Risk Control: Credit Risk


According to the Basel Accords (see Basel III) banks are required to measure the risk associated with their lending as well as trading practices and to cover these risks by holding a sufficient amount of equity. The main danger for financial institutions arises from borrowers defaulting on their payment obligations. This type of risk is called credit risk. In the internal ratings based approach banks use self developed rating models to estimate the probability of default for credit engagements. In addition statistical models are used for predicting the loss given default. These quantities are also used for developing pricing systems which determine the terms on which credits are granted.

The german public sector banks cooperate to develop the methods for measuring credit risks and to gather the required data. My task as a senior credit risk analyst (2012-2015) was to take part in these efforts, validate the employed systems and to identify potential risks for my employer. In addition I represented the interests of BLB in meetings where further developments of risk models are decided.

You can find a list of my former responsibilities in the following:
  • Development of rating systems: I took part in the development of rating models for ship financing and leasing companies at the rating service provider of the german public sector banks.
  • Validation of rating systems: Rating systems are regularly validated and monitored for potential economic risks. I was responsible for rating models for banks, corporate customers, leasing companies, project finance and ship financing.
  • Loss given default: The statistical models for predicting the loss ratios for defaulted loans are improved on an annual basis and need to be integrated in the banks internal processes.
  • Pricing: I was involved in the development and integration of the pricing system of the NORD/LB-group.
  • Stress Testing: To ensure that a financial institution is sufficiently capitalized stress tests, in which adverse economic situations are simulated, are regularly performed. Aside from carrying out internal stress tests I was responsible for modelling the shipping portfolio of the NORD/LB group during the eu-wide banking stress test 2014 as a major project during my work as a risk analyst.