Cenerus introduces AIICR Scoring System | Cenerus posted on the topic | LinkedIn (2024)

Banks imply the risk that a borrower's situation will change (it'll fail) before they know about it. Cenerus' proprietary AIICR approach makes the information gathering, analyzing and presenting to decision makers an explicit risk that can be managed - creating substantial opportunities. Want to know more?

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The Vasicek model A prominent structural credit risk model widely used, particularly as a foundation for calculating RWA's under the advanced IRB approach in credit risk management.The Vasicek model calculates the default probability of a borrower, conditioned upon the realisation of a systematic state variable. Assets as Random Variables: Starting with the premise that a borrower's assets are random and their returns can be modelled by standard normal distribution.Decomposition;- Systematic Variable: Captures economic or market-wide factors affecting all borrowers to some extent.- Idiosyncratic Variable: Captures factors specific to the individual borrower.Asset Correlation: An asset correlation parameter links the systematic and idiosyncratic variables, influencing the extent to which broader economic conditions affect an individual borrower.Basel IRB -Under the assumption of a large hom*ogeneous portfolio, the model leads to the Basel IRB formula, which is a standard for regulatory capital calculations.IFRS9-For financial reporting under IFRS9, the model helps convert a TTC PD to a PIT PD. Particularly useful for large exposures and involves constructing a time series for the systematic variable, often reflecting the credit cycle.Stress Testing-By manipulating the systematic variable, analysts can model stress scenarios and predict stressed PD's, aiding in understanding potential risks under adverse economic conditions.Portfolio Credit Analytics-From a risk manager's perspective, the model is instrumental in analysing the credit risk of portfolios, helping to strategise investments based on predicted credit events.

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Completion of Credit Risk Management: Frameworks and Strategies!!I'm able to :Understand conventional concepts related to risk management: unexpected loss, default probability, loss-given-default, risks vs rewards, and credit spread.Review default rates and trends in credit markets during normal periods, and periods of stress and trends in bankruptcies and insolvencies.Show how market indicators (from equity and debt markets) account for credit risks or show implied default probabilities; review how credit models attempt to measure default probabilities.Understand the distinction between credit default and credit deterioration and the use of a Credit “Value at Risk” metric.Review the primary concepts of portfolio risk management, including concentration and correlation risks.Review important methods and techniques to reduce credit risks and exposures, including credit derivatives.Review the primary purposes of credit analysis and the importance of presenting rational, updated assessments.Review the primary purposes of credit exposures (including funding corporate balance sheets and business operations).Understand how analysis leads to an overall credit rating of the borrower, a risk strategy and outlook, and approaches to structuring credit exposures (loans, e.g.).Identify and quantify the various categories and forms of credit exposure with corporate counterparties (loans, revolving credit commitments, counterparty-trading exposure, e.g.).Identify and summarize various types of credit structures based on tenor, collateral, ranking and amortization.#creditrisk #financialanalysis #creditanalysis

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#riskmanagement Credit risk management is the controls of potential credit or lending default by counterparties. It is not the risk of you owing counterparties.There are 3 levels of credit contract life cycle, namely:1. Onboarding of credit facility to the counterparties2. The conduct of servicing the loans or facilities3. The end of the credit cycle life either fully repay or facilities turn sour.At the onboarding process, most lenders or bonds subscribers will resort to credit rating or assessment to agree to provide the credit facilities. As such, information from reputable rating agencies becomes very crucial. This is also the point when the lenders will decide the amount of exposure, tenure of repayment or even the need for guarantee or collateral. The decision of interest or profit rates are decided here.Credit risk measures such as single counterparty limitation, rating level, ability to pre-settle upon call are assessed here.For the second phase, this is largely about tracking and monitoring of the exposure. Models of behavioural repayments, build up of sinking funds are closely tracked. Even rating migration or rating changed are closely observed. Sophisticated tools such as Value at Risk, Expected Credit Defaults are also used to gauge the health of the credit exposures.The last phase, this is a standard end of credit contract. Failure to honour could but not necessarily lead to legal action for failing to repay on time of the preagreed amount.That's a minute from me.

