04

Risk & Credit Committee

Composition as at 31 December 2014:
Eissa Mohamed Al Suwaidi (Chairman), Mohamed Sultan Ghannoum Al Hameli, Khaled H Al Khoori, Aysha Al Hallami
Secretary: Rami Raslan

Statement from the Chairman of the Risk & Credit Committee

Dear Shareholders,

During 2014 the Committee continued to refocus away from credit decision making and towards risk strategy, risk appetite and risk analysis. In particular, the Committee reviewed the structure of risk reports, considered credit concentration, asset quality, and the Bank’s performance against its risk appetite, and reviewed risk-related policies, procedures and tolerances. The Committee continued to play a role in considering high-level credit decisions, but (a) the Committee approved increased delegated limits to management with the aim of further reducing its role in credit decisioning in 2015, and (b) the Committee recognises that, in view of the nature of the local market, as well as certain regulatory requirements, the Board and, in particular, the Committee will need to retain some involvement with credit decisions on an ongoing basis.

The Committee held 35 meetings in 2014. The Committee:

• reviewed risks in the Bank’s asset portfolios;
• considered various risk policies, including policies relating to share lending, Islamic lending, real estate lending, mortgages, master risk-participation agreements, margin trading, leveraged investments, fraud risk, and market risks;
• considered the Bank’s operational risks and operational risk reporting;
• considered the outcome of stress tests conducted on various key portfolios;
• examined the actual risks and the control deficiencies in the Bank;
• analysed the formulas, inputs and assumptions used for various risk metrics including ‘probability of default’;
• considered the Bank’s limits and tolerances in various areas, such as concentrations, sectors, countries, foreign exchange and derivative transactions;
• assisted the Board to define the risk appetite and risk strategy of the Bank and monitored the independence and effectiveness of risk management functions throughout the Bank;
• considered the Bank’s appetite for risk in various areas, such as GREs in Dubai, Abu Dhabi and the region;
• ensured the adequacy of infrastructure, resources and systems to maintain a satisfactory level of risk management discipline;
• considered the Bank’s capital adequacy assessment process, including its ICAAP methodology;
• monitored the independence of risk management functions throughout the Bank; and
• considered its agenda for 2015.

In 2014, the Committee held three meetings focused exclusively on risk strategy. The Committee held another four meetings that comprised both credit decisions and discussion of risk appetite, strategy and policy issues.

The Committee considers that it made positive progress during 2014 towards meeting its responsibilities.

Looking at 2015

The Committee’s schedule in 2015 contemplates a continuing shift away from credit decision making towards a focus on risk strategy, appetite and analysis. The 2015 schedule contemplates 10 meetings focused exclusively on risk strategy and policy issues. As noted above, the Committee contemplates that it will remain involved in credit decision making to an extent, and that this will continue on an ongoing basis. However, the primary focus in 2015 will be on oversight of the Bank’s risk governance framework, risk appetite and strategy and review of the Bank’s risk policies and practices.

Eissa Mohamed Al Suwaidi

Chairman of the Board’s Risk & Credit Committee