Company - Our View

Capital Markets
Our analysis of the aftermath of the financial crisis shows that the economy will not get going until the banks start lending again. High leverage in the economy has not changed significantly since the crisis and since leverage was the fuel for economic growth prior the crisis, now, when deleveraging is needed in all sectors of the economy we do not see growth picking up soon and consider the economy fragile and vulnerable to any shocks. Thus we have a hawkish view on the current macro environment but see the issues in the economy as an opportunity to make money on credit.

Credit markets are very sensitive to economic shocks and this together with the innovative new technology we bring to credit research creates an opportunity in our view to make money on the credit markets in times of market turmoil.

Banking
We believe that in order to make the right decisions in lending and risk management one needs to have a clear vision about the risks relating to the portfolio. Having large number of assets in the balance sheet without automatic mechanisms to measure risk, it is hard to follow Expected Losses in changing macroeconomic environment. Challenges can only be overcome if the full magnitude of the problem is revealed and raising awareness is the first step to solve a problem. In order to manage risk, one needs to be able to measure it precisely on and individual and portfolio level considering prevailing macroeconomic assumptions.

QCR's new credit rating tool (RISKAWARE) provides an integrated, next-generation solution to enhance the measuring, handling and administering of credit risk. It can model the effects of any macroeconomic shocks on the whole portfolio considering borrower and deal specific factors. Each borrower and transaction is affected differently by changing macroeconomic environment. RISKAWARE evaluates each transactions individually and builds up the portfolio from individual credits, which will give a clear picture of the risk profile of the portfolio and make stress-testing easy and meaningful.

This approach can be presented to regulators under Pillar II as an ICAAP Approach and responsible and pragmatic decisions can be achieved by the model.