Economic fluctuations, social dynamics, advanced technology, and environmental crises are all interconnected and have a significant impact on an organization’s direction. Therefore, the Bank prioritizes risk assessment and management in order to prevent risks that may have an impact on the Bank while also exploring opportunities to serve customers in a stable and socially responsible manner.

Target

100% of employees and senior executives received basic risk management training.

Performance

100% of employees and senior executives received basic risk management training.

Impacts, Opportunities, and Risks to the Economy, Environment, Society, and Human Rights

The Bank has implemented comprehensive risk management across the organization by integrating processes into strategic plans and adhering to set standards for controlling, monitoring, and reporting risks. This ensures that operations are consistently aligned and that the Bank is prepared to prevent and adapt to various risks, or mitigate them to an acceptable level. The Bank places importance on cyber security risk management and online transactions to prevent such issues from causing business disruptions and slowing down the development of digital technology. Furthermore, the Bank has incorporated environmental and social considerations into the evaluation of loans and investments to mitigate indirect impacts stemming from its business operations. This aligns with the trend towards sustainable finance, ensuring that the Bank can allocate funds to facilitate the transition and generate maximum benefits for Thai society.

Effective risk management enhances business opportunities. The Bank takes into account the adequacy of the risk management system and its effectiveness. Regular reviews are conducted to assess appropriateness, evaluating both internal and external factors, by relevant committees. At the same time, the Bank aims to create a risk management culture within the organization so that its risk management system is in line with good international practices.

Policy and Management

Risk management and control are the Bank’s primary priorities. The Bank has clearly defined a risk management framework, organizational risk management policy and guideline manuals for enterprise risk management in accordance with the requirements of the Bank of Thailand (BOT), the Committee of Sponsoring Organizations of the Treadway Commission (COSO) direction, COSO ERM Risk Management Framework and risks arising from the significant activities of the Bank.

In addition to the main enterprise policy management, the Bank has established specific risk management policies correspond to comprehensive risk management, including:

The Bank places importance on environmental, social, and governance factors (ESG) and climate change. Such factors have been integrated into the Bank’s credit risk management and credit portfolio assessment processes, as well as evaluating and finding ways to manage emerging risks in order to build readiness to cope with changes that may occur in the future. The Bank has incorporated risk management processes into its annual business plan to ensure consistency in risk management across all organizational dimensions. This integration encompasses establishing measures to control, monitor, and report risks to prevent, control, or mitigate risks to an acceptable level within the internal and external environments impacting the Bank during each period. The adequacy of the risk management system is regularly reviewed by relevant committees, concurrently with fostering of a risk management culture within the organization to align with international best practices. This preparation ensures the organization’s readiness to prevent and adapt to risks while also effectively seeking business opportunities from such risks.

Furthermore, the Bank’s risk management includes stress testing for financial risks to ensure capital adequacy both in normal and crisis situations. The risk appetite or risk tolerance, along with a risk matrix, assesses the likelihood of risks and their key consequences. Key Risk Indicators (KRIs) and risk mitigation measures are also implemented, in addition to system monitoring and evaluation. The risk dashboard is regularly presented to the Risk Oversight Committee to ensure that risks are managed and maintain within acceptable levels. Internal in-process investigations are carried out to ensure accountability. In addition, the Bank regularly reviews risk factors once a year and considers emergency risk factors throughout the year, particularly during political crises and international conflicts. This ensures timely risk management, control, monitoring, and reporting, reducing potential business impacts on the Bank.

Risk Management Governance Structure

The Bank has developed an organizational structure and implemented effective risk management in accordance with principles of good corporate governance. Cluster Risk reports to the Risk Oversight Committee to ensure its independence. Also, the Cluster Risk reports the performance details of the Bank’s risk management governance to both the Management Committee and Audit Committee.

Roles and responsibilities for each business unit are clearly defined. The Bank’s risk management governance structure comprises high-level committees which are sub-committees of the Board of Directors. These committees include the Board of Executive Directors, Risk Oversight Committee, Compliance Committee, and Audit Committee. Additionally, management-level committees, consisting of the CEO and Senior Executives, are tasked with managing and monitoring risks. These management-level committees include the Management Committee, Asset and Liability Management Committee, Governance, Risk, and Compliance Committee-Management Level, and Credit Scrutiny Committee, etc.

