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Early Warning System for a Large Commercial Bank

Project Essence

To boost their loan portfolio’s quality, a large commercial bank made a decision to develop an early warning system (EWS).

 The launch of the new solution enabled the Bank to:

 1. Improve the quality of their loan portfolio.

2. Apply a risk-based approach to analyzing the customers’ financial position.

3. Become more responsive to vulnerable clients.

4. Solve the issues of monitoring and dealing with problem assets at the pre-collection and soft-collection stages.

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About the Bank

Our client is a Central European bank (hereinafter referred to as the Bank), whose history dates back to the 1990s. As a backbone bank for entities in the non-state sector, it also has extensive experience in implementing large projects on a national scale.

The Bank is one of the most technology-led financial institutions in the region. Its complex IT landscape includes a wide range of solutions on diverse platforms, partly connected by an Enterprise Service Bus (ESB).

Project Goals

At a certain stage of its development, the Bank recognized the need to increase the quality of its loan portfolio for the corporate segment.

The Bank’s second goal was to automate the pre-collection and soft-collection activities based on the warning signals received.

Solution Requirements

To achieve the aforementioned goals, the Bank decided to build a monitoring and early warning system (EWS) that could identify borrowers at possible risk of default.

The key requirements for the early warning system for the bank were as follows:

1. The software should monitor client organizations, their executive officers, as well as collateral objects.

2. Customization of risk indicators and signals catalog, which can be done by business users without the involvement of the IT department.

3. The EWS must integrate multiple data sources: the data input into the EWS comes from both internal and external sources.

4. The system needs to have a convenient web interface for business users, which allows the analysis of new alerts based on the data collected.

5. The EWS solution has to be built using existing software licenses or open-source software.

Choice of the Contractor

To find a project executor, the Bank organized a closed RFP process by inviting major players in the banking software development market to participate.

After analyzing the market, the Bank decided to build a new system using existing software licenses or open-source software. ABLE Platform was selected as a contractor due to our rich experience in delivering innovative software solutions for financial and banking institutions. In addition, our team proposed an approach that matched the Bank’s requirements most closely.

EWS Screenshots

Approach to EWS Development

Business analysis

The ABLE Platform business analyst team organized a series of meetings with the Bank’s representatives to develop a detailed requirements analysis. As our experts are well aware of the customer needs in this area, it helped us work out the basic concept of the system and specify the following:

  • Bank’s customer profile and the permissible values of its indicators.

  • System of risk indicators and early warning alerts.

  • Comprehensive requirements for offline and online monitoring, including data sources.

  • Requirements for user screening and reporting.

Building early warning indicators for the Bank

The early warning system for credit monitoring development lasted 15 months and was divided into a number of consecutive stages.

The solution built by ABLE Platform experts provides the Bank with the following benefits:

  • Customer profile maintenance.

  • Dictionary of risk indicators and groups of indicators that can be expanded to a higher level, for example, early warning signals in credit monitoring.

  • Use of information from external and internal systems through the enterprise service bus (ESB) of the Bank.

  • Credit data analysis system implemented with the help of BRMS.

  • Employee workspace for parsing events that require manual decision-making.

  • Personal and group task queues for employees and workgroups.

  • Sending of messages to bank employees.

  • Flexible system of information security event logging.

  • Customizable reporting system.

  • Flexible role-based access control.

  • Mechanisms for internal audit and control.

Result of the EWS Implementation

Our experts have successfully solved the key project tasks. We achieved the following results:

 1. The share of overdue debts in the corporate loan portfolio decreased, i.e. the primary goal of the project was accomplished.

2. The system analyzes the financial position of the Bank’s clients based on risk indicators.

3. The solution covers the issues of both monitoring and dealing with problem assets at the pre-collection and soft-collection stages.

4. The speed and quality of response to the client’s problem position at the early stages have significantly increased.

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