Under this phase, our structured approach to Basel II compliance comprises a number of inter-related modules:
Credit Risk: Our structured approach consists of eight inter-related Basel II compliance modules.
Credit Risk Governance Module
Defining the bank's risk charter, its risk governance and risk organisation structure. Mapping the roles and responsibilities of the risk organisation to the objectives of the defined risk charter.
Credit Risk Policy & Procedure Module
Developing the risk policy architecture of the financial institution and mapping the procedures to enhance the efficiency of the credit risk function. Policies and procedures are specifically designed to meet Basel II compliance requirements.
Credit Risk Mitigation (CRM) Module
Modifying / developing credit risk mitigation related policies to ensure the bank's compliance with Basel II regulations. Supporting the establishment of a CRM management unit and credit risk mitigation system.
Corporate Rating Module
Developing rating models / scorecards for non-retail portfolios. For instance, this could include corporate rating models, middle enterprise rating models, small enterprise scorecards and specialised lending rating models for areas such as project finance, real estate finance and securitisation rating frameworks.
Retail Scorecard Module
Developing an application and behavioural scorecards for different retail products. Bank specific scorecards are built using judgmental and statistical techniques, depending on the availability of data.
Retail Portfolio Segmentation Module
Segmenting portfolios into homogeneous risk pools using statistical techniques which comply with Basel II guidelines covering different types of retail portfolios.
Parameter Estimation & Validation Module
Estimating credit risk parameters (PD, LGD and EAD) for each portfolio, and conducting validation tests of existing models and their risk parameters.
Regulatory Capital Calculation Module
Conducting regulatory capital impact studies under different approaches, and calculating the capital required under Basel II regulations using the Standardised and Internal Rating Based approach.