In addition to ensuring Basel II compliance, the project is part of CMBC's initiative to focus on small and "micro" businesses by using data-based risk management tools and analytics.

Through this initiative, CMBC is expected to reduce its capital reserve requirement. FICO's assignment with CMBC includes testing and verifying the existing grading model; designing new grading models for application, transaction and collection in the small and "micro" business, retail and credit card businesses; conducting pool assignments of risks; and estimating PD, LGD, EAD and other risk indicators. In addition, the FICO team will develop strategies for retail products and advise on IT requirements.

Following a rigorous competitive review, CMBC selected FICO based on the company's deep experience with Basel II implementations and its proven analytic capabilities.

"FICO impressed us with their grasp of Basel II challenges, their leadership in risk management for small business customers, and their experience with similar projects in China and around the world," said Zhao Jichen, member of the Basel II Implementation Steering Committee of CMBC. "This initiative will allow CMBC to improve its risk management while reducing capital requirements, thereby freeing up capital to fuel additional growth."

"Basel II compliance is critical for a healthy and sustainable retail credit industry to emerge in China," said Dan McConaghy, president and general manager, FICO Asia Pacific. "True to its reputation as an innovative industry leader, CMBC has taken a big step in embracing advanced risk assessment tools and analytics."

FICO is currently working with 11 of the top banks in China to mitigate credit risk, profitably grow portfolios, adapt to regulatory change and mitigate fraud risk. The Basel II project marks FICO's first engagement with CMBC.