Credit Risk Evaluator 02 2009..

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Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors.Copyright (c) 2008 Standard & Poors, a division of The McGraw-Hill Companies, Inc. All rights reserved.

Credit Risk Management:

An Integrated Process

Standard & Poors

February 3, 2009


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2.Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors.

Agenda

Introduction

An Integrated Credit Risk Management Process

Credit Risk EvaluatorDemo

Questions & Answers


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Creating Value & Reducing Risk Through Credit Risk Management

Set Credit

Objectives &Responsibilities

Allocate CreditCapital

Monitor CreditPerformance

Measure CreditRisk

Set Credit RiskGuidelines

Make CreditDecisions

CollectCredit Data


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The GoalThe GoalThe Goal The RealityThe RealityThe Reality

% of borrowers by rating

10%

15% 15%

20%

15% 15%

10%

0%

5%

10%

15%

20%

25%

1 2 3 4 5 6 7

Risk Rating

%o

fborrowers

% of borrowers by rating

2% 3% 5%

78%

6% 3% 3%

0%

20%

40%

60%

80%

100%

1 2 3 4 5 6 7

Risk Rating

%o

fborrow

ers

Set Credit Objectives & Responsibilities

Credit Risk objectives help differentiate credits and guide risk appetite


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Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors.

Measurement of Expected Loss

Expected Loss = Probability of Default (PD) x Loss Given Default (LGD)

SpreadingSpreading

PD &

Obligor RiskRating

CollateralAllocation

Facility DataFacility Data

Facility Terms

Collateral Terms

Obligor DataObligor Data

Industry

Management

Financial

Expected Loss

LGD & FacilityRisk Rating


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Credit Risk Decision-making & Workflow

SeniorManagement

SeniorManagement

CreditPolicyTeam

CreditPolicyTeam

CreditOriginators

CreditOriginators

RiskManagement

RiskManagement

CreditApproval

CreditApproval

ObligorCredit

Analysis

ObligorCredit

Analysis

FacilityStructure

FacilityStructure

RiskMonitoring

RiskMonitoring

CapitalManagement

CapitalManagement

CreditGuidelines

&

Metrics

CreditGuidelines

&Metrics

Integrated Credit Risk Management PlatformIntegrated Credit Risk Management Platform

CreditAnalysts

CreditAnalysts

CreditApproval

Committee

CreditApproval

Committee


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Business Drivers for an Integrated Credit Risk Platform

Manage credit across portfolios andManage credit across portfolios andorganizationsorganizations

Uniform and transparent credit standards

Anticipate how credits will respond to changes

in market conditions

Faster and more consistent response to

borrowers

View which credits are most risky Ensure returns justify risksEnsure returns justify risks

Counter pressure on interest margins andCounter pressure on interest margins and

credit termscredit terms

Greater competitive advantageGreater competitive advantage

Responsive to evolving regulatory standards

Integrated and auditable platform Reduction in operational riskReduction in operational risk

Compliance with regulationsCompliance with regulations

Criteria Benefits


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Credit Risk Evaluator Demonstration


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Obligor Analysis: Analyzing Trends in Obligor Financial Data

Compare financial and qualitative data across periods.


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Obligor Risk Ratings: Reflecting A Banks Knowledge & Credit Culture

Estimate Default Risk using the banks rating scale and representative PDs.

Adjust Obligor Risk Rating using the banks parent company adjustment

notching rules.

Can immediately view the details that drive Obligor Risk Rating.

Risk Rating may be saved in users workspace.


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Obligor Risk Ratings: Streamline Obligor Rating Approval Process

Publish ORR for all other entitled users to view.

Submit a published ORR for credit approval.


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Obligor Risk Ratings: Streamline Obligor Rating Approval Process

Approved Obligor Risk Rating highly visible to all entitled users

after approval.Select from list of submitted

ratings to view rating details.

Only those entitled to do so can approve a submitted risk rating.

F ili S F ili T K


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Facility Structure: Facility Terms are Key

A entitled user can input and update facility information relevant to the loss given default calculation.

F ilit St t C ll t l T K


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Facility Structure: Collateral Terms are Key

Allocate collateral to a facility to determine loss given default.


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F ilit Ri k R ti St li F ilit R ti A l P


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Facility Risk Ratings: Streamline Facility Rating Approval Process

Publish the FRR for all other entitled users to view.

Those entitled to do so can submit a published FRR for approval.



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Easy viewing of the status of a rating while in the

Approval process and after Credit Approval.

Select from ratings submitted for approval to view rating details.

Only those entitled may overwrite or approve a submitted rating.

Workflow Platform: Individual User Workspace


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Workflow Platform: Individual User Workspace

An analyst can evaluate obligors and facilities in their own work environment and can leave the

analysis there until the analyst wants to share the results with a wider audience.


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Data: Multiple Methods to Load Data


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Data can be uploaded via Microsoft Excelor entered manually

Seamless integration to client data sources facilitated by open design ofCredit Risk Evaluator (CRE)

Third-party applications can be directly linked to the CRE platform

Data: Multiple Methods to Load Data

Upload obligor financial and management information, facility details, or collateral

details from Microsoft Excel files.

Manually input obligor financial and management information,

facility details, or collateral details.


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Questions & Answers


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Contact & Replay Information


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Contact & Replay Information

For additional information, please contact:

Scott Satterfield, Vice PresidentTel: 212-438- 5625

Email: [email protected]

Rod Gallagher, Director

Tel: 212-438-2493

E-mail: [email protected]

Main

E-mail: [email protected]: 212-438-1456

For a replay of this webinar, visit our website at:

www.risksolutions.standardandpoors.com


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This material is issued for informational purposes only. It is distributed with the understanding that the publisher is not rendering advice and assumes no liability in connection with its use.

The analytic services provided by Standard & Poors Risk Solutions are the result of separate activities designed to preserve the independence and objectivity of each Standard & Poorsanalytic process. Standard & Poors has established policies and procedures to maintain the confidentiality of non-public information received during each analytic process.

2009 Standard & Poors, a division of The McGraw-Hill Companies. Inc. All rights reserved.

STANDARD & POORS and CREDIT RISK EVALUATOR are registered trademarks of The McGraw-Hill Companies, Inc.

MICROSOFT and EXCEL are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries.

www.standardandpoors.com

Credit Risk Evaluator 02 2009..

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