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SAS Helps Banks Manage Their Internal Rating Systems

Leading BI vendor provides application for in-house credit rating following Basel Committee Working Paper Number 14

SAS, the leader in business intelligence (BI), offers enhanced data management, analytic and reporting capabilities that support the development, deployment and monitoring of internal rating systems. These capabilities, which come as part of SAS’ credit scoring solution, help banks quickly develop accurate internal models in an effort to monitor and reduce bad debt. In a user friendly Web-based interface, SAS® Credit Scoring for Banking provides all statistics suggested by the Basel Committee’s Working Paper No. 14. The working paper postulates the validation methodology of internal rating systems.

The most important applications coming as part of SAS’ upgrade include:

• Tracking model quality over time (model stability, model performance and model calibration).
• A high-level monitoring dashboard.
• Statistics for monitoring all Basel II risk parameters (probability of default, loss given default and credit conversion factor/exposure at default).
• Application approval, limit setting and collection scoring models.
• Drill down to detailed statistical reports and underlying data, and monitoring of third-party models.

“SAS Credit Scoring for Banking provides in-house capabilities for rating system development, deployment, monitoring and risk data collection that is faster, more flexible and more manageable than a cost-prohibitive and often unresponsive outsourcing strategy,” said Peyman Mestchian, Director of Risk Intelligence Practice at SAS’ international headquarters in Germany. The advantage of SAS’ solution to financial organisations is that they no longer need external credit-modelling services to accurately evaluate the creditworthiness of current and potential customers.

“We are meeting increasing interest for our credit scoring solution, which some recent new customers such as the Raiffeisen Zentralbank in Austria have indicated may be driven by the working paper of the Basel Committee,” Mestchian said.

Dexia Bank in Belgium also relies on an end-to-end SAS credit scoring solution to accurately develop internal models and track credit risk scores, reduce business risk, provide more efficient lending services to customers, increase cross-sell and up-sell opportunities, and streamline approval process and optimising of staff resources.

According to a global enterprise risk management survey of 339 financial services executives conducted by SAS in June 2006, credit scoring/rating is the highest spending priority in the area of credit risk management. Seventy-eight percent of respondents view credit risk management as critical and anticipate significant, quantifiable economic rewards over the next 24 months, including a 14 percent reduction in cost-of-credit losses.

Earlier this year, SAS reported its hundredth Basel II customer and a 100 percent increase of risk management software revenues in 2005 for the region that includes Europe, Middle East and Africa.