credit review - guidelines and scoring for retail and

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SUNCORP ~ QUALITY MONITORING RETAIL CREDIT REVIEW- RETAIL

AND SMALL BUSINESS LENDING AND EQUIPMENT FINANCE

Credit Review - Guidelines and Scoring for Retail and Small Business Lending

1 - Introduction

2 - Main Features

3 - File Selection

4 - Retail and Equipment Finance Credit Review Process

Appendix A - Home and Small Business Loans Eight (8) Key Compliance Areas

Appendix B - DCA Holder Compliance (Credit Analyst & Lending Leaders)

Appendix C - Personal Loans Six (6) Key Compliance Areas

Appendix D - Unsecured Business Overdrafts

Appendix E - Equipment Finance Key Compliance Areas

Appendix F - Document I Database Locations

Issue Date: June 2015

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QUALITY MONITORING RETAIL CREDIT REVIEW- RETAIL AND SMALL BUSINESS LENDING AND EQUIPMENT FINANCE

1 - Introduction

The Bank has a centralised Credit Review process for Retail and Small Business Lending and Equipment Finance.

The objective is to improve credit quality through introduction of a transparent and consistent review process with detailed guidelines and a common rating system for all loans reviewed. Review processes have been established for home lending and small business loans. The process involves reviewing the lending activities of every Lender to ensure compl iance with certain key credit policies and lending procedures.

In addition, the credit decisions of all authority holders in Retail and Small Business Credit Operations and Lenders who hold a personal DCA will be reviewed based on compliance with Delegated Credit Authorities and justification of any policy exceptions.

Personal Loans are reviewed for compl iance with policy and procedures in separate areas of operation for which individual Consultants are accountable eg Application , Settlement and Consumer Lending Centre.

Equipment Finance loans are also reviewed for compliance with policy and procedure for which lenders and credit analysts are accountable.

Detailed gu idelines for assessing and scoring the hindsight tests are contained in this document.


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2 - Main Features

The main features and functions of the Credit Review process are:

All Indirect and Direct lenders will be reviewed to ensure accountability for the authority entrusted to them. The review process will focus on acceptance, processing and approval of loans to ensure compliance with Retail Credit Policy and Procedures. Sales & Service Consultants and Consumer Lending Centre staff will be assessed for compliance with policy and procedures in their respective areas of accountability for Personal Loans. Equipment Finance lenders and analysts will be assessed for compliance with policy and procedures in their respective areas of accountability.

The key compliance areas tested are outlined in Appendices A - Retail Home and Small Business Loans; B - Credit Analyst/Lending Leader; C - Personal Loans;D - Unsecured Business Overdrafts; E - Equipment Finance

Delegated Credit Authority (DCA) Holders (ie Credit Analysts and Lenders who hold a personal DCA) will be reviewed when a file, selected for Hindsight Review purposes, has been submitted for their approval. Live credit review of files will be completed immediately 'Post-settlement'.

Home and Small Business loan files and Equipment Finance loan files will be selected to ensure an appropriate percentage of all settled loans according to risk profile are reviewed for each Specialist Lender. Personal Loans do not operate under an End to End process having individual accountabilities for each section of the loan process. In each case the Branch Manager or Team Leader will be accountable for the particular area (eg Validation) of the file being reviewed with the exception of Approval as all loans are centrally approved by a Credit Analyst. DCA Holders (ie Credit Analysts & Lenders who hold a personal DCA) will be reviewed where they have made a credit decision on any of the selected files.

Results of Reviews will be available to the appropriate accountable lending being reviewed, their line manager live on a daily basis.

Results will be updated daily and released via the intranet. It is recommended that line managers establish a regular program to ensure results are monitored as soon as possible after completion of reviews.

Credit Review results will be provided as detailed in section 4.3



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Post-review discussions are to be conducted on the following basis:

Retail and Small Business Loans When consistent errors are recognised discussions are to be initiated by the Leader of the Lender. The focus of these discussions is to identify the development needs of the Lender to improve the compliance pass rate going forward. Should performance be below a satisfactory" level (Refer 4.1 - Scoring Outcomes), an action plan will need to be documented in writing by the Lending Leader in terms of the HR guidelines 'Managing Unsatisfactory Performance'. Similarly, management should review the results of their Lending Leaders and so on up the chain of line authority within the distribution channel.

