Credit risk

Credit Risk Module 3.0 is a collection of tools for managing credit risk of a financial institution. It is fully compliant with Basel III and local regulations. It calculates the risk weighted assets of all balance sheet and off-balance sheet items, mitigating the credit risk using all of the available collaterals. Advanced optimization techniques are used in the mitigation process, yielding minimal capital charge for the given set of collaterals. Counterparty risk capital charge is calculated for all of the derivatives positions. Capital requirement for large exposures is calculated, and is compliant with the local regulation. Concentration risk is calculated for the single large exposure, sector, rating, and group of related entities. Advanced measures of concentration are also calculated (Herfindahl-Hirschman index and concentration ratio).

RiskGuard* Credit Risk Module 3.0 covers data manipulation and calculations of different measures of credit risk, including:

  • Determination of Basel II and III exposure types based on logical and quantitative criteria
  • Calculation of credit risk exposures for on- and off-balance sheet items
  • Calculation of risk weighted assets (RWA) for on-balance sheet items
  • Calculation of credit conversion factors (CCF) and risk weighted assets (RWA) for off-balance sheet items
  • Estimation of credit risk mitigation effects on exposure (simplified and comprehensive approach) and calculation of haircuts
  • Calculation of measures of concentration and overexposure:
    • Concentration risk for large corporate exposures
    • Concentration risk with respect to name, sector and rating
    • Indicators of limit breaches for large exposure
    • Quantitative indicators of concentration (Herfindahl-Hirschman Index and Concentration Ratio)
  • Calculation of credit risk capital charges according to the Standardized Approach (SA):
    • Regulatory capital for on-balance sheet items
    • Regulatory capital for off-balance sheet items
    • Regulatory capital for non-market related derivatives, based on original and current exposure method
    • Regulatory capital for counterparty credit risk
  • Calculation of credit risk capital charges according to Foundations and Advanced Internal-Ratings Based (IRB) Approach