Additional Disclosures in terms of compliance of Basel II Requirements as stipulated by Reserve Bank of India Table DF-1

Transcription

1 Additional Disclosures in terms of compliance of Basel II Requirements as stipulated by Reserve Bank of India Table DF-1 1. Scope of application 1.1 Corporation Bank is the top bank in the group to which the revised capital adequacy framework applies. 1.2 The bank has following subsidiary: Sr. No. Name of the subsidiary Country of incorporation Proportion of ownership percentage 1 Corpbank Securities Ltd. India 100% The subsidiary is fully consolidated as per the Accounting Standard 21 of Institute of Chartered Accountants of India (ICAI). Consolidated financial statements of the group (parent and its subsidiary) have been prepared on the basis of audited financial statements of Corporation Bank (parent) and its subsidiary, combined on line by line basis adding together like items of assets, liabilities, income and expenses, after eliminating intra group transactions and unrealized profit / losses and making necessary adjustments wherever required to confirm to the uniform accounting policies. The financial statements of the subsidiary are drawn for the same reporting period as of the parent i.e from to The minority interest in the net result of the operation and the asset of the subsidiary, represent that part of profit and the net asset attributable to the minorities. 1.3 The entity as given in para 1.2 is consolidated as per the Accounting Standards of ICAI and no entity is pro rata consolidated 1.4 Bank is having 20% or more stake in following entity. Proportion of Country of Sl. No. Name of the Entity ownership incorporation percentage 1 Chikmagalur Kodagu Grameena Bank India 35% 1.5 The entity mentioned in para 1.4 is accounted under equity method as per Accounting standard 23 Accounting for Investments in Associates in Consolidated Financial Statements, issued by The ICAI. 1.6 There is no capital deficiency in the subsidiary. 1.7 The bank presently is not involved in insurance activity.

2 Table DF 2 Capital Structure as on 31st March Bank s Tier I capital comprises of Particulars Amount Paid up share Capital Reserves & Profit & Loss account Innovative Perpetual Debt Tier I Capital ( Gross) Less : 50% Investments in Subsidiaries and Joint Ventures Tier I Capital (Net of Deductions) Bank has issued Innovative Perpetual Bonds (Tier I capital) and also other bonds eligible for inclusion in Tier II capital. Some of the important terms of the bonds are as under: A. Perpetual Unsecured Non-Convertible Subordinated Bonds in the nature of Promissory Notes (Tier I bonds) Bond Seri Date of Amount es Allotment Coupon Rate Tenor Put/ Call Option# % 10 YEARS Call Option may be exercised after the instruments has run for at least 10 years % 10 YEARS % 15 YEARS % 10 YEARS #Call option shall be exercised only with the prior approval of RBI Call Option may be exercised after the instruments has run for at least 10 years Call Option may be exercised after the instruments has run for at least 10 years Call Option may be exercised after the instruments has run for at least 10 years 2.3 The amount of Tier II Capital (capital net of deductions) is Rs 4, Crore. 2.4 Terms of the bonds issued under Tier II Capital are as follows: A Unsecured Redeemable Non-Convertible Subordinated Bonds in the nature of Promissory Notes (Upper Tier II bonds). (Rs. in Crores) Series Date of Bond Call Allotment Amount Coupon Rate Tenor Redemption/ Maturity Option (#) % 15 Years Yes % 15 Years Yes % 15 Years Yes % 15 Years Yes % 15 Years Yes % 15 Years Yes % 15 years Yes ,100 # Call Option at the end of 10 th Year

