CCAR and 3rd Quarter Reporting: COVID Induced Cultural Shifts in Credit Modeling
With COVID-19 continuing to batter the global economy, many banks are struggling to model credit losses as they prepare for their upcoming Comprehensive Capital Analysis and Review (CCAR) submissions as well as 3rd Quarter earnings.
This discussion will focus on the following themes:
- Models that calibrate the sensitivity of credit losses using the last 20 years of pre-COVID data simply will not pick up on the varying degrees to which different industries are affected by COVID-19
- Introducing alternative data and analytics to describe COVID induced cultural shifts, and assessing the profound impact of COVID on cross-industry-country credit risk
- How further fiscal and monetary stimulus programs distance the current environment from being properly described by the historical relationships between credit quality across industry segments and macroeconomic variable
- The extreme nature of economic scenarios are often out of model range, and not representative of the credit environment
- Introduce alternative data and analytics to describe COVID induced cultural shifts
- Assess the profound impact of COVID on cross-industry-country credit risk
- Discuss the use and interpretation of extreme economic scenarios
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