Annual Report - Ahli United Bank

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Annual Report - Ahli United Bank

Notes to theConsolidated Financial Statements (Contd.)RISK MANAGEMENT31 CREDIT RISKCredit risk is the risk that one party to a financial instrument will fail to discharge a financial obligation and cause the other party to incura financial loss. In the case of derivatives this is limited to positive fair values. The Group attempts to control credit risk by monitoringcredit exposures, limiting transactions with specific counterparties, and continually assessing the creditworthiness of counterparties.a) Concentration riskConcentrations of credit risk arise when a number of counterparties are engaged in similar business activities, or activities in thesame geographic region, or have similar economic features that would cause their ability to meet contractual obligations to besimilarly affected by changes in economic, political or other conditions.Concentrations of credit risk indicate the relative sensitivity of the Group’s performance to developments affecting a particularindustry or geographic location.The Group manages its credit risk exposure so as to avoid over concentration to any sector or geographic location. It also obtainssecurity where appropriate. Guidelines are in place regarding the acceptability of types of collateral and valuation parameters.The principal collateral types are as follows:– In the personal sector – mortgages over residential properties and assigments over salary income;– In the commercial sector – charges over business assets such as premises, inventories, receivables and corporate or bank guarantees;– In the commercial real estate sector – charges over the properties being financed; and– In the financial sector – charges over financial instruments, such as debt securities and equities.The Group monitors the market value of collateral and requests additional collateral when necessary in accordance with theunderlying agreement.Details of the concentration of the loans and advances by industry sector and geographic region are disclosed in note 10(a) and 10(b) respectively.Details of the industry sector analysis and the geographical distribution of the assets, liabilities and commitments on behalf ofcustomers are set out in note 32.90 AUB Annual Report 2009

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