13 May 2020
‘Working with the business to ensure a healthy credit portfolio: that's what we aim to achieve. By translating legislation and regulations into policy that's as clear and concrete as possible and providing tools such as credit risk models. More important still is our duty to keep the organisation alert to risks by asking questions, prompting discussions and imposing demands where necessary.’
Risk monitoring
Joris Cloostermans studied Financial Engineering & Management at the University of Twente. He began his career in the bank’s Credit Risk Modelling department but is now a member of the first-line credit risk team at ABN AMRO Commercial Banking. ‘Designing models is one thing, getting them to tie in with practical reality is quite another. We play a crucial role in this by acting as the linchpin between technology, data and our customers. Commercial Banking serves a huge range of different clients. So the art is to identify homogeneous groups who exhibit similar behaviour in relation to risks. Take liquidity risk, for example: to evaluate this for a small enterprise, all you need to do is monitor the balance on its bank account. Large companies, on the other hand, often have multiple accounts at several banks in different countries. This requires a different approach in order to monitor the different factors affecting risk.’
Credit Risk Models reformulated
‘As well as designing models to support the Relationship Managers in the acceptance and management process, we’re also asked to provide information to the regulatory authorities. This has resulted in three different models (probability of default, loss-given default and exposure at default), which makes things quite complex. At the moment, we’re working with 35 different models! We now want to make things more efficient. So we’ll be using state-of-the-art knowledge to reformulate the credit management process and hope this will enable us to reduce the number of models to around 20. It’ll be a very challenging puzzle.’
Regulations
A lot more regulations will be coming our way over the next few years. Our job will be to implement them in such a way that everything remains workable. With minimal disruption to our clients and the business. This calls for close coordination with various entities. But that's precisely what makes the work of a first-line credit risk manager so interesting. You come into contact with all aspects of banking and are constantly looking for the right balance between enterprise, regulations and a healthy credit portfolio.
If you’re confident of your abilities, have a background in numerical analysis and think you could make a positive contribution to this process, we’d be interested to hear from you.
