National Commercial Bank (NCB) is to implement
predictive analytics software from global analytics and decision
management technology vendor FICO, to meet Basel II
regulations.

Headquartered in Saudi Arabia and also known
as Alahli Bank, NCB has a branch
network of 282 outlets and over 2.2m customers.

NCB will implement FICO custom models along
with stress testing as part of its plan to adopt the advanced
approach set down in Basel II.

The Saudi Arabian Monetary Authority has
mandated compliance with the advanced approach to calculating
capital requirements, as required by Basel II. Under the
regulations, lenders using the advanced “internal rating based”
approach can use their own estimates of credit risk — measured
using probability of default, loss given default and exposure at
default – as primary inputs to determining minimum capital
requirements.

In addition, NCB will use FICO’s Economic
Impact Service for stress testing, another requirement of Basel II,
to reveal how changes in the economy would affect the risk in its
portfolio.

Ery Rinaldi Zaidir, vice president of
Portfolio Management and Risk Analytics at NCB, said:

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“The initial analytic discovery project we did
with FICO confirmed the sophistication of its approach, and
showed that working together we could meet our bank’s plan to
achieve Basel accreditation.

“One of the critical factors was to create
risk models that were sufficiently powerful for us to use in
originations and account management decisions, as well as in
calculating capital reserves.

“FICO demonstrated that it had both the
analytic skills and experience with Basel regulations to meet this
requirement, and to advance our whole best-practice Basel
programme.”

Mike Gordon, FICO managing director for EMEA,
said:

“Basel regulations are one of the top
priorities for banks around the world.

“By using this opportunity to further
improve its predictive analytics, National Commercial Bank is
out in front, turning regulatory compliance into a competitive
advantage.”

NCB has utilised FICO’s predictive analytics
and risk management tools since 2002.

For the nine months to 30 September, NCB’s net
profit increased 6% year-on-year to SAR3.47bn ($925.3m).

Loans and advances increased by
5.2% to SAR122.6bn; customer deposits rose by 8.4% to SAR215bn.

Total assets grew by 7.2% to
SAR271.2bn.