Oversea-Chinese Banking Corporation Limited
Pillar 3 Mid-Year Quantitative Disclosures (OCBC Group – As at 30 June 2013)
Incorporated in Singapore Company Registration Number: 193200032W
1. INTRODUCTION
The purpose of this document is to provide the information in accordance with Pillar 3 directives under Monetary Authority of Singapore (“MAS”) Notice 637 on Risk Based Capital Adequacy Requirements for banks incorporated in Singapore. MAS Notice 637 mandates a minimum level of public disclosures to be made available to market participants to assist them in assessing the capital adequacy and risk profile of a bank. For qualitative descriptions of the Group’s capital and risk management objectives and policies, and disclosures on remuneration, please refer to the Capital Management, Risk Management and Corporate Governance sections of the 2012 Annual Report.
2. SCOPE OF APPLICATION
The consolidation basis used for regulatory capital computation is similar to that used for financial reporting except for the following: Subsidiaries that carry out insurance business are excluded from regulatory consolidation and are treated as investments in major stake companies. The regulatory adjustments applied to these investments are in accordance to MAS Notice 637 paragraphs 6.1.3(p), 6.2.3(e) and 6.3.3(e). As at 30 June 2013, the subsidiaries that carry out insurance business are as follows: The Great Eastern Life Assurance Company Limited and its insurance entities The Overseas Assurance Corporation Limited and its insurance entities As at 30 June 2013, the total equity of these insurance subsidiaries was S$5b and total assets were S$59b.
The basis of consolidation for financial reporting can be found in Note 2.2 in the Notes to the Financial Statements of the 2012 Annual Report.
3. CAPITAL ADEQUACY
Disclosures on the Group’s capital adequacy ratios and the capital positions for the Group’s significant banking subsidiaries as at 30 June 2013 are presented in the Capital Adequacy Ratios section of the Second Quarter 2013 Financial Results. (http://www.ocbc.com/group/investors/index.html) Disclosures on the composition of the Group’s regulatory capital, including reconciliation between balance sheet and regulatory capital elements, as well as terms and conditions and main features of capital instruments can be found under the Capital and Regulatory Disclosures sections of the Bank’s investor relations website. (http:/www.ocbc.com/group/investors/Cap_and_Reg_Disclosures.html)
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4. CREDIT RISK
4.1 Maximum Exposure to Credit Risk
(3)
S$ million Credit risk exposure of on-balance sheet assets: Net loans and bills receivable Placements with and loans to banks Government treasury bills and securities Debt securities Assets pledged Others Credit risk exposure of off-balance sheet items: Credit commitments Contingent liabilities
Period End 157,172 32,612 20,737 15,266 2,145 7,795 235,727 73,315 9,981 83,296 319,023
(1)
Average 149,054 32,891 22,181 14,178 1,212 8,175 227,691 69,991 9,547 79,538 307,229
(2)
Total maximum credit risk exposure
(1) (2)
(3)
Net of specific allowances of $251 million and portfolio allowances of $1,438 million. Assets pledged comprise net loans and bills receivable of $8 million, placements with and loans to banks of $724 million, government treasury bills and securities of $260 million and debt securities of $1,153 million. Computed on a monthly average basis.
4.2
Geographic/Industry Distribution of Major Types of Credit Exposure
(1)
Gross Loans and Bills Receivable Analysed by Geography Singapore Malaysia Indonesia Greater China Other Asia Pacific Rest of the World
S$ million 82,725 24,744 12,003 20,204 8,158 11,035 158,869
Distribution by geography is determined based on where the credit risk resides.
(1)
Includes assets pledged of $8 million.
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Gross Loans and Bills Receivable Analysed by Industry
(1)
(continued)
Agriculture, mining and quarrying Manufacturing Building and construction Housing General commerce Transport, storage and communication Financial institutions, investment and holding companies Professionals and individuals Others
S$ million 5,413 9,296 23,667 40,465 23,007 10,872 22,410 15,851 7,888 158,869
(1)
Includes assets pledged of $8 million.
(1)
Placements with and Loans to Banks Analysed by Geography Singapore Malaysia Indonesia Greater China Other Asia Pacific Rest of the World Balances with banks Bank balances of life assurance fund
S$ million 1,501 2,458 499 18,870 2,513 6,511 32,352 984 33,336
Distribution by geography is determined based on where the credit risk resides.
(1)
Includes assets pledged of $724 million.
(1)
Government Treasury Bills and Securities Analysed by Geography Singapore Malaysia Indonesia Greater China Other Asia Pacific Rest of the World
S$ million 12,442 2,768 1,226 1,331 2,756 474 20,997
Distribution by geography is determined based on country of the issuer.
(1)
Includes assets pledged of $260 million.
