CREDICORP LTD | CIK:0001001290 |

 

The Group’s activities involve principally the use of financial instruments, including derivatives. The Group accepts deposits from customers at both fixed and floating rates, for various periods, and invests these funds in high-quality assets. Additionally, it places these deposits at fixed and variable rates with legal entities and individuals, considering the finance costs and expected profitability.

 

The Group also trades in financial instruments where it takes positions in traded and over-the-counter instruments, including derivatives, to take advantage of market movements in equities, bonds, currencies and interest rates.

 

Given the Group’s activities, it has a framework for risk appetite, a corner stone of our management. Our risk management processes involve continuous identification, measurement and monitoring. The Group is exposed, principally, to operating risk, credit risk, liquidity risk and market risk, strategic risk and insurance technical risk. Finally, we report on a consolidated basis the risks to which the Group is exposed.

 

 

The Board of Directors of the Group and of each subsidiary is ultimately responsible for identifying and controlling risks; however, there are separate independent instances in the major subsidiaries responsible for managing and monitoring risks, as further explained below:

 

 

The Board of Directors is responsible for the overall risk management approach and for the approval of the levels of risk appetite that the Group is prepared to assume. Furthermore, it approves the guidelines and policies for Integral Risk Management. On the other hand, the Board establishes an organizational culture which emphasizes the importance of risk management, oversees the internal control system and ensures the adequate performance of the compliance function.

 

Board of Group Companies –

 

The Board of each of the Group companies is responsible for aligning the risk management established by the Board of Credicorp with the context of each one of them. For that, it establishes a framework for risk appetite, policies and guidelines.

 

 

It represents the Board of Credicorp in risk management decision-making. This Committee defines the strategies used for the adequate management of the different types of risks and the supervision of risk appetite. In addition to establishing principles, policies and general limits.

 

The Risk Committee is presided by a Board member of Credicorp, it is also consists of a second member of the Board of Credicorp, a Board member of BCP, the General Manager of BCP, the Central Manager of Planning and Finance of BCP, the Central Risk Manager of BCP and the Manager of Risk Management of BCP CFO.

 

In addition to effectively managing all the risks, the Risk Committee is supported by the following committees which report on a monthly basis all relevant changes or issues relating to the risks being managed:

 

Credit Risk Committee -

 

The Credit Risk Committee is responsible for reviewing the tolerance level of the credit risk appetite and the limits of exposure. As well as also proposing credit risk management norms and policies within the framework of governance and the organization for the integral management of credit risk. Furthermore, it proposes the approval of any changes to the functions described above and important findings to the Risk Committee.

 

Treasury and ALM (Asset Liability Management) Risk Committee -

 

The Treasury and ALM Risk Committee is responsible for analyzing and proposing the risk appetite and exposure level of the Treasury. It also proposes the guidelines and policies for the Treasury Risk Management and ALM, within the framework of governance and organization for the integral management of market risks. Furthermore, it is responsible for proposing the approval of any changes in the functions described above and for reporting any finding to the Risk Committee.

 

Operational Risk Committee -

 

The Operational Risk Committee is responsible for reviewing the tolerance level, the appetite for operational risk and the limits of exposure. It also proposes the norms and policies for the management of operational risks and the mechanisms for the implementation of corrective actions within the governance framework. Furthermore, it proposes the approval of any changes to the functions described above and reports any finding to the Risk Committee.

 

 

The Central Risk Management is responsible for implementing policies, procedures, methodologies and actions to identify, measure, monitor, mitigate, report and control the different types of risks to which the Group is exposed. Also, it participates in the design and definition of the strategic plans of the business units to ensure that they are framed within the risk appetite metrics approved by the Group’s Board of Directors of Credicorp.

 

The Central Risk Management is divided into the following areas:

 

Credit Division -

 

The Credit Division is responsible for ensuring the quality of the wholesale banking portfolio in accordance with the Group’s risk strategy and appetite on the basis of an efficient management of the lending process relying on well-defined lending policies and highly trained personnel with best lending practices.

