Financial Crime World

Standard Bank PLC Reports Changes in Expected Credit Losses

Risk and Capital Management Report Highlights Key Findings

Cape Town, South Africa - Standard Bank PLC has released its Risk and Capital Management Report for the period ending June 30th, 2023, which reveals significant changes in expected credit losses (ECL) due to de-recognition.

Expected Credit Losses (ECL)

  • The bank’s ECL due to de-recognition decreased by R681 million during the period, attributed to the write-off of non-performing loans and advances to customers.
  • ECL on new exposure raised increased by R3.34 billion.
  • ECL for financial investments expected credit losses (stage 1 & 2) increased by R2.973 billion due to the raising of new exposures and subsequent changes in ECL.

Total Loss Provisions

As at June 30th, 2023, the bank’s total loss provisions stood at R23.044 billion.

Collateral Valuation and Monitoring

The bank uses a comprehensive framework to value and monitor collateral, including:

  • Minimum requirements for valuing collateral
  • Independent assessors/evaluators
  • Regular revaluation of collateral
  • Annual reviews of collateral performance
  • Updates to changes in market and economic conditions

Collateral Types

Financial Collateral

The bank sets adequate margins for currency fluctuations when the collateral is not denominated in the same currency as the exposure.

Physical Collateral

Physical collateral must possess certain qualities, including:

  • Capable of identification and documentation
  • Location known or traceable within a reasonable period
  • Rights of access preserved
  • Insurance coverage

Guarantees and Indemnities

The bank ensures that guarantees and indemnities have the following qualities:

  • Explicit: documented obligation explicitly referenced to specific exposures
  • Direct: direct claim on the protection provider
  • Irrevocable: no determinants that the protection provider can amend
  • Unconditional: immediate payment when conditions are met
  • Complete: full principal, interest, fees, and all other costs

Conclusion

The report provides a comprehensive overview of the bank’s risk management framework and its efforts to mitigate credit risk.