China Minsheng Banking (CMBC) has selected FICO, a provider of analytics and decision management technology, for Basel II compliance consulting, analytic services and support.
The project is part of CMBC’s initiative to focus on small and micro businesses by using data-based risk management tools and analytics.
The bank will align its capital reserve requirements with more precise risk assessments to improve bank’s risk management and satisfy government mandate.
Through this initiative, CMBC is expected to reduce its capital reserve requirement.
FICO said it will test and verify the existing grading model and design new grading models for application, transaction and collection in the small and micro business, retail and credit card businesses. It will also conduct pool assignments of risks and estimate PD, LGD, EAD and other risk indicators.
In addition, the FICO team will develop strategies for retail products and advise on IT requirements.
CMBC member of the Basel II Implementation steering committee Zhao Jichen said this initiative will allow CMBC to improve its risk management while reducing capital requirements, thereby freeing up capital to fuel additional growth.