CONTACTS:
| Suzanne Wharton, RMA
Director swharton@rmahq.org +1 (215) 446-4089 |
Doug Skinner, AFS
Director dskinner@afsvision.com +1 (484)-875-1562 |
Credit Risk Benchmarking Metrics Show No Evidence of Declining Credit Quality
PHILADELPHIA, PA, December 6, 2006 — RMA, The Risk Management Association (RMA), in alliance with Automated Financial Systems, Inc. (AFS), this week released quarterly results of the Risk Analysis Service, which enables participating financial institutions to benchmark the risk profiles of their middle market portfolios relative to that of their peers and the industry.
During the third quarter of 2006, conventional indicators of credit quality continued to be low and stable, including trends in average borrower risk ratings, delinquencies, non-accrual levels, and charge-off experience. The average risk rating for new deals-defined as transactions originated or renewed during the quarter-continued to mirror the average risk rating for all credits, seemingly refuting the notion that underwriting standards are weakening in any material way (see Figure 1).
Figure 1: Trend in Weighted Average Risk Rating, New Deals versus All Deals
The third quarter results reflect actual data for middle market loans totaling over $600 billion in commitments and $350 billion in outstandings provided by 17 top tier participating banks. The database is estimated to include nearly one-half of all middle market commercial loans in the U.S.
Recent enhancements to the Risk Analysis Service announced by RMA and AFS include (1) its expansion to the Commercial Real Estate line of business, and (2) its rollout in Europe. Due to the specialized nature of commercial real estate assets, the Service now offers a dedicated reporting module focused exclusively on the needs of the commercial real estate market. A group of eight leading European financial institutions has served as a Steering Committee to refine the Service delivery to meet the specific needs of the European banks, with a launch expected to coincide with the availability of year-end 2006 financial data and performance metrics.
"The Risk Analysis Service adds a new dimension to portfolio analysis by giving bankers both the data and the analytical capabilities to supplement a bank's internal experience and to identify exceptional credit risk," said Maurice H. Hartigan II, president and CEO of RMA. "As the database continues to grow and the service delivery model continues to expand, it will further improve participants' ability to draw statistical inference from reported findings and to enhance banks' risk management capabilities, including those with a global reach." For additional information on the Risk Analysis Service, please contact Suzanne Wharton at RMA at +1 (215) 446-4089 or Doug Skinner at AFS at +1 (484) 875-1562.
About RMA
Founded in 1914, the Risk Management Association is a not-for-profit, member-driven professional association whose sole purpose is to advance the use of sound risk principles in the financial services industry. RMA promotes an enterprise-wide approach to risk management that focuses on credit risk, market risk, and operational risk. Headquartered in Philadelphia, Pennsylvania, RMA has 3,000 institutional members that include banks of all sizes as well as nonbank financial institutions. They are represented in the Association by 17,000 risk management professionals who are chapter members in financial centers throughout North America, Europe, and Asia/Pacific. Visit RMA on the Web at www.rmahq.org.
About AFS
Automated Financial Systems, Inc. (AFS) is an information technology and software development company providing products and professional services exclusively to the financial services industry. Its mission is to work with forward-looking financial institutions to build the industry-leading global franchise for lending processes based on a straight-through processing model and on-demand technology and services. AFS assists clients by combining the lending applications, execution expertise, and management information to mitigate risk, reduce costs, and increase revenue. The firm is headquartered in Exton, PA; its European subsidiary, Automated Financial Systems GmbH is located in Vienna, Austria. For further information, visit AFS' website at www.afsvision.com.
