2011 Annual Report - Khaleeji Commercial Bank BSC

KHALEEJI COMMERCIAL BANK BSC
RISK MANAGEMENT DISCLOSURES
4. Credit Risk
4.1 Credit risk management
Credit Risk is the risk that counterparty fails to meet its obligations in accordance with agreed terms and conditions. The
major sources of credit risk in the Bank are under the following classes of assets:
• Placements with financial institutions,
• Financing assets,
• Assets acquired for leasing (including lease rentals receivable),
• Investments in Sukuk.
For the purpose of capital adequacy computation (as well as certain other tables below) the following have also been
considered as a part of credit risk:
• Investments in quoted and unquoted equity,
• Investment in associates,
• Investment property,
• Other assets (including property and equipment).
The Bank has the necessary internal processes for assessing, monitoring and controlling credit risk both at the individual
credit and portfolio levels. Credit limits are approved after a thorough assessment which takes into account the financial
strength of the counterparty, the technical feasibility and economic viability of the business being financed, the adequacy
and quality of the cash flow available for repayment, etc. in addition to availability of collateral security by way of physical
assets or guarantees. The RMD reviews every credit proposal and incorporates its remarks on the proposal before the
same is considered by the appropriate authority as per delegated approval levels granted by the Board of Directors.
At the portfolio level, the Board has established risk concentration limits for single counterparties and related counterparties
forming a business group, geographical and economic sectors as well as exposures to counterparties related to the
Bank and/or its major shareholders. The RMD regularly monitors compliance with these limits and deviations if any are
reported regularly to the Senior Management, Risk Management Committees and the Board of Directors.
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Annual Report 2011