BASEL II reporting tool

BASEL II regulations now in place in the banking sector require that processes are established to ensure that credit grades fairly reflect risk. Banks can now use an internal ratings-based approach to risk management, giving them more flexibility to run their business. However, the framework also obliges them to monitor the performance of their more advanced systems.

One of our banking clients asked for help to deal with the problem of monitoring the performance of their internal rating models for credit. The bank makes many different loans, the terms depending on the perceived credit risk of the client for the bank. It is essential to compare initial and revised assessments of risk with what actually happens over time, to ensure the grading model is generating correct results.

The bank had decided internally on the sorts of reports they required, based on the data files generated by their internal systems. We were asked to build them a tool that could generate the reports as needed in a robust and cost-effective fashion.

After meeting with them, we drew up plans for a fairly simple reporting tool using Microsoft Access and Excel. For users, the tool would be easy to use, needing only to locate the file to analyse, choose the reports needed and press a button to generate the configured reports. The simplicity for users belied a highly sophisticated architecture which allowed the same basic approach to be customised for the different grading models and business units in the bank, delivering elegantly formatted reports from widely differing inputs.

Once the application was in use in the appropriate bank departments, we agreed a support contract with the bank so that any issues that emerged could be quickly and efficiently dealt with.

Although not particularly advanced technically, this piece of work suited Golden Orb very well as it drew on a wide range of skills from an understanding of credit scoring, to the ability to deliver a cost-effective solution based on standard desktop software.