ICICI Bank 2008 Annual Report Download - page 171

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F97
Risk area Amount
Market risk
Capital required
– for interest rate risk 37.92
– for foreign exchange (including gold) risk 2.97
– for equity position risk 9.05
Operational risk
Capital required 15.22
Total capital requirement at 9% 379.01
Total capital funds of the Bank 566.81
Total risk weighted assets 4,211.19
Capital adequacy ratio 13.46%
Capital adequacy ratio
Capital ratios Consolidated1ICICI Bank
Limited1ICICI Bank
UK PLC2ICICI Bank
Canada2ICICI Bank
Eurasia LLC2
Tier-1 capital ratio 10.66% 11.76% 12.31% 19.78% N.A.3
Total capital ratio 13.46% 13.97% 18.97% 22.33% 15.57%
1. Computed as per Basel II guidelines
2. Computed as per capital adequacy framework guidelines issued by regulators of respective jurisdictions
3. Total capital ratio is required to be reported in line with regulatory norms stipulated by Central Bank of Russia
4. CREDIT RISK
a. Credit risk management policy and processes
The Bank is exposed to credit risk in its lending operations. Credit risk is the risk of loss that may occur
from the failure of any counterparty to abide by the terms and conditions of any financial contract with the
Bank, principally the failure to make required payments as per the terms and conditions of the contracts.
Management of credit risk in the Bank is governed by a Board-approved Credit and Recovery Policy.
Policies and processes
The Credit and Recovery Policy of the Bank has been prepared with the broad objective of meeting the
following goals:
l Adhere to the guidelines / policies enunciated by RBI and other regulatory authorities.
l Be the preferred bank for corporate, government, small and medium enterprises, rural/micro banking,
agriculture and retail customers.
l Maintain cordial business relationship with all customers by servicing their needs promptly and
efficiently.
l Build a diversified good quality asset portfolio through risk based lending and active churning of the
portfolio.
l Optimise risk return profile with adequate exit options.
The policy covers corporate, small and medium enterprise, retail, rural/agri and investment related exposures.
The Global Credit Risk Management Group (GCRMG) measures, monitors and manages credit risk at each
borrower level and at the portfolio level. There is a structured and standardized credit approval process
including a comprehensive credit appraisal procedure.
In order to assess the credit risk associated with any financing proposal, the Bank assesses a variety of risks
relating to the borrower and the relevant industry. The Bank evaluates borrower risk by considering:
l the financial position of the borrower by analyzing the financial statements, its past financial performance,
its financial flexibility in terms of ability to raise capital and its cash flow adequacy.
l the borrower’s relative market position and operating efficiency and
l the quality of management by analyzing their track record, payment record and financial
conservatism.
BASEL II – Pillar 3 Disclosures (Consolidated)
1P-less_(Pillar).indd 971P-less_(Pillar).indd 97 6/20/08 4:52:35 PM6/20/08 4:52:35 PM