Systems and methods for credit management risk rating and approval

• US 8,290,857 B1
• Filed: 04/02/2012
• Issued: 10/16/2012
• Est. Priority Date: 06/02/2005
• Status: Active Grant

• Current Assignee: The PNC Financial Services Group, Inc.
• Original Assignee: The PNC Financial Services Group, Inc.
• Inventors: Barie, Cynthia, Wicker, Douglas, Harrington, Michael, McCrum, Alan, Kuhs, Holly, Zielonka, Bobbie, Huffner, Berenice
• Primary Examiner(s): ROSEN, ELIZABETH H
• Application Number:
  US13/437,723
• Time in Patent Office: 197 Days
• Field of Search: 705/1.1, 705/35, 705/38
• US Class Current: 705/38
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof

Abstract

A method for one of approving and denying a credit offering to a borrower is disclosed. The method includes calculating a probability of default rating of the borrower and calculating a loss given default rating for the borrower. The method also includes integrating the probability of default rating and the loss given default rating with other information relating to the credit offering to produce a credit memorandum and automatically outputting the credit memorandum to a user so that the user can recommend one of approval and denial of the credit offering.

Claims

1. A method of evaluating a credit offering to a borrower, the method comprising:

electronically displaying on an electronic computing device a plurality of qualitative questions regarding the borrower, wherein at least some of the plurality of qualitative questions are based on an entity type of the borrower, wherein each answer is assigned a score representative of a portion of the borrower'"'"'s creditworthiness, and wherein the electronic computing device is in electronic communication with an electronic database via an electronic computer network;

receiving financial information, non-financial information, and sector information regarding the borrower from the scores of the answers to the plurality of qualitative questions;

calculating, by the electronic computing device, a first financial factor based on the financial information, a second non-financial factor based on the non-financial information, and a third sector factor based on the sector information, wherein at least a portion of the sector information is specific to the entity type of the borrower;

calculating, by the electronic computing device, a preliminary probability of default rating of the borrower based on the first financial factor, the second non-financial factor, and the third sector factor, wherein the first financial factor is given a first weight, the second non-financial factor is given a second weight, and the third sector factor is given a third weight;

generating, by the electronic computing device, at least one warning signal based on the answers to the plurality of qualitative questions and the entity type of the borrower;

electronically displaying on the electronic computing device the at least one warning signal, wherein the at least one warning signal highlights a potential credit vulnerability of the borrower that is not present in the financial information, the non-financial information, and the sector information;

calculating, by the electronic computing device, a probability of default rating of the borrower based on the preliminary probability of default and the at least one generated warning signal;

calculating, by the electronic computing device, a loss given default rating for the borrower;

integrating, by the electronic computing device, the probability of default rating and the loss given default rating with other information relating to the credit offering to produce a credit memorandum; and

automatically outputting, by the electronic computing device, the credit memorandum, wherein the credit memorandum comprises a recommendation associated with the evaluation of the credit offering.

2. The method of claim 1, wherein calculating the probability of default rating further includes:

deriving a process probability of default rating after evaluating the at least one warning signal; and

overriding, when necessary, the process probability of default rating to create a final probability of default rating.

3. The method of claim 1, wherein calculating the probability of default rating includes:

determining whether the borrower has a public debt rating; and

calculating the preliminary probability of default rating based on at least one of the public debt rating and an answer to at least one of the plurality of qualitative questions.

4. The method of claim 3, wherein calculating the probability of default rating further includes:

evaluating the at least one warning signal relating to the borrower; and

determining a process probability of default rating based on the evaluation of the at least one warning signal and a default frequency.

5. The method of claim 4, wherein calculating the probability of default rating further includes selecting a final probability of default rating when the process probability of default rating is worse than a threshold value.

6. The method of claim 1, wherein calculating the loss given default rating for the borrower includes:

calculating a collateral loss given default rating based on collateral information; and

calculating a guarantee loss given default rating based on guarantee information.

7. The method of claim 6, wherein calculating the loss given default rating further includes calculating a collateral recovery amount.

8. The method of claim 6, wherein calculating the loss given default rating further includes deriving a loss given default grade based on the collateral loss given default rating.

9. The method of claim 6, wherein calculating the loss given default rating further includes overriding, by a user, an automatically generated loss given default rating.

10. The method of claim 1, wherein calculating the probability of default rating of the borrower includes calculating the probability of default rating of the borrower using quantitative and qualitative information.

