ady-科尔尼上海银行风险管理项目建议书

StrengtheningRisk/RewardManagementCapabilities

A.T.KearneyInc2002年版权所有，此文件任何部分未经科尔尼管理顾问公司事先书面同意，均不得以任何形式复制ProposalForAssistanceJuly23,2002StrictlyConfidentialToday’sDiscussionOurunderstandingofBoS’currentsituationOurperspectiveonproposedinitiativesandexpectedresultsforBoSTheeffortswouldfocusondeliveringtangibleresultsWehaveproposedahand-onhigh-caliberteamtojointlyworkwiththeBoSteamWehavestrongcommitmentstoBoSAppendixProjectConsultant’sCVsToday’sTeamYearofExperience7NameHongLiManager,Shanghai11PeterKooPositionPrincipal,Shanghai10DouglasE.JacksonManager,SingaporeRelevantExpertiseandExperienceHelpeddomesticandinternationalfinancialinstitutionsinstrategyandprocessdesignExtensiveexperiencesinbankingandinsuranceindustriesConsultingexperiencesfocusonprovidingcreditriskmanagementsolutionstodomesticandglobalbanksLedmanystrategicdesignandsystemdevelopmentprojectsforBanksinSingaporeandrestofAsiaVariousconsultingandindustryexperienceininternationalfinancialinstitutionsExpertiseincreditmanagement,underwritingandprocessing5VictorDuSeniorBusinessAnalyst,ShanghaiHelpeddomesticandinternationalcompaniesinoperationsimprovementandchangemanagementExperiencesinFinanceandM&A2MichaelYaoBusinessAnalyst,ShanghaiDevelopedareviewofChinasecuritiesmarketbyidentifyingkeyplayersandrespectivestrategies,studyingmarkettrendsandassessinggovernmentregulationsParticipatedtheproposalwritingofdesigningaonline-portalforaleadingstockexchangeinChina8JorgeAzevedoManager,BrazilExtensiveexperienceinriskandcapitalmanagementDevelopmentandimplementationofacomprehensivecreditriskmanagementapproachcoveringorganization,technology,processesandstatisticalmodelsinoneofthelargestBrazilianbanksDiagnosisofthecurrentsituationinoneofthelargestBrazilianbanksToday’sDiscussionOurunderstandingofBoS’currentsituationOurperspectiveonproposedinitiativesandexpectedresultsforBoSTheeffortswouldfocusondeliveringtangibleresultsWehaveproposedahand-onhigh-caliberteamtojointlyworkwiththeBoSteamWehavestrongcommitmentstoBoSAppendixProjectConsultant’sCVsI.OurUnderstandingofBoS’SituationOurrefinedproposalhasbeenbasedontherelevantinformationprovidedbyBoSwithinthepastweekRelevanceofInformationReceivedfromBoSStatedBoSCreditRiskManagementImperativesCategoryReports/DocumentsRelevancetoRiskGradingRelevancetoPortfolioManagementCustomerInfo.BasicInformation51CapitalStructure,Management,etc.52FinancialReports(P/L,B/S,C/F)52FinancialRatios52TransactionsSummaryExposurebyloansize24Exposurebyborrowersize24Exposurebyborrowerownership23Exposurebycollateraltype24Exposurebymaturity23Exposurebyindustry25Exposurebyloanperformance25Exposurebycustomerrating25Exposure/percentagebyfacilityrating25Exposureandfacilityratingbyindustry25OtherInformationOrganizationoftheBank23Creditapprovalprocesses44Summaryofphases1&2ofITdevelopment,andplanforphase343Source:BankofShanghai,ATKAnalysisDegreeofRelevanceLow1

