India's largest platform and marketplace for GCC & AI leaders and professionals

Sign in

India's largest platform and marketplace for GCC & AI leaders and professionals

3AI Digital Library

Basel II Credit Risk Modeling

3AI August 17, 2020

A diversified global financial services company

Problem Statement

  • Compliance with Basel II regulations for Global Credit Card portfolio
  • Need consolidated exposure at the parent level for the segments–wholesale and retail
  • Existence of several versions of single model with virtually no documentation

Analytics Led Approach

  • Relevant data elements merged to create single version of truth for customer’s credit exposure
  • Multiple validation across different sources and different data granularity
  • Scenario analysis to finalize segments for model build
  • Developed probability of default models (PD) to score the entire institutional customer base in accordance with Basel 2 norms

Business Impact

  • 40% jump in ability of PD models to accurately capture ‘at risk’ customers
  • Effective credit portfolio management using the principle of risk adjusted return on capital
  • Timely compliance with the capital adequacy guidelines outlined by the Basel committee
  • Reduction in the overall regulatory capital charges due to better risk management

Critical Success Factors

  • Understanding of Basel II norms
  • Expertise in predictive modeling techniques (logistic regression, IV analysis, missing imputation, etc.)
  • Expertise in modeling tools and languages (SAS, SQL etc.)
  • Ability to embed compliance requirements into modeling parameters

    3AI Trending Articles

  • Data Science/Machine Learning and Software Quality

    Featured Article: Author: Biju Kalleppilli, Director-Performance Engineering, SAP Labs India Endless possibilities of data science applications in Software quality are probably an underrated one. At various stages of product testing life cycle, huge amount of data is generated and remain unexplored., primarily because the top management often become happy by looking at the quality metrics […]

  • From San Francisco to Hangzhou: How DeepSeek is shaping the next big shift

    Featured Article by Veena V, Fractal Analytics The global AI race has shifted from a focus on innovation aimed at solving problems to a fight for dominance. For quite some time now, the U.S. has been the dominant player in the AI race, with China remaining relatively less prominent on the global stage. However, with […]

  • Practical insights and best practices for Fine Tuned LLM based use cases for Governed Enterprises

    Featured Article: Author: Aditya Khandekar, President, Corridor Platforms India Objective There has been a lot of hype around Large Language Models (LLM) and their potential, but harnessing them to build real-world enterprise grade use cases is hard. This blog highlights key best practices and insights for building LLM powered use cases with a working example. […]

  • AI and Ethics – Modern AI Algorithms

    Featured Article: Author: Sameer Ranjan, CTO & Director – Data Science, Catenate Ethics has always been subjective and quite often changed based on the philosophy of nations or their leaders. It is often related to principles of morality and the set of beliefs that a group of people follows. In the 21st century, the narrative […]