Method and system for assessing credit risk in a loan portfolio

A computer-readable storage medium containing a plurality of program instructions executable by a processor for assessing credit risk in a loan portfolio of a lending institution, the plurality of program instructions comprising:

• a first instruction segment configured to receive a risk rating for each loan in the loan portfolio, each loan in the loan portfolio having been classified in one of a plurality of distinct concentration segments in accordance with its type, the risk rating for each loan in the loan portfolio having been assigned based on a set of risk characteristics associated with loans in its concentration segment, the risk rating assigned to each loan in the loan portfolio being based on a bifurcated model that takes into account probability of default and loss given default;
• a second instruction segment configured to receive a set of characteristics for each loan in the loan portfolio, the set of characteristics for each loan including information that can be used to assess the credit risk associated with that loan;
• a third instruction segment configured to receive capital numbers associated with the lending institution;
• a fourth instruction segment configured to perform, based on the assigned risk ratings, the sets of characteristics, and the capital numbers, a set of calculations for the loan portfolio to produce a credit-risk snapshot of the loan portfolio at a particular time, the set of calculations including at least one of expected loss, unexpected loss, economic capital, value at risk, and shareholder value added;
• and
• a fifth instruction segment configured to output the credit-risk snapshot of the loan portfolio to a user.

A system for assessing credit risk in a loan portfolio of a lending institution, the system comprising:

• at least one processor;
• and
• a memory connected with the at least one processor, the memory containing a plurality of program instructions configured to cause the at least one processor to:
• (a) receive a risk rating for each loan in the loan portfolio, each loan in the loan portfolio having been classified in one of a plurality of distinct concentration segments in accordance with its type, the risk rating for each loan in the loan portfolio having been assigned based on a set of risk characteristics associated with loans in its concentration segment, the risk rating assigned to each loan in the loan portfolio being based on a bifurcated model that takes into account probability of default and loss given default;
• (b) receive a set of characteristics for each loan in the loan portfolio, the set of characteristics for each loan including information that can be used to assess the credit risk associated with that loan;
• (c) receive capital numbers associated with the lending institution;
• (d) perform, based on the assigned risk ratings, the sets of characteristics, and the capital numbers, a set of calculations for the loan portfolio to produce a credit-risk snapshot of the loan portfolio at a particular time, the set of calculations including at least one of expected loss, unexpected loss, economic capital, value at risk, and shareholder value added;
• and
• (e) output the credit-risk snapshot of the loan portfolio to a user.