Re-engineering the Credit Approval Process Presented by: Nancy Hasey-Ross Date: October 5, 2011 1
Agenda • Credit life cycle assessment • Opportunities for credit re-engineering • Key accomplishments of credit re-engineering efforts • Challenges and lessons learned 2
Key Cornerstones of Credit Re-engineering • Strong governance to support ever increasing credit risk inquiries from growing number of stakeholders on a more timely basis • Better credit exposure management and control in a volatile economic climate • Global framework to address regulatory mandates and adhere to capital rules 3
Credit Life Cycle Assessment • Analyze – Counterparty Evaluation Process – Concentration Assessment – Trend Analysis – Electronic Data Feeds Manage & • Approve Analyze Control – Electronic Signatures Dimensions – Automated Workflow – Rules-Based Limit Generation • Aggregate Counterparty Product – Flexible Aggregation Approaches – Multi-Metric Methodologies – Credit Mitigating Benefits Country Business • Monitor Unit Monitor Approve – Dashboard Reporting Industry – Drill-Down Capability – Warnings & Alerts – Exception Management Dimensions • Manage & Control – Exception Resolution Aggregate – Reallocation – Audit Controls Process – Policy Guideline Checks – Role Based Security 4
Opportunities and Key Accomplishments of Credit Re-engineering Approvals and Surveillance • Opportunities – Expand credit risk monitoring and limit setting beyond legal entity and product levels – Facilitate cross-product and cross-divisional credit views to encourage more efficient use of limits – Tighten risk controls through rules, warnings, alerts, reports, and audit trail functionality – Increase automation of low-risk approval processes • Accomplishments – In March 2011, rolled out globally to 250 users including credit functions in Global Markets, Securities Finance, ERM and internationally including Germany, Asia Pacific, and London. Limited use in Luxembourg. – Provided flexible concentration limit setting and in process of building comprehensive risk analytics for counterparty legal entity, counterparty product, and country – Introduced risk-sensitive approval processes, allowing business and risk managers to focus on higher risk credit decisions – Implemented workflow rules, approval audit trail, and exception reports to tighten controls 5
Opportunities and Key Accomplishments of Credit Re-engineering Data Quality • Opportunities – Deliver credit decision makers with cleaner, more highly integrated credit data – Reduce manual data entry and minimize data duplication across systems – Centralize a standard limit and exposure dataset that also supports custom and local reporting views • Accomplishments – Improved credit decision making capabilities by increasing access to critical credit data – Established master list of all limits for all credit products across all counterparties – Automated synchronization with various source systems to ensure approved limits are up-to-date across the enterprise – Strengthened underlying data quality for enhanced credit and capital reporting 6
Opportunities and Key Accomplishments of Credit Re-engineering Efficiency • Opportunities – Standardize workflows to improve approval process efficiency across all products and counterparties – Realize significant business value from prior regulatory infrastructure investment • Accomplishments – Leveraged Basel infrastructure for counterparty, exposure and PD rating information to serve as data foundation supporting enterprise-wide limit monitoring processes – Facilitated stronger communication and collaboration across business units and international sites – Created an enterprise-wide platform to automate credit approval and exposure monitoring – Eliminated redundant data entry points and reduced operational overhead to approve and administer limits 7
Moving from Regulatory Compliance to Business Value Basel Infrastructure Credit Platform Operational Systems Risk Management System Limit Management System Fund Accounting Exceptions PD Counterparty and Alerts Counterparty, Tools Global Markets Limit details Country, and Product Utilization Aggregation Reporting Securities Finance Counterparty Banking Systems Workflow Treasury Systems Dashboards Credit Approval Workflow Exposures Approved Aggregate Loan Operations Limits Local Custody Systems 8
Moving from Regulatory Compliance to Business Value • Creates more risk-sensitive credit processes leveraging Basel framework • Improves credit decision making by providing more complete, easily accessible information • Delivers automated approach for reconciliation of limits back to the operational source systems • Strengthens underlying data quality and enhanced credit and capital reporting • Enables advanced analytics and improved capital allocation • Facilitates stronger communication and collaboration across business units and international sites 9
Global View of Credit Risk • Provides concentration limit setting and risk analytics for counterparty legal entity, counterparty product, and country • Promotes a global view of limits and exposures across internal legal organization hierarchy, product groups and industries • Supports global stakeholder base – Localized requirements: reports and exposure calculations – Workflow modification to support unique approval chains – Multicurrency for non-U.S. businesses – Time zone differences • Promotes effective use of capital using limit data 10
Counterparty Legal Entity and Product Limits Counterparty Information Legal Entity and Group Exposure Counterparty Exposure Trend Counterparty Hierarchy 11
Counterparty Legal Entity and Product Limits continued All product exposures and limits for the counterparty 12
Country Limit Structure Limits are set on a country size and risk specific basis from both a top-down perspective tied to SSB’s capital base and a bottom-up perspective that reflects business appetite. 13
Country Exposure Report by Product 14
State Street Legal Entity Views • State Street Bank Luxembourg and State Street Bank GmbH are separate legal State Street Corp entities which are part of the State Street Corporation hierarchy • Each of these legal entities must monitor SSB Luxembourg its limits and exposures in accordance with its regulators • Reports should display limits and SSB GmbH exposures from the perspective of State Street Bank GmbH, State Street Bank Luxembourg, and State Street Corporation 15
State Street Legal Entity Views • Reporting should adjust to different legal entity views • State Street corporation product exposure is $20 • SSB GmbH product exposure is $30 State Street Corp ABC Bank SSB Luxembourg $10 SSB $20 GmbH 16
Capital Allocation Optimization 8.0 • Ability to charge for unused limits 7.0 • Increased communication across 6.0 lines of business 5.0 (In $ Billions) • Reallocation across business units 4.0 3.0 2.0 1.0 0.0 Global Global Global Global Services Markets Advisors Treasury Credit Credit Allocated 17
Credit Approval Workflow Approval Monitoring Revision Creation • Approvals • Exposure • Renew single or • Product, legal required for utilization against multiple limits entity and group every request limits • Extend renewal limit creation • Multiple levels • Creates warnings dates • Shared Limits of approvals for breaches • Create a temporary • Manages each • Segregation of • Limits and limit user’s request who can create exposures are • Cancel a limit • Tracks progress a request and managed at the • Accelerated limit of each request who can lowest level, and renewals for low-risk approve aggregated FX pre-settlement • Displays across various • Reallocation approval dimensions pipeline for each approver 18
Productivity Features of New Credit Approval Process • Replacement of outdated, inflexible, decentralized systems and spreadsheets • Introduction of new risk-sensitive processes • Advanced limit setting functionality • Efficiency – can include numerous counterparties in a single request • Tabbed browsing enables multitasking across workflow, reports, and data maintenance • “One source fits all” – limits, exposure, and reference data in one place • Collaboration among business units who can view all counterparty product limits and exposure • Reduction in manual entry leads to increased accuracy Proposes Performs Approves Limit Analysis ERM Limit “Live” Business Limit Analyst Approver in LMS Unit 19
Limit Management System Workflow 20
Recommend
More recommend