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Developing a comprehensive credit risk assessment framework is crucial for effective credit risk management in corporate environments. This entails evaluating potential borrowers, managing existing credit relationships, and mitigating credit risk. Here's a practical tip to achieve this:Implement a multi-dimensional credit scoring system that considers financial metrics and qualitative factors such as industry trends, market conditions, management competence, and competitive positioning. By incorporating both quantitative and qualitative data, your credit assessment becomes more accurate and reflective of the holistic risk profile of a borrower. This approach enables your business to make informed decisions, allocate credit resources efficiently, and mitigate credit risks effectively.Sign up for our risk rating models:info@risk-enterprise.com

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The ECB report on “Sound practices in counterparty credit risk governance and management” (Oct. 2023) is an interesting read.The ECB has put together a collection of sound practices in CCR governance and management, observed during a review carried out in Q4-2022, with respect to 23 institutions active in derivatives and securities financing transactions (SFTs) with non-banking counterparties. According to the report, the targeted banks held on aggregate ca. €1,245 billion of CCR exposure value (of which, 59% was derivatives and 41% SFTs) and €278 billion of CCR risk-weighted exposure amount (RWEA) (of which, 82% was derivatives and 18% SFTs), at the reference date for the exercise, i.e., 31 March 2022. In addition to identifying a number of good industry practices already in use by institutions, the review showed areas for improvement. Supervisors’ expectations cover, among others, (i) customer due diligence (procedures to obtain information from non-banking counterparties should be improved, and the DD outcome should be reflected on credit decisions and contractual conditions), (ii) definition of risk appetite (institutions with material CCR exposures should explicitly specify their willingness to accept this risk in their risk appetite statement), (iii) default management processes (banks are expected to regularly stress test their CCR exposures) and stress testing frameworks (stress testing results should have an impact on risk mitigation strategies). https://lnkd.in/dQsrHJrJ

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Navigating Market Turmoil with robust Credit Risk Management webinar-It was an honour to be the moderator for this industry webinar with esteemed experts and practitioners to discuss changes to the way banks may need to manage, quantify, and report credit risk given recent events. Credit Risk has generally been benign over the past few years due to the low interest rate environment and government COVID relief measures. However, recent market turmoil due to rapid rises in interest rates, stress in the commercial real-estate sector, counter-party credit risk concerns, and stress on the SME sector have pushed credit risk top of the CRO agenda again. Stress testing and geo-politics, IFRS 9 ECL and loan provisions, PFE modelling, credit risk frameworks, credit models, ChatGPT for credit risk, XVA’s, NPL management were among some of the topics discussed.

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As banking professionals, we need to understand that credit risks are an integral part of our industry. To ensure successful risk management, it's crucial for management to establish clear risk appetites for their lending organizations. Additionally, effective communication of risk policies and the necessary skills for high-stakes risk-taking is crucial for all levels of credit officers within a bank. Working together to ensure that our risk management strategies are effective and well-communicated throughout our organizations is vital in the volatile credit market. #banking #risk_management #communication #credit_risk

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Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximise a bank's risk-adjusted rate of return. An effective credit risk management strategy involves establishing clear credit policies and procedures, conducting thorough credit assessments, monitoring and reviewing customer payment behaviors, implementing risk mitigation measures, and regularly updating credit limits based on changing circ*mstances.

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🌟INTRODUCING: The Ultimate Lenders Guide to Risk Assessment 🌟We've prepared an essential list of all you need to assess credit risk effectively in the modern era:🎯 Harness the Power of the 5 C's: Uncover the five key factors that provide invaluable insights into a borrower's financial health. By leveraging these factors effectively, you'll gain a deeper understanding of risk and make smarter lending decisions.💡 Embrace Precision and Certainty: Say goodbye to guesswork and hello to accurate credit risk calculation. We'll guide you through the best options and techniques for confidently assessing credit risk. Armed with data-driven decision-making tools, you'll revolutionize your risk assessment practices.🚀 Accelerating Credit Risk Management: Elevate your credit risk management game with the cutting-edge software offered by GDS Link. With our advanced tools, you can proactively manage risk, streamline processes, and provide an exceptional customer experience that sets you apart from the competition.🎁 Bonus Content: Dive deeper into the world of Credit Risk Management with our trending blogs! Explore best practices, techniques, and the major challenges banks face in managing credit risk. Check out these must-read articles:1️⃣ Credit Risk Management Process: Best Practices and Techniques: Gain insights into the most effective strategies and techniques for managing the credit risk process. Visit:https://lnkd.in/enA44Vfx2️⃣ 10 Major Challenges of Credit Risk Management in Banks: Discover the key challenges faced by banks when it comes to credit risk management and learn how to overcome them. Visit:https://lnkd.in/gMasa48z3️⃣ What Are The Different Types of Credit Risk?: Deepen your understanding of credit risk by exploring its various types and their implications. Visit:https://lnkd.in/gJrnZHizClick through the carousel below to embark on your journey to mastering credit risk assessments. Happy learning!

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