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How Robust Banking Book Collateral Management can Reduce Risk-Weighted Assets by 25%


There’s good news, however. Banks are finding that systematizing collateral data management enhances the ability to trace accurate Loan-to-Value (LTV) ratios and credit event histories. As a consequence, these banks can substantially reduce risk-weighted assets (RWAs).

Reduce operational costs

Common approaches to credit risk calculation

Models for credit risk calculations vary significantly around the world, but there are some key commonalities. Substantial banks are required to demonstrate reliable processes for credit data capture and integrity, as well as the ability to track and learn from credit default history. In any model, the application of out-of-date collateral values or the inability to prove that a loan has been secured will result in unused capital allowances and increased capital and opportunity costs.

Pulling RWA as low as it will go

High-quality banking book collateral management capabilities consolidate complex loan data, enabling more accurate credit risk and loan performance reporting. By capturing the right collateral data from the outset, it’s much easier to maintain associated information, such as:

  • Valuations
  • Insurance coverage
  • Flood status

In addition, consolidated data also simplifies the management of asset classifications and data aggregation across multiple business lines and jurisdictions. This helps banks achieve a complete picture of loan exposures, underlying collateral and associated relationships. Ultimately, these processes help to close gaps in loan data and reduce RWA.

Banking book collateral management fig2

Prioritize collateral across your entire lending lifecycle.

RWA over-estimations continue to put a strain on banking profit. Let Broadridge help. Our solution, COLLATE, is the only platform that puts a golden view of loan collateral at your fingertips. Close gaps in loan data and gain a complete picture of loan exposures at any level of granularity. COLLATE ensures that you can trace accurate LTVs and credit event histories over time. The result: substantial reductions in RWA.

For more, contact your Broadridge Account Representative today, or visit broadridge.com/COLLATE

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About Author

Luke Nestor has been in the Financial Services technology business for over thirty years. An expert in credit and loan systems, Luke founded Rockall to create banking book collateral management products that deliver value both operationally and strategically. Over his career, Luke has designed and built retail banking systems across multiple divisions.

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