Skip to main content
Custom print
Download Original PDF

8. Internal Controls System

No: 341000036442 Date(g): 1/2/2013 | Date(h): 21/3/1434 Status: In-Force

Effective from Jun 30 2013 - Jun 29 2013
To view other versions open the versions tab on the right

Bank's disclosures regarding Risk Management (both quantitative and qualitative) should be subject to the internal controls outlined in this section.
As part of their internal controls system, banks should introduce effective controls to manage credit risk. The internal audit function of the bank should independently assess the adequacy and effectiveness of internal controls relating to credit risk management. The internal audit should periodically evaluate the soundness of relevant internal controls covering, inter alia, the following: 
 
 i.Adequacy of internal controls for each stage of the credit process;
 ii.Appropriateness and effectiveness of internal controls in commensuration to the level of risks posed by the nature and scope of the bank’s lending activities;
 iii.Reliability and timeliness of information reported to the Board of Directors, its relevant committee(s) and senior management;
 iv.Effectiveness of organizational structure to promote checks and balances and to ensure existence of clear lines of authority and responsibilities for monitoring adherence to approved credit policies, procedures and limits;
 v.Adequacy of credit policies and procedures as well as adherence to such policies and procedures;
 vi.Compatibility of credit policies and procedures with legal and regulatory requirements as well as adherence to applicable laws/ regulations (this function can either be performed by internal audit or compliance);
 vii.An assessment of the alignment of remuneration incentive plans with the approved risk appetite and credit policies of the bank;
 viii.Identification of any weaknesses in the credit policies, procedures and related internal controls to enable the management and/or the Board to take timely corrective actions;
 
The internal audit should report the findings on adequacy and effectiveness of internal controls relating to credit function independently to the senior management and the Board or its relevant committee. The internal audit reports should also provide an assessment of the adequacy of any corrective actions being taken to address the material weaknesses.