Page 151 - Suncorp_Review

Suncorp Group Limited Annual Report 2010/11 149

(b) Collateral management

Collateral is used to mitigate credit risk as the secondary source of repayment in case the counterparty cannot meet their contractual repayment commitments.

The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Suncorp Group upon extension of credit, is based on management’s credit evaluation of the counterparty. The Bank holds collateral against loans and advances to customers in the form of mortgage interests over property, other registered securities over assets and guarantees. With more than 50% (2010: 50%) of the Bank’s lending being consumer in nature and 98% (2010: 98%) of that secured by residential property the Bank’s exposures are ultimately linked to factors impacting employment and residential property values.

An estimate of the fair value of collateral and other security enhancements held by the Bank against Non-performing loans – Impaired is $2,305 million (2010: $2,001 million). It has not been practicable to determine the fair value of collateral held as security against Non-performing loans – not impaired or Performing loans. (c) Concentration of credit risk

Concentration of credit risk is managed by client/counterparty and industry sector. Portfolios are actively monitored and frequently reviewed to identify, assess and guard against unacceptable risk concentrations.

Details of the aggregate number of Banking’s corporate exposures (including direct and contingent exposures) which individually were greater than 5% of the Banking capital resources (Tier 1 and Tier 2 capital) are as follows:

BANKING

2011 2010 Number Number

25 percent and greater 3 2 20 percent to less than 25 percent – – 15 percent to less than 20 percent 2 3 10 percent to less than 15 percent – – 5 percent to less than 10 percent 4 5

A structure of industry concentration limits has been developed to monitor exposure levels within the risk-graded portfolio. These are tactical limits upon which business planning and developmental activity is based but also act as guidelines for portfolio concentration purposes.

34.4.2 Liquidity risk

The Bank’s liquidity risk is managed using a framework that includes going concern and name crisis scenario analysis, minimum high quality liquid asset ratios, minimum liquid asset ratios, liquidity concentration limits and other supplementary management trigger limits.

The Board Risk Committee approves liquidity policies and reviews relevant risk limits. Liquidity and funding policies are also subject to APRA review. Executive management of liquidity risk is delegated to the Bank Asset and Liability Committee, which reviews risk measures and limits, endorses and monitors the overall Bank funding and liquidity strategy. Operational management of liquidity risk is delegated to the Balance Sheet Management section of the Bank Treasury. Liquidity risk is independently monitored against approved policies on a daily basis by the Market Risk division and reported to the Bank Chief Risk Offcer.