2009 Annual Report and Financial Statements - UBA Plc

Risk management report (continued)
96
Provisioning policies
The internal and external rating systems described on page 95 focus more on credit-quality mapping from the inception of the lending and
investment activities. In contrast, loan loss provisions are recognised for fi nancial reporting purposes only for losses that have been incurred
at the balance sheet date based on criteria set out in the Prudential Guidelines for Licensed Banks.
Non-performing credit:
A credit facility is regarded as non-performing when any of the following conditions exists:
• Interest on principal is due and unpaid for 90 days and above
• Where principal is outstanding for 90 days and above
Non-performing credit is categorised into three namely:
• Sub-standard – This occurs where principal and or interest remain outstanding for more than 90 days but less than 180 days and 10%
provision is suspended on the outstanding balance.
• Doubtful – This occurs where principal and/or interest remain outstanding for at least 180 days, but less than 360 days.
• Lost – This occurs where principal and or interest remain outstanding for more than 360 days.
These defi nitions are the same for both personal and corporate loans.
In the determination of the amount to be raised as provision according to the above categorisation, no value of collateral is recognised and set
off against the fi nal provision amount.
(b) Debt securities and other bills
For debt securities and other bills, external rating such as Standard & Poor’s rating or their equivalents are used by Treasury primarily to
manage their liquidity risk exposures.
RISK LIMIT CONTROL AND MITIGATION POLICIES
The Group manages limits and controls concentrations of credit risk wherever they are identifi ed – in particular, to individual counterparties and
groups, and to industries and countries.
The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups
of borrowers (single obligor limits), and to geographical and industry segments.
Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. Limits on the level
of credit risk by product, industry sector and by country are approved quarterly by the Board of Directors.
The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on- and off -balance sheet exposures,
and daily delivery risk limits in relation to trading items such as forward foreign exchange contracts. Actual exposures against limits are monitored
daily.
The Group also sets internal credit approval limits for various levels in the credit process as is shown in the table below.
Authorising level Approval limit
Board N15 billion – Lending Limit
Board Credit Committee N7.5 billion – N15 billion
Managing Director N100 million – N7.5 billion (Subject to Group Lending Committee recommendation)
Deputy Managing Director Up to N100 million (Subject to Divisional Lending Centre recommendation)
Approval limits are set by the Board of Directors and reviewed from time to time as the circumstances of the Group demand.
Annual Report 2009