Credit risk reporting

WGZ BANK, Geno Bank Consult and GAD did, with the support of noventum, jointly develop a new solution for credit risk reporting. In this, it was possible to show that an automated data management system and a standardised report template do not necessarily have to represent a contradiction to bank-specific requirements.

Current challenges

In the world of banking, the regulatory requirements posed to risk management are constantly increasing. The „Minimum requirements posed to risk management“ (MinReq-Risk) already do, in addition to requirements regarding the integrity, availability, authenticity as well as confidentiality of the data, also contain organisational requirements such as test and release processes or a detailed documentation of the application. Through the Basel Committee on Banking Supervision, credit institutes are furthermore required to have an automated reporting based on a uniform data repository.

Frequently Excel or Access applications created by the specialist departments are being utilised for the credit risk reporting. In addition to the higher susceptibility to errors resulting therefrom, these applications typically require an immense effort in the manual provisioning and processing of data. Additionally, the adherence to regulatory requirements, the high coordination effort, and the manual reporting have the effect that the available resource are – for the most part – tied up in technical and/or administrative activities. But it is necessary to invest more time into the thorough analysis of the data and commenting of reports.

The product

In the joint project, a DWH/BI application was developed that provided the credit institutes with a uniform and automatedly managed data base for analyses and reports. In addition, a standardised credit risk report was developed based on the many years of consulting experience of WGZ BANK and of Geno Bank Consult in the area of credit risk reporting and based on the feedback of several pilot banks, without neglecting the necessary individuality of individual bank structures in this.

Via a configuration user interface that is integrated into the user interface of bank21-Reporting, each credit institute can adjust important reporting parameters and control parameters for this report individually. This input is stored in the central data base and does dynamically have an impact on the results upon the execution of the report. This way it is possible, for instance, to specify individual structure limits for industries, ratings, and creditworthiness ratings, that influence the displayed columns/rows of individual report pages, and that define threshold values, etc. Furthermore, the report output can be parameterised for up to four groups of recipients, in order to generate a report preparation appropriate for the recipients – e.g. „Report for the Board“ vs. „Standard report“ – at the push of a button.

The credit risk report processes the data on approx. 30 pages both graphically as well as in tabular form. It contains a management summary for the customer credit portfolio, the portfolio development/quality and the risk concentrations as well as the risk drivers of the bank. The individual credit risk strategy is mapped with the help of structure limits and with bank-specific indicators. The individual report pages can be supplemented through individual commenting and can be - to a limited extent - adjusted in terms of layout. It is, furthermore, possible to embed individual report pages – e.g. ad-hoc analyses or manually created pages – into the standardised report folder.

Through the standardisation, the comparability of different credit institutes is achieved and therewith the foundation is laid for a central benchmarking data pool. Each participating institute makes its controlling-relevant indicators available in anonymised form and, in turn, receives access to this comprehensive data repository. As a result, each bank can compare itself to the anonymised benchmark data of the other participating institutes in the classification of its own risk position.

In summary

The uniform data base, the automated data management, and the easy report generation constitute a significant relief for the participating credit institutes. In addition, validation and coordination efforts fall to the wayside since WGZ BANK, Geno Bank Consult, and GAD have implemented the regulatory and technical requirements.

The data management and the credit risk report are centrally maintained and developed further. All users of the product benefit from the synergy effects in the form of lower costs and less effort. Additionally, the standardised credit risk report does provide for transparency and comparability, wherein bank-specific peculiarities are covered to the necessary extent through the individual report configuration and the optional integration of report pages created in-house.

Centralised cooperation projects like this one are a suitable way to comply with the increasing regulatory requirements in the controlling of banks. This way, banks can utilise the time gained to focus more on the analysis of the results and can concentrate more on the customer business. An efficient reporting is the foundation for a successful and sustainable overall controlling of banks.

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