BRMC Presentation

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2ALLIED BANK LIMITEDSPECIAL ASSETS MANAGEMENT

MANAGING NON PERFORMING LOANSBY

MIRZA MUHAMMAD YUSUF

ON 03 MARCH 20152CONTENTS3ORGANOGRAM OF SPECIAL ASSETS MANAGEMENTIMPORTANT PRUDENTIAL REGULATIONSCATEGORIES OF LOANSPROBLEM LOANS CAUSES AND IMPACTCLASSIFICATION OF LOANS AND FINANCESPARKING OF LOANS AND FINANCES WITH SAMREMIDIAL ACTIONSSETTLEMENTRESCHEDULING / RESTRUCTURINGLITIGATIONWRITE-OFFOTHER WORKOUT MODESAPPROPRIATION OF SECURITIESOUTRIGHT SALEACQUISITION OF DEFAULTERS PROPERTYDEBT EQUITY SWAPMANAGEMENT BY OUTMERGERS / ACQUISITIONSOUTSOURCING OF RECOVERYSPECIAL PACKAGE RELIEFREFFERENCE TO NAB & EXIT CONTROLL LISTRECOVERY LAWSORGANOGRAM OF SPECIAL ASSETS MANAGEMENT4

Page 1ORGANOGRAM OF SPECIAL ASSETS MANAGEMENT5

Page 2ORGANOGRAM OF SPECIAL ASSETS MANAGEMENT6

Page 3ORGANOGRAM OF SPECIAL ASSETS MANAGEMENT7

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Page 5IMPORTANT DEFINITIONS9BANKBORROWER OR OBLIGOR DOCUMENTS, PERSON AND RELATED PARTYEQUITY OF THE BANK AND EXPOSURE/LARGE EXPOSUREEQUITY OF THE BORROWERFORCE SALE VALUE (FSV)LIQUID ASSETSREADILY REALIZABLE ASSETSSECUREDSUBORDINATED LOANMEDIUM AND LONG TERM FACILITIESTANGIBLE SECURITY

PRUDENTIAL REGULATIONS10RISK MANAGEMENT REGULATIONS (R)CORPORATE GOVERNANCE (G)KYC AND ANTI MONEY LAUNDERING (M)OPERATIONS (O)

IMPORTANT RISK MANAGEMENT REGULATIONSEXPOSURE LIMITS (R1), SINGLE OBLIGOR/GROUP LIMIT AND RELATED PARTY EXPOSURE LIMIT. AND LARGRE EXPOSURE LIMITS.FINANCIAL ANALYSIS AND OTHER CONDITIONS (R3)CLASSIFICATION AND PROVISIONING FOR ASSETS (R8)CATEGORIES OF LOANS11PERFORMING LOANSREGULAR LOANSLOANS ON WATCH LIST (OVERDUE)

NON PERFORMING LOANSCLASSIFIED LOANSPROBLEM LOANS CAUSES AND IMPACT12PROBLEMSOVERDUESINCOMPLETE DOCUMENTATIONWEAK SECURITYFREQUENT CHANGES IN GOVERNMENT POLICIESWILLFUL DEFAULT

CAUSES AND IMPACTFAULTY FEASIBILITIESEXAGGERATED FINANCIAL STATEMENTSLACK OF EXPERIENCELACK OF PROPER SUPERVISSION OF PRIMARY SECURITYOVER ASSESST COLLATERAL SECURITIESUN-ECONOMICAL UNITCLASSIFICATION OF LOANS AND FINANCES13CLASSIFICATIONDETERMINANTTREATMENT OF INCOMEPROVISIONS TO BE MADESUB-STANDARDMark-up or principal is overdue by 90 days or more from the due dateUnrealized mark-up to be kept in memorandum account and not credited to income account except when realized in cash. Unrealized mark-up already taken to income account to be reversed and kept in memorandum account.25%DOUBTFULMark-up or principal is overdue by 180 days or more from the due dateAs above50%LOSS(a) Mark-up or principal is overdue by 360 days or more from the due dateAs above100%(b) Where Trade Bills (Import / Export or Inland Bills) are not paid / adjusted within 180 days of the due dateAs above100%PARKING OF LOANS AND FINANCES WITH SAM14MONITORING OF CLASSIFIED OBLIGORS WITH OUTSTANDING EXPOSURE OF Rs. 50 MILLION AND ABOVE THROUGH RISK MANAGEMENT COMMITTEE (RMC) AND DETERMINATION TO RETAIN THE RELATIONSHIP WITH BUSINESS GROUPS OR PARK THE ACCOUNT WITH SAM.THE MAXIMUM PERIOD TO RETAIN CLASSIFIED ACCOUNTS BY BUSINESS GROUPS UNDER LOSS CATEGORY IS ONE YEAR.IF THE RMC COMMITTEE IS OF THE OPINION THE DEFAULT IS WILLFUL THE ACCOUNT SHOULD BE IMEDIATELY PARKED WITH SAM BRANCH. IF THE DEFAULT IS CIRCUMSTANTIAL THE NPL ACCOUNT SHOULD BE TRANFERRED TO SAM BRANCH AS PER APPROVAL MATRIX GIVEN HERE.PARKING OF LOSS / DOUBTFUL ACCOUNTS OF Rs. 50 (M) AND ABOVE BY RMCPARKING OF LOSS / DOUBTFUL ACCOUNTS OF LESS THAN Rs. 50 (M) BY CHIEF SAMSUBSTANDARD CLASSIFIED ACCOUNTS CAN BE TRANSFERRED TO SAM AT ANY TIME WITH THE PRIOR PERMISSION OF CEO.APPROVAL MATRIX FOR TRANSFER / PARKING OF NPL ACCOUNTS WITH SAMREMIDIAL ACTIONS15NEGOTIATED SETTLEMENTSPRINCIPAL + MARKUP + COF + CHARGESPRINCIPAL + MARKUP + CHARGESPRINCIPAL ONLYLESS THAN PRINCIPAL

