The big four UK high street banks use very different economic scenarios to estimate the amount of cash they need to set aside to cover loan defaults.
Lenders employ an array of forward-looking simulations to size expected credit loss (ECL) provisions under IFRS 9 accounting. These are unique to each bank, meaning the number of, and economic assumptions featured in, these scenarios vary.
Barclays uses five scenarios, Lloyds four, HSBC six and RBS five. Each bank uses one baseline scenario they
- Banks rethink fund-linked trades ahead of FRTB
- People moves: Barclays’ investment bank chief exits, Citi president to retire, Vos promoted at BNY Mellon, and more
- Fund-linked structured products face extinction under FRTB
- Banks grapple with social media risk
- China Minsheng and SocGen team up for quant index product