Credit Governance and Compliance notes KASNEB CCP


1. Overview of Regulation of financial institutions

Table of Contents

1.1 Need and objectives of regulation of lending institutions
1.2 History of regulation
1.3 Regulation models and strategies
1.4 The role of regulatory models
1.5 Regulatory authorities and their structures

2. Credit Policy administration

2.1 The credit policy
2.2 Distinction between a policy, procedure and a rule
2.3 Scope of credit policy
2.4 Objectives of a credit policy
2.5 Operating principles of a credit policy
2.6 Structures and management of credit granting institutions
2.7 Responsibilities, Authority and decision making
2.8 The importance of a credit policy
2.9 Types of credit policies
2.10 Factors to consider when developing a credit policy
2.11 Component of a credit manual
2.12 Formulation and implementation of a credit policy
2.13 Benefits of credit policy periodic review

3. Prudential Guidelines in lending for banking institutions

3.1 Meaning of banking business
3.2 Role of the management and the board in credit risk management
3.3 Capital Adequacy and sanctions on non-compliance
3.4 Insider lending and reckless lending
3.5 Risk Classification of assets
3.6 Provisioning requirements
3.7 Management of NPAs and treatment of collateral
3.8 Credit Compliance reports
3.9 Administrative measures and penalties for non-compliance

4. Cooperatives/Saccos lending regulations

4.1 General lending requirements
4.2 Capital adequacy and sanctions on non-compliance
4.3 Role of the management and the board in credit risk management
4.4 Lending disclosures requirements
4.5 Interest rates, fees & penalties and limit on interest recoverable
4.6 Security for loans
4.7 Inter Sacco borrowings
4.8 Loan product approval
4.9 External borrowing, limits on loans, reckless lending and Insider lending
4.10 Credit collection practices
4.11 Classification requirements, basis of classification and computing delinquency
4.12 Treatment of collateral
4.13 Loan loss allowances, loan write-off and risk classification return
4.14 Cooperative principles and sound corporate governance (DTS)
4.15 Guiding principles (GP) of good corporate governance (DTS)
4.16 Credit Compliance reports
4.17 Administrative measures and penalties for non-compliance

5. Microfinance Institutions lending regulations

5.1 Capital adequacy and sanctions on non-compliance
5.2 Understanding Microfinance Banks and Credit only Microfinance Institutions
5.3 The credit committee of the board
5.4 Application for loan or credit facility.
5.5 Limit on loans and credit facilities.
5.6 Risk classification and provisioning of loans
5.7 Insider lending reckless lending
5.8 Credit Compliance reports
5.9 Administrative measures and penalties for non-compliance

6. Islamic Banking

6.1 Regulation of Islamic banking
6.2 Accounting and disclosure
6.3 Principles of lending

7. Measuring performance of credit Assets

7.1 Purpose of performance measurement
7.2 Portfolio at risk (PAR); institution PAR Vs Industry PAR
7.3 Value at risk (VaR)
7.4 Credit loss ratio, NPLs to gross Loans ratio, etc.
7.5 Average collection period (ACP)
7.6 Collections Effective Index (CEI)
7.7 Risk Migration rates

8. Basel Accords

8.1 Background of the Accord
8.2 Basel I -III
8.3 Basel capital adequacy framework for credit risk
8.4 Impact of changes to the Basel capital adequacy framework on credit risk
8.5 Key differences between regulatory capital (under Basel framework) and economic capital

9. Consumer protection

9.1 Relevant laws, codes of practice and lending policies
9.2 Moral ethical and cultural considerations
9.3 Principles of responsible lending
9.4 Unregulated lending institutions
10 Corporate Governance in lending institutions
10.1 Definition of corporate governance
10.2 Agency and stakeholders’ theories
10.3 Importance of corporate governance
10.4 Principles of corporate governance
10.5 Best practice in corporate governance
10.6 Developing framework for corporate governance
10.7 Corporate governance and stakeholders
10.8 Role of Chairman, CEO and board committees
10.9 Role of board in risk management
10.10 Role of other stakeholders
10.11 Internal control, audit and compliance and governance
10.12 Risk management and governance
10.13 Directors remuneration
10.14 Governance reporting and disclosure
10.15 Public sector governance
10.16 Conflict of interest
10.17 Investors education and protection of shareholders

11. Professional standards, ethics and values

11.1 Ethical theories
11.2 Different approaches to ethics and values
11.3 Standards of conduct and personal integrity
11.4 Professional and public interest
11.5 Professional practice and code of ethics
11.6 Conflict of interest and consequences of unethical behavior
11.7 Social and environmental issues in the conduct of business and integrity.


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