Consumer Credit Analytics

In this webinar, the Moody's Analytics team discuss the effects of Brexit on the U.K., European and U.S. economies and detail the assumptions behind their baseline forecast and four Brexit-driven scenarios.

Presenter: Dr. Juan Licari
Date: August 31, 2016
watch now
Learn how to develop a framework that addresses the forward-looking and probability-weighted aspects of IFRS 9 impairment calculation using macroeconomic forecasts and scenarios

Presenter: Barnaby Black
Date: August 31, 2016
watch now
Gain insight in to how to address IFRS 9 challenges by incorporating forward-looking information into impairment models for consumer lending portfolios.

Presenter: Barnaby Black
Date: August 31, 2016
watch now
In this webinar, Dr. Mark Zandi, Chief Economist and Dr. Dimitrios Papanastasiou, Director, Stress Testing Specialist, discuss the results of the latest stress tests,

resenter: Mark Zandi, Dimitrios Papanastasiou
Date: August 3, 2016
watch now
In the second of a two-part webinar series, we present a two-stage process that generates consistent, transparent scenario-specific forecasts for all relevant market and credit risk instruments, ensuring cross-consistency between projections for macroeconomic and financial series.

Author: Dr. Juan Licari
Date: December 2, 2015
watch now
In the first of a two-part webinar series, we present an innovative framework for stochastic scenario generation that allows risk managers and economists to build multi-period environments, integrating conditional credit and market risk modeling to meet dynamic stress testing needs.

Author: Dr. Juan Licari
Date: November 12, 2015
watch now
Measurement errors in macro variables may be biasing stress projections downwards. But in this article, we propose there is a solution to this problem.

Author: Tony Hughes
Date: August 7, 2015
Download PDF
In this article we demonstrate how to combine the PPNR Factors Library with internal data to produce forecasts that better reflect the macroeconomic environment posited under the various U.S. CCAR scenarios.

Author: Tony Hughes, Brian Poi
Date: July 15, 2015

Download PDF

Robust models are currently being developed worldwide to meet the demands of dynamic stress testing. This article describes how to build consistent projections for standard credit risk metrics and mark-to-market parameters simultaneously within a single, unified environment: stochastic dynamic macro models. It gives a step-by-step breakdown of the development of a dynamic framework for stochastic scenario generation that allows risk managers and economists to build multi-period environments, integrating conditional credit and market risk modeling. 

Author: Dr. Juan Licari & Dr. Gustavo Ordonez-Sanz
Date: June 5, 2015

Download PDF

Credit card charge‐off rates are still declining. According to CreditForecast.com, the U.S. average charge off rates over the last two quarters have been 3.2% annualized, down 0.28 percentage point on a year ago basis. Total outstanding balances during the same period increased 4.25% to $566 billion from a year earlier. Even taking into account the harsh winter, which weighed on consumer spending, both charge‐off rates and outstanding balances for credit cards look to be recovering.

Author: Jeesang Jung
Date: May 20, 2015

Download PDF
This article look at how banks, consumers and businesses are benefiting from the strengthening economy, and consumer and commercial credit conditions are improving.

Author: Mustafa Akcay
Date: April, 2015
Download PDF
This analysis examines the current auto lending outlook's stability and the potential to deteriorate quickly should underwriting standards loosen further.

Author: Cristian deRitis, Pedro Castro 
Date: March 25, 2015
Download PDF
In this report we look at numbers that show consumers, businesses and lenders are benefiting from a strengthening economy, and credit conditions are improving.

Author: Mustafa Akcay
Date: March 23, 2015
Download PDF
In this month’s report we analyze the US household growth in December and how the auto lending industry continues to lead the way.

Author: Cristian deRitis
Date: February 28, 2015
Download PDF
Regulators are challenging how to perform stress testing on low default portfolios by reviewing bank’s PD models for RWA stress testing, in the absence of data they need to be convinced of the methodology used. In this Moody’s Analytics webinar we put forward a statistical approach to stress testing low default portfolios with practical case studies.

Presenters: Dr. Juan Licari, Manuele Iorio
Date: September 2, 2014
watch now
Overall growth in consumer credit was muted in 2013 as repercussions from the housing bust and Great Recession continued to be addressed. With the last remnants of the financial shock finally behind us, households, businesses and lenders are now well positioned to capitalize on a growing economy.

Author: Critian DeRitis
Date: December 19, 2013
Download PDF
Moody’s Analytics develops economic alternative scenarios that are now a basic tool for regulators of financial institutions. This document describes our scenario development process and uses CCAR and PRA as the main examples.

Author: Petr Zemcik
Date: February 15, 2014
Download PDF
This article examines the Federal Reserve’s recently released Comprehensive Capital Analysis and Review scenarios, and asks: do they pose challenging new questions for bank capital planners, or are they mundane?

Author: Tony Hughes
Date: November 14, 2013
Download PDF
Australia, which has been recession-free since the early 1990s, faces many risks in the consumer credit landscape. One of the “problems” with a period of strong growth is that complacency tends to grow at an even greater pace. It is almost five years since the zenith of the global financial crisis—Lehman Brothers filed for bankruptcy on September 15, 2008—and although the ructions in Australian banking have not rivaled those in the U.S. or Europe, there have been some significant underlying changes in lending growth and credit performance. The purpose of this article is to examine some of these shifts and thus to elucidate our expectations for the near-term performance of the Australian consumer credit sector.

