Risk & Compliance Model Management That Fits Diverse Needs

Model Management One Size Does Not Fit All

As those of you who follow this blog know, I’ve been discussing the importance of centralized model management. But centralization should not translate into one-size-fits-all.

Indeed, banks vary greatly in how they use analytics across their enterprise and the scope of their efforts to standardize lifecycle model management processes. Among our clients, we see such diversity:

A top-five US bank is centralizing management of every model across its vast enterprise. A leading Asian bank is initially focusing on ensuring their models in development achieve Advanced Internal Rating Based status under the Basel III global standard. A top-five Australian bank seeks to bridge current process inconsistencies around model tracking and validation of Basel rating models and decision models across different countries.

Because of these varied needs and goals, configurable workflow tools are a core component of any model management infrastructure. It’s essential to have the flexibility to align workflows with the... [Read More]

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Fraud & Security US Chip and Sig Strategy: Days of Future Past?

X Men - Days of Future Past poster

Do you remember those early days at school where the teacher implored you to make sure that your handwriting was neat and tidy?

Most of us get sloppier as we get older, and we adopt a slightly different style — different pressure, different emphasis, a flourish with the pen here, a glide across the characters there. I have recently been selling a property that I acquired over a decade ago and it has meant accessing papers long since stored away. Had I not known that the writing was my own on some of the aged documents, I would have sworn that it was penned by someone else’s hand.

So if we accept that there our signatures change for many reasons — not forgetting the media used, the pen wielded and the occasion involved — then how can a stranger be expected to authenticate our identity by comparing today’s signature to... [Read More]

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Risk & Compliance Three Things We Learned from Our Latest Banker Survey

Risk Survey Report Cover

Happy New Year!

We’re kicking off 2015 with the release of our latest credit risk survey results. The bank risk officers we polled in December offered interesting insights into the potential financial and economic pitfalls we may face this year. Here are three results that grabbed my attention.

Credit card debt is expected to rise. In the banker survey, 57 percent of respondents said they expected credit card debt to rise. In addition, 42 percent expected consumer loan delinquencies to rise, while 11 percent expected delinquencies to decline. However, respondents did not see consumer demand for credit slowing – 58 percent expected the amount of new credit requested to increase, and just 6 percent expected a decrease. The wealth gap is perceived to be a big deal.Nearly 74 percent of those surveyed said “the wealth gap poses a risk to the financial system in North America.” That is an increase... [Read More]

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Collections & Recovery The CFPB Will Shine a Brighter Light on Collections Reporting in 2015

Collections in Spotlight

Since its inception, the CFPB has made debt collection a top priority. I have highlighted some of the Bureau’s activities in previous posts (in April and January of last year). Last month, the CFPB again demonstrated laser-focused interest in this subject by holding a field hearing in Oklahoma City on medical debt collections. Not surprisingly, there were several noteworthy developments.

The event featured a major speech by Director Richard Cordray, the announcement of several new Bureau initiatives, as well as a panel discussion on medical collections involving a group of experts. Jim Wehmann, the leader of FICO’s Scores division, was invited to join the panel of industry and consumer advocates.

Jim highlighted FICO’s research efforts in developing the latest and most predictive credit score version, FICO® Score 9. He discussed the positive impacts derived from the score’s innovative treatment in differentiating between unpaid medical and non-medical collections, as well as... [Read More]

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Collections & Recovery Collectors Take Note: Consumers Are Paying Debt Differently

Webinar details

Banks have a new competitive battleground: Debt collection.

The same high level of attention is being given to debt collection as has long been given to the front end of the credit process: offering mortgages, HELOCs, personal and auto loans and payment cards.

Why is debt collection being added to the list? Because there’s less money to go around and consumers are managing their budgets differently.

In years gone by, consumers could take out a home equity loan, line of credit or tap into a retirement account to stay current. Today, home values are only slowly climbing back to pre-recession prices and many homeowners remain under water. Credit is tighter, and harder to qualify for. Retirement accounts aren’t being funded the way they were pre-recession, and consumers have fewer resources for debt payment.

