Finance Companies should adopt and adhere to written policies and procedures detailing the credit risk systems and controls and the roles and responsibilities of the company's board and senior management. The Board and Management must review the finance company's credit risk management framework to comply with the requirements set out in these Rules including, but not limited to:
i.
Updating the governance and risk frameworks in accordance with these rules;
ii.
Reviewing, revising and approving sound credit risk management policies and strategies, and implementing credit risk management practices to facilitate effective identification (including internal credit risk rating and collective assessments), and adequate measurement and reporting of expected credit losses.
iii.
Adopting, documenting and approving sound expected credit loss methodologies to facilitate appropriate, consistent, and timely recognition of expected credit losses. Finance Companies' expected credit loss methodologies must be reviewed annually, or more frequently when the need arises especially when new information becomes available during the quarterly expected credit loss assessment process.
iv.
Review, evaluate, update, and report to the Board or Board delegated committees on the adequacy of its exposure and expected credit losses at least quarterly.
v.
Include requirements for internal audit function to independently evaluate the effectiveness of the Finance Company's credit risk assessment and measurement systems and processes, including the credit risk rating system on an annual basis.
vi.
The management of assets in default should be governed by a comprehensive policy that at a minimum has the following characteristics:
a.
Determining account action plans or recovery strategies;
b.
Monitoring compliance with the action plan, adjusting the plan as necessary;
c.
Updating collateral valuations;
d.
Pursuit of all options to maximize recovery, including placing customers into legal proceedings or liquidation as appropriate;
e.
Ensuring adequate and timely write offs; and
f.
Regular reporting to the Board or Board delegated committees on the overall problem exposure portfolio and in particular, the large and complex credits.
