Limit Setting, Monitoring & Management
Limit setting is an important way for banks to control concentration risk. Most banks are challenged with developing a limit setting framework that is objective and appropriately captures the differences in forecasted credit quality of one portfolio to another.
Banks also need to have a limit setting framework where limits are easy to monitor, responsive to changes in market conditions and easy to deploy to the lending units if and when they do change
SunGard can help. SunGard’s Ambit Risk Consulting provides a comprehensive solution to limit setting.
Features
- Produces limits at the portfolio level by industry, property type, product and region.
- Produce limits at the name level by risk ratings in order to control for “lumpiness” that is produced by large borrowers
- Objectively incorporates both concentration risk and credit quality (default risk and loss risk) by making a direct link to capital.
- Provide strategies on what types of derivatives a bank can use to manage these types of risks
Benefits
- Allows management of concentrations and lumpiness to lower the likelihood of having a large scale write-off
