CM-1.2 CM-1.2 Credit Analysis
CM-1.2.1
Proper credit risk management will help banks to discipline their lending activities and ensure that credit facilities are granted on a sound basis, and that bank funds are invested in a profitable manner. The process of managing credit risk starts at the origination of the credit facility. Standards for credit analysis should stress the borrower's ability to meet his future financial needs through analysis of his cash-flow generation capacity.
October 07CM-1.2.2
Measurement of credit risk is complicated by the fact that both credit
exposures and the likelihood ofdefault can vary over time and may be interdependent. The creditworthiness of customers shifts, as reflected in credit rating upgrades and downgrades. Customers that originally are highly rated are more likely todefault later in a credit facilities' life than earlier.October 07CM-1.2.3
Banks should properly assess the inherent risk factor of each credit facility; monitor the risks arising from any portfolio concentration; and ensure that appropriate precautions against losses have been taken in the form of
collateral and/or provisioning as described in Chapter CM-2.October 07CM-1.2.4
Banks which provide credit facilities to residents in Bahrain must become members of the Credit Reference Bureau (CRB). All requests for new credit facilities in Bahrain must be submitted to the CRB.
Amended: January 2014
Amended: October 2013
October 07CM-1.2.5
All CRB members must fully abide by the agreed Code of Practice of the CRB (see Appendix CM-3), in matters such as the protection of confidential customer data and payment of enquiry fees. Any such breaches will be viewed as calling into question the "fit and proper status" of persons involved, potentially making the licensee and the person liable to enforcement action by the CBB.
October 07CM-1.2.6
All CRB members must meet the following requirements and incorporate them into their policies and procedures:
a) Establish an electronic monitoring system to detect, monitor and maintain records and a log of all access to CRB data by the CRB member’s employees;b) Conduct a monthly internal audit on the access logs to identify unauthorised access to CRB data by any employee without securing customer consent and report to the CBB any observed violation of Article 68(bis(2)) of CBB Law;c) Require the sign off of a CRB member’s designated employee on their legal obligations concerning the confidentiality of CRB data and that any violation of Article 68(bis(2)) of CBB Law would subject them to an enforcement action in accordance with CBB Law; andd) Cover compliance with the above requirements in the performance appraisal of relevant employees.Added: July 2020CM-1.2.7
Failure to comply with Article 68(bis(2)) of the CBB Law and Paragraph CM-1.2.6 may result in an enforcement action taken against the CRB member, as well as the relevant employee in accordance with CBB Law.
Added: July 2020
