ICICI Bank 2013 Annual Report Download - page 189

F111
Credit risk mitigation techniques
The RBI guidelines on Basel II allow the following credit risk mitigants to be recognised for regulatory capital
purposes:
• Eligible financial collateral, which include cash (deposited with the Bank), gold (including bullion and
jewellery, subject to collateralised jewellery being benchmarked to 99.99% purity), securities issued by
Central and State Governments, Kisan Vikas Patra, National Savings Certificates, life insurance policies
with a declared surrender value issued by an insurance company, which is regulated by the insurance
sector regulator, certain debt securities, mutual fund units where daily net asset value is available in
public domain and the mutual fund is limited to investing in the instruments listed above.
• On-balance sheet netting, which is confined to loans/advances and deposits, where banks have legally
enforceable netting arrangements, involving specific lien with proof of documentation.
• Guarantees, where these are direct, explicit, irrevocable and unconditional. Further, the eligible guarantors
would comprise:
- Sovereigns, sovereign entities stipulated in the RBI guidelines on Basel II, bank and primary dealers
with a lower risk weight than the counterparty; and
- Other entities, which are rated AA(-) or better.
The Bank reckons the permitted credit risk mitigants for obtaining capital relief only when the credit risk
mitigant fulfills the conditions stipulated for eligibility and legal certainty by RBI in its guidelines on Basel II.
Concentrations within credit risk mitigation
The RBI guidelines, among its conditions for eligible credit risk mitigants, require that there should not be
a material positive correlation between the credit quality of the counterparty and the value of the collateral
being considered. RMG conducts the assessment of the aspect of material positive correlation on cases
referred to it and accordingly evaluates the eligibility of the credit risk mitigant for obtaining capital relief.
Currently, the Bank does not have any concentration risk within credit risk mitigation.
b. Portfolio covered by eligible financial collateral (March 31, 2013)
` in billion
Amount1
Exposures fully covered by eligible financial collateral, after application of haircut 180.25
1. Includes all entities considered for Basel II capital adequacy computation.
The processes for capital computation and credit risk mitigation based on Basel II guidelines are consistent
across subsidiaries of the Bank.
8. SECURITISATION
a. Securitisation objectives, roles played by the Bank and the risks
Objectives
The Bank’s primary objective of securitisation activities is to increase the efficiency of capital and enhance the
return on capital employed by diversifying sources of funding. The Bank also invests in third party originated
securitisation transactions to meet its priority sector lending requirements.
Roles played by the Bank
In securitisation transactions backed by assets either originated by the Bank or third parties, the Bank plays
the following major roles:
BASEL II – PILLAR 3 DISCLOSURES (CONSOLIDATED)
at March 31, 2013