As for Lenders above, Executive Manager Mortgage Services and Team Leader Retail Banking Credit are to adopt a similar approach in regard to post-review discussions with Credit Analysts and Lending Leaders respectively.

Personal Loans Results for the Personal Loan process, unlike housing loans which operates under an End to End process, will be applied and scored for each of the areas set out in the test scope (refer Appendix C -Key Compliance areas).

• Equipment Finance Loans

Results for the Equipment Finance process will be forwarded to the respective managers for review and action (if required).

Immediate Managers and Managers Once Removed will be accountable for management of individual performance in the respective areas of the review process.



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3 - File Selection

Home and Small Business Loans

Various factors will be considered in the file selection process. These factors focus on the perceived risk profile of an individual lender including items such as:

Lending volumes Product type (Interest Only vs Principal & Interest) Delegated Credit Authority approved Loan to Valuation Ratio PAYG vs Self-employed Special requests from Line Management, Risk and/or Customer Operations

Higher risk loans will form a greater proportion of the review sample.

Examples of such loans include; LVR > 80%; all loans > $500,000; Small Business; Low Doc and Asset Lines. Pilot loans from the Direct channel also form part of the sample size.

The balance of the file selection will be made randomly from the remaining lower risk categories.

10% file review

Personal Loans 100% File review

Equipment Finance

A random selection of Equipment Finance loans are also selected based on the risk to the Bank i.e. asset type, loan amount.

20% File Review



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4 - Retail Credit Review Process

4.1 - Scoring Outcomes

4.2 - Communicate Findings

4.3 - Reporting

4.4 - Action Plans


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4.1 - Scoring Outcomes Retail and Small Business Loans: The scoring methodology is aligned to QBE (Mortgage Insurer) and will be subject to a credit review process that has been designed to provide Stakeholders with:

Clear guidelines for ratings Ratings that reflect only material issues that impact on credit risk Consistency in approach and application; and Accountability for lenders including those that have moved on prior to the Credit Review being completed

Note: Lenders and Leaders need to be aware that all errors identified by the review process should be recognised as a breach of Delegated Credit Authority (DCA) unless relevant justification is recorded by the Specialist Lender and accepted by an appropriate DCA Holder. This aspect should be highlighted in management discussions with Specialist Lenders.

Recognising that all adverse findings in the Review process represent technical breaches of DCA, the specific DCA test is designed to focus on identifying whether DCA amounts are exceeded or decisions are made which are clearly outside the Bank's risk tolerances (refer - Appendix A).

The application of individual scores is shown against each Key Compliance area in Append ix A.

Personal Loans: Personal Loans

Equipment Finance: Loans will be scored against seven (7) compliance areas for lenders in the areas for which they are accountable. Credit Analysts will be scored against eight (8) possible compliance areas concerning their process.



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Delegated Credit Authority (DCA) Holders (ie Credit Analysts and Lending Leaders who hold a personal DCA) will be reviewed when a file, selected for Credit Review purposes, has been submitted for their approval. In these cases the actions of the DCA Holder will be reviewed and scored against the four (4)) compliance areas (DCA; Policy Exceptions; Capacity to Repay & Approval) of credit assessment (as detailed in Appendix B).

Note: It is also anticipated that where the individual compliance results in the area of DCA is below the "pass" benchmark then review of the DCA is required regardless of the overall result.

Personal Loans

Personal loans have a separate set of questions for each Compliance area as detailed in Appendix C. .



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QUALITY MONITORING RETAIL CREDIT REVIEW- RETAIL


4.2 - Communicate Findings

Retail Credit Review is not obligated to communicate findings directly to Lenders, Lending Leaders, Credit Analysts etc. Rather, the findings will be updated 'live' on completion of file reviews via the Credit Review databases on the Intranet.

Most Lenders, Lending Leaders, Regional General Managers, Retail and Small Business Credit Operations Staff and Sales and Service Management have access to information relevant to them and it is their responsibility to access this information and take appropriate steps to remedy any issues identified.

Regional General Managers, Lending Leaders, Team Leaders and Branch Managers have responsibility for monitoring their respective database results to ensure all staff are meeting the "Pass" benchmark standard of compliance and that appropriate action plans have been developed to address instances of unsatisfactory performance where required (Refer section 4.3 - Action Plans).

