Credit risk policy
The LLB Group supports municipalities, companies, small businesses and private persons to finance their plans for the future. The majority of the loans in 2014, i.e. 86.6 percent (2013: 87.3 %), comprised credits secured by mortgages. Moreover, we granted operating loans and Lombard loans.
The LLB Group pursues a conservative credit risk policy in all divisions and penetrated markets. Its integral parts include the specialized and individualized assessment of loan applications, the conservative assessment of collateral values, the individual calculation of affordability as well as compliance with standard market equity requirements.
Outside of the target markets of Liechtenstein and eastern Switzerland, the LLB Group provides mortgages in cases that involve an important client relationship or in cases in which such a relationship can be verifiably established within a reasonable period of time. In 2012, we adopted the new minimum requirements approved by the Swiss Federal Financial Market Supervisory Authority (FINMA) for mortgage financing. These were drawn up by the Swiss Bankers Association (SBVg).
On 28 February 2014, the EU published the “Mortgage Credit Directive” (Directive 2014 / 17 / EU) on credit agreements in the Official Journal of the European Union. The Directive aims to provide better protection for borrowers. The new credit business regulations deal in-depth with such issues as advertising, pre-contractual information, counselling, assessment of creditworthiness and early repayment dates. The EEA member country Liechtenstein transposed the provisions for assessing, evaluating and processing mortgage secured loans into the Banking Ordinance; they came into force on 1 April 2014.
We developed a Group-wide uniform methodology for ascertaining the collateral value of our Lombard loans. Among other things, this particularly takes into account the liquidity, the counterparty risk and volatility of individual securities and, on top of that, the diversification of the assets provided as security and pledged by the borrower. There has been a marked cutback in credits against non-diversified securities or single asset lending, which may only form an insignificant portion of a Lombard loan portfolio. Loan securities outside of examined and approved existing markets are excluded from this.