The business challenge
The framework for Basel II compels the supervisors to ensure that banks implement credit rating techniques that represent their particular risk profile. Besides the risk inputs (Probability of Default (PD), Loss Given Default (LGD) & Exposure at Default (EAD) calculation, the final Basel accord includes the “use test” requirement which is the requirement for a firm to use an advanced approach more widely in its business and not merely for calculation of regulatory capital.
Therefore many financial institutions are required to make considerable changes in their approach to risk management (i.e. infrastructure, systems, processes, data requirements).
The answer
Experian is a leading provider of products and services for the New Basel Capital Accord (Basel II). It works closely with existing banking partners and with a broad cross-section of financial institutions and national regulators.
The Decision Analytics solution for Basel II includes:
- Scoring and analytics
Development of pooled and customised models for probability of default, exposure at default and loss given default estimation. The risk estimates are used in the capital adequacy calculation as well as the processes to manage business risk, fulfilling the requirements of the ‘use test’. - Monitoring and Reporting system and processes
Reporting and strategy reviews are critical for monitoring and continually validating models, portfolio management and business processes. - Enterprise wide decisioning
The central decision engine, scorecards and strategies, support automation of decisions and efficient management of risk. Provides delivery of strategies for portfolios and customer processes as well as implementing Basel II requirements. - Data Warehouse
The data warehouse has been specifically designed to provide store and access the right quality and quantity of data. - Documentation
Assistance in the preparation of up to date and detailed documentation, critical for control and external and internal audit of the systems. - Consulting
Experienced Basel II consultants to review, advise and assist in implementation.