The process of credit risk control for lending operations is implemented both before and after loan signature. Its objective is to avoid making unsound loans from the outset and, subsequent to disbursement, to ensure that the value of the EIB's loans is preserved, leading to the complete and timely recovery of all outstanding amounts. In the case of treasury, portfolio and derivative operations, the goal is also to ensure that counterparties are of a high quality, that bilateral limits are not exceeded and that the credit risk of transactions is correctly measured and, if necessary, collateralised at all times.
The Credit and Climate Risk Department delivers an independent opinion on the credit and climate risk involved in each loan proposal to the Management Committee, with recommendations on the structure of the loan, checking its compliance with the relevant credit policy guidelines and approved individual and sectoral limits. Advice is given on appropriate credit risk mitigants (e.g. contractual clauses) to be included in the final contracts.
An in-depth analysis of the creditworthiness of both the client and the guarantor (when appropriate) is carried out, taking also into account the maturity of the operation, as well as all available securities and covenants. The result of this assessment is quantified by an internal loan grading, based on the expected loss methodology. This loan grading serves as a general guide to the acceptability of the proposed transaction and also to establish the level of the general provisioning required.
All the internal credit risk policy guidelines are codified and are approved by the competent bodies.