Regulations still choking European credit

“Asphyxiating” is a strong word, but that’s the word used at a recent meeting of banking leaders in Spain to describe the effect Basel regulations are having on credit. The meeting, hosted by FICO and the publication Expansion, demonstrated bankers’ frustration and showed that regulators are still searching for the...

Cutting capital requirements would increase lending

The Banker just published some interesting research on how lower bank capital requirements could boost the economy. Their numbers suggest that cutting capital requirement by just 1% would dramatically increase lending power, enabling the UK to increase bank assets by an amount equal to about 37% of GDP — for...

Managing Predictive Models (video)

Banks can increase the value they get from their predictive models by changing the way they manage those models. New OCC and Basel regulations make improving model management more important than ever. Hear more on this topic from Mike Gordon, FICO vice president and banking practice manager, in this Tech...

Inextricably Linked, for Better or for Worse

Last week, more than 30 senior risk officers from 12 countries across Asia Pacific gathered at the second annual FICO APAC Chief Risk Officer Forum in Bali, Indonesia. Hosted by FICO and moderated by IDC, the forum provided a venue for us to have an in-depth discussion around what’s ahead...

Adapting to New Interchange Rules on Debit Cards

Regulatory challenges were clearly top of mind for the 700 banking clients that gathered at last month's FICO World conference. One of our most highly rated regulatory sessions was the panel we convened to discuss the new debit interchange rule, defined in the Durbin Amendment under Dodd-Frank. The panel brought...

Despite Basel sticker shock, banks soldier on

A new study by the Boston Consulting Group finds that banks globally face a $450 billion (€350 billion) Basel III shortfall, as reported today in the Financial Times. According to the study, banks in Europe have the biggest gap, more than half of the total. While stunners like this make...

Webinar: Best Practices in Analytics and Model Validation

Next week, FICO will host free webinars that share best practices in analytics and model validation. With the proliferation of models used in financial services, and today's tightly regulated and volatile markets, organizations must reassess how well models are being strategically applied and how well they're being managed. In addition,...

Regulatory survey: complexity and frequent change are top concerns

The following guest post was written by Michelle Katics, CEO of BankersLab. What regulatory risks are you facing in the next 12 to 18 months? This question was posed to hundreds of FICO World attendees and colleagues in a recent regulation survey conducted by FICO and myself. Top concerns were...

Half of bankers say 2012 will be less profitable for banks

Last week the Bank of England released a study showing that UK bankers’ confidence has dipped sharply over the last six months. We have seen similar results in our recent surveys of risk managers in the US and Europe. Here’s another data point: At FICO World 2011 earlier this month,...

Is the Chinese Consumer Ready to Drive Global Economy?

As we approach the end of the year, I’m having numerous discussions with banking executives and other clients about where we see the global and local Asia Pacific economy performing next year. I was asked to opine on this for Singapore’s business daily, Business Times. In short: Globally, it often...

The Regulator Said What? Q&A with BankersLab

With regulation a central topic at next week's FICO World, FICO interviewed BankersLab CEO Michelle Katics, who will co-present, "The Regulator Said What? And You Said What Back?" In this session, Katics will lead an interactive discussion of the more unusual, occasionally vague and not always successful attempts at regulatory...

Take Our Brief Regulation Survey

At next week's FICO World 2011, we will discuss best practices on how the financial industry and regulators can work together. Even if you can't attend the conference, we hope you'll take a few minutes to complete our regulation survey. In it, we ask you to share the regulatory challenges...

Get a preview of PNC Bank’s FICO World keynote

Want a sneak peek into next week's FICO World? Then we invite you to watch the recorded FICO World preview webinars. The FICO World 2011 conference takes place November 1-4 in New York City. Revitalizing Growth in the Reset Economy Gordon Cameron, SVP, PNC and Mark Greene, CEO, FICO In...

Building Customer-Level Profitability: Q&A with Mashreq Bank

In the lead-up to FICO World in November, FICO interviewed Mashreq Bank Vice President Khalid Zafar, who will co-present “Building Customer-Level Profitability in a Changing Environment.” At the conference, Zafar will share how Mashreq Bank redefined its predictive analytics and decision strategies to better deal with changing consumer behavior, risk-reward...

Two Banks. Two Opposite Sides of the World. One Big Challenge.

Greater regulation in the credit card market has become a fact of life since the Global Financial Crisis, whether it’s the USA CARD Act, the NCCP Act in Australia or Canada’s new credit card regulations. As my colleague Evan blogged about earlier, in January 2011 new regulations came into effect...

