SGUS ENERGY SECTOR FRAMEWORK

This course will introduce you to the new policies concerning the energy sector. It applies to different business lines in AMER

Energy Framework Amer

Back from holidays

Wait! What is the energy sector? This sector is defined by the borrowers within these industries (choose):

  • Oil & Gas
  • Oil & Gas Trading
  • Power utilities
  • All of the above

Energy Sector Chart

AMER ORG CHART

If you take a closer look at this org chart, you will find the Business lines related to the Energy Sector. 

Meeting James

What are the new changes?

  • New policies and procedures framing the risk monitoring and management and defining sound underwriting guidelines;
  • New limits for the debtor and replacement risks based on SGUS’s risk appetite for the Energy Sector;
  • An Energy Sector Committee where SGUS management provides effective oversight for Energy related activities of FLOD (GLIFI, CORI and MARK) and reports monthly to the SGUS Credit Risk Committee.

New Policies and procedures

  • SGUS Energy Sector Policy  
  • SG US RISKCO memos and minutes 

        C2 confidential => circulated to heads of B/Ls 

  • SG US Credit Risk Policies and Procedures 

        SG AMER Credit risk Policy and SG AMER Procedures Manual 

  • Specific policies and procedures for Reserve Based Finance activities 

       For GLFI/NAT/RBF  

  • Specific Technical Services Policies and Procedures 

        For GLFI/DIR/TS (Technical Services)

Small talk about budget

Limit Framework Examples

New Limit Framework Examples

  • In GLFI/TCF (Trade and Commodity Finance): there are three different limits for TCF:

-Energy Sector:

  1. TCF Oil & Gas traders => a hard limit 
  2. TCF mid-stream => benchmark under O&G. 

-ADDITIONALLY, concerning the Global TCF limit: 

  1. it is broader than under the Energy scope (includes all commodities) – AMER limit from global CORISQ.  


  • Concerning other Business Lines: check with GLFI/AME/COO for the availability of benchmarks related to your BL and follow the escalation process if needed 
  • For employees in LBO/TMT: LBO CORISQ and Energy limits/benchmarks are set if the borrowers operate in the Energy Sector.

Escalation Process in case of limit breach

  • In case of the breach of a limit

-Inform Chief Regulating Officer and Chief Executive Officer immediately + GLFI/DIR or CORI/DIR;

If you experience a breach on CVAR, also inform MARK/DIR.

  • Threshold (90% of a limit)

-this is First Line Of Defense management so it immediately reports to the Chief Regulating Officer;

-Convene Energy Sector Committee to prepare remediation actions.

  • Benchmark

-Inform GLFI/AME/COO;

-Chair of the Energy Sector Committee convenes extraordinary E.S.C. to seek justifications and explanations on the proposed deal;

-E.S.C provides recommendations to GLFI/AME/DIR and CORI/AME/DIR to reallocate limit usage within the Debtor Risk limit.

-In case of disagreement, the issue is elevated to the CEO subject to CRO approval.

New Operational Energy Sector Committee


Energy Sector Committee (ESC): 

  • It's role is to Oversee and Monitor activities from business and risk management perspective.
  • Reviews the Management Information System (“MIS”);
  • Reports to the Enterprise Risk Committee (“ERC”) via the Credit Risk Committee.


Members Of the ESC

Members:

Head of GLFI/AME/NAT;

Deputy Head of GLFI/AME/NAT;

Head of CORI/AME or his delegate;

Head of RISQ/AME/CIB or his delegate;

Head of GLFI/AME/COO;

Head of GLFI/AME/SCR,

and various representatives of business lines involved in the Energy sectors can be invited.

Head of MARK/CTY, IFD join a limited part of the Committee to ensure that appropriate information barriers are respected.

 

 

ESC Purpose

Purpose:

  • Oversee and monitor FLOD’s Energy Sector activities in the U.S.;
  • Provide proposals to FLOD/DIR for decision making purposes;
  • Review, among others:

exposures and limits;

risk metrics migrations;

single name, product, sector, geographic concentrations and risk evolutions;

market driven credit alerts;

borrowing base trends;

facility usage;

approvals of exceptions to credit policies and procedures;

evolution of watchlist and sensitive accounts;

regulatory context

 

Quiz

In case of any question related to the Energy Sector, contact

  • GLFI/AME/COO
  • RISQ/AME/CIB
  • Head of Energy Sector Committee: Roberto Simon
  • Any of them
  • None

Now rank these categories by order, from biggest to smallest

  • Limit
  • Threshold
  • Benchmark

GLFI/AME/CMK/LBO team is contemplating to underwrite a Term Loan to finance the leveraged buy-out of company Z-Oil by Y-Petroleum. The Term Loan is booked in Societe Generale NY. Would this RCF fall under the Energy Sector Limit?

  • Yes
  • No
  • It depends