 

Risk Management Division -

 

The Risk Management Division is responsible for ensuring that policies and risk management policies established by the Board of Directors are complied with and monitored. Supervise the process of risk management and coordinate the risk response with the companies of Credicorp involved in the whole process. It also has the task of informing Senior Management regarding: global exposure and by type of risk, as well as the specific exposure of each of the Group’s companies.

 

The Risk Management Division consists of the following units: The Operational Risk and Insurance Risk Management Department, the Credit and Corporate Management Risk Department, Market Risk Management Department, Global Risk Management, Internal Validation and Risk Management Methodology and Modelling.

Retail Banking Risk Division -

 

This division is responsible for ensuring the quality of the retail portfolio and the development of credit policies that are consistent with the overall guidelines and policies set by the Board of Credicorp.

 

Treasury Risk Management –

 

The Treasury Risk Management is responsible for planning, coordinating and monitoring the implementation of the Treasury Division with risk measurement methodologies and limits approved by the Risk Committee. Also, it is responsible for assessing the effectiveness of hedge derivatives and the valuation of investments.

 

 

The Internal Audit Division is in charge of monitoring on an ongoing basis the effectiveness of the risk management function of the Group, verifying compliance with laws and regulations, as well as the policies, objectives and guidelines set by the Board of Directors. On the other hand, it evaluates the sufficiency and level of integration of the Group’s information and database systems. Finally, it ensures that independence is maintained between the functions of the risk management and business units, for each of the Group’s companies.

 

The Compliance Division is responsible for ensuring applicable laws and regulations and the internal Code of Ethics are adhered to.

 

 

Credicorp has independent databases that are subsequently integrated through corporate reports. These reports enable it to monitor at an aggregate and detailed level, the different types of risks to which each company is exposed. The system provides it the ability to comply with the needs for revision of the risk appetite requested by the above-mentioned committees and areas; as well as also complying with regulatory requirements.

 

 

Depending on the type of risk, the Group uses mitigating instruments to reduce its exposure, such as guarantees, derivatives, controls, insurance, among others. Furthermore, it has policies linked to risk appetite and established procedures for each type of risk.

 

The Group actively uses guarantees to reduce its credit risks.

 

 

In the different subsidiaries of the Group, the respective Boards approve the risk appetite framework to define the maximum level of risk that the organization is willing to take in seeking to accomplish its strategic and financial objectives. This Risk Appetite framework is based on primary and secondary objectives:

 

Primary objectives are intended to preserve the strategic pillars of the organization, defined as solvency, liquidity, profit and growth, stability of results and balance structure.

 

Secondary objectives are intended to monitor on a qualitative and quantitative basis the various risks to which the Group is exposed, as well as defining a tolerance threshold of each of those risks, so the risk profile set by the Board is preserved and any risk focus is anticipated on a more granular basis.

 

Risk appetite is instrumented through the following elements:

 

 

 

 

 

 

Concentrations arise when a reduced and representative number of all of the counterparties of the Group are engaged in similar business activities, or activities in the same geographic region, or have similar economic, political or other conditions.

 

In order to avoid excessive concentrations of risk, the policies and procedures include specific guidelines to guarantee a diversified portfolio.

 

 

 

Credit risk is the most important risk for the Group’s business; therefore, Management carefully manages its exposure to credit risk. Credit exposures arise principally from lending activities that lead to direct loans; they also result from investment activities. There is also credit risk in off-balance sheet financial instruments, such as contingent credits (indirect loans), which expose Credicorp to similar risks to direct loans. Likewise, credit risk arises from derivative financial instruments showing positive fair values. Finally, all exposure to credit risk (direct or indirect) is mitigated by the control processes and policies.

 

As part of the management of this type of risk, Credicorp assigns impairment provisions for its loan portfolio at the date of the statement of financial position.

 

The Group defines the levels of credit risk assumed based on risk exposure limits, which are frequently monitored. Said limits are established in relation to one borrower or group of borrowers, geographical and industry segments. Furthermore, the risk limits by product, industry sector and by geographical segment are approved by the Risk Committee.

