BANK 4.3.2 Policies — credit risk assessment

A banking business firm must establish and implement appropriate policies to enable it to assess credit risk when the credit is granted or the risk is incurred and afterwards. In particular, the policies must enable the firm:

(a) to measure credit risk (including the credit risk of off-balance-sheet items, such as derivatives, in credit equivalent terms);
(b) to effectively use its internal credit risk assessment;
(c) to rate and risk-weight a counterparty;
(d) to monitor the condition of individual credits;
(e) to administer its credit portfolio, including keeping the credit files current, getting up-to-date financial information on counterparties, and the electronic storage of important documents;
(f) to ensure that the value of collateral and the value of the other CRM techniques used by the firm are assessed regularly;
(g) to assess whether its CRM techniques are effective; and
(h) to calculate its credit risk capital requirement.
Amended by QFCRA RM/2015-3 (as from 1st January 2016).