AI/ML

Federal Reserve seeks feedback on proposed credit risk review

The Federal Reserve wants comments on an interagency-drafted set of guidelines for credit risk review systems. When finalized, these guidelines will specify the frequency and scope of credit risk reviews, depth of transaction reviews, a review of the findings, and communication and distribution of the findings.

Proposed credit risk review guidance has been jointly developed by Office of the Comptroller of the Currency (OCC), Treasury; Board of Governors of the Federal Reserve System (Board); Federal Deposit Insurance Corporation (FDIC); and National Credit Union Administration (NCUA) that would pertain to all institutions supervised by these agencies.

A recent Federal Reserve news release summarizes the proposed guidance for credit risk review systems as “sound management of credit risk, a system of independent, ongoing credit review, and appropriate communication regarding the performance of the institution’s loan portfolio to its management and board of directors.”

While other comments are welcomed, the agencies particularly want to know:

  1. To what extent does the proposed credit review guidance reflect current sound practices for an institution’s credit risk review activities? What elements should be added or removed, and why?
  2. To what extent is the proposed credit review guidance appropriate for institutions of all asset sizes? What elements should be added or removed for institutions of differing sizes, and why?
  3. What if any additional factors should the agencies consider incorporating into the guidance to help achieve a sufficient degree of independence and why? To what extent does the approach described for small or rural institutions with fewer resources or employees provide for an appropriate degree of independence in the credit review function? What if any modifications should the agencies consider and why?

Comments must be received by December 17, 2019.

For more information, full copy of the proposed guidelines and how to submit comments, please visit the Federal Reserve website.

The post Federal Reserve seeks feedback on proposed credit risk review appeared first on Brighterion.

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