4.3 - Reporting

Name Of Report

Retail Home Loan Hindsight Report

Monthly Asset Report

BORCO Credit Review Report

Personal Loan Hindsighting Report

The below table details formal reporting requirements of the Quality

Monitoring Team Leader

Summary Frequency Recipients

Weekly summary Weekly - Monday DL-LS Lending Leaders; DL-of identified Lending Services Coaching; breaches for retail CRICK, Helen; RHODES, Mark; home loans GOLDSPRING, Ian; BAKENS, including Tanya; LEFEVER, Kevin; commentary on CAMPBELL, Craig; ROBINSON, individual Glen breaches.

High level Monthly- 81h JULER, Lucy; Credit Reporting overview of Retail Working Day Cc: RUCINSKI, Greg; SHARP, Home Loan Christine; GOLDSPRING, Ian; hindsight results LEFEVER, Kevin; TL Quality

Monitoring; RHODES, Mark; PPD _Ana lytics_Ban k_And_Life

High level Monthly- as CDM Banking Risk; CAMPBELL, overview of advised by CDM Craig Monthly Retail Banking Risk Cc: GOLDSPRING, Ian; DELA Home and PENA, Paul Personal Loan hindsight results.

Individual and Monthly - 5th PURVIS, Adam; COLE, regional results for Working Day Raewyne; CRICK, Helen; Personal Loan FRAME, Justin; RHODES, Hind sighting Mark; LOUGHREY, Alice;

Distribution Support Team; FENWICK, Craig; CAMPBELL, Craig; WHITE, Susanne; HOWARD, Dianna; Bank



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Compliance; FLETCHER, Kylie; THORLEY, David; PLUCK, Petrina; BRIZA, Martin; MILLER, Craig; DALEY, Assunta; DELA PENA, Paul; FURNER, Jess; DE GREGORIO, Luella

Details Monthly 81h TO - THOMASON, Wayne; Hind sighting Working Day POLGRAIN, Gary; RHODES, results including Mark; CAMPBELL, Craig; BELL, commentary on Anthony; JOHNS, Ben individual breaches CC - CHALKER, Lee-Anne;

HARRYS, David

4.4 - Action Plans

Home & Small Business Loans

With the ability for Lending Leaders and Reg ional General Managers to monitor the performance of their Lenders on a 'live' database , it is expected that where individual results are less than "pass", the Lend ing Leader/ Regional Manager will take immediate steps to address issues identified.

Action Plans should form the basis of any request to Manager, EM Customer Development for retention of a Lender's DCA should this be applicable.



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Appendix A - Home and Small Business Loans Eight (8) Key Compliance Areas

Current Tests Scoring Model

DCA

Refer to Bank Credit Risk Policy Any breach in any test w ill 4.05 - Delegated Credit Authorities result in an overall breach

This test will be applied on all for the entire file.

transactions whether approved under a lender's DCA or not. The test is intended to assess both the lender's and approver's compliance with cred it policy.

1. Does calculated TCE (or corrected TCE if errors are detected) fall within the approver's DCA? (Lender test only)

2. Is the approved facility within the aggregate lending dollar authority (which incorporates TCE, Retail , Small Business & Low Doc dollar limits and product parameters)?

3. If security held/offered is also used to secure a Business/Small Business facility is total of linked exposures within approval officer's Business DCA limit?

4. Is the lender or approver at 'arms length' to the transaction (i.e. file contains no information that indicates a conflict of interest - application from self, direct or extended family member, immediate manager or staff)?

5. Is the recommended/approved product (e.g. Retail Secured , Small Bus Commercial , Small Bus Agri) consistent with the funding purpose or is exception approved by Product Manager?

SECURITY


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Refer to Bank Credit Risk Policy 3.19 Col lateral .

· Acceptable Security - Is the security acceptable in terms of establ ished policy and , if not, has the departure been identified and justified by the Lender and approval authorised by the appropriate DCA holder?

Refer to Policy Section 4 Security -4.3 LVR & Security Margins

· Has the correct LVR been applied in terms of establ ished policy and , if not, has the departure been identified and justified by the Lender and approval authorised by the appropriate DCA holder?

Note: Score will be applied for both tests. If either test fails an overall "zero" score will be recorded in this test.

