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AfrAsia Bank Limited and its Group Entities
Annual Report 2015
page 95
Risk team analyses the following elements:
the short and long term Economic Risk: the aim is to assess the degree to which the country approximates the ideal of non-inflationary
growth, contained fiscal and external deficits, and manageable debt ratios. The analysis takes into account GDP growth, unemployment,
inflation, real interest rates, exchange rates, the fiscal balance, the current account balance, external debt and a number of other
structural factors; and
the short and long term Political Risk: the political risk assessment compares the state against a theoretical ideal state, essentially a
liberal state and a homogenous society in terms of ethnicity and income equality, with the premise that democracies are more able to
contain and manage direct threats to the political system and offer a template for greater long-term stability.
LIMITS
An appropriate structure of limits is set for each individual country exposure.
The determination of limits is based on the following:
the overall strategy and commercial opportunities;
the relation with Bank’s capital base;
the perceived economic strength and stability of the borrowing country;
the degree of perceived risk; and
the diversification of the Bank’s international lending and investment portfolio.
The Board of Directors validates the structure and value of the limits.
The Bank’s operations are performed strictly within the approved limits
CREDIT RISK MITIGATION
As a fundamental credit principle, the Bank does not generally grant credit facilities solely on the basis of the collateral provided.
All credit facilities are also based on the credit rating, source of repayment and debt servicing ability of the borrower. Collateral is
taken whenever possible to mitigate the credit risk. The collateral is monitored on a regular basis with the frequency of the valuation
depending on the liquidity and volatility of the collateral value enforcement. Legal certainty of enforceability and effectiveness is
another technique used to enforce the risk mitigation.
COLLATERAL CHART
MUR’000
Cash Security
738,896
Unsecured Loans and Advances
3,281,990
Claims on Bank
282,795
Tangible Assets
17,790,175
Total Loans and Advances
22,093,857