5HighBasedontheinformationprovided,combinedwithourcreditexperience,wehaveconcludedthatBoS’currentstatemaybestilllaggingascomparedtoemergingrelevantpracticesinAsiaComparisonofBoSwithCommonAsianPracticesCustomerGradingFacilityGradingPortfolioManagementBoS’CurrentStateEmergingRelevantPracticesinAsiaCombinationofstatistics-basedandexpert-basedratingmethodologyConsiderthecustomertransactionrecordsLinktheriskratingwithEDFestimationStrictuplimitsettingforfacilitiesbasedondifferentratiosStatisticsandexpert-basedConductedduringtheapprovalprocess(pre-loan)BasisforpricingPurelyexpert-basedjudgmentalmethodologyStaticinformation-based,notconsideringcustomertransactionrecordsNostatisticsofEDFNostrictuplimitsettingforfacilitiesExpert-basedandjudgmentalConductedaftertheloanMainlyusedtomeettheregulatoryrequirementsPartlyusedinmonitoringandcontrolPortfoliomanagementfunctionsinplaceConductedpreliminarypositioningandtargetingPreliminaryconcentrationcontrolandlimitsNoportfoliomanagementfunctionsDifferentproductsarehandledseparately(e.g.retailandinternationalbusinesses)NoclearconcentrationcontrolandlimitAssuch,wehaveconcludedthatthestatedinitiativestosupportBoS’creditriskimperativesshouldbefocusednotonlyonmeetingtheshort-termneeds,butalsohighlightdirectionalbuildingblockstoserveasabasisforfuturecreditcapabilityexcellenceStatedBoSRequiredInitiativesandObjectivesBoSCreditRiskImperativesEffectivelyconductanalyticsbased oncurrentgradingsystemDevelopnecessaryportfolio managementreportsA.CreditRiskGradingAnalyticsB.PortfolioRiskManagementReportingLonger-termCapabilityGapAssessment/RecommendationsObjectivesAsafirststepindevelopingsomebasicpredictive(or“earlywarning”)capabilities,developtheriskgradinganalyticsthatlinkriskgradingwiththeEDF,thereforedevelopcreditapprovalandprocessingcapabilitiesleveragingtheexistinggradingsystemIdentifyreportingdevelopmentneeds,definethe“to-be”reportingframeworkanddistribution,anddesigntheformatandcontentofrequiredreports,thereforeimprovethedecision-makingandportfoliomanagementcapabilitiesBaselinethecurrentorganization,processandcapabilitiesaroundcreditriskgrading,figureoutthedirectionforfuturedevelopmentShort-termTangibleResultsLonger-termDirectionSettingTowardsExcellenceStatedBoS’immediateAreaofFocusInitiativesToday’sDiscussionOurunderstandingofBoS’currentsituationOurperspectiveonproposedinitiativesandexpectedresultsforBoSTheeffortswouldfocusondeliveringtangibleresultsWehaveproposedahand-onhigh-caliberteamtojointlyworkwiththeBoSteamWehavestrongcommitmentstoBoSAppendixProjectConsultant’sCVsProposedInitiativesandExpectedResultsII.OurPerspectivesofBoS’ProposedCreditEnhancementProgramToeffectivelysupportBoS’creditriskimperatives,weareproposing3keyinitiativesthatwouldsupportbothBoS’short-termandlong-termresultsBoSCreditRiskImperativesExpectedResultsFromProposedEffortsStatistically-basedriskgradingmodelforbothborrowerriskgrade,aswellasprocess/methodologyforfutureenhancementsAudience-focusedportfolioriskmanagementreportingdesignandhigh-levelsystemspecificationfocusedonreportingdeliveryprocessandinformationsourcingIdentificationofcapabilitygapsalongorganization,process,toolsandoperationsrelatedtocreditriskgradingandportfolioriskmanagementreportingQuantitativeModelFinancialAccountingVariablesExistingDefaultModelVariablesBorrower/FacilityVariablesQualitativeModelManagement/BusinessFactorsIndustryFactorsEDF+/-FacilityRisk(1)BorrowerRiskAdjustedByXLienPositionCovenantsGuaranteeFacilityMatchingCollateralCoverageGrade12345678910EDF(%)0.–.02.021–.04.041–.10.11–.50.51–2.02.01–15.015.01–30.030.01–65.065.01–90.090.01–100S&PAAAAAABBBBBBCCCCCCDGradeABCDEFGHIJLGD(%)(2)00.01 -2.02.01 -5.05.01 -9.09.01 -15.015.01 -25.025.01 -38.038.01 -55.055.01 -75.075.01 -100.FacilityRiskGradeBorrowerRiskGradeCreditRiskAssessmentToolsFacilityCustomerConcentrationLimitsValueReportsforPresident/VPReportsforHQCreditHeadsReportsforCredit-relatedDepartmentHeadReportsforBranchHeadsFacilityCustomerConcentrationLimitsValueFacilityCustomerConcentrationLimitsValueFacilityCustomerConcentrationLimitsValue200420032002Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Ongoing)Effectivelyconductanalyticsbased oncurrentgradingsystemDevelopnecessaryportfolio managementreportsShort-termTangibleResultsLong-termDirectionSettingTowardsExcellenceInitiativesOurProposedFocusAreaA.CreditRiskGradingAnalyticsB.PortfolioRiskManagementReportingLonger-termCapabilityGapAssessment/RecommendationsCreditRiskGradingAnalyticsQuantitativeModelFinancialAccountingVariablesExistingDefaultModelVariablesBorrower/FacilityVariablesEDFFacilityRiskBorrowerRiskXLienPositionCollateralCoverageGrade12345678910EDF(%)0.–.02.021–.04.041–.10.11–.50.51–2.02.01–15.015.01–30.030.01–65.065.01–90.090.01–100.0S&PAAAAAABBBBBBCCCCCCDGradeABCDEFGHIJLossGivenDefault(%)00.01 -2.02.01 -5.05.01 -9.09.01 -15.015.01 -25.025.01 -38.038.01 -55.055.01 -75.075.01 -100.0FacilityRiskGradeBorrowerRiskGradeAsfortheriskgradinganalyticalmodel,wewouldexpect,withinthe6-7weekprojecttimeframe,tobaselinethecurrentgradingsystemandbuildlinksbetweencustomergradinganddecisionmakingindicatorslikeEDFIllustrativeForportfolioriskmanagementreporting,wewoulddeveloptheportfolioriskmanagementframework,distributionandusesofnecessaryreports,aswellastheirformatsandcontentsReportsFrameworkandDistribution

