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Role of Early Warning System

Role of Early Warning System. 12 th Finance IT Forum April 2 0 th 2010 Sheraton Hotel, Sofia , Bulgaria. Agenda. LOXON introduction Role of early warning system Q&A. Agenda. LOXON introduction Role of early warning system Q&A. The company.

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Role of Early Warning System

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  1. Role of Early Warning System 12th Finance IT Forum April 20th 2010 Sheraton Hotel, Sofia, Bulgaria

  2. Agenda LOXON introduction Role of early warning system Q&A

  3. Agenda LOXON introduction Role of early warning system Q&A

  4. The company Software company of strong business competence in risk management and lending Established in 2000 Specialised set of modules covering the entire credit risk management and lending cycle Professional consulting organisation for supporting large scale implementations – local implementation partners

  5. Products and services Supporting individual credit risk management LOXON Lending LOXON Rating/Scoring LOXON Collateral Management LOXON Limit Management LOXON Collection LOXON Early Warning LOXON Leasing Frontend

  6. Strong Basel II competence Portfolio based risk management LOXON Basel II Calculation Engine Credit Risk Market Risk Operational Risk Stress Testing RAROC LOXON IFRS Provisioning Basel II implementation consulting

  7. Budapest Bank Banca Comerciala Romana BRD (Groupe Societé Generale) CIB Bank Egyptian Arab Land Bank Eximbank K&H Bank KBC Banka MKB Bank Unicredit Bank LOXON Main References • Raiffeisen Leasing • Raiffeisen Bank Hungary • Raiffeisen Bank Croatia • Raiffeisen Bank Serbia • Raiffeisen Bank Albania • Raiffeisen Bank Aval • Raiffeisen Bank Romania • Hanwha Bank • Hungarian Savings Cooperatives 2014.10.20. 2014.10.20.

  8. Agenda LOXON introduction Role of early warning system Q&A

  9. Role of rating and scoring systems Key question of banking: who can get a loan? Rating and scoring is the classification tool Credit assessment is strongly related to the Probability of Default (PD) PD is essential for Loan approval Risk based pricing Credit portfolio modelling Compliance with Basel II (mainly the advanced approaches) will push Banks to have: Historical data Quality data Complete data

  10. Role of early warning systems Rating is done annually Due to the availability of official financial data Not frequent enough! What happens in between two consecutive rating? EWS is supporting the credit monitoring process Goal: to identify the possible threats in the existing credit portfolio at an early stage Tool: EW rating or scoring system Behavioural scoring based PD prediction Expert based classification

  11. Use of the EWS Classification incorporates the latest information as special explanatory variables latest quantitative signals (decrease in sales, collateral value, turnover with the bank; payment delay, etc.) qualitative signals (change in management, loss of key buyer, negative media, etc.) Knock-out signals (bankruptcy, lawsuit filed against client, etc.) Classification determines action on customer Pre-workout, Early workout, Late workout Neutral X-sell, up-sell, retention Models should be backtested Discriminatory power (Gini, KS, ROC) Efficiency of actions (Migration rates) EWS should support the CRM workflows

  12. Other functionalities of EWS Data sources Interface with Datamart / DW Manual data recording Documents Upload documents Generate documents, based on templates Reporting Pre-defined reports Dashboards / Business Intelligence Algorithm Editor Flexibility for business changes 4-eye principle Data quality checks Based on LOXON Framework

  13. Lending and Risk Management Systems Thank You Gabriel SERBANESCU Managing Director, Romania and Bulgaria Mobile: +40-723-323-042 gabriel.serbanescu@loxon.ro

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