Review of Operations - Commercial Bank of Kuwait

TREASURY |Backed by solid foundation and sound business strategies, Treasury’s focusing was to bring cost of fund lower andthereby to increase net interest margin while assuming top priority for liquidity as well as Balance Sheet management.Treasury’s effort to bring cost of fund lower yielded positive result by mobilizing deposits both from domestic as wellas international markets at a relatively lower cost. Treasury continued its emphasis in developing customer oriented FXbusiness coupled with proprietary trading in major currencies, gave further boost to our profitability.Technology strength in Treasury system and high tech communication facilities have facilitated our customers to executefinancial transactions with minimum cost and that kept Treasury as a preferred choice among the corporate community.Treasury activities are mainly channeled through its dedicated FX, MM and Corporate desks managed by professionallyexperienced dealers.Treasury is now taking further emphasis to expand its business volume in the field of corporate bond investments withthe aim to diversify asset class and simultaneously targeting for higher portfolio yield.Financial prudence and ethical governance have been the corner stone of Treasury’s trading philosophy.RISK MANAGEMENT |The Bank believes in undertaking risks associated with its business only after proper identification, assessment,management and adequate mitigation of potential risk factors. The material risks to which the Bank is exposed to are– credit risk, market risk, operational risk, liquidity risk, interest rate risk, reputational risk and strategic risk.The risk management framework includes a hierarchy of committees involving the Board of Directors and the executivemanagement for approval and reporting purposes. The governance structure of the Bank is explained in detail elsewherein this report.Treatment of different types of risks:The treatment of different types of risks by the Bank is elaborated hereunder.a) Credit RiskCommercial Bank Of KuwaitThe Credit Policy and the Credit Risk Management Policy lay down the guiding principles for lending activities and thebasis of measuring, monitoring and managing credit risks. The credit policy provides guidelines that establish the lendingcriteria and all credit decisions are made after giving due consideration to credit policy requirements. Continuous reviewand update of the credit policy is carried out to calibrate it with regulatory and business requirements.The credit policy is supplemented by the credit risk management policy which establishes the infrastructure for creditrisk management including tools for risk rating, portfolio analysis and independent reviews. Internal limits are also20