The client was seeking to develop a more risk sensitive measure of credit and concentration risks to address internal steering and regulatory requirements. Avantage Reply assisted the client to design and industrialise a model to evaluate economic capital in line with market practices.
The client is one of the largest corporate and investment Bank in France. It is notably specialised in capital markets activities, specialised financial services, asset management and private Banking.
The client wanted to build in the same setup, a credit risk model to assess the economic capital amount for strategic steering purposes, and, in accordance with the regulatory requirement, a more risk-sensitive measure of credit and concentration credit risk. The quantitative approach should be more sophisticated and adapted to the institutions’ portfolio, but also replace the current basic indicator used for Pillar II capital. The main issues were to:
To achieve client objectives, Avantage Reply designed a comprehensive model, from the structural specification to the process industrialisation. Main ingredients in the modelling strategy were: