Credit Risk Mitigants dbs annual report 2014

G O VER N A N C E When฀required,฀DBS฀will฀take฀possession฀of฀the฀collateral฀it฀holds฀฀ as฀securities฀and฀will฀dispose฀of฀them฀as฀soon฀as฀practicable,฀฀ with฀the฀proceeds฀used฀to฀reduce฀the฀outstanding฀indebtedness.฀฀ A฀breakdown฀of฀collateral฀held฀for฀NPA฀is฀shown฀in฀Note฀41.2฀to฀฀ the฀Financial฀Statements฀on฀page฀173.฀Repossessed฀collateral฀is฀ classiied฀in฀the฀balance฀sheet฀as฀other฀assets.฀The฀amounts฀of฀฀ such฀other฀assets฀for฀2014฀and฀2013฀were฀not฀material.

5.2 Credit Risk Mitigants

Collateral Received Where฀possible,฀DBS฀takes฀collateral฀as฀a฀secondary฀recourse฀to฀the฀ borrower.฀Collateral฀includes฀cash,฀marketable฀securities,฀properties,฀ trade฀receivables,฀inventory฀and฀equipment฀and฀other฀physical฀and฀ inancial฀collateral.฀We฀may฀also฀take฀ixed฀and฀loating฀charges฀on฀ the฀assets฀of฀borrowers.฀It฀has฀put฀in฀place฀policies฀to฀determine฀฀ the฀eligibility฀of฀collateral฀for฀credit฀risk฀mitigation,฀which฀include฀ requiring฀speciic฀collaterals฀to฀meet฀minimum฀operational฀ requirements฀in฀order฀to฀be฀considered฀as฀effective฀risk฀mitigants. When฀a฀collateral฀arrangement฀is฀in฀place฀for฀exposures฀arising฀฀ from฀derivative,฀repurchase฀agreement฀repo฀and฀other฀repo-style฀ transactions฀with฀inancial฀market฀counterparties,฀these฀are฀covered฀ under฀market฀standard฀documentation฀such฀as฀Master฀Repurchase฀ Agreements฀and฀International฀Swaps฀and฀Derivatives฀Association฀ ISDA฀Agreements.฀Collateral฀received฀is฀marked฀to฀market฀on฀฀ a฀frequency฀mutually฀agreed฀with฀the฀counterparties.฀These฀are฀ governed฀by฀internal฀guidelines฀with฀respect฀to฀the฀eligibility฀of฀ collateral.฀In฀the฀event฀of฀a฀default,฀the฀credit฀risk฀exposure฀is฀ reduced฀by฀master฀netting฀arrangements฀where฀DBS฀is฀allowed฀to฀ offset฀what฀we฀owe฀to฀a฀counterparty฀against฀what฀is฀due฀from฀฀ that฀counterparty฀in฀a฀netting-eligible฀jurisdiction. Collateral฀taken฀for฀commercial฀banking฀is฀revalued฀periodically,฀ depending฀on฀the฀type฀of฀collateral.฀While฀real฀estate฀constitutes฀ the฀largest฀percentage฀of฀collateral฀assets,฀we฀generally฀consider฀฀ the฀collateral฀assets฀to฀be฀diversiied. Helping฀our฀customers฀to฀restructure฀repayment฀liabilities,฀in฀times฀ of฀dificulty,฀is฀our฀preferred฀approach.฀However,฀should฀the฀need฀ arise,฀expeditious฀disposal฀and฀recovery฀processes฀are฀in฀place฀for฀ disposal฀of฀collateral฀held฀by฀DBS.฀We฀also฀maintain฀a฀panel฀of฀ agents฀and฀solicitors฀for฀the฀expeditious฀disposal฀of฀non-liquid฀ assets฀and฀specialised฀equipment.฀ Collateral Posted DBS฀is฀required฀to฀post฀additional฀collateral฀in฀the฀event฀of฀a฀rating฀ downgrade.฀As฀at฀31฀December฀2014,฀for฀a฀one฀notch฀downgrade฀ of฀its฀Standard฀฀Poor’s฀Ratings฀Services฀and฀Moody’s฀Investors฀ Services฀ratings,฀DBS฀Bank฀would฀have฀to฀post฀additional฀collateral฀ amounting฀to฀SGD฀106฀million฀and฀SGD฀35฀million฀respectively. Other Risk Mitigants DBS฀also฀uses฀guarantees฀as฀credit฀risk฀mitigants.฀While฀DBS฀may฀ accept฀guarantees฀from฀any฀counterparty,฀it฀sets฀internal฀thresholds฀ for฀considering฀guarantors฀to฀be฀eligible฀for฀credit฀risk฀mitigation.฀

5.3 Internal Credit Risk Models