 

Exposure to credit risk is managed through regular analysis of the ability of debtors and potential debtors to meet interest and principal repayment obligations and by changing the credit limits when it is appropriate. Some other specific control measures are outlined below:

 

 

The Group employs a range of policies and practices to mitigate credit risk. The most traditional of these is collaterize with guarantees part of the loan portfolio. The Group implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The main types of collateral obtained are as follows:

 

 

 

 

Collateral held as security for financial assets other than loans is determined by the nature of the instrument. Debt securities, treasury and other eligible bills are generally unsecured, with the exception of assets backed securities and similar instruments, which are secured by portfolios of financial instruments.

 

Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for impairment losses. It is the Group’s policy to dispose of seized assets in an orderly manner. The proceeds are used to reduce or repay the outstanding claim. In general, the Group does not use seized assets for its own business.

 

 

The amount subject to credit risk is limited to the current and potential fair value of instruments that are favorable to the Group (fair value is positive). In the case of derivatives this is only a small fraction of the contract, or notional values used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the total credit limits with customers, together with potential exposures from market movements. Collateral or other security is not usually obtained for this type of risk exposure. With respect to derivatives agreed with non-financial customers, collaterals have been granted to secure the overall amount; with respect to financial counterparties, collaterals granted are those required under the clearing provisions issued by the International Swaps and Derivatives Association Inc. (ISDA) or the local framework agreement.

 

 

The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and letters of credit have the same credit risk as loans. Documentary and commercial letters of credit - which are written undertakings by the Group on behalf of a customer authorizing a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions - are collateralized by the underlying shipments of goods to which they relate and therefore have less risk than a direct loan. The Group has no mandatory commitments to extend credit. 

 

In order to manage credit risk, as part of the Group’s risk management structure, there is a Credit Risk Management Department, the major functions of which are implementing methodologies and statistical models for measuring credit risk exposures, developing and applying methodologies for the calculation of risk-ratings, both at the corporate and business unit levels, performing analysis of credit concentrations, verifying that credit exposures are within the established limits and suggesting global risk exposures by economic sector, among others.

 

For enhanced risk identification, the Group has internal credit scoring models, which have been prepared and implemented for the main business segments. Each model is related to a defined group of scoring bands. Clients who are inside a band are characterized by having a similar risk level (within the band); however, they are different compared to the other band. For retail clients, these scoring models are highly related to management (admission, follow-up, campaigns, etc.) from different portfolios. On the other hand, for non-retail clients, ratings mainly serve as support for making credit decisions in admission, follow-up and price allocation, etc.

 

The Group has a Credit Division, which establishes the overall credit policies for each of the businesses in which the Group decides to take part. These credit policies are set forth based on the guidelines established by the Board of Directors and keeping in mind the statutory financial laws and regulations. The main activities are to establish the client credit standards and guidelines (evaluation, authorization and control); follow the guidelines established by the Board of Directors and General Management, as well as those established by governmental regulatory bodies; review and authorize credit applications, up to the limit within the scope of its responsibilities and to submit to upper hierarchies those credit applications exceeding the established limits; monitor credit-granting activities within the different autonomous entities, among others.

 

 

The Management is confident of its ability to continue to controlling and maintaining minimal exposure of credit risk to the Group resulting from both its loan and securities portfolio.

 

 

Credit risk management is mainly based on the rating and scoring of the internal models of each of the Group companies. In Credicorp, a quantitative and qualitative analysis of each customer is carried out, its financial condition and the conditions of the market in which those customers operate; for that purpose it classifies its loan portfolio into one of five pre-defined risk categories, depending upon the degree of risk of default of each debtor.

 

The categories used are: (i) normal - A, (ii) potential problems - B, (iii) substandard - C, (iv) doubtful - D and (v) loss - E, which have the following characteristics:

 

Normal (Class A): 

Debtors of commercial loans that fall into this category have complied on a timely basis with their obligations and at the time of evaluation do not present any reason for doubt with respect to repayment of interest and principal on the agreed dates, and there is no reason to believe that the status will change before the next evaluation. To place a loan in Class A, a clear understanding of the use to be made of the funds and the origin of the cash flows to be used by the debtor to repay the loan is required. Additionally, consumer and micro-business loans are categorized as Class A if payments are current or up to eight days past-due. Residential mortgage loans are classified as Class A, if payments are current or up to thirty days past-due.

