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Christopher Hansert
Product Manager
Phone +49 7545 202-300

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Nagendra Sherman
Sales Manager – Finance Solutions Americas
Phone +1 312 368-2506

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Chandrasekhar Ujjini
Senior Solution Architect
Phone +65 6571-2269

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Basel III - Latest Developments

with Dr. Michael Buttler

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Credit Risk Rating Expert Interview

with Stefan Opferkuch, credit risk rating expert from Bosch Software Innovations

Credit Risk Rating Platform

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References

DG HYP

LeasePlan

PostFinance (Swiss Post)

Rand Merchant Bank

Volkswagen Bank

Further References

Basel II: Determination of Capital Requirements

Internal Rating Systems for the Assessment of Credit Risks

Risk-sensitive determination of minimum capital requirements is an essential goal of Basel II. The option of using internal rating systems for the assessment of credit risks is extremely relevant to achieve this goal. The internal ratings-based approach (IRB), according to Basel II, enables financial institutions to utilize their many years of experience and industry-specific knowledge in the form of internal ratings models. This will increase the precision of their determinations and achieve lasting competitive advantages in the area of tension that exists between loan default risk and costs of capital.

5 Dimensions - 1 Platform for Basel II Compliant Credit Risk Rating Models

The Credit Risk Rating Platform from Bosch Software Innovations offers a comprehensive solution for Basel II-compliant use of internal credit risk rating models. This platform supports the multi-dimensional requirements involved in implementing credit risk rating models as well as ensuring compliance with supervisory provisions.

Dimension 1: Implementation Approach

The Basel Committee makes a fundamental distinction between a Standardized Approach to Credit Risk and Internal Ratings-Based (IRB) approach. Within the IRB approach, another distinction is made between a foundation and an advanced approach.

With its graphic modeling environment, the Credit Risk Rating Platform is perfectly suited for the implementation, improvement and maintenance of rating models for both IRB approaches. The complexity of computation and decision logic is not subject to any limitations and they can still be structured and represented to the rating experts (without any programming skills) in a clear, highly-intuitive way.

Dimension 2: Risk Components PD/LGD/EAD/M

The following risk components are specified by the Basel Committee for determining credit risks:

Probability of Default (PD)
Loss Given Default (LGD)
Exposure At Default (EAD)
Effective Maturity (M)

While the standardized approach relies solely on external credit assessments, the IRB approach also employs internal ratings systems. With the foundation IRB approach, internal rating models to estimate the Probability of Default (PD) are used, and with the advanced IRB approach, banks also use internal rating systems for the determination of all other risk parameters as well.

Dimension 3: Portfolio Specific Rating Models

The following types of portfolios have already been implemented in customer projects using the Credit Risk Rating Platform:

Corporates
Retail
Sovereigns
Financial Institutions
Project Lending
Specialized Lending
Real Estate

Dimension 4: Assessment Methodology

The Credit Risk Rating Platform supports both, scorecard-based as well as simulation-based risk rating models.

Dimension 5: Quantitative & Qualitative Risks

Rating models may be based on quantitative as well as quaitative factors. Quantitative factors are for example obligor data and financial ratios based on financial statements. Qualitative factors (e.g. management quality, positioning in market) are assessed by Credit Analysts.

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