Who should be provided with a loan? This is the key question, i.e. the question of credit rating and credit scoring, faced by traditional commercial banking. The answer seems quite obvious in theory but less so in practice: anyone who will pay back your loan, increased by fees, commissions and interest amounts that cover all your costs, plus a margin which makes it profitable for you.
Credit rating and credit scoring with the finest software tool
- Capture financial statements through system interface, user screen or file upload
- Execute the analysis of the financial statements also on a historical horizon
- Calculate various types of financial indicators
- Capture qualitative information and soft facts about the client for further analysis through system interface, user screen or file upload
- Offer you our proficiency in Rating and Scoring modeling, including PD, LGD, EAD models
- Calculate Champion/Challenger simultaneously models
- Provide you with full-scale parameterization so that you can change the models, the calculations, the financial statement structures, the qualitative questionnaires later on
- Manage application or behavioral models
- Calculate ratings based on different approaches at the same time
- Integrate into the current IT infrastructure of the Bank
- Support both quantitative and qualitative measurements (expert or statistical systems)
- Centralize the scattered storage of financial data about the clients
- Support multiple IT platforms
How does it work?
In order to execute a proper model calculation, all relevant data has to be available. Our solution’s financial statement module is responsible for capturing balance sheet, P/L and cash flow statements.
Afterwards, the module calculates control checks and indicators to ensure consistency, then calculates an automated cash flow statement and compares it with the provided one.
During the financial analysis part of the credit rating/credit scoring process, the software calculates all industry standard and custom financial indicators parameterized by you for multiple periods.
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Principles of credit rating and credit scoring
The determination of the credit rating category or the credit scoring value of a given customer can be based on expert judgment, statistical or mixed models. The most widespread statistical models are the linear regression, probity or logit models.
The set of possible explanatory variables strongly depends on the asset segment (e.g., bank, retail, corporate, etc.) and the future time horizon of the risk assessment. The discriminatory power of the models can be continuously monitored and, if necessary, the existing model can be replaced with a new, stronger one.
How you will benefit from Loxon
credit rating/credit scoring
Your Loxon credit rating/credit scoring system appraises client/transaction based ratings/scorings for any possible application area where credit assessment should be used (e.g., approval, risk based pricing, historical PD estimation, Basel II IRB calculation). You can integrate it with other elements of the Loxon portfolio or use it as a standalone solution.
The software provides you with the possibility of setting expert or statistical scorecards, maintaining parameter values for the already built scorecards and assign them to processes in real time. Hence you can modify existing credit scoring/credit rating parameters as well as build new ones.
You can use both quantitative and qualitative data as input for classifications. For qualitative (soft) inputs a questionnaire builder is implemented.
The engine provides you with a flexible tool, supported with customizable data interfaces and an algorithm editor to define the methodologies with the highest selectivity power.
Once the scorecard is set, your Loxon credit rating/credit scoring system can receive input data through any standard interface communication channel, evaluate them according to your predefined method and send back the outcome immediately.
Cut off values and assessment grades are also determined in the Loxon credit scoring/credit rating system. Pre-scoring for indicative offer and early phase of negotiation with the client is available. A scenario builder helps you define different credit rating/credit scoring methodologies for the same portfolios and compare the power of them.