Document ID: chunk:federal_register_of_legislation:F2022L01576:body:0:p10
Version: federal_register_of_legislation:F2022L01576
Segment Type: other
Provision Reference: 
Character Range: 26087–29151

ADI must ensure all valuations are appraised independently from the ADI's credit origination, credit assessment and approval process.
49.         The valuation of collateral must reflect fair values, taking into account prevailing market conditions such as time taken for the liquidation or realisation of collateral.
50.         An ADI must also ensure that the valuation of collateral such as land takes into account, to the extent possible, the likelihood of external events, including but not limited to fire, drought and flood, which may impact the valuation of the asset taken as collateral.
51.         An ADI must have appropriate mechanisms in place for regularly assessing the value of collateral, guarantees and other risk mitigants.
52.         An ADI must establish appropriate limits on LVR to minimise the risk that a property serving as collateral will be insufficient to cover any repayment shortfall. An ADI must ensure there is appropriate scrutiny of any instances of lending with high LVR.
53.         An ADI must appropriately evaluate the level of coverage being provided in relation to the credit quality of the guarantor and legal enforceability of the guarantee. For exposures to individuals in particular, an ADI must ensure a guarantor has a clear understanding of the risks involved.

Credit approval and experienced credit judgement
54.         An ADI must have a clearly established process in place for:
       (a)          approving new exposures (including prudent credit standards);
       (b)          renewing and refinancing existing exposures; and
       (c)          identifying the appropriate approval authority for the size and complexity of the exposures.
55.         An ADI must document the credit assessment and approval process and identify the approval authority for each exposure, so that it is clear which personnel are accountable for the individual credit decision.
56.         An ADI must ensure personnel involved in the credit assessment and approval process have appropriate experience and knowledge to exercise prudent credit judgement commensurate with the nature, size and complexity of the transaction to which they are involved.
57.         An ADI must have prudent credit risk policies and processes with respect to overrides, waivers or exceptions, including clear identification of approval authorities and limits that reflect the maximum level of allowable overrides, waivers or exceptions.[6]
58.         Exposures originated as overrides, waivers or exceptions to, or otherwise not in compliance with, credit risk policies must be regularly reported to an ADI's relevant internal governance bodies and review functions.

Third party credit assessment and approval
59.         Where an ADI uses a third party, such as a broker, to undertake any aspects of the credit assessment or approval, an ADI must implement appropriate oversight processes of the third party. An ADI must monitor and test the integrity of the third-party assessment and approval on a regular basis, either directly or through