— Effectiveness of Monitoring Systems
CA-5.8.105
The bank must be able to monitor both the quality of the receivables and the financial condition of the seller and servicer. In particular:
(a) The bank must (i) assess the correlation among the quality of the receivables and the financial condition of both the seller and servicer, and (ii) have in place internal policies and procedures that provide adequate safeguards to protect against such contingencies, including the assignment of an internal risk rating for each seller and servicer;(b) The bank must have clear and effective policies and procedures for determining seller and servicer eligibility. The bank or its agent must conduct periodic reviews of sellers and servicers in order to verify the accuracy of reports from the seller/servicer, detect fraud or operational weaknesses, and verify the quality of the seller's credit policies and servicer's collection policies and procedures. The findings of these reviews must be well documented;(c) The bank must have the ability to assess the characteristics of the receivables pool, including (i) over-advances; (ii) history of the seller's arrears, bad debts, and bad debt allowances; (iii) payment terms, and (iv) potential contra accounts;(d) The bank must have effective policies and procedures for monitoring on an aggregate basis single-obligor concentrations both within and across receivables pools; and(e) The bank must receive timely and sufficiently detailed reports of receivables ageings and dilutions to (i) ensure compliance with the bank's eligibility criteria and advancing policies governing purchased receivables, and (ii) provide an effective means with which to monitor and confirm the seller's terms of sale (e.g. invoice date ageing) and dilution.Amended: April 2011
Apr 08
