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Risk Quantum finds insights in data. The service tracks the public disclosures of over 120 banks, funds, insurers, corporates, and central counterparties – as well as reports from prudential and markets regulators – in Asia, Europe and North America.

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Are UK banks underestimating coronavirus impact?

The stress scenarios UK banks currently have in place to ballpark their expected credit losses (ECLs) may underestimate coronavirus-related impacts, although regulatory intervention should spare them from dramatically increasing loan-loss reserves as the economic effects of the crisis manifest. Lenders use a series of forward-looking simulations to size ECLs under IFRS 9 accounting standards. These are unique to each bank, meaning the number of, and economic assumptions included in, these scenarios vary. Downside, central and upside scenarios are all assigned a probability weighting, and the blended outcome is used to set loan-loss amounts.

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