BankMuscat Officers trained on Risk Rating

BankMuscat, Oman’s largest bank with a loan book of US$ 3 billion held an advance-training course on Risk Rating for their Officers on 22nd & 23rd May 2002. BankMuscat has adopted Moody’s Financial Analyst and Risk Calc for rating the risk of its customers. The training was conducted by an expert from Moody’s Risk Management Services.

Abdul Razak Ali Issa, Chief Executive of the Bank, stated that BankMuscat aims to develop risk management as a core competence and is investing significant resources in adopting latest technologies and advanced risk management practices to improve and maintain the asset quality of the bank. Risk rating is a key milestone in this process that helps in the objective measurement and management of risk, he added.

Yaseen Abdullatif, Assistant General Manager - Finance & Risk Management, explained that the Basel Committee on Banking Supervision in its consultative document has proposed changes to the capital requirement for banks in line with the underlying risks. A significant feature of this new approach is that it offers a range of approaches for banks capable of using more risk sensitive analytical methodologies. Under the internal rating based approach, banks will be allowed to use their internal estimates of borrowers’ credit worthiness to assess credit risk in the portfolio subject to strict methodology and disclosure standards. Moody’s Financial Analyst and Risk Calc is a pioneering product in this area and BankMuscat has adopted it to estimate borrowers’ credit worthiness. He said that BankMuscat has already migrated the financial statements of its corporate customers into the Moody’s system, which enables the bank to differentiate customers based on risk, which is the core of the internal rating based approach. This financial information is used by Mood’s Risk Calc to generate a 1 year and 5 year probability of default, which is used by the bank’s Risk Management and approving authorities along with other inputs in the decision making process. Yaseen said in the current challenging scenario, BankMuscat views usage of Moody’s Financial Analyst, Risk Calc and related software as a proactive way of managing credit risk in an objective manner. The grouping and differentiation of credit risk will help identify, measure and monitor risks according to the severity, helping minimize credit losses and give a positive nudge to bank’s profitability.