• Impairment in value of physical collateral A substantial portion of the Bank’s loan portfolio is secured by physical collateral and other assets, the value of which may be affected by the overall economic condition in Thailand. For example, a downturn in the real estate market could result in the principal amount of loans secured by real estate exceeding the loan-to-value proportion compared to that at the time of origination. A decline in the value of collaterals securing loans may result in an increase in the Bank’s allowance for expected credit loss. The Bank manages collateral value impairment risk through the collateral and appraisal guideline and executes related procedures in accordance with BOT’s regulations. The Bank has established a list of selection criteria for appraiser and appraisal standards to ensure the compliance with BOT’s regulations, professional standards and ethics. The reappraisal frequency is driven by the level of risk measured by the borrower’s loan performance. In addition, the Bank’s internal appraisal function is independent from the credit approval function to ensure transparency and prevent conflicts of interest. • Credit Concentration Concentration risk in credit portfolios is an important aspect of credit risk management. Managing concentration risk is an ongoing area of attention in the Bank’s Credit Risk Management prioritization. The Bank manages and monitors credit concentration with respect to individual industry, industry cluster, countries, group of customers and individual customer by establishing Bank-wide Maximum Industry Exposure Limit at individual industry level and industry cluster level, Maximum Country Exposure Limit, Single Lending Limit as per BOT’s regulation and Single Exposure Limit as per internal guideline to manage both existing and potential exposures within acceptable levels to ensure appropriate diversification of the portfolio and avoid excessive credit risk exposure in certain individual industry, industry cluster, countries, group of customers and individual customer. 2.2.1.2 Credit-Related Policy 1) Policies relevant to Staging and Provisioning The Bank maintains a staging and provisioning framework in line with BoT’s notification which requires all banks to set up clearly defined policies and guidelines to comply and align with the International Financial Reporting Standard 9 (IFRS9). The stage assignment is based on the customer’s credit quality which can be assessed using both quantitative and qualitative factors. Commercial loans are classified by debtors, whereas consumer or retail loans are classified by accounts separately. If customers use both types of credits, the loans are classified by debtors based on the worst of all accounts. The Bank sets aside provision based on the Expected Credit Loss (ECL). In addition, the Bank proactively sets aside management overlay when underlying assumptions or data used to estimate ECL do not adequately reflect current circumstances at the reporting date. 103 Form 56-1 One Report 2021
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