 

Potential problems (Class B):

Debtors of commercial loans included in this category are those that at the time of the evaluation demonstrate certain deficiencies, which, if not corrected in a timely manner, imply risks with respect to the recovery of the loan. Certain common characteristics of loans or credits in the category include: delays in loan payments which are promptly covered, a general lack of information required to analyze the credit, out-of-date financial information, temporary economic or financial imbalances on the part of the debtor which could affect its ability to repay the loan, and market conditions that could affect the economic sector in which the debtor is active. Consumer and micro-business loans are categorized as Class B if payments are between 9 and 30 days late. Residential mortgage loans are classified as Class B when payments are between 31 and 60 days late.

 

Substandard (Class C):

Debtors of commercial loans included in this category demonstrate serious financial weakness, often with operating results or available income insufficient to cover financial obligations on agreed upon terms, with no reasonable short-term prospects for a strengthening of their financial capacity. Debtors demonstrating the same deficiencies that warrant classification as category B warrant classification as Class C if those deficiencies are such that if they are not corrected in the near term, they could impede the recovery of principal and interest on the loan on the originally agreed terms. In addition, commercial loans are classified in this category when payments are between 61 and 120 days late. Consumer and micro-business loans are categorized as Class C if payments are between 31 and 60 days late. Residential mortgage loans are classified as Class C when payments are between 61 and 120 days late.

 

Doubtful (Class D):

Debtors of commercial loans included in this category present characteristics that make doubtful the recovery of the loan. Although the loan recovery is doubtful, if there is a reasonable possibility that in the near future the creditworthiness of the debtor might improve, a Class D categorization is appropriate. These credits are distinguished from Class E credits by the requirement that the debtor remains in operation, generates cash flow, and makes payments on the loan, although at a rate less than that specified in its contractual obligations. In addition, commercial loans are classified in this category when payments are between 121 and 365 days late. Consumer and micro-business loans are classified as Class D if payments are between 61 and 120 days late. Residential mortgage loans are Class D when payments are between 121 and 365 days late.

 

Loss (Class E):

Commercial loans which are considered unrecoverable or which for any other reason should not appear on the Group’s books as an asset based on the originally contracted terms fall into this category. In addition, commercial loans are classified in this category when payments are more than 365 days late. Consumer and micro-business loans are categorized as Class E if payments are more than 120 days late. Residential mortgage loans are classified as Class E when payments are more than 365 days late.

 

The Group constantly reviews the loan portfolio in order to assess the completion and accuracy of its classifications.

 

All loans considered impaired (the ones classified as substandard, doubtful or loss) are analyzed by the Group’s Management, which addresses impairment in two areas: individually assessed provisions and collectively assessed provisions, as follows:

 

 

The methodology is applied to all of the impaired clients (classified as deficient, doubtful or loss) of Wholesale Banking and consists of estimating the loss generated by each client after deducting the present value of the future payments that he could pay and the recovery value of the guarantees, equally brought to present value.

 

The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group in order to reduce any differences between loss estimates and actual loss experience.

 

 

The methodology is applied for the unimpaired clients of Wholesale Banking and for Retail Credits (Consumer Credits, Small and Medium Enterprise Credits and Mortgage Loans). Allowance requirements are assessed collectively for losses on loans and advances that are not individually significant (including consumer, micro-business and residential mortgages) and for individually significant loans and advances where there is not yet objective evidence of individual impairment (included in categories A and B).

 

Impairment losses are estimated by taking into consideration the following information: historical losses on the portfolio, and current economic conditions. The impairment allowance is then reviewed by Management to ensure alignment with the Group’s overall policy.

 

The methodology includes three estimation scenarios: base, upper threshold and lower threshold. These scenarios are generated by modifying some assumptions, such as collateral recovery values and the effects of changes in the economic environment.

