The monitoring of loans should be assigned to qualified personnel working independently of the units responsible for granting credit. Internal rating systems call for close liaison with the crucial aspects of risk management, such as pricing, provisioning and deciding to review loans or ask for their repayment. Exhaustive and continually updated information on borrowers’ financial positions and on the value of collateral is fundamental.
The flow of information provided to financial markets is essential to ensure that the discipline they can impose on banks’ managements is effective.