ICICI Bank 2011 Annual Report Download - page 177

F99
2. Policies approved from time to time by the Board of Directors/Committees of the Board form the governing
framework for each type of risk. The business activities are undertaken within this policy framework.
3. Independent groups and sub-groups have been constituted across the Bank to facilitate independent evaluation,
monitoring and reporting of various risks. These control groups function independently of the business groups/
sub-groups.
The risk management framework forms the basis of developing consistent risk principles across the Bank, overseas
branches and overseas banking subsidiaries.
Material risks are identified, measured, monitored and reported to the Board of Directors and Board level committees
through the following:
a. Key risk indicators
Key risk indicators are presented to the Risk Committee on a periodic basis. The presentation covers an
overview of the key developments in the global and domestic economy as well as trends observed in the major
industries where the Bank has an exposure. Additionally, risk indicators with respect to credit risk, liquidity risk
and market risk are also presented and discussed.
b. ICAAP/stress testing
As part of ICAAP, the Bank conducts stress testing under various historical and hypothetical scenarios to
assess the impact of stress on current and projected capital positions. The methodology for the stress testing
is approved by the Board of Directors. The results of stress testing are reported to the Board of Directors
and submitted to RBI annually as part of the ICAAP. As detailed in the ICAAP, stress test results are reported
periodically for various risks to the Asset Liability Management Committee (ALCO).
c. Stress tolerance limits
In line with various risk limits applicable for the Bank’s portfolios, stress tolerance limits have been formulated
for various risks. The actual position/utilisation against the limits is periodically reported to Board level
committees/ALCO.
d. Risk profile templates
Bank-wide risk dashboard covering various risks of the Bank is presented to the Risk Committee and to the
Board on a quarterly basis. The risk dashboard provides the level and the direction of risk at Bank level with
a comparison to the previous quarter. The level and direction of risk are arrived at based on pre-determined
parameters.
e. Other Reviews by Credit Committee
Apart from sanctioning proposals, the Credit Committee carries out reviews of the credit quality of the portfolio at
regular intervals. The Committee also reviews specific cases that need special attention, details of credit sanctions,
irregularity reports and movement in non-performing loans. Further, the Committee reviews developments in
industrial sectors and specific strategies of the Bank with respect to the exposure to those industries.
f. Reporting against prudential exposure norms
Status of actual position against prudential exposure limits set by the Board or stipulated by RBI is reported
periodically to respective committees.
Measurement of risks for capital adequacy purposes
Under Pillar 1 of the extant RBI guidelines on Basel II, the Bank currently follows the standardised approach for credit
and market risk and basic indicator approach for operational risk.
5. CREDIT RISK
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.
BASEL II – PILLAR 3 DISCLOSURES (CONSOLIDATED)
at March 31, 2011