The process to select the best estimate within the range is based on management´s best judgment, complemented by historical loss experience and the Company’s strategy (e.g. penetration in new segments).

 

Impairment losses are evaluated at each reporting date as soon as there is any objective evidence that a financial asset or group of assets is impaired.

 

Financial guarantees and letter of credit (indirect loans) are assessed and a provision estimated following a similar procedure as for loans.

 

In the case of borrowers in countries where there is an increased risk of difficulties in servicing external debt, an assessment of the political and economic situation is made, and an additional country risk provision is recorded, if necessary.

 

When a loan is uncollectible, it is written off against the related provision for loan impairment. Said loans are written off after all the necessary legal procedures have been completed.

 

The subsequent recovery of written off loans decreases the amount of the provision for loan losses, in the consolidated statement of income.

The following is a summary of the direct credits classified into three important groups and their respective allowance for each of the types of loans:

 

(i)        Loans neither past due nor impaired, comprising those direct loans having presently no delinquency characteristics and related to clients ranked as normal or potential problems;

(ii)       Past due but not impaired loans, comprising past due loans of clients classified as normal or with potential problems and

(iii)       Impaired loans, those past due loans of clients classified as substandard, doubtful or loss;

 

		At December 31, 2017																		At December 31, 2016
		Commercial  loans			Residential  mortgage  loans			Micro- business  loans			Consumer  loans			Total			%			Commercial  loans			Residential  mortgage  loans			Micro- business  loans			Consumer  loans			Total			%
		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)						S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Neither past due nor impaired impaired
Normal			55,043,920			14,003,445			12,048,576			10,685,098			91,781,039			96.34	%		50,984,455			13,052,249			11,292,194			11,105,796			86,434,694			96.15	%
Potential problem			1,081,497			61,482			240,063			104,359			1,487,401			1.56	%		1,367,997			76,585			182,425			90,498			1,717,505			1.91	%
Past due but not impaired
Normal			714,511			411,309			341,422			235,324			1,702,566			1.79	%		329,448			503,168			274,003			430,932			1,537,551			1.71	%
Potential problem			43,041			110,241			37,861			27,119			218,262			0.23	%		38,703			101,805			40,711			17,014			198,233			0.22	%
Impaired
Substandard			586,112			143,241			239,035			196,930			1,165,318			1.22	%		468,745			143,610			224,559			222,401			1,059,315			1.18	%
Doubtful			297,712			248,215			345,397			387,220			1,278,544			1.34	%		355,146			231,872			309,523			379,923			1,276,464			1.42	%
Loss			688,755			474,154			675,203			293,672			2,131,784			2.24	%		589,377			386,165			628,213			271,872			1,875,627			2.09	%
Gross			58,455,548			15,452,087			13,927,557			11,929,722			99,764,914			104.72	%		54,133,871			14,495,454			12,951,628			12,518,436			94,099,389			104.68	%
Less
Allowance for loan losses			1,237,616			228,287			1,476,578			1,558,017			4,500,498			4.72	%		1,026,411			193,385			1,353,168			1,634,169			4,207,133			4.68	%
Total, net			57,217,932			15,223,800			12,450,979			10,371,705			95,264,416			100.00	%		53,107,460			14,302,069			11,598,460			10,884,267			89,892,256			100.00	%

 

In accordance with IFRS 7, the entire loan balance is considered past due when debtors have failed to make a payment when contractually due.

 

At December 31, 2017, the renegotiated credits amount to approximately S/915.6 million, of which S/339.6 million are classified as not past due nor impaired, S/165.3 million as past due but not impaired and S/410.7 million as impaired but not past due (S/845.0 million, S/304.5 million, S/201.2 million and S/339.3 million, respectively, at December 31, 2016). 

