In the aftermath of the Great Recession and the credit crunch that followed, the financial institutions across the globe are facing an increasing amount of regulatory scrutiny, and for good reasons. Regulatory efforts necessitate new, in-depth analysis, reports, templates and assessments from financial institutions in the form of call reports and loan loss summaries, all of which ensures better accountability, thus helping business initiatives.
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Also, regulators have started asking for more transparency. Their main objective is to know that a bank possesses thorough knowledge about its customers and their related credit risk. Moreover, new Basel III regulations entail an even bigger regulatory burden for the banks.
For the most effective credit risk management solution, one needs to gain in-depth understanding of a bank’s overall credit risk. View individual, customer and portfolio risk levels.
While banks give immense importance for a structured understanding of their risk profiles, a lot of information is found strewn across among various business units. For all this and more, intensive risk assessment is needed, otherwise bank can never know if capital reserves precisely reveal risks or if loan loss reserves sufficiently cover prospective short-term credit losses. Banks that are not in such good shape are mostly taken under for close scrutiny by investors and regulators, as they may lead to draining losses in the future.
Adopt a well-integrated, comprehensive credit risk solution. It helps in curbing loan losses, while ensuring capital reserves that strictly reflect the risk profile. Owing to this solution, banks buckle up and run quickly to coordinate with simple portfolio measures. Fortunately, it will also lead to a more sophisticated credit risk management solution, which will include:
In summary, if your credit risk is controlled properly, the rest of the things are taken care by themselves. To manage credit risk perfectly, rest your trust on credit risk professionals – they understand the pressing needs of decreasing default rates and improving the veracity with which credit is issued, and for that, they need to devise newer ways and start applying data analytics to Big Data.
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