Leasing and Factoring Portfolio Optimisation
Leasing and factoring books are among the most capital-inefficient assets a bank or finance company holds. They are granular, short-dated and well-secured, yet often capitalised as if each exposure were a stand-alone corporate loan. Swissdacs engineers these portfolios so the capital held against them reflects how they actually behave — releasing the difference for new business.
Why working-capital books trap capital
A leasing or factoring portfolio is built from hundreds or thousands of small, self-liquidating exposures. Losses are frequent but shallow, recoveries are high, and the book as a whole behaves far more predictably than any single name within it. Conventional capital treatment rarely captures that. Risk weights are applied position by position, diversification is under-recognised, and the protection already embedded in the structure — security, retention, insurance — is only partly reflected. The result is a book that ties up materially more capital than its true loss behaviour requires.
How Swissdacs optimises the portfolio
Swissdacs applies its deterministic calibration engine, Harmonia©, to the portfolio as a whole. Harmonia reads every position, orders exposures by rating, geography and risk, and calibrates the book to a defined level of confidence — to the order of 99.9%. From that it derives the loss the portfolio needs to absorb, separates the residual tail from the part that is structurally protected, and sizes the required capital precisely. Because the engine is deterministic, every figure can be traced and reproduced for a regulator or auditor.
Structured loss absorption and risk transfer
Calibration is only half the work. The other half is engineering where losses sit. Through Structured Loss Absorption (S.L.A.©), Swissdacs defines the order in which a portfolio absorbs loss — the retained first layer, the protected layer, and the residual tail — and pairs it, where appropriate, with insurance-backed protection from rated insurers. Recognised risk transfer then does the work it is designed to do, within the prudential framework the institution already operates under.
What the institution gains
- CET1 released — capital sized to the book's true behaviour, not to a conservative convention, freeing capital to lend again.
- A defensible result — calibrated, documented and reproducible, ready for a regulator, an auditor and a treasury committee.
- More business on the same balance sheet — released capital supports new leasing and factoring volume, and the revenue that comes with it.
- A repeatable framework — the same engineering applies to existing books and to new programmes.
Defensible by construction
Swissdacs does not seek relief through interpretation. Leasing and factoring optimisation is built to be defensible line by line: the calibration logic is kept separate from, and in support of, the regulatory arithmetic, and the structure stays inside recognised regulatory categories. The test is always the same — the outcome must be defensible line by line.
Where to start
Most engagements begin with a leasing or factoring book the institution wants to make more capital-efficient, or a new programme it wants to structure correctly from the outset. To discuss a portfolio, contact info@swissdacs.com, or read more about the engine at harmonia.engineering.