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This document provides guidance for banking supervisors to promote sound practices for managing credit risk in banks. It covers four areas: establishing an appropriate credit risk environment, operating under a sound credit-granting process, maintaining an appropriate credit administration, measurement and monitoring process, and ensuring adequate controls over credit risk.
In Chapter 1 (“Fundamentals of Credit Risk”), we define credit risk and present the major families of transactions that generate credit risk for industrial companies and financial institutions.
up in the credit crunch have underlined is the major impact of credit risk and – by implication – credit risk management on the wellbeing and profitability of business-es. Being able to manage this risk is a key requirement for any lending decision. This is well understood in theory – if not always in practice – by banks and other lending
credit risk management framework and the adequacy of the institution’s credit profile. Be able to apply IPPF and risk-based internal audit techniques to assess and audit credit risk in their organization.
The use of credit risk models offers banks a framework for examining this risk in a timely manner, centralising data on global exposures and analysing marginal and absolute contributions to risk.
It is imperative for banks to ensure sound credit risk management systems and internal controls are in place to cover risk assumed, even under the new ways of working. Here are some good practices identified from recent reviews conducted by KPMG. Robust practices in managing credit quality. December 2020. Credit Risk Management
Modern Credit Risk Management Theory and Practise is an extremely valuable book as it successfully covers and tackles a very broad coverage of topics in rela- tion to effective credit risk analysis and management.
