Credit Risk Advantage

A risk advantage solution from SAS and Teradata

Business Challenges
Measuring and managing
regulatory credit risk requires
transaction-level data which
is not always readily available in order to capture the
performance characteristics
of each credit in the portfolio.
Financial services firms must
be able to quickly source data
for an enterprise data warehouse that can support credit
risk at the required level of
granularity, as well as myriad
other analytical and business
challenges.
Financial services firms need
to produce nontraditional
credit risk measures such
as RAROC, economic capital
or other risk and performance
measures in order to incorporate risk information into
everyday decision making.

Credit Risk Advantage part of the SAS

and Teradata Risk Advantage Program
is the only solution that integrates
an authoritative, comprehensive data
environment for credit risk decision
making. The solutions industry-leading
risk analytics meet current requirements, while also providing a framework
to support future requirements.
The underlying data model, integrated
with the Teradata Risk Data Warehouse,
helps corporations consolidate data
from disparate sources and supports
faster implementation with greater
transparency for risk information. As part
of the solution, SAS Credit Risk Management for Banking enables financial
institutions to quickly and accurately
calculate critical risk measures e.g.,
credit migration, risk-weighted assets
and regulatory capital from a compliant data environment for risk.
After analyses are complete, customizable templates enable reports to be
published to the Web, stored as PDFs
or integrated within desktop applications. Flexible reporting capabilities
enable managers to quickly identify
problems and meet regulatory requirements related to credit risk.

Key benefits
Flexibility. Allows for system evolution,
so you can think big, but start focused.
Anticipate and respond with agility to
meet future regulatory changes.
Adjust to local/regional regulations.
Anticipate future modeling
methodologies.

Integration and Data Governance.

Enables seamless integration of your
risk data, measurement and reporting
systems.
Integrate SAS Data Integration Studio
and SAS/ACCESS for Teradata
technologies for data management
and integration with Teradata.
Seamlessly integrates with other SAS
solution components.
Transparency. Promotes greater
transparency and minimizes costs
through open systems architecture.
No hidden system files or black-box
models.
All the data and intermediate steps
of calculations can be archived,
accessed, audited and validated in
the future for supervisory and internal
review requirements.
Minimizes project risk and reduces
implementation time. Reduces both
implementation time and project risk
with predefined regulatory environment
and sample reports.
Reduced implementation time for
regulatory requirements.
A data model, along with predefined
analytical and reporting processes.
Enhanced scalability and performance.
A transparent and robust system
that documents all relevant data and
processes so they can be easily
accessed and validated to meet
supervisory requirements.

Solution overview
Data model and risk repository
SAS Credit Risk Management for
Banking is integrated with the Teradata
Enterprise Data Warehouse (EDW)
platform to provide the most efficient,
accurate and transparent process for
delivering regulatory credit risk measures thats available from any vendor.
Teradatas Financial Services Industry
Logical Data Model (TD FS-LDM)
provides a comprehensive framework
for an organizations enterprise data
warehousing activities. In addition,
SAS Detail Data Store is a comprehensive, banking-specific data model
supporting risk management, customer
intelligence, performance management
and compliance solutions from SAS
and is supported on Teradata.
SAS Detail Data Store provides a
comprehensive data dictionary and is
designed to support a broad set of
banking business requirements.
Implemented in Teradata, SAS Detail
Data Store contains all data including
historical needed to populate the SAS
Credit Risk Management for Banking
data mart and SAS Credit Scoring for
Banking analytical base tables (ABTs)
to support both credit risk and credit
scoring, respectively. SAS Detail Data
Store ensures successful data mapping

covering loan, trading, risk factor,

parameters and dimensional data
to define drill-down hierarchies and
counterparty, netting set and customer
behavioral data, etc.
The data mart is populated by applying
hundreds of predefined SAS data
transformation routines, which are part
of SAS Credit Risk Management for
Banking. Together, SAS and Teradata
provide an integrated best-in-class
offering for risk data acquisition, storage,
management, analysis and reporting.
Data management
The data required by SAS Credit Risk
Management for Banking is stored in a
Teradata EDW. SAS Data Integration capabilities, optimized for Teradata, provide the
solutions data management requirements.
Consistent, accurate and reliable data is
necessary for achieving best practices in
credit risk management. Using SAS Data
Integration, the user can efficiently bring
together vast quantities of data from
across the enterprise including data
from loan capture systems, trading
systems, risk factor agencies, collateral
management systems, loan decision
systems and parameters from spreadsheets, among others. The data read
from the banks operational systems is
typically structured for specific data
models and requires data preparation,

What does Credit Risk Advantage do?

