ICICI Bank 2013 Annual Report Download - page 187

F109
6. CREDIT RISK: PORTFOLIOS SUBJECT TO THE STANDARDISED APPROACH
a. External ratings
The Bank uses the Standardised approach to measure the capital requirements for credit risk. As per the
Standardised approach, regulatory capital requirements for credit risk on corporate exposures is measured
based on external credit ratings assigned by External Credit Assessment Institutions (ECAI) specified by
RBI in its guidelines on Basel II. As stipulated by RBI, the risk weights for resident corporate exposures are
assessed based on the external ratings assigned by domestic ECAI and the risk weights for non-resident
corporate exposures are assessed based on the external ratings assigned by international ECAI. For this
purpose, at March 31, 2013, the domestic ECAI specified by RBI were CRISIL Limited, Credit Analysis &
Research Limited, ICRA Limited, Fitch India, SME Rating Agency of India Limited and Brickwork Ratings
India Private Limited, and the international ECAI specified by RBI were Standard & Poor’s, Moody’s and
Fitch. Further, the RBI’s Basel II framework stipulates guidelines on the scope and eligibility of application
of external ratings. The Bank reckons the external rating on the exposure for risk weighting purposes, if the
external rating assessment complies with the guidelines stipulated by RBI.
The key aspects of the Bank’s external ratings application framework are as follows:
• The Bank uses only those ratings that have been solicited by the counterparty.
• Foreign sovereign and foreign bank exposures are risk-weighted based on issuer ratings assigned to
them.
• The risk-weighting of corporate exposures based on the external credit ratings includes the following:
i. The Bank reckons external ratings of corporates either at the credit facility level or at the borrower
(issuer) level. The Bank considers the facility rating where both the facility and the borrower rating are
available given the more specific nature of the facility credit assessment.
ii. The Bank ensures that the external rating of the facility/borrower has been reviewed at least once by
the ECAI during the previous 15 months and is in force on the date of its application.
iii. When a borrower is assigned a rating that maps to a risk weight of 150%, then this rating is applied
on all the unrated facilities of the borrower and risk weighted at 150%.
iv. Unrated short-term claim on counterparty is assigned a risk weight of at least one level higher than
the risk weight applicable to the rated short term claim on that counterparty.
• The RBI guidelines outline specific conditions for facilities that have multiple ratings. In this context, the
lower rating, where there are two ratings and the second-lowest rating where there are three or more
ratings are used for a given facility.
b. Credit exposures by risk weights
At March 31, 2013, the credit exposures subject to the Standardised approach after adjusting for credit risk
mitigation by risk weights were as follows:
` in billion
Exposure category Amount outstanding1
Less than 100% risk weight3 3,065.38
100% risk weight 4,839.48
More than 100% risk weight 604.50
Deducted from capital 21.32
Total2, 3 8,530.68
1. Credit risk exposures include all exposures, as per RBI guidelines on exposure norms, subject to credit risk and investments
in held-to-maturity category.
2. Includes all entities considered for Basel II capital adequacy computation.
3. Includes investment in government securities held under held-to-maturity category.
BASEL II – PILLAR 3 DISCLOSURES (CONSOLIDATED)
at March 31, 2013