"We spent little time collaborating but the results were always exactly what we needed."

Dr. Stefan Krohnsnest, Head Credit Risk Controlling

DG-HYP implements rating application for commercial real estate financing

Consolidation of the Technical Landscape

Deutsche Genossenschafts-Hypothekenbank AG (DG HYP) is the banking specialist for commercial real estate financing within the DZ Bank Group. DG HYP is currently deploying leading-edge credit risk rating application to consolidate the technical landscape for its Basel II PD and LGD calculation models. The application is successively replacing the previous IT-centric rating systems. DG-HYP requires an integrated platform for all 15 rating models that allows the banking specialist to continue to rapidly and reliably develop and refine these models further – a typical application scenario for ACTICO software.

Calculations for Commercial & Private Clients

Credit Risk Management Platform supports calculations in the commercial sector for contractors, developers, housing companies or real estate investors and on the retail side calculates default probabilities and loss severity for 192,000 loans. These calculations are executed by the application using batch processes.

Cash Flow-Based Rating Models

The application has been created on the standard platform at very little additional expenditure. Not just the rating models are executed on this platform, but the governance rules as well – for example, the use of the "dual control principle" – and the user interface with input boxes for the credit risk experts. From a business perspective the application enables cash flow-based rating models: With the aid of a market model and a Monte Carlo simulation, market developments, the leasing situation, and the development of rental income are calculated for a real estate portfolio over several years, and PDs estimated.

The Objectives in a Nutshell

Methodical enhancements, with a short time-to-market

One central system for all IRBA-relevant calculation models

Providing the models in the form of a service available to Volksbanken and Raiffeisenbanken

High performance of quantitatively demanding and complex cash flow models

"For us, as a credit risk controlling department, this project was a pleasant surprise – it was much leaner than many others in the past. Some of our rating models are extremely complex, and we were expecting to have to do a lot more hand-holding and explaining. The big surprise was how little time we had to spend sharing our expertise – but the results were always what we needed. As someone with responsibility for a business department, I personally find it especially important that any collaboration be based on mutual trust and reliability – and this is and has always been the case here."

Dr. Stefan Krohnsnest, Head of Credit Risk Controlling, DG HYP

Read the full interview on our rating platform in use at DG-HYP in our Success Story.