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Credit Risk Management Audit Checklist

A comprehensive checklist for auditing credit risk management practices in financial institutions, covering risk assessment, underwriting standards, monitoring processes, and regulatory compliance.

Credit Risk Management Audit Checklist

by: audit-now
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About This Checklist

In the dynamic world of financial services, effective credit risk management is crucial for maintaining a healthy loan portfolio and ensuring institutional stability. This Credit Risk Management Audit Checklist is designed to help financial institutions evaluate and enhance their credit risk assessment processes, underwriting standards, and monitoring practices. By systematically reviewing key aspects of credit risk management, this checklist enables auditors to identify potential weaknesses, ensure compliance with regulatory requirements, and optimize the institution's approach to managing credit exposure. Regular use of this checklist can significantly improve loan quality, reduce potential losses, and strengthen overall risk governance.

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Industry

Financial Services

Standard

Financial Reporting Standards

Workspaces

ATM locations

Occupations

Credit Risk Analyst
Internal Auditor
Risk Manager
Loan Officer
Chief Credit Officer
1
Are the underwriting standards being adhered to?
2
What is the current amount of loan loss reserves?
Min: 0
Target: 1000000
Max: 5000000
3
Describe the credit monitoring processes in place.
4
Is the organization compliant with Basel III and IFRS 9?
5
Provide details on the credit risk governance framework.
6
Is the loan approval process compliant with internal guidelines?
7
What is the current average loan default rate?
Min: 0
Target: 5
Max: 100
8
Describe the risk assessment methodology used for the loan portfolio.
9
When was the last loan portfolio review conducted?
10
Is the current loan loss reserve adequate based on the portfolio risk?
11
How frequently is credit risk monitored?
12
Is there a regular reporting mechanism for credit risk?
13
Describe the strategies in place for remediating identified credit risks.
14
What is the current risk exposure value of the loan portfolio?
Min: 0
Target: 5000000
Max: 10000000
15
When was the last comprehensive risk assessment conducted?
16
Is the governance structure for credit risk clearly defined?
17
Are the roles and responsibilities for credit risk management documented?
18
How many risk committees are in place to oversee credit risk?
Min: 1
Target: 3
Max: 10
19
Describe the training programs available for staff on credit risk governance.
20
When was the last review of the credit risk governance framework conducted?
21
What is the current risk rating of the loan portfolio?
22
What percentage of the portfolio consists of non-performing loans?
Min: 0
Target: 10
Max: 100
23
What mitigation strategies are in place for high-risk loans?
24
When was the last comprehensive risk assessment of the loan portfolio conducted?
25
Describe any findings from the last internal audit related to the loan portfolio.

FAQs

Credit risk management audits should be conducted at least annually, with more frequent reviews of high-risk portfolios or in response to significant changes in market conditions or lending strategies.

Key areas include credit underwriting policies, risk rating systems, loan documentation practices, credit monitoring processes, stress testing methodologies, and loan loss reserve adequacy.

These audits are typically conducted by internal audit teams, risk management specialists, or external auditors with expertise in credit risk assessment and banking regulations.

The checklist ensures that credit risk management practices are robust and consistent, leading to better-informed lending decisions, improved risk identification, and more effective portfolio management strategies.

Yes, the checklist can be customized to address specific credit risk management requirements of various lending institutions, including commercial banks, credit unions, mortgage lenders, and fintech lenders.

Benefits of Credit Risk Management Audit Checklist

Enhances the effectiveness of credit risk assessment and monitoring processes

Ensures compliance with regulatory guidelines on credit risk management

Improves loan portfolio quality and reduces potential credit losses

Facilitates early detection of deteriorating credit conditions

Strengthens overall risk governance and decision-making processes