Credit Risk has always been at the core of the banking business. The major cause of serious banking problems continues to be strongly associated with insufficient credit standards and poor risk management practices. Banks should identify, measure, monitor and control Credit Risk in order to hold adequate capital reserves against future losses.
Synectics has considerable experience building models to assess the Credit Risk of borrowers, in relation to mortgages, consumer loans, and other financing facilities. Our assessment occurs both at origination of the facility i.e. prior to extending credit, but also during the life of the facility where the client’s repayment behaviour is proactively monitored and assessed.
Apart from traditional credit risk models, we have also developed predictive models for Loss Given Default (LGD), which is also a vital input in calculating capital requirements. An error in predicting LGD is as damaging as an equivalent error in predicting Probability of Default, and its importance should therefore not be underestimated.
Our Credit Risk Infrastructure is a supporting software tool capable of handling and managing all these risk models. In addition, the Infrastructure is used for data collection and transformations, statistical calculations, visualisations, parameterisation, and reporting.