The eligibility of more and more categories of credit risk mitigation under Basel II Simple and Comprehensive methods is both a challenge and an opportunity.This paper illustrates that potentially complex many-to-many relationships between CRM and customer exposures are resolvable in a way that is transparently compliant and at the same time optimises minimum regulatory capital, from both the bank’s and the customer’s viewpoints. It outlines an approach to automate and optimise the allocation of eligible regulatory credit risk mitigation - CRM - to Exposures.

Authors:
Theo Scott
Paul Ashton, Director and Head of Consultancy