Credit policy

The Group updated its individual credit policies in relation to regular reviews of the loan granting process and the necessity to update credit risk parameters arising from PFSA recommendations. It has also carried out a comprehensive review of internal principles and procedures for compliance with external regulations, with the review results reflected in the process of internal regulations update.

Retail clients

In the area of retail loan portfolio, the key changes include adjusting the Group to T, S, and J Recommendation requirements. The compliance work included:

• determining the risk appetite and internal exposure concentration limits for retail loans secured and non-secured by mortgage;
• determining the maximum acceptable Dtl and LtV levels and requirements regarding own contribution;
• updating requirements regarding stress testing to include testing of debtors’ and Bank's sensitivity to changes in the business environment;
• introducing the obligation of regular verification of real property market databases;
• reviewing and updating of the process of verifying the market value of housing properties;
• verification of the policy of legal security of loans dedicated to retail clients;
• introducing an optional simplified evaluation of creditworthiness of the Group’s existing clients applying for non-mortgage loans

Additionally, changes were introduced to optimize and improve loan granting processes, to include: modification of the methodology of determining household costs and income included in the calculation of creditworthiness and of the methodology of determining the nominal interest growth parameter based on the historical variability of rates. A periodic update of other risk parameters as well as financial and legal documents required to calculate creditworthiness was carried out on a regular basis.

Corporate clients

With regard to the corporate loan portfolio, the Group commenced a series of initiatives aimed at improvement of the loan granting process efficiency and methods of credit risk management, to include in particular elements regarding evaluation of creditworthiness in the Micro-enterprise segment and of selected SME clients.

Following a review of the loan granting process, the Group changed the credit risk evaluation methodology and introduced new parameters of credit products dedicated to corporate clients. In order to optimize the process, for selected credit products, a system of risk evaluation and loan decision making was introduced based on a new, standardized and automated credit process in Ferryt system.

Further, key changes involved achieving compliance with S and J recommendation in terms of credit risk management in the Group, to include:

• reviewing and updating of the process of verifying the market value of commercial properties;
• determining the maximum acceptable level of LtV ratios and own contribution requirements;
• providing details to the process of evaluation of investment funding, the structure and manner ofreleasing subsequent loan tranches, investment progress control.

Debt collection

With regard to debt collection, the Group transferred restructuring operations to separate specialized organizational units / positions in the Bank. It concluded cost-free arrangements with external entities to maintain the loan collection process in the form of an electronic reminder process. This allowed optimization of debt collection costs. The Group has established a dedicated pre-collection unit. Additionally, for the purpose of pre-collection maintenance of loan transactions, cooperation with the external entity was extended to allow faster and direct contact with mortgage loan and Micro-enterprise segment clients who default on payment. In order to improve the corporate client monitoring process, in 2013 the Bank initiated development of an application dedicated to this part of the process. At the end of 2013, the first project stage, i.e. daily monitoring, was implemented.