Making history as a credit risk modeller; it is happening now
He loved maths as a child, and now he manages a team that deals with perhaps the most important arithmetics in the bank and beyond. To redevelop the model for the international wholesale portfolio as a credit risk modeller is as complex as it is valuable. Senior Credit Risk Modeller Martin van Buren prefers to bite down on the most complicated quantitative issues and likes to talk about it.
Risk analysis: a responsible task
‘Risk is inherent in banking, because any loan has a chance of not being fully paid back. From mortgages to large corporate loans, for every loan portfolio in the bank there is a credit model that helps us manage the risks . Our team is working on the redevelopment of the PD-modelProbability of Default is the chance that payment obligations are not fully met. of the international wholesale portfolio. To this end, we perform quantitative analyses on immense amounts of data to map out the creditworthiness of customers.’
‘Our credit models are the basis for decision-making. That is quite a responsibility, especially when it comes to the international wholesale portfolio. Our clients range from Dutch SMEs to the listed corporates we all recognize from the economics section of the newspaper. In terms of credit risk capital, this is Rabobank’s largest portfolio.’
‘So in terms of exposure, it’s billions – but the social impact is also huge. Many companies depend on our model. As one of the largest financial institutions in the Netherlands, Rabobank bears joint responsibility for a healthy financial climate. That pressure is palpable, both from the business and the ECB, but it is definitely motivating. We know very well what we are contributing to.’
The redevelopment of redevelopments
‘Modelling is always a cyclical process, but the cycle we are now in is of unprecedented proportions. I have been working for Rabobank since 2007 and have never done a project as extensive as the redevelopment of this model. The data landscape is vast, the diversity of clients is enormous, the standards we have to meet are sky-high, regulations are – rightly – increasingly stringent and we have to deal with many different stakeholders and interests.’
‘A model is a simplified representation of reality. But that reality is a rather complex whole that is constantly changing, so that is our greatest challenge. “Keep it simple, stupid”, is what I always say. And if we can find the right balance between that transparent simplicity and that complex reality, we really make a difference. For a credit risk modeller, this is the moment where you can write history: this redevelopment of the model. There is a lot at stake.’
The human side of a technical profession
‘In my team, that pressure creates an extra drive to perfect the model. I manage a team of 10 modellers. They program, mainly in Python, to perform the analyses to identify and quantify risks. I am the bridge between them, the management and other stakeholders. Such as the business, i.e. the people who use the models, but also IT for the implementation, the data team for the quality of the data, the validation team and audit. The latter two monitor the model content and process.’
‘Personally, I find the network of stakeholders a very nice aspect of this profession. Risk analytics sounds quite technical, and in the core it is, but it is also very human. The complexity lies, on the one hand, in the quantitative puzzle itself and, on the other hand, in the interpretations and the various interests it represents. In the end, we all serve the client. And yes, we use advanced Python scripts, but we must always be able to explain it to everyone, including non-technical stakeholders. Whether it is senior management, the business or the regulator, the model must be as transparent and understandable as possible.’
Together for the best result
‘I am incredibly proud of my team. The pressure is high, the dynamics matchless and the atmosphere is good! We are a very close team of very smart people from all over the world and we work very closely together. So, many stand-ups, round-table discussions and knowledge sharing meetings. We are critical and keep each other on our toes. Normally, we do a lot of fun things besides work. Covid has made that a little less, but we still have a lot of fun together.’
‘That atmosphere contributes to everyone’s dedication to making this project a success. We did not miss a deadline, I am really proud of that. Everyone helps each other, within the team but also outside. This mentality is typical of Rabobank: we always make time for others, no matter how busy we are. There is a great awareness that you get the best results together, especially within risk analytics. From this profession, you are the most intertwined with all parts of the bank – and you feel that.’