Credit risk arises from a situation in which the debtors or counterparties fail to repay or fulfill their agreed obligations. This might be contributed by the fact that the debtor’s financial position is under distress due to volatilities of economic conditions that pose adverse impact on businesses or the debtors’ mismanagement, which as a result, may adversely affect the Company and its subsidiaries’ earnings and capital. The credit risk may arise from ordinary financial transactions such as credit lending, financial obligations in the form of avals or guarantees, other transactions related to credit lending, as well as investment in debt instruments issued by state agencies or state enterprises with neither guarantee from government nor the BOT and private debt instruments such as debentures.
Under its credit risk management policies and guidelines, the Company and its subsidiaries have successfully established a credit culture. To start with, the credit risk of the borrowers or counterparties or issuers of debt instruments will be independently assessed by the model developed specifically to each type of borrowers or counterparties by the Credit Analysis Unit. At this juncture, authorized Credit Committee would then consider and determine the level of credit risk of borrowers or couterparties, appropriate credit lines and investment budget, as well as terms and conditions on loans or other obligations. The Committee also controls the overall risk status by appropriately diversifying credit risk into various business sectors and groups of customers within the established risk ceilings. In addition, the Committee closely monitors the quality of loans to ensure proper and vigilant management by emphasizing on business capability and repayment ability under the supervision of an independent risk control unit - ensuring that credit transactions are in line with the policies and guidelines of credit risk management. Apart from the aforementioned units, there is also an Internal Audit Division to verify that the credit transactions are in compliance with the BOT’s guidelines.
In order to receive return suited to risks, the Company and its subsidiaries employ the use of tools to measure the Risk Adjusted Return on Capital (RAROC). The Company and its subsidiaries also organize a stress test to estimate the damage that may occur in a crisis. Under this condition, the debtors’ ability to complete their financial obligations may lessen or the debtors may be unable to pay off the debt as stated in the terms and conditions of the hypothetical contract. The risk factors are determined in order to affect business in the industrial sector in which the debtor has a working operation.Key Credit Risk Factors
Credit Concentration Risk
TBank aims to appropriately diversify its loans to various groups of customers, focusing on high potential customers and attempt to prevent concentration of loans to a particular group of customers. Group limits and single limits are set in accordance with risk level of the borrowers. Analyzing and monitoring are carried out, and results are regularly reported to relevant committees to minimize risks from uncontrollable factors. Furthermore, the Bank has loan portfolio management and analyzes the loan portfolios in general, and manages the portion of the portfolios in correlation with circumstantial changes for maximum return under acceptable risk levels.
Credit Status as of 31 December 2018 and 31 December 2017, classified by Business Types
Business Type 2018 2017 Debt Balance (Million Baht) Percent Debt Balance (Million Baht) Percent Agricultural and Mining 6,582 0.87 7,498 1.05 Manufacturing and Commerce 74,816 9.91 81,105 11.38 Real Estate and Construction 48,600 6.44 47,484 6.66 Public Utilities and Services 54,114 7.17 58,878 8.26 Personal Consuming Housing Loans 103,280 13.69 97,676 13.70 Securities Business 3,822 0.51 4,116 0.58 Hire Purchase 420,680 55.75 371,031 52.06 Others 31,402 4.16 29,504 4.14 Others 11,317 1.50 15,469 2.17 Total loans 754,613 100.00 712,761 100.00
The overall credit data revealed that as of 31 December 2018, the Company and its subsidiaries’ lending concentration on hire purchase business increased from 52.06 percent in 2017 to 55.75 percent. Most of the hire purchase loans were provided to retail customers whose credit line was relatively small and with a large number of customers, such risk therefore was well diversified.
Risk of Non-performing Loans
Non-performing loans are loans classified as substandard, doubtful, and doubtful of loss. They have been the major concerns of each financial institution. They have adverse effect on earnings and capital of the Company. At this juncture, the Company and its subsidiaries have focused efforts on controlling credit quality through appropriate policies and procedures to regularly monitor the quality of the loans.
NPL Ratio of the Company and Its Subsidiaries that are Financial Institutions (excluding accrued interest receivables)As of 31 December 2018 and 31 December 2017 are as follows:
Loan Classification 2018 2017 Debt Balance (Million Baht) Percent Debt Balance (Million Baht) Percent Substandard 4,656 25.40 5,957 34.61 Doubtful 3,172 17.31 2,674 15.53 Doubtful of Loss 10,500 57.29 8,582 49.86 Total 18,328 100.00 17,213 100.00
As of 31 December 2018, non-performing loans of the Company and its subsidiaries that are financial institutions amounted to 18,328 million baht, an increase from the end of the previous year of 17,213 million baht. From credit overview, non-performing loans accounted for 2.43 percent of total loans, an increase from 2.41 percent as of 31 December 2017. This level of NPL ratio was relatively low compared to the industry level.
