The bigger potential gain from RegTech innovations will be better-managed risk through cultural change that will allow an enterprise to use these tools to be more agile and adaptive. This will allow risk to be managed at lower overhead and likely lower capital reserve levels. These same tools will enable business operations to run more efficiently, and profitably. [Financial Services Roundtable, June 2017]
REGTECH
Our RegTech (CECL/IFRS9/CCAR/ICAAP/IRRBB) solutions, based on innovative machine learning techniques, provide a “sandbox” for financial institutions to:
- Generate custom, coherent and relevant multi-factor scenarios – at different levels of plausibility for capital adequacy, loss allowance and strategic planning
- Create and update seamlessly a data repository – for all the regulatory modeling needs for retail and wholesale credit products
- Develop and validate models automatically – for risk and behavioural parameters that can forecast cashflows of retail and wholesale credit products
- Stress test with company and regulatory scenarios – applied to the relevant models for calculating regulatory capital (Basel III/CCAR)
- Apply custom scenario(s) to calculate loss allowance (CECL/IFRS9)
Tangible and intangible benefits from our RegTech solutions include:
- 12-45bps in savings per credit portfolio – more accurate loss provisioning and regulatory capital, and minimizing losses by catching risks early (credit, renewal and interest rate risks)
- sophisticated scenario analysis capability – to better prepare the organization for portfolio management, capital planning, corporate governance, as well as regulatory and accounting standards compliance.
SCENARIO GENERATION WITH ScenGenor
ScenGenor is a software tool for generating coherent, multi-factor scenarios for the economy as well as its sectors at user-specified probability levels (scenario plausibility).
Sectors include residential real estate, commercial real estate, oil & gas, lumber, and auto industry.
- For residential real estate the software uses neighbourhood (FSA/zip code) house price indices for generating scenarios at the neighbourhood level
- For commercial real estate the software uses data associated with vacancy, rent, NOI and cap rates by asset (office, retail, industrial and multifamily) class and geographical region
Scenarios can be hypothetical or historical, conditional or unconditional.
- Example of a conditional scenario: What happens to macro-economic and market factors, including house prices, at 1/40 years plausibility level, if national/regional unemployment rates go up by 300bps?
ScenGenor is available as a web-enabled tool installed internally or as a service. It is also an integral part of our RegTech tools.
REQUEST A DEMOPaB-r FOR LOSS FORECASTING AND STRESS TESTING FOR RETAIL PORTFOLIOS
- Leading edge predictive modelling technology
- Basel III/CCAR and CECL/IFRS9 compliant
- Forecasting cashflows, stress testing and benchmarking
- For retail portfolios (mortgages, credit cards, lines of credit and instalment loans).
PAB-r has been helping our clients minimize losses by identifying financial risks early (credit, renewal and interest rate risk) and pricing of products under a range of possible future environments.
Through scenario analysis with ScenGenor, PAB-r estimates CECL/IFRS9 loss provisioning, regulatory capital levels, risk tolerance thresholds, risk appetite, and perform budget planning.
The Benchmarking option of the software has been helping our clients develop peer-group benchmarks for loss forecasting and stress testing.
Unique features include:
- Modelling of various parameters, e.g. PD, LGD, EAD, prepayment, etc., for cashflow prediction
- Dynamic recalibration of parameters as internal portfolio data are updated
- Multi-factor scenarios from ScenGenor
- Support for different types of macro and micro stress testing
- Explain the contributions of various input factors to the predictions of the parameters
- Automatically validate the predictive power of its models using out-of-sample data
- Benchmark portfolios by comparing them with peer-group portfolios based on bureau data (optional)
- Easy to integrate with various internal data sources and administer users
PAB-r is available as a web-enabled tool installed internally and supporting unlimited number of internal users, or as a service.
REQUEST A DEMOPaB-w LOSS FORECASTING AND STRESS TESTING FOR WHOLESALE PORTFOLIOS
An analytics tool that enables wholesale portfolio managers perform:
- Forecasting of PD, LGD, EAD and risk rating migrations as a function of obligor/facility-specific factors and macro-economic factors
- Stress testing of macro-economic and sector specific factors using our ScenGenor tool to assess their impact on risk parameters and capital adequacy ratio
It can be used for origination as well as portfolio management (Basel III/IFRS9).
