Exclusive interview of Alena Stratan, Director of Bank Risks Control Department, member of ZAO VTB Bank (Armenia) Directorate to ARKA news agency
ARKA – Ms. Stratan, would you tell us about the automated loan decision-making system that VTB Bank (Armenia) began to introduce from February 1 this year? What are its advantages both to the Bank and its clients?
Alena Stratan – The idea about the need to introduce automated decision-making system for so-called ‘mass’ credit products (retail loans) appeared after the Bank passed a decision to make retail businesses a targeted segment in line with its credit policy. It is a fact that retail credits markets is a high-tech market and that was why the Bank decided to enter it. It realized also the need for introducing a technology tat would imply a relevant standardization level.
The automated loan-decision making system supposes that an application filled in and signed by a client at the Bank’s head office or a branch is input into the automated system by a Bank employee. Then the application goes through all stages of analysis. The task is to find out whether it complies with the minimum of its requirements, to define a client’s scoring history, the limit calculation , the groups of linked borrowers and so on. All operations are automated.
In this system the sequence of analysis phases and decisions made based on the application’s data are standardized. This is why it allows a complete standardized decision-making process, excluding virtually human factors like subjective judgment, manager’s risk at the moment of decision-making for each application. In short, the ability to control technologically the process of decision-making for credit deals is one of the most substantial advantages of the Bank. From a client’s viewpoint the system allows high-level and quick decision-making.
ARKA – Does this mean that after the introduction of this system clients will be given credit cards?
Alena Stratan- The Bank began offering credit cards to its clients in 2010 November and that is not related in any way with this new system. It is rather part of its strategy to expand the types of its products. I would like to note that the availability of the automated system does not necessarily mean that the Bank offers this or that product. It only creates an instrument thanks to which the Bank may choose ‘desired clients’ through a standardized system in accordance with a set of necessary requirements.
In addition to it the Bank has no need to train employees of its vast network on how to consider each application. We have assigned this role to the automated system and therefore the launch of new products will take least time. That will give the Bank a certain competitive edge.
ARKA- Is the system completely automated or there is still some manual work?
Alena Stratan- The new system has one mandatory manual phase- client’s security check. The checking rules are highly standardized, this is why the consideration time at this stage is very limited depending on the product type. The Bank will automate this stage partially only after accumulating sufficient data on the market.
Another manually implemented phase may arise at the final stage of decision-making when the system ’ has doubts’ about the clients’ calculated limit. In other words, what the total amount of the loan should be. This problem arises when the client and the group of linked borrowers have liabilities with other banks and they should not be registered while calculating the client’s credit limit. According to our estimates, about 60-70% of the applications will go now through the automated system. This percentage will grow and then we shall modify the system along with accumulating market related statistical data.
ARKA – Who of the Bank’s clients can make use of the system?
Alena Stratan- Virtually all our clients. In fact clients are not interested at all to learn what a system is used to process their applications, a manual or automated. What is important to them is get a soonest response of the Bank. The system has been developed for the Bank rather than for its clients. It does not have to employ an army of risk managers at its head office to make timely decisions.
ARKA- For what kind of loans the new system is designed for and what is the minimum and maximum loan amount?
Alena Stratan – The system is tuned now and works for mortgage and car loans. Soon applications for cards and Universal type credits will also go through it. Then new products will be added to the list. If we try to explain it in plain words, the system is like an empty box which we fill with requirements for each product and then this box decides itself who of the clients fits into them or not, depending on the level of filling.
ARKA – What kind of risks the system’s introduction may pose and what the Bank will do to fight them?
Alena Stratan – Risks are minimal, but they depend strongly on the knowledge of the people operating it. It is a sophisticated system. It processes the application by stages depending on the input rules. But what concerns the rules it depends on the professionalism of risk managers who must be able to ‘feel’ the market, possess sufficient data and be able to interpreter them correctly when tuning the system. At that they have to secure that the problematic portfolio does not go beyond the planned level. It is a serious challenge that needs permanent skills improvement by our managers.
ARKA – What is the role of the Bank’s branches for this system?
Alena Stratan – Their role is big, especially in the process of selling credit products. Branch staff must be able to ensure timely input of applications into the system. They are responsible for all data to be reflected in the system and for timely scanning the minimum set of documents for client identification and add it to the already input information. Without that the Bank will be unable to provide timely answer to its clients.
ARKA – Was the system designed by the Bank’s specialists or bought as a finished product?
Alena Stratan – The system was developed by the Bank’s risk managers with the support of colleagues from OAO Bank VTB 24, although we could buy it as a finished product. We proceeded from the fact that we would benefit if the system was developed by our specialists since in that case we should know for sure what it has inside, how to maintain it and what is most important is that it would be our own product. Of course, in view of the time its development took, buying the system would be an easier option, nonetheless, it took us a year to develop it. I think this is a weighty achievement. -0-