An overview of the Bank’s risk management governance structure is provided below:

Mr. Ekachai Techawiriyakul, Chief Risk Officer, is primarily responsible for overseeing risk management in accordance with the Bank’s policies and strategies. His responsibilities include managing capital, liquidity, and various risks to ensure they remain within the Bank’s acceptable risk level. Monthly reports on risk status, management effectiveness, and compliance with organizational culture are submitted to the Risk Oversight Committee, while quarterly reports are presented to the Bank’s Board of Directors.

Mr. Panabhand Hankijjakul, the Chief Audit Officer, is primarily responsible for monitoring and reviewing the performance of strategic, credit, market, liquidity, and operational risk management. Performance reports are submitted to the Audit Committee, a board-level subcommittee. It is a requirement that the individual in this role must not simultaneously hold the CEO position. Additionally, the risk management unit must maintain structural independence from business-related Groups.

In 2023, the Bank continuously managed risks by considering Environmental, Social, and Governance factors (ESG Risk). The ESG Risk Task Force prioritizes both existing and emerging ESG risks, ensuring alignment with the prevailing economic context. Monthly reports are submitted to the Chief Risk Officer, while regular updates are provided to the Risk Oversight Committee and Management Committee. The ESG Risk Task Force also identifies risk management approaches to mitigate the impact of foreseeable risks.

Developing a Risk Culture

The Bank prioritizes cultivating organizational culture and risk management throughout the organization by dividing risk management duties and responsibilities into Three Lines of Defense, which include the following: the First Line of Defense comprises leaders and all employees working collaboratively to monitor and uphold organizational integrity, honesty, and efficient work processes that generate value while adhering to the Code of Ethics. The Second Line of Defense includes the regulatory and legal risk management unit, while the Third Line of Defense comprises internal and external audit units.

The Bank has formed a Compliance Committee and an Audit Committee to provide additional oversight, enhancing trust and rigor. Within the supervision framework, the Risk Oversight Committee (ROC) is critical in driving risk management and governing risks to ensure compliance with policies and acceptable risk levels. This is achieved by adhering to international risk management frameworks such as COSO and Prudential Banking guidelines, which is reflected in the organizational structure.

Furthermore, to foster a positive work environment and communication among all levels of employees, the Bank has developed a risk culture, which is summarized as follows:

1. Establish a clear Risk Policy Management and Framework.

2. Delegate authority to approve risk limits for acceptable risk levels and define the level of risk that can be tolerated.

3. Create an environment that promotes clear risk management by fostering a risk culture and communicating with employees of all levels through action plans. The details are as follows:

3.1. Declare intent and follow guidelines based on the 5 core values, which take into consideration appropriate risk management and internal control procedures.

3.2. Promote the moral identity of 5 core values through activities and programs designed to instill a risk culture throughout the organization. These initiatives aim to raise awareness and understanding of appropriate behavior while encouraging participation from all levels, from bank directors to every employee.

3.3. Assign a committee to oversee risk management. This subcommittee is responsible for driving and supervising risk management efforts to ensure compliance with policy and adherence to the Bank’s acceptable risk level.

3.4. Establish the Sustainable Krungthai Initiative to increase transparency in business operations. This initiative includes adhering to the Code of Conduct, fostering a zero-tolerance culture for corruption, and enforcing anti-bribery and corruption policies that are verifiable and free of conflicts of interest.

3.5. Offer a Whistleblowing Policy and establish a Governance, Risk, and Compliance Committee (GRC) at both management and operational levels to address reported incidents and ensure their effective and speedy resolution. These measures underscore a dedication to risk supervision and enhance credibility.

4. Provide robust tools to facilitate effective risk management and conduct periodic testing of risk assessment tools to verify the accuracy of risk assessments.

5. Conduct stress tests to ensure that the Bank maintains sufficient capital to withstand both normal and crisis situations.

6. Implement a system to monitor risks and report them through the Risk Dashboard on a monthly basis to the relevant committees, ensuring that risks are managed to be within the acceptable level.

7. Incorporate Key Risk Indicators into performance evaluations and employee compensation to raise awareness about risks among executives and employees of all levels and prevent potential risks.

8. Integrate risk criteria into the product development or approval processes to ensure compliance with the Bank’s policies and strategic plans.

9. Prioritize risk management training across the organization to enhance the knowledge and understanding of employees and executives within business units under the Risk Management Group.

Creating Risk Awareness

The Bank prioritizes and fosters an effective risk culture. It focuses on promoting understand, raising awareness, and encourage participation in the Bank’s risk management among senior executives, employees, and departments across the organization. In 2023, the Bank provided compulsory online organizational risk management training and assessment to all employees. The goal was to provide employees with the ability to distinguish between work problems and risks, as well as identify, prioritize, and manage risks in a systematic manner. 100% of employees and senior executives successfully completed this fundamental organizational risk management training.

