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    CECL Quantification: Commercial & Industrial (C&I) Portfolios

    In the third webinar in our CECL quantification webinars series, our experts discussed which commercial and industrial (C&I) models and methodologies can be leveraged to fulfill CECL requirements, and key considerations in transitioning these models.

    Implementation of the new financial instruments impairment standard (CECL), may take between twelve months to two years and over 62% of banks surveyed by Moody’s Analytics expect CECL compliance to increase their overall provisions.

    Successful implementation requires understanding the impact of the accounting standard on provisions and identification of appropriate methodologies to incorporate the forward-looking information and life-of-loan horizon required for CECL.

    Moody’s Analytics has designed a series of CECL Methodology webinars to help firms of all sizes with the tactical and strategic considerations when selecting the best modeling approach.

    In this third webinar of our series, we cover:

    How to leverage these existing capabilities in the transition to CECL

    Key methodologies (approaches, segmentation, data requirements) and challenges for C&I Considerations for Lifetime Expected Credit Losses vs. Incurred Loss Model

    The overall quantitative impact of CECL and how to be prepared

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    Whitepaper

    Sovereign & Size-Adjusted EDF-Implied Rating Template (for Private Firms)

    RiskCalc™ EDF™ (Expected Default Frequency) values and agency ratings are widely used credit risk measures. RiskCalc EDF values typically measure default risk for private companies, while agency ratings are only available for rated companies. A RiskCalc EDF value measures a company's standalone credit risk based on financial statement information, while an agency rating considers qualitative factors such as Business Profile, Financial Policy, external support, and country-related risks. Moody's Analytics new Sovereign & Size-Adjusted EDF-Implied Rating Template combines RiskCalc EDF values with additional factors to provide a rating comparable to agency ratings for private companies. The new template applies to RiskCalc EDF values across numerous geographies and regulatory environments. With the new template, users can generate a rating more comparable to an agency rating than RiskCalc EDF values or EDF-implied ratings. Analyzing data from 3,900+ companies in 60+ countries, we find that sovereign rating and total asset size, in addition to EDF value, have a statistically significant impact on an agency rating — our quantitative template incorporating these three variables reliably estimates agency ratings in a robust fashion.

    December 2018 Pdf Maria Buitrago, Uliana Makarov, Dr. Janet ZhaoDr. Douglas Dwyer
    Whitepaper

    Identifying At-Risk Names in Your Private Firm Portfolio — RiskCalc Early Warning Toolkit

    This report outlines a practical approach for using RiskCalc EDF credit measures to effectively monitor large portfolios of private firms and to proactively identify at-risk names. The RiskCalc Early Warning Toolkit Excel add-in is an easy to use, yet comprehensive tool that allows users to focus costly and scarce resources on a highly targeted selection of the most at-risk names in their portfolios. This research for private firms compliments previous research on Early Warning Toolkit for public firms. The Early Warning Toolkit identifies at-risk names within a private firm portfolio well before default, using a number of different EDF-related risk metrics.

    November 2018 Pdf Ziyi Sun, Dr. Janet Zhao, Gustavo Jimenez
    Whitepaper

    Features of a Lifetime PD Model: Evidence from Public, Private, and Rated Firms

    With the new CECL and IFRS 9 requirements, this document formally investigates and summarizes the term structure properties consistently seen across public, private, and rated firms.

    May 2018 WebPage Sajjad Beygiharchegani, Uliana Makarov, Dr. Janet ZhaoDr. Douglas Dwyer
    Webinar-on-Demand

    Applications of Alternative Data in Credit Decisioning

    With an immense amount of available data generated worldwide within the last two years, the next evolution of banking analytics will include information from a variety of open and closed sources.

    April 2018 WebPage Eric Bao, Irina Korablev, Rama Sankisa, Dr. Janet Zhao
    Presentation

    Applications of Alternative Data in Credit Decisioning

    In this webinar, a panel of research and data scientist experts across Moody's Analytics discuss social data in probability of default modeling, closed and open data for location scoring, and text analytics for credit risk.

    April 2018 Pdf Eric Bao, Irina Korablev, Rama Sankisa, Dr. Janet Zhao
    Article

    How to Unlock Benefits from CECL Compliance: 5 Principles

    The primary objective of FASB’s CECL standard is to provide investors with more meaningful and timely information regarding credit risk, but it also presents a unique opportunity for financial institutions to advance credit risk practices, break down silos and strengthen business decisions.

    March 2018 WebPage Eric Ebel, Emil Lopez
    Webinar-on-Demand

    Empowering Users, Satisfying Auditors for CECL

    In this webinar, Emil Lopez and Olivier Brucker from Moody's Analytics, demonstrates how the Moody's Analytics Credit Loss and Impairment Analysis suite helps financial institutions overcome CECL challenges and implement best-practice allowance processes.

    October 2017 WebPage Emil Lopez, Olivier Brucker
    Presentation

    Empowering Users, Satisfying Auditors for CECL Presentation Slides

    In this presentation, Emil Lopez and Olivier Brucker from Moody's Analytics, demonstrates how the Moody's Analytics Credit Loss and Impairment Analysis suite helps financial institutions overcome challenges with CECL and implement best-practice allowance processes.

    October 2017 Pdf Emil Lopez, Olivier Brucker
    Whitepaper

    Combining Financial and Behavioral Information to Predict Defaults for Small and Medium-Sized Enterprises: A Dynamic Weighting Approach

    This note presents the first tool that assesses borrowers’ credit risk using a scientific method that leverages both financial and behavioral information.

    September 2017 WebPage Alessio Balduini, Dr. Douglas Dwyer, Sara Gianfreda, Reeta Hemminki, Lucia Yang, Dr. Janet Zhao
    Whitepaper

    Moody's Analytics RiskCalc Transfer Pricing Solution

    Tax authorities monitor cross-border, inter-company loan and financing transactions to curb tax avoidance and require arm's length pricing for such transactions. At the core of arm's length pricing is the process of understanding the creditworthiness of a borrower and identifying a typical interest rate charged to borrowers with comparable credit ratings. The Moody's Analytics RiskCalc Transfer Pricing Excel Template provides a consistent, analytical solution to the arm's length transfer pricing process. This document explains the methodology behind this tool.

    August 2017 Pdf Dr. Janet Zhao, Jeunghyun Kim
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