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Analytics and Credit Risk Measurement

Specific areas on credit risk measurement where our professionals have a wealth of experience and expertise include:

  • Individual Impairment Tests and Provisioning (Allowance for Loan and Lease Losses): setting up the process, workflow design, implementation, evaluation of an existing process, calculation of the provision charge, assessing the adequacy of stock of provisions, navigating between accounting and regulatory expectations, implementing the new IFRS 9 (that will be replacing IAS39)
  • Credit risk Collective Provisioning by portfolio type: methodology , risk parameter estimation and moel validation, implementation, evaluation,  assessing the adequacy of provisions
  • Provisioning policies (Impairment and write off): development of new ones customised to the size and complexity of an institution, and  evaluation of existing ones
  • Internal (credit) rating models for legal entities/borrowers: methodology development, implementation, validation
  • Transition probability matrices based on borrower/obligor rating or days past due bucket count migrations
  • Retail Credit Application Scorecards, generic and bespoke: development, evaluation, validation
  • Credit Behavioural Scorecards
  • Risk adjusted credit facility pricing, based on either regulatory capital requirements (Standardised Approach or IRB) or on economic capital needs. RAROC (risk adjusted return on capital) based performance measurement
  • Creation of credit default annual loss distribution (Vasicek Single Factor Model, Actuarial Model, other modelling approaches)
  • Credit Value-at-Risk (VaR) for internal capital allocation: model implementation, evaluation and validation of existing models
  • Credit Risk stress testing for Pillar 2 capital allocation purposes; Methodology development implementation, validation
    • P&L impact of flow of new defaults
    • P&L impact from falling immovable property values
    • Point-it-time default probability (PD) and loss-given-default (LGD) estimation
    • Capital allocation for concentration risk to large exposure and industry sectors (Herfindahl approach, Granularity approach).
  • Customer loan portfolio and counterparty risk comprehensive analysis

See also Stress Testing

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