Axtria Insights

Axtria Insights

CASE STUDY
Axtria Created an Off-shore Dedicated Modeling Team for a Bank’s Regulatory Modeling Assignments

Situation

  • A leading Bank wanted to build Basel-II models for regulatory compliance for products like credit cards, personal loans, mortgages
  • Client was facing shortage in terms of Basel skilled resources in compliant risk methodologies

Approach

  • 10 member team deployed at client location for ongoing Base II model building, documentation and implementation
  • A trained and experienced team to provide
    • Modeling support across products and geographies
    • Model development & validation support for ongoing monitoring of bank portfolio
  • SME inputs from our Basel experts on need  basis
  • Flex Staffing Capability to ramp up or down as per the project requirements
Data Understanding and Definition of Default
  • Identified the timeframe to build the model as per the Basel requirements
  • As per Basel accord and BIPRU rules crafted a definition of default
  • Understanding of data marts, data dictionaries and variables definition
Data Validations and Segmentation
  • Validation and QC of data and performing data consistency checks
  • Benchmarking of input data sources with relevant standard client MI
  • Segmentation analysis to evaluate segmentation in line with Basel clauses
  • Separate segmentations carved out for PD EAD LGD on respective risk drivers
PD, LGD, EAD Parameter Estimation
  • MVI and Outlier treatment using various techniques
  • Probability of Default (PD) modeling using logistic regression
  • Data preparation for LGD – Identification of work out window, chain ladder modeling
  • EAD computation using CCF and OS balance methodologies
Documentation and Implementation
  • Documented key data assumptions, data analysis, and approach in detail
  • Thorough documentation of entire modeling exercise and methodologies used
  • Documentation of alternate methodologies considered
  • Documentation of implementation and monitoring framework
  • Implementation and Monitoring code

Results

  • Enhanced ability to meet Basel timelines
  • Benchmarking of internal methodologies to industry best practices
  • Streamlined model development and implementation
  • Comprehensive and state of the art documentation
  • Enhanced ability to meet the timelines as per Basel Accord framework & regulatory requirements
  • Robust and business logic driven segmentation scheme which helped in portfolio decision making

modeling team for bank regulatory modelling assignments