EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
6
|
€ = Euro
m = million
bn = billion
approval authorities. The
BRC consists of five (5) non-executive directors, meets at least on a monthly basis and
reports to the BoD on a quarterly
basis and on ad hoc instances if it is needed.
The Management Risk Committee (MRC) is
a management committee established by the Chief Executive Officer
(CEO)
and
its
main
responsibility
is
to
oversee
the
risk
management
framework
of
the
Group.
As
part
of
its
responsibilities, the
MRC facilitates
reporting to
the
BRC on the
range of
risk-related
topics under
its purview.
The MRC supports
the Group
Chief Risk Officer
to identify material risks, to promptly
escalate them
to the BRC
and to ensure that the
necessary policies and procedures
are in place to prudently manage risks and to comply
with regulatory requirements.
In the
context of the
climate risk
stress testing
process,
the MRC
is responsible
to review,
challenge and
agree
on the
material climate
risks identified
in the
risk identification
process
as well
as the
transition scenarios
and
physical
risk
events
developed
in
the
scenario
design
process.
Further
to
MRC’s
clearance,
appropriate
management actions are proposed to the Executive Board Committee (“ExBo”) and consequently to the BRC for
review,
challenge and approval.
The
Group’s
Risk
Management
General
Division
which
is
headed
by
the
Group
Chief
Risk
Officer
(GCRO),
operates independently from the business units and is responsible for the identification, assessment, monitoring,
measurement
and
management
of
the
risks
that
the
Group
is
exposed
to.
It
comprises
of
the
Group
Credit
General
Division
(GCGD),
the
Group
Credit
Control
Sector
(GCCS),
the
Group
Credit
Risk
Capital
Adequacy
Control
Sector (GCRCACS),
the Group
Market and
Counterparty Risk
Sector (GMCRS),
the Group
Operational
Risk Sector (GORS),
the Group Model Validation and Governance Sector (GMVGS), the Group Risk
Management
Strategy
Planning
and
Operations
Division
(GRMSPO),
the
Supervisory
Relations
and
Resolution
Planning
Sector (SRRPS), the Group
Climate Risk Division (GCRD) and the
Risk Analytics Division (RAD).
As part of its overall system
of internal controls, Eurobank
Ergasias Services and Holdings
S.A. has engaged in a
Service
Level
Agreement
(SLA)
with
Eurobank
S.A.
(the
banking
subsidiary
of
the
Group)
in
order
to
receive
supporting and advisory services in all areas
of risk management undertaken
by the Group.
The most important types of
risk that are addresse
d
by the risk management
functions of the
Group are:
Credit Risk
Credit risk is the
risk that a counterparty
will be unable to fulfill
its payment obligations
in full when
due. Credit
risk is also
related with country risk and
settlement risk. Credit risk arises
principally from the wholesale and retail
lending activities of the Group, as well as from credit enhancements
provided, such as financial guarantees and
letters of credit. The Group is also exposed to credit risk arising from other activities such as investments in debt
securities, trading,
capital markets
and settlement activities.
Taking
into account that
credit risk is
the primary
risk the Group is exposed to,
it is very closely managed and monitored by
specialised risk units, reporting to the
GCRO.
The
credit
review
and approval
processes
are
centralized
both
in Greece
and in
the
International
operations
following
the
“four-eyes”
principle and
specific
guidelines
stipulated
in the
Credit
Policy
Manual
and the
Risk
Appetite
Framework.
The
segregation
of
duties
ensures
independence
among
executives
responsible
for
the
customer relationship, the
approval process and the loan disbursement, as well as monitoring of the loan during
its lifecycle. The credit approval
process in Corporate Banking is centralized
through the establishment of Credit
Committees with escalating Credit
Approval Levels,
which assess and limit to the extent possible the
corporate
credit risk. Rating
models are used
in order to calculate
the credit
rating of corporate
customers, reflecting
the
underlying
credit
risk. The
most significant
ones
are
the
MRA (Moody’s
Risk Analyst)
applied
for
companies
-
mostly-
with
industrial
and
commercial
activity
and
the
slotting
rating
models,
used
for
specialised
lending
portfolios
(shipping,
real
estate
and
project
finance)
with
ring
fenced
transactions.
Credit
risk
assessment
is
performed
by
Group
Credit
General
Division
(GCGD),
which
assesses
the
credit
requests
submitted
by
the
Business Units, a procedure including the evaluation of the operational
and financial profile of the customer, the
validation of the borrower’s
rating and the
identification of potential risk factors
for the
Bank.
The credit review and approval processes
for loans to Small Businesses (turnover up to €5m)
are also centralised
following
specific
guidelines
and
applying
the
‘four-eyes’
principle.
The
assessment
is
primarily
based
on the
analysis
of
the
borrower's
operational
characteristics
and
financial
position.
The
same
applies
for
Individual
Banking (consumer
and mortgage
loans), where
the
credit
risk assessment
is based
on criteria
related
to the
characteristics of the
retail portfolio,
such as the financial position of the
borrower,
the payment behaviour,
the
existence of real estate property
and the type and quality of securities.
The
ongoing monitoring
of
the
portfolio
quality
and
of
any deviations
that
may arise,
lead to
an immediate
adjustment
of
the
credit
policy
and
procedures,
when
deemed
necessary.
The
quality
of
the
Group’s
loan
portfolios
(business, consumer
and mortgage
in Greece
and abroad)
is monitored
and assessed
by the
Group
Credit Control
Sector (GCCS) via
field, desktop and thematic
reviews in
order to timely
identify emerging
risks,
vulnerabilities,
compliance
to credit
policies and
consistency in
underwriting. Furthermore,
the
GCCS assumes
oversight
and
supervisory
responsibilities
for
proper
operation
of
corporate
rating
and
impairment
models.
Moreover,
GCCS regularly reviews the adequacy of provisions of all loan portfolios. Finally, the
sector formulates
Group’s
credit
policies
while at
the
same time
it monitors
regulatory
developments
proposing
relevant
policy
updates
when
necessary.
GCCS
operates
independently
from
all
the
business
units
of
the
Bank
and
reports
directly to the GCRO.