FI target boundary and coverage on corporate loan portfolio for Bank

Criteria
1

Hi,

My name is Kassana and I am currently helping one of the major state-owned banks in Thailand. They are interested and considering setting SBT target aligned with SBTi-FI guidance.

I am writing this to seek opinions and confirmations from experts on corporate loan target coverage in table 5.2 on page 55 - 56 in the guidance (link: Financial-Sector-Science-Based-Targets-Guidance.pdf (sciencebasedtargets.org)) It said that we need to account 67% of base year corporate lending by loan value or financed emissions.

What I would like to confirm is that:

  • I understand that SMEs can be excluded from coverage accounting for corporate loan of the 67% coverage threshold.
  • Let’s say, if the bank provides loans to listed companies 50% by total loan value and 50% to unlisted companies and excludes loans to SMEs. It means that for 67% coverage by loan value, we should include 50% of total loan value from listed companies and 17% from unlisted companies to reach minimum threshold.

Thanks a lot in advance for your time and help.

2

Hi Kassana,

Yes that is correct - the 67% coverage can be calculated excluding SME loans.

Kind regards,
Haseena

3

Hi. SME may be also a listed company. So in the first step you can exclude SMEs (listed & unlisted) and then compile 67% of non-SME debt exposures, listed or unlisted.
Best
Damian

4

Hi Haseena and Damiance,

Thank you very much! This is super clear and very helpful.

Apart from general corporate loan, may I kindly ask a bit more on Commercial Real Estate and Power Generation Project Finance target coverage which need to be indicated by sq.m. and kWh respectively.

I am wondering if it works like corporate loan that we can exclude SMEs from target coverage accounting.

5

Table 5.2 of the Near-Term Financial Sector SBT Guidance, which provides minimum coverage requirements, has been updated in the draft Version 2 with more granular specifications for each asset class. If there is no differentiation in short vs. long-term or SME vs. corporate mentioned for an asset class, then both are in scope.

The proposed changes are up for public consultation so we welcome your feedback/questions on this document, and two other new documents, through the survey by Aug 14.