IFRS 9 ECL modelling solution of the year
The S&P Global Market Intelligence solution for International Financial Reporting Standard (IFRS) 9 credit impairment combines data, qualitative and quantitative analytics, and workflow tools to compute the credit risk components – probability of default (PD) and loss given default (LGD) – necessary for expected credit loss (ECL) calculation. The solution helps clients perform in-depth credit risk analysis by leveraging the company’s expert judgement and sector‑specific scorecards – which are particularly relevant for low default asset classes – or quick and scalable statistical models.
The PD and LGD components can be combined with exposure-at-default estimates, interest rate data and cashflows to perform an IFRS 9-compliant ECL calculation.
The S&P Global Market Intelligence solution comprises three distinct components – datasets, analytics and workflows. The datasets can be accessed directly through the S&P Capital IQ platform, databases or application programming interfaces and data feeds. Data includes credit ratings from S&P Global Ratings for clients needing to create a point-in-time (PIT) credit score for their ECL calculations across a rated universe of exposures. It also includes more than 30 years of default, ratings transitions and trends, and comprehensive company-level fundamental data.
Statistical models on the S&P Capital IQ platform provide PD values, either over one year or the lifetime of the exposure, so clients can address both stages one and two of the IFRS 9 ECL. The platform also provides a macro‑scenario model that addresses the requirement to incorporate multiple weighted-macroeconomic scenarios and forecasts into ECL calculations. PIT adjustment can be applied to PDs, scores or credit ratings, which can be combined with statistical LGD models to calculate expected losses.
Workflow includes the ability to easily gather, analyse and store the different information required to perform ECL calculations, as well as integrate statistical models with fundamental data, with tools for entity and batch analysis.
IFRS 9 advises institutions to include the market view of risk in the weighted average calculation in addition to macroeconomic scenarios where the data is available. S&P Global’s solution makes this data readily available for incorporation into users’ risk metrics.
Sidiq Dawuda, director of risk services at S&P Global Market Intelligence, says: “We have developed our IFRS 9 offering with extensive market feedback from key participants and after careful examination of the reporting requirements. Our solution incorporates data, analytics and workflow tools to provide the PD and LGD inputs necessary for ECL calculations, and offers the flexibility necessary to address the challenges posed by the new standard. To perform quick and scalable calculations across multiple ECL exposures, clients can use the credit analytics platform. For a more qualitative and fully transparent approach, clients can apply our scorecard framework, which is especially applicable to low-default asset classes.”
“Strong offering because of both modelling analytics and data provision”
“Well thought out with valuable supporting data”
“S&P is a leader in this space”