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AfrAsia Bank Limited and its Group Entities
Annual Report 2015
page 89
CREDIT MONITORING
Monitoring weaknesses in portfolios
Credit risk exposures and weaknesses are managed through the robust credit assessment, structuring and regular monitoring
process. The latter under the responsibility of the Credit Recovery Unit, involves the monitoring of daily credit excesses on accounts
as well as the review of all potential credit losses on a timely basis. Those exposures showing signs of deterioration are put on
a watch list (WL), the files are reviewed at least monthly to ensure prompt action is taken. The basis for provisioning and loan
assessment is based on the Guideline on Credit Impairment and Income Recognition issued by the Bank of Mauritius.
Corporate portfolios
Corporate accounts that are showing signs of deterioration or a likelihood of potential credit losses risk are recorded on the WL
comprising two categories graded in line with the perceived severity of the risk attached to the lending, and its probability of default.
These lists are updated monthly and circulated to the relevant recovery manager. Once an account has been placed on WL, the
exposure is carefully monitored and, where appropriate, exposure reductions are effected. When an account becomes impaired,
it will normally, but not necessarily, have passed through each of the two categories, which reflect the need for increasing caution
and control. Where a borrower’s financial health gives grounds for concern, it is immediately placed into the appropriate category.
While all borrowers, regardless of financial health, are subject to a full review of all facilities on at least an annual basis, more
frequent interim reviews may be undertaken should circumstances dictate.
Retail portfolios
Within the retail portfolios, the approach is consistent with the Bank’s policy of raising a collective impairment allowance as soon
as objective evidence of impairment is identified. Retail accounts can be classified according to specified categories of arrears
status, which reflects the level of contractual payments which are overdue. The probability of default increases with the number
of contractual payments missed, thus raising the associated impairment requirement. Once a loan has passed through a prescribed
number of statuses and downgrades, it will enter recovery status where the file will be classified and monitored by the recovery unit.