Credit risk modelling
Fed’s climate stress test whips up storm for banks
Long-awaited US climate risk exercise puts tough pressure on banks’ data and models
Small banks set for 2% capital reduction under Basel III
Lower leverage ratio requirements expected to offset Tier 1 capital increases for credit risk and output floor
US banks’ risk-free exposures keep falling
Assets with 0% risk-weighting lowest proportionally since Q1 2020, replaced by riskier exposures
UK banks added £1.6bn to loan allowances in 2022
Increase in set-asides driven by stage-two and stage-three credit-loss reserves
Rabobank closes gap to Basel III after RWA top-ups
Mortgage floor, other model corrections bring forward reforms’ forecast impact
Swedbank takes $3.47bn RWA hit from credit model overhaul
Rejig of IRB models is expected to reduce the bank’s Pillar 2 requirement
US credit risk modellers prepare for life after IRB
Stress tests and economic capital calculations may not carry the same weight as Basel ratio
Lifetime achievement award: Stephen Kealhofer
Risk Awards 2023: KMV co-founder helped usher in a new era of credit risk analysis – at banks and investors
IRB risk-weights highest at smallest EU banks – ECB
Lenders with less than €30 billion in assets consistently report lower risk densities than bigger banks across all modelled portfolios
At US banks, risk-free exposures hit lowest in two years
Just under a third of credit assets carried a 0% risk-weight in Q3
Collateralised exposure modelling: bridging the gap risk
Concentration, leverage and correlations may affect a collateralised equity swap portfolio
F-IRB captured more of EU banks’ credit risk in H1
Gains mostly accrued from bank-modelled A-IRB portfolios
Erste, RBI top up provisions with €258m in overlays
Austrian lenders remain reliant on model supplements as energy squeeze looms
HSBC’s quarterly UK provisions rose 111% in Q3
Uncertainty around interest rates and political stability reflected in model overlays
US Bank cautions on regulators’ TLAC proposal
Risk USA: CRO also says bank is readying credit risk models and business plans for recession
A-IRB to lose credit risk reach under Basel III
Americas banks expected to generate just 40% of RWAs using internal models, from 67% currently
EU banks add overlays as crises evade modelling
Lenders buttress provisions against unpredictable fallout from Russia's invasion of Ukraine
ECL model forecasts are off-target, researchers find
Anticipated slowdown will be first major test for new generation of expected credit loss models
Holistic credit risk assessment and the goal of safe unbiased modelling
In this Asia Risk webinar, experts in artificial intelligence (AI) and machine learning examined the growing applications being seen in the field and their merit in credit risk modelling
Banks temper credit loss models by editing Covid narrative
Faced with geopolitical chaos and signs of recession, expected credit loss models need to adapt fast
US banks underestimate loan losses in Fed stress test
Systemic lenders predict 34% lower hit to their loan books in latest DFAST exercise
Standard risk measures low-balled Archegos exposures
When a potential blow-up doesn’t show up, what use are VAR, SA-CCR and stress tests?
The evolution of liquidity risk management
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Modeling credit risk in the presence of central bank and government intervention
In this paper a simple approach for including central bank and government intervention in credit models is developed and illustrated using the Fed’s data for the CCAR 2021 stress test.