Non-performing Loans of the Company and Its Subsidiaries that are Financial Institutions, classified by Business Types (excluding accrued interest receivables)
As of 31 December 2018 and 31 December 2017 are as follows:
Business Type 2018 2017 Debt Balance (Million Baht) Percent Debt Balance (Million Baht) Percent Agricultural and Mining 73 0.40 68 0.40 Manufacturing and Commerce 5,106 27.86 4,985 28.96 Real Estate and Construction 1,973 10.76 2,065 12.00 Public Utilities and Services 1,432 7.81 1,444 8.39 Personal Consuming Housing Loans 4,468 24.38 3,577 20.78 Hire Purchase 3,595 19.62 3,577 20.78 Others 1,445 7.88 1,253 7.28 Others 236 1.29 244 1.41 Total NPLs 18,328 100.00 17,213 100.00
Trouble Debt Restructuring
(Unit: Million Baht)
2018 2017 Number of Debtors (Persons) 6,745 8,820 Outstanding Principal and Accrued Interest Receivables 10,107 11,169 Loan not Fully Covered by Collateral 2,841 3,678 Revalutaion Allowance for Debt Restructuring 1 1 Total Loans and Accrued Interest Receivables 755,270 713,362 Restructred Debt to Total Loans (Percent) 1.34 1.57
The risk on debt restructuring arises from re-entry of the substandard debtors, i.e. after the debt restructuring, the debtors again default on their repayments, and hence re-enter the non-performing status. The problem poses adverse effects on performance of the Company and its subsidiaries. As of 31 December 2018, the outstanding principal and the accrued interest receivables of the restructured debt amounted to 10,107 million baht or 1.34 percent of total loans and accrued interest receivables. The net restructured debt (less collateral) or loan not fully covered by collateral amounted to 2,841 million baht.
Risk from Collaterals
For collateralized loans, the Company and its subsidiaries carefully assess and classify quality of each type of collateral by taking into account the liquidity and overall risk from that collateral. The assessment result is one of the important factors applied in the classification of each credit exposure. In this regard, the collateral, both in the form of immovable and movable whose value could be appraised, is subject to appraisal or valuation complying with the BOT’s regulation. The Company and its subsidiaries significant types of collaterals are deposits and bills of exchange, marketable equity securities, non-listed equity securities, commercial immovable property, immovable property from housing, vehicles, machinery, etc. The Company and its subsidiaries have determined guidelines, standards, and frequency of appraisal and valuation of each type of collateral. Furthermore, a report of the appraisal and valuation is made which includes clear and sufficient data and analysis to determine the price. In case that it cannot be specified whether the collateral price has decreased or declined over time, the impairment of the asset must be considered by a concerned official.
Hire purchase loans are the Company and its subsidiaries’ main business. The ownership of collateralized car belongs to the Company, and in case of default, the Company is eligible to immediately repossess the collateral for the purpose of reselling in the used car market. As a result, the Company might be exposed to risk from the inability to repossess the car or from recovering the incurred loss by reselling the assets. Such conditions depend on risk factors, for instance, the conditions of the used car market and the repossessed car itself. TBANK used statistic information to calculate the possible incurred loss that may happen when default called Loss Given Default (“LGD”). and TBANK provides reserve higher than the LGD to cover possible loan loss.
Risk from Impairment of Property Foreclosed
As of 31 December 2018, the Company and its subsidiaries had 4,822 million baht in property foreclosed according to the book value net allowance for impairment, equivalent to 0.45 percent of total assets. Impairment totaled 1,700 million baht, equivalent to 26.07 percent of the book value.
Risks from Guarantees and Avals
The Company and its subsidiaries are also obligated in forms of avals, letter of credits, loan guarantees, and other obligations which the Company and its subsidiaries are held responsible for, if the customers are unable to fulfill their obligations. In managing such risk, the Company and its subsidiaries carefully scrutinize supporting information and apply strict approval procedures to these obligations. A close monitoring on these transactions is undertaken based on the same guideline used for its regular lending procedure of the Company and its subsidiaries.
