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Queen City Development Bank
RISK MANAGEMENT

Overview

     Risk Management is the banking institution’s ability to identify, monitor or assess, and mitigate or control risk exposures. Risk management covers areas such as credit, market, interest rate, foreign currency, liquidity, operational, technology, legal and regulatory risk. Management of these areas are vital in a bank’s growth and development, and in increasing profitability.

The Queenbank Way

     The Queenbank Risk Management System has adopted an efficient approach in controlling its risk management. Proper management and handling of its assets and operations will improve the bank’s growth and value for its shareholders and clients. We assure that every Queenbanker is responsible in the implementation of our risk management system in order to promote stability, efficiency and oversight.

The Structure

     The Risk Management Structure is comprised of the Board of Directors (BOD), Executive Committee, Asset Liability and Other Risks Committee (ALCO), the Audit Committee, Legal Risk Committee, and the Electronic (IT) Risk Committee.

Our Risk Management Committee

     At Queenbank, the Asset Liability and Other Risk Committee (ALCO) is the core group created by the Board to identify, monitor and manage the bank’s exposure to the following risk areas, namely, Liquidity Risk, Interest Rate Risk, Market Risk, Foreign Exchange Risk, Market Risk, Regulatory, and Credit Risk. It is likewise tasked to develop strategies and to oversee and formulate risk tolerances in the risk management process. It is comprised of four (4) Board Directors/Executive Officers, Group Heads for Branch Banking and Commercial Banking Groups, Department Heads representing the Portfolio Administration Unit and Treasury and the Compliance Officer. This committee meets twice a month regularly.

Credit Risk Management

     Credit risk involves the possible financial loss of the bank resulting from default of its borrowers or from the depreciation in value of the assets acquired by the bank in settlement of loans. This also involves risk in settlement procedures or counterparty risk.

     Our loans department follows the credit policy guidelines as provided by the Board. These serve as minimum standards in extending loans to our clientele. Maintenance and strict implementation of sound credit in the granting of loans is observed. We also integrate adequate internal control procedures in the credit-granting process.

     Credit risk is controlled through establishment of appropriate and sufficiently defined environments. We manage this based on the type, economic sector, geographical location, maturity and anticipated profitability of individuals and other borrowers.

Market Risk Management

     Market Risk arises from adverse movements in the level or volatility of market prices of interest rate instruments, equities, commodities and currencies. This risk is also associated with a price movement of a given probability over a specified time or period.

     The bulk of excess funds are invested in the Bangko Sentral ng Pilipinas (BSP) through Overnight Lending. ALCO deliberates the evaluation and approval function in investments.

Interest Rate Risk

     The Interest Risk is identified on mismatches on maturities. It measures interest rate risk by identifying gaps between repricing dates of assets and liabilities. To minimize mismatches, the bank accredits itself with various financial institutions such as the BSP, the Small Medium Enterprise Credit (SMEC), and the Small Business Corporation (SBC).

Liquidity Risk

     Liquidity Risk arises when the bank is faced with the unexpected cash flow positions where management will either have to fund cash flow shortfalls at a short notice and unfavorable terms or to invest surplus funds despite unattractive conditions.

     The liquidity risk is controlled by the consistent maintenance of well-calculated reserves, accurate measurement and management of funding requirement, effective management of the bank’s access to the financial market, and establishment of updated contingency plans based on the bank’s familiarity with various assumptions underlying the possible cash flows.

Operational Risk

     Operational Risk Management arises from the failure and inefficiency of the bank’s internal policies, systems and procedure to deal with the major disturbances in the financial and economic market, and from the incorrect and unstudied decisions of management that lead to the bank’s inability to carry out normal business banking operations.

     The bank has circularized its Bank Operations Manual which serves as a policy guideline and makes sure that these are adhered to, properly implemented and strictly followed. It maintains a close watch over the financial and economic market and oversees operations with care.

     The bank has established its Internal Audit Group (IAG) tasked to monitor strict compliance with these guidelines. It also recommends policies for adoption or for further improvement to the Audit Committee. The Internal Audit Group presents findings and recommendation to the Audit Committee/Board regularly on a monthly basis.

Technology Risk

     Technology Risk arises from the inefficiency and insufficiency of the bank’s electronic or computerized systems and its existing technology in use to process its transactions. It also occurs when the bank fails to install a system that fully complies with the requirements of the regulatory bodies including reports and records management.

     It also arises from the inability of the current manpower resources to utilize these available systems and technology to its full capacity.

     Technology Risk is controlled through the implementation of adequate maintenance procedures for all bank equipment, continuous research and study on the development of systems and the integration of efficient and highly dependable audit trails in all the bank’s operational systems.

     To address Queenbank’s technological risk concerns, the bank’s Board has appointed a Technology (IT) Risk Officer who chairs the IT Risk Committee. It is composed of ten (10) members including two Directors/Executive Officers and Department and Branch Heads.

Legal Risk

    Legal Risk is the potential loss due to non-existent, incomplete, incorrect and unenforceable documentation that the bank uses to protect and enforces rights under the law on obligations and contracts. The Board acquires proper counsel from competent lawyers in order to ensure that all transactions entered into are valid under the laws of the country.

     At Queenbank, a Legal Risk Committee has been formed to address legal issues that are faced by the bank.

     It performs the legal review process for major transactions that the bank may undertake. This committee meets regularly on a monthly basis.

Regulatory Risk

     Regulatory Risk covers potential loss from non-compliance with laws, rules and regulations, policies and procedures, and ethical standards. It is also known as compliance risk. The Bank ensures that compliance is followed in our endeavors.

Other Risks
Reputational Risk

     Reputational Risk occurs when the bank is seen or perceived to be poorly prepared to deal with its operational difficulties or when it seems to lack the ability to operate normally and efficiently during crisis. We target this risk through consistent and adequate compliance of the bank’s operations, proper and timely disclosure of the bank’s condition, and provision of constant information and assurance to the public on the bank’s growth and development plans.