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

Sign in

India's largest platform and marketplace for AI & Analytics leaders & 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

  • A hacker broke into a Florida Water Treatment Plant

    A hacker broke into a Florida water treatment plant and ordered it to increase the amount of lye to extremely dangerous levels, officials said. . A hacker broke into a Florida water treatment plant and ordered it to increase the amount of lye in the water to extremely dangerous levels, officials said Monday. The plant […]

  • Carlyle is the frontrunner to acquire Mphasis from Blackstone

    Carlyle Group is negotiating with at least half a dozen banks and a pension fund to buy out Blackstone’s stake in Mphasis. Binding offers due today. Mumbai: Private equity firm Carlyle Group has emerged as a probable frontrunner to acquire Mphasis Ltd. from Blackstone Group, in what could be the largest buyout in the Indian IT space, according to people familiar […]

  • How AI is transforming Financial Services

    Since its inception, AI has experienced at least two major hype cycles with resulting winters of disillusionment. Although after the first “winter”, many financial firms deployed a number of successful applications, by the 1990s, AI went into its second winter of disillusionment as realization set in that these systems were harder and more costly to build and maintain […]

  • Global Captive Centers – The true enablers of Collaboration (Part-2)

    Featured Article: Author: Vinodh Ramachandran, Neiman Marcus Group In my previous article, I had spoken about some challenges due to a siloed working model within data & analytics teams in large retailers and how setting up a Data & Analytics CoE within the GCC can be a good solution. Lets look at a few ways […]