AssetAllocationCategoriesPortfolioPerformanceMetrics•

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•Profitability

RiskAdjustedProfitability

Volume&Growth

Concentration

Provisions,Reserves&Capital

HistoricalLoanLosses&Volatility

NPLMetrics

CreditRiskMetrics

PortfolioSummaryMeasures•Industry•GroupMembership•OwnershipStructure•CollateralType•CustomerSize•BusinessUnit•CustomerLocation•CollateralLocation•Customer’sMarketLocation•CreditProduct•FacilitySize•Currency•Maturity•Floating/FixedRates•PortfolioRiskManagementFrameworkIllustrativeCurrentReportContentFormatIntendedReadersUses1.CustomerInformation1.1KeyAccountRankingName,Exposure,CustomerGradingExcelLendingstaff,CreditDept.TobetterunderstandtheKAs1.2CustomerTransactionRecordName,Guarantor,Collateral,Exposure,FacilityGrading,MaturityExcelLendingstaff,CreditDept.,AuditTomonitorthecustomertransactionrecord1.3CustomerFinancialReportsP/L,BalanceSheet,CashFlowStatement,OtherFinancialInfo.,KeyRatiosExcelLendingstaff,CreditDept.,AuditTounderstandthecustomers’financialperformance…………Excel…………2.LoanSummary2.1ByindustryIndustry,No.ofLoans,ExposureExcelLendingstaff,CreditDept.,researchTounderstandtheindustryconcentrationofloans2.2ByCustomerGradingCustomerGrading,Exposure,No.ofLoansExcelLendingstaff,CreditDept.,researchTounderstandtheconcentration…………Excel…………3.InternalPerformance3.1ExposurebyBranchBranch,No.ofLoans,ExposureExcelLendingstaff,CreditDept.,researchTounderstandtheperformancesandgeographicdifferences…………Excel…………CurrentReportFormatandContentFacilityCustomerConcentrationLimitsValueReportsforPresident/VPReportsforHQCreditHeadsReportsforCredit-relatedDepartmentHeadReportsforBranchHeadsFacilityCustomerConcentrationLimitsValueFacilityCustomerConcentrationLimitsValueFacilityCustomerConcentrationLimitsValueReportsDistributionandUsesProposedOverallApproachATKhasproposedacustomizedapproachwithspecificinitiativesfocusedonimprovingBoScreditriskgradingandportfoliomanagementcapabilitieswithin6-7weeksA.CreditRisk GradingAnalyticsB.PortfolioRisk ManagementReportsFocusDiagnosesoundnessofcurrentriskgradingcapabilitiesAgreefuture-stateobjectivesandriskgradingprioritiesDeveloppreliminaryriskgradinganalyticalmodelleveragingBoS’existingcapabilityLaythegroundworkforachieveobjectiveDiagnosecomprehensivenessandusefulnessofcurrentportfoliomanagementinformationAgreefuture-stateobjectivesformanagingportfolioriskDesignhigh-priorityreports,identifycontentandlayoutdistributionframeworkInitiatedevelopmentofrequiredcapabilitiesDiagnosticDesignPlanningDiagnosticDesignPlanning2-4Weeks3-4Weeks1-2Weeks3-5Weeks3-5Weeks1-2Weeks6-7WeeksImplementPlanA.CreditRiskGradingAnalytics––KeyActivitiesKeyActivitiesReviewgradingmodel,developmentmethodologyandintendedusesBaselinecurrentunderwritingandgradingpractices/policies/controlsBaselinecurrentunderwritingskills,culture,toolsandKPIsEvaluatecurrentfacilitygradingandpricingapproachesEvaluateinternal/externaldataenvironmentandimplicationsShowcaserelevantbestpracticesacrossabovedimensionsPreparegapanalysisAgreevisionandtimingforriskgradingcapabilitiesIdentifyanddefineinitiativestosupportriskgradingobjectives,suchas(2)Modelrecalibration/statisticalvalidationapproachesFacility/gradingpricingmechanismsDesignthemodelIdentifythekeyfactorsofcreditriskgradinganalyticsDesignthestatisticalmodeltoestimateEDFbasedoncurrentdataTestthemodelincreditmanagementDeterminetheinitiativestoachievelong-termanalyticsobjectivesDuringthefirst6-7weeks,weplantofocusoureffortwiththeassessmentofBoS’’currentcreditriskgradingcapabilitiesandthedevelopmentofcreditriskgradinganalyticsDiagnose(1)AreaofFocusDesignNote:(1)Limitedtocreditgradingaspectsonly(2)Initiativestobedeterminedbasedonagreedvision1.2.3.B.PortfolioRiskManagement(PRM)Reporting––KeyActivitiesWewillalsofocusonportfolioriskmanagementreporting,relevantdocumentdesignanddevelopahigh-levelimplementationplan

