Annual Report 2012 - National Savings Bank

119ASSESSING AND MANAGING OUR RISK FACTORSRISK MANAGEMENTCredit Risk Monitoring,Mitigation and ControlCredit risk monitoring refers tocontinual monitoring of individualcredits inclusive of Off-Balance sheetexposures to obligors as well as theoverall credit portfolio of the Bank. Aproper credit monitoring system enablesto monitor quality of the credit portfolioon day-to-day basis and will providethe basis for taking prompt correctiveactions when warning signs point-out todeterioration in the nancial health ofa borrower.The credit discipline, credit riskmanagement and control processare being implemented in the Bank.Streamlining of the credit processis being carried-out through theCredit Committee via continuousrevision of procedures and monitoringperformance.The Bank has taken action to strengthenand streamline the Credit RiskManagement Unit (CRMU) under thesupervision of the Risk & ComplianceDivision in order to carry-out creditrisk management functions such as;credit limit setting, credit exceptions,security valuation, exposures etc.The Risk & Compliance Division willinitially be involved in the assessmentof pre-approval stage on large and highrisk credits as per the Integrated RiskManagement Policy.MARKET RISKMarket risk to the Bank stems frommovements in market prices, inparticular, changes in interest rates,foreign exchange rates and equityprices. Market risk is often propagatedby other forms of nancial risk such ascredit and market-liquidity risks. Therisk of losses would arise from On-Balance sheet as well as Off-Balancesheet activities.A bank is required to develop a soundand well informed strategy to manageits market risk. The strategy should rstdetermine the level of market risk theinstitution is prepared to assume. Thislevel should be set with considerationgiven to, among other factors, theamount of market risk capital set asideby the institution.Once its market risk tolerance isdetermined, the Bank needs to developa strategy that balances its businessgoals with its market risk appetite. TheBank will consider the following factorswhen developing such strategies: Economic and market conditionsand their impact on market risk Whether the Bank has the expertiseto prot in specic markets and isable to identify, monitor and controlthe market risk in those markets The Bank’s portfolio mix and howit would be affected if more marketrisk is assumedThe Bank has taken actions toestablish a market risk managementframework with the objective ofoptimising the rewards during theyear 2012. This is facilitated throughBoard approved policies, guidelinesas well as risk parameters and limits.The Risk Management Division ofthe Bank is responsible for the overallrisk management of the Bank and theNATIONAL SAVINGS BANK . ANNUAL REPORT 2012