Electronic fraud on the rise in Brazil

The Brazilian Banks Federation (Febraban) recently released data from a survey revealing that losses caused by electronic fraud are on the rise. These losses totaled R$ 685 million (US$ 460 million) from January to June this year, up from R$ 504 million (US$ 340 million) for the same period last...

Join a conversation with PNC Bank’s Gordon Cameron and FICO CEO Mark Greene

What are the approaches that banks are taking to create growth in a weak economy with greater regulation? Join a discussion about this next week with FICO CEO Mark Greene and PNC Bank SVP and Credit Executive Gordon Cameron. This special FICO World Preview Webinar will take place on Friday,...

Credit Counselors Stumped

This week, hundreds of credit counseling executives gathered in San Francisco for the annual leadership conference of the National Foundation for Credit Counseling. I participated on a panel to address what The New Credit Normal promises for consumers. As I explained, regulators are helping to empower consumers by having creditors...

Learn more about modeling economic impact on credit risk

The FICO presentation on Economic Impact Grade Migration Modeling that won the Paragon Award for Best Paper at the Credit Scoring and Credit Control XII conference in Edinburgh last month has been posted online, along with the other conference papers, at: www.crc.man.ed.ac.uk/conference/archive/2011.html. I will be giving a webinar on this...

Restoring banking balance

In August, I blogged about the notable regulatory guidance issued by the Monetary Authority of Singapore, which called for increased capital levels and – more significantly – an accelerated timeline mandated by Basel III. I also talked about the three key lessons from global financial crisis: More capital. More liquidity....

Get a FICO World sneak peek at a preview webinar

Are you considering registering for FICO World 2011 but want a taste of what to expect? In the coming weeks, blog authors Daniel Melo and David Molyneaux will present two free FICO World preview webinars, providing a sneak peek into their upcoming FICO World sessions. The FICO World 2011 conference...

Bank of England supports counter-cyclical risk approach

Robert Peston, BBC, reported the speech by the UK Chancellor of the Exchequer at the Lloyds of London annual dinner: "…. Mr Osborne last night gave a nod that he might agree with Mr Cameron, by lauding a paper recently written by the influential Bank of England economist, Andrew Haldane,...

Edinburgh conference award for economic impact modeling

I’m proud to note that FICO’s Johan Jansen van Rensburg and I won the Best Paper Prize at the Credit Scoring and Credit Control XII conference in Edinburgh last week. Our paper was on “Economic Impact Grade Migration Modeling - To Address Pro-Cyclicality in Current Risk Management Practice,” and addresses...

Optimizing Credit Limits Under New Regulations

July 2012. Add a reminder to your Outlook calendar, because that’s when new Australian regulatory changes for credit card lending will take effect—specifically Phase 2 of the National Consumer Credit Protection Act 2009 (as detailed in my colleague Paul Swyny’s recent post). What does this mean to portfolio managers throughout...

Why increased capital adequacy is only part of the solution

We’ve blogged a lot about the various proclamations of the Basel Committee, specifically how our banking clients around the world are using analytics to ensure capital adequacy and manage portfolio risk. Under the most recent Basel III measures, banks would have to hold six percent of Tier 1 capital, up...

FICO discusses risk management challenges in Cards International

A recent Cards International article explores the challenges of risk management in a dynamic economy and implications of the CARD Act, as well as new analytics-driven solutions that can help. In the article, FICO blog author Chisoo Lyons discusses how the economic downturn has heavily constrained the creativity of risk...

Can Australian lenders learn from the US CARD Act aftermath?

Australian banks often look to their overseas counterparts for hints of new best practices, emerging challenges or troubles to come. So it appears to be with Australian regulators. Like their peers in Western markets like the US and UK, they are aggressively attempting to change the local banking landscape in...

Fox Business: FICO CEO Breaks Down New Score Disclosure Rules (video)

On Fox Business, FICO CEO Mark Greene discusses the Consumer Financial Protection Bureau (CFPB) and breaks down the new credit score disclosure rules in the Dodd-Frank financial reform bill. Watch the latest video at video.foxbusiness.com If you have difficulties viewing the video above, you can also view it here. 

New Mortgage Standard Must Be Predictive

A major debate underway in our nation’s capitol hinges on how federal regulators choose to define a “Qualified Residential Mortgage” (QRM). Opposing sides agree on one thing: this decision could fundamentally change America’s real estate industry. After researching a key component of the debate, FICO has found a significant flaw...

UK Tackles Bribery and Corruption

Effective as of 1 July 2011, Britain saw a brand new Bribery Act come into force. Wide-ranging powers were provided to the Serious Fraud Office (SFO), now required to investigate and prosecute offences, even for companies not based in the UK but doing business on its shores. Business entertainment and...