Credit Risk Advantage includes SAS Credit Risk Management for Banking,
which provides an integrated, best-of-class solution that supports modern risk
management best practices for data management and governance combined
with preconfigured risk measure calculations for regulatory and nonregulatory
credit risk measurement and management.

Why is Credit Risk Advantage important?

The combined SAS and Teradata solution is the only solution available today
that integrates an authoritative and comprehensive data environment for risk
with industry-leading risk analytics to provide a flexible credit risk analysis
environment that not only meets current requirements, but also provides a
framework that will support future requirements, too.

cleansing and quality checks in conjunction with being loaded into the warehouse. The interactive, point-and click
SAS Data Integration environment and
integrated metadata reduce the need for
custom coding, testing and maintenance,
which increases business user productivity and reduces the burden on IT staff.
Regulatory calculations and beyond
SAS Credit Risk Management for
Banking supports regulatory credit risk
management with predefined methodologies and preconfigured reporting
capabilities. The solution provides a
tabular approach for implementing the
Basel II Capital Accord and Capital
Requirements Directive (CRD) for all
three credit risk approaches (Standardized, IRB Foundation and IRB
Advanced).
In addition, SAS Credit Risk Management for Banking can assist with Basel I
regulatory calculations based on the
risk-weight approach. The solution facilitates regulatory compliance, delivering a
standardized workflow to calculate
regulatory capital the calculations are
data-driven, configurable and extensible. Regulatory analysis is integrated
with scenario analysis, stress testing
and an optimized risk mitigation
algorithm. The underlying risk engine is
SAS Risk Dimensions.
The solution also enables the use of
nonregulatory risk analytics in the same
framework as regulatory calculations,
enabling banks to take their initial
investment to a new level, in contrast
with solutions from other vendors that
propose additional full modules.
SAS Credit Risk Management for
Banking, when implemented with a
Teradata EDW, provides the flexibility to
grow and accommodate future requirements. Future regulations may allow for
applying economic capital models to
calculate regulatory capital for credit
risk. There may also be unanticipated

data requirements. The combined SAS

and Teradata solution provides the
flexibility to meet such future needs.
SAS Credit Risk Management for Banking
is integrated with other SAS solutions,
such as SAS Credit Scoring for Banking,
to enable information reuse. In this way,
the enterprise risk function adds value to
overall organizational performance management e.g., for risk-based customer
segmentation, to maximize risk-adjusted
rate of return and to migrate from a
volume- to a value-based business.
Reporting and regulatory disclosure
SAS Credit Risk Management for
Banking offers the full range of reporting
capabilities as an integrated part of the
SAS Business Analytics Framework.
The Web-based SAS Credit Risk Studio
lets users view all of the input and
configuration data, and execute SAS
Stored Processes for performing ad
hoc analysis, creating credit risk reports
and interacting with OLAP reports.
The SAS Enterprise BI Server includes
a secure, role-based portal that enables
personalized interaction with information.
Business users can access aggregated
information via an easy-to-use, Webbased dashboard. Point-and-click
dashboard development lets users create
their own dashboards in just minutes from
a variety of data sources, which:
Enables faster, more efficient decision
making.
Provides enhanced security and
reduced IT costs.
Enables self-sufficiency for users and
more strategic use of IT resources.

Key Features
Risk data infrastructure
SAS Detail Data Store for banking
calibrated to reflect bank-specific
and regulatory data requirements.

The Teradata Financial Services

Logical Data Model (LDM) is the only
integrated data model that supports
retail and commercial banking,
brokerage, investment, charge card
and insurance.
The Teradata Financial Services
LDM, enhanced with credit and
market risk management extensions
and business-line functional views,
offers firms a blueprint to structure
banking organizational data.
The SAS Risk Reporting Repository
to store results and historicize data;
the data model incorporates support
for audit.
Risk data management
SAS Credit Risk Management for
Banking uses all the power, scalability
and wealth of data management
functionality of SAS Data Integration
within the SAS9 platform.
Teradatas scalable EDW platforms
and solutions provide the ultimate
analytic foundation. The parallel
RDBMS provides a wide range of data
management applications and robust
analytic and data mining functions.
Together, these capabilities enable
organizations to use data in imaginative new ways to gain maximum value.
Regulatory calculations
Facilitates requirements for Basel I.
Basel ll/CRD regulations:
Delivers IRB capital requirements
for the following asset classes:
sovereign, bank, corporate, equity,
securitization.
Delivers capital requirements for
equity exposures based on:
market-based approach, simple
risk-weight method and internal
models method; Probability of
Default (PD)/Loss Given Default
(LGD) approach.
Delivers capital requirements for
securitization exposures based

on: standardized approach (STD);

