Those organisations, already exploiting the concepts of a strategic approach to collections, are seeing significant benefits. Those yet to adopt such approaches should seriously consider how well they will continue to perform in the increasingly competitive operating environment.

With 99% of Turkish companies classified as SME’s and their demand for credit expected to soar, this new credit environment along with increasing competition has led to the essential automation and centralisation of credit granting processes for both the SME and individual consumer. As a direct consequence, scoring-based decision systems for managing the customer acquisition process have become well established and the focus is now shifting towards customer management and behavioural scoring systems.

As Turkish lenders develop their technical and business infrastructures they are also poised to take advantage of optimisation techniques to manage and maximise customer relationships. In such a complex market where risk, propensity, attrition and profitability have to be finely balanced, this presents the ideal solution for organisations wanting to maintain competitive advantage whilst managing multiple, and often conflicting, business drives and constraints.

The Accord will also lead to the convergence of retail and corporate risk management practices and to increased availability of credit, both in developed and emerging credit markets. Finally, it will facilitate a new wave of consolidation at all levels between international banking groups, among national players and even specialised financial institutions.

The Committee’s intention is to create a safer banking industry. While most banks and national trade bodies would broadly agree, there are plenty who are raising a voice of concern about the complexities of the Accord and consider difficult its timely implementation.

In Italy, for example, the Accord is generally considered to be overly complex. There are plenty in the US, too, who regard Basel II as virtually impenetrable. In South Africa, on the contrary, banks are taking a positive view of Basel II’s likely effect on making the economy more attractive for investments.

Whether or not banks have any need to comply with Basel II depends mainly on the geographical location of their operations. All international banks, regardless their position, have to comply with the Accord. Furthermore, in America, South Africa, Australia and South-East Asia, all “major” banks are also included. All banks and financial institutions operating in the EU territory – including 10-accession countries- must implement the Accord.

The immense growth in consumer credit cannot be accomplished without the necessary risk management infrastructure, as realised by countries such as South Corea or that could be experienced by East European countries.

It is normal that in the countries with sudden and immense credit expansion, there is a great interest for Credit Bureau development. Even though in many countries the banks are not directly obliged to comply with Basel II, however, many enterprises already walk towards the path of implementation, even if this path does not end in 2007. The difficulties are multiple: lack of existing risk management infrastructure both internally within the banks and within the market themselves, high initial investment to import best practice, lack of experience from national regulators in developing sophisticated compliance approaches.

The expected advantages are also important, such as, increased evaluations and access to international capitals and markets. We should take into serious consideration the fact that most “major” banks in developing countries belong to big international banking groups that must anyways comply with the Accord. While these institutions have a long experience in risk management, they deal with lack of cooperation between various national regulators (central banks) and, thus, find it difficult to apply one implementation approach for all their members. This issue is already tackled with the central banks’ coordination procedures under the auspices of the Basel II Committee.

While the implementation of Basel II is picking up pace – implementation dates are getting closer – one more interesting development has been observed. It is obvious that the risk management practices have began to influence the banks’ boardroom decisions. The main reason is the increasing recognition that the advanced risk management practices are a critical factor for the success of a bank. It is obvious that most bank decisions around the world on investments in the credit risk management territory, and their efforts to steal a march on their competitors, are being directed from their boardroom. Even in Greece, the development of risk management directions, not only in the staffing level, but even in the organisational charts of several banks, confirms the international tendency and recognition that the credit risk management sector has an increasing influence on board level decisions. Credit management has moved to a bigger home.

*English version of the article published in Netweek, Greek magazine, on October 2004.

As an official partner and sponsor of the BANRISK 2004 event, Experian Decision Analytics will hold on March 1st a residential seminar for the participants of the Banrisk game, which will  focus on the steps banks have to undertake to implement the Basel II framework for credit risk and on the advanced internal rating based approach for the retail segment.

The fourth Polish edition of Banrisk took place on November 19th 2004: the opening session discussed the rules of the game and elaborated on the results of the first trial decision taken before the training. The competition gathered 19 teams from important Polish banking institutions that took part in training events, online sessions and interactive forum discussions.

Based on the teams’ strategy implementation reports and results, and with the active mentoring support and the regular comments of a Chief Expert, all teams’ results will be calculated and the Banrisk portal game will be completed with the announcement of the winner during the final session, which will be held in March 2005.

Risk Management in Russia / 3-4 March, Zurich, Switzerland

A three-day Credit Risk Management seminar was held in Sofia by Experian Decision Analytics on November 9th-11th. Driven by practical experience, theory, case studies, tools and techniques, the event guaranteed relevance and applicability to the 30 participants, executive members from various banking and financial institutions. The participants remarked that it was a “necessary and positive seminar” and commented “a very interesting training, very useful for my day by day job”. The co-operation with the Bulgarian Banking Association provides evidence of Experian Decision Analytics’s interest to be involved in the Bulgarian market in the long term.