2011 Annual Report - BDO

2010More MoreOne to than three than one Morethree months to year to than fivemonths one year five years years TotalForwards P 352,000 P 90,368 P 97,718 P 96,124 P 636,210Cross-currency swaps 1,865 492,673 240,641 104,950 840,129Interest rate swaps - 16,960 54,087 - 71,047P 353,865 P 600,001 P 392,446 P 201,074 P 1,547,386The amounts presented are net of derivative transactions with existing net settlementagreement.2.15.04 Credit RiskCredit risk is the risk that the counterparty in a transaction may default and arises from lending,treasury, derivatives and other activities undertaken by the Bank. The Bank manages its creditrisk and loan portfolio through the Risk Management Unit, which undertakes several functionswith respect to credit risk management.The Risk Management Unit undertakes credit analysis and review to ensure consistency inthe Bank’s risk assessment process. The Risk Management Unit performs risk ratings forcorporate accounts and risk scoring for consumer accounts. It also ensures that the Bank’scredit policies and procedures are adequate to meet the demands of the business. The RiskManagement Unit is also responsible for developing procedures to streamline and expedite theprocessing of credit applications.The Risk Management Unit also undertakes portfolio management by reviewing the Bank’sloan portfolio, including the portfolio risks associated with particular industry sectors, regions,loan size and maturity, and development of a strategy for the Bank to achieve its desiredportfolio mix and risk profile.The Bank structures the levels of credit risk it undertakes by placing limits on the amount ofrisk accepted in relation to one borrower or issuer, or groups of borrowers or issuers, and togeographical and industry segments. Such risks are monitored on a revolving basis and subjectto an annual or more frequent review. Limits on the level of credit risk by product, industrysector and by country are approved quarterly by the Risk Management.Exposure to credit risk is managed through regular analysis of the ability of borrowers andpotential borrowers to meet interest and capital repayment obligations and by changing thesewww.bdo.com.ph 65