In addition

Create, implement operational and constantly actualized system of internal credit ratings - based on actual observations on a quarterly basis to calculate the probability of migration matrix of credit ratings and to assess its value based on the required reserves for credit losses in future periods; - Provide back-testing of migration internal credit ratings on real data on the maximum possible period of time. Banks are also urged to consider the world's best practices for managing credit risk, which, inter alia, set out in the Basel Committee on Banking Supervision, "Principles of credit risk management," where Banks encouraged to introduce the process of managing credit risk, which takes into account the risk profile of institutions, but also contains prudential guidelines and procedures for identifying, evaluating, monitoring and control of credit risk (including counterparty risk). Credit risk management, according to this document must include procedures for granting loans and investments, assess the quality of such loans and investments and ongoing management of the loan and investment portfolios. Management of credit risk the bank is carried out at two levels in accordance with the reasons for its appearance - at the level of each individual loan level and portfolio as a whole. The approaches to risk management, loan portfolio diversification belong; limitation, the establishment of reserves to compensate for losses on credit operations of commercial banks, securitization. The total loan portfolio risk depends on the riskiness of loans, which it is formed, so to determine the portfolio risk is necessary to analyze the risk of its parts. The risk of the loan portfolio is mainly due to its imperfect structure, as well as to the quality of its components (individual loans). For example, an excessive concentration of loans in a certain economic sector creates a dependency on the state of the state bank of the industry. Topic: Risks in Banking | Tags: control