CAPACITY TO REPAY

1. Income streams - Has all income, on which reliance is placed to demonstrate capacity to repay, been verified in terms of ADR (e.g. payslips, financial statements or other acceptable forms of documentation)? If not, has the departure been identified and justified by the Lender and approval authorised by appropriate DCA holder?

Note: If capacity is evident without reliance on any individual listed income source that income source does not need to be supported by ADR documentation.

2. Living costs - Does capacity to repay assessment include at least the minimum of Cost of Living Allowance (i.e. applicant(s), partner(s) and dependant(s) )?

3. Financial commitments -Have all proposed and continuing financial commitments been included with payments/ repayments sensitised in accordance with Policy? If not, has the


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Any breach in any test will result in an overall breach for the entire file.

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departure been identified and justified by the Lender and approval authorised by appropriate DCA holder?

4. Loan Terms - Have minimum and maximum loan term requirements (Bank Credit Risk Policy 3.03 - Facility Terms) been observed and in the case of "Regulated" facilities have issues surrounding borrower(s) future retirement been addressed? If not, has the departure been identified and justified by the Lender and approval authorised by the appropriate DCA holder?

5. Overriding Servicing Test -Regardless of whether the capacity to repay calculation has been performed accurately:

• Does the Lender's calculation indicate capacity to repay is evident, OR if not has any calculated servicing shortfall been identified and justified by the Lender and approval authorised by appropriate DCA holder?

• Ignoring Lenders calculation, is capacity to repay demonstrated using at least minimum allowances (i.e. living costs and financial expenses) defined in Policy and with all income streams evidenced by acceptable supporting documentation? If not has any servicing shortfall been identified and justified by the Lender and approval authorised by appropriate DCA holder?

VALIDATION

1. Have all requirements of Actual Document Requirements (ADR) been met? If not, has


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the departure been identified and justified by the Lender and approval authorised by the appropriate DCA holder?

2. Has the information on the application been validated against the supporting documentation (e.g. contract, valuation , title search etc)?

3. Has the statement of financial position been completed in full?

4. Is the Credit Report/son file and has it been actioned in terms of Policy?

5. Is the 'original' signed Premium Low Doc Loan Declaration on file (if applicable)?

Note: All tests will be scored. In addition, 'exceptions' to Actual Document Requirements that have been identified and approved will be tracked through the database.

Similarly, statistics will be maintained in the database identifying loans where an approval by Sun Loans or Credit Operations is based on incorrect information submitted by the lender that influences the decision.

VALUATION

Refer to Bank Credit Risk Policy 3.22 Valuations

1. (a). Has the VDM been completed in terms of Standard Operating Procedures?

(b). Has over/under compliance with VDM been approved in terms of procedure?

2. Has the correct valuation been applied in terms of Policy?


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3. Risk Assessed - have the risk ratings or other issues impacting such as lease-back, rebates, valuer's comments etc. been adequately assessed and documented to mitigate the risk?

4. Is the valuation more than 5% less than the purchase price? If so, have the requirements of Credit Policy 4.5F been satisfied? If not, has this been justified and approved by Retail Credit.

Note: Only score one of tests 2 - 4

Retail Credit Review will maintain statistics for Question 1 and Valuations Used vs Preferred Valuation.

LOAN APPROVAL

Have the loan approval conditions been complied with prior to settlement?

(excluding standard approval cond itions A1 to A6 & A13 [being cond itions otherwise requ ired by Retail Credit Pol icy or those relating to Actual Document Requirements] and documentary conditions)

Note1: Enter either Pass, Fail or Not Applicable for this test

Note 2: Test excludes compliance with conditions listed above as compliance with these are tested elsewhere

REGULATORY COMPLIANCE

Regulatory Compliance has been satisfied in relation to all legislation governing Banking activities, including:

1. Code of Banking Practice


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Any breach other than removal of Tax File Number will result in an overall breach of the file.

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2. National Credit Code (e.g. Key Requirements - Funding purpose has been identified and correctly documented in relation to Regulated/ Non-Regulated loans and where applicable any commissions payable to third party introducers have been disclosed)

3. Competition and Consumer Act - refer RCP Legislative/Regulatory Compliance.

4. Privacy Act (e.g. signed Privacy Act Consent held and dated prior to obtaining Credit Bureau Report, Tax file number on file (if any) has been deleted)

Note: Each Test is to be scored either Pass or Fail

LMI (if applicable)

Is full LMI insurance cover held and compl iant? . Is LMI unconditional approval held and certificate of file? If not, has the departure been identified and justified by the Lender and approval authorised by the appropriate DCA holder?