As of 31 December 2018, the Company and its subsidiaries’ obligations in the form of avals, guarantees for loans, and other obligations amounted to 25,472 million baht or 2.40 percent of total assets.
- Credit Concentration Risk
The market risk arises from movements in interest rates, exchange rates, and prices of instruments in money market and capital market, which may adversely affect earnings and capital of the Company and its subsidiaries. Market risk can be segmented into three categories including price risk, interest rate risk, and exchange rate risk. At this juncture, the Company and its subsidiaries’ policies are to control and manage these risks to remain at an appropriate level and in line with the Company and its subsidiaries’ policies on risk management.
Price risk arises when the Company and its subsidiaries’ earnings and capital are adversely affected by changes in the price of debt and equity instruments, causing the value of the Company and its subsidiaries’ trading and available-for-sale investment portfolio to decline.
The Company and its subsidiaries have developed risk measurement tools based on the Value-at-Risk model (VaR Model) to estimate the maximum loss amount at a certain confidence level and over a given asset holding period. The Company and its subsidiaries also determine the various limits of transaction in order to control risk to remain in an acceptable level, for example, Position Limit and Loss Limit. The Risk Control Unit separated from the front office and back office, has the duty of risk control and reporting on the status of the limits to the Board of Directors and departments and executives associated to the risk management in order to respond to the risk in a timely manner. The Company and its subsidiaries assigns Investment Committee to control and monitor this type of risk. In order to ensure the efficiency and accuracy of its tools for risk measurement, the Company and its subsidiaries require that the tools are subject to back-testing in accordance with the Bank for International Settlement (BIS) standards. Moreover, the Company and its subsidiaries have conducted stress testing by formulating stress scenarios which can create extraordinary reduction in stock prices. The test result could therefore shed light on how much the impact to earnings and capital of the Company and its subsidiaries could be.As of 31 December 2018 and 31 December 2017, the Company and Its Subsidiaries’ Trading and Availablefor- sale Investments, classified by Types of Investments are as follows:
(Unit: Million Baht)
Fair Value 2018 2017 Investment Trading Investments Government and State Enterprise Securities 13,346 11,500 Private Debt Securities 3,507 5,364 Domestic Marketable Equity Securities 958 1,713 Available-for-sale Investments Government and State-owned Enterprise Securities 99,910 114,495 Private Debt Securities 23,702 25,373 Foreign Debt Securities 17,203 10,430 Domestic Marketable Equity Securities 6,793 4,531 Unit Trusts 68 625 Total Trading and Available-for-sale Investments 165,487 174,031
The value of trading and available-for-sale investments of the Company and its subsidiaries decreased from lowering investments in government and state-owned enterprise securities and foreign debt securities. Therefore, the overall price risk of the Company and its subsidiaries decreased from the previous year.
Interest Rate Risk
Interest rate risk is the risk that earnings or capital are adversely affected by changes in interest rates that pose impact on its rate-sensitive items including assets, liabilities, and off-balance sheet items. These changes may have a negative impact on net interest income and capital fund of the Company and its subsidiaries.
It is a goal of the Company and its subsidiaries to run their business operatings under a long-term effective interest rate risk management system, in other words, to maintain an appropriate structure of assets and liabilities which are rate-sensitive at different time intervals. To ensure maximum benefits of the Company and its shareholders, the Company and its subsidiaries have developed the Repricing Gap Analysis Model as a tool for measuring interest rate risk by assessing the impact that may arise from the mismatch of the repricing periods of assets, liabilities, and obligations at different time intervals, which is used for risk measurement every month. In order to ensure that the risk of the Company and its subsidiaries business operation is within an acceptable limit, they have also established an acceptable risk ceiling and an early warning risk level, taking into consideration the structure of assets, liabilities, and obligations as well as interest rate repricing which are expected to take place in each period of the Company and its subsidiaries’ business plan. The Asset and Liability Management Committee (ALCO) is responsible for monitoring and controlling such risk very closely. To effectively design appropriate measures to accommodate the risks, the committee has to monitor economic conditions, development in the money market and capital market, and the interest rate trend which could become important interest rate risk factors.Details of Financial Assets and Liabilities as of 31 December 2018, classified by the Period when the Interest Rate would be Repriced in Accordance with Contract Related to Financial Assets and Liabilities of the Company and Its Subsidiaries are as follows:
