Regulatory Alerts2021-02-04
Sound Credit Risk Assessment and Valuation for Loans
The Supervisor of Banks issued this directive to establish principles for sound credit risk assessment and loan valuation, requiring banking corporations to maintain robust internal controls and reliable classification systems. The regulation mandates that boards and senior management ensure adequate loan loss provisions by adopting documented methodologies that utilize experienced judgment and validated risk models. These requirements apply to all banking corporations to ensure timely identification of credit deterioration and accurate measurement of losses for financial reporting and capital adequacy purposes.
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