Mark to Actual: IRA Releases New Version of Corporate Monitor

June 27, 2005

Institutional Risk Analytics has released a new version of the IRA Corporate Monitor, including expanded coverage of Canadian as well as U.S. Companies.

The IRA Corporate Monitor is a comprehensive analytics & peering engine used to perform fundamental analysis and, in particular, to generate internal risk ratings required for compliance with Basel II and Sarbanes-Oxley. The IRA Corporate Monitor allows the user to select from an array of non-Merton financial tests and metrics from which to calculate a probability of default ("P(D)"), one of the key risk metrics defined in the Basel II capital accord.

Under Basel II, risk managers must calculate their own internal P(D) ratings for both retail and institutional counterparties, and then aggregate these individual ratings into a single P(D) rating for whole portfolios and ultimately each bank. These ratings from actual experience will then be used to calculate a bank's economic capital and, more important, benchmark the bank's performance vs. the confidential, internal forward projections which are provided to regulators. While economic capital is an important concern under Basel II, more vital for institutions aspiring to Advanced IRB status is a bank's ability to model its own capital needs based upon how well it "marks to actual" with respect to projected credit default and recovery experience.

The IRA Corporate Monitor provides an important tool required for effective risk analytics and regulatory compliance by helping credit analysts and managers generate and document non-Merton internal risk ratings for public and private companies. The next major upgrade of the system is scheduled for September and will include additional tools to generate Basel II internal risk profiles.

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