CARY, N.C. (April 27, 2004) â Financial services institutions must monitor credit, market and operational risk even more closely to adhere to the capital requirements of the New Basel Capital Accord (Basel II). SAS, the leader in business intelligence, is releasing a new software solution that makes it easier for them to comply.
The company today announced the release of SASÂ® Credit Risk Management, a comprehensive solution capable of performing credit data management, credit scoring, credit portfolio risk management and providing a credit risk dashboard. The SAS solution enables organizations to measure credit risk exposures accurately and then evaluate alternative strategies for managing risk. This ensures maintenance of adequate regulatory capital reserves and capabilities beyond Basel II like modeling of economic capital.
SAS Credit Risk Management helps organizations:
Accurately assess the risk of potential credit losses both on the counterparty level and on the portfolio level while allowing seamless integration of credit scoring with credit portfolio analytics.
Meet reporting and risk disclosure requirements for regulators and investors.
Calculate both regulatory capital and economic capital.
Credit risk is top concern for financial institutions
In a recent report by Financial Insights, spending on default probability and loss given default systems is estimated to be $893 million in 2004, growing to $1,876 million in 2009, increasing at a compound annual growth rate of 16% between 2004 and 2009 (or roughly four times the rate of overall IT spending in the industry) [Source: "Give Me Some Credit! Projected Spending on Credit Risk Solutions, 2004-2009", Financial Insights, April 2004]. Much, if not substantially all, of this growth is driven by the adoption of Bank for International Settlements (BIS) II standards for measuring and managing credit risk.
The new regulations require institutions to manage credit risk at a more granular level than in the past, with the primary goal of incorporating a framework for improving the safety and soundness of the financial system. To comply, financial services organizations need to implement revised minimum capital requirements on credit risk as well as market and operational risk, execute new supervisory review processes, and improve market disclosure. SAS Credit Risk Management is an optimal foundation for financial institutions to comply with Basel II aspects related to credit risk and provides a complete view of an institutionâs risk position for best credit risk management practices, well beyond the specific Basel II requirements.
Financial institutions worldwide are turning to SAS Credit Risk Management to help drive their Basel II programs. At BankWest, a leading bank in Australia, SAS Credit Risk Management serves as the backbone of its Basel II project. "We chose SAS as they showed us they could provide a best of breed solution for Basel II and a foundation for risk management beyond Basel II compliance," said Ed Bradley, director of portfolio management and policy at BankWest.
"Credit risk management is one of the most critical issues influencing technology investments by financial institutions. Whether or not BIS II compliance is required by an institution's national regulator, the recommendations advocate for a much more proactive approach to aggregating and understanding credit exposures," said Debbie Williams, group vice president for capital markets and corporate banking at Financial Insights, an IDC company. "The size and scope of the technology infrastructure required to implement the recommendations will be a challenge for even the most sophisticated and well prepared institutions."
"SAS Credit Risk Management helps institutions satisfy the credit risk requirements of all three pillars of Basel II, enabling the calculation and aggregation of risk measures, and ensuring transparency and comparability," said Jeff Hasmann, SAS global credit risk strategist. "The flexible analytics, proven risk expertise and powerful data management capabilities that are at the heart of this SAS solution empower companies to quickly meet changing regulatory and business requirements related to credit risk management."
SAS Credit Risk Management represents a key risk management solution for SAS, drawing on the companyâs significant domain expertise in the financial services sector. It helps banks improve capital allocation, increase profitability and maximize returns for shareholders. The solution includes a credit risk data model, credit scoring capability to calculate probability of default and loss given default for sets of individual counterparties, credit portfolio analytics such as credit concentrations and credit value-at-risk, and a credit risk reporting dashboard. It is part of SAS Banking Intelligence Solutions, an industry intelligence framework designed to address all business issues for the financial services industry.
SAS Credit Risk Management is currently available.
Tapping more than a quarter-century of experience in financial services, SAS works closely with more than 2,000 financial institutions worldwide to provide timely solutions that address their critical business needs. Customers include 61 of the 62 banks listed in the Fortune Global 500 and leading companies such as AXA Financial, Barclays Bank, Dreyfus, Hang Seng Bank, ING Bank, Royal Bank of Scotland and U.S. Bancorp.