Wells Fargo 2014 Annual Report Download - page 66

Risk Management - Credit Risk Management (continued)
FOREIGN LOANS AND COUNTRY RISK EXPOSURE We
classify loans for financial statement and certain regulatory
purposes as foreign primarily based on whether the borrower’s
primary address is outside of the United States. At December 31,
2014, foreign loans totaled $50.6 billion, representing
approximately 6% of our total consolidated loans outstanding,
compared with $47.6 billion, or approximately 6% of total
consolidated loans outstanding, at December 31, 2013. Foreign
loans were approximately 3% of our consolidated total assets at
December 31, 2014 and at December 31, 2013.
Our foreign country risk monitoring process incorporates
frequent dialogue with our financial institution customers,
counterparties and regulatory agencies, enhanced by centralized
monitoring of macroeconomic and capital markets conditions in
the respective countries. We establish exposure limits for each
country through a centralized oversight process based on
customer needs, and in consideration of relevant economic,
political, social, legal, and transfer risks. We monitor exposures
closely and adjust our country limits in response to changing
conditions.
We evaluate our individual country risk exposure on an
ultimate country of risk basis, which is normally based on the
country of residence of the guarantor or collateral location, and
is different from the reporting based on the borrower’s primary
address. Our largest single foreign country exposure on an
ultimate risk basis at December 31, 2014, was the United
Kingdom, which totaled $21.1 billion, or approximately 1% of our
total assets, and included $5.0 billion of sovereign claims. Our
United Kingdom sovereign claims arise primarily from deposits
we have placed with the Bank of England pursuant to regulatory
requirements in support of our London branch.
We conduct periodic stress tests of our significant country
risk exposures, analyzing the direct and indirect impacts on the
risk of loss from various macroeconomic and capital markets
scenarios. We do not have significant exposure to foreign
country risks because our foreign portfolio is relatively small.
However, we have identified exposure to increased loss from
U.S. borrowers associated with the potential impact of a regional
or worldwide economic downturn on the U.S. economy. We
mitigate these potential impacts on the risk of loss through our
normal risk management processes which include active
monitoring and, if necessary, the application of aggressive loss
mitigation strategies.
Table 22 provides information regarding our top 20
exposures by country (excluding the U.S.) and our Eurozone
exposure, on an ultimate risk basis.
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