Credit risk is measured, estimated and assessed at the level of the Customer, a single credit transaction and at the level of the loan portfolios of the Bank’s Group, using scoring or rating methods, which ensure a uniform and objective assessment of the Customer’s credibility in the creditworthiness assessment process.
The Bank’s Group develops credit risk assessment methods taking into account the requirements of the Internal Ratings-Based Approach (IRB).
As part of credit risk measurement or estimation at the level of loan portfolios, stress tests of the risk related to foreign currency and zloty credit exposures are carried out.
Measurement, estimation and assessment of portfolio credit risk includes periodical assessment of this risk taking into account all credit exposures of Customers, as well as various aspects of the portfolio, such as Customer groups, groups of credit products.
In order to assess the level of credit risk and profitability of loan portfolios, the Bank’s Group uses different credit risk measurement and valuation methods, including:
- probability of default (PD);
- loss given default (LGD);
- credit conversion factor (CCF);
- expected loss (EL);
- credit value at risk (CVaR);
- share and structure of impaired loans;
- coverage ratio;
- cost of credit risk;
- stress testing.
The process of assessing the Group’s credit risk takes into account the requirements of the Polish Financial Supervision Authority as specified in the PFSA Recommendations.
The Group performs analyses and stress-tests regarding the influence of potential changes in the macroeconomic environment on the quality of the Group’s loan portfolio and the results are presented in reports to the Bank’s authorities. The above-mentioned information enables identifying and taking measures to limit the adverse influence of unfavourable market changes on the Group’s performance.