Project Aura
Asset Quality Review and Credit Loss Projection
Methodology
Prepared for the Bank of Greece
5 March 2014
2 BANK OF GREECE │ ASSET QUALITY REVIEW AND CREDIT LOSS PROJECTION METHODOLOGY
Disclaimer
This material was prepared solely for the exclusive use of the Bank of Greece pursuant to and subject to the
terms of the Advisory Services Agreement, dated as of 17 July 2013, between BlackRock and the Bank of
Greece, and, is not intended to be relied upon by any other party or persons, and should not be distributed to
any other party or persons, except as described in the Agreement. Accordingly, BlackRock accepts no liability
or responsibility to any other party or person in connection with this material or work product.
This material constitutes Confidential Information of BlackRock.
Any analysis or projections contained in this work product are advisory and estimated in nature and are based
on assumptions and models. The information and opinions contained in this material are derived from
proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive
and are not guaranteed as to accuracy. This draft is not intended to make any recommendations or solicit any
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intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or
solicitation to buy or sell any securities or to adopt any investment strategy.
THIS DOCUMENT IS CONFIDENTIAL AND ITS CIRCULATION AND USE ARE RESTRICTED.
©2014 BlackRock Financial Management, Inc., All Rights Reserved.
3 | BANK OF GREECE │ ASSET QUALITY REVIEW AND CREDIT LOSS PROJECTION METHODOLOGY
Table of Contents
Abbreviations and Key Terms
5
Executive Summary
7
1.1.
Overview
7
1.2.
Scope of Diagnostic Assessment
11
1.3.
The 2011 Diagnostic and Recent Greek Bank Consolidation Activity
12
1.4.
Key Assumptions
14
1.5.
Important Assumptions and Limitations
17
Residential Mortgage Loans
18
2.1.
Scope of Asset Quality Review
18
2.2.
Portfolio Stratifications and Risk Analysis
19
2.3.
Loan File Review
24
2.4.
Residential Property Drive-bys
31
2.5.
Modelling Methodology
35
2.5.1. General Approach
35
2.6.
Group B Banks
47
2.6.1. Portfolio Stratifications
47
2.6.2. Methodology Overview
48
Consumer Loans
49
3.1.
Scope of Asset Quality Review
49
3.2.
Portfolio Stratifications and Risk Analysis
50
3.2.1. Auto Loans
54
3.2.2. Revolving Loan Stratifications
54
3.2.3. Other Consumer Loans
55
3.3.
Loan File Review
56
3.4.
Modelling Methodology
62
3.4.1. General Approach
62
3.5.
Group B Banks
72
3.5.1. Portfolio Stratifications
72
3.5.2. Methodology Overview
72
Small Business and Professional Loans (SBP)
73
4.1.
Scope of Asset Quality Review
73
4.2.
Portfolio Stratifications and Risk Analysis
74
4.3.
Loan File Reviews
78
4.4.
Modelling Methodology
83
4.4.1. General Approach
83
4.4.2. CLP Modelling Approach
84
4.5.
Group B Banks
97
4.5.1. Portfolio Stratifications
97
4.5.2. Methodology Overview
98
Corporate Loans
100
5.1
Scope of Asset Quality Review
100
5.2
Portfolio Stratifications and Risk Analysis
101
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5.3
Large Loan Underwriting
102
5.4
Modelling Methodology
107
5.4.1 Exposure at Default
109
5.4.2 Probability of Default Analysis
111
5.4.3 Loss Given Default
115
5.5
Group B Banks
122
5.5.1 Portfolio Stratifications
122
5.5.2 Methodology Overview
122
Shipping Loans
124
6.1
Scope of Asset Quality Review
124
6.2
Portfolio Stratifications and Risk Analysis
125
6.3
Large Loan Underwriting
129
6.4
Modelling Methodology
130
6.5
Group B Banks
133
6.5.1 Portfolio Stratifications
133
6.5.2 Methodology Overview
133
Commercial Real Estate (CRE) Loans
134
7.1
Scope of Asset Quality Review
134
7.2
Portfolio Stratifications and Risk Analysis
135
7.3
Large Loan Underwriting
136
7.4
Modelling Methodology
139
7.5
Group B Banks
139
7.5.1 Portfolio Stratifications
139
7.5.2 Methodology Overview
139
Small and Medium Enterprise (SME) Loans
140
8.1
Scope of Asset Quality Review
140
8.2
Portfolio Stratifications and Risk Analysis
141
8.3
Loan File Review
142
8.4
Modelling Methodology
148
8.5
Group B Banks
149
8.5.1 Portfolio Stratifications
149
8.5.2 Methodology Overview
149
Leasing and Factoring
150
9.1
Portfolio Stratifications and Risk Analysis
150
9.2
Modelling Methodology
151
9.3
Group B Banks
152
9.3.1 Portfolio Stratifications
152
9.3.2 Methodology Overview
152
State-Related Exposures
153
10.1 Scope of Asset Quality Review
153
10.2 Portfolio Overview of State Related Exposures
154
10.3 Large Loan Underwriting and Model Approach
157
Appendix – Summary of Foreign Entity Submissions
159
Appendix – Retail
161
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Activity (27)