Credit Risk and Credit Screening System
Credit risk arises when a borrower’s business fails or business conditions worsen and the bank suffers a loss due to the difficulty of recovering the principal and interest on loans.
    With the aim of improving asset soundness, the Bank has customarily separated its credit screening and loan management divisions from other divisions and set up strict, independent credit screening and loan management.
    During the screening process, the Bank makes comprehensive credit evaluations based on quantitative and qualitative examinations of the financial condition of the borrower company, including its characteristics and growth, and analyses of industry trends.
    The Bank introduced a credit rating system in April 1998 to manage each account in accordance with customers’ credit ratings. Each loan is subject to strict examination, including the appropriateness of the business plan, proposed use of funds, financial resources for repayment, and collateral and other measures to ensure the integrity of the loan. Further, the Credit Supervision Division conducts detailed credit evaluations and provides branch guidance, including inspections on a regional, group, industry, and customer-specific basis.
    Credit administration is supported by an efficient and reliable system in which the Credit Supervision Division manages financial and credit rating data and integrates valuations of real estate collateral.
    Since the term ended March 1998, banks have been charged with the duty of conducting asset self-assessments. The Bank makes efforts to improve its self-assessment system through independent auditing by the Self-Assessment Supervision Department and so as to strengthen the system of checks and balances in the Head Office and branches. Moreover, external corporate auditors are brought in to ensure that the Bank has appropriate self-assessment standards and that it conforms to those standards and implements adequate self-assessment.

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