SAS said that the Israeli bank has developed its own commercial and corporate credit-risk methodology supported by advanced risk architecture and it required a solutions provider for credit risk management to build a single credit-risk database to support all aspects of the credit-risk management system.
In order to build that risk management database, the bank deployed the SAS Detail Data Store for Banking, a data model that ensures consistent data flow, SAS said.
Data that is updated or refreshed by one function will be immediately ready for use by all others, optimizing the information continually.
Bank Leumi also developed a lab for building statistical models to generate risk parameters, such as probability of default (PD), loss given default (LGD) and exposure at default (EAD).
SAS added that with its solution, Bank Leumi can rerun all credit risk questionnaires to derive new PDs should the sector risk, financial ratios or any other forecasts change.
Bank Leumi head of the credit risk modeling and measurement group Boaz Galinson said that the credit risk management approach goes beyond regulatory requirements, which do not necessarily add business value. Rather, the role is providing information that will help the business make the right decisions.
"The bank’s next big step is to optimize our Risk-Adjusted Return on Capital (RAROC) modeling.
"SAS helps Bank Leumi manage based on RAROC, which brings much greater discipline to lending decisions and ensuring that reward is consistently and accurately linked to risk, thereby maximizing real returns," Galinson said.
