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Banking Industry Solutions

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The Challenge

Poor credit quality and poor assessment of credit risk are the causes behind the failure that befalls banks. Failure in on-time identification of deterioration in credit quality aggravates the problem and prolongs the solution process. The usefulness of capital requirements would be challenged and the proper assessment process would be hampered, if the credit risk assessment policies and procedures are inadequate. This would also lead to inadequate and untimely recognition and measurement of loan losses.

The BASEL Committee has come up with several concepts on credit risk modeling and credit risk management. The banking supervisors choose those concepts which they deem fit to be executed for credit risk assessment and valuation practices.

These are some of the challenges that necessitate Credit Risk Data Capture System for every financial institution:

  • Many Banks and Financial Institutions have incurred huge losses and some of them failed due to absence of effective credit risk management system
  • Regulators require that Financial Institutions implement a comprehensive framework for measurement and control of credit risk.
  • Basel Norms threaten to impose punitive capital charges for errors and wrong estimation of credit risk data
  • Need for aggregation of risk-related information to assess the PD, LGD, and EAD