CREAM INTEGRATION

THE CREAM RISK MANAGEMENT

Credit Risk Portfolio Analysis

CREAM loads the credit risk portfolio of a bank either through data loader or through portfolio inheritance from CREAM'S Credit Risk Administration module. Once the portfolio is loaded, it is analyzed based on BIS/BASEL II guidelines and its approach adopted by a bank. Credit risks are recognized based on risk exposures and the category of the recipients of credit. Thus determined risks are subjected to netting agreements and final mitigation is further achieved through collateral evaluation. All the caps and floors are determined to ensure complete compliance to the BIS/BASEL accord and national supervisors.

CREAM Collateral

A credit risk or basket of risks, when associated to one or more collateral(s), Cream ensures that correct mitigation technique with right haircut is applied to each risk. The management of collateral is automatically carried out including their revaluation if CREAM'S Credit Risk Administration module is implemented. If CREAM handles the mark to market and re-margining, then currency mismatch haircuts are also determined. CREAM supports both the simple and comprehensive approaches of BIS/BASEL II. In case of collateral basket, CREAM supports the "H= a " basket haircut.

Credit Risk Analysis & Measurement of Credit Value at Risk

After the portfolio analysis, CREAM first measure pure credit risk of exposures. It then dynamically establishes the subsequent steps that are needed to mitigate the pure risk and to finally reach the Exposures at Default (EAD) and Loss Given Default (LGD) taking into consideration Probability of Default of (PD), Maturity (M) and Granularity (G) if required. While measuring credit risk, CREAM fully complies to and supports BIS/BASEL II standardized and Internal Ratings Based (IRB) approaches. CREAM ensures that it produces the right documentation at each step so that the reliance on its data and Credit Value at Risk (CVaR) is unquestionable. CREAM'S uses best practices in its evaluation and analysis methodology.

CREAM'S measured CVaR can be directly used for calculation of tier one and tier two capital requirement for a bank based on New Capital Accord i.e. BIS/BASEL II.

CREDIT RISK ENVIRONMENT ADMINISTRATION & MANAGEMENT

Credit Risk Policy

CREAM fully automates the credit risk division of a bank. CREAM continuously measures the bank's existing credit portfolio against the defined credit risk policy. Variable factors like concentrations and diversification of country, industry, sector, region, etc. are monitored. CREAM offers flexible definition of credit risk policy allowing various different banks to fully use the application customized to their requirements. The system monitors the bank's credit portfolio quality based on customer's internal/external ratings, collateral, etc. CREAM monitors exposure against classified limits/customers, exposure against quality of collateral, funded and un-funded exposures and more.

Credit Risk Administration

CREAM allows the bank to identify each credit limit by customer and its associated group. Once the credit is approved, all further processes and monitoring of credit risk becomes the responsibility of CREAM. The application monitors limits and sub-facilities within a main facility. CREAM maintains basket of collaterals against basket of facilities or on one to one basis ensuring calculation of correct drawing power (DP) based on individual margins/haircuts. The application monitors all Documentation Requirements and their deficiencies and classifies these to CRITICAL and Non-Critical class of documentation automatically, based on facilities and collateral.

Credit Risk Monitoring

CREAM allows monitoring of credit events based on specific dates or linked to events or on regular or irregular frequency. All such monitored event's actions are also documented by the system. Furthermore, credit exceptions and their override authorities are documented and monitored within CREAM. For example insurance renewal, customer visits, project evaluation reports, hypothecation reports, etc. are all automatically followed up. CREAM superbly monitors all approved credit so that the utilization is strictly within limits and any exceptions are promptly and accurately reported to the relevant authority. The temporary overdrafts, utilization of any facility without proper approval of limit, temporary bursting of limit, etc. are all monitored within CREAM.

CREAM'S Stand-in Credit Authorization

CREAM possesses the ability to act "Credit Authorization" system thus providing on-line authorization for credit utilization as per approved individual customer's credit parameters. It can be integrated to a bank's existing banking system (irrespective which system it is) using industry standard messaging methodology. In this mode CREAM controls all credit utilization and ensures compliance to approvals and provides credit risk measurement from the available data.

Credit Risk Operation:

Conventionally, in the absence of an application like CREAM, a customers drawdown requests are followed by series of manual events. These events involves different departments reviewing the existing situation of the customer credit from the perspective of utilization against limits, any defaults, group limits, status of collaterals, documentations and any exceptions, etc. Finally, the request is approved or denied. With CREAM, the Stand-in Authorization module carries out all these checks automatically. It thus drastically reduces processing and customer turn around time, increases operational efficiency and streamlines the process.

Risk Asset Review (RAR):

This is the most critical area within the bank that ensures "Credit Policy Compliance" and identifies all potential risks, in time, thus giving early warning to the bank's management. In the recent years, in most banks, the RAR supervisory function has shifted to bank's audit committee.

This function provides timely and sensitive credit portfolio quality information to the bank's board of directors. In this backdrop, CREAM allows many exception reports to be generated for the RAR department. These reports highlight areas where the review team may concentrate more thus getting optimum portfolio information.

CREAM Reporting:

Designing of well presented, contents rich, easy to read and meaningful reports is an art that has no relevance to risk management. Good quality automation must ensure comprehensive and informative reporting designed in a way that they provide maximum information with minimum report reading efforts. Consequently, CREAM reporting is a fine combination of art and risk interpretation. Risk management reports are designed with banks internal departments like administration, operations, risk granting, risk asset review, relationship management, corporate risk policy, together with senior management, internal and external auditors and national banking supervisors in mind.

CREAM extensively employs graphical reporting tools such as bar charts, pie charts and comparative bar graphs, etc. to simplify the data analysis. With BIS / BASEL II round the corner, it is imperative that a banks risk management system provides special reporting for the national banking supervisors. This would allow the supervisors to rely on risk management information provided by a bank for capital adequacy calculations. Credit risk policy makers, policy implementers, management and national supervisors are all greatly benefited by CREAM's specially and logically designed reporting. Furthermore, any third party RDBMS report writer can be used for generating additional report(s) by a bank. 

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