Written by Infopro Digital.
The expected credit loss (ECL) and impairment calculation and analysis required by International Financial Reporting Standard (IFRS) 9 present a number of challenges in terms of having the right parameters (default, recovery, market scenarios and forecasts), models (corporate, retail and commercial real estate) and platform. To address these, Moody’s Analytics offers a suite of solutions including data, models and economic forecasts.
The solutions, such as ImpairmentCalc and RiskCalc with Macroeconomic Scenarios model, are robust and flexible enough to accommodate the size and needs of any financial institution. ImpairmentCalc brings models and calculations together, and can be implemented as a standalone or fully integrated system, allowing custom inputs along with data and models provided by Moody’s Analytics. It can be integrated with internal accounting systems and offers reporting for financial disclosures with automated analysis of allowance volatility over multiple reporting dates.
RiskConfidence Impairment is a strategic platform that enables end-to-end orchestration and automation of ECL calculations. It facilitates data management, model automation, impairment calculation and reporting, providing transparency, control, auditability, traceability and repeatability. It can be deployed on-premises, or in public, private or hybrid cloud environments.
The company’s granular data includes extensive private and public firm credit risk recovery and default data, loan-level consumer and structured credit data, and economic, demographic and financial data for 180 countries and subregions as model drivers. Off-the-shelf models cover commercial/wholesale, retail/consumer, structured credit/cashflow portfolios and public firms. The models are transparent, auditable and flexible. Custom and hybrid models are also available.
The company produces multiple upside and downside scenarios that extend through long future horizons to satisfy IFRS 9 lifetime requirements. It also provides a methodology for staging assessment that identifies the quality of clients’ portfolio deals and assigns it as stage 1, 2 or 3.
The judges said:
- Moody’s Analytics’ IFRS 9 enterprise solution is an excellent product and methodology combined with support and expertise.
- Moody’s Analytics comprehensively addresses the challenges of ECL modelling. Its solution is the market leader in this area.
Cris deRitis, deputy chief economist, Moody’s Analytics, says:
“The implementation of IFRS 9 and CECL [Current Expected Credit Loss] means financial institutions must now measure and report on the future performance of their portfolios and business. How each institution generates and measures their expected credit losses is unique. As the pandemic reminds us, what those measurements look like can quickly change quite a bit. Our modular and flexible solutions – comprising data, forecasts, economic scenarios, models and portfolio management platforms – enable clients to apply the new standards while also strengthening their risk management processes. As these awards highlight, whatever a firm’s specific requirements, and no matter the financial environment they’re navigating, Moody’s Analytics can help.”