By using Advanced Basel II compliant credit risk analytics, the Profitability Analysis Program will allow lenders to evaluate a block of ten commercial real estate investment deals, both as a portfolio and as individual deals. A number of large European banks have already successfully deployed Risk Integratedâs technology to satisfy regional regulators that they stand up to the stringent demands of this level of compliance.
Risk Integrated will offer the Profitability Analysis Program as a low cost, low risk stand alone service, without the need for implementation of the system. The results are generated as a report which provides an in-depth analysis of all commercial property deals including suggestions on how to improve their risk-adjusted profitability. The reports quantify the source of risk in the portfolio and the extent to which it is caused by lease structures, interest rates, tenant creditworthiness or exit risk.
The complete 60 page report includes the full detailed results for stress tests and risk statistics such as the probability of default, loss given default, Basel II capital and risk-adjusted profitability. Risk Integrated work with the bankâs analysts to load the necessary deal data and the entire analysis can be conducted within a few working days.
Dr. Chris Marrison, CEO of Risk Integrated, states: âThis is an easy way for banks to gain a fast and effective insight into the nature of the risks in their portfolio and how those risks can be mitigated through careful deal restructuring. Following our success in Europe showing banks the way to gain Advanced Basel II compliance, we have extended our services so that other banks can also benefit from Risk Integratedâs expertise and technology. Regulatory issues aside, it has never been more important for lenders to have a deep insight into the overall risk of a basket of deals in order to see how market stresses can affect not just one deal, but the whole portfolio.â
Risk Integratedâs CTO, Dr. Yusuf Jafry, considers Profitability Analysis Program to be a natural evolution of the SFS product set: âFor four years we have had SFS installed on clientsâ banking systems and recently have also given access to the system via ASP. By adding this service we are widening our reach to offer invaluable stress testing and cashflow simulation technology to all commercial real estate lenders. With Basel II and the current flux in the real estate markets, the service is a quick and easy way to test the adequacy of existing risk measurement systems and to understand how to make their portfolios more profitable.â