Closing the Voters’ Roll Fraud Loophole

Fraud consultants at FICO have warmly welcomed the announcement on 30th June 2011 by Mark Harper, the British minister for political and constitutional reform, to change the process by which households register to vote in the UK. Currently households register as one to vote, which has allowed people to be...

What Makes a Score “Fair”?

In writing my last post about legislative and consumer pressures to modify credit scores, often to make them “fair,” I began thinking about what does make a score fair. Legislators and regulators look for fair lending. The U.S. Fair Credit Reporting Act governs much of what FICO does when we...

A Positive Sign: Bureau Evolution in Australia

You may have read earlier this week about how Brazil, one of the fastest growing economies, is poised for great change in how it tracks consumer credit behavior. Brazil is not alone. After almost a decade of deliberation, Australia, too, is finally following the footsteps of positive credit bureau countries....

Positive data sharing in Brazil is a positive move

One of the reasons that the FICO® Scores are so powerful a risk predictor in the U.S. is that the underlying credit bureau data includes a wealth of both positive and negative bureau data. Now one large credit market that previously had only negative credit bureau data — Brazil —...

Subjective Tinkering of Credit Scores is Bad Policy

Recently I made a case against a new IRS policy to withdraw tax liens from the credit bureau files of delinquent taxpayers who eventually pay their overdue bills. This subjective tinkering with empirically developed credit scoring only ends up hurting consumers, particularly those who legislators are trying to protect. It...

The Counter-Cyclical Imperative in China

You’ve read from my colleague, David Molyneaux, on how the long-awaited publication of capital guidelines from the Basel Committee on Banking Supervision should help the financial industry emerge from the financial crisis stronger and better capitalized. Here’s some perspective on how that’s playing out in Asia Pacific. Many banks in...

Q&A: Dodd-Frank Amendment Could Impact Fraud

In an interview with GovInfoSecurity.com, FICO blog author and fraud expert Mike Urban spoke about the Durbin Amendment and its impact on fraud. Here's an excerpt: The highly debated proposal from Sen. Dick Durbin, D-Ill., would amend the Dodd-Frank Wall Street Reform and Consumer Protection Act by significantly reducing interchange...

The UK’s Second Important Wedding Benefits Banks

As anyone following the economic situation in the UK knows, these are trying times for banks and consumers alike. The Bank of England just released another disappointing growth report, and revised its projection down to 2.7 percent in 2011, and 2.8 percent in 2012. Overall productivity has eroded due in...

Join FICO for a Live Interview on Credit Scoring on Monday, May 16

Next Monday, Bankrate.com’s Leslie McFadden will conduct a live interview about credit scores with FICO blog author Careen Foster, director of Scores product management. Specific topics of discussion will include the Credit CARD Act, risk-based pricing rules, the inclusion of alternate data in credit scores and building a credit score...

Stabilizing RWA Calculations

As an article in last week's Financial Times notes (Time to work out real odds in the weighting game, May 2), some European regulators are calling for a standard way to calculate risk-weighted assets (RWA) under Basel. RWAs and equity are used to determine a bank's capital strength. Banks and...

Preparing for new score disclosure regulations in July

On the heels of the Federal Reserve/FTC’s risk-based pricing rule that went into effect January 1, lenders must immediately turn their attention to the next set of regulations governing credit score disclosures. As part of the Dodd-Frank financial reform bill, Senator Mark Udall added a provision that requires credit scores...

Survey reveals issuer response to the CARD Act

When the CARD Act went into effect last year, compliance and rising delinquencies commanded the attention of card issuers, often at the expense of revenue-generating activity. A recent FICO client survey asks: have issuers turned the corner? To find answers, we asked a range of both large and small issuers...

New Regulation Raises Consumer Awareness of Credit Scores

While the FICO® Score is certainly no stranger to thousands of US banks and credit unions, a new federal regulation is introducing this important three-digit number to millions of consumers for the first time. The Fair Credit Reporting Act’s risk-based pricing rule, issued by the Federal Reserve and the Federal...

Call for presentations: Submit your FICO World session idea

As FICO™ World 2011 approaches, we invite FICO clients and other industry thought leaders to submit proposals for conference sessions related to predictive analytics and key issues in retail banking and insurance. The FICO World 2011 conference will be held in New York from November 1-4. It’s easy to submit...

FICO CEO on CNBC Squawk Box: Credit Where It’s Due

On CNBC Squawk Box, FICO CEO Mark Greene discusses results from a new FICO survey of risk managers, as well as key issues affecting US consumer credit health. For those who can't see the embedded video above, view it here.

