“Story of a Bank” Basel II Accreditation through University-Industry Collaboration- Case Study

Liew Choon Kiat, Dileep Kumar M.

Abstract


ABSTRACT

This paper deals with a case study of credit risk scoring models at Industrial Bank. The aim of this research is to investigate how a Malaysian financial institution developed and integrated credit risk scoring models with current organisational needs and evaluation of best practices for university-industry collaboration on this initiative. Attempts were made to categorise the credit risk scoring models initiative according to a variety of statistical techniques from modeling. This is an exploratory study which uses qualitative research methodology. Analysis of document from company annual reports as well as articles from journal, Bank Negara Malaysia, (BNM) regulatory reports as well as working papers and semi-structured interviews were conducted to identify the organisational needs as a result of context and task. A company-wide development system for credit risk scoring model was effectively integrated to provide a direct support to competence management endeavor. The company’s credit risk scoring models initiatives have also resulted in managerial implications such as increased effectiveness of risk management through measuring the riskiness of each customer and automated the whole process, thereby leading to significant efficiency improvements. Thus, scoring models help banks to control credit risks. Going forward, credit risk scoring model is to become the best practice approach of the receivables management process and is essential to effective credit risk management.

Keywords: Credit risk rating model; Basel II accreditation; industry – institute collaboration; credit risk management

ABSTRAK

Kertas kerja ini berkaitan dengan sebuah kajian kes mengenai model penilaian risiko kredit di sebuah bank industri. Tujuan kajian ini adalah untuk meninjau bagaimana institusi kewangan Malaysia membina dan mengintegrasikan model penilaian risiko kredit melalui keperluan organisasi semasa dan menilai praktis yang terbaik untuk kolaborasi universiti-industri atas inisiatif ini. Beberapa percubaan telah dilakukan untuk membina kategori untuk inisiatif model penilaian risiko kredit melalui pelbagai teknik statistik seperti pemodelan. Ini adalah kajian eksplorasi yang menggunakan metodologi pengajian kualitatif. Analisis dokumentasi seperti laporan tahunan syarikat, jurnal, laporan regulasi dari Bank Negara Malaysia (BNM), kertas kerja dan temuduga semi-struktur dijalankan untuk menentukan keperluan organisasi dari segi kandungan dan tugasan. Pembangunan sistem yang efektif dan berintegrasi dengan model penilaian risiko kredit secara keseluruhan dalam syarikat telah memberi sokongan terus terhadap usaha daripada pihak pengurusan. Model penilaian risiko kredit adalah inisiatif syarikat yang mempunyai kesan atas implikasi pengurusan seperti meningkatkan tahap keberkesanan dalam pengurusan risiko melalui penilaian risiko pelanggan dan mengautomatifkan proses secara keseluruhan, menuju ke arah meningkatkan efisiensi yang signifikan. Dengan itu, model penilaian membantu bank untuk mengawal risiko kredit. Pada masa hadapan, model penilaian risiko kredit akan menjadi praktis yang terbaik dalam proses pengurusan dan adalah penting untuk pengurusan risiko kredit yang efektif.

Kata kunci: Model penilaian kedudukan risiko kredit; Akreditasi Basel II; kolaborasi institusi – industri; pengurusan risiko kredit


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