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Debt Securities
(1)
Analysed by Geography Singapore Malaysia Indonesia Greater China Other Asia Pacific Rest of the World S$ million 4,029 1,737 488 4,616 3,112 2,437 16,419
Distribution by geography is determined based on where the borrowers are incorporated. Analysed by Industry Agriculture, mining and quarrying Manufacturing Building and construction General commerce Transport, storage and communication Financial institutions, investment and holding companies Others
(1)
S$ million 423 606 1,626 830 997 9,036 2,901 16,419
Includes assets pledged of $1,153 million.
Credit Commitments Analysed by Geography Singapore Malaysia Indonesia Greater China Other Asia Pacific Rest of the World S$ million 55,204 6,577 3,245 6,091 1,358 840 73,315
Distribution by geography is determined based on where the transactions are recorded.
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Credit Commitments (continued) Analysed by Industry Agriculture, mining and quarrying Manufacturing Building and construction General commerce Transport, storage and communication Financial institutions, investment and holding companies Professionals and individuals Others S$ million 1,620 5,593 5,948 11,741 3,459 15,255 22,993 6,706 73,315
4.3
Residual Contractual Maturity of Major Types of Credit Exposure
On-Balance Sheet Assets
S$ million Net loans and bills receivable Placements with and loans to banks Government treasury bills and securities Debt securities
(1) (2)
Within 1 week to 1 to 3 1 week 1 month months 12,372 3,979 559 34 14,188 6,381 1,942 776 12,036 9,268 3,420 1,538
3 to 12 months
1 to 3 years
Over 3 years
Total
(1) (2) (3) (4)
20,576 27,005 71,003 157,180 12,089 3,334 3,176 635 5,254 4,656 # 6,488 6,239 32,352 20,997 16,419
Includes assets pledged of $8 million. Includes assets pledged of $724 million and excludes bank balances of life assurance fund of $984 million. (3) Includes assets pledged of $260 million. (4) Includes assets pledged of $1,153 million. # represents amounts less than $0.5 million.
Credit Commitments S$ million Undrawn credit facilities: Term to maturity of one year or less Term to maturity of more than one year 57,409 15,906 73,315
4.4
Non-Performing Loans, Past-Due Loans, Impairment Allowances
Non-Performing Loans Analysed by Geography S$ million Substandard Doubtful Loss Singapore 105 72 53 230 Malaysia 274 158 40 472 Rest of the World 349 51 49 449 Total 728 281 142 1,151
Distribution by geography is determined based on where the credit risk resides.
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Non-Performing Loans (continued) Analysed by Industry Agriculture, mining and quarrying Manufacturing Building and construction Housing General commerce Transport, storage and communication Financial institutions, investment and holding companies Professionals and individuals Others S$ million 4 377 168 209 123 109 50 89 22 1,151
Analysed by Period Overdue $ million Over 180 days Over 90 days to 180 days 30 days to 90 days Less than 30 days Past due No overdue Total Past-Due Loans Analysed by Industry Agriculture, mining and quarrying Manufacturing Building and construction General commerce Transport, storage and communication Financial institutions, investment and holding companies Professionals and individuals (include housing) Others S$ million 21 150 71 123 34 65 416 47 927 S$ million 317 80 113 9 519 632 1,151
Analysed by Geography Singapore Malaysia Rest of the World S$ million 168 510 249 927
Distribution by geography is determined based on where the credit risk resides.
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Past-Due Loans (continued) Loans Past Due but Not Impaired Certain loans and advances are past due but not impaired as the collateral values of these loans are in excess of the principal and interest outstanding. Allowances for these loans may have been set aside on a portfolio basis. Analysed by Period Overdue S$ million Past due Less than 30 days 30 to 90 days Over 90 days Past due but not impaired Impairment Allowances for Loans and Bills Receivable Analysed by Geography Specific allowances 72 124 26 2 21 6 251 Portfolio allowances 614 330 152 181 88 73 1,438 186 289 71 546
S$ million Singapore Malaysia Indonesia Greater China Other Asia Pacific Rest of the World
Distribution by geography is determined based on where the credit risk resides. Analysed by Industry Specific allowances charged/(writeback) to income statements # (4) (15) (1) 5 2 (#) 28 (2) 13
S$ million Agriculture, mining and quarrying Manufacturing Building and construction Housing General commerce Transport, storage and communication Financial institutions, investment and holding companies Professionals and individuals Others
# represents amounts less than $0.5 million.
Cumulative specific allowances 2 48 21 34 34 27 8 60 17 251
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Impairment Allowances for Loans and Bills Receivable (continued) Reconciliation of Changes in Impairment Allowances Specific Allowances 303 (1) (63) (19) 32 13 (1) 251 Portfolio Allowances 1,351 (2) 89 1,438
S$ million At 1 January 2013 Currency translation Bad debts written off Recovery of amounts previously provided for Allowances for loans Net allowances charged to income statements Interest recognition on impaired loans At 30 June 2013
S$ million At 1 January 2013 Currency translation Allowances charged to income statements At 30 June 2013
KEY PARAMETERS USED TO QUANTIFY CREDIT RISK
1.