ImplementKeyActivitiesDiagnoseDesignPlanBaselinecurrentreportingsystem,focusingondocumentationstructure,formatandcontentBaselinedistributionandusesofPRMinformation,especiallyinstrategicplanningandpolicydevelopmentPerformdetailedgapanalysisbetweencurrentBoSPRMreportingsystemanddocumentswithbestpracticesIdentifythekeyreportingdocumentsthatneedtobeimprovedordevelopedBaselinedataavailabilityandqualityAgreevisionandtimingfordevelopmentofportfoliomanagementcapabilitiesIdentifybusinessrequirementsonportfoliomanagementreportingDesignthereportingdocumentstructure/frameworkaccordingtoBoSbusinessrequirementsDevelopformatandcontentrequirementsofdocumentsbasedonbestpracticesDevelopguidelinesforreportgeneration1.2.3.Determinetheinitiativestodeveloplong-termreportingneedsAreaofFocusThroughoutthe6-7week’sproject,weintendtofocusonprovidingknowledgetransfertothecoreBoSteammemberswhilealsoprovidinginterimcheckpointalongthewayKeyWorkstreamsBeforeOfficialKick-off:BoSDataCleaningandPreparationCreditRiskGradingDiagnosethecurrentcreditriskratingsystemDesignrequiredriskgradinganalyticsmodelPrioritizeinitiativesanddevelopplanPortfolioManagementReportingDiagnosethecurrentportfoliomanagementsystem,focusingonthereportingdocumentsDesignrequiredreportingdocumentsDeveloprecommendations/plansforfurtherdevelopmentProposedWorkplanKeyMilestonesProjectKick-offPreliminaryWorkstreamsandMilestonesInterimReport01234567WeeksFinalReportToday’sDiscussionOurunderstandingofBoS’’currentsituationOurperspectiveonproposedinitiativesandexpectedresultsforBoSTheeffortswouldfocusondeliveringtangibleresultsWehaveproposedahand-onhigh-caliberteamtojointlyworkwiththeBoSteamWehavestrongcommitmentstoBoSAppendixProjectConsultant’’sCVsProposedApproach––KeyDeliverablesAreaofFocus

