Annual Report 2008 - ProCredit Bank

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Annual Report 2008
Risk Management
Strong risk management is crucial to the achievement
of ProCredit Bank’s main objective, which is
to provide reliable banking services to its clients.
The bank has a conservative approach in its credit
operations and follows a policy not to engage in
speculative transactions. Its adheres to a simple
business model of lending to core target groups
and mobilising retail deposits, undertaking other
business activities on only a limited scale to support
its lending activities.
Our assets and liabilities are broadly diversified
across thousands of small businesses and lowerand
middle-income savers. This minimises the
risk that an individual borrower or group of borrowers
could have a substantial adverse impact
on loan portfolio quality or that the withdrawal of
an individual deposit could jeopardise the bank’s
liquidity position.
Risks are assessed by four committees, all of which
support the Risk Department and operate under its
supervision: the Loan Portfolio Review Committee,
the Assets and Liabilities Committee (ALCO),
the Operational Risk Committee and the Credit
Risk Committee. These bodies all meet at least on
a monthly basis, while the Risk Department conducts
more frequent tests on key risk indicators.
The Risk Department is responsible for identifying,
measuring, analysing and monitoring potential
risks. It reports its findings and recommendations
to the Management Board and the relevant
departments. However, responsibility for ensuring
that the level of risk is properly controlled and
managed lies with the respective departments,
and ultimately with the members of the Management
Board.
In line with the ProCredit group’s risk management
policy, the bank’s risk position is described
in a quarterly risk report, which the Risk Department
discusses with the management of
ProCredit Bank, the Board of Directors and
ProCredit Holding’s Group Risk Management Department.
The bank has clearly defined procedures in place
and invests heavily in staff training to ensure that
all employees are aware of them and of the risks
that are entailed in their respective field of operations.
In addition, process-based internal controls
carried out by the Internal Audit Department
are an integral part of the bank’s risk management
system. They ensure compliance with legal
regulations and internal procedures in all areas.
Credit Risk
ProCredit Bank makes use of a highly developed
technology to manage credit risk at all stages of
the lending process. Regardless of the amount
involved, each loan is assessed on an individual