Risk-Adjusted Return on Capital (RAROC)

Our client is a Tier 2 Bank in Turkey who serve retail and commercial customers and has a global presence in the world.
  • The bank needed to compare return on capital of different products and portfolios to the risk taken to earn this return
  • Internal and external factors that impact the amount of risk
  • Determined the hierarchical structures to be used by granular portfolio planning and Risk-Adjusted Return On Capital (RAROC) calculation engine
  • Calculated hierarchical income and expense distributions
  • Established a calculation infrastructure where risk costs will be determined and distributed on a balance sheet basis
  • Established the infrastructure to manage risk-weighted assets and creation of a RAROC calculation simulation module
  • Designed pricing modules including strategic reports and monitoring structure required for the pricing process



Increased profit



Reduced default rate



Reduced decline rate