Implement

PlanCreditRiskGradingAnalyticsDiagnose(1)DesignNote: (1) LimitedtocreditriskgradingaspectsonlyA.1.1.RiskgradingorganizationbaselineA.1.2.RiskgradingprocessbaselineA.1.3RiskgradingtoolsassessmentA.1.4.RiskgradingcapabilitygapanalysisA.2.1.RiskgradingvisionandrequiredcapabilitiesA.2.2Short-termriskgradinganalyticsmodelA.3.3InitiativestobuildrequiredcapabilitiesA.3.1.Prioritizedinitiativesandhigh-levelinitiativeplan1.2.3.B.1.1.ReportingdocumentationbaselineB.1.2.DocumentedcurrentusesanddistributionofPRMinformationB.1.3.PRMreportinggapanalysisB.1.4.IdentifiedkeydocumentdevelopmentneedsB.2.1.Confirmedportfoliomanagementreportingdocumentsdistribution/framework(Shorttermandlongterm)B.2.2.Samplereportswithdesiredformatandcontent(Shortterm)B.3.1.PrioritizedinitiativesonfuturereportdevelopmentPortfolio-RiskManagement(PRM)ReportingIII.ProposedTangibleDeliverablesWorkingtogetherwithBoS,wewouldexpecttodelivertangibleandvalue-addedresults.Thedegreeofdepthwillstillbesubjecttofinalization/agreementwithBoSuponcompletionofthediagnosephaseA.B.III.ACreditRiskGradingAnalyticsEightkeydeliverableshavebeenidentifiedtospecificallyaddressBoS’shortandlongtermcreditriskgradinganalyticsrequirementsKeyDeliverablesModulesDeliverablesObjectivesA.1DiagnoseA.1.1. RiskgradingorganizationbaselineEnsureclearunderstandingofthecurrent/requiredorganizationalcapabilities(anizationaldependencies,KPIs,performancemeasures,etc)relatedtoensuringcreditriskgradingeffectivenessA.1.2. RiskgradingprocessbaselineEnsureclearunderstandingofthecurrent/requiredprocessingcapabilities(i.e.policysetting,appraisal,approvals,review,etc.)relatedtoensuringcreditriskgradingeffectivenessA.1.3 RiskgradingtoolsassessmentAssessmentandidentificationofshort/longer-termcreditriskgradingrelatedtool(s)capabilitygapswithrespecttorequiredcapabilitiesA.1.4. RiskgradingcapabilitygapanalysisSummaryofoverallcreditriskgradingrelatedcapabilitygapstoensurecreditprocessingrisksandissuesareidentifiedtominimizerisksrelatedtoimmediateprojectdeliveryrisksaswellaslonger-termcapabilitiesimperativesA.2DesignA.2.1. RiskgradingvisionandrequiredcapabilitiesClarityandconsensus,amongstkeystakeholders,ofoverallcreditriskgradingvisionandrequiredcapabilities–forbothshortandlonger-term–alignedtotheSMEbankingandcreditstrategyA.2.2. Short-termriskgradinganalyticalmodelDevelopmentofapracticalborrowerstatistically-basedgradingmodelleveragingBankofShanghai’sexistingcreditriskgradingtool–whilstidentifyingadditionalstatisticalfactorsrequiredforconsiderationEffectiveknowledgetransfertotheBoSteamtoensureself-sustainabilityinthenearfutureasthecreditriskgradingmodelfurtherevolves(asthemodelmaynotbeof100%confidencelevelbasedonpotentialexistinganalyticalandinformationqualitygaps)A.2.3 InitiativestobuildrequiredcapabilitiesIdentificationofadditionalmodelingcapabilitygapsaddressedbythemodelingteambasedonagreeduponassumptionsmadeduringtheprojectA.3PlanA.3.1 Prioritizedinitiativesandhigh-levelinitiativeplanSummaryofidentifiedkeyinitiatives,forbothoverallcreditriskgradingcapabilitiesaswellasanalyticalcapabilities,BankofShanghaishouldconsiderfurtheranalyzingorimplementingtoaddressmediumandlongertermcreditcapabilitiesissuesCreditRiskGradingAnalyticsIII.A.1.1RiskGradingOrganizationBaselineTheorganizationbaselinewillensureclearunderstandingofthecurrent/requiredorganizationalcapabilities(anizationaldependencies,KPIs,performancemeasures,etc)relatedtoensuringcreditriskgradingeffectivenessEvaluationandAssessmentCreditApprovalRiskAppraisal&PricingCalibrationofCRRPolicysettingforUsagePolicy/SystemSet-upCreditAppraisal/RenewalReviewKeyPerformanceIndicatorSkills&CultureAccuracyandtimelinessofevaluationreportingGoodloanprocessingrecordObjectiveness,fairnessandefficiencyincreditapprovalOverallobjectivenessandfairnessintheassessmentTimelinessinreportwritinganddeliveryNoperformanceevaluationcriteriaNoperformanceevaluationcriteriaWeakproblemidentificationcapabilityYearsofexperienceofcreditevaluationWeakatcreditandcustomerrecordscaparisonNospecificresponsiblepersonnelPreliminaryunderstandingofcustomer’screditstrengthwhichismainlybasedonfinancialindicatorsBasicregulationandpolicydefinitionRoles&ResponsibilitiesPeriodicallyevaluatetheperformanceoftheloantoensurerepayment