(Unit: Million Baht)
Items Period of Interest Rate Repricing or Due Date Floating Interest Rate At Call 0-3 Months 3-12 Months 1-5 Years Over 5 Years No Interest Total Financial Assets Cash - - - - - - 11,022 11,022 Interbank and Money Market Items 1,351 850 86,032 3,500 - - 7,504 99,237 Derivative Assets - - - - - - 2,005 2,005 Investments 838 - 59,520 14,105 79,353 5,684 10,869 170,369 Loans to Customers 213,812 6,511 36,361 19,492 241,421 236,756 260 754,613 Receivables from Purchase and Sale of Securities - - - - - - 2,640 2,640 Other Assets - Receivables from Clearing House - - - - - - 64 64 Total Financial Assets 216,001 7,361 181,913 37,097 320,774 242,440 34,364 1,039,950 Financial Liabilities Deposits 361,816 18 127,523 212,005 43,488 - 7,067 751,917 Interbank and Money Market Items 17,924 920 38,257 11,281 1,749 488 1,304 71,923 Liabilities Payable on Demand - - - - - - 1,163 1,163 Derivative Liabilities - - - - - - 2,097 2,097 Debts Issued and Borrowings 137 330 2,477 6,724 24,915 20,430 - 55,013 Payables from Purchase and Sale of Securities - - - - - - 1,325 1,325 Other Liabilities - Payables to Clearing House - - - - - - 795 795 Total Financial Liabilities 379,877 1,268 168,257 230,010 70,152 20,918 13,751 884,233
In view of the above assets and liabilities structure, if the market interest rate is higher than the current level, net interest income will be adversely impacted during the forthcoming year. This is mainly due to the Company’s hire purchase loan portfolios of the Company and its subsidiaries, whose interest rates are fixed ones. However, the Company and its subsidiaries have implemented risk management measures including interest rate swaps and mobilization of more long-term deposits.
Exchange Rate Risk
The exchange rate risk is a risk that the earnings and capital of the Company and its subsidiaries can be adversely affected by exchange rate fluctuations from transactions in foreign currencies or having exposures in their possession of assets or liabilities in foreign currencies. There are two types of exchange rate risk - risk from transactions in foreign currencies (Transaction Risk) and risk from changing value from exchanging foreign currency to local currency (Translation Risk).
Most transactions in relation to exchange controls are due to the service of TBANK which is one of the Company’s subsidiaries. TBANK assigns ALCO to be responsible for monitoring and controlling this type of risk through the consideration in the proper matching between the structure and the maturity of assets and liabilities in foreign currencies. TBANK’s policy is to determine the risk ceiling in order to control the impact of exchange rate movements on earnings and capital. Nevertheless, in order to avoid the exchange rate risk, TBANK has also relied on hedging instruments such as forward contracts.
As of 31 December 2018, the Company and its subsidiaries faced with relatively low exchange rate risk as most of the assets in foreign currencies have been hedged by forward contracts.
- Price Risk
Liquidity risk arises from the inability of the Company and its subsidiaries to repay their debts or obligations upon the delivery date due to the lack of ability to convert assets into cash or to mobilize adequate funds or to mobilize funds at an acceptable cost. This could adversely affect the current and future earnings and capital of the Company and its subsidiaries. The liquidity risk management mechanism starts with the assessment of the cash flows and liquidity position over particular time horizons of the Company and its subsidiaries when the different levels of funds may be required to accommodate borrowings upon maturities, to reduce other types of liabilities, or to acquire of assets by using Liquidity Gap Analysis, various liquidity ratios, and “What If” scenarios to evaluate the sufficiency of the cash flow liquidity depending on customer behavior in extending contracts upon maturity and estimate the need of liquidity in various “What If” scenarios depending on the economic climate and extraordinary situations that may happen to the Company and its subsidiaries, and the financial institution system.
