Credit Precisor

A fully audited and efficient process for loan risk-based pricing and also has the functionality to calculate the borrower´s credit creditworthiness.

Precisor Loan Pricing


Credit Precisor software enables a fully audited and efficient process for risk-based loan pricing and calculation of borrower’s credit creditworthiness (rating/scoring grade and corresponding PD as well as LGD with collateral evaluation).

The risk-based loan pricing is accurately calculated based on the credit risk costs (PD, LGD, EAD, capital), cost of funding, operating and administrative costs, interest rates and detailed transaction characteristics as well as any adjustment to market condition and competition (contact AnalytiX Boutique for a demo and commercial details).

Precisor Risk-Based Loan Pricing software is built to comply with regulations such as EBA’s GUIDELINES ON LOAN ORIGINATION AND MONITORING and similar regulations in other jurisdictions.

The main risk-based loan pricing features provided by Precisor Risk-Based Loan Pricing software are:

  • Accurate risk-based loan risk-based pricing and IFRS9 considerations
  • Environmental and Social Governance (ESG) evaluation
  • Transaction and client relationship profitability analysis (EVA, RAROC, RORWA, RORAC, ROTA and others)
  • Ex-post profitability analysis of the loan portfolio
  • Assessment of borrower’s creditworthiness (Rating/scoring)
  • Loan creditworthiness scenario analysis engine
  • Cost allocation engine
  • Monitoring
  • Internal governance for credit granting

Download Precisor Risk-Based Loan Pricing application brochure.

Credit Precisor Risk-Based Loan Pricing provides an accurate risk-based loan pricing framework considering, but not limited to, the following factors:

  • Credit risk costs including rating, PD (TTC/PiT), LGD, expected loss (ECL/IFRS9) and economic capital/regulatory capital
  • IFRS9 considerations: PDs and expected losses resulting from IFRS9 reserves
  • Transaction characteristics:  Credit Precisor Risk-Based Loan Pricing permits a cash-flow projection customised to each product specific features including commissions, interest payments (fixed vs. variable, reference IR and other), amortization schedules, withdrawals, collaterals, guarantees and any other product characteristic. It based on the life of the product. This permits to create a specific modelling for almost any product (i.e., credit lines, export credit letters, leasing, Real Estate finance, promissory notes, guarantees, factoring and so and so forth). It is even possible to model cash-flow for multi-products bundled into the same marketing offer
  • Funding costs: Credit Precisor Risk-Based Loan Pricing permits customised funding costs allocation based on client criteria and methodology
  • Immovable or movable collateral: collateral value, corresponding LGD, haircuts and schedules of any kind of collateral or guarantee
  • Commissions’ flexible module: Credit Precisor Risk-Based Loan Pricing contains a module to model multiple features of commissions allowing a precise cashflow projection from each facility commissions, assuming one or many commissions per product
  • Operating and administrative costs: as calculated by the institution and allocated to each product or transaction characteristics
  • Competition and prevailing market conditions: Credit Precisor Risk-Based Loan Pricing permits to compute the pricing based on a target profitability/hurdle rate or, alternatively, calculate the implicit transaction profitability (EVA, RAROC…) based on a target pricing allowing to adjust the pricing while understanding the profitability implications

Credit Precisor Risk-Based Loan Pricing’s very flexible configuration of rating and pricing algorithms and forms permits to implement a robust ESG framework in compliance with ECB guidelines or other similar regulations:

  • Credit Precisor provides the appropriate ESG instruments to identify, measure and mitigate climate-related and environmental risks in the periodic reviews and allows institutions to perform regular internal reviews, for instance, in the context of the ICAAP
  • Credit Precisor provides a sufficient granular ESG classification of client exposures to correctly assess climate-related and environmental risks, and the assess the portfolio exposures to these risks
  • Credit Precisor permits to control and implement institution’s risk appetite framework and to manage ESG related risk, through (sub-)sector, geography, sovereign, businesses or other lending limits highly exposed to climate-related and environmental risks
  • An institution can also set limits on financing certain sensitive economic (sub-) sectors, sovereigns, businesses or real estate exposures or even excluding some specific (sub-) sectors or borrowers from credit-granting that are not aligned with its climate-related risk appetite 
  • Accordingly, it permits to include climate-related and environmental risks in all relevant stages of the credit-granting process and credit processing and to capture the opinion on how climate-related and environmental risks affect the borrower’s default risk
  • Credit Precisor can be configured to consider climate-related and environmental risks in the collateral valuations and to give benefit to environmental compliant assets, and consequently adjusting prices of collaterals exposed to those risks 
  • The risk-based loan pricing algorithm can be configured to deploy an ESG sensitive pricing framework. Loan pricing can be defined to reflect the different costs driven by climate-related and environmental risks  
  • Credit Precisor Risk-Based LOAN Pricing’s algorithm can be configured to transmit the benefits of using lower cost liabilities thanks to green funding initiatives

Credit Precisor Risk-Based Loan Pricing permits a detailed profitability analysis for accurately structuring the transaction adding collateral, guarantees commissions, cross selling and other:

  • Multistep profitability metrics: EVA, RAROC, RAROC, RORWA, ROTA, spread analysis and other are calculated over the life of the transaction and are reported on annual basis for each period and on a cumulative basis
  • Transaction structuring impact analysis: as additional collateral, guarantees, insurance, cross selling or other is added to the transaction, the profitability analysis can be recalculated for the profitability impact evaluation
  • Facility vs. client profitability: Credit Precisor Risk-Based Loan Pricing can provide multiple profitability views including a stand-alone transaction, application which may include multiple facilities and the client and/or group profitability view. It is possible to calculate the contractually secured cash-flows profitability or the assume the renewal of existing facilities to project the profitability into the future. Using the client profitability view it is possible to assess the appropriateness of a low profitability transaction to support a client relationship
  • Ex-post profitability analysis: the facility, application, client or client group profitability can be analysed after approval given any potential changes in rating, expected recoveries, or other variables used for pricing
  • Optimization of transaction terms: Credit Precisor Risk-Based Loan Pricing permits to optimise (e.g. break even) the spread, commissions, collateral or any other facility feature in order to achieve a minimum target profitability

Credit Precisor Risk-Based Loan Pricing permits to calculate Ex-Post profitability by loading all portfolio assets and evaluating the actual performance of each transaction looking the actual commissions charged, interest paid (i.e., arears interest rates), transaction actual length, etc. Portfolio analysis can be performed and compare the actual profitability to the profitability originally forecasted for the portfolio and each of the transactions. In addition, application, client, group or market segment profitability analysis can be generated to better define management strategy.

