Annual Report 2012 - National Savings Bank

113ASSESSING AND MANAGING OUR RISK FACTORSRISK MANAGEMENT32.6%Loans and Advances Industry-wise Exposure 20125.5%4.6%8.4%0.1%18%0.0%0.1%30.8%less than perfect granularity of theportfolio, while sectoral concentrationimplies that risk may be driven by morethan one systematic component (factor).The Bank analyses the maximumexposure to credit risk by geography ofcounterparty and by industry before theeffect of mitigation is applied throughthe use of collateral agreements.The geographical analysis of Loansand Advances of the Bank depicts thatthe Western province has deployed thehighest percentage of mobilised fundsin every category of loans.Agriculture and FishingTourismConstructionTradersNew EconomyFinancial and business ServicesInfrastructureOther Services (Education, Health, Media)Other Customers (Pawning etc)The Bank has deployed the mobilisedfunds in the respective provincesthrough loans and the ratios are in linewith the Bank’s loans to deposit ratio.Industry Analysis of Loans andAdvancesThe Industry-wise classicationof credit exposure indicates thatConstruction represents the majorsector in the year 2012 (30.8% as perthe SLAS categorisation and 25.5% asper the SLFRS categorisation) amongthe sectors nanced by the Bank.Herfindahl and Hirschman Index(HHI)Concentration is a key driver of aportfolio credit risk and the HHI isa reliable standard for measuringconcentration risk. HHI measures thesize of rms in relation to the industryor a sector in relation to the totalportfolio.The Bank applied the HHI Measureof sector exposure to the total Loansand Advances portfolio. The results ofHHI can range from 0 to 1.0, movingfrom a few sectors to a larger numberof sectors where the minimum valueof HHI Index generally indicates alow concentration and low level ofcompetition in the market place andvice versa.The index shows a decrease inconcentration risk from 2011 to 2012indicating the Bank’s credit portfolio ison the low end of credit concentrationrisk. The concentration risk impact onthe overall portfolio too is low, sinceconcentration risk on account of thegrowing products such as housing loansand pawning are distributed over largeNATIONAL SAVINGS BANK . ANNUAL REPORT 2012