About Volkswagen Financial Services

Volkswagen Financial Services is a business division of Volkswagen AG group of companies, a German multinational automotive company. It is the largest automobile financial services corporation in Europe and operates across various verticals such as banking, leasing, insurance as well as mobility services.

Creditworthiness of Corporate Clients

Volkswagen Financial Services decided to replace its Basel II standard credit scoring approach with the basic IRB approach, with an intent to better use its know-how in the market. For this evaluation, the bank has replaced its MS Access-based application with ACTICO’s Credit Rating Module. The new system is called CARAT (Corporate Assessment and Rating Model Administration Tool), and has been used successfully for multiple years.

THE CHALLENGE

Make Complex Ratings Transparent

Creditworthiness evaluation of the client is made through a complex rating procedure. It entails both financial figures as well as qualitative factors, such as future business prospects, assessment of management quality, market and industry environment, as well as payment practices and interfaces with external data providers. Drawing all this information in the evaluation process was a complex task. given:

  • Considering annual report figures and various qualitative factors
  • Connecting multiple suppliers of data including SAP applications
  • Avoiding redundancy of data from different sources
Solution

Creation and Audit-Proof Archiving of Ratings

Analysts conduct the research, evaluate corporate data and calculate a rating with the aid of CARAT. Every rating event is archived in the corporate business warehouse, including all input and output data. In addition, a rating report can be generated for a completed and released rating. This report lists the most important key figures, sub-scores and rating classes. When a default event occurs, such as the client applies for insolvency, CARAT automatically recalculates and recategorizes a default class. Key components of the solution include:

  • Calculation of credit risk ratings and audit-proof documentation
  • Inheritance of rating models from parent company to subsidiaries
  • Seamless integration with various internal and external data sources
IMPACT

Model Rules Graphically

The graphical modeling approach of ACTICO Rules greatly simplifies the development and modification of models. The risk team at Volkswagen Financial Services now retains full responsibility, not only in making changes to existing models but also in developing new models from scratch. Support from the IT team is rarely sought on these matters.

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