ApprovethequalifiedfacilityandloansRemarkandarticulatethepotentialbenefitsandrisksNospecificresponsiblepersonnelResponsibleforpreliminaryreportandregulationIllustrativeKeyAreatoProbeWhat’stheoverallorganizationalfitnesstoBoS’scurrentandfutureriskgradingsystem?Whatistherolesandresponsibilitiessetcurrentlyforeachposition?Whatisthecurrentperformanceevaluationcriteriaandindicatorsofeachpositionintheriskgrading?Whatareskillsandcapabilitiesrequirementofeachposition?WhatisthecreditriskmanagementcultureinBoS?CreditRiskGradingAnalyticsTheprocessbaselinewillensureclearunderstandingofthecurrent/requiredprocessingcapabilities(i.e.policysetting,appraisal,approvals,review,etc.)relatedtoensuringcreditriskgradingeffectivenessLevel2DetailsProvidedNote:(1) CRR=CreditRiskRatingSystem;ICTP=IntegratedCoreTransactionProcessingsystem(2)SubmitcreditapplicationdirectlytoBranchCreditManagementorthroughBranchCorporateBankingaccordinglytoauthoritylimitsIII.A.1.2RiskGradingProcessBaselineICTPCRRCRRSetpolicyonuseofCRRModelReview&approvepolicyNewapplicationRiskManagementCommitteeBranchCorporateBankingSub-BranchCorporateBankingBranchCreditManagementHQCreditManagementHQCorporateBankingEvaluationandAssessmentCreditApprovalRiskAppraisal&PricingCalibrationofCRRModelPolicysettingforModelUsageInputCalibratetheCRRModelInputReview&approveCRRModelPreparecreditapplicationswithCRR(2)MakecreditdecisionsDisseminatetheCRRModelPreparecreditapplicationswithCRRInformclientsandproceedwithloanprocessingInformclientsandproceedwithloanprocessingCreditrenewalNewapplicationCreditrenewalReportandanalyzeInputReview&approvechangeInputfromCRRdatabasePolicy/SystemSet-upCreditAppraisal/RenewalReviewIllustrativeKeyAreatoProbeWhatisthenormalloangrantingandriskgradingprocessofBoS?Whatprocedureandhowlongdoesittaketogothrougheachlinkageoftheriskgradingprocess?Whatarethedeterminant/coursechangingfactorsineachlinkageoftheprocess?Whomakedecisionineachlinkageoftheriskgradingprocessandwhat’stheirrespectiveauthorities?CreditRiskGradingAnalyticsIII.A.1.3RiskGradingToolsAssessmentThetoolsassessmentandidentificationofshort/longer-termcreditriskgradingwillidentifyrelatedtool(s)capabilitygapswithrespecttorequiredcapabilitiesCRRToolsCustomerInformationCollateralTransactionRecordsMacroeconomicConditionsCreditPoliciesGuarantorCustomerGradingFacilityGradingAnalyticalToolsEDFApprovalPricingProvisionLimit-SettingGood,butcanbeimprovedSomebasicutilizationNocurrentcapabilities√Riskgradingandpricingtools√Performancemeasurementtool(RAROC)√Individuallimitsystem√TransactionModel√StageofExcellenceClientModelMajorToolsNotapplicableforBoSstatusquoIllustrativeKeyAreatoProbeWhatarethetoolscurrentlyusedinBoSriskgradingsystem?Howwerethetoolsdeveloped?Whatarethesetools’currentusage?Aretheyfullyutilized?Whoarethemostfrequentlyusers?Whatarethecurrentusersspecificrequirement?Andwhatarethepotentialneedsandutilizationofthesetools?CreditRiskGradingAnalyticsIII.A.1.4RiskGradingCapacityGapAnalysisSummaryofoverallcreditriskgradingrelatedcapabilitygapswillensurecreditprocessingrisksandissuesareidentifiedtominimizerisksrelatedtoimmediateprojectdeliveryrisksaswellaslonger-termcapabilitiesimperatives…………The2gradingsystemsareseparatedandhavelittlerelationshipSystemintegrationNopre-loanfacilitygradingPost-loanfacilitygradingismainlyusedtomatchtheregulationrequirementsUsesoffacilitygradingGradinghaslimitedimpactoncreditapprovalUsesofcustomergradingIndicatorsselectedfollowingcompetitorsIndicatorSelectionGradingbasedonjudgmentalmethods,nostatisticallyreliablemethodsGradingmethodologyLackclarifiedriskappetiteClearriskappetite/cultureLackcustomerinformationandthecurrentdataisnotreliableenoughDatacompletenessandreliability54321RemarksonBoSBenchmarkingMajorGradingCapacities

