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Print Duhon Dina Thompson Wayne

Print Duhon Dina Thompson Wayne

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Published by: api-3806285 on Oct 17, 2008
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Best Practices in Credit RiskModel Monitoring
Dina DuhonWayne ThompsonCredit Risk Analytics Product ManagerCredit and Investment Risk ManagementSAS Data MiningCIBCSAS
Best Practices in Credit Risk Model Monitoring
A model should be made as simpleas possible, but not one bit simpler.Not everything that counts can becounted, and not everything that canbe counted counts.-Albert Einstein
Who Are We?
Why Do We Need to Monitor?
What Needs to be Monitored?
How to Monitor?
Where to Monitor?
SAS Model Manager Overview
Introduction: Banking in Canada
Dominated by 5 big banks (~ 90% of total bank assets in Canada)
Nationwide branch networks for many years
Huge in relation to the Canadian economy, they are less than ¼thesize of the largest international banks
Heavily regulated at the national level by the Office of theSuperintendent of Financial Institutions (OSFI)
Historically concentrated lending on prime borrowers
Recently, US and other foreign banks have entered the Canadianretail market
Non-traditional banking channels such as the Internet have becomepopular 
In this new, more competitive environment, banks are moving downmarket: offering credit products to customers who would not havequalified in the past. This increases the importance of riskmanagement
Introduction: CIBC
37,000 employees, 1,055 branches, and more than 3,800automatic banking machines
$303 billion in assets and a market capitalization of $29billion (October 31, 2006)
Largest credit card portfolio in Canada
Higher loss ratio than peers
Business mix is approximately 70% retail, 30% wholesale(2001 mix was ~50/50)
BASEL II Overview
Bank for International Settlements (BIS) in Basel, Switzerland,coordinates activities between central banks
Implemented the Basel Capital Accord 1988 (minimum capitalrequirements for all internationally active banks)
The Basel II Framework is a major revision to the 1988 Accord
Smaller banks can use a set of static rules similar to the 1988rules
Larger or more sophisticated banks will use the AdvancedInternal Ratings Based (AIRB) approach
All major Canadian banks must use the AIRB approach

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