Machine Learning in Credit Risk Modelling

Description:

The logistic regression is useful in calculating rankings of customer creditworthiness. However, there is large literature showing the advantages of machine learning in credit risk. Machine learning offers higher classification accuracy and solutions to deal with common problems faced in the classical credit risk models. In addition, machine learning can improve credit allocation and estimate credit risk relatively more accurate. Hence, the aggregated social welfare is improved. This is achieve in two ways 1)right customers have access to credit and the credit cost is relatively more accurate, and 2) bank's financial obligations are not threaten by customers' lack of payment. Hence, Santander Consumer Bank AS wants to learn from the best-in-class research institutes in the country, and to be able to build in-house competence and use this knowledge to improve bank's credit risk management by building machine learning credit risk models. Santander considers this project as an essential part of a long-term strategy for building in-house competence and expertise in machine learning for credit risk modelling. This competence is not limited to Mr. Mancisidor, the industrial PhD candidate. Over the duration of the project, and upon completion of the PhD, Santander aims for Mr. Mancisidor to actively transfer his acquired knowledge in this project to his fellow members of the Nordic Risk Models department.

Project leader: Andrés Díez

Started: 2016

Ends: 2021

Category: Næringsliv

Sector: Næringsliv

Budget: 1707000

Institution: SANTANDER CONSUMER BANK AS

Address: Bærum