Regions Bank 2012 Annual Report Download - page 124

quarterly assessment of the exposure, on both an outstanding and limit basis, which is then distributed to upper
management for review.
CREDIT RISK
Regions’ objective regarding credit risk is to maintain a high-quality credit portfolio that provides for stable
credit costs with acceptable volatility through an economic cycle. See the “Credit Quality” section found earlier
in this report for further information.
Management Process
Regions employs a credit risk management process with defined policies, accountability and regular
reporting to manage credit risk in the loan portfolio. Credit risk management is guided by credit policies that
provide for a consistent and prudent approach to underwriting and approvals of credits. Within the Credit Policy
department, procedures exist that elevate the approval requirements as credits become larger and more complex.
Generally, consumer credits and smaller commercial credits are centrally underwritten based on custom credit
matrices and policies that are modified as appropriate. Larger commercial and investor real estate transactions are
individually underwritten, risk-rated, approved and monitored.
Responsibility and accountability for adherence to underwriting policies and accurate risk ratings lies in the
lines of business. For consumer and small business portfolios, the risk management process focuses on managing
customers who become delinquent in their payments and managing performance of the credit scorecards, which
are periodically adjusted based on actual credit performance. The credit risk management division works with
commercial relationship teams to analyze and underwrite new business opportunities, manage the overall loan
portfolio, and perform ongoing credit servicing activities utilizing a risk-based approach which incorporates
quantitative and qualitative factors.
To ensure problem commercial credits are identified on a timely basis, several specific portfolio reviews
occur each quarter to assess the larger adversely rated credits for accrual status and, if necessary, to ensure such
individual credits are transferred to Regions’ Problem Asset Management Division, which specializes in
managing distressed credit exposures.
There are also separate and independent commercial credit and consumer credit risk management
organizational groups. These organizational units partner with the business line to assist in the processes
described above, including the review and approval of new business and ongoing assessments of existing loans in
the portfolio. Independent commercial and consumer credit risk management provides for more accurate risk
ratings and the timely identification of problem credits, as well as oversight for the Chief Credit Officer on
conditions and trends in the credit portfolios.
Credit quality and trends in the loan portfolio are measured and monitored regularly and detailed reports, by
product, business unit and geography, are reviewed by line of business personnel and the Chief Credit Officer.
The Chief Credit Officer reviews summaries of these credit reports with executive management and the Board of
Directors. Finally, the Credit Review department provides ongoing independent oversight of the credit portfolios
to ensure policies are followed, credits are properly risk-rated and that key credit control processes are
functioning as intended.
Risk Characteristics of the Loan Portfolio
In order to assess the risk characteristics of the loan portfolio, Regions considers the current U.S. economic
environment and that of its primary banking markets, as well as risk factors within the major categories of loans.
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