Additionally, the Bank is committed to improving the knowledge and understanding of environmental, social, and governance (ESG) issues, as well as climate change, among employees and executives in the risk management functions. These issues are incorporated into the Bank’s risk management processes at both the operational and portfolio levels. The Bank has organized a training course on risk management in ESG and climate risk management for executives and employees across all Groups. This initiative aims to enhance understanding of the risks and opportunities stemming from climate change and environmental, social, and governance issues. Some of the trainings include:

Courses

• Fundamentals of responsible banking: M1 ESG disclosure
• Fundamentals of responsible banking: M2 key environmental issues and related financial risks and opportunities
• Fundamentals of responsible banking: M3 implementing your sustainable business risk management strategy
• ESG: Thailand Taxonomy Overview

Emerging Risk

The Bank conducts regular risk assessments to identify risks to its business or its group, including both current and emerging risks anticipated over the next 3-5 years. These assessments evaluate the potential impact of these risks, which could impede the business’s ability to achieve its objectives. Furthermore, the Bank has established mitigation standards to prevent and minimize impacts on both the Bank’s business operations and its customers.

Transition Risk

The issues and impacts of climate change are currently worsening, as evidenced by extreme events such as heatwaves, rainstorms, floods, droughts, and wildfires that are more severe and frequent than in the past. Countries around the world, including Thailand, have agreed to establish directions, goals, and criteria aimed at limiting the global temperature rise to no more than 1.5 degrees Celsius compared to pre-Industrial Revolution levels. These changes may prompt shifts in laws, regulations, and consumer preferences. The Bank must adapt to effectively navigate and manage the risks associated with the transition to a low-carbon society, including:

• Risks associated with changes in laws or regulations, such as the Emission Trading Scheme (ETS) and the European Union’s Carbon Border Adjustment Mechanism (CBAM) are expected to impact various industries, including cement, electricity, fertilizer, iron and steel, aluminium, and hydrogen. Additional risks within the industrial sector, particularly under the EU Emissions Trading System (EU ETS), as well as potential adjustments affecting other sectors, such as basic organic substances for plastics and polymers, should also be considered. Furthermore, there is the possibility of implementing measures such as a Polluter Import Fee on U.S. polluters and a carbon tax on the energy, transportation, and industrial sectors. Thailand is currently in the process of developing a carbon tax structure.
• Risks arising from shifts in customer behaviour and investment policies driven by growing interest in environmentally friendly products and services, including Green and Sustainable Finance. At the same time, investors are recognizing the potential impacts of climate change on future business financial losses.

Impacts

The risk of law or regulatory changes associated with the transition to a low-carbon society, coupled with changing customer behaviour, has the potential to significantly impact the business operations of both the Bank and its customers.

• The Bank’s customers are facing increasing expenses due to regulatory and legal changes, including carbon emissions taxes, CBAM, and ETS. Large businesses are particularly affected due to their potential for emitting high levels of greenhouse gases that exceed the government’s established minimum tax threshold. The Bank estimates that the sectors to be affected are cement, electricity, fertilizer, iron and steel, aluminium, and hydrogen, collectively representing 1-2% of the Bank’s total loans. Increased costs in these industries may impact customers’ ability to repay debt and influence investment decisions regarding expansion.
• In severe cases, the risks associated with the CBAM carbon emissions tax may affect customers in specific industrial sectors, influencing their business decisions. These decisions could involve reducing production capacity and employment, shifting to alternative export outlets, adjusting product prices to manage rising costs, and potentially impacting SMEs and retail customers. Such effects could have repercussions on liquidity and increase the risk of bad debt due to default.
• If the government implements carbon tax measures in 2024, the Bank may experience increased operating costs, potentially leading to a slight rise in expenses during the initial 5 years. Additionally, the Bank may face penalties imposed by financial institution regulators.

Mitigation Measures

The Bank has conducted thorough studies, assessments, and implemented a risk management strategy integrating ESG risk evaluations to mitigate risks and facilitate the transition to a low-carbon society. Measures have been implemented to mitigate the impact on both operational processes and loan portfolio management.

