New QIS5 gives more PD and LDG leeway

REGULATORY UPDATE

In response to requests from some QIS5 participants, the final workbook allows banks to define more probability of default (PD) and loss-given default (LGD) bands under the IRB approaches to credit risk, relative to the first version, which should allow for finer gradations of risk. Most of the remaining changes have been technical, the source said, primarily involving minor changes and addressing errors in the spreadsheet. There are no changes of substance to the operational risk aspects, with

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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