The retail scoring system incorporates rating assessments of borrowers credit standings, the quality of their collaterals, as well as the credit application. The rating evaluation is crucial for loan conditions and precedes the loan approval process.
Private or corporate rating evaluation is based on hard facts (e.g. calculated ratios from balance sheets for the last three years) and soft facts (e.g. estimates of management quality, industry sector, personal data) etc. The result is a rating score within the internal rating scale, that can be mapped to a standard rating scale (Moody's, S&P, Fitch).
The analysis of the scoring model's charachteristics is required by regulatory authorities, according to Regulation (ЕU) № 575/2013. It refers to the validation of the scoring method, during which the factors' significance, independence, sensitivity and influence, as well as the orthogonalization of the scoring structure are determined. Based on these characteristics, the reliability of the model can be ascertained. These characteristics make the scoring model’s reliability the most important element of the credit risk assessment.
The Rating and Scoring Module in Risk Framework has the following features:
For more information, see Scoring_and_Rating_Systems_Basel_III_Requirements_EN.pdf