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>> Consolidated Financial Statements
Part E – Information on risks and related risk management policies
Since 2008 Aspra Finance, a wholly-owned subsidiary of UniCredit, gradually bought the Group’s nonperforming
loans, starting with those held by former Capitalia Legal Entities and then including the whole
portfolio.
In addition and in order to strengthen governance and independent control over credit risk management
processes, a function dedicated to the management of restructuring and workout files has been set up in
Holding Company, reporting directly to the Group CRO.
In general, the main goal of managing the non-performing portfolio is to recover all, or as much exposure
as possible, by identifying the best strategy for maximizing the net present value (NPV) of the exposure,
or minimizing LGD (loss given default).
This activity is managed internally by specially qualified staff or externally through a mandate given to a
specialized company - the Group includes UniCredit Credit Management Bank, an Entity specialized in
workout activities which operates as a servicer for most of the Group’s Italian Legal Entities –, or through
sale of non-performing assets to external companies.
The methodology is based on the calculation of the NPV of amounts recovered as a result of alternative
recovery strategies, with assumptions made for recoveries, related costs and likelihood of failure for any
strategy. These results are compared with the Group Entity's average LGD for positions with the same
characteristics. If data series are not available, the comparison is based on estimates.
In order to determine provisions, an exercise that is performed at least quarterly, specialized units use an
analytical approach to assess the loss projections for the non-performing portfolio on the basis of the
Group’s accounting policies, which are consistent with the rules of IAS 39 and Basel II. If an analytical
approach is not possible (e.g., if there are numerous small positions), a Group Legal Entity may make
provisions on a lamp sum basis by regrouping these positions into aggregates with similar risk and
exposure profiles. The percentage used for such provisions is based on historical data series.
With regard to the powers to be granted in the area of classifying files as default positions and calculating
loss projections, Group Legal Entities designate several decision-making levels that have been
appropriately tailored to the amount of exposure and the provision. In the light of the impact that these
decisions have on earnings and tax payments, these decision-making processes involve the Group CRO
function as well as the Group Entity’s Senior Management.
The Group’s business and solidity in terms of profitability, capital and finance depend inter alia on the
creditworthiness of its borrowers. The Group has adopted procedures, rules and principles that steer,
govern and standardize the assessment and management of credit risk, in line with principles and best
practice. Increasingly difficult access to the credit and capital markets – together with ongoing difficult
economic conditions – could in 2010 continue to prejudice corporate borrowers’ ability to meet their
payment obligations, to some extent limiting the Group’s ability to improve its credit quality. We can
reasonably expect a partial reduction in non-performing loans and consequently a prudential level of loan
loss provisions.