IRB - Ratings Based Approach
(RBA); IRB Internal Assessment
Approach (IAA); IRB Supervisory
Formula (SF).
Delivers capital requirements for
purchased receivables based on:
purchased retail receivables;
top-down approach; purchased
corporate receivables; receivables
pool top-down approach;
individual receivables bottom-up
approach. Irrespective of the
approach chosen, risk weights
for purchased receivables under
IRB are calculated for both default
risk and dilution risk.
Supports preconfigured capital
calculations for the following transaction types: loans and deposits; repos;
securities; forwards; swaps; credit
risk mitigants; securitization.
Supports stress tests.
Supports regulatory netting treatment.
Supports mitigants either by using the
optimal allocation algorithms or by
using user-specified rank orderings.
Supports credit risk management
across multiple jurisdictions.
Audit and system transparency
System transparency for auditors
and supervisors.
Regulatory capital calculation:
includes mapping tables that allow
users to configure the regulatory
capital calculations at the bank level.
All the mapping tables contain date
information defining the time range
the mapping information is valid; this
functionality delivers a specification
history, which enables the user to
fully reproduce past results for audit
trail purposes.
Robust risk reporting: offers a robust
SAS Risk Reporting Repository to
store referring analysis output. By
default, offers audit and historization
capabilities.

SAS Credit Risk Management for

Banking facilitates a self-service
reporting environment that lets risk
analysts respond quickly to inquiries
from management and regulators.
Based on SAS and Teradata, a bank
can implement a risk framework that
preserves a business units autonomy
while enabling the parent bank to roll up
risk reports into an integrated, aggregated, groupwide view.
The SAS solution supports aggregation
and decomposition of all results,
including nonadditive at-risk measures
through configurable drill-down

Technical Requirements
Integration with legacy systems
SAS Credit Risk Management for
Banking easily integrates with legacy
systems and third-party data management systems.

variables (cross classifications), which

are powered by SAS OLAP technology.
Architecture
SAS Credit Risk Management for
Banking is integrated with the Teradata
EDW and also includes the SAS9
Business Intelligence Architecture,
which is scalable to an enterprise level.
It includes integration with SAS Foundation Services, SAS Metadata Server,
SAS OLAP Server, SAS Stored Process
Server, SAS workspace server and job
scheduler.
Additionally, SAS Credit Risk Management for Banking is integrated with
Teradata 12 EDW which includes
high-performance data modeling,
storage, and query and reporting
services supporting stress testing,
loan modifications and regulatory
capital management.

SAS release dependency

Audit and system transparency

SAS 9.2

All regulators and rating agencies

that follow the Basel II regulatory
approaches as best practices require
regular, independent review of their
overall risk management processes,
including: consistency, timeliness
and reliability of data; the integrity of
risk assessments provided by a
banks internal systems; and the
validation of any significant change
in the risk measurement process,
among other things.

SAS Detail Data Store 3.1

Platform availability
SAS Credit Risk Management
server (including the SAS Stored
Process Server and the SAS Metadata Server): AIX, HP PA-RISC, HP
IPF, Linux 32-bit and 64-bit, Solaris
x86, Solaris SPARC, and Windows
32- and 64-bit
Midtiers: AIX, HP IPF, Solaris
SPARC, Solaris x86, Windows 32and 64-bit
Clients: Windows 32- and 64-bit
Workstations
Java Web Application Server
JBoss 4.2
BEA WebLogic 9.2
IBM WebSphere 6.1
Language of Front End English

SAS Credit Risk Management for

Banking does not use any hidden
system files or black-box models, thus
providing transparency throughout the
process. All the data and intermediate
steps of calculations can be archived,
accessed, audited and validated in
the future for supervisory and internal
review requirements.

Enterprise Data Warehousing from Teradata

Teradata delivers a complete, single
view of your business, allowing you to
quickly glean the valuable business
insights needed to compete and win in
todays economy. The Teradata
approach provides:
A single, integrated view of the
enterprisewide data needed to
make smarter, faster decisions.
Consistent and accurate data at
both the detail and summary levels.
Parallel database processing that
supports nearly unlimited amounts
of data and users, as well as simple to
complex queries and mixed workloads.
Proven data warehousing technology
that is flexible and scalable enough
to grow with your business needs.
The opportunity to avoid the proliferation of costly and inefficient
localized data marts.
A true business partner with the
expertise needed to successfully
apply SAS solutions and analytics
within Teradata.

About SAS and Teradata

SAS is the leader in business analytics
software and services, and the largest
independent vendor in the business
intelligence market. Since 1976, SAS
has been giving customers around the
world THE POWER TO KNOW.
www.sas.com
Teradata is the acknowledged global
leader in data warehouse innovation
and analytical solution development.
Simply put, Teradata solutions make
companies smarter and give them the
competitive advantage to win.
www.teradata.com

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