GENERAL MEETING DRAFT - Bankier.pl

2.2.1 Country risk
Country risk is defined as the risk of losses of exposures caused by events in a specific Country which
may be under the control of the government but not under the control of a private enterprise or
individuals. This may imply that the repayment of assets within a specific Country will be ultimately
prevented by actions of the Country's government (e.g. transfer risk, expropriation risk, legal risk, tax risk,
security risk, delivery risk) or by a deterioration of the economic and / or political environment (e.g. a
sharp recession, currency and / or banking crisis, disaster, war, civil war, social unrest) of a Country.
Country risk is managed by determining the appropriate maximum operational risk levels, whether in the
banking or financial business, that can be assumed by the various Legal Entities belonging to the Group
vis-à-vis all counterparties (sovereigns, government entities, banks, financial institutions, corporate
customers, small businesses, individuals, project finance, etc.) residing in or related to the Country, for
cross-border transactions (from the standpoint of the Entity providing the loan) in foreign and local
currency (from the standpoint of the borrower).
Country risk management processes are mainly concentrated at Holding Company in terms of both
methodological aspects and the decision-making process, in order to ensure a uniform assessment and
monitoring approach, particularly for the rating assignment – PD (probability of default) and LGD (loss
given default) – as well as control of risk concentration.
A new methodology for defining the risk appetite is planned to be introduced in 2010 to set plafond limits
for individual Countries in a top-down / bottom-up process considering the risk of the Country, the size,
regulatory capital limits, domestic corporate customer requests, business opportunities, actual exposure,
earning targets and strategic targets, including the target risk profile.
2.3 Credit Risk Management, Measurement and Control
2.3.1 Reporting and Monitoring
The fundamental objective of the reporting and monitoring activities performed by the CRO function is the
analysis of the main drivers and parameters of credit risk (exposure at default (“EAD”), expected loss
(“EL”), migration, cost of risk etc.) in order to promptly initiate any counter-measures on portfolios, subportfolios
or individual counterparts.
Group CRO function performs the reporting for credit risk at portfolio and individual counterparty level,
producing reports at Group level, both recurring and specific (on demand of Senior Management or
external entities, e.g., regulators or rating agencies) with the objective of analyzing the main risk
components and their development over time, and thus to detect any signals of deterioration at an early
stage and, subsequently, to put in place the appropriate corrective initiatives. The performance of the
credit portfolio is analyzed with reference to its main risk drivers – such as growth and risk indicators -
customer segments, industrial sectors, regions and the performance of credits in default and the relevant
coverage.
Portfolio reporting activities at Group level are carried out in close collaboration with the Transactional
Risk Managers and the Credit & Cross-Border Risk Portfolio Managers that, within their respective
perimeters, implement their specific reporting activities.
In the first half of 2009, reporting activities developed considerably thanks to the gradual improvement in
the quality of data and processes supporting the consolidated reporting (i.e. development of a report on
Enterprise Risk Management, the “ERM Report”). The Group Risk Reporting function, at central level,
also uses the “Credit Tableau de Boards”, a quarterly instrument which contains detailed information on
the trends in the risks of the Strategic Business Area, to support the production of the aforementioned
reports.
2009 CONSOLIDATED REPORTS AND ACCOUNTS
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