It is based on our web-enabled software platform for user interface, data storage and manipulation, and report generation
REQUEST A DEMOPAB-cre LOSS FORECASTING AND STRESS TESTING FOR CRE PORTFOLIOS
Based on a web-enabled platform and advanced machine learning techniques, PAB-cre forecasts various credit risk measures associated with a commercial real estate (CRE) loan.
- Probability of Default (PD)
- Loss Given Default (LGD)
- Lifetime Expected Loss (LEL) under various scenarios (CECL/IFRS9)
- Regulatory and Economic capital (Basel III)
- Risk Adjusted Return on Capital
PAB-cre can help lending and risk officers in origination as well as portfolio management for:
- Pricing and structuring loans to make them more profitable
- Scenario analysis of macro-economic and CRE factors to assess their impact on risk measures
- Monitoring and reporting risk measures including concentration and grade migration
PPNR FORECASTING AND STRESS TESTING
A web-enabled, analytics tool that uses a suite of predictive models to forecast PPNR and its components, by asset class and under regulatory and company-run scenarios. It allows integrated stress testing of credit, interest rate and liquidity risks. It can be combined with our other RegTech solutions. Its output can feed into regulatory and management reporting.
REQUEST A DEMOMORTGAGE PREPAYMENT AND DEPOSIT WITHDRAWAL
Our customized predictive models allow asset-liability managers to more effectively and accurately measure and manage interest rate risk. Our models can be incorporated in valuation models for valuing the option to prepay/redeem. They can also be used for better pricing of product offerings as well as targeting customers likely to liquidate for preventing attrition.
APPLICATION AND BEHAVIOURAL CREDIT SCORING FOR RETAIL LENDING
Our breakthrough technology delivers scoring models that perform better and are more robust to changes in the economic environment than typical statistical scorecards. Furthermore, the models are capable of predicting not only “if” but also “when” a delinquency or default event may occur. Our solution allows managers to compare different multi-objective cut-off strategies and select the one that best meets their business goals.
COLLECTIONS AND RECOVERY SCORING
Our customized collections models can predict the likelihood that an account in arrears will cure with no action (i.e. self-cure), cure with a call, or with a letter. Collections managers can use these models to better manage internal collections by reducing the cost of curing per customer, improving the curing rate and assigning the non-curable customers to the appropriate collection agencies in a proactive way.
FRAUD DETECTION
Our breakthrough technology delivers application fraud models for predicting the likelihood that an individual application for credit is fraudulent, prior to the approval and booking of the application. An application fraud model can help a bank to dramatically reduce application fraud losses and also help reduce operational costs.
FINANCIAL RISK RATING FOR SMALL BUSINESS AND COMMERCIAL LENDING
Our Probability-of-Default and Loss-given-Default models allow a bank to implement a more accurate risk rating system for Small Business, Mid-Market and Commercial Real Estate lending. The models can be used for risk rating of an obligor (firm) as well as of the industry that the obligor operates in. Credit/risk officers can use those models to assess how well the obligor under study performs with respect to its peers in an industry group. They can also use them to perform what-if scenario analysis in order to understand the impact of changes in the performance of the obligor and/or its industry.
What pricing in our term deposits will increase volume by 10% while maintaining the same profit?
POP tool is a web-enabled solution that based on customer behavior models it performs:
- Price optimization for customer-level pricing of a deposit or credit product
- Scenario analysis for comparing alternative pricing strategies
- Monthly reports with Key Performance Indicators (KPIs) of pricing strategies
- Monthly reports with term deposit inflow/outflow analysis
Client report: for a non-redeemable term deposit portfolio (>$15B) increased profit by 219bps per year
REQUEST A DEMOAn advanced analytics solution using our web-enabled software platform and ScenGenor tool for:
- forecasting expected cashflows
- comparing property valuations and
- measuring market risk of CRE properties/portfolios under baseline and stress scenarios
Based on information about a property, the software derives forecasts of risk parameters and cashflows, and compares it with similar projects.
Forecasts are based on a baseline scenario about macro-economic and market factors over the next 5 years.
A user can perform stress testing by using the scenario generator tool, ScenGenor, integrated with the software to develop custom scenarios, or using regulatory scenarios.