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CITIC LIMITED
Notes to the Consolidated Financial Statements
For the six months ended 30 June 2016
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32 Financial risk management and fair values
(continued)
The Group’s exposure to these risks and the financial risk management policies and practices used by the
Group to manage these risks are described below.
(a) Credit risk
Credit risk represents the potential loss that may arise from a customer or counterparty’s failure
to meet its obligation when due. For loan business, the Group identifies and manages the credit
risk through its target markets definitions, credit approval process, post-disbursement monitoring
and remedial management procedures. In respect of treasury businesses, credit risk mainly
represents impairment losses of debt securities due to default by issuers, and inability of derivative
counterparties in fulfilling their obligations. The Group sets credit limits for treasury activities and
monitors them regularly with reference to the fair values of the relevant financial instruments.
The Group is also confronted with credit risk resulting from receivables that arising from sale of goods
and rendering of services within the non-financial services segments. The relevant subsidiaries have
established a credit policy under which individual credit evaluations are performed on all customers
to determine the credit limit and terms applicable to the customers. These evaluations focus on the
customers’ financial position, the external ratings of the customers and their bank credit records
where available.
(i) Maximum credit risk exposure
The maximum exposure to credit risk as at the balance sheet date without taking into
consideration of any collateral held or other credit enhancement is represented by the net
balance of each type of financial assets in the balance sheet after deducting any impairment
allowance. A summary of the maximum exposure is as follows:
30 June
2016
31 December
2015
HK$ million
HK$ million
Deposits with central banks, banks and
non-bank financial institutions
865,589
792,788
Placements with banks and non-bank
financial institutions
128,762
141,775
Financial assets at fair value through profit or loss
71,538
33,682
Derivative financial assets
26,976
16,509
Trade and other receivables
110,175
118,008
Financial assets held under resale agreements
113,199
165,391
Loans and advances to customers and other parties
3,153,019
2,947,798
Available-for-sale financial assets
517,843
449,769
Held-to-maturity investments
225,507
216,267
Investments classified as receivables
1,380,912
1,331,281
6,593,520
6,213,268
Credit commitments and guarantees provided
1,453,653
1,475,150
Maximum credit risk exposure
8,047,173
7,688,418