3 . B Unsecured Redeemable Non-Convertible Subordinated Bonds in the nature of Promissory Notes (Lower Tier II bonds): (Rs. in Crore) Sr. No. Date of Allotment Bond Amount Coupon Rate Tenor (in years) Date of Maturity % 10 Yrs % 10 Yrs % 10 Yrs % 10 Yrs % 10 Yrs 2 Mth , Debt Capital Instruments eligible for Inclusion in Tier I and Tier II capital: (Rs. in Crore) Particulars Tier-I Upper Tier-II Lower Tier-II Amount Raised during the year ended Amount Outstanding as on , , Amount eligible to be reckoned as Capital Fund as on , , The total eligible capital: Particulars Amount Tier I Capital Tier II Capital Capital Table DF-3 Capital Adequacy Qualitative Disclosures: 3. Objective The Bank actively manages it s capital requirement by taking in to account the current and future Business growth of the Bank. Stress tests are used as a part of Internal Capital Adequacy Assessment Process (ICAAP) to evaluate the impact on the bank s capital under extreme stress scenario and to ensure that the capital base can with stands the adverse impact of uncertain events. The bank is guided by the philosophy of optimal utilisation the capital so as to increase the return on capital and increase shareholders value in the long run.

4 3.1 Organisational set up The Bank has put in place an Internal Capital Adequacy Assessment Committee (ICAAC) which is a Board level Committee charged with the overall responsibility of implementing the ICAAP. The Board of Directors maintains active oversight over Bank s Capital levels so as to ensure that Bank continues to operate above the minimum regulatory capital requirement all the times. 3.2 Regulatory Capital Bank maintains at both solo and consolidated level CRAR of more than 9% and tier I CRAR of more than 6% The bank maintains the minimum capital required as per revised framework under Basel II above the prudential floor (As prescribed by the RBI) viz higher of (a) Minimum capital Required as per the revised framework under Basel - II (b) 80% of the minimum capital required as per Basel I framework. Quantitative Disclosures: Capital Required for Credit Risk Rs 8, Crore Capital Requirement for Market Risk Rs Crore Capital for Operational Risk Rs Crore Capital and CRAR Particulars Capital Ratio Tier-I Capital Ratio % 8.33 % Table DF-4 Credit Risk - General Disclosures Qualitative Disclosures: The Bank has adopted the definition of the past due and impaired assets (for accounting purposes) as defined by the regulator for income recognition and asset classification norms The Bank has put in place Board approved Group Credit Policy. The objectives of the policy are to ensure that the operations are in line with the expectation of the Management and the strategies of the top management are translated into meaningful directions to the operational level. The policy stipulates prudential limits on large credit exposure, standards for loan collateral, portfolio management, risk concentration, risk monitoring and evaluation, provisioning and regulatory / legal compliance The Bank identifies the risks to which it is exposed and applies suitable techniques to measure, monitor and control these risks.

5 4.1.4 Risk Management Committees monitors implementation of these policies and strategies approved by the Board and monitors credit risks on a bank wide basis and ensures compliance of risk limits The Bank monitors the risk concentration by analyzing the actual exposure Vis-à-vis exposure limits fixed for single and group borrowers, rating grade wise limits, Industry wise exposure limits and analyzing the geographical distribution of credit across the Zones / States etc Bank considers rating of a borrowal account as an important tool to measure the credit risk associated with any borrower and accordingly a Single scale credit rating system is in place in the Bank. A software driven rating / scoring model for different segments have been customized to suit the Bank s requirements and the same has been put in place across the bank. Quantitative Disclosures: gross credit risk exposures, Fund Based and Non-fund based Gross Credit Risk Exposures Amount Fund Based Advances Investments Other Assets Fund Based Non Fund Based Market Related & Non- Market Related Credit Risk Exposure

6 4.2.2 Geographic distribution of exposures as on 31 st March 2012 Exposure Sl.No Name of the State Non-Fund Credit 1 ANDHRA PRADESH ASSAM BIHAR CHANDIGARH CHATTISGARH DELHI GOA, DAMAN & DIU GUJARATH HARYANA HIMACHAL PRADESH JAMMU & KASHMIR JHARKHAND KARNATAKA KERALA MADHYA PRADESH MAHARASHTRA MEGHALAYA ORISSA PONDICHERY PUNJAB RAJASTHAN SIKKIM TAMILNADU UTTAR PRADESH UTTARANCHAL WEST BENGAL TOTAL

