HSBC has developed a new credit ranking tool capable of running multiple 'what if' climate risk scenarios simultaneously on Google Cloud.
The bank plans to use the tool to measure the impact of climate change risk on its trading book, identifying the capital requirements necessary to cover potential rating downgrades and default risk of credit products, such as corporate bonds.
The system harnesses the power of cloud computing, where billions of data points are generated, with results delivered in minutes, allowing HSBC traders to better manage their trading portfolios on an intraday basis.
Ajay Yadav, global head of fixed income & digital strategy for traded risk, HSBC, says: “The computing power of Google Cloud makes it much quicker to run complex simulations for many different ‘what if’ scenarios, providing a more holistic risk picture of trading for optimum decision-making.
"HSBC’s digital development team built this innovative capability in less than five months in collaboration with Google Cloud. The focus now is to take the HSBC Risk Advisory tool and integrate climate risk into it as a proof of concept, which we are aiming to make available in the next few months.”