2) Policy on Provision for Off - balance Sheet Contingent Liabilities The Bank estimates provisions on off-balance sheet items to make appropriate provision in line with BoT’s notification regarding Classification and Provision of the Financial Institutions in the case of 1) Legal obligations that result from the Bank’s activities and 2) with a high likelihood that the Bank will be liable to make (re)payment for such obligations and 3) Obligations can be reliably estimated. 3) Policies relevant to Stage 2 Loans (Under Performing Loans) and Stage 3 Loans (Non-Performing Loans) management The Bank is aware that the management of stage 3 (Non-Performing) and stage 2 (Under-Performing) loans impact the overall bank performance. To ensure independence, the Bank set up a Special Advisory Banking Services (SABS) team (in the 1st line of Defense) which together with Credit Restructuring Underwriting (the 2nd line of Defense) work together towards the objective of SABS to prevent viable clients from flowing to stage 3 based on the principle of proactive advisory and fast track measures to restructure under-performing loans and convert to stage 1-performing loans, with the objective of Credit Underwriting to ensure quality of debt restructuring at all stages, as well as the accuracy of loan staging. SABS takes care of debtors who start to be under-performing on their credit facilities and fall in “Early Warning Sign (EWS)” or show a significant deterioration in their risk profile. The debtors who are classified as stage 2 require close monitoring. To be more efficient, SABS Manager will co-ordinate/ negotiate with debtors to identify debtors’ problems and to set appropriate solutions based on the nature of their problem. For example, in case of short term liquidity problem, the Bank may consider term extension, restructuring loan facility, etc. In case of long term problem such as higher competition or lower sale, the Bank may consider long-term restructuring (troubled debt restructuring, TDR) based on debt service ability. To comply with the policy, regulations and procedures, Documentation Team and Legal & Strategy Team will co-ordinate with SABS team to prepare any document or agreements to properly capture any such arrangements. To monitor the implementation, the Monitoring Team will closely follow up on all actions related to contracts by working along with SABS to ensure that the risk is controlled until the accounts are converted back to normal. For stage 3 and to set Debt Restructuring Plans which comply with the Bank’s Policies and Regulations, Special Advisory Banking Services will work with the Legal Strategy Team to establish an appropriate plan before negotiating with Debtors, In order to effectively manage the size of stage 3, the Bank may sell or write off stage 3 exposures that are not expected to be able to finalize Debt Restructuring Plans, by portfolios or on a case by case basis. 104 TMBThanachart Bank Public Company Limited
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