(ii) Credit Risk Control
CA-5.8.52
Banks must have independent credit risk control units that are responsible for the design or selection, implementation and performance of their internal rating systems. The unit(s) must be functionally independent from the personnel and management functions responsible for originating exposures. Areas of responsibility must include:
(a) Testing and monitoring internal grades;(b) Production and analysis of summary reports from the bank's rating system, to include historical default data sorted by rating at the time of default and one year prior to default, grade migration analyses, and monitoring of trends in key rating criteria;(c) Implementing procedures to verify that rating definitions are consistently applied across departments and geographic areas;(d) Reviewing and documenting any changes to the rating process, including the reasons for the changes; and(e) Reviewing the rating criteria to evaluate if they remain predictive of risk. Changes to the rating process, criteria or individual rating parameters must be documented and retained for CBB to review.Apr 08CA-5.8.53
A credit risk control unit must actively participate in the development, selection, implementation and validation of rating models. It must assume oversight and supervision responsibilities for any models used in the rating process, and ultimate responsibility for the ongoing review and alterations to rating models.
Apr 08
