The bank runs an adequate credit risk management process covering the full credit life cycle (underwriting, evaluation and ongoing management of loan and investment portfolios) and counterparty credit risk, considering risk appetite, profile, market conditions, macroeconomic factors and forward-looking information, with a bank-wide view of all credit exposures and a robust method for early identification and measurement of credit losses. The board approves and regularly reviews the credit risk strategy and significant policies consistent with appetite and oversees their implementation. Policies establish a controlled credit environment: a documented strategy for assuming credit risk without undue reliance on external ratings; defined criteria for approving new exposures with prudent underwriting and full understanding of borrowers (and of securitisation features), for renewing and refinancing and for the approval authority by size and complexity; credit administration that keeps analysing ability and willingness to pay and monitors documentation, covenants, collateral and mitigation, with a grading system; information systems that aggregate and report credit exposures to the board and management; limits consistent with appetite and capital, communicated to staff; exception tracking with prompt escalation; and controls over data quality and validation of credit models. The bank monitors obligors' total indebtedness and default risk factors, including unhedged foreign exchange risk; makes credit decisions free of conflicts and at arm's length; and requires major exposures above set amounts or shares of capital, and especially risky or non-core exposures, to be decided by the board or senior management.
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