What is the probability of an obligor going into default?
Probability of Default
=
PD (%)
4.
What is our exposure in the event of a default?
Exposure at Default
=
EAD
3.
How much of the exposure amount should we expect to lose?
Loss Given Default
=
LGD (%)
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4.5 Exposures and Risk Weighted Assets (“RWA”) by Portfolio EAD S$ million Credit Risk Standardised Approach Corporate Sovereign Bank Retail Residential Mortgage Others Total Standardised Internal Ratings-Based (IRB) Approach Foundation IRB Corporate Bank Advanced IRB Residential Mortgage Qualifying Revolving Retail Small Business Other Retail Specialised Lending under Supervisory Slotting Criteria Securitisation Equity Total IRB Credit Valuation Adjustments Credit RWA pursuant to paragraph 6.1.3(p)(iii) Total Credit Risk Market Risk Standardised Approach Operational Risk Standardised Approach Basic Indicator Approach Total Operational Risk Total RWA
(1) (2)
RWA S$ million
7,702 29,934 1,260 1,685 1,521 9,825 51,928
7,687 990 365 1,267 642 9,108 20,059
67,270 55,444 47,282 5,022 8,566 1,290 23,191 69 1,319 209,454
42,953 16,121 5,454 1,144 3,415 267 21,311 38 4,534 95,239 1,784 5,756
(1) (2)
261,382
122,838
15,943 8,524 826 9,350 148,131
New disclosed item starting in 2013 New disclosed item starting in 2013, refers to Credit RWA for Total Investment in Unconsolidated Major Stake Companies within the prescribed threshold amount in accordance with MAS Notice 637 paragraph 6.1.3 (p)(iii).
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4.6 Credit Exposures under Standardised Approach Credit exposures under the standardised approach comprise mainly exposures to sovereigns, private banking customers in Bank of Singapore and fixed assets. Rated exposures relate mainly to debt securities and sovereign portfolios while unrated exposures relate mainly to individuals and fixed assets.
Risk Weight 0% 20% - 35% 50% - 75% 100% >100% Total Rated exposures Unrated exposures
EAD S$ million 28,940 2,766 2,709 17,500 13 51,928 38,478 13,450
RWA S$ million 753 1,787 17,500 19 20,059 8,676 11,383
4.7 Credit Exposures subject to Supervisory Risk Weights under Internal Ratings-Based Approach Equity Exposures under IRB Approach
(1)
Equities for regulatory capital computation are risk weighted and/or deducted from capital in accordance with MAS Notice 637 under IRB Approach. Equity exposures of S$182 million have been deducted from regulatory capital.
IRB Approach (SRW) EAD S$ million Listed securities Other equity holdings Total 1,000 265 1,265 Average Risk Weight % 318% 424% 340% EAD S$ million 54 54 (PD/LGD) Average Risk Weight % 424% 424%
(1)
Starting in 2013, Equity Exposures are reported under the IRB approach using Simple Risk Weight (SRW) and PD/LGD methods.
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Specialised Lending Exposures under Supervisory Slotting Criteria Specialised lending exposures include financing of income-producing real estate as well as project, object and commodity finance.
