Bank

Study Case

By : Farhan Ghalibto
Team 5
 Table of Contents

01 02 03 04
Background DARCI Problem Statement Objective

05 06 07
Root Cause Hypothesis Metrics
 Background
You are a data analyst at a large company named TFS Bank Ltd. that has a job description to
provide insight about credit risk and how to implement financial strategies in order to have a
more prudent strategy while maintaining healthy financial performance.

Hence, the management has informed you what factors they should focus on in order to reduce
credit risk. They want to know what changes they should make to make their portfolio healthier
in order to get the most out of their assets. Also, they want to know which of these variables
is most important and needs to be addressed right away.

The CRO is reaching out today to find any hints or patterns that might suggest potential credit
risks. He would greatly appreciate it if you could take a look at the data and let him know if
anything raises a red flag for you.
 DARCI

Decision Maker Accountable Responsible

Chief Risk Officer Head of Data Data Analyst Team

Consulted Informed
Financial Planning Department Branding and Communication Department

Risk Management Department Accounting Department

Regulatory Compliance Department

 Problem Statement

How to reduce Risk in credit risk to

make portfolio healthier from 0.4267
to under 0.3500 gradually in next year
?
 Objective

● Provide key matric to Leadership team

on which metrics most important and
needs to be addressed right away
● Reduce Risk in credit risk to make
portfolio healthier from 0.4267 to under
0.3500 gradually in next year
 Root Cause

debt exceeds
income

ability to pay debts

Loans against asset

value
Why the Risk
Reach 0.4267 ?
credit history

The amount of
loan

Focus on one Outstanding

company Balance
 Hypothesis
Possible Root Hypothesis Prioritization
Cause

debt exceeds If the debt exceeds income is below 50% then the risk value will High, payment will definitely be very difficult or take a long time because
income decrease by 10% of fines

ability to pay debts If the ability to pay debts Ratio is above 70%, the risk value will decrease High, High paying ability will make payments easier and have a good
by 10% in one year record

Loans against If the Loans against asset value is under 60% then the probability of default High, Sometimes the value of assets can fall which can lead to losses
asset value will decrease by 15% next year

credit history If the borrower has a good credit history, it is certain that the risk value High, A good history indicates no problems with payments
will decrease by 15% at the end of the year

The amount of If the amount loan is below 1 billion, losses due to default will decrease Medium
loan by 3% every 3 months

Outstanding If the outstanding balance does not exceed the specified limit of 2 billion Medium
Balance then the exposure to default does not exceed 5%

Focus on 1 Party If the Party is unable to pay, the risk value increases rapidly High, Make the bank loose to much Money(Asset) in one time
 Metrics
Possible Hypothesis Prioritization Metrics Metrics Reasoning
Root Cause

debt exceeds If the debt exceeds income is High, payment will definitely be very difficult or Debt-to-Income DTI is one way lenders measure your ability to
income below 50% then the risk value take a long time because of fines Ratio (DTI) manage the monthly payments to repay the
will decrease by 10% money you plan to borrow.

ability to If the ability to pay debts Ratio is High, High paying ability will make payments Loan-to-Value LTV measures the relationship between the loan
pay debts above 70%, the risk value will easier and have a good record Ratio (LTV) amount and the market value of the asset
decrease by 10% in one year securing the loan.

Loans If the Loans against asset value is High, Sometimes the value of assets can fall Debt Service DSCR shows the company's ability to pay off
against asset under 60% then the probability which can lead to losses Coverage Ratio costs and principal of its current debt and bonds
value of default will decrease by 15% (DSCR) with net operating income.
next year

credit If the borrower has a good credit High, A good history indicates no problems Score Credit credit scores to evaluate your credit worthiness,
history history, it is certain that the risk with payments or the likelihood that you will repay loans in a
value will decrease by 15% at timely manner.
the end of the year

Focus on 1 If the Party is unable to pay, the High, Make the bank loose to much Concentration By using Concentration Risk it can divide the
Party risk value increases rapidly Money(Asset) in one time Risk Risk so the asset can be relatif Safe.
library sources
● https://www.investopedia.com/ask/answers/022415/what-factors-are-taken-account-quantify-credit-risk.as
p#:~:text=Lenders%20look%20at%20a%20variety,payments%20in%20a%20timely%20manner
.
● https://www.investopedia.com/terms/c/credit_score.asp
● https://www.investopedia.com/terms/e/exposure_at_default.asp
● https://corporatefinanceinstitute.com/resources/commercial-lending/credit-risk-analysis/
● https://blog.gitnux.com/credit-risk-metrics/#:~:text=Credit%20risk%20metrics%20such%20as,specific%2
0metrics%2C%20and%20credit%20portfolio
● https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-en-1791/#:~:text=Your%20de
bt%2Dto%2Dincome%20ratio,money%20you%20plan%20to%20borrow
.
● https://www.rumah123.com/panduan-properti/membeli-properti-106006-loan-to-value-id.html#:~:text=Ji
ka%20diartikan%20ke%20dalam%20Bahasa,besar%20risiko%20yang%20mereka%20ambil
.
● https://www.jurnal.id/id/blog/rasio-keuangan-mengenal-manfaat-rasio-cakupan/#:~:text=Rasio
%20Cakupan%20Utang%20adalah%20rasio,lancarnya%20dengan%20pendapatan%20operasional