ICICI Bank 2013 Annual Report Download - page 180

F102
The key principles underlying the risk management framework at the Bank are as follows:
1. The Board of Directors has oversight on all the risks assumed by the Bank. Specific Committees of the
Board have been constituted to facilitate focused oversight of various risks. The Risk Committee reviews
the risk management policies, the Bank’s compliance with risk management guidelines stipulated by the
RBI and the status of implementation of the advanced approaches under the Basel framework. It reviews
key risk indicators covering areas such as credit risk, interest rate risk, liquidity risk, foreign exchange risk,
operational and outsourcing risks and the limits framework, including stress test limits for various risks. The
Risk Committee also reviews the risk profile of the overseas banking subsidiaries. Credit Committee reviews
developments in key industrial sectors and the Bank’s exposure to these sectors and various portfolios on
a periodic basis. Audit Committee provides direction to and also monitors the quality of the internal audit
function.
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. Risk profile templates
Bank-wide risk dashboard covering various risks of the Bank is presented to the Risk Committee on a
periodic basis 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. Additionally, the key risk indicators for different risks are
also presented to the Risk Committee as part of the risk profile templates on a periodic basis.
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 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. 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 various industries.
e. 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.
BASEL II – PILLAR 3 DISCLOSURES (CONSOLIDATED)
at March 31, 2013