Data not judgement required for Nordic banks' Basel approach

Nordic banks want to use the Basel framework’s advanced approach to credit risk capital, but local regulators are insistent that data – rather than judgement – has to be the basis for the calculations. Banks don’t have enough instances of default in their large corporate portfolios to model the risk accurately, but the solution could be loss data-sharing. By Duncan Wood


A European loss data consortium is set to receive a boost to its membership, courtesy of Finansinspektionen (FI), the Swedish financial supervisor. Svenska Handelsbanken and Nordea have decided to join the six-year-old Pan-European Credit Data Consortium (PECDC) because it’s the only way for them to satisfy FI’s strict criteria on credit risk modelling.

“If banks want to use advanced models to calculate regulatory capital, their models need to be based on a sufficient amount of high-quality data

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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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