Debts are also being paid slower and as a result, first and third parties are... [Read More]

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Fraud & Security Fighting Financial Crime — Why FICO Acquired TONBELLER

Tackling Fraud-thumb

FICO announced today that we have acquired TONBELLER an innovative provider of financial crime prevention and compliance solutions based in Bensheim, Germany. With this announcement, FICO has moved firmly into the rapidly growing market for financial crimes and compliance solutions. We intend to bring the benefits of advanced analytics and a risk-based approach to a field dominated by older, relatively inflexible, rule-based systems.

The need for these solutions is absolutely critical. CROs are under mounting pressure to manage increasingly sophisticated fraud / financial crimes as well as an increasingly dynamic regulatory environment – and to do so amid growing time and resource constraints. This is exacerbated by the fact that incumbent, rule-based systems are proving to be inflexible and costly to maintain in the face of evolving regulations – and the penalties for this inadequacy can easily reach into the billions of dollars in fines, increasing the institution’s risk and endangering... [Read More]

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Risk & Compliance Strategic Planning: How Two Banks Dodged Profit Perils


Most of us in lending would benefit from a crystal ball, particularly anyone responsible for strategic planning. Strategic planners face uncertainties arising from tightening regulation and expense constraints, economic turbulence, new competitors, and fragmented objectives. As a result, they struggle with questions like:

How do I create an achievable and balanced plan for earning more profit 12 months from now? Can I quantify the likely profit and loss impacts of combinations of actions? Which step should I take first? Must some be taken simultaneously? How can I align all stakeholders toward the common goal of a more profitable portfolio?

To find answers, we’ve been working with several banking clients on a new approach to strategic planning—one that enables them to achieve profit targets sooner through deliberate, coordinated action. The method combines analytics and domain expertise to examine the main drivers of profit and loss across the lending product’s lifecycle. It... [Read More]

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Risk & Compliance FICO Rings NYSE Bell, Marking 25 Years of Credit Swagger

FICO NYSE Credit Swagger

Yesterday, FICO rang the New York Stock Exchange (NYSE) bell to open trading, celebrating 25 years of the FICO® Score. This comes on the heels of news that Experian is making FICO Scores available to consumers at http://www.experian.com/. Indeed, the “credit swagger” shown by the FICO team in the NYSE video is the same swagger dance from new Experian commercials (Hamburger Hot Dog, Home Loan) that show consumers celebrating the power of knowing their FICO Score.

Don’t know what credit swagger is? Watch @MyFICO (NYSE: $FICO) bust it out at the 15 second mark https://t.co/WVX9rGYXUN

— NYSE (@nyse) January 7, 2015

If you can’t view the video above, view it here.

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Analytics & Optimization Popular Analytics: The Data Science of Hit Making


Data science is increasingly accepted as an effective way to accomplish things that used to be the domain of savants and soothsayers – identifying undervalued baseball players, for example, or predicting election results, or modeling the future performance of investment portfolios.

But what about matters of public taste and fashion – things that are more ephemeral and difficult to measure than batting averages and earnings growth?

In Hollywood, where creating hits is serious business, the dreams, fortunes and careers of many, many people are predicated on such fickle matters. We refer to the people at the top of that list – people like Lady Gaga, Taylor Swift and Hozier – as artists. But how much of hit-making is really art, and how much is science?

The fact is that our personal tastes in music, food and footwear can be predicted with increasing accuracy, just like our likelihood of repaying a debt.... [Read More]

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Risk & Compliance Model Management: From Work Friction to Work Flow

Insights_82_Model Management

I’ve been blogging about how increasing regulatory scrutiny is placing increased demand on bank analytic teams. Here’s the rub: This burden is settling on analytics teams at exactly the moment when demand for their services—building more models to automate more decisions—is rapidly expanding.

Banking executives want their analytic teams to bring more powerful, complex analytics to market as quickly as possible. But they also need them to capture all the details and reasons along the way so that models and their usage are transparent and explainable to regulators, customers and executives.

Executives also want to get answers that allay their concerns about model risk. It’s not just potential financial and reputational damage from regulatory noncompliance that’s worrisome. It’s also the opportunity costs of delayed model deployments and bottom-line impacts resulting from decisions based on underperforming models.

That’s why it’s so critical to have automated, configurable workflow tools as part of... [Read More]

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