EAD S$ million 7,647 9,379 4,933 1,007 225 23,191 Average Risk Weight 62% 84% 122% 265% NA 92%
Strong Good Satisfactory Weak Default Total
4.8 Credit Exposures under Foundation Internal Ratings-Based Approach (F-IRBA)
Corporate exposures are mainly exposures to corporate and institutional customers as well as major non-bank financial institutions. Bank exposures are exposures to banks and eligible public sector entities. Corporate Exposures
PD Range up to 0.05% > 0.05 to 0.5% > 0.5 to 2.5% > 2.5 to 9% > 9% Default Total
Bank Exposures
EAD S$ million 10,178 29,316 20,829 5,617 759 571 67,270
Average Risk Weight 20% 48% 85% 142% 161% NA 64%
PD Range up to 0.05% > 0.05 to 0.5% > 0.5 to 2.5% > 2.5 to 9% > 9% Default Total
EAD S$ million 31,032 17,054 6,862 476 20 55,444
Average Risk Weight 11% 39% 79% 120% 214% NA 29%
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4.9 Credit Exposures under Advanced Internal Ratings Based Approach (A-IRBA)
Residential Mortgages are loans to individuals secured by residential properties. Qualifying Revolving Retail exposures are revolving unsecured loans to individuals e.g. credit cards. Small Business exposures include lending to small businesses and commercial property loans to individuals in Singapore and Malaysia. Other Retail exposures are mainly auto loans in Singapore. Residential Mortgages
EAD S$ million 32,292 9,327 4,899 559 205 47,282 Undrawn Commitment S$ million 4,491 1,677 284 23 6,475 EAD Weighted Average LGD Risk Weight 11% 5% 11% 19% 10% 34% 11% 62% 15% 82% 11% 12%
PD Range up to 0.5% > 0.5 to 3% > 3 to 10% > 10% 100% Total
Qualifying Revolving Retail Exposures
EAD S$ million 3,933 541 398 127 23 5,022 Undrawn Commitment S$ million 6,495 391 166 36 7,088 EAD Weighted Average LGD Risk Weight 81% 6% 78% 40% 82% 97% 82% 224% 81% 0% 81% 23%
PD Range up to 0.5% > 0.5 to 3% > 3 to 10% > 10% 100% Total
Small Business Exposures
EAD S$ million 2,995 3,350 1,786 288 147 8,566 Undrawn Commitment S$ million 1,032 528 178 27 56 1,821 EAD Weighted Average LGD Risk Weight 30% 14% 36% 39% 41% 65% 49% 104% 44% 150% 35% 40%
PD Range up to 0.5% > 0.5 to 3% > 3 to 10% > 10% 100% Total
Other Retail Exposures
EAD S$ million 865 293 90 40 2 1,290 Undrawn Commitment S$ million 290 50 5 345 EAD Weighted Average LGD Risk Weight 29% 12% 29% 34% 29% 45% 27% 61% 28% 5% 29% 21%
PD Range up to 0.5% > 0.5 to 3% > 3 to 10% > 10% 100% Total
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4.10 Exposures Covered by Credit Risk Mitigation
Amount by which exposures have been reduced by eligible credit protection S$ million
Eligible Financial Collateral S$ million Standardised Approach Corporate Sovereign and Bank Retail and Residential Mortgage Others Total 2,967 2,449 314 3,535 9,265
Other Eligible Collateral S$ million
-
-
Foundation IRB Approach Corporate Bank Total 3,722 397 4,119 9,589 9,589 505 118 623
Note: 1. Not all forms of collateral or credit risk mitigation are included for regulatory capital calculations. 2. Does not include collateral for exposures under Advanced IRB Approach and Specialised Lending.
4.11 Counterparty Credit Risk Exposures Net Derivatives Exposure
S$ million Replacement Cost Potential Future Exposure Less: Effects of Netting EAD under Current Exposure Method Analysed by type: Foreign Exchange Contracts and Gold Interest Rate Contracts Equity Contracts Precious Metals Contracts Other Commodities Contracts Credit Derivative Contracts Less: Eligible Financial Collateral Other Eligible Collateral Net Derivatives Credit Exposure 4,302 4,963 3,593 5,672 3,489 1,150 151 31 851 426 5,246
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Credit Derivatives Exposure
S$ million Notional Amount Bought Credit Default Swaps for own credit portfolio for intermediation activities Total 11,447 45 11,492 Sold 10,214 45 10,259
4.12 Securitisation Exposures Purchased There are no re-securitisation exposures and all the securitisation exposures are in the banking book.
S$ million Capital Charge 1 1 2 4
Risk Weight up to 20% > 20% to 50% > 50% to 100% > 100% to 500% > 500% 1250% Total
EAD 50 17 2 69
5. MARKET RISK
Capital Requirement by Market Risk Type under Standardised Approach
S$ million 786 41 447 1 1,275
Interest rate risk Equity position risk Foreign exchange risk Commodity risk Total
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6. EQUITY EXPOSURES IN BANKING BOOK
Disclosures on valuation and accounting treatment of equity holdings can be found in Notes 2.2.3, 2.6.2 and 2.23.3 in the Notes to the Financial Statements of the 2012 Annual Report. Carrying Value of Equity Exposures Quoted equity exposure - AFS Unquoted equity exposure - AFS Quoted equity exposure - Associates Unquoted equity exposure - Associates Total S$ million 2,268 527 – 352 3,147
Realised and Unrealised Gains and Losses Gains/(losses) from disposal of AFS equities Unrealised gains included in fair value reserve Total S$ million 52 404 456
7. INTEREST RATE RISK IN THE BANKING BOOK
A description of the nature of interest rate risk in the banking book and key assumptions made by the Group can be found in Note 39.3 in the Notes to the Financial Statements of the 2012 Annual Report. Based on a 100 bp parallel rise in yield curves on the Group's exposure to major currencies i.e. Singapore Dollar, US Dollar and Malaysian Ringgit, net interest income is estimated to increase by $364 million. The corresponding impact from a 100 bp decrease is an estimated reduction of $123 million in net interest income. As a percentage of reported net interest income (on an annualised basis), the maximum exposure for the three major currencies is estimated to be approximately -3.3 %.
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