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Credit Risk

Release Date: 22 Jan 2018

The Bank has issued the policy document on Credit Risk for banking institutions, insurers and takaful operators, and financial holding companies. The revised standard is a culmination of the Bank’s comprehensive review of the existing regulatory framework, Best Practices for the Management of Credit Risk guidelines. The revised standard aims to further elevate credit risk management practices across the industry, taking into account developments in the size and diversity of product offerings, greater internationalisation of the financial system and the growing role of domestic capital markets as an alternative source of financing.

The standard also addresses requirements that will support the effective implementation of the Malaysian Financial Reporting Standards 9: Financial Instruments (MFRS 9) by financial institutions, and promote alignment with prudential objectives.

Key changes to the revised policy document include:-

  • clarity on governance expectations in respect of the involvement of the board and the risk management function in credit decision-making, management of problem credits and the independent credit review function;
  • expanded requirements on the management of exceptional credits and concentration risk;
  • strengthened requirements on credit risk measurement to promote greater sophistication in loss estimation approaches; and
  • new expectations for the management of country risk, transfer risk and group-wide credit risk oversight.

The policy document will take effect beginning 1 July 2018 for banks on an entity basis and 1 July 2019 on a consolidated basis. Insurers and takaful operators are required to comply with the standard on 1 January 2021 on both entity and consolidated basis.

Details can be found in the following documents:

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