Credit Risk Management Systems for the Banking Book 2013

The credit crunch highlighted the deficiencies of the ad hoc and fragmented approach to credit risk management taken by many firms and damaged many banks’ core business models. Banks face the dual challenges of complying with the raft of risk regulations and running economically viable credit businesses. In many cases, banks have decided that an overhaul of their approach to credit risk is necessary to succeed in the new environment.

Banks face the impact of the Basel 3 regulations, which will create increased compliance requirements and will impose higher capital costs for credit risk. They need to adapt to manage higher compliance requirements and also to recognize the impact of capital charges on their business strategies. To balance the increased regulatory cost of credit risk, many banks are looking at methods of risk mitigation, which will mean a greater role for collateral in credit risk management.

However, what banks really want is the option to manage credit risk in a way that allows them to improve performance. To do this, they want credit risk management systems that support decision making in the front office and that can align risk management with improved performance. As a result, banks are looking at ways to enable greater flexibility in managing credit risk and greater links between risk and the front office, such as improved model management, enterprise and real-time scoring and limits management, improved stress testing capabilities, and business intelligence tools that provide end-users with the information they need at the time they need it. Banks are searching for the technology systems that will enable them to align credit risk management with performance management and meet regulatory requirements.

This report provides an update to Chartis’s 2010 Credit Risk Management Systems report and focuses exclusively on credit risk management for the banking book. It provides an overview of the demand and supply sides of the market, including banks’ business, regulatory, and technology requirements, the vendor landscape and an overview of available vendor solutions.

This report uses Chartis’s RiskTech Quadrant™ to explain the structure of the market. The RiskTech Quadrant™ uses a comprehensive methodology of in-depth independent research and a clear scoring system to explain which technology solutions meet an organization’s needs. The RiskTech Quadrant™ does not simply describe one technology solution as the best credit risk management solution; it has a sophisticated ranking methodology to explain which solutions would be best for buyers, depending on their implementation strategies.

This report covers the leading vendors offering credit risk management solutions for banking, including Axiom SL, Fernbach, FICO, Fiserv, IBM, Misys, Moody’s Analytics, Oracle, SAP, SAS, SunGard, and Wolters Kluwer Financial Services