notes to the consolidated financial statements - Sacombank

44.1.1 Credit risk measurement and provisioning policies
(a) Loans and guarantees to customers
Credit risk measurement is carried out before and during loan period.
The Group has developed models to support the quantification of the credit risk. These rating and scoring models are in
use for all key credit portfolios and form the basis for measuring default risks before and during loan period.
The Group applies Decision 493/2005/QD-NHNN dated 22 April 2005 and Decision 18/2007/QĐ-NHNN dated 25 April
2007 of the State Bank of Vietnam for measurement of credit risk and estimate of provision for loans and guarantees to
customers as presented in Note 2.7 and Note 2.8
(b) Debt securities
The Group’s investment in debt securities are those issued by the Government, reputable credit institutions and economic
organisations. The credit risk management is measured on a case-by-case basis when the Group assesses that the risk
profile of the counterparty is changed. The investments in those securities are viewed as a way to gain a better credit
quality mapping and maintain a readily available source to meet the funding requirement at the same time.
44.1.2 Credit risk limit control and mitigation policies
The Group manages credit risk by placing limits on exposures (for both on and off balance sheet exposures) in relation to one
borrower, or groups of borrowers in accordance with regulation of the State Bank of Vietnam. In addition, exposure to credit
risk is also managed through regularly reviewing the acceptance classes of collateral and analysing the ability of borrowers and
potential borrowers to meet interest and capital repayment obligations.
The Group has a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for
funds advances, which is common practice. The principal collateral types for loans and advances are:
n Mortgages over residential properties;
n Charges over business assets such as premises, machineries and equipment, inventory and accounts receivable;
n Charges over financial instruments such as debt securities and equities
For secured loans, collateral is independently valued by the Group from which it applies specific discount rates to determine the
maximum amount of loans that can be granted. The specific discount rates for each type of collateral are guided under Decision
493/2005/QD-NHNN dated 22 April 2005 and Decision 18/2007/QĐ-NHNN dated 25 April 2007 of the State Bank of Vietnam and
are adjusted by the Group on case-by-case basis. When the value of collateral is reduced, the Group will ask the borrower to
provide additional collateral to maintain the security over the loan exposure.
Credit related commitments mainly include letters of credit and financial guarantee contracts which carry the same credit risk
as loans. Documentary and commercial letters of credit - which are written undertakings by the Group on behalf of a customer
authorising a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions - are
collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan. Issuance
of financial guarantee contracts and letters of credit are subject to the same credit assessment and approval process as those for
loans and advances to customers, unless the customer places 100% margin deposits for the related commitment
ANNUAL REPORT 2011 140