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MIT RA
Gen er al Ma na ger
Punjab Nati onal Ban k
He ad Office, N ew Del hi
Outline of the Presentation
risk assessment
Risk Based Lending
Interest rate
Foreign exchange
Operational Risk
Fraud
Cause Definition
Internal Losses from failed transactions, client accounts,
Processes settlements and every day business processes.
People Losses caused by an employee or involving employees
(intentional or unintentional), or losses caused through
the relationship or contact that a firm has with its clients,
shareholders, third parties, or regulators.
Systems Losses arising from disruption of business or system
failure due to unavailability of infrastructure or IT.
External Losses from the actions of 3rd parties including external
Events fraud, or damage to property or assets, or from change in
regulations that would alter the firm’s ability to continue
doing business.
Foundation
Advanced
Internal Model
20
65 60
40
Minimum requirements
Values for Loss given default (LGD) and Values for Loss given default (LGD)
exposure at default (EAD) are provided by and exposure at default (EAD) are
the regulatory authority. determined by each bank through
internal modeling with a data of 5-7
years.
Assessment of values of credit mitigants is Banks may assess the value of its credit
done by the regulatory authority. mitigants.
8.00%
7.53%
7.00%
6.00% Unexpected loss
Loan losses
5.00%
4.58%
4.00% 3.93%
3.52% 3.32%
3.00%
2.21% 2.30%
2.00% 1.96%
1.21% 1.41%
1.00% Expected loss 0.56%
0.44% 0.27% 0.42%
0.00%
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Time (Year)
punjab national bank
…..the name you can BANK upon 30
Capital Requirement under IRB
Borrower Transaction
Internal Rating Collateral Maturity
80
70 A rating
60
POPULATION
50 D rating
AA rating
40
30
20 Random
10
0
GINI Coeff ici ent
0 =
10 20 30 40 50 60 70 80 90 100
0.63
% CUMULATIVE POPULATION
fiiting
16.00%
12.00%
8.00%
4.00% PNB
0.00%
AAA AA A BB BB C D
Actual 0.03% 0.09% 0.40% 0.77% 2.35% 6.40% 13.21%
Exponential 0.04% 0.10% 0.28% 0.77% 2.14% 5.94% 16.47%
CRISIL 0.00% 0.00% 1.01% 3.47% 15.85% 30.30% 28.57%
Rating Grades