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Effective from Jan 01 2008 - Dec 31 2007 To view other versions open the versions tab on the right
Corporate, sovereign and bank exposures
5.2.1
Banks should ensure the independence of the rating assignment process. Rating assignments and periodic rating reviews should be completed or approved by a party that does not stand to benefit from the extension of credit. Credit policies and approval/review procedures should reinforce and foster the independence of the rating process.
5.2.2
Borrowers and facilities must have their ratings refreshed at least on an annual basis. Certain credits, especially higher risk borrowers or problem exposures, must be subject to more frequent review. In addition, banks must initiate a new rating if material information on the borrower or facility comes to light.
In addition, borrower and facility ratings should be reviewed whenever material information on the borrower or facility comes to light1. Bank should establish an effective process to obtain and update relevant and material information on the borrower’s financial condition, and on facility characteristics that affect LGD and EAD (e.g. the condition and value of collateral).
Retail exposures
5.2.4
Banks should review the loss characteristics and delinquency status of each identified risk pool at least on an annual basis. It should include a review of the status of individual borrowers within each pool as a means of ensuring that exposures continue to be assigned to the correct pool. This requirement may be satisfied by review of a representative sample of exposures in the pool.
1 The rating should generally be updated within 90 days for performing borrowers and within 30 days for borrowers with weakening or deteriorating financial condition.