Note: Test is Pass, Fail or Not Applicable


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Not included in hindsight score other than test to for residency as per QBE requirement.

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Appendix B - DCA Holder Compliance {Credit Analyst & Lenders with DCA's)

1. Is the loan within the DCA holder's authority?

2. Are policy exceptions evident and have they been justified?

Principal policy exception approved(Pick 1 from drop down box);

2.1. No identifiable exceptions

2.2. Capacity to Repay - unable to service

2.3. Capacity to Repay - use of applicant's unrecognised income (Gov't payments, board, maintenance etc.)

2.4. Capacity to Repay - recognition of negative gearing benefit

2.5. Capacity to Repay - age of financials

2.6. Capacity to Repay - use of guarantor or non-applicant's income

2.7. Security Type - acreage property I restricted security and location

2.8. Security Type - smaller units i.e. < 50sqm

2.9. No Valuation Policy

2.10. MOR Exceptions - income validation I OT usage I other allowances

(All questions to be answered)

01 & 3: Pass or Fail

02 & 4: Pass, N/A or Fail

If any test is Fail = O for section.

(Thumbs down recoded for any fail)

2.11. Other - adverse credit history (e.g. Credit Report and/or Suncorp)

2.12. Other - short-term employment

2.13. Other - Bridging loans > 70%

2.14. Other - Owner builders

2.15. Other - Non-specific Exceptions

3. Has Capacity to repay been established and/or justified?

4. Have relevant approval conditions been nominated?


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Appendix C - Personal Loans Compliance Areas

Current Tests.

Ignite Personal Loan Files

1. Have Underwriting Standards and Procedure requirements been met and the Ignite income data input correctly i.e PAYG, Self Employed , Existing Rental Income, Investment Income and Other Income-Non Taxable?

2. Servicing : Does the applicanUs service the personal loan facility on the correct calculation of income? (Fatal)

3. Payout of Liabilities : For liabilities paid out with loan proceeds or prior to settlement, has acceptable evidence (statement or payout letter) been uploaded?

4. Internal Liabilities : Have all Suncorp liabilities, as listed in CRM/accounts, been captured correctly?

5. Credit History : Have comments been added to confirm outcome/status of all listings on the credit report, as required by credit policy? (Fatal)

6. Credit Bureau : Have comments been added to address any adverse listings on the credit report , as required by credit policy?

7. Purpose: If the Sub-purpose is 'Other', has the loan purpose been captured as a Note, and is it within credit pol icy?

8. Facility Structure : Has only one account been created under the Facility?

9. Pricing Negotiations : If fee/interest rate discounts have been applied, has the appropriate eligibility/approval been confirmed/uploaded?

10. Application Form : Has the application form been signed and dated by all parties to the loan?

11. Removal of TFN's : Have all tax file numbers been removed from financial documents?

12. Truncation of Credit Card Numbers: Have all credit card numbers been truncated correctly?

13. Segregation of Duties (Branch applications only) : Was the Verification task completed by a different person to the Submitter?

14. Quality of Uploaded Documents : Are uploaded documents of a readable/acceptable quality?


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15. Disbursement Authority : Has the disbursement authority been signed and dated by all parties to the loan?

16. Disbursement : To the details on the Disbursement Authority match the details of the actual disbursement?

17. Cost Benefits Spreadsheet (Debt Consol idation loans only): Has the cost benefit spread sheet been completed , uploaded and meets credit policy?

SUN Loans Personal Loan Files

1. Have Underwriting Standards and Procedure requirements been met and the SunLoans income data input correctly i.e PAYG, Self Employed , Government Pension and Other?

2. Does the applicanUs service the personal loan facility on the correct calculation of income? (Fatal)

3. For liabilities being paid out with loan proceeds or prior to settlement, has required supporting documents been received?

4. Have comments been added to confirm outcome/status of all listings on the credit report in the last 6 months, as required by Underwriting Standards and Procedure? (Fatal)

5. Have all Suncorp liabilities, as listed in CRM/accounts, been captured correctly?

6. Have comments been added to address any adverse listings on the credit report or confirm it is clear, as required by Underwriting Standards and Procedure?

