Risk & Regulatory

Unprecedented events such as COVID-19 and climate change are changing banks’ and regulators’ expectations of effective commercial risk management

Look forward, not just backwards

 

With commercial lending, forward-looking data, such as projections of revenues, enable lenders to get ahead of borrower financial hardship, industry driven risk deterioration, and potential covenant breaches. Combined with historical data, they give banks and borrowers a much deeper understanding of future risks and the opportunity to act with increased confidence.

 

PI_Icons_Bottoms_Up Bottoms Up Approach

Resulting in lower losses than traditional top-down methods

PI_Icons_Multiple_Scenarios Dynamic Stress Testing Re-run analyzes and stress test on an ongoing basis to see impact on your loan book
PI_Icons_Glass_Box 'Glass box', not 'black box' Set your own rules and see the impact of changes instantly

"As regulatory focus on credit continues to grow and evolve, tools like OakNorth are invaluable in ensuring you are able to meet important and detailed requests from supervisors."

Jeremiah Norton
Former FDIC Board Member & former Deputy Assistant Secretary, US Treasury

Get granular with a bottoms-up approach

Most banks’ risk models tend to lump all businesses into one of a dozen or so categories – for example, all restaurants, bars and hotels are classified as “Hospitality” – which disregards the fundamental differences in how these business operate and makes it harder for banks to identify the most vulnerable businesses in their portfolio.

Dynamic stress testing

In the intervening years since the ‘08 recession, regulators have sought to understand how banks’ thought processes and risk management capabilities have evolved, particularly when it comes to stress-testing. The challenge is that traditional risk models don’t take into account how quickly industries and consumer behaviors are changing. Banks therefore need the ability to re-run analyzes and stress test on an ongoing basis in order to determine how governmental or socio-economic changes are impacting their loan book.

Glass box, not black box

The ON Credit Intelligence Suite replaces the traditional third-party vendor ‘black box’ approach in favor of a ‘glass box’. Banks see the underlying assumptions that flow into the product, alter the parameters of scenarios and stress testing, and see the impact of those changes instantly. They are able to set their own rules for financial alerts, such as hard or soft covenant triggers. A sector alert is fully explainable, with direct or derived data points and context for the alert. Even for stress scenarios, the ON Credit Intelligence Suite provides full transparency on assumptions, calculations, parameters, weights and thresholds within the user interface: going a step further to provide users with the ability to create their own stress scenarios and re-run tests.

"The transparent, bottoms-up, granular view that OakNorth provides has the potential to fundamentally transform banks’ approach to commercial credit, whether deployed at point of origination, or across the second and third lines for ongoing monitoring and independent challenge."

Bruce T. Richards
Former Head of Supervision for Complex Financial Institutions, Federal Reserve Bank of New York
Take the next step

Request a demo

Request a personalized demo to discover what ON Credit Intelligence can do for your bank.

What We’ll Cover:

  • What makes our technology different
  • How rapidly you’ll see results
  • Ease of installation and cost benefits
  • Current customers and outcomes