Most of the credit rating methods and philosophies have started to be replaced with mathematical and more qualitative decision-making focused credit risk measurement methodologies. The positive developments in the Turkish economy from the year 2000, the divergence in credit facilities, the increase in operational volumes and the high inactive credit ratio have all led to increased default rates. Banks have begun to feel the need for fast, proactive and integrated processes which capture the whole credit cycle for the quantitative measurement of credit risk. During the last ten years, market risk was the most apparent risk that banks were exposed to but the expectation for the next ten years is the critical importance of credit risk, especially due to the impact of increasing credit operations.
With the decreasing interest margin, the effective use of capital is the top issue on many banks’ agendas. From this point of view, the importance of a credit book has increased due to the adoption process for Basel II and customer-based risk management practices. With this framework, credit risk management plays the key role in developing the optimal risk and return balance.
The PricewaterhouseCoopers Financial Risk Management Unit continues to support its clients with comprehensive credit risk management methodologies and systems, with the continuous communication and sharing of information among the global PwC environment. Some of the services of FRM Turkey are as follows:
- Development of integrated information and decision systems which capture the whole credit cycle
- Description of the portfolio definition in light of Basel II
- Development of scorecards for all credit portfolios
- Calculation of critical credit risk parameters required in credit risk management
- Development methodologies for the risk adjusted pricing of credit products
- Development of credit risk strategies to control credit risk
Considering all of these studies, the development of comprehensive credit portfolio management methodologies and adoption of Basel II according to the special needs of the financial institution.
