Annual Report LRP 2007 - Rheinland Pfalz Bank
Annual Report LRP 2007 - Rheinland Pfalz Bank
Annual Report LRP 2007 - Rheinland Pfalz Bank
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32 <strong>LRP</strong> <strong>2007</strong> CONSOLIDATED STATEMENT OF FINANCIAL CONDITION<br />
Management of Credit Risks<br />
The credit risk strategy agreed with the committees defines<br />
the framework for our business activities in the<br />
context of credit risks and is geared to our corporate<br />
strategy and risk-bearing potential. <strong>LRP</strong>’s rules define<br />
the guidelines for responsible and risk-oriented lending<br />
practices.<br />
The following principles provide the basis for configuring<br />
the credit processes, as well as for independent<br />
risk assessment and responsible management of credit<br />
risks in the <strong>LRP</strong> Group:<br />
• Credit risks are, in principle, only entered into in<br />
relation to appropriate revenue customary to the<br />
market.<br />
• The internal risk classification and rating procedures<br />
constitute an essential part of credit rating assessment.<br />
While the external rating of a recognized rating<br />
agency can also be taken into account, the lending<br />
decision is always based on the <strong>Bank</strong>’s own credit<br />
rating analysis.<br />
• In cases of doubt, the default avoidance principle<br />
takes precedence over an interest in generating revenues.<br />
• The credit risks entered into must bear an appropriate<br />
relation to the <strong>Bank</strong>’s total capital adequacy and<br />
earnings situation. No single credit risk or combination<br />
of (interactive) individual risks may reach an<br />
order of magnitude that might endanger the <strong>Bank</strong>’s<br />
stability.<br />
• If a loan is mainly based on collateral, the costs involved<br />
in recovery by the <strong>Bank</strong> must be appropriate.<br />
• Cross-selling criteria are only relevant if a loan transaction<br />
is justifiable by itself on risk criteria.<br />
• In the case of syndicated loans, attention is also paid<br />
to the quality of the lead manager and effective codecision<br />
rights.<br />
• The amount of an individual (Group) commitment<br />
and hence the <strong>LRP</strong> Group’s share of the total credit<br />
provision for a borrower must be appropriate to<br />
the size of the borrower and the borrower’s risk<br />
structure.<br />
• Business partners are handled in such a way that the<br />
independence of the credit decision-making processes<br />
is guaranteed at all times.<br />
• Transfer risks are only entered into within country<br />
limits.<br />
Risk Measurement<br />
<strong>LRP</strong> uses a wide variety of instruments to measure credit<br />
risks. These instruments are quality assured and further<br />
developed on a regular basis.
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