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

- 60 -b. SubstandardAccounts classified as “Substandard” are individual credits or portions thereof,which appear to involve a substantial and unreasonable degree of risk to theBank because of unfavorable record or unsatisfactory characteristics. Thereexists in such accounts the possibility of future loss to the BDO UnibankGroup unless given closer supervision. Those classified as “Substandard” musthave a well-defined weakness or weaknesses that jeopardize their liquidation.Such well-defined weaknesses may include adverse trends or development offinancial, managerial, economic or political nature, or a significant weakness incollateral.c. DoubtfulAccounts classified as “Doubtful” are individual credits or portions thereofwhich have the weaknesses inherent in those classified as “Substandard”, withthe addedcharacteristics that existing facts, conditions and values make collection orliquidation in full highly improbable and in which substantial loss is probable.Positive and vigorous action is required to avert or minimize losses.d. LossAccounts classified as “Loss” are individual credits or portions thereof whichare considered uncollectible or worthless and of such little value that theircontinuance as bankable assets is not warranted although the loans may havesome recovery or salvage value. The amount of loss is difficult to measure andit is not practical or desirable to defer writing off these basically worthlessassets even though partial recovery may be obtained in the future.In addition to the above, credit portfolio review is another integral part of the BDOUnibank Group’s management of credit risk. This exercise involves the conduct ofperiodical post approval review of individual credits whose main objective is to helpmonitor and maintain sound and healthy risk asset portfolio. Parameters of the creditportfolio review are structured so as to reflect both sides of the risk managementequation such as credit quality and process. This function actuates the philosophy thatcredit quality is derived from sound risk management process. The credit quality offinancial assets is managed by the BDO Unibank Group using internal credit ratings.