Smart Banking

Mar 22, 2010 (LBO) – Banks can reduce credit risks by segmenting present and future customers into different credit risk pools using information technology, a senior official from International Business Machine (IBM) Corporation said. “We believe that there are three imperatives that are going to force financial institutions to think and act in fundamentally new ways,” Shanker Ramamurthy, general manager, global banking and financial markets at IBM Corporation said.

“The first is to re-think and innovate the business model. The second is developing new intelligence that enables financial institutions make informed judgments and become more client-centric.

“The third and final imperative is the need to integrate various types of risk into an overall integrated risk management framework.”

He said banks should use technology to calculate credit risks of customers. Banks that carry out poor credit risk calculations often see non-performing loans going up, especially during a recession when job losses climb.

In 2008 global banks wrote-off billions of dollars mainly from US housing loans going bad.

Most banks have large exposures in the housing market which is the worse hit during a recession as asset values take