Service overview

Reserves forecasting

Banks create their own reserves evaluation systems. Their choice of reserving model depends on particular internal procedures and policies. Evaluation methods can vary greatly between banks, so for this short overview let us limit ourselves to one.

Quite commonly banks split up credit portfolios into segments for assessment. Then monthly write-off figures from every segment are combined in a year’s total. This is called coverage. For consumer credit annual coverage is all transitions to 120 DPD over 12 months divided by total value of loans at the start of the period. Once this is known, moving average coverages are calculated, e.g. for 6 months. Finally current segment distribution of a portfolio is determined and reserves are computed.

Forecasting reserves is much more challenging. A good assessment needs monthly predictions by segment and future annual coverage values. RRAS has a number of functions just for this purpose. It can forecast reserves for various business scenarios, macroeconomic scenarios and reserve models of credit portfolios.

Back

Service

• Scenario analysis and forecasting
• Stress-testing
• Risk factors determination and analysis
• Scoring cards calibration
• Credit risks assessment
• Market and liquidity risk assessment
• Hedging
• Funding plan
• Reserves forecasting
• Pricing
• Capital adequacy
• Basel
• Model validation