CRIF Credit Solutions’, in its Management Consulting Risk & Regulatory Advisory practice, helps financial institutions to stay one step ahead of compliance and regulatory requirements. CRIF Credit Solutions’, in its Management Consulting Risk & Regulatory Advisory practice, helps financial institutions to stay one step ahead of compliance and regulatory requirements.
In its most recent working paper which analyzes impacts of the Basel committee’s proposed changes to the standardized approach for credit risk, CRIF Credit Solutions identifies areas to improve regulatory capital calculation for Retail, Real Estate and Corporate exposures.
The empirical analysis, which was provided to the European Banking Authority, suggests use of wider and different risk drivers in credit risk calculations for regulatory capital requirements, so to improve variables’ correlation with risk and minimize data-related inaccuracies, for example applying debt-to-income, years with bank loan-to-value for Retail and Real Estate exposures.
On the Corporate side, CRIF Credit Solutions’ Management Consulting analysis' indicates strong potential impacts on Banks' Risk Weighted Assets (RWA) based on a sample of corporate exposures adopting ratios proposed by regulators. CRIF’s study recommends to redefine number of clusters, allow a better distribution of risk-weights and to leverage multi-dimensional statistically derived algorithms and ratios, such as Rating Tool algorithms, as an alternative to leverage and revenue drivers.
