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  • Credit Risk Policy and Procedures

    • CM-1.2.16

      A properly documented credit risk policy is an essential element of, and a prerequisite for, the credit risk management process. Consistent with the Board's objectives, it assists licensee’s management in the maintenance of proper credit standards and the avoidance of unnecessary risks. Additionally, periodic internal assessment should be undertaken by the internal audit. In the case of branches of foreign bank licensees, the credit policy, limits and the procedures are normally those that are approved by the Head Office/Regional Office.

      Added: June 2022

    • CM-1.2.17

      Senior management, based on the approved credit risk policy, must develop credit risk procedures for identifying, measuring, monitoring and controlling credit risk. The procedures must address credit risk in all of the Islamic bank licensee’s activities, and at both the individual credit and portfolio levels.

      Added: June 2022

    • CM-1.2.18

      Explicit guidelines in the credit risk policy provide the basis for effective credit risk management. A sound credit risk policy should consider which types of credit products and obligors the licensee is looking for, and the underwriting standards the licensee will utilize.

      Added: June 2022

    • CM-1.2.19

      Islamic bank licensee’s credit risk framework must address all credit and credit risk related activities throughout the credit lifecycle covering matters of significance including, but not limited to:

      (a) Organisation and reporting structure of the credit risk function/activities;
      (b) Delegation of authority;
      (c) Role of credit committee and Board risk committee;
      (d) Designated markets and products;
      (e) Credit limit framework;
      (f) Desirable pricing levels and criteria;
      (g) Policy on country and transfer risks;
      (h) Credit granting criteria and authorisation procedures for the advancement of credit, including exceptions to set criteria and limits;
      (i) Credit risk analysis, reviews and credit risk ratings;
      (j) Assessment of concentration;
      (k) Large exposure policy;
      (l) Financing to connected counterparties;
      (m) Problem credit identification, remediation and administration;
      (n) Policies and procedures on write-offs and recoveries;
      (o) Monitoring and reporting.
      Added: June 2022

    • CM-1.2.20

      Islamic bank licensees must operate within sound, well-defined credit-granting criteria. These criteria must include a clear indication of the licensee’s target market and a thorough understanding of the obligor or counterparty, as well as the purpose and structure of the credit and its source of repayment. In addition, the criteria must set out who is eligible for credit and for how much, what types of credit are available, and under what terms and conditions the financing may be granted.

      Added: June 2022

    • CM-1.2.21

      In the case of branches of foreign bank licensees, the credit policies, credit limits and the procedures are those that are approved by the Head Office/Regional office.

      Added: June 2022