Management Responsibilities in Credit Granting

From Open Risk Manual

Management Responsibilities in Credit Granting

The management body, as referred to in the EBA Guidelines on internal governance, in relation to credit granting, should[1]:

  • approve the institution’s Credit Risk Strategy, within the overall Risk Strategy, and Business Strategy, to ensure that they are in line with the institution’s Risk Appetite Framework (RAF), capital and liquidity planning, and are in line with the internal capital adequacy assessment process (ICAAP) and internal liquidity adequacy assessment process (ILAAP), when relevant;
  • set the Credit Risk Appetite within the overall RAF, including credit-granting standards, qualitative statements, quantitative metrics and limits, and escalation thresholds, without business performance biases;
  • approve the framework for the Credit Approval process, including, when relevant, the internal structures for credit granting and monitoring, and defining delegated decision-making authorities;
  • ensure an effective oversight of Credit Risk Quality, in particular at the point of credit granting, and provisioning;
  • ensure adequate credit approval, monitoring and control processes, for the purposes of effective Credit Risk Management;
  • ensure that all staff involved in credit risk taking, and the managing, monitoring and controlling of credit risk, are adequately skilled, resourced and experienced;
  • set, approve and oversee the implementation of the institution’s risk culture, core values and expectations regarding credit risk;
  • ensure that the Remuneration Framework, including any relevant performance targets, and the performance assessment framework for credit decision-makers who are identified staff remain aligned with the credit risk and credit risk appetite.

See Also

References

  1. EBA, Guidelines on loan origination and monitoring EBA/GL/2020/06