7. Is the loan purpose within Underwriting Standards and Procedure?

8. Have Staff Benefits been appl ied correctly as per Procedure?

9. Do the collateral details on the supporting documents match the collateral details entered into Sunloans? (Fatal)

10. Has an acceptable certificate of currency been received with correct collateral details, market value and Suncorp listed as financier?

11. Has the correct amount been entered into the purchase price field in Sunloans?

12. Is the collateral acceptable security as per Product Underwriting Standards?

13. Has the Application Form and Privacy Declaration been signed and dated by all parties to the loan?

14. Have all Tax File Numbers been removed from financial documents?


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15. Are uploaded documents of a readable/acceptable quality?

16. Have the Credit Contract, Disbursement Authority and Chattel Mortgage (secured only) been signed and dated by all parties to the loan?

17. Has the Cost Benefit Spread sheet been completed and uploaded?


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Appendix D - Unsecured Business Overdrafts

Credit Criteria

All criteria to be adhered to in all applications - i.e no exceptions. If all criteria are held, then test passes. If any are not held, then test is failed.

The Bank provides Unsecured Business Overdrafts, on a LowDoc basis, to eligible Small Business applicants.

Where Product Underwriting Standards differ from general Policy, Product Underwriting Standards shall prevail. All provisions of general Policy apply, unless varied by the contents of this Product Underwriting Standard.

Origination

This Product Underwriting Standard relates solely to Small Business customers. Exposures are not to be originated under th is Underwriting Standard for Personal or Business Banking customers/ groups.

The product is limited to one facility per borrower group (refer Policy 4.02 - Aggregation).

Acceptable Borrowers

Acceptable borrowers are credit worthy applicants who have:

satisfactory credit bureau reports (refer to Policy 3.09 - Credit History); and

satisfactory account conduct (refer to Policy 3.09 - Credit History) over the most recent available 6 months for the:

business working account (excluding Greenfield /start up ventures); and

all Suncorp facilities for the business and principals.

Greenfield or start up businesses may only be considered where the principals meet the above requirements and have both:

stable employment (long term PAYG or Self Employed); and

have a minimum $10K account opening deposit.

Note: Ownership of real property is not mandatory for an Unsecured Business Overdraft applicant.

Excluded Borrowers

applicants listed in Policies 2.06.1 - Restricted and Unacceptable Borrowers Appendix to Underwriting Standards or 2.07 - Industry Risk;

applicants in receipt of PAYG income (acceptable for Greenfield or start up businesses);

overseas residents;

organisations/ associations I not for profit and co-operatives with limited recourse;

broker referred applications;


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primary producers;

proprietary companies with one or more corporate shareholders; and

unit trusts, superannuation trusts, bare trusts and any trust with one or more corporate beneficiaries.

Acceptable Purposes

Only genuine requests for working capital requirements for the business will be considered. (Payment of fines, judgements, loan arrears etc and as a deposit for further borrowing is excluded).

Structuring and Assessment

Funding Limits

Limits are available as follows:

$10K

Available to a business that has been established and GST registered for >2 years.

$5K

Available to new owners of an existing business that has been established for >2 years and is currently GST registered.

$2.SK

All other businesses including Greenfield/ start up businesses with a registered ABN.

Collateral Requirements

Exposures approved under this Product Underwriting Standard are unsecured and exempt from Policies 3.19 - Collateral Selection and 3.20 - Guarantees.

Approval

To be approved by Tier 4 Retail DCA holders with unsecured lending authority.

Limits are to be strictly respected and excesses are not to be approved by Retail DCA holders. Banking Credit will only consider requests for excesses in exceptional circumstances, where a strong Bank relationship exists and mitigants are robust.

Documentation and Settlement

The following documents are to be held on file prior to funding:

current application for Unsecured Business Overdraft;

completed and signed LowDoc Declaration from business principals/ directors and trustees;


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evidence of satisfactory identification; and

ASIC company search confirming business name, ABN and ownership

Problem Management

The Banks standard arrears management procedures will apply.

If overdraft excesses occur, a system generated statement will be issued to the customer. If not cleared within 30 days, Banking Collections will commence recovery action.


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Appendix E - Equipment Finance Compliance Areas.

Lending Officers Test Areas.

DCA

1. Has DCA been observed for specific authority?

2. Have specific policies been applied correctly/exceptions approved?

3. Has the annual review been completed?

Rationale

1. Have authorised amounts been observed for specific authority ( eg. Motor vehicle, plant & equipment aggregate and total bank exposure)?