11. A system of evaluating a credit offering to a borrower, the system comprising:

an electronic user computer; and

an electronic server in communication with the electronic user computer via a network, the server configured to execute software instructions to;

electronically display on the electronic user computer a plurality of qualitative questions regarding the borrower, wherein at least some of the plurality of qualitative questions are based on an entity type of the borrower, wherein each answer is assigned a score representative of a portion of the borrower'"'"'s creditworthiness, and wherein the electronic user computer is in electronic communication with an electronic database via a computer network;

receive financial information, non-financial information, and sector information regarding the borrower from the scores of the answers to the plurality of qualitative questions;

calculate a first financial factor based on the financial information, a second non-financial factor based on the non-financial information, and a third sector factor based on the sector information, wherein at least a portion of the sector information is specific to the entity type of the borrower;

calculate a preliminary probability of default rating of the borrower based on the first financial factor, the second non-financial factor, and the third sector factor, wherein the first financial factor is given a first weight, the second non-financial factor is given a second weight, and the third sector factor is given a third weight;

generate at least one warning signal based on the answers to the plurality of qualitative questions and the entity type of the borrower;

display the at least one warning signal to a user, wherein the at least one warning signal highlights a potential credit vulnerability of the borrower that is not present in the financial information, the non-financial information, and the sector information;

calculate a probability of default rating of the borrower based on the preliminary probability of default and the at least one generated warning signal;

calculate a loss given default rating for the borrower;

integrate the probability of default rating and the loss given default rating with other information relating to a credit offering to produce a credit memorandum; and

automatically output the credit memorandum, wherein the credit memorandum comprises a recommendation associated with the evaluation of the credit offering.

12. The system of claim 11, further comprising a database in communication with the server.

13. The system of claim 11, wherein the server is configured to execute instructions to:

calculate a collateral loss given default rating based on collateral information; and

calculate a guarantee loss given default rating based on guarantee information.

14. A computer readable medium having stored thereon instructions which, when executed by a processor, cause the processor to:

electronically display a plurality of questions regarding a borrower, wherein at least some of the plurality of questions are based on an entity type of the borrower, wherein each answer is assigned a score representative of a portion of the borrower'"'"'s creditworthiness, and wherein the electronic computing device is in electronic communication with an electronic database via a computer network;

receive financial information, non-financial information, and sector information regarding the borrower from the scores of the answers to the questions;

calculate a first financial factor based on the financial information, a second non-financial factor based on the non-financial information, and a third sector factor based on the sector information;

calculate a preliminary probability of default rating of the borrower based on the first financial factor, the second non-financial factor, and the third sector factor, wherein the first financial factor is given a first weight, the second non-financial factor is given a second weight, and the third sector factor is given a third weight;

generate at least one warning signal based on the answers to the plurality of questions and the entity type of the borrower;

display the at least one warning signal to a user, wherein the at least one warning signal highlights a potential credit vulnerability of the borrower that is not present in the financial information, the non-financial information, and the sector information;

calculate a probability of default rating of the borrower based on the preliminary probability of default and the at least one generated warning signal;

calculate a loss given default rating for the borrower;

integrate the probability of default rating and the loss given default rating with other information relating to a credit offering to produce a credit memorandum; and

automatically output the credit memorandum, wherein the credit memorandum comprises a recommendation associated with an evaluation of a credit offering to the borrower.

15. The computer readable medium of claim 14 having stored thereon instructions which, when executed by a processor, cause the processor to:

calculate a collateral loss given default rating based on collateral information; and

calculate a guarantee loss given default rating based on guarantee information.

16. A method of evaluating a credit offering to a borrower, the method comprising:

electronically displaying on an electronic computing device a plurality of qualitative questions regarding the borrower, wherein at least some of the plurality of qualitative questions are based on an entity type of the borrower, wherein each answer is assigned a score representative of a portion of the borrower'"'"'s creditworthiness, and wherein the electronic computing device is in electronic communication with an electronic database via a computer network;

receiving financial information, non-financial information, and sector information regarding the borrower from the scores of the answers to the plurality of qualitative questions;

calculating, by the electronic computing device, a first financial factor based on the financial information, a second non-financial factor based on the non-financial information, and a third sector factor based on the sector information, wherein at least a portion of the sector information is specific to the entity type of the borrower;

calculating, by the electronic computing device, a preliminary probability of default rating of the borrower based on the first financial factor, the second non-financial factor, and the third sector factor, wherein the first financial factor is given a first weight, the second non-financial factor is given a second weight, and the third sector factor is given a third weight;

generating, by the electronic computing device, at least one warning signal based on the answers to the plurality of qualitative questions and the entity type of the borrower;

electronically displaying on a display screen the at least one warning signal, wherein the at least one warning signal highlights a potential credit vulnerability of the borrower that is not present in the financial information, the non-financial information, and the sector information;

calculating, by the electronic computing device, a probability of default rating of the borrower based on the preliminary probability of default and the at least one generated warning signal;

calculating, by the electronic computing device, a loss given default rating for the borrower;

integrating, by the electronic computing device, the probability of default rating and the loss given default rating with other information relating to the credit offering to produce a credit memorandum; and

automatically outputting, by the electronic computing device, the credit memorandum, wherein the credit memorandum comprises a recommendation associated with the evaluation of the credit offering.