2020 Universal registration document and annual financial report - BNP PARIBAS346
5 risks and CaPital adequaCy Pillar 3
5
Credit risk
CREDIT RISK MANAGEMENT POLICY
CREDIT POLICIES [Audited] The Bank s lending activities are governed by the Global Credit Policy. It applies to all Group activities that generate credit or counterparty risk. The Global Credit Policy provides general principles (including the risk assessment and decision-making process, adherence to the highest standards of compliance and ethics) applicable to all credit risk, as well as specific principles applicable to country risk, economic sector risks, clients selection and the transaction structures. It is supplemented by specific policies tailored to each type of business or counterparty.
These policies are regularly updated in line with developments in the credit environment in which the Group operates.
Corporate Social and Environmental Responsibility (CSR)
Since 2012, clauses on Corporate Social and Environmental Responsibility (CSR) are included in specific new credit policies or when existing policies are updated.
Furthermore, sectoral policies and financing exclusions for certain sectors presenting significant Environmental, Social and Governance (ESG) challenges (described in the Commitment 3 section of chapter 7: Systematic integration and management of Environmental, Social and Governance risks (ESG)) have also been implemented since 2011 and have been steadily strengthened since then. These risks are also analysed in the context of sector reviews and country envelope limits.
The Group is also taking a number of steps to improve the incorporation of ESG risks, especially climate change-related risks, in its credit risk system. Within the context of the application of the Duty of Vigilance law, in addition to sectoral policies and financing exclusions, the Group also decided to strengthen the ESG assessment of its clients to make it more systematic and to better understand the ESG risk profile of all its corporate clients.
INDIVIDUAL DECISION- MAKING PROCEDURES [Audited] A system of discretionary lending limits has been established, under which all lending decisions must be approved by managers or representatives of the sales teams, with the approval of a formally designated member of RISK. Approvals are systematically evidenced in writing, either by means of a signed approval form or in the minutes of formal Credit Committee meetings. Discretionary lending limits correspond to aggregate commitments by business group and vary according to internal credit ratings and the specific nature of the business concerned. All transactions proposed are subject to a detailed review of the borrower s current and future position. The review, conducted as soon as the transaction is arranged and updated at least on an annual basis, is designed to ensure the Group has comprehensive information about the borrower and can monitor any potential changes in its situation. Certain types of lending commitments, such as loans to financial institutions, sovereign loans and loans to customers operating in certain industries that are exposed to cyclical risks or to a rapid pace of change, are subject to specific authorisation procedures and require the sign-off of an industry expert or designated specialist. In Retail Banking, simplified procedures are applied, based on statistical decision-making aids.
Loan applications must comply with the Bank s Global Credit Policy and any relevant specific policies. Material exceptions undergo a special approval process. Before making any commitments, BNP Paribas carries out an in-depth review of any known development plans of the borrower, and ensures that it has thorough knowledge of all the structural aspects of the borrower s operations and that adequate monitoring will be possible.
The General Management Doubtful Committee (CCDG) is the highest level Group committee for all decisions related to credit and counterparty risk. It is chaired by a member of Executive Management or, by delegation, a Deputy Chief Operating Officer or the Chief Risk Officer (see Governance in section 5.3 Risk Management). It has ultimate decision-making authority for all loan applications for amounts in excess of individual discretionary lending limits or applications that would not comply with the Global Credit Policy.
