Credit risk – the risk of financial loss due to an unexpected deterioration of counterparty credit quality – has doubtless been brought into sharp focus over recent years, but it has also played a significant role in the majority of financial crises prior to this time. This ongoing need to have accurate measurement and efficient management of credit exposure is a foundation stone for firms; therefore it is essential that they are equipped with a complete gamut of tools and techniques to achieve this.
Our credit risk solution provides single name and portfolio credit risk analysis by means of three components: current and potential exposure, expected credit loss and credit value-at-risk (Credit VaR).
The solution’s counterparty structure allows users to drill down to the individual subsidiaries of an organization. The full legal structure can be implemented with distinction between branches and legally independent subsidiaries. Subsidiaries can be consolidated based on the percentage ownership. Additionally, flexible analysis by country is available.
Wolters Kluwer Financial Services Credit Risk solution
Risk mitigation techniques
- Close out netting
- Collateral and guarantees for one specific exposure or all exposures of a given counterparty
- Freedom to model any contract structure, whether from the corporate, trading or retail business
Credit line analysis
- Modelling of the expected usage of the undrawn part of a credit line
Financial product / Instrument coverage
- All credit exposure calculations applied consistently for any type of financial product/instrument from deposits to exotic options
- Specific instruments for credit risk include collateral, guarantees, credit lines, credit line opening, credit default swaps, total return swaps and credit spread options
Integrated market and credit risk analysis
- Scenarios for the potential exposure calculation can be taken directly from the market risk scenario simulation
- Credit risk factors for credit VaR can be the same or form a subset of market risk factors
For more information on how Wolters Kluwer Financial Services can help firms to meet the Credit Risk requirements, please contact us.