Page 201 - EXIM-Bank_Annual-Report-2023

Management Discussion and Analysis Ensuring Sustainability Commitment to Lead Upholding Accountability Financial Statements 199

Notes to the fiNaNcial statemeNts

43. FINANCIAL rISk MANAGEMENT PoLICIES (cont’d)
Credit risk management

Approach and risk strategy
The Group and the Bank recognise that credit risk is inherent in its banking and insurance activities. The main objective of the
Group’s and the Bank’s credit risk management is to ensure that exposure to credit risk is always kept within its capability and
financial capacity to withstand potential future losses.
The Group’s and the Bank’s strategies in credit risk management are:

• Consistent credit approving standards are applied in each of its credit decision process;
• All credit decisions are within credit risk tolerance that the Group and the Bank are willing to take in meeting its mandated
role;
• All credit risk inherent in business activities of the Group and the Bank are comprehensively identified, measured and
managed;
• Ensure the Group and the Bank hold adequate capital against credit risk and adequately compensated for risks assumed;
• Regular credit review is performed as an effective tool to constantly evaluate the quality of credits given and adherence to
the credit process;
• The composition and quality of the Group’s and the Bank’s credit portfolio are constantly monitored to identify and manage
concentrations risk; and
• Conduct stress testing on the Group’s and the Bank’s credit portfolio to identify possible events or future changes in
economic conditions that could have favourable effects to its credit exposures and assess the Groups and the Bank’s ability
to withstand such changes.
Risk identification

The Group and the Bank take into account the sources of credit risks identified from all lines of business on a bank-wide basis
such as direct financing risk, contingent financing risk, issuer risk, pre-settlement risk and settlement risk.

As a development financial institution, the Group and the Bank are expected primarily to fill the gaps in the supply of financial
services that are not normally provided by other banking institutions.
Therefore, the Group and the Bank are exposed to credit risk mainly from credit facilities to finance and support exports
and imports of goods, services and overseas projects with emphasis on non-traditional markets, provision of export credit
insurance services, export financing insurance, overseas investment insurance and guarantee facilities.
The Group and the Bank are also exposed to credit risk from investment in securities and other financial market transactions.

Measurement
The Group and the Bank monitor actual exposures against established limits and have procedures in place for the purpose
of monitoring and taking appropriate actions when such limits are breached. If exceeded limits, such occurrences must be
reported to the MRC and subsequently, corrective measures are taken to avoid recurrence of such breaches.
Internal credit rating system is an integral part of the Group’s and the Bank’s credit risk management. It provides a good
means of differentiating the degree of credit risk in the different credit exposures of the Group and the Bank. This will allow
more accurate determination of the overall characteristics of the credit portfolio, concentrations, problem credits and the
adequacy of allowances for losses on loans, advances and financing.