Technology-enabled innovation for credit granting

From Open Risk Manual

Technology-enabled innovation for credit granting

When using technology-enabled innovation for credit-granting purposes, institutions should do the following [1]:

  • Adequately capture, in their risk management and control frameworks, the inherent risks associated with the technology-enabled innovation in use. This should be commensurate with the business model, credit risk exposure, complexity of the methods and the extent of the use of technology-enabled innovation.
  • Ensure that the management body has a sufficient understanding of the use of technology-enabled innovation, its limitation and the impact it has on credit-granting procedures.
  • Understand the underlying models used, including their capabilities, assumptions and limitations, along with ensuring their traceability, auditability, and robustness and resilience.
  • Ensure that the models are fit for purpose, taking into account the identified task and other criteria, such as its performance and use. If explanations are required during the models’ use, then consideration should be given to developing an interpretable model.
  • Understand the quality of data and inputs to the model and detect and prevent bias in the credit decision-making process, ensuring that appropriate safeguards are in place to provide confidentiality, integrity and availability of information and systems.
  • Ensure the performance of the model, including the validity and quality of its outputs, is continuously monitored and appropriate remediation measures are taken in a timely manner in the case of detected issues (e.g. worsening or deviating from expected behaviour).


See Also

References

  1. EBA, Guidelines on loan origination and monitoring EBA/GL/2020/06