• Assess climate risks through the Task Force on Climate-related Financial Disclosures (TCFD) to analyze potential impacts across diverse scenarios. This includes identifying opportunities and approaches for coping with climate-related risks.
• Establish strategies and guidelines to reduce greenhouse gas (GHG) emissions, including short- and long-term targets for Scope 1 and 2 emissions from the Bank’s business operations and assets, as well as Scope 3 emissions associated with its customers’ greenhouse gas emissions, all in line with the overarching goal of achieving net-zero greenhouse gas emissions.
• Enhance knowledge and understanding of ESG principles among relevant employees. This includes providing training on carbon credits and Scope 3 greenhouse gas emissions. Additionally, the Bank has developed e-learning modules covering 3 dimensions: ESG awareness, ESG knowledge, and ESG activities.
• Establish an ESG working group and define an ESG Risk Infrastructure action plan to devise a transition plan that is in line with the guidelines of the Bank of Thailand (BOT) to help the business sector adapt and achieve concrete results. The Bank has an operational framework and strategies, as well as support plan for each industry according to the Thailand Taxonomy criteria.
• Develop and establish Responsible Lending Guidelines. Loan applicants are required to evaluate environmental, social, and governance impacts using an ESG Checklist. The Bank maintains an Exclusion List, which outlines loan applicants or activities not supported by the Bank, and an Inclusion List, which identifies industries those in the Inclusion List are loans for energy conservation, loan for entrepreneurs with good corporate governance, loans that will create jobs, develop the quality of life, or have positive impact on the country’s overall economy.
• The Bank consistently monitors market conditions and assesses risks associated with adjustments for affected customers. This evaluation occurs at regional, industry, and individual customer levels, enabling the consideration of appropriate corrective measures to aid customers in need.
• The Bank develops transition plans for customers within industries anticipated to be affected, as well as those within the supply chain, to facilitate their transition. Continuous monitoring of the impact is conducted so that the Bank can promptly minimize the proportion of affected industries in the Bank’s portfolio.

Risks Emerging from Sustainable Finance Landscape

As the business landscape shifts towards social and environmental awareness, financial institutions play an important role in addressing this challenge by allocating capital to businesses to facilitate their adaptation to the transition and further support Thailand’s greenhouse gas emissions targets. At present, the allocation of funds for the transition falls significantly short of the demand, posing a challenge for the international community, including Thailand, to adjust in a timely manner. According to a report by the International Energy Agency (IEA), investments in such transitions represent only 30% of the demand. Other countries are making changes to policies and principles, as well as developing more sustainable finance products.

Sustainable finance in Thailand is still in its infancy, representing a very small proportion. Regulators are beginning to develop principles, criteria, and tools to promote the expansion of sustainable finance. Furthermore, investors prioritize conducting business with environmental, social, and governance (ESG) considerations in mind, emphasizing the importance of adapting to the transition. They expect banks to develop sustainable finance products to align with global standards, meeting both international requirements and customer demands.

Krungthai Bank is a state-owned commercial bank and a leading financial institution in the country, renowned for its high level of competitiveness in developing financial products and services. In addition to serving its customers, the Bank offers financial services to people across the country through its open digital platforms. With this extensive reach and influence, the Bank is expected to lead the development of sustainable financial products. This proactive approach ensures readiness to adopt new tools and practices as they emerge in the future.

The changes may have an impact on the Bank as follows:

• Developing sustainable financial products is crucial for meeting customer needs. Failure to do so in a timely or comprehensive manner may jeopardize the Bank’s competitiveness.
• Definitions and criteria for considering ESG loans must be clear, appropriate, and based on credible principles that support and account for environmental, social, and human rights impacts. The Bank may face risks in determining the definitions and criteria for considering ESG loans due to the novelty and ongoing evolution of the issue. Currently, definitions and criteria for green activities are available only for the energy and transportation sectors (Ref: Thailand Taxonomy Phase I).
• The Bank may encounter difficulties in accurately identifying, evaluating, or monitoring customers’ credit usage for green loan purposes. There are currently no mechanisms for suspending loans in the event that it is found that a loan no longer meets the criteria for green loans.

Impacts

As Krungthai Bank is a state-owned commercial bank that prioritizes the development of products and services to meet the needs of not only its customers but also the general public that use the open digital platforms. Therefore, the Bank focuses on developing sustainable finance products to promptly and properly comply with relevant regulations.

The Bank’s definitions and criteria must be reliable and aligned with international standards to ensure that funds are directed towards customers or projects with genuine environmental and social objectives. The Bank must also avoid unintentional greenwashing that could negatively impact the Bank’s image and reputation. Furthermore, the Bank must comply with government-enforced criteria to avoid fines for negligence in financing to green activities and avoid missingopportunities to support projects or activities that genuinely have positive impacts on society and the environment.

