«credit histories bureau: risk management, product range, cooperation regulation». cjsc...

«Credit Histories Bureau: Risk Management, Product Range,

Cooperation Regulation».

CJSC «International Bureau of Credit Histories»

Копирование запрещено

2

RETAIL LOANS

• Auto loans

• Consumer goods loans

• Education loans

• Mortgage loans

• Credit Cards


3

RETAIL LENDING IS BOOMING

GDP as of 01.01.2006 reached 400 Bn UAH. Forecasted GDP growth:•2006 F – 3%•2007 F – 5%•2008 F – 7%•2009 F – 9%

Aggregate Credit Portfolio of banks as of 01.01.2006 reached 157 Bn UAH.•2006 F – 35%•2007 F – 40%•2008 F – 40%

Growth of loans to individuals as of 01.01.2006 reached 32 Bn UAH.•2006 F – 80%•2007 F – 80%•2008 F – 90%

Mortgage financing market size as of 01.01.2006 is 10 Bn UAH.•2006 F – 50%•2007 F – 70%•2008 F – 70%

Autolending market size as of 01.01.2006 is 6 Bn UAH.•2006 F – 70%•2007 F – 80%•2008 F – 80%

Retail market of other lending as of 01.01.2006 ≈ 16 Bn UAH.•2006 F – 70%•2007 F – 80%•2008 F – 80%


4

RISKS

50-60% of the total population have never applied for loans

• Risk of default (including anticipated losses)

• Risk of underreceived profit (average rate of failures 30-40%)


5

NBU’s risk assessment methodology is Inefficient

Following credit risk analysis methodology offered by NBU, a bank may only derive conclusions similar to the analogies below:

Analogies:– Only black or white clothes – Very cheap or very expensive hotel– Shoes sizes 35, 40 and 45 only

Due to this inefficiency, good clients may be “sifted out”.


6

Parameters

How many parameters to choose : – Initially, nobody knows which parameters are

indeed significant. – Excessive number of parameters may negatively

affect perceived evaluation. • multicollinearity • Time of questionnaire filling out

– Too few parameters (less than 5) considerably impairs successful solution of objective.

– A quick validation procedure should exist for parameters (verification and internal control).

– Scoring enables accumulation of statistical data. But information thus received may be used for purposes other than borrower’s creditworthiness assessment.


7

CREDIT BUREAU, SCORING

•A standard solution is based on the Expected Loss Rate (ELR) calculated as a result of two variables: Probability of Default (PD) and Loss Given Default (LGD):

ELR = PD * LGD•Conventional scoring systems classify clients by their default

probability, beginning from those having the lowest score (with the highest likelihood of default) to the ones with highest score (with lowest probability of default)

•LGD scoring model adds to this rating new variables by means of similar classification of clients by their expected final loss rate in case of default.

OPTIMAL RESULT MAY BE ACHIEVED ONLY WHERE THE PROBABILITY OF DEFAULT MODEL IS COMBINED WITH THE LOSS

GIVEN DEFAULT MODEL


8

Scoring of credit bureau

Principally, there exist two ways of delivery of credit bureau scoring :

– ON-LINE – Risk assessment on the basis of answers to inquiries to credit bureau followed by a credit report

– GROUP OF REPORTS (OFF-LINE) – Risk Monitoring services; portfolio analysis; solicitations; previous reviews analysis

A SPECIFIC TYPE OF SCORING IS CALCULATED ON THE BASIS OF HISTORICAL A SPECIFIC TYPE OF SCORING IS CALCULATED ON THE BASIS OF HISTORICAL DATA, CONTAINED IN THE CREDIT BUREAU’S DATABASE.DATA, CONTAINED IN THE CREDIT BUREAU’S DATABASE. THIS IS THE MOST THIS IS THE MOST COMPREHENSIVE SCORING MODEL BASED ON A HUGE VOLUME OF DATACOMPREHENSIVE SCORING MODEL BASED ON A HUGE VOLUME OF DATA


9

Types of Users

«Absolute» partnership – Partners that deliver and receive both negative and positive data,

«Extended» partnership – Partners that submit only negative information and receive both negative and positive data,

«Partial» partnership – Partners that submit and receive only negative information.

Data provider – is a partner of bureau which only provides data.

Database Registries are both public and private registries which accumulate documented information.


10

Hook up Procedure

Stage 1• Closure of Service contract between a Partner/User and CJSC “International Bureau of

Credit Histories” – 3 daysStage 2 • Coordinate compatible technical formats, and rules and deadlines of information

sharing with IBCH. If needed, do so in writing. Data collection, processing, update, transfer and storage procedures are subject to clause 4 of the IBCH’s bylaws. – 10 days

• Connection to the base and system in testing mode. If needed, preliminary analysis of a sample or entire database of the lender– 7 days

• Fill out and send to IBCH a special form with names and contacts of Partner/User’s employees designated to work with the Bureau. – 1 day

Name Position/title Contact phone e-mail

1 Lender’s representative assigned to work with CHB

2 Lender’s administrator

3 Lender’s operator

4 Operator -2

n Operator - n


11

Hook up Procedure

• Log-in on the Bureau’s website or request the Bureau directly to install the system and make steps in accordance with the Information System Connection Regulation – 2 days

• Receive personal identification numbers (PIN) from IBCH’s designated person – 1 day

• Access system in testing mode – 3 days• Work through the mechanism of data shipment to the Bureau (10% of the

data base at the most), send inquiries and receive reports. If needed, formulate recommendations to the IBCH administrator on additional agreed modules for integration with the system of borrower’s assessment, adopted by the Partner/User – 10 days

Stage 3 • If needed, Lender’s employees (administrator, operator) may go through a

short-term customized training in IBCH – 2 days

Begin regular data transfer in secure mode.


12

A lender receives 400`000 loan

applications per year, which

translates into 1`500 per day

Of these, guided by business rules, management

approves 70% - 1`050 loans

Of 1`050 loans 15% are defaults or 780

good faith borrowers

450 refusals per day

Average size of loan is 10`000 USD, average

interest is 15%

Annual income – 1`170`000 USD

Underreceived profit – 675`000

USD p.a.

10% refusals, 1`350 approvals

Sale of security, legal proceedings,

collectors’ services cost 20`000 USD

per year

Total loss – up to 700`000 USD p.a.

Of 1`350 loans 5% are defaults or

1`280 good faith borrowers

Average size of loan is 10`000 USD, average

interest is 15%

Annual income – 1`920`000 USD

Sale of security, legal proceedings,

collectors’ services cost–7`000 USD

per year

150 refusals per day

Bureau’s services to identify 450

borrowers’ cards cost 185`500 USD

per year

Total Cost – 190`000 USD


13

Rules and dates of data exchange with IBCH

IBCH offers three options of data sharing : (КК - credit committee, ОДБ – banking operational day)

Option 1.

Lender’s headquarters

Lender’s subsidiaries

Under this option, IBCH closes agreements both with lender’s HQ and subsidiaries, as separate legal entities, and issues certificates to each. Both lender’s HQ and its subsidiaries may make inquiries and receive reports in real time mode. At the end of each workday, the lender and its subsidiaries send new and/or updated data to IBCH.


14

Scoring Workflow

BANK

Leasing Company

Credit Union

IBCH WEB

IBCH SERVER

Info on borrower

Info on borrower

Info on borrower

Info on borrowerData check

Financial analysis

Credit Scoring

Credit limit

Decision report

Decision report

Decision report


15

Sample Basic Credit Report

«credit histories bureau: risk management, product range, cooperation regulation». cjsc...

Documents