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CADCalc® Credit

Regulatory rules applicable to the area of risk management in banks determine the approaches to the calculation of regulatory capital requirement for the coverage of credit risk. These rules are contained in the document Basel II which is recommendatory and in EU Directives resulting from Basel II and addressing this topic. The Czech Republic which is a EU member is necessarily bound by this laws. According to new regulatory rules, banks adopted more sophisticated methods of the calculation of capital requirement for credit risk. The result of that is a need of a software solution for the calculation of capital requirement. The solution is the software CADCalc® Credit.

What is the purpose of CADCalc® Credit? CADCalc® Credit enables to:

  • calculate the capital requirement for the coverage of credit risk (according to STA, F-IRB and A-IRB approaches)
  • calculate the expected loss
  • calculate the economic capital for credit risk through the single factor model
  • analyze the portfolio and its structure from the point of view of its risk and amount of necessary capital
  • illustrate graphically the results of the analysis which facilitates the interpretation of results
  • monitor the concentration of portfolio
  • analyse the effect of Credit Risk Mitigation instruments
  • perform stress testing of the impact of stress scenarios on the level of capital requirement and/or in the loan portfolio of a bank, to archive the results and monitor the trends in graphic format
  • prepare reporting

Calculation of capital requirement

  • calculation of capital requirement for credit risk in the loan portfolio and other assets
  • comparison of the amount of capital requirement with the actual amount of own capital held
  • comparison of the amount of capital requirement according to the used approach (STA, F-IRB and A-IRB)
  • calculation of the capital requirement and risk premium for a new loan
  • calculation of capital requirement for various sub-portfolios (e.g. regions, segments, branches...)

Calculation of economic capital

  • calculation of economic capital for credit risk on the basis of IRB functions of risk weight (based on Vašíček´s distribution)
  • possibility to set the required confidence level for the calculation of economic capital
  • even during the calculation of economic capital it is not necessary to calculate all risk parameters but it is possible to use the regulatory values under the Foundation approach
  • it is not necessary to change the form nor the format of input files
  • possibility of stress testing of the amount of economic capital
  • standard reporting and analysis of the portfolio

Credit Risk Mitigation

  • calculation of capital requirement while taking into account Credit Risk Mitigation instruments
  • combination of several Credit Risk Mitigation instruments
  • possibility to calculate and compare the results of capital requirement and with and without taking into account Credit Risk Mitigation instruments

Stress scenarios

  • standard stress scenarios prescribed by the regulator or bank management
  • analytical stress scenarios defined by the user serving for the analysis of the loan portfolio
  • modelling future fluctuations, crises and non-standard development of various combinations of risk factors
  • analysis of the impact of stress scenarios for various sub-portfolios according to actual needs of the user

Mapping tables

  • flexible solution facilitating the work with input database and allowing an easy creation of stress scenarios
  • transfer of input parameters entered in the input database via alpha numeric code into a numeric value
  • immediate and global preview of the values of input parameters
  • if values of the parameters change, only the mapping table is adjusted, there is no need to change the entire input database

Security

  • user accounts - the user logs in via a selected login name and password
  • user rights - access only to certain functions of the application CADCalc® Credit depending on the assigned rights
  • monitoring of user activity - it is always possible to find out who and how worked with the software

Advantages

  • quick and easy implementations - in terms of days
  • easy operation
  • speed - processing of thousands of exposures within seconds
  • flexibility of the solution - use of mapping tables
  • sophisticated instrument for the calibration and testing of the internal model for the calculation of capital requirement
  • control of the correctness of input data and recording of possible errors in a transparent format
  • archiving of data, settings and results of calculations for audit purposes

Compatibility

  • implementation of CADCalc® Credit - ensuring compatibility with bank's internal systems
  • support of standard database inputs
  • support of non-standard databases according to the requirements of the client
 
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