Mitigation Measures

The Bank explored international standards for sustainable finance product by employed new tools such as the Thailand Taxonomy and green loans criteria to respond to stakeholder expectations.The Bank has taken the following actions:

• The Bank has studied and developed various products and services tailored to meet the diverse needs of customers across all business sizes. These include ESG-linked derivatives catering to large businesses, loans aimed at enhancing production efficiency and reducing greenhouse gas emissions, and Krungthai Sustainability Loans designed for small and medium-sized enterprises (SMEs). Furthermore, the Bank has established a clear product and service development plan in alignment with the principles set by the Bank of Thailand. Currently, it is in the process of developing several products, such as Sustainability-Linked Loans and Green Loans, to support customers seeking funding for environmentally friendly and sustainable projects.
• Piloting products for funding, such as green deposits, green bonds, or derivatives to finance green loans.

The Bank is currently developing Green Loan and Green Financing Frameworks. External evaluators will review and certify these to ensure their compliance with international standards. The details are as follows:

• The Bank has a plan to develop a Green Loan Framework, which includes indicators that align with international standards, such as the Green Loan Principles of the Asia Pacific Loan Market Association (APLMA) and the Loan Market Association (LMA), and green transition activities according to the Thailand Taxonomy Framework, which will assist in defining the Criteria for industries or projects that the Bank will support with green loans. These criteria will help filter the intensity of business activities or projects and facilitating the phase-out or transition of certain activities. The Green Loan Framework must have main components: 1) use of fund, 2) process for project evaluation and selection, 3) management of funds, and 4) reporting to ensure clear green loan qualifications in order to support the Green Financing Framework.
• The Bank has a plan to develop a Green Financing Framework that will establish a clear structure and process for issuing products that meet international standards, such as the International Capital Market Association’s Green Bond Principles. The Green Financing Framework consists of 4 main components: 1) the use of proceeds, 2) process for project evaluation and selection, 3) management of proceeds, and 4) reporting to ensure that depositors or investors have confidence in the Bank’s commitment to a solid capital management process for green loans in accordance with standard criteria.
• The Bank has a plan to put forth a policy to reduce lending to specific industries (phase out) as a guideline for mitigating the impact of greenhouse gas emissions from specific sectors. The effort is intended to help the Bank meet its greenhouse gas emissions reduction targets.
• The Bank mandates verification from external agencies when granting green loans in accordance with the Green Loan Framework and Green Financing Framework. The Bank also acquires a second-party opinion to ensure that green loans meet specified criteria and are deemed appropriate.

Central Bank Digital Currency Risk

The Bank of Thailand (BOT) is currently in the process of developing a Central Bank Digital Currency (CBDC) designed to be equivalent to the baht, maintain a stable value, and be legally used to repay debt. Initially, the BOT has planned for CBDCs to be distributed through financial institutions, but they will not accrue interest on CBDC deposits and will impose limits on holdings.

CBDCs may present various risks to the Bank, including:

• In the event of a significant increase in market demand for CBDC, there could be potential impacts on the adequacy of CBDC supply of both the Bank’s and the market, as well as on Banks’ liquidity for CBDC.
• The Bank has yet to estimate the costs of developing a system to support CBDC intermediation, access to the technology required, and managing the increased cybersecurity risks that may arise as a result of the use of digital currency.

Impacts on the Bank and Customers

Digital currency risks can cause crises that affect the Bank’s finances as follows:

• In the event of CBDC liquidity crisis, the Bank may need to acquire additional funds and re-allocate them as CBDCs to avoid disruptions to its business operations. This could lead to increased cost of funds.
• Researching and developing a system to support CBDC intermediation incurs significant expenses. Nevertheless, the Bank must prioritize the timely development of such systems to retain CBDC and deposit customers.

Mitigation Measures

The Bank conducts comprehensive digital financial risk assessments to prevent risks and seek measures to mitigate the impact.

• The relevant departments within the Bank closely monitor the project’s progress, assess its feasibility, and analyze its potential impacts on the Bank. They develop operational plans to address these changes, for example, exploring and acquiring technology to develop the Bank’s system.
• The Bank has designated specific departments to monitor CBDC liquidity once it is used in the Thai financial system. It has established ceilings or indicators (triggers) to manage liquidity risk effectively, ensuring it remains at an acceptable level. Additionally, the Bank reports its liquidity position regularly.
• The Bank has added stress test scenarios to assess liquidity risk under stressful conditions and understand their potential impact. The Bank has developed measures to address scenarios where deposit mobilization may not reach the expected level. This includes the development of a liquidity contingency plan, aimed at managing crises and mitigating negative impacts from potential liquidity issues promptly and cost-effectively.
• The Bank is actively seeking partners to collaborate on jointly enhancing the capabilities to develop new technologies or business models.

