6.73. Review of levels

The levels of provisions and write-offs must be reviewed regularly to ensure that they are consistent with identified and estimated losses.

Guidance

i) A review of a firm’s write-offs can help identify whether an Islamic Bank’s provisioning policy results in over-provisioning or under-provisioning.

ii) The AFSA regularly assesses trends and concentrations in risk and risk build-up across financial entities in relation to problem assets. In making the assessment, the AFSA takes into account any observed concentration in the CRM techniques used by firms and the potential effect on the efficacy of those techniques in reducing loss. The authority would consider the adequacy of provisions for a firm (and the industry in general) in the light of the assessment.

iii) The AFSA might seek the opinion of external experts in assessing the adequacy of a firm’s policies for grading and classifying its assets and the appropriateness and robustness of the levels of its provisions.