TlB Annual Report 2009 - Triodos Bank

‘dry runs’ for all teams. There is a functional
reporting line to Group Operational Risk
Management to ensure the overall operational
risk profile of the organisation.
For calculating operational risks in accordance
with Basel ii, the Basic Indicator Approach is
used. The revised operational risk framework is
in line with the principles mentioned in the
Sound Practices for the Management and
Super vision of Operational Risk. These sound
practices are not a requirement of the Basic
Indicator Approach, but supports more advanced
methods. They give guidelines to the
qualitative implementation of operational risk
management and are advised by the Bank of
International Settlements.
CREDIT RISK
Credit risk relates primarily to counterparty’s
potential inability to meet its obligations towards
the Bank and the losses the Bank might incur as
a result. This counterparty risk concerns both
payment arrears and negative value changes due
to a counter party’s lower credit rating. Credit
risk also includes concentration risk in the
credit portfolio, which is the risk the Bank faces
that a particular event may result in a company
or a group of associates failing to meet their
obligations towards the Bank. The risk re lates
to all of the Bank’s assets: company loans,
deposits with financial institutions and bonds.
Triodos Bank manages credit (counterparty) risk
and concentration risk from two perspec tives:
• at the individual level per borrower focusing
on the direct relation with the customer
• at portfolio level in order to manage the
concentration of risks per sector, country or
region;
LOANS TO CUSTOMERS
Loans are extended to businesses and projects
in sectors that contribute to achieving Triodos
Bank’s mission. Given that this involves a small
number of sectors, higher sector concentration
is inherent to the loans portfolio. Concentration
on the existing sector is acceptable because the
Bank has considerable expertise in them and
actively invests in increasing knowledge about
them within the organisation. Risk is also
reduced by the high quality of securities
(collateral) against outstanding loans and the
spread of the portfolio in the different countries.
Outstanding loans per sector in 2009
The main sectors are:
Nature & Environment (50%)
Culture & Welfare (26%)
Social business (19%)
Others (5%)
NATURE & ENVIRONMENT (50%, 2008: 47%)
This sector consists of renewable energy pro jects
such as wind and solar power and hydro electric
projects. It also includes organic agri culture, and
projects across the entire agricultural chain, from
farms, processors and wholesale companies to
natural food shops. Environmental technology,
such as recycling companies and nature conservation
projects, is also represented.
SOCIAL BUSINESS (19%, 2008: 21%)
This sector includes loans to traditional
businesses and innovative enterprises and
service providers with clear social objectives,
such as social housing, and loans to fair trade
business.
CULTURE & WELFARE (26%, 2008: 30%)
This sector covers loans to organisations
working in education, retreat centres, religious
groups and artists. It also covers health care
institutions including care for people with
learning disabilities.
Lending is primarily the responsibility of local
branches, which are closest to their customers.
Limits are imposed and regular reports to the
group credit risk department agreed to manage
the risk concentration in the sectors Triodos
Bank is active in. Limits are also considered
and agreed on a case-by-case basis.
Summary of outstanding loans per branch in 2009
The Netherlands (35%)
Belgium (21%)
United Kingdom (17%)
Spain (23%)
Germany (4%)
54 TRIODOS BANK - ANNUAL REPORT 2009