Bank of Beijing introduces new enterprise-wide credit early-warning system to improve asset quality

Bank of Beijing, one of the leading city commercial banks in China, recently introduced a new credit risk ‘smoke index’ early-warning system to strengthen its enterprise-level credit risk controls across businesses, customer segments and front-to-middle and back-office functions.

It aims to strengthen the risk management capabilities in supporting all business processes through the development and deployment of big data and artificial intelligence or AI-enabled analytics, modelling, algorithms, application scenarios and risk-manager experience by benchmarking top industry peers.

Han Xu, the chief risk officer of Bank of Beijing, said the system has provided effective technological support for the development and growth of its loan and financing business. As of December 2022, the bank’s business scale exceeded RMB 3.39 trillion ($493.5 billion). The system has helped maintain a stable and positive trend in asset quality, with non-performing loan and provision coverage improving consistently.

The system uses a data-driven approach that integrates internal and external data to achieve proactive risk monitoring and warning in response to multi-dimensional application scenarios, coupled with offline surveillance and in-person assessment.

The bank has strengthened its management of lifecycle credit risks by updating the risk management scope and implementing differentiated credit policies. The system has enabled the bank to screen for higher-quality customers, conduct early warning and targeted intervention, and monitor warnings in real-time to support differentiated and trigger-based management.

Han described how the ‘smoke index’ risk warning system has improved the bank’s capability for proactive prediction, warning, and prevention of default. It can spot risks as early as 10 months ahead and helps maintain the overall asset quality of the bank.