"The aim is to assess how well the enhanced system addresses both the
spirit and the letter of the Basel II advanced IRB approach, as interpreted by
the Canadian regulator OSFI," said Stuart Braman, managing director of Risk
Solutions in New York.
Risk Solutions analysts will review the bank's written policies and procedures as well as loan files from each portfolio industry-sector. They will also interview key members of the credit and risk-management teams and analyze data from a segmentation and calibration perspective. The analysts' findings will form the basis for a written report that will evaluate the degree to which CIBC's current system--along with the recommended enhancements--addresses Basel II A-IRB requirements for documentation, transparency, consistency, and replicability.
A second phase of the project would include development of the recommended enhancements.
"The goal is to refine the credit factor and scoring guidelines as well
as develop weights for the credit factor for the obligor risk components of
the IRB system," said Mr. Braman. Activities in the second phase will include
setting, testing, and revising weights for an agreed set of credit factors--statistically where data permits and using expert judgment where it does not. As more data becomes available, weights will be refined through periodic recalibration exercises. Also, the possibility of industry-sensitive scoring will be explored. Risk Solutions will also support CIBC's running of a
pilot of the revised IRB system as well as any revisions to the scoring and
weighting of credit factors that result.