7 4.2.3 Industry Wise distribution as on 31 st March 2012 Sl.No. Industry 1 Mining and Quarrying [including Coal ] 2 Food Processing 2.1 Sugar 2.2 Edible Oils and Vanaspati 2.3 Tea 2.4 Others 3 Beverage & Tobacco 4 Textiles 4.1 Cotton Textiles 4.2 Jute Textiles 4.3 Man-Made Textiles 4.4 Other Textiles 5 Leather & Leather Products 6 Wood & Wood Products 7 Paper & Paper Products 8 Petroleum, Coal Products and Nuclear Fuels 9 Chemicals & Chemicals Products 9.1 Fertilizer 9.2 Drugs & Pharmaceuticals 9.3 Petro-Chemicals 9.4 Others 10 Rubber, Plastic & their Products Exposure Credit Non-fund ( Rs)

8 Sl.No. Industry 11 Glass and Glassware 12 Cement and Cement Products Credit ( Rs) Exposure Non-fund Basic Metal and Metal Products 13.1 Iron and Steel 13.2 Other Metal and Metal Products All Engineering Electronics 14.2 Others Vehicles, Vehicle Parts and Transport Equipments 16 Gems & Jeweler 17 Construction Infrastructure 18.1 Power 18.2 Telecommunications 18.3 Roads & Ports 18.4 Other Infrastructure 19 Other Industries TOTAL

9 4.2.4 Residual Contractual Maturity Break down of advances and investments as on 31 st March 2012 Maturity Pattern Advances Investments Foreign Currency Assets Next day days days days days - 3months >3months-6months >6months-1yr >1yr-3yrs >3yrs-5yrs >5yrs Amount of NPAs (Gross) as on 31st March 2012 : Sl.No. Category Amount i. Sub Standard ii. Doubtful iii. Doubtful iv. Doubtful v. Loss vi. NPA [Gross] Net NPA as on 31 st March 2012 Rs Crores NPA Ratios Sl.No. Category % i. Gross NPA to Gross Advances 1.26 ii. Net NPA to Net Advances Movement of NPA s (Gross) Sl.No. Category Amount i. Opening balance at the beginning of the year 1 st April ii. Additions during the Year till 31st March iii. Reductions during the Year till 31st March iv. Closing balance as on 31st March

10 4.2.9 Movement of Provisions for NPA Sl.No. Category Amount i. Opening balance at the beginning of the year 1 st April ii. Provisions made during the year till 31st March iii. Written off during the current year till 31st March iv. Write back of excess provision made during the year till 31 st March v. Closing balance as on 31st March Amount of Non-Performing Investment as on 31 st March 2012 is Rs Crore Amount of provision held as on 31 st March 2012 for non-performing investment Rs Crore Movement of Provisions for Depreciation on Investments. Sl.No. Category Amount i. Opening balance at the beginning of the year 1 st April ii. Provisions made/(reversed) during the year till 31st March iii. Less write-off Write-back of excess provision during the year till 31st March 2012 iv. Closing balance as on 31st March Table DF- 5 Credit Risk: Qualitative Disclosures: Bank has approved the following rating agencies identified/ approved by RBI to facilitate the borrower customers to solicit the ratings. The rating so obtained shall be used for the purpose of computation of CRAR. CARE, CRISIL, ICRA Fitch India The rating assigned by the above external rating agencies are being used for all exposures subjected to rating for risk weighting purposes under the standardized approach for CRAR calculations under Basel-II For assets that have contractual maturity less than or equal to one year, short term ratings are used while for other assets, long term ratings are used. For Cash Credit / Over Draft and other revolving Credit exposures long-term ratings are taken.

11 Particulars Fund Based Loans & Advances Quantitative Disclosure Below 100% Risk weight Book Value RWA 100% Risk Weight Book Value RWA More than 100% Risk Weight Book Value RWA Book Value RWA Investments Other Assets Non Fund Based Non Market Related Market Related Table DF- 6 Credit Risk Mitigation: Disclosures for standardized Approaches Qualitative Disclosures: Bank employs various methods and techniques to reduce the impact of the credit risks it is exposed to in its daily operations. The various Credit Risk Mitigants (CRM) are as under: (1) Collateralized transactions (2) Guarantees Eligible financial collateral: The following financial collaterals are recognized as Credit Mitigants by the Bank. i. Cash and Deposits including deposits in foreign currency. ii. Gold : benchmarked to 99.99% purity iii. Securities issued by Central and State Governments iv. Kisan Vikas Patra and National Savings Certificates v. Life insurance policies vi. Debt securities -Rated and Debt Securities -not rated but issued by banks vii. Units of mutual funds Guarantees Guarantees issued by entities with a lower risk weight than the counterparty shall be accepted as a credit risk Mitigant. Guarantee of the Sovereigns, sovereign entities (including ECGC and CGTSME) are obtained wherever warranted. ( Rs in Crores)

