Responsible Lending
- Sustainable Finance Statement
- Responsible Investment
- Responsible Lending
SinoPac Holdings' KYC and CDD Processes for Lending Business
SinoPac Holdings incorporates ESG factors into its Know Your Customer (KYC) and Client Due Diligence (CDD) procedures for lending business and implements classified management of corporate banking and retail banking customers, carrying out reviews and management operations by risk level. Furthermore, the Company has enhanced ESG risk reviews for project financing and continues to monitor environmental and social risks after approval.
- Note 1: Please see SinoPac Holdings 2021 Sustainability Report section 2.2.3.4 Customer Due Diligence and 3.1.3.2 Retail Banking Lending for details.
- Note 2: If the project financing amount reaches US$10 million or above, its risk level must be determined according to the EPs. Please see SinoPac Holdings 2021 Sustainability Report section 3.1.3.1 Corporate Banking Lending for details.
Corporate Banking Lending
Bank SinoPac's "Corporate Credit Risk Management Division" is the dedicated unit responsible for establishing regulations relating to responsible lending and the EPs, and for planning a conducting ESG credit risk analysis. The Division continues to monitor trends in ESG risks of each industry and their impact on the Bank's operations. In terms of execution, front line corporate banking personnel are responsible for disclosing and specifying the ESG risks of clients. Corporate banking credit review personnel are then responsible for checking and reviewing the analysis of ESG factors in credit applications. Corporate banking and credit review personnel jointly complete due diligence of ESG risks.
Bank SinoPac established the “Responsible Lending Management Guidelines” and incorporate ESG considerations in the lending process. If ESG risk factor exists, the business unit shall engage with customers to explore the situation and assist customers to improve and respond by evaluating and proposing mitigative and remedial measures. In the event that customers involving in serious issues or cannot resolve issues continuing for a long time, the Bank should evaluate the business relationship in a prudent manner.
- Prohibit controversial industries: e.g. pornography, controversial arms.
- Carefully Evaluate in Sensitive Industries: enhanced ESG risk analysis for sensitive industries, including oil and gas, coal-fired power generation, gambling, those with issues in food safety, toxic radioactive substance, non-medical and hazardous genetic engineering, non-adhesive asbestos fiber and polychlorinated biphenyls (PCBs) manufacturing.
- Since July 1, 2022, all SinoPac Holdings Group's domestic and overseas subsidiaries will cease financing for new thermal coal and Unconventional Oil & Gas projects and will not renew the existing projects, including mining, power, manufacturing, trading, transport and logistics, equipment manufacturing, and infrastructure.
- In the financing processes, SinoPac Holdings assessed high carbon emission industries by reviewing its ESG performances and the carbon emission information and engaged with the related companies actively. If after continued engagement a client transition plan is not produced, we will formally assess whether we continue to provide financing for that client to guide clients low carbon transition and achieve our net zero commitment.
Equator Principles
Bank SinoPac formally became a signatory to the Equator Principles (EPs) in February 2020. Bank SinoPac established EPs related guidelines and operating procedures, completed EPs training sessions, and smoothly transitioned to EP4, strengthening the management of human rights risks and climate change risks in the credit investigation and lending process for project financing. Bank SinoPac established a dedicated Environmental and Social Risk Team in November 2021, serving as an internal consultant for assisting the risk assessment and review of EPs cases. For high-risk cases, the team seeks assistance from a third-party external consultant according to the EPs.
EPs Credit Investigation and Lending Process
Starting in 2022, Bank SinoPac will disclose on the EPs official website the industry, risk category, and designated or non-designated country of project financing, number of cases involving environmental and social risks management, and whether or not an environmental and social risks assessment report prepared by independent third-party experts is provided.
Retail Banking Lending
SinoPac Holdings incorporated ESG factors in its retail banking businesses (including mortgage, motor vehicle loan, credit loan, and credit cards). When a new retail banking loan application is received, besides carrying out KYC and CDD mechanisms, the Company actively investigates the customers’ ESG related information and uses the ESG risk they may face for risk grading, appraisal, and adjustment of loan terms.
Client Due Diligence is first conducted to verify the customer's identity and suitability for products. Transactions may be temporarily suspended if the customer does not cooperate with regular reviews, refuses to provide information on the beneficial owner or individual who exercises right of control over the customer, the nature and purpose of transactions, or the source of funds.
Furthermore, Bank SinoPac also creates a risk classification process in credit reviews, and divides customers into high, medium, and low risks of money laundering with a Risk Based Approach (RBA) based on their background, region, business dealings, transaction behavior, and services. The process is incorporated in the credit review system and different management measures are taken accordingly.
Considering sustainability risks in the credit investigation and review process
- In the mortgage review process, if the property is located in a restricted area or area prone to flood, debris flow, or soil liquefaction (with high physical climate risk), the application should be rejected during the appraisal review process if the collateral is not the target case. If the case should be taken due to special considerations, the loan-to-value should be lowered and enhance the level of case approval.
- Major earthquakes and natural disasters are taken into consideration when dividing the area where property is located into grade A, B, and C, which is then used for valuation.
- In the process of reviewing corporate motor vehicle loan applications, the Company checks clients’ records and information on fines imposition due to severe pollution cases. If it is involved in such cases, SinoPac Holdings requires the company to provide a reasonable explanation and improvement measures, and will adjust the terms of the loan depending on the case.
Exclusion/Rejection conditions in the credit investigation and review process
- The loan application of sanctioned parties, terrorists or terrorist groups confirmed or investigated by foreign governments or international AML organizations, and individuals, corporate entities and groups sanctioned under the Counter-Terrorism Financing Act, shall be rejected.
- During the credit investigation process, if the customer was found to have previously gained illegal profit from the sale of unlisted stocks, the application shall be rejected after verification.
- In the review process for corporate credit cards application, if the client was found to involve in illegally funds raising through online gambling, the application shall be rejected after verification.
- In the process of reviewing corporate motor vehicle loan applications, the Company checks clients’ records and information on fines imposition due to severe pollution cases. If it is involved in such cases and does not propose effective improvement measures, the application shall be rejected.
After approval, Bank SinoPac will examine if current retail banking credit products (car loan, credit loan, credit card) have major warning signs or potential abnormalities based on customer or case indicators (including product application approval rate, average annual interest, age of accounts, etc.), and will regularly track customers' credit status and payments. This will significantly reduce overdue loans and overdue receivables in our product portfolio, taking action to prevent potential ESG risks of bank services and funds.
If customers have any overdue payments, Bank SinoPac adopts different collection strategies based on the time payments are overdue. According to the debt negotiation mechanism set forth in the “The Statute for Consumer Debt Clearance” promulgated by the government, debtors who are unable to repay their loan for consumption, credit card or cash debt may submit an application to the bank for negotiation, and jointly formulate a feasible repayment plan with the bank. This approach helps people who have financial difficulties due to debt to have an opportunity to rebuild their life and economic status. For loans that cannot be collected, bad loans are regularly written off to maintain asset quality. When collection is outsourced, if the collection agency engages in improper conduct that is against the law or severely damages the Company's reputation, SinoPac Holdings will initiate emergency response procedures.