Basel Regulations

Implement the Basel standardized, foundation, and advanced internal rating based (IRB) approaches in FACT.

FACT accommodates Basel requirements:

  • Reviewing of borrowers

  • Assigning ratings to borrowers and facilities

  • Rating history reporting

  • Rating override reporting

  • Storing facility and collateral information

FACT complies with general Basel requirements providing consistent credit and rating processes. FACT’s workflow process facilitates frequent reviews of borrowers based on financial information and archiving of the respective counterparty and facility information.

Store collateral, Loss Given Default (LGD) and Exposure at Default (EAD) information in FACT. Implement borrower rating models, providing quantitative and qualitative assessments of counterparties and archive information for detailed rating models. FACT provides high security user authentication and a full audit trail, as well as full reporting for borrowers, facilities and rating grades.

Basel Committee Recommendations FACT Module FACT Function
RATING:
1) Internal model transparency Rating Flexible rating model editor, view line by line the structure of the models formula
2) Capability to perform qualitative and quantitative assessment Rating Ratings can be computed using both financial and non-financial information
3) Assessment of the country in which the borrower operates Rating “Customisation ready” country risk models
4) Comprehensive rating documentation Rating Archiving for credit ratings and credit analysis documentation
ANALYSIS:
1) Balanced distribution of exposure across borrower grades Analysis Actively monitor rating grade distributions with sophisticated portfolio analysis
2) Stress testing, validation of internal models and back testing. Robust mapping of internal grades to external rating agency scales Analysis Benchmarking provides a clear comparison between external and internal methodologies
3) Determine the impact of changes in the economic environment (industry downturn etc.) Analysis “What if” analysis and rating migration analysis
MAINTENANCE:
1) Optimum rating model integrity and security Maintenance High security user authentication and full audit trail
2) Management of rating model overrides Maintenance Ability to track, document and archive the performance of overridden ratings. Pre-defined alerts, run portfolio models and benchmarking
WORKFLOW:
1) Frequent review of borrowers Workflow Full workflow facilitates the review, approval and archive processes
2) Independent review and approval processes Workflow Workflow can be segmented by role and approval, with submissions sent automatically to the right person
GENERAL:
1) Full rating system, reporting (rating history, analyst and models) General Rating migration analysis, portfolio level reports and statistical analyses
2) Adherence to Basel disclosure requirements General Online reporting available for model methodology, capital requirements and portfolio performance
3) Accurate and timely information relating to the borrower General Weekly updating of financial statements. Automatic batch import of borrowers
4) Robust information technology system General SQL based portfolio database hosted and maintained by the bank, based on N-tier architecture

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