12 Quantitative Disclosures For disclosed credit risk portfolio under the standardized approach, the total exposure that is covered by Eligible financial collateral after the application of haircuts Eligible financial collateral Capital Relief availed Deposits Rs Cr Gold jewels Rs Cr KVP/NSC/LIC/Govt Securities Rs Cr Table DF- 7 Securitization: Disclosure for Standardized approach- Nil. Table DF-8 Market Risk in trading Book 1.1 Bank has adopted the Standardized Duration Approach as prescribed by RBI for computation of capital charge to market risk. 1.2 The capital requirements for market risk are as under: Risk Category i) Interest Rate Risk ii) Equity Position Risk iii) Foreign Exchange Risk (including Gold ) 3.69 iv) capital charge for market risks under Table DF-9 Operational Risk Qualitative disclosures The Bank has put in place important policies like Operational Risk Management; Information System Security, Know Your Customer (KYC) and Anti Money Laundering (AML); Business Continuity and Disaster recovery Management. Updated manuals on all-important functional areas have been made available on the Bank s Intranet. Risk Based Internal Audit is in place and all the branches are subjected to Risk Based Internal Audit The Operational Risk Management Policy outlines the Organization Structure and covers the process of identification, assessment / measurement and control of various operational risks. Internal control mechanism is in place to control and minimize the operational risks. Quantitative Disclosures: Capital Charge required to be maintained for Operational Risk under Basic Indicator Approach Rs Crore.

13 Table DF-10 Interest rate risk in the banking book (IRRBB) Qualitative Disclosures Interest rate risk refers to fluctuations in Bank s Net Interest Income and the value of its Assets and Liabilities arising from internal and external factors. Internal factors include the composition of the Bank s assets and liabilities, quality, maturity, interest rate and re-pricing period of deposits, borrowings, loans and investments. External factors cover general economic conditions. Rising or falling interest rates impact the Bank depending on Balance Sheet positioning. Interest rate risk is prevalent on both the asset as well as the liability sides of the Bank s Balance Sheet. The Market Risk Management Committee/ALCO is responsible for evolving appropriate systems and procedures for ongoing identification and analysis of Balance Sheet risks and laying down parameters for efficient management of these risks through Asset Liability Management Policy of the Bank. ALCO, therefore, periodically monitors and controls the risks and returns, funding and deployment, setting Bank s lending and deposit rates, and directing the investment activities of the Bank. ALCO also develops the market risk strategy by clearly articulating the acceptable levels of exposure to specific risk types (i.e. interest rate, liquidity etc). The Risk Management Committee of the Board of Directors (RMCB) oversees the implementation of the system for ALM and reviews its functioning periodically and provides direction. It reviews various decisions taken by the Asset - Liability Management Committee (ALCO) for managing market risk. Interest rate risk exposure is measured with Interest Rate Gap analysis, Duration analysis. RBI has stipulated monitoring of interest rate risk at monthly intervals through a Statement of Interest Rate Sensitivity (Repricing Gaps) to be prepared as the last Reporting Friday of each month. Accordingly, ALCO reviews Interest Rate Sensitivity statement on monthly basis. Bank also carries out Duration Gap analysis (on monthly basis) to estimate the impact of change in interest rates on economic value of Bank s assets and liabilities and thus arrive at changes in Market Value of Equity (MVE). Quantitative Disclosures 1. Earnings at Risk for 100 bps interest rate shock as on assets and liabilities is (+/-) Rs Crores 2. Change in the Market Value of Equity for 200 bps interest rate shock is %