Meanwhile, the Company and its subsidiaries developed an emergency plan in the case of a liquidity problem and there will be a revision of the significant occurrences that affect working operations. In this regard, the Company and its subsidiaries have assigned ALCO in controlling and managing the liquidity risk every two weeks to monitor and manage risk.The Structure of the Company and Its Subsidiaries’ Funds, classified by Source of Fund and Maturity Date are as follows:
Capital Funds Classified by Source of Fund 2018 2017 Million Baht Percent Million Baht Percent Deposits 751,917 85.56 716,091 84.24 Interbank and Money Market Items 71,923 8.18 82,343 9.69 Debts Issued and Borrowings 55,013 6.26 51,596 6.07 Total 878,853 100.00 850,030 100.00
Capital Fund Classified by Maturity
Capital Funds Classified by Maturity Date 2018 2017 Million Baht Percent Million Baht Percent Less than 1 Year 786,934 89.54 761,007 89.53 More than 1 Year 91,919 10.46 89,023 10.47 Total 878,853 100.00 850,030 100.00
As of 31 December 2018, deposits and debts issued and borrowings of the Company and its subsidiaries were 878,853 million baht, where sources of funds were mostly from public deposits with maturity less than 1 year. This is considered a common structure of the financial institutions. Nevertheless, the Company and its subsidiaries also offered various products such as Negotiable Certificates of Deposit (NCD) and debentures in order to increase the saving alternatives for the customers.Financial Assets and Liabilities as of 31 December 2018, classified by Maturity Date are as follows:
(Unit: Million Baht)
Items Maturity Date of Financial Instruments At Call Less than 1 Year More than 1 Year Not Specified Total Financial Assets Cash 11,022 - - - 11,022 Interbank and Money Market Items 9,704 89,533 - - 99,237 Derivatives - 670 1,335 - 2,005 Investments 843 73,362 85,300 10,864 170,369 Loans to Customers 41,158 187,162 526,293 - 754,613 Receivables from Purchase and Sale Securities - 2,640 - - 2,640 Others Assets - Receivable from Clearing House - 64 - - 64 Total Financial Assets 62,727 353,431 612,928 10,864 1,039,950 Financial Liabilities Deposits 364,735 342,845 44,337 - 751,917 Interbank and Money Market Items 22,398 47,288 2,237 - 71,923 Liabilities Payable on Demand 1,163 - - - 1,163 Derivative Liabilities - 703 1,394 - 2,097 Debts Issued and Borrowings 467 9,201 45,345 - 55,013 Payables from Purchase Sale Securities - 1,325 - - 1,325 Other Liabilities - Payable to Clearing House - 795 - - 795 Total Financial Liabilities 388,763 402,157 93,313 - 884,233 Commitments Aval to Bills 2 291 10 - 303 Guarantees of Loans 87 2,315 - - 2,402 Liability under Unmatured Import Bills 57 226 - - 283 Letter of Credits 31 728 - - 759 Other Commitments 37,732 43,858 1,770 - 83,360 Total Commitments 37,909 47,418 1,780 - 87,107
The operational risk is the risk that arises from the damage that occurs from lack of good corporate governance within the organization. Risk may arises from the inadequate efficiency of the internal audit and internal control systems which could be relating to internal operation process, personnel, systems or external events and adversely affect the Company and its subsidiaries’ operating income and capital. This also includes legal risks such as litigations, exploitation by the government, and also damage from settlements outside the courtroom. Such risk can pose an adverse impact on other risks, especially strategic risk and reputation risk.
The Company and its subsidiaries are well aware that efficient operational risk management is crucial to the business to achieve goals sustainably. Under current uncertainties, the Company and its subsidiaries, thus, place importance on efficient and effective operational risk management that is sufficiently comprehensive across the Company and its subsidiaries, so that timely preparations can be made in unexpected situations and increasingly stringent regulations are followed. The Company and its subsidiaries set operational risk policies and management that gear toward risk protection and monitoring. In addition, as internal control is a key mechanism in controlling and mitigating possible damage, the Company and its subsidiaries ensure that there is a strong internal control system: an organization structure that has counterbalance, transaction-supporting units with a specialized skill set and independence to reduce possible errors, practice regulations applicable to all types of transactions, information technology system management and data security system, including the business continuity plan.
The Company and its subsidiaries determine a principle, form or condition of the process used in the measurement and assessment of internal risks of the Company and its subsidiaries. In the determination of this process, the Company and its subsidiaries consider the circumstantial factors such as supervising guidelines of the government units associated with the Company, state and complexity of the business, the capability of the Company in accepting risks. The Company has also put in place the tools for important operational risk management in line with Basel New Capital Accord (Basel II) e.g. risk and control self-assessment, key risk indicators (KRIs), loss data, incident management, outsourcing risk management. The practice guidelines are in line with the regulations imposed by the BOT and business continuity plans. As per BOT’s specification for commercial banks to maintain capital funds in proportion to risk-weighted assets in terms of credit, market, and operation according to the Basel III guidelines, the Group has employed the Basic Indicator Approach to calculate operational risk.
