Malaysian banks enhance risk management systems

Affin Bank, Alliance Bank Malaysia and OCBC Bank have beefed up its risk management systems.

"The risk management systems in place have enabled the bank to proactively manage the loans portfolio, particularly in early and prompt identification of vulnerabilities, emerging risks or adverse trend in various industry sub-sectors and products portfolio," said Affin Bank Berhad chief risk officer Kasinathan Kasipillai.

Affin Bank Berhad's budget to improve its risk management systems for 2009 to 2010 is US$5,601,456.

According to Kasinathan, the effectiveness of the systems can be judged by the bank’s ability to reduce its net NPL ratio from 7.7 percent in 2007 to 3.2 percent last year.

In its first quarter this financial year, the bank had been able to sustain its loans growth momentum whilst continuing to manage its net NPLs at the 3 percent level.

Last year, Affin Bank implemented the credit scoring system for consumer mass market products like mortgages, hire purchase loans and credit cards at a cost of US$420,109. It also embarked on a Basel II-compliant credit grading project for its corporate customers, which has cost the bank US$1.1 million to date.

Alliance Bank Malaysia Berhad group CEO Datuk Bridget Lai says the bank is also investing more to further beef up its risk management system, and has just upgraded the bank’s trade system and loan origination systems.

"Our enterprise database system enables us to capture and store all the relevant information. Using management information system and analytics to help manage risks, we are able to retrieve this information for scenario planning and predictions," she says.

In the current market where margins are thinning, Lai says banks need to be efficient to save costs.

They also need to be accurate in assessing risk proactively, in addition to a fast turnaround response rate to customers, she adds.

OCBC Bank Berhad director and CEO Jeffrey Chew says the bank has proprietary tools such as a credit scoring model and an early warning and account monitoring system to protect loan portfolios.

"With such robust systems already in place, we do not, at this moment, feel a need to add any new systems but will continue to enhance the existing ones as a matter of natural upgrading," he says.