Has the expansion of car finance overstretched borrowers?

Over the past decade, there has been a significant shift in patterns of consumer behaviour in relation to purchasing of new cars. UK private car registrations were 39% higher in 2016 than they were in 2011, a trend which has in part been driven by the expansion of the Personal Contract Purchase (PCP) deals. Some 82% of private new car purchases was financed in this way in 2016. PCPs contribution to the rise in unsecured borrowing is firmly on the radar of both the Bank of England (BoE) and Financial Conduct Authority (FCA).

Probability of moving from employment to unemployment at all-time-low

UK unemployment continues to fall. In the three months to February, there were 45,000 fewer people unable to find a job than was the case in September to November 2016. This is down 141,000 on a year ago.  Those looking at the numbers from a credit risk perspective can take heart: the last time the UK unemployment rate was this low was in the 1970s.  


On the 31st October 2016 the consultation period closed on new proposals by the Prudential Regulatory Authority (PRA), which are highly likely to alter the internal ratings based (IRB) approach that deposit institutions (banks and building societies) with residential mortgage lending portfolios will need to adopt when calculating their risk-weighted assets (RWA). 



The financial services industry is currently busying itself with building models to predict the lifetime losses under the new IFRS 9 accounting standard, specifically for their stage 2 and stage 3 accounts. Generally, these are account level lifetime loss predictions with the ability to mechanically adjust to use probability weighted economic scenarios.

IFRS 9 Benchmarking – more than a nice to have?

IFRS 9 is the new accounting standard from the International Accounting Standards Board for credit losses on portfolios of loans. It will come into effect in most jurisdictions for reporting periods starting January 2018. One of the key principles is that lenders should use relevant data that is reasonably available to assess the appropriateness of credit provisions.

Forecasting under IFRS9 – Technical Challenges ahead

IFRS9 is the new accounting standard from the IASB for credit losses on portfolios of loans that is expected to come into effect in January 2018 across at least 96 of 174 jurisdictions around the globe. Work in many banks and lenders is well progressed towards meeting the reporting deadline. I will not repeat the considerations required in the building of a new provision process here as that has been well covered in many places previously.