BANK 4.7.2 Policies — provisioning

Depending on the nature, scale and complexity of a banking business firm’s business, and of the credit it provides, the firm’s provisioning policy must set out:

(a) the areas of its business to which the policy applies;
(b) whether the firm uses different approaches to those areas, and the significant differences in approach;
(c) who is responsible for regularly monitoring its assets, to identify problem or potential problem assets, and the factors it takes into account in identifying them;
(d) the extent to which the value of any collateral, guarantees or insurance that the firm holds affects the need for, or the level of, provisions;
(e) the basis on which the firm makes its provisions, including the extent to which their levels are left to managerial judgement or to a committee;
(f) the methods, debt management systems or formulae used to set the levels of provisions and the factors that must be considered in deciding whether the provisions are adequate;
(g) the reports to enable the firm’s governing body and senior management to ensure that the firm maintains adequate provisions;
(h) the procedures and responsibilities for arrears management and the recovery of exposures in arrears or exposures that have had provisions made against them;
(i) the procedures for writing off and writing back provisions; and
(j) the procedures for calculating and making provisions for contingent and other liabilities (such as contingent liabilities that have crystallised from acceptances, endorsements, guarantees, performance bonds, indemnities, irrevocable letters of credit and the confirmation of documentary credits).
Derived from QFCRA RM/2014-2 (as from 1st January 2015).