Banks look to repurpose credit risk models for IFRS 9

Dealers adapt capital models for new accounting standard, but shortcut has challenges

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Existing credit risk models are being upcycled for IFRS 9 usage

Banks in the midst of implementing new accounting standards are looking to lighten the load by adapting their existing credit risk models for regulatory capital to calculate loan-loss provisions under International Financial Reporting Standard (IFRS) 9.

Set to be implemented in 2018, IFRS 9 introduces a new expected credit loss (ECL) regime for loans which will dramatically increase the reserves banks must hold against future losses. Dealers must calculate ECL for all loans over a 12-month

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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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