TThe International Financial Reporting Standard (IFRS) 9 sees businesses making significant changes to the way expected credit losses are calculated. As a specialist in loss forecasting and impairment, Experian can work with you on a consultative basis to build and deliver a comprehensive approach to the new standards. How we can help your business?
We can support you in anticipation of the accountancy standard change with an end to end solution covering four areas. This does vary however, from business to business, because your business is unique and our solutions can be tailored to your business requirements. Your loss forecasting methodology depends on whether you are under Advanced IRB or Standardised accounting standards, whether you have sufficient relevant historical data internally to support modelling lifetime losses and whether your lending policy or collections strategy has changed significantly in the recent past.
It may be that you have a portfolio that is relatively new and has yet to build up the history required for lifetime loss forecasting. Alternatively, it could be that changes have been made to lending/collections policies that have made all, or a proportion of your historical data, inapplicable for future modelling. We can advise as to the best approaches regarding historical data.
Our economists and credit risk analysts work together to understand the relationships between lending policy and the economy, and how it affects credit risk. We provide generic bureau scores with the economic impact embedded. You can use these scores to determine changes in credit risk and include them within lifetime probability of default models.
Lifetime loss models should be re-assessed quarterly or bi-annually to keep up with changes in loss rates and changes in the economy. We can help with this and benchmark your position against your peers and against market lifetime losses.