2. Has the Lender correctly applied the Sale & Buy-backs, Private Sales and Restricted Industries sections of their DCA and/or had any policy exceptions approved by the appropriate authority?

3. Has the annual review been completed as required?

Risk Grade

1. Is the risk grade correct?

2. Has the risk grading been calculated correctly?

3. Has risk grading been assessed and/or reviewed I terms of pol icy?

Rationale

1. Is recorded risk grading (including CQR and SR) correct?

2. Have risk grading questions been answered in accordance with directions given in "Help" notes and have TCE & SSV amounts been correctly recorded?

3. Has Risk Grading (including CQR & SR) been assessed and/or reviewed in terms of policy and downloaded to CLMS?

Serviceability

1. Has FAST been used/

2. Are financials/tax returns on file?

3. Has debt servicing been demonstrated?

4. Is debt servicing correct?

Rationale

1. Have financials been extracted to FAST in accordance with policy?


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2. Are the financials/tax returns obtained and held on file consistent with policy requirements(if not, has this been justified and approved by the appropriate DCA holder as required)?

3. Is debt servicing correctly calculated?

Risk Assessment

1. Has a Risk Assessment Analysis been completed?

2. Has the overall assessed risk been mitigated?

3. Is a satisfactory valuation on file in terms of policy?

Rationale

1. Has a Risk Assessment Analysis been completed on proposed chattels being funded (and incorporating chattels already financed)?

2. Has the overall assessed risk been mitigated?

3. Is a satisfactory valuation on file in terms of policy. (Only applicable for properties and business assets via a mortgage debenture that have been taken as additional security)?

Validation

1. Is the supplier acceptable?

2. Are credit reports on file?

3. Is a copy of the fax or e-mail to the broker held on file?

Rationale

1. Is the supplier acceptable and is an original/valid tax invoice (or fax direct from supplier) with correct GST recorded held. Has the Lender confirmed and made comments regarding the suitability of the supplier, if not has appropriate policy been followed (private sale etc)?

2. Have credit reports (obtained from a credit reporting agency eg Baycorp/CRL) been analysed and actioned in terms of policy (credit reports are not required for 'Preapprovals')?

3. Is a copy of the fax or e-mail to the broker held on file (all approval conditions, repayment arrangements etc. must be contained in the approval advice)?

Approval Cond

1. Have approval conditions have been satisfied?

2. Has asset financed been physically inspected?

3. Has security documentation been correctly executed?

Rationale

1. Have approval conditions have been satisfied prior to settlement (unless an overriding approval is on file)?

2. If required , have asset financed been physically inspected by a Suncorp Officer or acceptable agenUrepresentative?

3. Has security documentation been correctly executed and matches details on invoice?


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Regulatory

1. Is Privacy Act consent held?

2. Have TFNs been deleted?

Rationale

1. Is original signed and dated Privacy Act consent form held?

2. Have TFNs been deleted from file?

Credit App

1. Is the approval within the TCE of the approving officer; and,

2. Is the exposure within an industry sector which approving officer's DCA extends?

Rationale

1. Is the approval within the TCE limitation of the approving officer; and,

2. Is the exposure predominantly within an industry sector for which the approving officer's DCA extends e.g. Agribusiness approvers can only approve agribusiness exposures unless otherwise specified in the DCA letter issued by the Manager Credit Approval. The determinant of the industry exposure will be consistent with the Credit Approval procedure i.e. purpose/ nature of request.

Accuracy

1. Is the risk grade as approved correct?

2. Has the risk grade been reassessed as required?

Rationale

1. Is the risk grade as approved correct?

2. Has the risk grade been reassessed as required?

Security

1. Is the valuation correct?

2. Is the security structure correct?

3. Is the security correctly recorded?

4. Is the valuation current?

Rationale

1. Is the valuation correct - external valuations by panel valuer, internal valuation within assigned Delegated Valuation Authority ("OVA"), correct valuation methodology used (e.g. development site valued as a site long term hold for future development valued as a passive investment only) or exception/variation justified and approved?


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2. Is the security structure correct in terms of policy requirements or exception/variation justified and approved (e.g. Credit Facility Deed, Company Charge, Guarantees, Stock Mortgage etc held in terms of policy)?

