Improved credit loss estimates proposed for IFRS 9

New smoothing technique claims to overcome flaws in risk rating scales

Cake
Smooth operator: algorithm tackles ECL calculations

A new method of providing smoothed estimates for probability of default could lead to better loan loss forecasting under recently introduced accounting standard IFRS 9, a new paper finds.

The technique claims to help banks make more accurate fixes on expected credit loss, or ECL, which is an important part of the new standard. It may also help for annual stress tests, such as the US Federal Reserve’s Comprehensive Capital Analysis and Review, or CCAR. Some institutions already use the technique

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: