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With the growing emphasis on risk management and capital, it is important to know the correlation of your risks within your retail portfolio and the diversification benefit provided to the rest of your institution.

Computing the Capital Diversification Benefit for Retail Portfolios [pdf, 56k]

Enterprise risk management involves knowing the correlation of risks within a business unit and how much diversification benefit can be justified by looking across the bank. Managing these correlations is an important source of additional return from better risk management, lower capital requirements, and marginal pricing flexibility.

Strategic Analytics (SA) offers a detailed and analytically-rigorous approach to quantifying the diversification benefit present in your current or proposed portfolios including all retail lending products: Mortgage, Home Equity, Auto, Credit Card, Small Business, Personal Loans, etc. Our analysis will quantify both the correlations within your Retail portfolio and the diversification benefit that portfolio provides to the rest of your institution.

The key to computing correlations in retail loans lies in being able to separate the different components driving performance, an area where Strategic Analytics has deep experience. Contact us to find significant benefits for your institution.
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