Multiple NPL models better than single models, research finds

Combinations of models produce better NPL estimates in study of Greek crisis

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Two heads better than one when it comes to NPL modelling?

New research into the forecasting of bad loans has found banks would achieve better results by combining a variety of economic models, rather than relying on a single approach.

The analysis, by Georgios Papadopoulos, an economist at the Democritus University of Thrace in Greece, used portfolio data from three Greek banks to study how effectively models were able to convert a macroeconomic scenario – such as a decline in GDP or rise in unemployment – into a credit risk impact, specifically the

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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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