Using Loan Accounting System Data to Model New Origination
Modeling new origination is important for forecasting the future dynamics of a portfolio, and it is becoming prevalent for banks to use these models for capital and risk management, stress testing, and strategic planning. In recent years regulators have laid out stress testing frameworks that focus on modeling the relationship between new origination and the macro environment. The main challenge with modeling new origination is finding data on new origination dynamics over time.
In this webinar we propose using the Loan Accounting System data extracted from Moody’s Analytics Credit Research Database to construct and examine new origination dynamics of C&I loans to middle-market borrowers over time, and highlight the different patterns that emerge for different portfolio segments. Our analysis shows how important different types of segmentation are for understanding new origination dynamics.
Webinar Highlights:
Loan Accounting System data validation
New origination of C&I loans
Understanding new origination dynamics for different portfolio segments (segmented by loan type, tenor, industry, and credit quality)
Related Insights
What Do 20 Million C&I Loan Observations Say about New Origination Dynamics? — Insights from Moody's Analytics CRD DataWe construct and examine new origination of C&I loans to middle-market borrowers using the Loan Accounting System data extracted from Moody's Analytics Credit Research Database (CRD/LAS). We find that C&I loan origination declines during the Great Recession and recovers soon after. The magnitude of the decline and the speed of the recovery varies across segments. For example, new lending to the financial industry decreases more than to the non-financial industry during the recession and recovers faster afterwards. Another example, new originations during the recession consists predominantly of short-term loans, while long-term lending becomes more dominant post crisis. This finding suggests that banks are using loan tenor as a means to mitigate risk during crises, at times even more so than credit quality.
February 2017
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Dr. Pierre Xu, Tomer Yahalom, May Jeng
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December 2016
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Ian Ward, Tomer Yahalom
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