Document ID: chunk:federal_register_of_legislation:F2022L01576:body:0:p13
Version: federal_register_of_legislation:F2022L01576
Segment Type: other
Provision Reference: 
Character Range: 34699–37718

An ADI must establish and enforce internal controls and other practices to ensure that overrides, waivers or exceptions to policies, processes and limits are reported in a timely manner to the appropriate level of management for action.

Systems for remedial action
79.         An ADI must have an appropriate system in place for early remedial action on problem exposures, managing problem exposures and similar workout situations. An ADI's collections systems must bring together a borrower's arrears profile and be able to be scaled to manage high volumes in a time of stress.
80.         An ADI must have an effective workout program for problem exposures, with the segregation of the workout function from the area that originated the exposure. An ADI must have an effective strategy and appropriate organisational resources and personnel in place to manage these exposures.
81.         An ADI must have prudent policies and processes that assist the ADI to recover as much of an exposure as is reasonably achievable within the requirements established by law and also having regard to community expectation as to how borrowers are to be treated. An ADI must consider the risk to its reputation in such circumstances.

Classification of exposures and provisions
82.         An ADI must have prudent policies and processes for classifying its credit risk exposures for prudential reporting purposes and for establishing appropriate and robust provisioning levels. An ADI's system for classification and provisioning must take into account on- and off-balance sheet exposures.
83.         An ADI must classify its credit risk exposures as performing or non-performing. An ADI must have adequate documentation to support its classification of exposures and its provisioning levels. An ADI must also classify its exposures when payments are past-due for a minimum number of days (i.e. 30, 60 and 90 days).
84.         An ADI must regularly review its exposures at an individual level or at a portfolio level to ensure appropriate classification of exposures, provisioning levels and write-offs.
85.         An ADI must have sound policies and processes to ensure that provisions and write-offs are timely and reflect realistic repayment and recovery expectations, taking into account market and macroeconomic conditions.
86.         An ADI's Board must obtain timely and appropriate information on the condition of the ADI's credit portfolio, including the classification of exposures as performing and non-performing and the level of provisions. The information must include, at a minimum, results of the latest credit risk review process, comparative trends in the overall quality of exposures and measurements of existing or anticipated deterioration in asset quality and expected credit losses.
87.         An ADI must ensure that valuation, classification and provisioning for material non-performing exposures are conducted on an individual exposure basis.
88.         An ADI must regularly assess any trends and