Credit Risk Management

Assessing, pricing and managing credit risk remains one of the most important core business areas of financial institutions – with a still limited set of instruments for active credit risk management. On the other hand, new competitors, services and business models are entering the established markets, such as peer-to-peer platforms (P2P), crowdfunding, and mobile banks. High regulatory costs, stricter equity rules and low interest rates are also putting pressure on achievable net margins.

Consequently, institutions are forced to create new attractive banking channels and customer experiences, to increase agility and quality in customer service, product development and process design, and finally to reduce costs. Increasing quality and efficiency as well as reducing costs affects the entire value chain in the credit context, e.g. not only the credit application and processing procedures, but also the content, processes and organisation of credit risk controlling and management, as well as customer relationship management (CRM).

Financial institutions that want to achieve these goals should proceed as follows – of course, always in compliance with regulatory conformity:

• Reduction to technically necessary content, as well as its standardisation and modularisation

• Optimisation, standardisation and automation of processes, including their digitalisation without media/system interruptions, supported by intermediary robotics if necessary

• Identification of new innovative sources of information and use of advanced data analytics methods (machine learning/AI, text mining, etc.) for a targeted increase in the quality of results and speed of execution while at the same time reducing the use of experts

• Integration of targeted and proactive CRM, agile and paperless credit scoring, and efficient and fast credit processes for positive customer experiences and high customer satisfaction while maximising efficiency for the financial institution

In addition, financial institutions must optimise the overall implementation of new external standards such as the Future of IRB, Basel IV, NPL Guidance/Guideline and IFRS 9 Impairment. The integrative coordination of these requirements is a necessary prerequisite for redundancy-free, efficient credit processes and consistent credit risk information in risk management. In-depth rating modelling know-how is also necessary in order to implement the concretised CRR requirements arising from the Future of IRB together with the Basel IV rules in an equity-conserving and compliant manner.

KPMG offers financial institutions and other business entities concerned a holistic approach to increasing competition and meeting external requirements in the context of “credit”. Our experts will be happy to support you with their interdisciplinary know-how:

• Credit risk modelling (rating models, credit risk portfolio models, early warning systems, etc.) e.g. in SAS and R

• Independent validation of credit risk models as consultants and as a service

• Credit process optimisation and digitalisation, incl. optimisation of rating development and validation processes

• Data analytics (identification/generation of new data sources, machine learning/AI, text mining, etc.)
  

• RWA optimisation

• Regulatory (CRR, MaRisk, NPL Guidance/Guideline etc.)

• Reconciliation (e.g. IFRS 9)

• Efficient organisational and operational structure in credit risk controlling and management

• Technical and IT architecture

• Customer relationship management (propensity models, retention, customer value, campaign models etc.)

and much more. The spectrum of services ranges from quick scans, development of strategies and target visions, implementation-related technical concepts, rapid prototyping and software selection to support institutions during supervisory audits and direct implementation, e.g. in SAS, R or Python.

In project work, our goal is to closely involve the customer’s employees for a successful transfer of know-how. That is why we usually work in appropriately mixed project teams – so that your institution also benefits from our work in the long term.

Thank you for your interest. Please get in touch with us!