Via ODiSy March 22, 2012 PHILIPPINE STOCK EXCHANGE ... - BDO

- 59 -The BDO Unibank Group’s definition of its loan classification and correspondingcredit risk ratings are as follows:• Current/Unclassified : Grades AAA to B• Watchlisted : Grade B• Loans Especially Mentioned : Grade C• Substandard : Grade D• Doubtful : Grade E• Loss : Grade FOnce an account is Watchlisted or Adversely Classified, the resulting risk rating grade isaligned based on the above classification.(i) UnclassifiedThese are individual credits that do not have a greater-than-normal risk and do notpossess the characteristics of adversely classified loans as to be defined below.These are credits that have the apparent ability to satisfy their obligations in full andtherefore no loss in ultimate collection is anticipated. These are adequately securedby readily marketable collateral or other forms of support security or are supportedby sufficient credit and financial information of favorable nature to assurerepayment as agreed.(ii) WatchlistedSince early identification of troublesome or potential accounts is vital in portfoliomanagement, a “Watchlisted” classification of credit accounts is maintained. Theseaccounts are not adversely classified but they require more than normal attention toprevent these accounts from deteriorating to said category.Past due or individually impaired comprise accounts under the following risk ratings:(iii) Adversely Classifieda. Loans Especially Mentioned (LEM)Accounts classified as “Loans Especially Mentioned” (LEM) are individualcredits that have potential weaknesses particularly on documentation or creditadministration that deserve management’s close attention. These potentialweaknesses, if left uncorrected, may affect the repayment prospects of the loanand thus heighten the credit risk to the BDO Unibank Group.A credit may also be classified as “Loans Especially Mentioned” if there isevidence of weakness in the borrower’s financial condition or credit worthiness,or the credit is subject to an unrealistic repayment program or inadequatesource of funds.