During 2021, in line with the MFSA’s supervisory expectations, Banking Supervision carried out a credit risk thematic review of a selected number of banks, specifically on credit monitoring. The outcome of this review shed light on credit institutions’ credit monitoring practices. The observations emanating from this review were the backbone of Banking Supervision’s communication to the Board Risk Chairs held in November 2021.
Banking Supervision identified four credit monitoring practices which banks need to concentrate on in the coming year. These being:
- the processes around forbearance measures;
- the design of early warning indicators;
- the composition of unlikely-to-pay triggers and the frequency of unlikely-to-pay reviews; and
- the upkeeping of forward-looking documentary evidence held in customer files.
Board Risk Chairs were invited to consider their effective oversight over credit risk management processes. The benchmarking of these observations to the current practices employed by banks is encouraged, together with the necessary follow-up action. Credit risk will continue to be high on the MFSA’s agenda in 2022, particularly through supervisory assessments.
The roundtable held with the Board Risk Chairs is part of a larger outreach programme on credit risk which comprises of the Circular titled Credit Risk Management in Malta’s Banks which was issued by the MFSA on 12 November 2021.
