Future of Credit

Lending remains the core business of financial institutions. In the highly competitive credit market, efficient processing and production are just as important a competitive feature as ensuring quality and customer satisfaction. The measurement and management of credit risk, typically the most important type of risk, is one of the decisive factors for the economic and sustainable success of an institution.

The front office, back office and risk controlling functions are involved here and should act in a coordinated manner. IT technology in conjunction with modelling and methodology is also of particular importance with regard to efficiency and quality targets. The regulatory requirements for the lending business, such as the EBA guidelines on lending and credit monitoring. Future of IRB, CRR III or the MaRisk amendment, have become increasingly extensive and complex in recent years. They typically lead to increased process costs and thus reduce the efficiency gains already achieved by banks.

Thanks to our holistic advisory approach in the lending business segment, we are able to take into account and map the highly relevant dependencies. Some examples of this are listed below.

• In the development of credit risk measurement procedures and rating models, the involvement of the front and back office is essential for the quality of the results. These units operate close to the data generation processes and are therefore familiar with the respective risks from the user's perspective.
• When professionalising and subsequently optimising credit processes from an end-to-end perspective, all regulatory requirements for the lending business must be taken into account in accordance with the size and risk profile of the institution and the business area. In addition, potential adjustments to the credit assessment or rating must also be examined from a risk-oriented perspective in order to realise all efficiency gains. Technological support can minimise redundancies here. The introduction of an integrated workflow tool optimises and automates the entire credit process - from the front office to the back office.

The institutions are currently working intensively on the measurement and management of ESG risks. To measure the climate risks of borrowers, their exposures and collateral, we are developing special scores that enable comparability in the portfolio. We integrate this assessment into the credit decision and monitoring process. In addition, we offer solutions for analysing and integrating climate risks in relation to individual counterparty risk parameters, such as probability of default (PD) and loss given default (LGD).