BB& T Overview General Information 9 th Largest Bank in the - - PowerPoint PPT Presentation

Challenges and Rew ards of Implementing a Dual Risk Rating Infrastructure October 17 th, 2012

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BB& T Overview

• General Information

– 9th Largest Bank in the U.S. based on Customer Deposits – $178.5 Billion in Assets and Market Capitalization of $21.6 Billion – Employs nearly 33,000 with approximately 1,800 Financial Centers in 12 States and Washington, D. C.

• Organizational Structure

– Community Bank Structure – 36 Regions each with a separate Regional President – Credit Approval Process – Analytical and Risk Grading Process

• Risk Grading – Current Methodology (Single Risk Grades)

– C&I Risk Grading Process – Existing Template (MMAS) and Scorecard (General C&I) – CRE Risk Grading Process – Existing Template (MMAS) and Scorecard (General CRE and SFR)

• Existing Challenges and Opportunities

– Data Integrity – Risk Grade Consistency

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C& I Risk Grading Implementation

• Scorecard Overview

– Moody’s RiskCalc and RiskCalc Large Firm

• Version 3.1
• Credit Cycle Adjustment

– Public Company Scorecard (Moody’s Credit Edge) – Excluded Industries

• Specialized Industry Scorecards
• Evaluating Impacts of RiskCalc 4.0
• Template Overview

– MMAS Template – Three (3) Custom Templates to Support Scorecard Deployment Above

• Excel Prototypes Complete – Parallel Testing Underway
• RAFTA Deployment – Complete in 1st Quarter 2013
• Emphasis on Data Integrity

– Centralized Analytical Spreading Process – De-Centralized Completion of Risk Grading Process

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CRE Risk Grading Implementation

• Scorecard Overview

– CRE General Scorecards

• Office, Retail, Industrial
• Multifamily
• Hotel
• SFR

– Monte Carlo Simulation Model (Larger Credit Exposures)

• Template Overview - CRE Analytical Workbook

– Continuous Income Properties – Non-Continuous Income Properties

• Emphasis on Data Integrity

– Centralized Analytical Spreading Process – De-Centralized Completion of Risk Grading Process

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Loss Given Default Implementation

• Loss Given Default (LGD) Version 2.0 Completed October 2012
• General Methodology

– Universal Scorecard (CRE, C&I, Individual) – Weighted Average Collateral Coverage Calculation – Liquidation Values Based on Historical Loss Experience

• Individual Impact

– Guarantors Impact Loss Given Default Grades – Substitution Permitted if Certain Minimum Parameters are Satisfied – Individual Risk Grading Methodology Still in Development

• Probability of Default Scale – 16 Grades
• Loss Given Default Scale – 6 Grades

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Risk Grade Project - Timeline

• 2009 – Project Inception
• 2010 – Project Parameters Established

– CRE Ratings Methodology – C&I Ratings Methodology – Risk Grading Group Established in 4th Quarter 2012

• 2011 – Initial Rollout Plan Established

– June 2011 Pilot – CRE Monte Carlo Simulation – 3rd/4th Quarter – Project Re-Conceptualized

• 2012 – Rollout Plan 2.0 Established

– June 2012 Pilot – Foundational Scorecards – 3rd/4th Quarter – Evaluating Initial Pilot Results, 3rd Party Feedback

• 2013 – Complete Dual Grade Rollout

– February 2013 Pilot – Specialized Scorecard – 4th Quarter 2013 – Bank-Wide Rollout

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Data Integrity – Methodology and System Solutions

• Current and Adequate Financial Information
• Data Capture – Analytical Spreading Process

– Commercial Real Estate Analytical Process – Commercial and Industrial Analytical Process

• System Solutions

– Client Management Solution – Analytical Spreading Solution – Loan Accounting System Solution

• Organizational Challenges

– Build vs Buy Decision – System Integration

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Organizational Dynamics

• Managing Change

– Beliefs – Behaviors – Results – Community Bank – Collecting Client Financial Information – Commercial Credit Administration – Existing Credit Culture

• Project Leadership

– Executive Sponsor – Enterprise Risk Manager – Project Leader – Credit Policy and Governance – Project Manager – Enterprise Risk Management – Line of Business – Chief Commercial Credit Officer – Line of Business – Senior Commercial Real Estate Manager – Line of Business – RGG Manager – Line of Business – ERM Risk Analytics

• Decision-Making Process

– Commercial Risk Grade Governance Committee – Ad Hoc Meetings with Executive Management

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Training Strategy and Implementation

• Training Strategy - Foundational Progression

– Assess Organizational Competency – Current and Adequate Financial Information/Analytical Spreading – Identify and Address Deficiencies – Develop Long Term Training Strategy

• Utilize Online Channel – Captivate (40-50 Interactive Modules)
• In-Person Training – Two (2) Lab Sessions (3,000+ Individuals)
• Post-Training Assessment

– Position-Specific Certification Program(s)

• Account Officers
• Portfolio Managers
• Credit Officers
• Training Materials – Universal Access and Version Management

– SharePoint Development – Position-Specific Playbooks

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Summary

• Risk Grade Project Structure and Leadership
• Organizational Assessment

– Foundational Execution – End to End Data Integrity – System Assessment – End to End Data Integrity

• Risk Grade Methodology

– Determine Primary Objectives (Basel) – Determine Rating System Priorities

• Point in Time vs Through the Cycle
• Forward Looking Components
• Portfolio Strategy and Specialized Scorecards

– These Decisions Should not be Revisited

• Develop, Design, and Implement Data Capture Components
• Develop, Design, and Implement Risk Rating Components
• Continual Optimization (DMAIC)