Basel III and Profitability

The new Basel III rules on capital and liquidity are focusing banks on how to achieve compliance with new ratios. But as McKinsey points out in a recent white paper, banks also need to start developing strategies and initiatives to enable them to make market-acceptable returns from their products and...

Credit Scores and Counter-Cyclical Risk Management

Basel III regulations call for banks to adopt a counter-cyclical approach to managing risk and capital. To avoid creating credit bubbles or prolonging economic recessions, risk measures should reflect the effect of the next economic cycle. FICO's David Molyneaux explains in this Tech Talk. Credit Scores & Counter-Cyclical Risk Management...

How will regulations affect Europe's credit supply?

What do European credit risk managers see ahead for credit supply and demand? That’s what FICO and Efma asked in the first European Credit Risk Survey, and the report, released today, shows a mixed response. One thing risk managers across Europe agreed on is that regulations are likely to tighten...

Navigating the new normal in Asia Pacific

Navigating today's banking "new normal" continues to be top of mind for businesses and policymakers—so much so, that I was recently asked to byline an article on the subject for Singapore’s Business Times. In the article, I identify three new realities of the new normal that we must wrap our...

CNBC Squawk Box: FICO CEO on consumer debt, new risk-based pricing rules

On CNBC Squawk Box, FICO CEO Mark Greene discusses consumer debt and delinquency, new risk-based pricing rules for lenders, and FICO's launch of ScoreInfo.org, an educational website to help US consumers understand risk-based pricing disclosures. Can I Get Your (Credit) Digits? http://www.cnbc.com/id/15840232/?video=1738503669&play=1

What can banks learn from retailers?

Banking profits are up. Back in the summer, banks like HSBC and BNP declared record profits. Lloyds bank returned to profit promising the UK government a return on its investment, and the U.S. banking industry earned $14.5 billion during the third quarter of last year. The FDIC went on to...

Accelerating product innovation and new revenue

The recent spate of regulatory reform that is capped by Dodd-Frank will inhibit institutional profits by either expressly limiting or completely eliminating established sources of revenue. We believe that—as in the past—this kind of adversity will spark industry innovation. Indeed, many clients have told us that they are in research...

Why the holistic customer view is even more critical

Dodd-Frank is just the latest in a succession of game-changing regulations that have rocked the financial services industry over the past two years. For banks to be profitable in the new financial landscape, they’ll need to manage customers more holistically. Customer retention is going to be key, and it won’t...

Profitable line increases after the CARD Act

The CARD Act has posed a number of challenges for issuers, not the least of which is how best to determine a consumer's “ability to pay”—a requirement that applies not only to new accounts, but also for credit line increases. The predominant response from issuers has been to implement an...

Analytics as an interactive planning tool

While the full impact of Dodd-Frank is yet to be felt, it’s clear that banks will face meaningful pressure on profits as a result of compliance with the legislation. As banks develop new plans to shore up profitability, comply with regulations and hold onto high-value customers, analytics can play a...

Bottom-line impacts of the CARD Act

For many credit card issuers, concerns over rising delinquency, and compliance with the CARD Act and other recent legislation have been top-of-mind—sometimes at the expense of more profitable activity. This contraction of revenue-generating events has been confirmed in a recent FICO survey. We asked a range of issuers, both large...

FICO assists FTC in case against credit repair organization

Posted by Robert Duque-Ribeiro, FICO VP and general manager, Scores Business Unit In October 2008, the Federal Trade Commission and 24 state agencies announced a crackdown on 33 credit repair organizations (CROs) in 22 states, and brought 7 lawsuits. The FTC’s cease and desist orders alleged that the CROs had...

European stress tests reinforce need for new analytics

Starting today -- July 23 -- the Committee of European Banking Supervisors (CEBS) has begun publishing results of stress tests on European Union banks at http://stress-test.c-ebs.org/firstresults.htm. THE CEBS has performed this stress test on 91 banks “to assess the overall resilience of the EU banking sector and the banks’ ability...

Free scores in financial reform act

- Posted by Tom Quinn, FICO® Score Product Manager Almost buried in the massive Congressional bill on financial services regulatory reform is a provision by Senator Udall (D-CO) that gives millions of consumers new and free access to credit scores. I think both lenders and consumers will benefit from this...

Welcome to the FICO Banking Analytics blog — why are we here?

- Posted by Tom Quinn, FICO® Score Product Manager Today's bankers are information junkies. We should know - as the creators of the FICO® score and other predictive analytics solutions, we are constantly providing our clients with new research and insights into credit trends. We created this blog to share...