A seminar on credit risk organised recently in Dubai by Moody's Risk Management Services was attended by Arvind Aiyer, assistant general manager of finance & corporate affairs and risk management, and Nasser al Rashdi, head of corporate banking, at the National Bank Oman. This seminar highlighted the issues relating to the recent proposals made by the Basel Committee regarding determination of capital adequacy and the advantages of using an internal rating approach in determining the risk weight for loans. The seminar gave details of the best practices, which can be followed in finalising the internal rating approach by a bank.
NBO with a loan book of $2 billion as at December 2001 has constantly worked towards adopting best practice credit risk systems. This has included progressive implementation of prudent practices such as an independent and full-fledged credit division, which is responsible for review of the credit risks of each credit proposal, the introduction of detailed credit verification which includes contact point verification, business verification and residence verification for retail credit, centralisation of preparation of legal documents, and the mirroring with account relationship managers in the business divisions by credit division executives to review regularly all advances above a certain level to identify potential problem exposures. As part of this process this year NBO has implemented the Moody's Financial Analyst (MFA) and Risk Calc system to assess its credit risk in a more detailed manner, as well as complement and enhance its existing credit approval process.
Aiyer says "The Moody's Financial Analyst allows for the automation of the spreading and partial analysis of the financial statements of all corporate customers to be analyzed thereby enabling the bank to differentiate customers based on risk. The Risk Calc system generates a one-year and five-year probability of default for each customer. This, along with other relevant inputs, provides an enhanced basis for the credit assessment and decision making for each credit, and also allows us to systematically weed out advances which do not meet our risk profile. The development of risk management as a core competence has also continued in other areas and toward this NBO has already organised risk awareness seminars for its managers in major areas such as credit risk, market risk, reputational and operational risk. We are also reviewing the need to adopt other latest technologies and advanced risk management practices to improve and maintain our asset quality".
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© Press Release 2005
