5.2. Role of Governing Body—Credit Risk

(1) A Bank’s Governing Body must ensure that its Credit Risk management policy enables it to obtain a comprehensive bank-wide view of its Credit Risk exposures and covers the full credit lifecycle including credit underwriting, credit evaluation, and the Credit Risk management of the Bank’s trading activities.

(2) A Bank must ensure that its Governing Body is responsible for monitoring the nature and level of Credit Risk assumed by it and for monitoring the Credit Risk management process.

(3) The Governing Body of the Bank must also ensure that:

• (a) an appropriate senior management structure with clearly defined responsibilities and roles for Credit Risk management and for compliance with the Bank’s Risk strategy, is established and maintained;
• (b) the Credit Risk management framework is consistent with the Bank’s risk profile and its systemic importance.
• (c) the Bank’s senior management and other relevant staff have the necessary experience to manage Credit Risk and to effectively implement the Credit Risk management policy;
• (d) appropriate Credit limits covering Credit Risk management in both day-to-day and stressed conditions are set;
• (e) stress-tests, funding strategies, contingency funding plans and holdings of high-quality liquid assets are effective and appropriate for the Bank;
• (f) the Bank’s senior management:

(i) develops a Credit Risk management policy in accordance with the Bank’s Credit Risk tolerance;

(ii) monitors the Bank’s Credit Risk profile and reports to the Governing Body regularly;

(iii) determines, and sets out in the Bank’s Credit Risk management policy, the structure, responsibilities and controls for managing Credit Risk and for overseeing the Credit Risk of all legal entities, branches and subsidiaries in the jurisdictions in which the Bank is active; and

(iv) monitors trends and market developments that could present significant, unprecedented or complex challenges for managing Credit Risk so that appropriate and timely changes to the Credit Risk management policy can be made.

(4) The Governing Body must regularly review reports on the Bank’s Credit Risk profile and portfolio returns and, where necessary, information on new or emerging problem assets. The Governing Body of the Bank must also review the Credit Risk tolerance and strategy at least on an annual basis.

(5) The Governing Body must approve:

• (a) the Bank’s Credit Risk management policy; and
• (b) its Credit Risk tolerance and risk strategy.