Tuesday, June 7, 2011

Retail Banking Risk Dashboards

This write-up details KPIs that provide Risk Intelligence on a wide spectrum of consumer lending products. These reports provide actionable intelligence from executive management to operational managers in Banks and financial services institutions. These reports can be used to report on a host of loan products such as

o   Home equity lines of credit (HELOC)
o   Home refinance loans (HRL)
o   Home mortgage
o   Auto loans
o   Credit Cards
o   Unsecured loans
o   Small business loans (SBA) / lines of credit

Further these reports can easily be tailored to report on other unique or exotic consumer loan products offered by individual Banks and financial services providers. Currently most bank use Excel or PowerPoint paper outputs as the delivery media for these reports. Since usually these reports make a big pile of paper reports, they provide a great opportunity for  iPad apps.

Retail Banking Dashboards that support loan products management generally fall under two large groups of reports. The groupings reflect the back-end databases/ source systems from which these dashboards are generated. 

o   Acquisition Related Reports
o   Existing Account Reports

In addition to these reports, Banks also invest resources in building Regulatory / Compliance / Governance / Audit reports.

Acquisition reports are really a point in time view of an ever moving target. For example it provides executives and managers insights on day-to-day account bookings, dollar volume, demographics and risk segmentation of credit qualified prospects and approvals. They provide snapshots on short time spans typically daily or weekly reports. They typically use OLTP / front end underwriting systems as data source to generate the reports.

 On the other hand existing account/ portfolio reports generally source their data from a data warehouse that is refreshed usually every month. In large banks, typically several intelligent cubes or OLAP cubes will be the prime provider of data for such reports.  Although there is a time lag, these reports provide powerful insights to the Chief Credit Officer / Chief Risk Officer and his executive team to efficiently manage their portfolio in accordance with stated corporate objectives - usually financial targets.

Risk Management KPI for Consumer Lending Portfolio - An illustrative list of reports

Acquisition Related Reports

ü  New Account Acquisition Management KPI
ü  Loan applications volume / on line enquiries / pre approved solicitations
ü  Approval Rate  i.e  Approved Applications / Credit Qualified Population
ü  New Customers vs new applications from existing customers – Wallet share?
ü  Customer Segmentation -   Risk Segments  - By Credit Score Bands
ü  Income segments  -  Debt to Income ratio
ü  Current Credit  Bureau Debt Level  - shows overall debt burden
ü  Existing customer – Wallet Share?
ü  Geographic Segments                   
ü  Average  Daily Balance on DDA
ü  Exception Reporting  Low Side Overrides/ High Side Overrides
Existing Account Reports / KPI

ü  Balance and account attrition reports             
ü  Current level of Line Utilization or unpaid balance
ü  New loans sought in last 3 months?  Shopping or Wallet share opportunity?
ü  Credit Bureau Triggers - Any derogs  with any other lender?
ü  Debt to income ratio changes / alerts
ü  Change in income segments – Mass affluence migrations/changes
ü  Credit Score Migration (Change / Deterioration in loan quality)
ü  Adverse public data – possible impact on loan quality
ü  First Payment Defaults
ü  Delinquency Reports / KPI – Past due reports by severity
ü  Charge off reports – Loan default KPIs
ü  Bankruptcy  Loss Reports
ü  Fraud Losses
ü  Forecast vs actual loss reports

As mentioned earlier, this is only an illustrative list to provide guidance in designing Risk Intelligence Dashboards for Retail Banks and Financial Services. Different variations and permutations of these reports can be incrementally added to meet client’s requirements.

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