An assessment of the risk of individual loan transactions is performed by the Group using the scoring and rating methods which are supported by dedicated IT applications. The risk assessment method is defined in the Group’s internal regulations whose main aim is to ensure a uniform and objective evaluation of the credit risk during the lending process.
The Group evaluates the credit risk of retail customers in two dimensions: qualitative and quantitative borrowing capacity assessment. A quantitative creditworthiness assessment consists of examining a customer’s financial position, and the qualitative risk assessment involves scoring and assessing a customer’s credit history obtained from the Group’s internal records and external databases.
In the case of corporate customers in the small- and medium-sized enterprises segment who meet certain criteria, the Group assesses credit risk using the scoring method. Such assessment refers to low-value, non-complex loan transactions and it is performed in two dimensions: a customer’s borrowing capacity and his creditworthiness. An assessment of the borrowing capacity consists in examining a customer’s economic and financial position, and the assessment of creditworthiness involves scoring and evaluating the customer’s credit history obtained from the Group’s internal records and external databases.
In other cases, the rating method is used for institutional customers.
An assessment of the credit risk associated with financing institutional customers is performed by the Bank in two dimensions: the customer and the transaction. The measures involved include an evaluation of the customer’s creditworthiness, i.e. the rating, and an assessment of the transaction risk, i.e. the customer’s ability to repay the amounts due in the amounts and on the dates specified.
Rating models for institutional customers are developed using the Group’s internal data, thus ensuring that they are tailored to the risk profiles of the Group’s customers. Models are based on a statistical dependence analysis between the default and the customer’s risk scoring. The scoring includes an evaluation of financial ratios, qualitative factors and behavioural factors. A customer’s risk assessment depends on the size of the enterprise assessed. In addition, the Group applies a model for the assessment of credited entrepreneurs in the formula of specialized lending, which allows an adequate credit risk assessment of large projects involving real estate financing (e.g. office space, retail space, industrial space) and infrastructure projects (e.g. telecommunication, industrial or public utility infrastructure).
Rating models are implemented within the IT tool which supports the assessment of the Group’s credit risk associated with the financing of institutional customers.
In order to examine the correctness of the operation of the methods applied by the Group, credit risk assessment methodologies relating to individual loan exposures are subject to periodical reviews.
The credit risk assessment process in the Group takes into account the requirements of the Polish Financial Supervision Authority as defined in Recommendation S concerning good practices for the management of mortgage-secured loan exposures and Recommendation T concerning good practices for the management of retail credit exposures.
Information on rating and scoring assessments is widely used in the Group to manage credit risk, in the system of credit decision authorizations, to determine the amounts triggering the credit risk assessment services and in the credit risk measurement and reporting system.