		At December 31, 2017															At December 31, 2016
		Commercial  loans			Residential  mortgage loans			Micro- business  loans			Consumer  loans			Total			Commercial  loans			Residential  mortgage  loans			Micro- business  loans			Consumer  loans			Total
		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Impaired loans			1,572,579			865,610			1,259,635			877,822			4,575,646			1,413,268			761,647			1,162,295			874,196			4,211,406
Fair value of collateral			1,692,544			734,397			34,702			118,472			2,580,115			1,542,874			639,186			69,503			93,232			2,344,795
Allowance for loan losses			835,786			119,945			1,045,694			468,342			2,469,767			813,844			116,796			1,018,242			456,047			2,404,929

On the other hand, the breakdown of loans classified by maturity is shown below, according to the following criteria:

 

 

		As of December 31, 2017																		As of December 31, 2016
		Current loans			Current but  impaired			Loans with  delays in  payments of one  day or more but  not internal  overdue loans			Internal  overdue  loans			Total			Total past  due under  IFRS 7			Current  loans			Current but  impaired			Loans with  delays in  payments of one  day or more but  not internal  overdue loans			Internal  overdue  loans			Total			Total past  due under  IFRS 7
		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Neither past due nor impaired
Normal			91,781,038			–			–			–			91,781,038			–			86,434,694			–			–			–			86,434,694			–
Potential problems			1,487,402			–			–			–			1,487,402			–			1,717,505			–			–			–			1,717,505			–
Past due but not impaired
Normal			–			–			1,662,913			39,653			1,702,566			1,702,566			–			–			1,512,321			25,230			1,537,551			1,537,551
Potential problems			–			–			176,861			41,401			218,262			218,262			–			–			162,730			35,503			198,233			198,233
Impaired debt
Substandard			–			412,582			386,177			366,560			1,165,319			752,737			–			349,529			495,719			214,067			1,059,315			709,786
Doubtful			–			203,952			393,463			681,128			1,278,543			1,074,591			–			299,196			294,905			682,363			1,276,464			977,268
Loss			–			118,048			121,564			1,892,172			2,131,784			2,013,736			–			30,927			181,452			1,663,248			1,875,627			1,844,700
Total			93,268,440			734,582			2,740,978			3,020,914			99,764,914			5,761,892			88,152,199			679,652			2,647,127			2,620,411			94,099,389			5,267,538

 

The classification of loans by type of banking and maturity is as follows:

 

		As of December 31, 2017															As of December 31, 2016
		Current loans			Current but  impaired			Loans with delay in  payments of one  day or more but not  internal overdue  loans			Internal  overdue loans			Total			Current  loans			Current but  impaired			Loans with delay in  payments of one  day or more but not  internal overdue  loans			Internal  overdue loans			Total
		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Commercial loans			56,125,417			211,918			790,739			1,327,475			58,455,548			51,108,503			230,366			1,317,893			1,477,109			54,133,871
Residential mortgage loans			14,064,927			185,853			693,482			507,825			15,452,087			13,266,248			193,819			626,045			409,342			14,495,454
Micro-business loans y microempresa			12,288,639			207,548			774,435			656,934			13,927,557			12,451,403			18,072			180,871			301,282			12,951,628
Consumer loans			10,789,457			129,262			482,323			528,680			11,929,722			11,326,045			237,395			522,318			432,678			12,518,436
			93,268,440			734,581			2,740,979			3,020,914			99,764,914			88,152,199			679,652			2,647,127			2,620,411			94,099,389

 

Most of these operations are performed by Credicorp Capital Colombia and Inversiones IMT. The Group has implemented credit limits for each counterparty and most of the transactions are collateralized with investment grade financial instruments issued by Colombian and Chilean entities and financial instruments issued by the Colombian and Chilean Governments.

 

 

The Group evaluates the credit risk identified of each of the financial instruments in these categories, considering the risk rating granted to them by a risk rating agency. For investments traded in Peru, the risk ratings used are those provided by the three most prestigious Peruvian rating agencies (authorized by the Peruvian government regulator) and for investments traded abroad, the risk-ratings used are those provided by the three most prestigious international rating agencies.

 

In the event that any subsidiary uses a risk-rating prepared by any other risk rating agency, said risk-ratings are standardized with those provided by the afore-mentioned institutions.

