SunTrust 2013 Annual Report Download - page 93

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The CRO and, by extension, CRM, establishes sound corporate risk frameworks and processes that focus on identifying,
measuring, analyzing, managing, and reporting the risks that we face. At its core, CRM’s objective is to deliver sophisticated
risk management capabilities throughout the organization that:
• Identify, measure, analyze, manage, and report risk at the transaction, portfolio, and enterprise levels;
• Optimize decision making;
• Promote sound processes and regulatory compliance;
• Maximize shareholder value; and
• Support our Purpose of Lighting the Way to Financial Well-Being and conform to our supporting guiding principles
of Client First, One Team, Executional Excellence, and Profitable Growth.
To achieve this objective, CRM continually refines our risk governance and management limits, policies, processes, and
procedures to reflect changes in our operating environment and/or corporate goals and strategies. In terms of underwriting,
CRM Credit Risk seeks to mitigate risk through analysis of such things as a borrower's credit history; pertinent financial
information, e.g., financial statements and tax returns, cash flow, and liquidity; and collateral value. Additionally, our loan
products and underwriting elements are continuously reviewed and refined. Examples include: client eligibility requirements,
documentation requirements, loan types, collateral types, LTV ratios, and minimum credit scores. Prior reviews have resulted
in changes such as enhanced documentation standards, maximum LTV ratios, and changes in production channels, which
contributed to material reductions in higher-risk exposures, such as higher-risk mortgage, home equity, and commercial
construction loans, as well as a decline in early stage delinquencies and NPLs.
In practice, CRM measures and oversees risk management along several primary risk dimensions: credit, market, liquidity,
operational, and compliance. Other risks, such as legal, strategic, and reputational risk, which can arise from any corporate
activity, are also monitored by CRM and other risk stewards such as Technology Risk and Compliance, Finance Risk
Management, Human Resources, Third-Party Risk Management, and others.
Credit risk programs/processes are overseen by the Chief Wholesale Credit Officer and the Chief Retail Credit Officer; market
risk and liquidity programs/processes are overseen by the Corporate Market Risk Officer; operational risk programs/processes,
including the Bank Secrecy Act/Anti-Money Laundering, Resolution Planning, and Third-Party Risk programs, are directly
overseen by the Corporate Operational Risk Officer; other risk steward programs are coordinated through the Operational
Risk Program; Model Risk Management program/processes and model validation are overseen by the Corporate Model Risk
Management Officer; Compliance programs are overseen by the Corporate Compliance Officer; and regulatory relations
activities are overseen by the Corporate Regulatory Liaison Officer. Other activities overseen by CRM include risk information
and reporting; risk technology/consulting investments; risk analytics (including the ALLL); Risk Review, an assurance
function; and other risk administration functions such as Executive and BRC risk committee reporting.
Credit Risk Management
Credit risk refers to the potential for economic loss arising from the failure of clients to meet their contractual agreements on
all credit instruments, including on-balance sheet exposures from loans and leases, investment securities, contingent exposures
from unfunded commitments, letters of credit, credit derivatives, and counterparty risk under derivative products. As credit
risk is an essential component of many of the products and services we provide to our clients, the ability to accurately measure
and manage credit risk is integral to maintain the long-run profitability and capital adequacy of our business. We commit to
maintain and enhance a comprehensive credit system to meet business requirements and comply with evolving regulatory
standards.
CRM establishes and oversees the adherence to the credit risk management governance frameworks and policies, independently
measures, analyzes, and reports on portfolio and risk trends, and actively participates in the formulation of our credit strategies.
Credit risk officers and supporting teammates within our lines of business are direct participants in the origination, underwriting,
and ongoing management of credit. They work to promote an appropriate balance between our risk management and business
objectives through adherence to established policies, procedures, and standards. Risk Review, one of our independent assurance
functions, regularly assesses and reports on business unit and enterprise asset quality and the integrity of our credit
processes. Additionally, total borrower exposure limits and concentration risk are established and monitored. Credit risk may
be mitigated through purchase of credit loss protection via third party insurance and use of credit derivatives such as CDS.
Borrower/counterparty (obligor) risk and facility risk is evaluated using our risk rating methodology, which is utilized in all
lines of businesses. We use various risk models to estimate both expected and unexpected loss, which incorporates both
internal and external default and loss experience. To the extent possible, we collect and use internal data to ensure the validity,
reliability, and accuracy of our risk models used in default, severity, and loss estimation.