An African Bank Taps Expert Support to Assess the Financial Strength of Its Counterparties

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Case Study
6 Nov, 2023

Identifying and managing potential default risks of private, publicly traded, rated, and unrated companies can be a challenge, especially when counterparties are in many different countries. This requires an assessment of three levels of risk ― country, industry, and company.

About
- The credit risk team at this African bank wanted to assess the financial strength of a large number of publicly listed and privately held financial institutions that were located across the continent, including in Cameron, Kenya, Nigeria, and South Sudan.
Challenge
- Members of the credit risk team needed to deliver results very quickly to meet regulatory deadlines and use a standardized approach to meet regulatory requirements. Given the challenging nature of credit risk analysis of financial institutions in emerging markets, the bank knew they needed expert support given the volume and complexity of the work that had to be completed.
Solution
- Credit analysts at S&P Global Market Intelligence (“Market Intelligence”) were engaged to conduct the analysis of counterparties and ensure delivery of reviews in a timely manner. The analysts:
  - Accessed reliable financial data for both public and private financial entities in a structured format through S&P Capital IQ Pro (a one-stop desktop solution for essential intelligence).
  - Used Market Intelligence’s proprietary Scorecards that follow S&P Global Ratings methodology to assess credit quality, scoring counterparties using both qualitative and quantitative factors.
  - Incorporated country and industry specific risks through Market Intelligence’s Banking Industry Country Risk Assessment (BICRA) scores.
  - Identified an appropriate template suitable for analyzing banking counterparties’ financial statements. They also adjusted, classified, and validated, financial data using pre-determined rule books.
  - Validated a system-generated set of peers and corresponding data for benchmarking counterparties to their peer group.
Outcome
- Market Intelligence delivered a standardized report for credit assessments and completed the analysis for both public and private financial institutions to align with regulatory requirements. Members of the credit risk team were able to meet the tight turnaround time and increase the efficiency of the bank’s internal credit approval process.

An African Bank Taps Expert Support to Assess the Financial Strength of Its Counterparties

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