Thematic Credit Review (2021-12-24)

Summary

This is a Supervisory Information Circular from CIMA's Banking Supervision Division reporting on a Thematic Credit Review conducted between 18 March 2021 and 30 June 2021, covering nine domestic lending institutions ('Selected Lending Institutions' or SLIs). The review examined how the loan portfolios, credit risk policies, corporate governance and internal controls of these institutions responded to the COVID-19 pandemic, including the use of forbearance and payment moratorium measures.

The circular reports that loan portfolios were largely resilient and most institutions safely unwound COVID-19 concessions. However, the review identified recurring deficiencies across several areas.

• Practices for granting blanket waivers/concessions
• Documentation of concentration limits
• Credit risk classification methodology
• Oversight of watch lists
• Timeliness of reclassification and write-offs/provisions for uncollectible credits
• Internal audit resourcing/frequency
• Use of outdated or undocumented collateral valuations

CIMA states it has already communicated specific deficiencies and required remediation directly to each participating SLI through bilateral communication.

Beyond the nine reviewed institutions, the circular directs 'all licensees' to consider these general themes and incorporate relevant lessons into their own credit risk management frameworks where applicable. It also notes CIMA intends to continue using thematic reviews going forward for peer comparison and trend analysis. The circular references a more detailed Report available separately, but that report's specific content is not reproduced here.

Key obligations

• All licensees, including the SLIs, should consider the general themes in the Thematic Credit Review Report and incorporate them into their credit risk management framework, where applicable.
• SLIs that received bilateral communications from the Authority must address the specific deficiencies and requirements identified for their institution to enhance their credit risk management framework.

Applies to

banks, lending institutions, licensees