Authors: Tony Hughes, Daniel Melser
Date: July 22, 2013
Download PDF

Many of the dynamic features of the auto finance industry are countercyclical. We argue that the CCAR auto modeling methodology used by the Fed pays too little heed to these features. We propose a plausible alternative scenario that synchronizes the observed dynamics to be maximally stressful for the auto finance sector.  

Author: Juan Carlos Calcagno, Tony Hughes, Stephen Kernytsky
Date: June 24, 2013

Download PDF

The Comprehensive Capital Analysis and Review (CCAR) stress-testing protocol dictates that banks be able to quantify the effects of the Supervisory Stress Scenarios (SSS) on their entire profit and loss statement and balance sheet. Most banks that are subject to the requirements already have models in place for analyzing credit losses, though responses vary in terms of the quality of models and the level of coverage. This year, we feel that attention will increasingly turn to the problem of testing the other factors that can make or break a bank’s performance under stress. Notably, banks need a solution for analyzing the liabilities book while also extending analysis to cover the volume and quality of new originations made given the bank’s risk appetite and the revenues that flow from both new and existing loans on the asset side of the ledger.  

Author: Tony Hughes
Date: June 13, 2013

Download PDF

Some of the pushback we’ve had from internal and external validators and the Fed during the last round of Comprehensive Capital Analysis and Review is that stress-testing models need to be very simple. Tony Hughes, senior director for consumer credit at Moody's Analytics, discusses that while it's important for bank managers to understand their stress testing models, the potential for these models to yield deep insights will be lost if we oversimplify them.  

Author: Tony Hughes
Date: May 15, 2013

Download PDF

In this Banker & Tradesman article, John Baer talks about the empowering of deal makers through a thorough understanding the current risk, borrowing limits, exposure and collateral values for each counterparty within their customer's borrowing group, and across their portfolio.  

Author: John Baer
Date: May 20, 2013

Download PDF

The main purpose of our exercise is to stress-test the elements of a standard, through-the-cycle rating transition matrix with an explicit and transparent connection to macroeconomic drivers. The challenge behind this exercise is evident in the time-series nature of through-the-cycle migrations: They are built to be stable over time, and changes happen in waves (of upgrades or downgrades) that disappear once the economic and credit conditions go back to normal. In other words, their behaviour over time is not symmetric around an average or median value. They actually show bimodal distributions, with observations accumulated in different states of nature: (i) normal and/or good times vs. (ii) stressed conditions. 

Authors: Juan Licari, Jose Suarez-Lledo, Barnaby Black
Date: May 13, 2013

Download PDF

The Canadian economy and Canadian consumers continue to receive intense scrutiny from lenders and policymakers alike. The resilience of the economy and continued rise of house prices in the face of the global recession has puzzled analysts for several years. Forecasts of a U.S.-style collapse in home values and mass charge-offs across consumer credit portfolios have failed to materialize. In this article, we focus on the consumer credit card sector in particular to better understand the trends and consumer behaviours driving outstanding balance growth and payment performance.  

Authors: Cristian deRitis, Mustafa Ackay, Stephen Kernytsky 
Date: May 09, 2013

Download PDF
Now in its fourth year, the bank stress-testing process prescribed by the Dodd-Frank Act continues to evolve. Data and reporting templates have been standardized along with the Federal Reserve’s process for creating economic scenarios. Banks have invested millions of dollars to upgrade their IT systems and beef up their risk oversight and modeling teams. As evidenced by the Fed’s 2014 Comprehensive Capital Analysis and Review report, most banks are now flush with capital as a result of shedding noncore assets and maintaining tight lending standards over the past four years. Now that bank finances and risk management are stronger and data are more reliable, we focus on the quantitative accuracy of the stress tests themselves and their reasonableness vis-à-vis the Great Recession experience.

Author: Cristian deRitis
Date: April 30, 2014
Download PDF

In this case study, the client evaluated and quantified the risks and sensitivities of a retail portfolio for which it had limited historical performance data. The analysis showed that even under a very negative macro scenario where the unemployment rate rises up to 16%, the deterioration of the mortgage book would not be dramatic. Analysis of the consumer loan portfolio showed much more sensitivity to the labor market. The impact of other variables, including interest rates and exchange rates, were also evaluated but shown to have a significantly smaller effect on portfolio performance. 

Authors: Juan Licari & Jose Suarez-Lledo
Date: March 15, 2013

Download PDF

This article outlines why the US Federal Reserve should formulate a stress-testing strategy that aligns with its monetary policy objectives as it attempts to aid the recovering US economy.

Author: Tony Hughes
Date: November 1, 2012

Download PDF

The Canadian economy in general and the consumer segment in particular were surprisingly unscathed by the economic recessions in the U.S. and Europe. Recent data suggest this good fortune may be starting to turn, however.

Authors: Cristian de Ritis and Mark Hopkins
Date: September 1, 2012
Download PDF

Econometricians need to build models for forecasting or prediction, strucutural analysis or hypothesis testing, and policy or shock analysis. Each of these applications has an underlying loss or risk function that governs how the model should be built and the properties the preferred model specification should retain. In this paper, we condiser stress-testing, which we view as somewhat distinct from other types of econometric analysis.

Author: Tony Hughes
Date: June 4, 2012

Download PDF
Print