RESCHEDULING / RESTRUCTURINGA RESCHEDULED LOAN IS ONE IN WHICH THE RATE OF MARKUP ANDOTHER ORIGINAL TERMS REMAIN UNCHANGED BUT REPAYMENT OF THEPRINCIPAL IS EXTENDED BECAUSE OF PROJECT DELAYS OR ANY OTHERSIMILAR REASON. INTEREST / MARK-UP IN RESCHEDULING CASESCONTINUES TO BE SERVICED ON DUE DATES.A RESTRUCTURED LOAN IS ONE WHOSE TERMS AND CONDITIONS OFLOAN HAVE BEEN MODIFIED, PRINCIPALLY BECAUSE OF DETERIORATIONON THE OBLIGORS FINANCIAL CONDITION, TO PROVIDE FOR AREDUCTION IN THE RATE OF MARKUP OR PRINCIPAL OR CAPITALIZATIONOF INTEREST / MARK-UP.CONSIDERATIONS FOR RESCHEDULING / RESTRUCTURING

IMPROVEMENT IN BANKS RISK.NO CHANGE IN CLASSIFICATION STATUS OF THE ACCOUNT UNLESS TERMS OF RESCHEDULING / RESTRUCTURING ARE FULLY MET FOR A PERIOD OF ONE YEAR.NO CAPITALIZATION OF MARKUP.REPAYMENT SCHEDULE SHOULD BE BASED CASH GENERATION CAPACITY OF THE UNIT AND SPONSORS ABILITY TO INJECT FUNDS.LEGAL DOCUMENTATION BEFORE ISSUANCE OF DAC.PERSONAL GUARANTEES OF DIRECTORS (OUTGOING & INCOMING).CONSENT DECREE.ADHERENCE TO SBP REGULATIONS & DIRECTIVES.APPROVING AUTHORITIES.16REMIDIAL ACTIONSLITIGATIONSFAILURE OF ALL THE PERSUASIVE EFFORTS FOR RECOVERY / SETTLEMENT OF ANY NPL ACCOUNT OR ANY CRIMINAL ACT OF OBLIGOR WITH REGARD TO LOAN / FINANCE ACCOUNT LEAVES NO OPTION WITH THE BANK, BUT TO ADOPT LITIGATION (BOTH CIVIL OR CRIMINAL) FOR RECOVERY OF BANKS DUES. LITIGATION SHOULD BE INITIATED IN ALL THE NPL ACCOUNTS WITHIN ONE YEAR OF PARKING WITH SAMG.EXCEPTIONSTIME LIMITATION AS PER LIMITATION ACTCLAIMS VERSES COST OF LITIGATIONDEFECTIVE DOCUMENTATIONANY SPECIFIC INSTRUCTIONS BY REGULATORY AUTHORITY

SELECTION OF LAWYERCHANGE / REPLACEMENT OF LAWYERFOLLOW-UP OF LITIGATIONPERFORMANCE REVIEW OF LAWYERCONTINUOUS REPORTING TO THE BANKAVOID ADJOURNMENTSUITS PENDING FOR MORE THAN TWO YEAR17REMIDIAL ACTIONSWRITE-OFF / WAIVERWRITE-OFF REFERS TO ANY FINANCIAL RELIEF IN RESPECT OF PRINCIPAL, MARKUP DEBITED & CREDITED TO INCOME ACCOUNT.REVERSAL / WRITE BACK REFERS TO ANY FINANCIAL RELIEF IN RESPECT OF MARKUP DEBITED AND NOT CREDITED TO INCOME ACCOUNT.WAIVER REFERS ANY FINANCIAL RELIEF IN RESPECT OF MARKUP AND COST OF FUNDS NOT YET DEBITED TO OBLIGORS ACCOUNT.WRITE-OFF PROPOSAL SHOULD BE DULLY AUDITED BY THE INTERNAL AUDITOR AND APPROVED BY THE REGIONAL AUDIT CHIEF.LATEST VALUATION OF ASSETS HELD AS SECURITY.LATEST VALUATION OF PROPERTIES / STOCK / OTHER ASSETS HELD BY THE BANK.CONSIDERATIONS FOR WRITE-OFFDEFECTIVE DOCUMENTATIONDEATH OF SPONSORS & GUARANTORSUNTRACEABLE ASSETSAMOUNT OF DECREE IS LESS THAN AMOUNT OF OUTSTANDINGSUBSTANTIAL DECREASE IN VALUE OF SECURITYNO CHANCES OF RECOVERY OF OUTSTANDING AMOUNTMANDATORY SCHEME INTRODUCED BY SBPHUMANITARIAN GROUNDSAPPROVAL MATRIX18REMIDIAL ACTIONSAPPROPRIATION OF SECURITIESOUTRIGHT SALEACQUISITION OF DEFAULTERS PROPERTYDEBT EQUITY SWAPMANAGEMENT BY OUTMERGERS / ACQUISITIONSOUTSOURCING OF RECOVERYSPECIAL PACKAGE RELIEF19OTHER WORKS OUT MODESREFERENCE TO NAB UNDER SECTION 31-D

