The Role of the Board of Directors
CM-1.2.4
The Board of Directors of the
conventional bank licensee is responsible for ensuring that thelicensee has an effective CRMU and for approving and regularly reviewing, at least every two years, itscredit risk policies,credit risk appetite and limits framework. Amendments made to such documents must also be approved by the Board. The Board may delegate some of its functions, such as approval of policies, amendments to policies and periodic reviews to a designated Board committee.Added: June 2022CM-1.2.5
Effective credit risk management is imperative to optimise the
licensee ’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. A risk appetite statement is a written articulation of the aggregated level and types of risk exposures that thelicensee will accept, or avoid, in order to achieve its business objectives.Added: June 2022CM-1.2.6
The Board must ensure that the
credit risk policies cover all activities of theconventional bank licensee in which it incurscredit risk . The Board must also determine that thelicensee’s capital level is adequate for the risks assumed throughout the entire organisation or group.Added: June 2022CM-1.2.7
The
credit risk policy must document thelicensee’s willingness to grant credit based on exposure type (commercial, consumer, real estate etc.), economic sector, geographical location, product, currency, maturity and anticipated profitability. This might also include the identification of target markets and the overall characteristics that theconventional bank licensee would want to achieve in its credit portfolio (including levels of diversification and concentration tolerances).Added: June 2022CM-1.2.8
The Board must ensure that the
credit risk appetite framework delineates the delegated powers, lines of responsibility and accountability overcredit risk management decisions, and must clearly define authorised instruments, hedging strategies and risk-taking opportunities.Added: June 2022CM-1.2.9
The Board must assess whether the
conventional bank licensee is operating within the boundaries of thecredit risk appetite and limits framework approved by the Board.Added: June 2022CM-1.2.10
The Board must ensure that it receives adequate management information reports and exception reports to meet its oversight requirements to monitor adherence to the
licensee’s risk tolerance/appetite/limits. The Board must regularly evaluate whether it is receiving the right balance of detail and quantitative versus qualitative information.Added: June 2022CM-1.2.11
The Board must approve the structure in which the
conventional bank licensee will organise its credit-granting functions, including independent review of the credit granting process and the overall portfolio.Added: June 2022CM-1.2.12
For
branches of foreign bank licensees where no Board/Audit Committee exists, all references to the Board/Audit Committee should be interpreted as the Group Chief Risk Officer or equivalent person who has direct access or reports to the Board or Audit Committee of the parent bank, unless alternative structures that satisfy the primary objectives of such oversight are in place.Added: June 2022
