Annual REPORT

NOTES TO THE FINANCIAL STATEMENTS (Continued)
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)
The board provides written principles for overall risk management as well as written policies covering specific risk areas. The
group’s risk management policies are established to identify and analyse the risks faced by the group, to set appropriate
risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions, products and best market practices. The group, through its training and
management standards and procedures, aims to develop a disciplined and constructive control environment, in which all
employees understand their roles and obligations.
Financial Risk Management disclosures
The Risk and Compliance Committee is responsible for monitoring compliance with the group’s risk management policies
and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced by the
group. This committee is assisted in these functions by the Assurance Function. The Assurance Function undertakes reviews
of risk management controls and procedures, the results of which are reported to the committee.
(a)
Credit risk
Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations. Credit risk arises principally from the group’s loans and advances to customers and other
banks and investment securities but can also arise from credit enhancement provided such as financial guarantees,
letters of credit and acceptances. The group is also exposed to other credit risks arising from its trading activities
including derivatives.
Credit risk is the single largest risk for the group’s business and management carefully manages its exposure to credit
risk. For risk management reporting purposes, the group considers and consolidates all elements of credit risk exposure.
For risk management purposes, credit risk arising on trading securities is managed independently, but reported as a
component of market risk exposure.
The board of directors has delegated responsibility for the oversight of credit risk to its credit committee comprising
of three. non-executive directors and two executive directors. The implementation of the credit risk policies and monitoring
of the credit portfolio to ensure that risks are managed within acceptable standards is the responsibility of the
credit committee comprising of executive management.
Management of credit risk
The board of directors has delegated responsibility for the oversight of credit risk to its credit committee comprising
of three non-executive directors and two executive directors. The implementation of the credit risk policies and monitoring
of the credit portfolio to ensure that risks are managed within acceptable standards is the responsibility of the
credit committee comprising of executive management.
The committee assisted by the credit department is responsible for the management of the group’s credit risk including:
· Formulating credit policies in consultation with business units, covering collateral requirements, credit assessment,
risk grading and reporting, documentary and legal procedures, and compliance with regulatory and statutory
requirements.
· Establishing the authorisation structure for the approval and renewal of credit facilities. Authorisation limits are
delegated to the head of credit and the credit committee while larger facilities require approval by the board of
directors.
· Limiting concentrations of exposure to counterparties, geographies and industries for loans and advances.
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