Geopolitical Risk

Geopolitical risks from the spread of wars in certain regions of the world, which are likely to intensify, affect the Bank’s business operations in those regions. The Bank is unable to plan investments efficiently. In addition, demonstrations and protests may damage or cause delays in the Bank’s operations.

Impacts on the Bank and Customers

The Bank has branches in China, Singapore, Cambodia, Laos, Myanmar, and England. While these countries are not currently directly affected by geopolitical issues, escalating situations could disrupt the Bank’s operations in regions where these challenges arise, and the Bank’s assets may suffer damage from protests. Employees will be unable to work efficiently or carry out business as planned, resulting in decreased revenue and profits as well as potential losses due to the damage.

Mitigation Measures

The Bank regularly monitors conditions, assesses risks, conducts ESG, and Human Rights Due Diligence. These measures can help the Bank address various risk factors and provide guidance to customers impacted by these changes.

Polycrisis Risk

The various crises currently emerging have the potential to set off a chain reaction, posing challenges for the Bank to prepare for and adapt to. These include the climate change crisis, emerging epidemics, natural resource scarcity crises, political issues, and human rights violations.

These crises stimulate significant risks of rapid inflation and have wide-ranging impacts, leading to debt crises at all levels, including households, private organizations, financial institutions, and national public debt. The issues may arise from an inability to quickly adapt to the new economy, characterized by a dynamic economic model driven by innovation, technology, and creativity. This model prioritizes both social and environmental sustainability, as well as regional connectivity, which involves digital transformation or rapid changes resulting from driving the economy with digital technology. The economy in the new era is changing.

Impacts

The Bank has been impacted by the crisis in various dimensions, affecting the quality of the Bank’s customers both domestically and overseas. The customer groups are classified as follows:

• Corporate customers have been impacted by geopolitical crises, for example, the lack of income from exports to sanctioned countries has led to a lack of liquidity and the inability to repay debts to the Bank on time. Furthermore, import controls have resulted in higher raw material prices and lower profits, limiting the ability to repay debts to the Bank and the failure to promptly adapt to the new economy and regional connectivity, thereby deteriorating their ability to repay debts.
• Retail customers have been affected by the crisis of higher living costs, resulting in decreasing ability to repay debts.

Mitigation Measures

These crises are difficult to predict and affect the entire world. Preparing for them in advance is necessary. The Bank prepares to deal with risks from multidimensional crises through a strict credit risk management process that is prudent, up-to-date, and in accordance with good governance. Details of the measures can be classified as follows:

• Loan Approval: The Bank strictly adheres to policies, guidelines, and credit approval authority, taking into account environmental factors, climate change, conducting business with respect for human rights, and relevance to current situations such as war, sanctions, and various rules and regulations that the Bank’s customers are affected by.
• Monitoring Loan Quality: The Bank proactively manages credit quality by forecasting credit quality on a weekly basis and presenting it to the Management to consider guidelines for prevention before NPL occurs, such as proposing debt restructuring to suit debt repayment ability and providing advice to customers before a lack of liquidity shortage occurs.
• Classification and Provisioning: The Bank assesses and sets additional reserves for vulnerable customer groups and individuals showing signs of deteriorating credit quality. These measures receive monthly approval from the Override and Overlay Management Committee, ensuring the Bank maintains sufficient reserves to mitigate future risks effectively.
• Regular Stress Testing: To evaluate potential risks, the Bank considers all significant risk factors, including environmental, social, and governance factors, to manage capital funds appropriately under normal economic conditions and during severe changes in the economic environment.
• The Bank cooperates with all groups of business partners, both public and private agencies, through “Total Solutions” to develop products and services that encompass all aspects of customers’ lives, meeting their needs comprehensively and directly.
• The Bank continues to monitor emerging challenges and adjusts assessment guidelines to align with the changing global context, encompassing the new economy and regional connectivity. This enables the Bank to assess and evaluate potential impacts resulting from changes in societal behavior and structures.

Risk management in Product Process

The bank has set up Product Committee (PC) to approve new products and review products under incorporating risk criteria in line with the bank's policies and strategic plans. Furthermore, the bank has established product assessment to ensure that the product development and product review processes have covered all risks and necessary functions.