Model Validation Services for Consumer Credit Risk
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Moody’s Analytics provides independent and unbiased model validation and advisory services for proprietary and third party consumer credit risk models.
Independent model validation is an integral component of model risk management. Poorly designed models can undermine underwriting performance, mismeasure expected losses, and undermine financial reporting, capital allocation and strategic decision making. In addition, increased regulation has significantly raised the bar for validation through increased scrutiny of models, process and governance.
As a trusted second line of defense, Moody’s Analytics provides independent and unbiased model validation and advisory services for proprietary and third party models. Our model validation services go beyond ticking the box. We evaluate whether the chosen model delivers sound results and meets the needs for which it was designed, while improving our client’s governance processes.
Benefit from best-practices and expertise
- Conduct qualitative and quantitative analysis based on the model objectives
- Demand thorough and defensible documentation for internal and third party review
- Review model assumptions and methodologies
- Assess performance using extensive modeling, econometric, machine learning and regulatory expertise
- Verify that the model assesses material risks and ensures reasonable mitigation actions
- Provide findings and recommendations
- Offer guidance on maintaining quality models and governance practices
- Importantly, we design challenger models for model developers to use as a performance benchmark
We provide model validation services for financial institutions of all sizes:
- Loan Lifecycle Management Models: Underwriting, Pricing, Origination, Loss Mitigation, Disposition
- Regulatory, Economic, Financial Capital & Stress Testing Models: Basel, CCAR, PRA, EBA, etc.
- Financial Reporting: IFRS9 and CECL
The elements provided by Moody’s Analytics in our validation services conform with the central tenants of the regulatory guidance provided by major authorities.
We also provide advisory services on:
- Credit Portfolio Management Models: Risk Appetite, Concentration Risk, Operational Risk, etc.
- Business & Strategic Planning Models: Credit Policy, Marketing, etc.
- Gap Analysis
- Best Practices and Model Governance
Our services facilitate insight into primary drivers of portfolio performance, allowing you to manage risk and opportunities confidently.
Related Thought Leadership
Credit Risk Modeling
Moody’s Analytics delivers award-winning credit models and expert advisory services to provide you with best-in-class credit risk modeling solutions.
Current Expected Credit Loss Model (CECL)
Moody’s Analytics provides tools for the most crucial aspects of the expected loss impairment model, with robust solutions to aggregate data, calculate expected credit losses, and derive and report provisions.
Quantify diversification benefits across portfolios and define risk types that inform risk management and active asset allocation decisions.
Moody’s Analytics helps financial institutions develop collaborative, auditable, repeatable, and transparent stress testing programs to meet regulatory demands.
Automating the process of financial spreading and credit scoring increases loan application volume and helps lenders make better credit decisions.
Credit Risk Advisory Services
Moody's Analytics credit risk advisory services enable faster, better informed credit decisions through a holistic and consistent assessment of risk.