Credit exposures: Don't get caught off guard

On the surface, both activities may seem simple and straightforward: envision what you want, outline objectives to be met, and then build according to a simple set of rules. However, whether creating a framework to address risk weights for credit exposures or the framing of a dream house, the key is not to be caught off guard.

In the classic film Mr. Blandings Builds His Dream House, Mr. Blandings is caught off guard and pays the price – both situationally and financially. While unexpected scenarios may be humorous onscreen, being unprepared for regulations that affect multiple reporting schedules across jurisdictions and can result in inefficient or inaccurate risk weighting and capital allocation is not so amusing. Therefore, financial institutions may be asking themselves critical questions as they assign risk weights for credit exposures, including:

• What happens if a customer has 3 loans on 4 properties that are a mix of residential, commercial, buy-to-let, and other types?
• Must all loans be treated as commercial or can the allocation of collateral be segregated and/or optimised?
• What if repayment of the loan on residential property depends on cash flow generated from the property?

To address these important questions and others, it is essential that organisations build a data standard infrastructure that includes governance, controls, and the Cloud, for example, and seamlessly maps/ingests/aggregates disparate source data while quickly and accurately adapting to regulatory changes.

This article provides insights into how FIRE delivers harmonised data and enables confident risk weighting of credit exposures.

If you are currently working on improving your regulatory reporting processes or would like to learn more about how Suade is automating regulation for global financial institutions, then please get in touch to arrange a demo.