Prudential Regulation Authority Rulebook

11E.1

Where a firm engages in the activity of providing loans, it must ensure that it has written policies to ensure all of the following:

1. (1) that credit-granting is based on sound and well-defined criteria and that the process for approving, amending, renewing and refinancing credits is clearly established;
2. (2) that the firm has internal methodologies that enables it to assess the credit risk of exposures to individual obligors and at the portfolio level;
3. (3) that the ongoing administration and monitoring of the loan portfolios, including for identifying and managing problematic credits, and for making adequate value adjustments, is operated through effective systems; and
4. (4) that the diversification of the loan portfolios is adequate given the target markets and overall investment strategy of the firm.

11E.2

Where a firm engages in mortgage insurance (including reinsurance), it must base its underwriting on sound and well-defined criteria and comply with the requirements referred to in 11E.1 (2), (3) and (4) with regard to the mortgage loans underlying its insurance and reinsurance obligations.