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Handbook of Asian Finance by Greg N. Gregoriou, David LEE Kuo Chuen

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Chapter 1

Risk Rating in Asian Banks

Edward H.K. Ng,    Dren Analytics Pte Ltd., 4 Burgundy Rise, Singapore 658855, Singapore,    E-mail: edwardhkng@dren.biz

Abstract

Developing robust consumer credit scoring models is notoriously difficult for Asian banks. The first challenge is the lack of good data. For that reason, many banks have resorted to internal heuristic models or Western vendor-provided ones. Such models rely on priors often disproved by empirical evidence. Given compliance requirements, banks in Basel II regimes do not have the luxury to wait for sufficient reliable data to be collected to develop credit risk models. This paper proposes a relatively easy approach to use transaction data to model riskiness. The empirical evidence obtained ...

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