 

The following table shows the analysis of the risk-rating of trading, available-for-sale and held-to-maturity investments, provided by the institutions referred to above:

 

		At December 31, 2017						At December 31, 2016
		S/(000)			%			S/(000)			%
Instruments rated in Peru:
AAA			1,254,943			3.8			1,412,290			5.1
AA- to AA+			1,313,967			4.0			1,060,347			3.8
A- to A+			6,850,118			20.9			5,483,403			19.7
BBB- to BBB+			2,279,478			7.0			1,919,853			6.9
BB- to BB+			469,679			1.4			314,913			1.1
Lower than +B			4,960			–			22,129			0.1
Unrated
BCRP certificates of deposit			10,026,038			30.5			7,066,653			25.4
Listed and unlisted securities			702,384			2.1			796,961			2.9
Restricted mutual funds			425,300			1.3			368,418			1.3
Mutual funds			167,607			0.5			50,314			0.2
Other instruments			29,181			0.1			90,407			0.3
Subtotal			23,523,655			71.6			18,585,688			66.8

  

		At December 31, 2017						At December 31, 2016
		S/(000)			%			S/(000)			%
Instruments rated abroad:
AAA			467,654			1.4			1,385,911			5.0
AA- to AA+			1,040,411			3.2			677,042			2.4
A- to A+			1,434,598			4.4			1,298,815			4.8
BBB- to BBB+			4,179,102			12.7			3,069,547			11.0
BB- to BB+			1,258,752			3.8			1,011,463			3.6
Lower than B+			19,869			0.1			148,212			0.5
Unrated:
Rated and unrated instruments			211,487			0.6			586,953			2.1
Certificates of deposit of Bolivia Central Bank			95,042			0.3			14,644			0.1
Participations of RAL funds			527,729			1.6			650,804			2.3
Mutual funds			98,911			0.3			245,730			0.9
Hedge funds			1,062			–			1,095			–
Other instruments			3,729			–			143,202			0.5
Subtotal			9,338,346			28.4			9,233,418			33.2
Total			32,862,001			100.0			27,819,106			100.0

 

As of December 31, 2017 and 2016 financial instruments with exposure to credit risk were distributed considering the following economic sectors:

 

		2017																		2016
		Designated at fair value  through profit for loss																		Designated at fair value  through profit for loss
		Held for  trading and  hedging			At inception			Loans and  receivables			Investments  available-for- sale			Investments  held-to- maturity			Total			Held for  trading and  hedging			At  inception			Loans and  receivables			Investments  available- for-sale			Investments  held-to- maturity			Total
		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Central Reserve Bank of Peru			2,102,330			–			21,630,506			7,925,997			–			31,658,833			2,122,662			–			18,748,155			3,419,374			–			24,290,191
Financial services			1,057,679			320,619			11,644,317			4,700,343			98,866			17,821,824			2,051,650			321,298			10,732,478			5,721,827			123,676			18,950,929
Manufacturing			23,277			29,508			14,363,997			1,529,261			13,135			15,959,178			9,886			12,026			13,952,167			1,650,833			37,965			15,662,877
Mortgage loans			–			–			14,638,363			–			–			14,638,363			–			–			13,283,126			–			–			13,283,126
Consumer loans			–			–			10,816,588			–			–			10,816,588			–			–			11,410,640			–			–			11,410,640
Micro-business loans			–			–			12,897,206			–			–			12,897,206			–			–			5,175,700			–			–			5,175,700
Commerce			52,453			45,130			11,682,985			248,396			17,950			12,046,914			35,022			3,693			14,242,421			192,136			14,765			14,488,037
Government and public administration			1,287,212			40,480			450,174			5,220,054			4,164,128			11,162,048			221,754			11,199			245,948			2,830,156			4,836,820			8,145,877
Electricity, gas and water			79,825			52,521			4,148,658			1,918,317			56,331			6,255,652			26,068			41,877			4,562,433			1,903,494			44,640			6,578,512
Community services			–			–			4,408,494			34,495			–			4,442,989			–			–			4,118,309			43,992			–			4,162,301
Communications, storage and transportation			8,285			–			3,991,424			1,182,783			34,477			5,216,969			8,043			6,659			4,122,639			983,966			35,998			5,157,305
Mining			7,728			29,249			3,031,376			329,773			–			3,398,126			40,441			32,380			2,318,702			285,571			–			2,677,094
Construction			51,812			17,820			1,790,431			400,386			9,333			2,269,782			45,030			27,033			1,910,677			387,779			9,569			2,380,088
Agriculture			3,342			–			2,272,312			5,447			–			2,281,101			14,992			–			2,222,398			5,100			–			2,242,490
Insurance			6,664			–			404,691			–			–			411,355			24,376			–			1,288,212			–			–			1,312,588
Education, health and others services			5,279			2,358			1,494,635			213,181			–			1,715,453			9,956			2,934			912,031			359,602			3,471			1,287,994
Real Estate and Leasing			10,391			–			5,306,353			77,161			–			5,393,905			17,359			–			7,115,947			244,377			–			7,377,683
Fishing			1,689			–			394,287			–			–			395,976			7,521			–			405,538			–			–			413,059
Others			28,597			–			4,976,570			638,297			19,153			5,662,617			322,861			–			4,234,272			657,460			11,516			5,226,109
Total			4,726,563			537,685			130,343,367			24,423,891			4,413,373			164,444,879			4,957,621			459,099			121,001,793			18,685,667			5,118,420			150,222,600

