This article outlines recent approaches to managing credit risk when facing regulatory capital requirements. We explore how institutions should best allocate capital and make economically-optimized investment decisions under regulatory capital constraints, such as those imposed by Basel or CCAR-style rules.
In this article, we provide an overview of some common problems organizations face and introduce a solution to develop an integrated, transparent, measurable, and actionable Risk Appetite Framework.
In order to thrive in today's competitive environment, financial institutions are adapting to rapidly changing business demands and regulatory requirements and finding new ways to transform their data into business insights and opportunities. Data visualization is an emerging trend in credit risk management.
Mehna Raissi, Grace Wang
In this Q&A, we recap the main themes from the 2015 Moody's Analytics Risk Practitioner Conference, and look forward to what we expect next year.
In this article, we compare the results of estimating retail portfolio risk parameters (e.g., PDs, EADs, LGDs) and simulating portfolio default losses using traditional – frequentist – methods versus Bayesian techniques.
The Moody's Analytics Regulatory Radar provides an overview of the main regulatory guidelines affecting the banking industry. It is a proprietary tool developed to monitor regulations in the immediate, medium, and long term, across multiple jurisdictions.
María C. Cañamero
With powerful computers and statistical packages, modelers can now run an enormous number of tests effortlessly. But should they? This article discusses how bank risk modelers should approach statistical testing when faced with tiny data sets.
Banks should prepare for a new business ecosystem driven by the financial technology (FinTech) revolution. Learn how the industry can adapt to disruptions.
The banking industry will be affected by significant structural changes and required to implement risk governance reforms to keep up with complex regulations and macroeconomic and financial conditions. This article provides best practices for how banks can thrive in this future operating environment.
Banks and the services they offer remain essential to global economies.To stay relevant, however, banks need to adjust their business models and adapt to the new realities – tighter regulation, lower interest rates, changing client needs and behavior, technology disruption, and accelerating disintermediation.
Dr. Christian Thun
The way insurance and investment products are distributed and managed in the future will undoubtedly change, but firms can benefit from the new paradigm. This article addresses how financial institutions can remain competitive by delivering intuitive customer journeys at a low cost using the latest technology.
Philip Allen, Brian Heale
This article addresses the two interdependent needs of effective integrated risk training and measuring optimal risk management to make recommendations for how to train and track behavior.
With their focus on profit margins, data and risk management, and compliance with an increasing number of regulations, financial institutions often pay insufficient attention to the human side of their operations. This article addresses that deficiency and explains the sea change taking place in how risk professionals acquire “human data” – the quantifiable ability of employees to do their jobs well.
This article explains the benefits of an online decision system to deliver higher returns on risk while making regulatory compliance easier and cheaper.
This article aims to illustrate the general impact of credit deterioration on regulatory capital risk weights in a large dataset of multiple structured finance asset classes.
Welcome to the fourth edition of Risk Perspectives, a Moody's Analytics publication created for risk professionals, with the goal of delivering essential insight into the global financial markets.
This article aims to illustrate the general impact of credit deterioration on regulatory capital risk weights in a large dataset of multiple structured finance asset classes. For investors and risk managers, any asset class-specific trends can help in the investment evaluation process.
How can banks measure the success of their stress testing efforts? This article explores where banks can look for the “alpha” in stress testing – that is, how they can measure the performance of their stress testing programs, identify weaknesses, and make the process more efficient and effective.
Mark McKenna, Greg Clemens
As mass amounts of data meet ever-increasing regulation in the world of finance, sophisticated data management has never been more important. How a bank handles this complex problem will make or break its position as a global player.
This article looks back at the Asian financial crisis of 1997-1998 and applies new methods of measuring systemic risk and pinpointing weaknesses, which can be used by today's financial institutions and regulators.
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.
Most banks are able to stand up to quantitative stress testing and even prove their capital adequacy. But many organizations lack a streamlined process that allows them to run stress tests with ease and control. This article outlines a five-step process that will help banks maximize their stress testing investment.
Greg Clemens, Mark McKenna
Multicollinearity, the phenomenon in which the regressors of a model are correlated with each other, apparently causes a lot of confusion among practitioners and users of stress testing models. This article seeks to dispel this confusion.
To get senior stakeholders to buy in to alternative macroeconomic scenarios, risk management and ALM teams must assemble risk models and risk-adjusted performance measurements in their simulation tools. Institutions must switch from a qualitative to a quantitative approach to analysis.
Regulators and auditors expect banks' data submissions to be more detailed than ever before. This article explains the benefits of an online decision system to deliver higher returns on risk while making regulatory compliance easier and cheaper.
International Financial Reporting Standard 9 (IFRS 9) will soon replace International Accounting Standard 39 (IAS 39). The change will materially influence banks' financial statements, with impairment calculations affected most.
This article addresses how banks should look to sources of high-quality, industry-level data to ensure that their PPNR modeling is not only reliable and effective, but also better informs their risk management decisions.
In this article, we focus on the impairment aspect of the IFRS 9 standard, and how banks should now calculate credit losses to comply with the new IFRS 9 rules by 2018.
Big data isn't just for Silicon Valley. This article discusses the trend of large data set capture and analysis by regulators, referred to here as “regulatory big data,” by detailing the motivations and goals of regulators.
Michael van Steen
Funds transfer pricing (FTP) is of growing concern to banks and regulators. But what does FTP have to do with stress testing? A comprehensive FTP framework can help organizations use the results of stress tests to forecast their P&L across departments.