In addition, to monitor operational risk, the Company and its subsidiaries determine a policy for executives of each department to be responsible for monitoring the risk by considering this as a part of their regular duties. This will help identify all risks and problems that occur in order to respond to the changes in an appropriate and timely manner and not damaging to the Company and its subsidiaries. Nevertheless, to be informed of the result of business operations and problems that occur, as well as trends and changes in information of risk factors, the Company and its subsidiaries organize a filing and reporting of the information associated with operational risk management to be continually and regularly reported to the Board of Directors, the Risk Management Committee, and high level executives to use in the determination of policies, to develop a sufficient risk management system, and to be a tool in aiding the Company and its subsidiaries to evaluate the capability and efficiency of the internal control system.
The information technology risk is the risk that may arise from using information technology systems to support the business, providing financial services to customers digitally, data management and cyber threats that may cause other risks, financial and non-financial damage e.g. strategic risk, reputational risk and operational risk.
Digital adoption is rising so rapidly that it has become the main service of the Company and its subsidiaries, and the Group has adopted information technology systems to enhance efficiency and provide services to customers confidently and securely. With such reasons, the Company and its subsidiaries have realized the importance of information technology risk management. In 2018, key actions taken were as follows:
- Organized a risk management structure into Three Lines of Defence, duties was separated: (1) information technology operations, (2) information technology risk management, and (3) information technology audit.
- Prepared information technology risk policy for having cautious information technology risk management with all risk areas coverage.
- Applied DLP (data leakage protection) system to the Company and its subsidiaries to protect customer data and key information of the Bank.
This type of risk arises from the inappropriate formulation of strategies, business planning, and implementation which are not compatible with internal setups and external environment, resulting in an adverse impact on earnings, capital or the existence of the Company and its subsidiaries. In managing the strategic risk, the formulation of strategies of the Company and its subsidiaries will be considered over the three years ahead, with the review required annually or in the case of an external event that may impact the achievement of the Company’s business goals. The Executive Committee is responsible for regular monitoring and evaluating the performance of the work units upon the established targets stated in the annual operation plan.
The reputational risk means a risk that occurs when the public i.e. customers, strategic or alliance partners, investors, and regulators has a negative perception of or lose confidence in the Company and its subsidiaries. This risk may impact the Company and its subsidiaries revenue and/or capital at present and in the future. Reputational risk may arise from noncompliance with corporate governance and business ethics, or nonconformity to the laws, regulations, as well as the Company and its subsidiaries practice rules.
The Company and its subsidiaries have continuously taken into account the importance of the reputational risk. To align with BOT’s capital supervisory regulations in accordance with Pillar II, a reputational risk policy has been formulated. The policy consists of reputational risk framework and reputational risk management processes which entail reputational risk assessment and measurement divided into 5 levels of impact and likelihood, reputational risk prevention by raising awareness and devising measures to prevent reputational risk events, regular monitoring and reporting to relevant committees, including risk management in case of high and very high risk levels. The Company and its subsidiaries set key units responsible for the risk management processes.
The regulatory risk arises from incompliance to laws, regulation, requirements, standards, and guidelines in the Company transactions which can lead to financial loss, reputation damage, and interference by state entities. Also, there are risks from the amendments or changes in regulations, laws or requirements of the authorities especially the BOT, the SEC, the SET, the OIC, the AMLO, etc. Such changes may affect the strategies and business operations of the Company and its subsidiaries.
Thanachart Group has a Compliance Department, which is under TBANK, reports directly to the Audit Committee of TBANK. The department ensures that the Company and companies in Thanachart financial conglomerate are incompliance with regulations and requirements from related various state agencies and the Code of Business Conduct. The department also provides advices and disseminates knowledge to executives and employees. Furthermore, it helps high-level executives to effectively manage risk of regulatory violation. The role and responsibilities do not overlap with the Internal Audit Department. As well, its specific responsibilities include operations in anti-money laundering measure, coordination with official supervisory or agencies, etc. It parallelly reports to the highest executives of the Company and TBANK together with the Audit Committees of the Company and TBANK.
In evaluating regulatory risk, the Compliance Department assesses incompliance risks in various transactions by considering all related internal and external factors for both the Company and its subsidiaries. These include regulatory climate and outlook of the authorities, auditing assessment by the officials, business policies, debates and complaints, internal audit, and internal work procedures. The consideration is placed on the magnitudes of possible impact and likelihood of occurrence in each aspect of incompliance risks using the guideline of “Risk Based Approach” (RBA). Random review is executed to comply with Control and Monitor standard, and a recommendation is proposed to correct errors and improve performance.