Annual Report 2012 - National Savings Bank

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108ASSESSING AND MANAGING OUR RISK FACTORSRISK MANAGEMENTStrength of the Capital AdequacyFurther, the sensitivity to the stress condition of the CAR hasbeen examined periodically to ascertain the buffer to absorbrisk shocks. Both the Tier I and Tier II Capital AdequacyRatios are well above the minimum regulatory requirementseven under the serious scenarios calculated under stress testsas approved by the Board. Stress conditions are given in thetable below.Risk TypeCredit RiskStress ScenarioIncrease in the Non-Performing Loans(NPLs) and the respective provisioningMarket Risk- Interest Rate Impact of Change in the DifferenceRiskbetween Average Yield of GovernmentSecurities and average rate of less than 12months FDs and Savings- Liquidity Risk Impact of Liquidating Interest EarningAssets to pay 3 Months LiabilitiesOperational Risk Risk Weighted Assets under TheStandardised Approach (TSA)The table below summarises the impact on the Bank’sCapital Adequacy Ratio in a situation of combined stressesOccurrence.Stress Test Results and Capital CushionRisk TypeCapitalRequiredUnderNormalDirectionPossibleCapitalErosiononAccountof StressScenarioRiskWeightedAssetsafter theCapitalErosionCredit Risk (Rs. Mn) 53,943 7,132 61,074Market Risk (Rs. Mn) 13,928 3,182 17,110Operational Risk (Rs.Mn) 24,038 5,442 29,480Liquidity Risk (Rs.Mn) 1,423 1,423Total (Rs. Mn) 91,909 17,179 109,088Capital FundsAvailable (Rs. Mn) 18,946 - 18,946CAR (%) - Tier II 20.61 - 17.37Impact on CAR (%) 3.25 NATIONAL SAVINGS BANK . ANNUAL REPORT 2012
109ASSESSING AND MANAGING OUR RISK FACTORSRISK MANAGEMENTCREDIT RISKCredit risk is the possibility of lossesarising from the diminution in the creditquality of borrowers or counterpartieswhich could materialise from thebanking book and the trading book andboth on or off balance sheet.For a bank’s stability and continuingprotability, it is crucial that every bankhas a sound credit risk managementsystem integrated into the overall riskmanagement framework. The creditrisk management aims to maximise abank’s risk-adjusted rate of return bymaintaining credit risk exposure withinacceptable parameters. Banks shouldhave a keen awareness to identifymeasure, monitor and control creditrisk and should have adequate capitalto absorb these risks.Ensuring lending staff complies with theset policies, procedures and guidelinesof the Bank and ensuring the existenceof Board approved policies to limit ormanage other areas of credit risk arethe main steps in managing credit risk.As part of the annual planning process,the Board and Management set targetsfor the NSB’s loan portfolio mix andreviews on an ongoing basis to ensurethat the performance meets the Board’sexpectations and the level of risk remainswithin the acceptable limits. Adaptationof standardised lending procedureswhich reduces risk of transactional errorand ensures compliance with regulatoryrequirements are the high priority inBank’s credit process. The Bank appliesKey Performance Indicators (KPIs),Key Risk Indicators (KRIs), StressTesting, Portfolio Review, InternalControl Assessment, Yield Assessmentetc. to monitor the quality of the CreditPortfolio on a quarterly basis.Credit Risk AppetiteThe Bank manages and controls creditrisk by setting limits on the amountof risk it is willing to accept and bymonitoring exposures in relation tosuch limits. The risk appetite of theBank is set by the Board of Directorsand contains a set of credit portfoliomonitoring measures which includetolerable risk levels.Credit Risk ManagementStructureThe Bank has initiated a structure tothe credit risk management process tooptimise the credit risk managementfunctions and identies, assesses,quanties, prices, monitors andmanages credit risk continuously.The Risk & Compliance Divisionconducts two key functions of CreditRisk Management and Credit RiskReview. The functions covered bythe Credit Risk Management are;involvement in assessment of preapprovalstage on large and high riskcredits as per the Integrated RiskManagement Policy, evaluate andcomment on new lending products froma risk perspective, monitor Key CreditRisk Indicators including NPL, monitorand report to the Board of Directorsand Operational Level Committeessuch as Credit Committee (CC), Asset& Liability Management Committee(ALCO) etc. Credit Risk ReviewFunction covers evaluating the portfoliosof different loan categories, evaluatingthe credit process and adequacy ofNATIONAL SAVINGS BANK . ANNUAL REPORT 2012
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ROOTEDANNUAL REPORT 2012
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ROOTEDNATIONAL SAVINGS BANK l ANNUA
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5MISSIONProviding our customers wit
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7ROOTEDFor over 40 years, the Natio
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92000Establishment of subsidiary co
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11HOW WE PERFORMED IN 2012FINANCIAL
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13CHAPTER 1FIRMLY ANCHOREDSTRATEGY
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15A MESSAGE FROM MR SUNIL S. SIRISE
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17A MESSAGE FROM MR SUNIL S. SIRISE
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19A REVIEW BYMR. HENNAYAKE BANDARAG
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21A REVIEW BY MR HENNAYAKE BANDARAG
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23A REVIEW BY MR HENNAYAKE BANDARAG
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25CHAPTER 2HOW WE PERFORMED IN 2012
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33HOW WE PERFORMED IN 2012ECONOMIC
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35HOW WE PERFORMED IN 2012ECONOMIC
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37HOW WE PERFORMED IN 2012ACHIEVEME
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39HOW WE PERFORMED IN 2012OPERATION
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51HOW WE PERFORMED IN 2012FUTURE PL
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53CHAPTER 3ROOTED IN OUR HERITAGEGO
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55ROOTED IN OUR HERITAGEGOVERNANCE
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Page 91 and 92: 89ROOTED IN OUR HERITAGEGENERAL MAN
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Page 105 and 106: 103CHAPTER 4ASSESSING AND MANAGING
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159BRANCHING OUT INTO NEW VENTURESS
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173BRANCHING OUT INTO NEW VENTURESG
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183CHAPTER 6THE RESULTS OF A CHALLE
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185THE RESULTS OF A CHALLENGING YEA
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251CHAPTER 7ANNEXURESNATIONAL SAVIN
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253STATEMENT OF FINANCIAL POSITION
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255TEN YEARS AT A GLANCE(Rs Mn)Year
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257OUR PRODUCTS AND SERVICESSAVINGS
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259OUR PRODUCTS AND SERVICES19. Ran
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261OUR PRODUCTS AND SERVICESOUR EXT
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263BRANCH NETWORKCentral Province1.
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265CORRESPONDENT BANKSCiti Bank NA,
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267EXCHANGE COMPANIESHabib Qatar In
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269GLOSSARYCredit RatingsAn evaluat
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271GLOSSARYReturn on Average Assets
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273CORPORATE INFORMATIONCOMPLIANCE
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Annual Report 2012 - National Savings Bank

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