Financing decision within the focus of optimization

The financial sector was flooded with new challenges in the last years. Not only is there a lowered demand on investment financings and a harsh situation in the refinancing market but also now one has to deal with stricter rules of supervision, imposed by the government. Cost-reducing steps as well as new markets are needed. An important starting-point is the optimization of the decision process for financing, which is an integral part for many banks and leasing-companies’ business.

It doesn’t matter if you have to work with simple standard-deals or complex financing requests; you start with checking your customer’s data. The supplied data is often not enough to make a decision. Often you will deal with missing values for the deposited collaterals, the needed enquiries, the current rating and the exact values of the object that is going to be financed.

Crucial for the processing of requests are not only the requirements of Basel II and MaRisk, but also the companies own rules to minimize risks. An important reference point for rating risks is the LGD (Loss Given Default), which represents the loss-quota in case of insolvency. This parameter and its influencing factors are suitable for measuring and exact controlling of the risk of loss. 

After the first check and the vote from a market employee, the processing starts through the middle office. If needed, this division either demands additional requirements or it will be rejected. On a successful pass, the offer will be transmitted to the customer. In case the deal gets accepted, the business data is transferred to the portfolio management system, which usually is used for monitoring and execution of the financing. The portfolio management system returns important information about single deals and, if applicable, their interruptions. This information plays an important role during requests from companies which operate in a network.

The risk of errors rises significantly during the analysis of complex network structures. Reasons for this are the very complex legal and economic relations, which are prone to erroneous ratings.  It is important that all network partners of the beneficiary unit are rated correctly (exposure, rating, collateral, network collaterals, etc.). The partial results also need to be merged into a valid overall result.

With the help of the credit decision system KM3, complex financing decisions are backed up by a workflow, and if desired, run fully automated without manual interaction. Thus, deals can be processed at optimal costs. KM3 represents the credit decision process from trading to middle office. And depending on the exposure structure and the object that will be financed, it can run with or without manual interaction.

The system can be integrated seamless in the system and processing-environment of existing systems. It enhances the existing systems by transforming the old processes from manual to automated and standardized ones. From data collecting and processing over the checking (dual control principle) and up to the decision, KM3 delivers all required steps in compliance with legal regulations. The system determines and rates automatically the beneficiary unit and offers a complex, multi-level dissolution of the structures for a correct exposure and collateral-rating.

A manual calculation of collaterals in complex structures is almost impossible nowadays, especially in reasonable periods. What also needs to be taken into consideration is that while collaterals are being calculated, new financings could be added and other ones could end. The risk of a miscalculation is high due to the degree of complexity. KM3 does these calculations fast and reliable.


By means of the integrated system of rules, one can store different processes that will run depending on the amount of exposure, that needs to be approved, and the properties of the financing itself.  The interaction of automated and manual processing-levels is directed by system of rules and the extensive rights and role-management. Every employee is assigned to a specific role that manages affiliations to a department and approved competences. If the financing happens to have specifics, like being a foreign object, additional key personnel will be added. The decision is based on legal requirements and the companies own rules.

Crucial support

The automated process starts with choosing the needed rating methods (Basel II-conform). The system will then check if the needed requirements for a segment-conformed rating are met. Missing data will be fetched automated via web-interfaces (i.e. Creditreform, SCHUFA or by bank-information). In the same way, the newest object-collaterals and the actual degree of auto-collateralization are determined. The deposited, additional collaterals are also managed and will be included in the decision process.

The basis for every decision is a differentiated set of rules, which not only speeds up the process, but also improves its quality. The key for the quality of a recommendation is the underlying set of rules and their actual implementation.

The quality of the decision process is crucial in the financial business, since it defines itself on the failure quote. One important control quantity is the LDG-index (Loss Given Default), which is also calculated by KM3. Of special interest for the funder is also the amount and type of interruptions, like delayed payments.

The more differentiated the reports for the transacted deals are, the better one can adjust the decision rules and thus, align the credit process towards the business objectives. By using the embedded reporting in KM3, the funder can approach his goals (business volume, margin and degree of risk) iteratively.

A strong foundation: JBoss Middleware

The portal technology integrates single portlets to a flexible interface, which fits the requirements. KM3 is completely browser-based, a locally installed client is not needed. The centralization reduces administrative- and operating-costs, compared to traditional desktop installations.

Experience and quality for your success

Almost 20 years of experience in software development and in consulting for banks and leasing companies are contained in the conception of KM3. The actual realization happened in close cooperation with GEFA (SG Equipment Finance), the industry leader for sales and investment-financings of movable assets. The GEFA-group already uses KM3 successfully since 2009.

What really differentiates KM3 from other systems or the manual processing is the sophisticated set of rules, which gives you the option to automatize and improve your decision results. The set of rules are so flexible, that a fine tuning of your companies own rules, legal or workflow changes can be implemented very fast.

KM3 offers both: the security of a successful product and the flexibility of individual development. The users will benefit from the flexibility and security during the handling of requests. You can always choose the needed degree of automation that is needed for a seamless integration into your business processes.

Every KM3 project starts with an analysis of existing business processes and decision criteria. S&N not only offers the analysis, but also the process consult and integration. For the support of your system, S&N offers an own support-team, that can represent the individually needed service level.

Contact: Sarah Schwemin; Turn on Javascript!