Enterprise Risk Management at ABN AMRO

Credit risk was inherent in ABN Amro's business. All commercial activities, which committed the bank, to engage in transactions involving credit risk, required prior approval by authorized individuals or committees. The Managing Board delegated approval authority to GRM and further down to the SBUs. Decision authority was based on Global One Obligor Exposure (GOOE), which combined all direct and contingent credit limits to a given relationship globally, and the Uniform Counterparty Rating system (UCR), which was the risk rating of the individual counterparty.

The UCR was an important pillar of ABN's decision-making and portfolio management processes. The UCR was important for:
• Defining the appropriate credit authority for approvals on a risk-based matrix and setting the frequency of reviews
• Identifying general trends in the quality of the bank's credit portfolios and consequent adjustment to credit strategies
• Generating key data for Risk Adjusted Return on Capital (RAROC), economic capital and expected loss calculations.