How to Use Credit Bureau Data to Better
Manage Retail Portfolio
Vasil Verulashvili
Head of Credit Risk
Bank of Georgia
January 2014, Tbilisi
1
Contents
•
Brief Introduction – Bank of Georgia
•
General Benefits of Credit Bureau
•
How to Use Credit Bureau Data in Different Processes
•
How to Use Credit Bureau Data in Decision Models
•
In which Models Credit Bureau Data is Generally Used
•
Summary
2
Brief introduction – Bank of Georgia
• JSC Bank of Georgia (LSE: BGEO) is the largest commercial bank in
the country, with 34.1 % market share by total assets;
• The only Georgian company with credit ratings from all three global
rating agencies: S&P: ‘BB-’, Moody's: ‘B1/Ba3’ (foreign and local
currency), Fitch Ratings: ‘BB-’; outlooks are ‘Stable’
• JSC Bank of Georgia First and still the only entity from Georgia to list
on the London Stock Exchange since 2006 (in the form of GDRs since
2006 and premium listing since February 2012, in FTSE 250);
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Brief introduction – Bank of Georgia
• JSC Bank of Georgia provids retail banking, corporate banking, wealth
management, brokerage and insurance services to its clients;
• JSC Bank of Georgia serves more than one million customers through
one of the largest distribution networks in Georgia, largest ATM
network, self service terminals and a full-service remote banking
platform and a modern call center;
4
Contents
•
Brief Introduction – Bank of Georgia
•
General Benefits of Credit Bureau
•
How to Use Credit Bureau Data in Different Processes
•
How to Use Credit Bureau Data in Decision Models
•
In which Models Credit Bureau Data is Generally Used
•
Summary
5
General Benefits of Credit Bureau
•
Makes more complete picture of customer (other banks lending, public data);
•
Supports responsible lending and reduces credit losses;
•
Increases predictive power of scoring models;
•
Increases lending opportunity of financial institutions;
•
Increases access to credit for customers;
•
Provides additional services, improves quality of lending processes;
6
General Benefits of Credit Bureau
Credit Bureau in Georgia (CreditInfo Georgia) was founded in 2005
and played one of the most important role in developing of retail lending
in Georgia, especially in Bank of Georgia;
CreditInfo Georgia is now the only credit bureau in Georgian market
servicing banks, MFIs, insurance, telecommunication companies, etc…
CreditInfo Georgia provides efficient decision making tools as well as
access to credit information databases.
Loan Portfolio Growth Rates (X)
2002 / 2005
2005 / 2013
Banking Sector - Total Loans
2.8
5.8
Banking Sector - Loans to individuals
2.1
9.5
Bank of Georgia - Total Loans
3.1
11.1
Bank of Georgia - Loans to individuals
2.8
12.6
Bank of Georgia - Unsecured Loans to individuals
4.3
22.5
7
Contents
•
Brief Introduction – Bank of Georgia
•
General Benefits of Credit Bureau
•
How to Use Credit Bureau Data in Different Processes
•
How to Use Credit Bureau Data in Decision Models
•
In which Models Credit Bureau Data is Generally Used
•
Summary
8
How to Use CB Data in Different Processes
What are we looking for in Credit Reports?
•
Current Liabilities:
–
–
–
–
–
•
Number and amounts of liabilities
Types of products
Monthly payment amounts
Number of banks
Collateral…
Credit History:
–
–
–
–
Length of payment history
Delinquency status
Credit usage pattern
Products used…
•
Inquiries;
•
Court judgments, debtors records, tax obligations, salary check status…
9
How to Use CB Data in Different Processes
How are we getting Credit Report?
•
Through the Credit Bureau website
•
Through the web service directly in application processing system
Detailed information from reports can be summarized and used in calculations
automatically, also shown in user forms when needed
•
Through the web service in batch processes
White list, Cross & Up selling
•
Getting triggers from Credit Bureau Monitoring service
Collection/Retention processes
10
How to Use CB Data in Different Processes
Sample flowchart of application processing and decision making process
Application
Form
Simple
Validation
Identity
Verification
Core System,
Reporting DWH
Credit
Bureau
Data Collecting Area
Reject
Calculations
Corrections
Policy
Rules
Scorecards
(App, Fraud)
Decision Making Area
Final
Decision
Confirmation
& Contract
Refer
Manual
Underwriting
Accept
Core
System
Disbursement Area
11
Contents
•
Brief Introduction – Bank of Georgia
•
General Benefits of Credit Bureau
•
How to Use Credit Bureau Data in Different Processes
•
How to Use Credit Bureau Data in Decision Models
•
In which Models Credit Bureau Data is Generally Used
•
Summary
12
How to Use CB Data in Decision Models
Choice 1.
Application
Details
Internal
Data
Internal
Score
LOGISTIC MODEL
Decision
Score
Score2
Low
Low Decline
Medium Decline
High Accept
Score 1
Medium
High
Decline Accept
Accept Accept
Accept Accept
Bureau
Data
Policy
Decision
Bureau
Score
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How to Use CB Data in Decision Models
Choice 2.
Application
Details
Internal
Data
Internal
Score
Bureau
Score
Bureau
Data
LOGISTIC MODEL
Decision
Score
Policy
Decision
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How to Use CB Data in Decision Models
Stylized representation of uplifts
As well as better scores, policy rules can have a significant additional advantage!
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How to Use CB Data in Decision Models
15%
Bad Rates According to
Model A
Bad Rates According to
Model B
12%
9%
6%
3%
0%
A1 A2 A3 A4 A5 A6 A7 A8 A9 A10
B10 B9 B8 B7 B6 B5 B4 B3 B2 B1
Bad Rates after combination of A & B models
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
B10
B9
B8
B7
B6
B5
B4
B3
B2
A1
B1
A2
A3
A4
A5
A6
A7
A8
A9
A10
0.0%
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How to Use CB Data in Decision Models
ROC Curve for Model A and Model A&B
100%
80%
60%
40%
GINI Ratio
Model A
Model B
40.81
44.06
20%
Model A&B
48.30
0%
0%
20%
40%
Model A&B
60%
Model A
80%
100%
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Contents
•
Brief Introduction – Bank of Georgia
•
General Benefits of Credit Bureau
•
How to Use Credit Bureau Data in Different Processes
•
How to Use Credit Bureau Data in Decision Models
•
Different Models Where CB Data is used
•
Summary
18
Different Models Where CB Data is used
•
Loan Origination
Portfolio management
–
Decision model
–
Credit risk model
–
Fraud model
–
Size of Wallet & Spend potential
model
–
Policy rules
–
Retention model
–
•
•
Pre-approvals
Collection
•
Capital
–
Collection scoring model
–
Provisioning
–
Pre-emptive strategies
–
AIRB capital model
–
When to sell Portfolio and at what
price
–
ICAAP
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Summary
•
More precise approach compare to the simple (Policy based) decision making process
•
Credit Bureau data based Scoring model is more predictive
•
CB Score is very important parameter in decision making model
Result
•
Better & Faster Decisions
20
Q&A
21