Today’s highly volatile business and macroeconomic environment makes the portfolio value be correspondingly volatile and the analysis of its potential value change in different macroeconomic of great value for the institution. Credit Precisor Risk-Based Loan Pricing provides a scenario simulation engine to evaluate the impact of business and macroeconomic circumstances into the loan portfolio value. Risk-based loan pricing inputs (PDs, LGDs, IR, Forex, Rating transitions, Opex, cost of capital, etc.) are modified according to the scenario evaluated and each loan profitability and risk-based loan pricing metrics (RAROC, EVA, ROA, etc.) revaluated for each loan and for the portfolio as a whole. This permits understanding in advance how a scenario may impact the portfolio performance providing a valuable input for an proactive portfolio management.

Credit Precisor Risk-Based Loan Pricing provides a highly flexible environment to create a customized credit debtor rating/scoring and loan data template process (input). It permits the creation of any type of questionnaire and analysis:

  • Predefined proprietary rating models (optional)
  • Any type of client: individuals, micro-companies, SMEs, corporates, financial institutions and more
  • Any industry: agriculture, services, manufacturing, Real Estate developers, and others
  • Rating dimensions: qualitative, financial, other numerical data and more
  • Spreading tool for financials and others
  • Non financials considerations: environmental, social, industrial and economic development questionnaires
  • Warning signals and overides
  • Risk analytics: calculation of Probabilities of Default term profile
  • Strategy: rating process can be defined for efficiency lending or to deep analysis with strong governance and anything else in between
  • Loan instruction documents storage and management: financial statements, property titles, identification, others, as defined by user

Credit Precisor Risk-Based Loan Pricing permits to simulate of the institution portfolio and recalculate the credit worthiness of each facility under multiple scenarios:

  • Definition of macroeconomic or business scenarios: based on the rating model inputs, it will be possible to define multiple scenarios and re-rate each loan of the portfolio under such scenario to easily analyse the impact of the scenario. The definition of the new scenarios will be done by defining flexible rules to transform original rating inputs into the new rating inputs
  • Revaluation of the portfolio under the new scenarios: all portfolio assets will be revaluated under multiple defined in an automatic manner and be available for the analysis
  • Strong analytics the impact in the portfolio health of the different scenarios will be easily analysed permitting a deeper understanding of portfolio for the purposes of informed management actions
  • Reporting: Credit Precisor Risk-Based Loan Pricing robust reporting features will be available for the analysis and report generation of the portfolio simulation engine

In current competitive markets, operational cost impacts profitability and loan pricing competitiveness. These circumstances make essential an accurate and updated estimation of operational cost for a precise risk-based loan pricing. Credit Precisor Risk-Based Loan Pricing can flexibly recalculate and recalibrate operational costs to permit a more accurate risk-based loan pricing and profitability analysis. This is particularly useful for efficiency lending.

In conjunction with “portfolio creditworthiness scenario analysis engine” monitoring pricing at origination with real performance (compare ax-ante with ex-post), Credit Precisor Risk-Based Loan Pricing provides powerful reporting monitoring exploiting the central loan origination repository including:

  • Create custom made dashboards
  • Pivot table interactive flexible reporting
  • Multiple predefined dashboards:
  • Strategic reporting: portfolio composition, portfolio growth and so on
  • Staff performance: Number of clients rated by analyst and/or department and number of loans priced by analyst and/or department, times and so on
  • Process efficiency: Derived from the time and date of each change in the workflow, it is possible to measure time consumed by staff, group, phase and so on, and identify bottle necks in the processes
  • Portfolio profitability analysis: expected loss, NPV, average RAROC or any other calculated metric, understand ex-ante and ex-post results
  • Exception reports: loans applications, responses, pending re-rating are overdue
  • Rating biases: identification of systematic bias like underestimation, overestimation, error…
  • Other, as defined by user
  • Generation of loan approval documentation: pricing, rating and approval documentation and more
Flexible and comprehensive reporting engine

Credit Precisor Risk-Based Loan Pricing creates a governance framework to guarantee the quality of the loan origination process:

  • Workflow management and approvals: permits to build a customizable workflow embedding multiple potential approvals and control checks by different departments / functions
  • User permissions: users can be assigned very specific permissions into workflow steps, tool menus / functions, reports and so on
  • Process controls: each workflow step may incorporate controls such as the existence of a rating before pricing, permission for editing or deleting or other as defined by the user
  • Audit trail: every action is recorded in a log organized by user, date, facility, rating, application and so on. The log of actions can also be used for reporting purposes
  • Process quality alerts: Credit Precisor Risk-Based Loan Pricing automatically generates re-rating alerts or identifies rating overwrite and causes like potential biases
  • Notifications: automatic notifications are sent when the loan application / rating / pricing tools change status and there are actions to be initiated consequently
  • Reports: the centralized data repository can be used to generate exception reports, staff performance, identification of process bottlenecks and others
Customizable multilayer control framework

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