National Commercial Bank Will Accelerate Basel Compliance Using FICO Analytics

Basel II models, stress testing are part of meeting Basel II advanced approach

LONDON--(BUSINESS WIRE)-- FICO (NYSE:FICO), the leading provider of analytics and decision management technology, today announced that the National Commercial Bank (NCB), the largest bank in the Arab world, will use FICO predictive analytics to meet Basel II regulations. NCB, based in Saudi Arabia and also known as Alahli Bank, has purchased FICO custom models along with stress testing as part of its plan to adopt the advanced approach set down in Basel II.

The Saudi Arabian Monetary Authority has mandated compliance with the advanced approach to calculating capital requirements, as required by Basel II. Under the Basel II rules, banks using the advanced “internal rating based” (IRB) approach can use their own estimates of credit risk — measured using probability of default (PD), loss given default (LGD) and exposure at default (EAD) — as primary inputs to determining minimum capital requirements.

FICO is building models for NCB that will calculate PD, LGD and EAD. Because the models developed will be used both in new account decisions and in credit decisions on NCB’s 2 million customers, as well as for calculating capital reserves under Basel, National Commercial Bank will meet the Basel II “use test.” In addition, FICO will use the FICO Economic Impact Service for stress testing, another requirement of Basel II, to reveal how changes in the economy would affect the risk in its portfolio. FICO worked on the sale to NCB with Cadmus International, a sales agent in the Middle East.

“The initial analytic discovery project we did with FICO confirmed the sophistication of their approach, and showed that working together we could meet our bank’s plan to achieve Basel accreditation,” said Ery Rinaldi Zaidir, vice president of Portfolio Management and Risk Analytics at NCB. “One of the critical factors was to create risk models that were sufficiently powerful for us to use in originations and account management decisions, as well as in calculating capital reserves. FICO demonstrated that they had both the analytic skills and experience with Basel regulations to meet this requirement, and to advance our whole best-practice Basel program.”

“Basel regulations are one of the top priorities for banks around the world,” said Mike Gordon, FICO managing director for Europe, the Middle East and Africa. “By using this opportunity to further improve their predictive analytics, National Commercial Bank are out in front, turning regulatory compliance into a competitive advantage.”

NCB has worked with FICO since 2002 to advance its predictive analytics and risk management. FICO has assisted NCB in moving from “expert” origination models developed when no data was available, to fully empirical models based on NCB data.

FICO offers banks at all stages of adopting the Basel II Internal Rating Based (IRB) system the advantages of superior analytics, proven methodologies, and unmatched experience at measuring and predicting risk in retail portfolios. FICO has helped clients in Europe, the Americas, Asia Pacific, the Middle East and Africa comply with Basel regulations. In addition to Basel risk models that combine regulatory measures with the precision needed for risk decisions, FICO provides analytic services for stress testing, including the FICO Economic Impact Service, which can help banks adopt the counter-cyclical approach that is part of Basel III.

About FICO

FICO (NYSE:FICO) transforms business by making every decision count. FICO’s Decision Management solutions combine trusted advice, world-class analytics and innovative applications to give organizations the power to automate, improve and connect decisions across their business. Clients in 80 countries work with FICO to increase customer loyalty and profitability, cut fraud losses, manage credit risk, meet regulatory and competitive demands, and rapidly build market share. FICO also helps millions of individuals manage their credit health through the www.myFICO.com website. Learn more about FICO at www.fico.com.

About Cadmus International

As a local representative of FICO’s world-class solutions, Cadmus International currently provides decision technology, loyalty solutions and marketing consulting services to the Middle-East region. Based in Dubai, U.A.E., Cadmus serves 41 clients in 9 countries by partnering with world leaders in their respective fields.

Statement Concerning Forward-Looking Information

Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company’s Decision Management strategy and reengineering plan, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to realize the anticipated benefits of any acquisitions, continuing material adverse developments in global economic conditions, and other risks described from time to time in FICO’s SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2010. If any of these risks or uncertainties materializes, FICO’s results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.

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Source: FICO