There is a particular focus in formulating the credit policies of the Group on maintaining an appropriate risk/yield profile and on assuming risks that are consistent with the propensity to risk defined by senior management and, more generally, with the mission of the Group.
Particular attention is also paid to defining guidelines for the treatment of new products with adequate reporting to senior management concerning observance of risk/yield objectives, the calculation of minimum interest rates for granting loans, the quality of borrowers, guarantees received and expected rates of recovery in cases of insolvency.
The orientation of credit policies continues to be one of supporting local economies and the needs of families, businessmen, professionals and small to medium size enterprises.
The particular attention paid to maintaining relations established with customers and to developing them as time goes on is one of the strong points of the Group and it helps to eliminate information asymmetries and to strengthen continuity with customer relations in a perspective of long term support.
With regard to the corporate market specific credit policy guidelines have been drawn up to develop the lending portfolio in terms of geographical area, industrial sector and rating class. Credit policies are there to support the distribution network in assessing the attractiveness of business with a view to value creation for specific areas, sectors and counterparties and in evaluating the creditworthiness of counterparties.
Credit policies have been developed on the basis of:
macroeconomic forecasts which allow risk and expected growth for 2008 to be assessed for different sectors and geographical areas;
forecasts of growth in lending, from which expected growth rates can be defined for each sub-portfolio, geographical area, sector and rating class;
a model to optimise the portfolio developed using an EVA approach with the objective of maximising the value created on the corporate market, while observing the constraints applied to maintain high asset quality and an acceptable risk profile for loans.
Action was also taken with regard to credit policies to define operational rules for very short term transactions and for medium and long term business by using pricing sensitivity indicators, given the increase in the cost of funding that has occurred.
Credit policies are implemented in the distribution network by means of:
loan assessment procedures which are made simpler for counterparties belonging to attractive clusters and through targeted marketing campaigns;
initiatives designed to contain risk profiles and limit the negative impact on value creation in the corporate portfolio (corrective pricing action/acquiring guarantees/revision of credit lines) for counterparties belonging to unattractive clusters.