Phone +49 7545 202-300
Sales Manager – Finance Solutions Americas
Phone +1 312 368-2506
Senior Solution Architect
Phone +65 6571-2269
Credit Risk Rating Expert Interview
with Stefan Opferkuch, credit risk rating expert from Bosch Software Innovations
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.
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.
The following risk components are specified by the Basel Committee for determining credit risks:
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.
The following types of portfolios have already been implemented in customer projects using the Credit Risk Rating Platform:
The Credit Risk Rating Platform supports both, scorecard-based as well as simulation-based risk rating models.
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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