such as the goals of credit risk management, types of credit risk, credit risk principles, and credit risk governance. It also defines various credit-related terms and outlines the segmentation and categorization of different types of credit exposures, clients, and facilities.

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    Management

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    L1_Credit Management

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    This document provides an introduction to credit risk management. It discusses key topics such as the goals of credit risk management, types of credit risk, credit risk principles, and credit risk governance. It also defines various credit-related terms and outlines the segmentation and categorization of different types of credit exposures, clients, and facilities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    30 views21 pages

    L1 - Credit Management

    Uploaded by

    hansiperera
    This document provides an introduction to credit risk management. It discusses key topics such as the goals of credit risk management, types of credit risk, credit risk principles, and credit risk governance. It also defines various credit-related terms and outlines the segmentation and categorization of different types of credit exposures, clients, and facilities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 21

    Credit Management

    PRESENTED BY
    LILAN WICKRAMASEKARA
    MBA-PIM, AIB, ADICM
    In this Module
     Introduction to Credit Risk Management
     Credit Process and Selection
     Credit Risk and Objectives of Credit Portfolio
     Application of Credit Risk Measurement
    Introduction to Credit Risk Management

     What is Banking
     Bank as an Enterprise and associated Risk
    1. Capital & Liquidity 2. Compliance
    3. Conduct 4. Country
    5. Credit 6. Financial Crime
    7. Information & Cyber Security 8. Model
    9. Operational 10. Reputational
    11. Traded
    Introduction to Credit Risk Management

     What is Credit Risk Management


    Credit risk is most simply defined as the potential for lose due to the failure of a
    bank borrower or counterparty to meet its agreed obligations.
    The goal of credit risk management is to maximize a bank's risk-adjusted rate of
    return by maintaining credit risk exposure within acceptable parameters.
    Introduction to Credit Risk Management

     Credit Risk Related Principles


    Lending to counterparts should be followed a strong Credit assessment, an
    evaluation of credit quality and including willingness, ability and capacity to pay.
    1. be identified, assessed & measured
    2. be monitored, limited through the term of exposure
    3. be capped by a maximum acceptable exposure limit & tenor
    4. not prohibited by the Bank’s policies or applicable laws or regulations
    Introduction to Credit Risk Management

     Credit Risk Related Principles


    5. be not used for illegal or immoral purposes or not known purposes
    6. be assessed on material non-credit risk
    7. approved by an authorized individual or committee
    Introduction to Credit Risk Management

     Credit Risk Sub-Types


    1. Credit Concentration Risk
    2. Fx Lending Risk
    3. Credit Residual Risk
    4. Refinancing Risk
    5. Regulatory Risk
    6. Collateral Management
    7. Credit Monitoring
    8. Credit Approval
    9. Credit fulfillment
    Introduction to Credit Risk Management

     Lets introduce few terminologies


     Lending vs Facility
     Lending vs Trade
     Corporate Finance vs Non-CF
     Senior vs Subordinate
     Short Term, mid Term, Long Term
     Direct Lending vs Indirect Lending
     Balance sheet lending vs Non-balance sheet lending
     Contingent labilities vs Non-contingent liabilities
    Introduction to Credit Risk Management

     Lets introduce few terminologies


     Capital expenditure vs Working capital
     Committed vs Uncommitted
     Secured vs clean
     Discretionally lending vs Programmed lending
     Syndicated vs Bi-lateral
     Standard Documentation vs Non-standard
     Outer / Inner or Limit / Sub-limit
    Introduction to Credit Risk Management

     Lets introduce few terminologies


     IBOR, RFR – LIBOR, SLIBOR, AWPLR,
    Secured Overnight Financing Rate (SOFR), Swiss Average Rate Overnight (SARON), Sterling
    Overnight Index Average (SONIA), Tokyo Overnight Average Rate (TONAR)
    Introduction to Credit Risk Management

     Segmentation of Business
    1. Retail
    2. Small & Medium
    3. Corporate
    Introduction to Credit Risk Management

     Type of Clients
    1. Personal
    2. Sole Proprietor, Partnership
    3. Private Limited, Public Limited, Joint Ventures
    4. Sovereign, Governments, State owned enterprises
    5. Banks, Central Banks
    Introduction to Credit Risk Management

     Types of Facilities (Retail)


    1. Personal Loans, Overdrafts
    2. Credit Cards
    3. Mortgaged Loans – Hosing, Auto
    4. Leasing, Hire-Purchases
    Introduction to Credit Risk Management

     Categorization of Credit Exposures (Corporate & SME)


    1. Lending and Trade facilities
    2. Treasury facilities
    3. Control and monitoring facilities
    Introduction to Credit Risk Management

     Types of Facilities
     Lending
    1. Overdraft
    2. Short Term Loans
    3. Term Loans

     Leasing
    1. Finance Leasing
    2. Hire Purchases
    3. Operating Leasing
    Introduction to Credit Risk Management

     Types of Facilities
     Trade - Pre-shipment and Post-shipment
    1. Letter of Credit
    2. Shipping Guarantee
    3. Import loans
    4. Bank Guarantee – Bid, Performance, Advance Payment, Retention, Custom, General Other
    5. Bill discounting
    6. Invoice financing

    7. Buyer finance, Supplier finance, Vender prepayment, Trade payable


    Introduction to Credit Risk Management

     Types of Facilities
     Trade - Pre-shipment and Post-shipment
    8. Receivable finance – Buyer backed, Insurance backed, Cash/SBLC

    9. Trust Receipts, Pledge facilities – dying


    Introduction to Credit Risk Management

     Types of Facilities
     Treasury facilities
    1. Fx facilities – Spot, Swap, Forward, Derivatives
    2. Repo, Reverse Repo

     Control & Monitoring facilities (unadvised)


    1. Risk-collateral – Bank Guarantee, Corporate Guarantee, Insurance
    2. Product, Programmed facilities
    Introduction to Credit Risk Management

    Governance Committee   Board of Directors

    Policy & Procedure Credit Manual Credit Risk Appetite SBL  

    Credit Risk Management   Identification


    & Control
      Assessment
      Monitoring
      Mitigation

    Enable Culture People & Skill Infrastructure Information & Data quality

    Oversight   Process inventory Health Check Audit  


    Introduction to Credit Risk Management

     Facilities – Balance Sheet view

    Non-current Assets

    Current Assets

    Current Liabilities

    Equity

    Long Term Liabilities


    Introduction to Credit Risk Management

    Thank You !

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