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CLIENT CASE STUDY


Accenture helps Italian bank validate internal AIRB credit risk models

Developing a new framework for validating corporate and retail credit risk models

Overview

This Italian bank has over 600 branches and more than 2 million customers. Accenture helped it design and implement an improved framework for validating its internal Advanced Internal Rating-Based (AIRB) models for calculating credit risk capital requirements.

DOWNLOAD: ITALIAN BANK: A FRAMEWORK FOR AIRB CREDIT RISK MODEL VALIDATION [PDF]

Client Profile: This Italian bank has over 600 branches and more than two million customers.

Revising credit risk models

"Success in this endeavor will give the bank the opportunity to be part of the first group of Italian banks subject to the new European Central Bank (ECB) supervision."

This client undertook the revision of its credit risk models, processes and IT architecture to meet new regulatory requirements and efficiently manage its credit risk. Success in this endeavor will give the bank the opportunity to be part of the first group of Italian banks subject to the new European Central Bank (ECB) supervision. Based on its experience and good track record in this area, the bank asked Accenture to support it in conducting an assessment to identify potential gaps and actions required to validate its internal credit risk models, which are based on the AIRB approach for the capital requirements calculation related to credit risk.

Assessing design & methods

The bank’s goal was to establish an improved framework of internal models for calculating credit risk capital requirements. Accenture did a preliminary assessment to identify the main actions as well as the areas of credit risk (models, processes and IT architecture) that needed to be refined.

Accenture helped the bank’s Internal Model Validation function evaluate the design and the methodological choices underlying Probability of Default (PD) models on corporate and retail portfolios, and to design a new framework of internal controls for its PD models.

Accenture also provided project management and coordination support. This includes:

  • Definition of project streams and master plan, roles and responsibilities, and main interventions and goals

  • Coordination of the business divisions and resources involved

  • Management of deadlines

"The bank can now manage the ongoing validation of PD models in a more structured way."

A new framework

With Accenture’s support, the client has developed a new framework of internal controls that can easily be managed and monitored by its Internal Validation Office. Accenture has also helped the bank create a reporting tool to monitor results.

The bank can now:

  • Manage the ongoing validation of PD models in a more structured way.

  • Clearly understand the challenging choices to be made to improve its rating models.

  • Gain insight into day-by-day issues arising across its different offices involved in the overall project.

Based on the strong relationship built with the client and the Accenture team’s execution of the project, the bank has asked Accenture to support it in the implementation of the identified interventions.

DOWNLOAD: ITALIAN BANK: A FRAMEWORK FOR AIRB CREDIT RISK MODEL VALIDATION [PDF]