Industrybestpractice BoSPracticeIllustrativeKeyAreatoProbeWhat’stheoverallgapbetweenBoS’scurrentandrequiredcapabilities?Generally,howdoesthegapimpacttheBoS’’performance?WhichgapwillhavetheworstimpactonBoS’performance?Whereisthemostoutstandingshortageandwhichonemakesthebiggestnegativeimpactontheriskgrading?Whatcanbethepossiblemodelorevolving/developingdirectionforBoS’sriskgrading?CreditRiskGradingAnalyticsIII.A.2.1RiskGradingVisionandRequiredCapabilitiesWewillclarifyandachieveconsensus,amongstkeystakeholders,ofoverallcreditriskgradingvisionandrequiredcapabilities––forbothshortandlonger-term–alignedtotheSMEbankingandcreditstrategyStagesofExcellenceRiskGradingCharacteristicsStageIStageIVStageIIIStageIIStageIPortfolioManagementfunctionactsasinvestmentunitIncreasedportfoliomanagementindependenceinre-balancingtheportfolioPortfolioManagementadvisesonrisk-basedpricingPortfolioManagementfunctionresponsibleforreportingandmonitoringloanmovementandqualityCreditprocessinghandledbybranchesNoexistenceofPortfolioManagementfunctionOrganization/GovernanceDiversifiedportfoliobasedoncorrelation-adjustedportfoliowidemeasurementsActiveuseofsecondarymarketsIncreaseduseofsyndications,secondaryloanmarketpurchasesandsalesEarlyeffortstomeasurecorrelationsTargetingselectedcustomersonrisk-adjustedreturnbasisIntroductionofloansales,trading,andderivativesConstrainunderwritingtoadheretoportfoliolimitsEarlyinterventionwithnon-performingloanLoanoriginationsheldtomaturityMinimalfocus/targetinginoriginationsPortfolioActionRAROCpricingmodelappliedSystematiccalculationofrisk-basedpricesRAROCpricingmodelappliedSystematiccalculationofrisk-basedpricesRAROCintroducedAcceptmarketpricingTransactionpricingdeterminedbySBUmanagersAcceptmarketpricingTransactionpricingdeterminedbySBUmanagersRiskPricing7-19passgradesassignedQuantitative-drivenCalibratedtoexternalratingagencies7-19passgradesassignedQuantitative-drivenCalibratedtoexternalratingagencies4-7passgradesassignedAssigningbothborrowerandfacilitygrades4-5passgradesassignedJudgmentalriskgradingmodelNoriskgradingmodelappliedRiskGrading“Maximizeeconomicreturn””Flexible