Credit Risk Rating Platform
A borrower's default risk and loss severity are key factors of successful credit risk management and fundamental prerequisites for adequate credit portfolio management. The risk rating models that encompass key risk parameters are often complex and must be continually adapted to regulatory requirements and market dynamics.
In recent years, the Basel II Accord in particular has given rise to the need for continuous and costly development and improvement of risk rating models. Therefore, the possibility of applying internal rating models for credit risk assessment is of central importance.
Transparent Implementation of Credit Risk Rating Models
With its Credit Risk Rating Platform, Bosch Financial Software offers a comprehensive solution for the transparent and flexible development and implementation of credit risk rating models. Bosch Financial Software's Credit Risk Rating Platform comprises the following core components:
Model Authoring Platform: The central platform for the creation, testing and on-going maintenance of risk rating models. The graphical modeling environment facilitates development and improvement of rating models to such a degree that it can be done by risk experts.
Rating Manager: A Web-based application for credit analysts for management and execution of ratings in a production environment, it supports the entire rating process from data collection through risk calculation to final approval.
Stress Testing: This encompasses impact analysis and portfolio optimization through simulations and stress tests.
Rating Database: The Rating Database is a Basel II-compliant relational database that stores all relevant input and output data for credit risk rating.
Transparent Implementation of Rating Models and their Seamless Deployment into Production
Traditional IT systems are too rigid and inflexible to meet the increasing demands of complexity, transparency and flexibility of internal risk rating models. With the Credit Risk Rating Platform, Bosch Financial Software offers a platform that enables transparent implementation of rating models and their seamless deployment into production. The Credit Risk Rating Platform has a component-based architecture, which is depicted in the following figure:
Transparently Implement Credt Risk Rating Models
The Model Authoring Platform is the core component for creating and maintaining credit risk rating models. The Visual Rules Modeler offers a particularly intuitive approach to the graphical implementation of internal rating models. The representation of logic mimics human thought processes, making it extremely well suited for use by business people. Along with rating logic, the user interface elements are also specified. The results are rating models and the User Interface (UI) models that are required for seamless operationalization.
Dynamically Generate User Interfaces for Credit Analysts
Qualitative risk factors are often involved in the assessment of default probabilities, and loss severities and must be evaluated. To that end, the web-based user interface elements (such as data entry screens) required for the operational rating process are generated dynamically from the UI models. Model changes (for example, the addition of qualitative factors) can thus be transferred directly to the interface. The result? Maximum flexibility of both rating model and user interface.
Perform Credit Risk Ratings
The Rating Manager supports the credit analyst in performing and managing credit risk ratings in a web-based environment. This component provides the required menu structures to select the rating model and the dynamically generated interfaces for the data entry and results dialogs. Bosch Financial Software Rating Manager can fulfill the most complex requirements of any rating process.
Archive Ratings in Compliance with Basel II
The Basel II Framework poses explicit requirements for the storage and archival of ratings. All ratings-relevant input and output data are archived in the Rating DB within the Credit Risk Rating Platform. By coupling with loss data, the rating models can be validated and backtested in any external statistics software.
Connect to External Databases and Systems
The Credit Risk Rating Platform from Bosch Financial Software can be connected to a bank’s internal systems and data sources to facilitate bi-directional data exchange. External data providers (credit rating agencies, for instance) can also be connected to the platform.