Credit risk appetite statement template
A credit risk appetite statement sets out, in writing, how much credit risk your firm is willing to take to meet its objectives, and the limits that keep it there. This template gives a practical structure you can adapt.
Why it matters
A clear risk appetite turns strategy into day-to-day lending rules. It tells underwriters and the decisioning engine what to accept, refer or decline, gives the board a way to monitor exposure, and is expected by regulators as evidence of sound governance.
What to include
Purpose and scope
State what the statement covers (products, portfolios, entities) and who owns it. Note the review cycle (typically annual, or on material change).
Risk appetite statement
One or two plain sentences on the overall stance, for example: we lend to support financial inclusion while keeping expected losses within agreed limits and protecting members' funds.
Quantitative limits
Set measurable limits: maximum expected loss or default rate, maximum exposure by product, segment or single borrower, affordability buffers, and concentration limits. Give each a green/amber/red threshold.
Qualitative statements
Describe lending you will and will not do that numbers alone miss, for example vulnerable-customer safeguards, excluded sectors, or minimum affordability standards.
Roles and governance
Who sets, approves, monitors and can breach the appetite, and the escalation path when a limit is hit.
Monitoring and reporting
Which metrics are reported, to whom and how often, and what triggers action. Link this to your management information.
Review and sign-off
Version, date, owner and approver. Record board or committee approval.
This template is general guidance to help you structure your own document. It is not legal, regulatory or compliance advice, and it is not a substitute for your own policies or professional advice. Adapt it to your firm, products and current regulatory requirements.
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