SECTION 31-D OF NAB ORDINANCE 1999 SPEAKS ABOUT INQUIRY, INVESTIGATION OF PROCEEDINGS IN RESPECT OF IMPRUDENT LOAN / FINANCE, DEFAULT LOAN / FINANCE OR RESCHEDULED LOAN / FINANCE SHALL BE INITIATED OR CONDUCTED BY THE NAB AGAINST ANY PERSON, COMPANY OR FINANCIAL INSTITUTION FOR WHICH REFERENCE IS TO BE ROUTED THROUGH GOVERNOR, SBP.

DIRECT COMPLAINT TO NAB FOR CRIMINAL ACTIONS

UNDER SECTION-9 OF THE NAB ORDINANCE 1999 AND SECTIONS 409, 420, 468 & 168 OF PAKISTAN PENAL CODE BY SIMPLY LODGING A COMPLAINT IN WRITING TO THE CONCERNED OFFICE OF REGIONAL DIRECTORATE OF NAB, IN RESPECT OF BORROWERS INVOLVED IN SIPHONING OF FUNDS, UNDER / OVER INVOICING, FAKE DOCUMENTS, UNAUTHORIZED REMOVAL OF MACHINERY AND PLEDGED STOCKS.20NATIONAL ACCOUNTABILITY BUREAUEXIT CONTROL LIST

IN ALL THE CASES OF WILLFUL DEFAULT OF RS.100 (M) & ABOVE, AND / OR ANY CRIMINALITY HAVING BEEN DETECTED AGAINST BORROWERS / STAFF & OTHERS, THE FIELD OFFICES / SAM BRANCHES MAY FORWARD THEIR REQUEST TO GH / GC FOR PLACING THEIR NAMES OF EXIT CONTROL LIST (ECL) THROUGH SBP, WITH THE APPROVAL OF CEO.21PLACEMENT OF NAMES OF DEFAULTERS ON EXIT CONTROL LISTTARGET WISE RECOVERY POSITION FOR THE 1st JAN 30th SEP, 2013 (GROUP WISE) Name of GroupClassifiedAdvancesAs On31-12-2012Cash RecoveryRegularizationM/up & Other ChargesRecoveryRecovery In Already Written-off A/Cs.Total Cash RecoveryWrite-OffTarget During1st Jan-30th Sep, 2013Achieved During The PeriodTarget During1st Jan-30th Sep, 2013Achieved During The PeriodAmountAmount%AmountAmount%AmountAmountAmountAmountSAM8,798.086530.000553.991105---18.18144.518616.69067.650CIBG9,032.1071,068.0001,034.43897600.00050.000844.265-1,078.70314.233CRBG2,837.36887.858245.52527987.858227.22525950.109-295.634-TOTAL20,667.5611,685.8581,833.954109687.858277.22540112.55544.5181,991.02781.88322Amount In MillionsPEER BANK ANALYSIS AS ON 30-09-201323Amount In MillionsSr.No.BANKGROSSADVANCESNPLsNPL %30-09-2013NPL %31-12-20121Allied Bank Limited 261,821.558 19,692.318 7.52%7.15%2Bank Al-Habib 160,944.941 3,877.862 2.41%2.41%3Bank Al-Falah 251,405.835 21,296.148 8.47%8.93%4MCB Bank Limited 245,257.287 24,936.093 10.17%9.74%5Habib Bank Limited 494,454.766 50,643.930 10.24%10.10%6United Bank Limited 415,919.050 52,438.169 12.61%13.57%7National Bank of Pakistan 724,569.281 95,568.533 13.19%12.14%8Standard Chartered Bank 160,027.124 25,145.672 15.71%16.99%9Askari Bank Limited 162,989.540 32,830.348 20.14%16.28%10NIB Bank Limited 98,145.186 31,461.966 32.06%34.71%2324