3. Is the security correctly recorded in CAR or has the Credit Specialist highlighted the errors in his approval of the CAR (e.g. all security recorded, ssv ratio correct, linking of security correctly identified etc)? (The intent of this is not to highlight immaterial errors such as incorrect title descriptions etc).

4. Is the valuation current i.e. < 3years old, or in the event of TCE increasing >10%, <18 months old or exception/variation justified and approved?

Financial

1. Is current and complete financial data is held?

2. Have the appropriate assessment tools been used to analyse the information provided?

3. Has serviceability been demonstrated?

Rationale

1. Current and complete financial data is held (full group information is preferred, but Credit Review will recognise that on occasion, less detailed information will be required i.e. where it is not relevant or material to the assessment of credit risk or sufficient information is held to assess credit risk when balanced with the Bank's relationship with the borrower and/or the business need to service the cl ient); and,

2. The appropriate assessment tools have been utilised to analyse the financial information provided. Where a material increase in the borrower's exposure, variation in trading operations or other event material to the borrower's financial position and cashflow is the purpose of the credit application, then it is considered that the minimum required assessment tools are as follows:- -Agri - RAM including Soo, SoP, CFB, Business Plan ("BP"), and Livestock Schedule where applicable -Commercial - FAST and Soo -Property - DLS/ILS, FAST and SoO

3. Has serviceability been demonstrated, or has the Credit Specialist elected to accept the lack of demonstrated serviceability and documented the mitigants he has relied upon?

Risk Controls

1. Are material, additional areas of risk evident?

Rationale

18. Are material, additional areas of risk evident in the application and in acceptance of the risk appropriate loan conditions/risk controls have been in place to control/monitor as part of the approval?

Watch List

1. Has a remedial strategy been clearly identified?

2. Has the existing strategy been assessed?

3. Has security, financial information and valuations been checked?

4. Has the exposure been in Watch List for <6 months?


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5. Has the procedure by Credit SpecialisUTeam Leader been followed?

Rationale

1. Has a remedial strategy been clearly identified and documented as part of the approval?

2. Has the effectiveness or otherwise of an existing strategy been assessed?

3. Has security been vetted for correctness, current financial information sought and currency of security valuations determined?

4. Has the exposure been in Watch List for <6 months (<12 months Agri) or valid reasons identified for retention in Watch List in excess of these timeframes?

5. Has the procedure of no more than two consecutive approvals for a Watch List exposure by the same Credit Specialist/Team Leader been met? (This test not to be applied until procedure is formally implemented and advised by Credit Approval)

CR Actions

1. Have the Credit Review requirements been met?

Rationale

1. Has the Credit Specialist satisfactorily establ ished that Credit Review requirements have been met where they are known to the Credit Special ist/Team Leader, or where requests to vary/waive are submitted , that appropriate justification for the variation/waiver has been recorded in the credit submission and/or approval provided. Where consultation with Credit Review is undertaken as part of the approval , this should be documented in the approval.

1. Has the acceptability of the borrower and industry been established?

2. Has a group structure diagram been provided?

Rationale

1. Has the acceptability of the borrower and industry been established, or in the case of a restricted industry, the Restricted Industry Guidance Sheets ("RIGS") been compl ied with?

2. Has a group structure diagram been provided where appropriate?

Appendix F


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QM Retail Credit Review Manual - Document/Database Locations

Hindsight Selection Report

The Cognos report is emailed weekly each Monday morning to Suncorp Retail Hindsighting lnbox

Retail Home Loan Hindsight Database

http://mpdomp1402/business/hindsightreview/hindsightreview.nsf

Personal Loan Web Portal

http://pbnecfapp4001/banking/Hindsight/

GSOP (Genpact Standard Operating Procedure

http://team.int.corp.sun/Banking/BPO/Pages/default.aspx

Equipment Finance Hindsight Database

http://fusion.int.corp.sun/efhindsight/cfml/home dsp.cfm?reinit=yes

Non-Standard Reviews FYE (2015)

Q: Quality Assurance (\\int\GroupData\BBSecur\BP&SM) : Retail Credit QM : BB Retail Loans


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Version History

Date 8/8/2012

Previous version July 2011

November 2013

June 2015


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Prepared By

Previous EM Credit Review

Craig Campbell

QM Credit Review Team

QM Credit Review Team

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