Rand Merchant Bank ("RMB") is a division of FirstRand Bank Limited and one of the "big four" banks in South Africa. To meet the Basel II standards, RMB uses Visual Rules' Business Rules Management System from Innovations Softwaretechnologie (Germany) as a platform to house its credit rating models. Visual Rules facilitates the integration of these rating models in any application or workflow - a prerequisite for up-to-date risk management in conformity with Basel II.
RMB's head of wholesale credit ratings and portfolio analytics, Rautie Nel, considers his company to be very well positioned in this regard and describes RMB's rating system as a hybrid system which makes use of statistical models while incorporating a qualitative overlay into the final credit risk metric.
Despite the outstanding quality of RMB's rating models, until recently their rating models did not meet the requirements of up-to-date auditing as far as processes were concerned. "The models, which were implemented in Microsoft Excel, did not have the necessary controls in place and no history of the ratings that were generated was readily available. Moreover, it would be difficult for a bank applying for the IRB approach to meet the operational requirements of Basel II with an Excel-based solution for its rating models", says Rautie Nel.
A Highly Dynamic Project to Update Risk Management
RMB started with the most important ratings for the evaluation of credit risks: the probability of default (PD) and the loss given default (LGD). At the same time, both the import of data from rating agencies and the model platform for 80 bank analysts were created. The number of possible services runs to more than 20.
RMB's head of wholesale credit ratings and portfolio analytics, Rautie Nel, considers his company to be very well positioned in this regard and describes RMB's rating system as a hybrid system which makes use of statistical models while incorporating a qualitative overlay into the final credit risk metric.
Despite the outstanding quality of RMB's rating models, until recently their rating models did not meet the requirements of up-to-date auditing as far as processes were concerned. "The models, which were implemented in Microsoft Excel, did not have the necessary controls in place and no history of the ratings that were generated was readily available. Moreover, it would be difficult for a bank applying for the IRB approach to meet the operational requirements of Basel II with an Excel-based solution for its rating models", says Rautie Nel.
A Highly Dynamic Project to Update Risk Management
RMB started with the most important ratings for the evaluation of credit risks: the probability of default (PD) and the loss given default (LGD). At the same time, both the import of data from rating agencies and the model platform for 80 bank analysts were created. The number of possible services runs to more than 20.