As of December 31, 2017 and 2016 financial instruments with exposure to credit risk were distributed by the following geographical areas:

 

		2017																		2016
		Designated at fair value through  profit for loss																		Designated at fair value through  profit for loss
		Held for  trading and  hedging			At inception			Loans and  receivables			Investments  available-for- sale			Investments  held-to- maturity			Total			Held for  trading and  hedging			At inception			Loans and  receivables			Investments  available-for- sale			Investments  held-to- maturity			Total
		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Peru			2,394,575			118,396			114,046,024			17,324,374			3,900,388			137,783,757			2,661,743			174,771			107,315,656			11,515,894			4,606,110			126,274,174
United States of America			195,955			291,295			1,757,745			3,049,957			111,122			5,406,074			235,036			223,223			1,722,387			2,986,309			82,536			5,249,491
Bolivia			13,372			–			7,516,991			1,213,397			–			8,743,760			–			–			6,992,985			885,013			–			7,877,998
Colombia			1,324,999			28,510			1,619,679			590,387			138,941			3,702,516			1,245,998			–			1,157,154			780,468			150,667			3,334,287
Panama			4,909			–			498,512			48,531			–			551,952			65			–			660,191			65,767			–			726,023
Chile			411,276			22,154			1,906,346			379,465			72,004			2,791,245			342,613			29,315			1,597,426			838,702			69,839			2,877,895
Brazil			22,476			–			193,120			44,062			111,168			370,826			–			–			283,056			98,022			121,794			502,872
México			19,570			30,148			80,844			329,679			70,072			530,313			–			7,654			83,792			334,116			77,423			502,985
Canada			14,804			–			39,477			74,533			–			128,814			5,819			–			28,295			72,102			–			106,216
Europe:
United Kingdom			231,336			–			112,869			172,932			3,132			520,269			364,433			–			111,019			129,960			3,218			608,630
Others in Europe			2,215			–			131,983			269,958			–			404,156			1,605			–			133,373			154,668			–			289,646
France			90,845			–			12,883			48,649			1,639			154,016			98,556			–			23,465			74,734			1,708			198,463
Spain			–			–			204,100			5,048			3,269			212,417			–			–			205,334			6,119			3,414			214,867
Switzerland			231			–			89,718			47,027			–			136,976			–			–			171,335			36,065			–			207,400
The Netherlands			–			–			–			54,251			–			54,251			–			–			–			56,136			–			56,136
Others			–			47,182			2,133,076			771,641			1,638			2,953,537			1,753			24,136			516,325			651,592			1,711			1,195,517
Total			4,726,563			537,685			130,343,367			24,423,891			4,413,373			164,444,879			4,957,621			459,099			121,001,793			18,685,667			5,118,420			150,222,600