Bank Mapping Tool Quantitative Assessment of banks risk 2020 Bank - PowerPoint PPT Presentation

Bank Mapping Tool Quantitative Assessment of banks ’ risk 2020

Bank Mapping Tool A non- linear quantitative model assessing banks’ overall vulnerabilities. 1. Methodology and objectives 2. Illustrations 3. Cost and terms of use Bank Mapping Tool – BMT – 2020 2

Methodology and Objectives Bank Mapping Tool – BMT – 2020 3

Bank Mapping Tool – Methodology & objectives Conceptual approach to banks’ risk The BMT provides a quantitative assessment of the strength and ▪ vulnerabilities of banks. The tool is based on a combination of accounting indicators, ▪ grouped on three Fundamental Equilibria, with scores assigned for each bank and on each Equilibrium according to its position relative to the median (or diagonal) observed on the sample (Scores per equilibrium ranging from 1 to 16). The overall score is an unweighted geometric mean on the 3 Scores. ▪ The method remains relative, and is therefore adapted to sort or ▪ rank a list of banks and highlight vulnerabilities, weaknesses or sensitivities to economic uncertainties. Bank Mapping Tool – BMT – 2020 4

Bank Mapping Tool – Methodology & objectives Quantification principles BMT’s three Fundamental Balances Risk Balance - measures the degree of risk by combining Impaired ▪ Loans / Gross Loans, with Loan Loss Reserves / Impaired Loans. Liquidity Balance - measures the bank's vulnerability by combining a ▪ liquid assets / deposit and short-term funding indicator, with a net loan / customer and funding ratio. Strength Balance - Measurement of the strength of the bank based ▪ on the degree of capitalization (Equity / Assets) and ROAA. Bank Mapping Tool – BMT – 2020 5

Bank Mapping Tool – Methodology & objectives Potential add-ons and customization Incorporation of additional « structural » indicators to improve the ▪ segmentation of banks Definition of normative threshold closer to the bank’s traditional ▪ approach to bank risks Application of clustering techniques to the sample of banks to identify ▪ « look-alike » groups of banks. Bank Mapping Tool – BMT – 2020 6

Illustrations Bank Mapping Tool – BMT – 2020 7

Bank Mapping Tool – Illustrations Liquidity Balance - sample of large banks (2015) Bank Mapping Tool – BMT – 2020 8

Bank Mapping Tool – Illustrations Overall Vulnerability Score - sample of large banks (2015) Bank Mapping Tool – BMT – 2020 9

Bank Mapping Tool – Illustrations Banking Vulnerability for Chinese banks (2015) China – Bank Mapping Tool applied to Chinese banks – Overall relative measure of banking vulnerability Bank Mapping Tool – BMT – 2020 10

Bank Mapping Tool – Illustrations Banking Vulnerability and size, Chinese banks (2015) China: Banks’ vulnerability and size Bank Mapping Tool – BMT – 2020 11

Costs and Terms of use Bank Mapping Tool – BMT – 2020 12

Bank Mapping Tool – Cost and terms of use Data used by TAC ECONOMICS is taken from ThomsonReuters; No ▪ treatment is made unless we detect a massive anomaly. The tool is best used once a year when annual accounts are ▪ published, implying a « best time window » in H2. Cost of the service is per computation and is dependent on the ▪ number of banks included: Up to 100 banks: 2,500 EUR excluding taxes • 101 to 500 banks: 5,000 EUR excluding taxes • Above 500 banks: 5,000 EUR, plus 3 € per bank above 500 banks, • excluding taxes. Customized presentation and discussion of the results would add ▪ 2,500 EUR. Add-ons are priced according to demands. ▪ Bank Mapping Tool – BMT – 2020 13

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