New circumstances oblige SCB to stress risk management
ROBUST lending in the past few years has made Siam Commercial Bank fine-tune its risk management to balance growth and risk.
The economic circumstances of the past few years encouraged SCB to expand rapidly, leaving risk management in a secondary role. However, the aggressive lending pace resulted in the back office lagging behind the front office, said Anucha Laokwansatit, senior executive vice president and chief risk officer.
Anucha, who joined the bank last June to oversee risk management, said SCB now was aware of this oversight, so it had invested heavily to make risk management more efficient.
SCB has stressed the theme of risk assessment to frontline teams.
In the past, risk assessment might not have been effective because the frontline business was focused on key performance indicators (KPIs).
“We have to imbue the culture of risk management in frontline officers, who have contact with customers. They are the first persons to assess a customer’s risk.
“In the past, credit analysis was based on the background of customers.
“We are adjusting them to assess risk by being more forwarding-looking,” he said.
The bank will keep the frontline business as the risk owner. They have to be aware of the KPIs for risk together with KPIs for business growth.
The bank also has added more scenarios for each corporate customer and the loan portfolio of each industry besides conducting annual stress tests to comply with the Bank of Thailand’s rules.
“We have to change our mindset for risk management so that we are not doing this just to serve the regulator,” Anucha said. “We must do it to manage our risks, so we set tougher scenarios than what we submitted to the central bank.”
Each scenario has to incorporate data analytics. The bank has to transform its analysis from macro to micro. Each corporate customer has to be rated on such indices as probability of default.
Doing these indices needs time.
The first phase of data analytics is expected to take one year and the next phase two to three years.
“The goal of risk-management improvement is to instil more discipline,” Anucha said. “The data will show the bank what risk we will meet from each incident.”
The bank is monitoring the early-warning system to help manage risk in its retail loan portfolio. This model should predict if a customer will weaken in the next six to 12 months.
If the data show that a customer is going to weaken, the bank will move quickly to offer it help, since the bank doesn’t want to see this customer fall into the special-mention category.
