Lending policy

Bank’s lending policy consists of allocation of loan resources very effectively and efficiently according to regulations of the Central Bank of the Azerbaijan Republic, advices of the Basel Committee on Banking Supervision and the bank’s rules and standards those prepared according to international experience. 

Bank’s lending policy is prepared according to corporate principles of the bank, such as clarity, flexibility, honesty, professionalism, transparency, convenient service.

Priority areas are consumer loans, auto loans, express loans (microloans), credit cards, corporate loans and mortgage loans in the bank’s credit policy

The main purpose of lending policy is credit risk management. These processes include risk analysis, risk assessment, risk minimization and risk prevention.

Steps in credit risk management:



1. Loan application assessment;

1.1. Loan application - Consumer’s application for getting a loan;

1.2. Assessment of application - Assessment of the consumer's compliance with the terms of the loan by a loan officer;

1.3. The analysis of the consumer – Analysis of consumer’s financial position and ability to repay the loan;

1.4. Decision making – decision is made by branch or Head office in a short period of time depending on amount and type of loan.

 

2. Asset classification and provisioning; 

2.1. Assets are classified and provisions are made by operating system automatically based on available data in accordance with the regulations of CBAR.

 

3. Diversification of credit portfolio; 

3.1. Taking into account the risk factors, credit products are classified according to economic sectors, geographical areas, types of currency, period and profitability of loan, different customer groups and etc.

 

4. Analysis of loans on a regular basis.

4.1. Loans are controlled with reports those contains loan overdue, loan repayment and etc. In addition, inspections are carried out in order to determine consumer’s financial position, spending of loans in accordance with their purposes is controlled by Loan control and monitoring department under Risk Management department on a regular basis and results are presented to management on a monthly basis. 

5. Non-performing loan: 

5.1. Control of non-performing loan is carried out by special software and reports on a daily basis. Software and reports reflect changing trends of non-performing loans in relevant indicators;

5.2. Non-performing loans department prepares reports about implemented works and presents Credit Committee on a monthly basis. Non-performing loans are discussed by Credit Committee;

5.3. Non-perfoming loans under the control of the Bank consist of three levels:

5.3.1 Control by branches – Regulate compliance of repayment according to repayment schedule with building customer relationship. If the customer refuses to comply with its obligations over a period of time, documents and information related to existing customer would be sent to Non-performing loan department;

5.3.2 Non-performing loan department - Implements the collection of non-performing loans. If the collection of non-performing loans will not be possible, relevant documents are presented to Law Department.

5.3.3 Law Department – Represents the interest of the bank in court and implements all procedures in order to collect non-performing loans in accordance with laws.

 

6. Off-balance sheet risks consideration

6.1. Applications of off-balance sheet liabilities are analyzed in order to minimize off-balance sheet risks and decisions are made by Credit Committee or other department. Bank prefers secured off-balance sheet liabilities.

 

7. Reporting 

7.1. Special reports are presented to the Supervisory Board and the Management Board on monthly and quarterly basis in order to manage risks effectively. In addition, reports reflect minimum requirements of risk management, compliance with limitations, adequacy of system, effectiveness of processes, and trends of risk indicators. 

8. Control of guarantees

8.1. Guarantees are analyzed regularly and changes are assessed depending on type of guarantee by loan officer or by appraisal companies.



9. Determination of loan as impaired when the collection of loan (the amount of principle and interest) was failed in accordance with loan contract.

9.1.  If the three steps of loan control are taken, however the collection of loan was failed, then loan is determined as impaired.



10. Determination of loan limits

10.1. Credit limits are determined by the relevant department of the bank and credit are allotted only within the specified limits.

Bank controls and improves credit policy regularly: reviews division of authority, adequacy of system and internal rules.

During the implementation of credit policy bank considers social and moral responsibilities and doesn’t allot loan to the projects which harmful for human health, public interest and environment. Anti-money laundering is one of the main principle of bank’s credit policy.