1. 1 How to Use Credit Bureau Data to Better Manage Retail Portfolio Vasil Verulashvili Head of Credit Risk Bank of Georgia January 2014, Tbilisi

2. 2 Contents Brief Introduction – Bank of Georgia How to Use Credit Bureau Data in Decision Models How to Use Credit Bureau Data in Different Processes In which Models Credit Bureau Data is Generally Used Summary General Benefits of Credit Bureau

3. 3 Brief introduction – Bank of Georgia JSC Bank of Georgia (LSE: BGEO) is the largest commercial bank in the country, with 34.1 % market share by total assets; The only Georgian company with credit ratings from all three global rating agencies: S&P: BB-, Moody's: B1/Ba3 (foreign and local currency), Fitch Ratings: BB-; outlooks are Stable JSC Bank of Georgia First and still the only entity from Georgia to list on the London Stock Exchange since 2006 (in the form of GDRs since 2006 and premium listing since February 2012, in FTSE 250);

4. 4 JSC Bank of Georgia provids retail banking, corporate banking, wealth management, brokerage and insurance services to its clients; JSC Bank of Georgia serves more than one million customers through one of the largest distribution networks in Georgia, largest ATM network, self service terminals and a full-service remote banking platform and a modern call center; Brief introduction – Bank of Georgia

5. 5 Contents Brief Introduction – Bank of Georgia How to Use Credit Bureau Data in Decision Models How to Use Credit Bureau Data in Different Processes In which Models Credit Bureau Data is Generally Used Summary General Benefits of Credit Bureau

6. 6 Makes more complete picture of customer (other banks lending, public data); Supports responsible lending and reduces credit losses; Increases predictive power of scoring models; Increases lending opportunity of financial institutions; Increases access to credit for customers; Provides additional services, improves quality of lending processes; General Benefits of Credit Bureau

7. 7 Credit Bureau in Georgia (CreditInfo Georgia) was founded in 2005 and played one of the most important role in developing of retail lending in Georgia, especially in Bank of Georgia; CreditInfo Georgia is now the only credit bureau in Georgian market servicing banks, MFIs, insurance, telecommunication companies, etc… CreditInfo Georgia provides efficient decision making tools as well as access to credit information databases. General Benefits of Credit Bureau Loan Portfolio Growth Rates (X)2002 / 20052005 / 2013 Banking Sector - Total Loans2.85.8 Banking Sector - Loans to individuals2.19.5 Bank of Georgia - Total Loans3.111.1 Bank of Georgia - Loans to individuals2.812.6 Bank of Georgia - Unsecured Loans to individuals4.322.5

8. 8 Contents Brief Introduction – Bank of Georgia How to Use Credit Bureau Data in Decision Models How to Use Credit Bureau Data in Different Processes In which Models Credit Bureau Data is Generally Used Summary General Benefits of Credit Bureau

9. 9 What are we looking for in Credit Reports? Current Liabilities: –Number and amounts of liabilities –Types of products –Monthly payment amounts –Number of banks –Collateral… Credit History: –Length of payment history –Delinquency status –Credit usage pattern –Products used… Inquiries; Court judgments, debtors records, tax obligations, salary check status… How to Use CB Data in Different Processes

10. 10 How are we getting Credit Report? Through the Credit Bureau website Through the web service directly in application processing system Detailed information from reports can be summarized and used in calculations automatically, also shown in user forms when needed Through the web service in batch processes White list, Cross & Up selling Getting triggers from Credit Bureau Monitoring service Collection/Retention processes How to Use CB Data in Different Processes

11. 11 Disbursement Area Decision Making Area Data Collecting Area How to Use CB Data in Different Processes Identity Verification Core System, Reporting DWH Credit Bureau Calculations Simple Validation Scorecards (App, Fraud) Corrections Policy Rules Accept Reject Refer Final Decision Confirmation & Contract Core System Manual Underwriting Application Form Sample flowchart of application processing and decision making process

12. 12 Contents Brief Introduction – Bank of Georgia How to Use Credit Bureau Data in Decision Models How to Use Credit Bureau Data in Different Processes In which Models Credit Bureau Data is Generally Used Summary General Benefits of Credit Bureau

13. 13 How to Use CB Data in Decision Models Application Details Internal Data Decision Score Bureau Score Bureau Data Policy Decision Internal Score LOGISTIC MODEL Choice 1.

14. 14 How to Use CB Data in Decision Models Application Details Internal Data LOGISTIC MODEL Decision Score Bureau Score Bureau Data Policy Decision Internal Score Choice 2.

15. 15 As well as better scores, policy rules can have a significant additional advantage! How to Use CB Data in Decision Models Stylized representation of uplifts

16. 16 How to Use CB Data in Decision Models

17. 17 How to Use CB Data in Decision Models GINI Ratio Model A40.81 Model B44.06 Model A&B48.30

18. 18 Contents Brief Introduction – Bank of Georgia How to Use Credit Bureau Data in Decision Models How to Use Credit Bureau Data in Different Processes Different Models Where CB Data is used Summary General Benefits of Credit Bureau

19. 19 Loan Origination –Decision model –Fraud model –Policy rules –Pre-approvals Collection –Collection scoring model –Pre-emptive strategies –When to sell Portfolio and at what price Different Models Where CB Data is used Portfolio management –Credit risk model –Size of Wallet & Spend potential model –Retention model Capital –Provisioning –AIRB capital model –ICAAP

20. 20 More precise approach compare to the simple (Policy based) decision making process Credit Bureau data based Scoring model is more predictive CB Score is very important parameter in decision making model Result Better & Faster Decisions Summary

21. 21 Q & A