Credit Decisioning

CREDIT RISK, COMPETITION AND CONSUMER BANKS

CREDIT RISK, COMPETITION AND CONSUMER BANKS

A recent Bank of England working paper highlights the link between banking market competition and financial system stability. Consistent with earlier work, it highlights that as competition increases, the banking system overall responds typically by moving to higher risk lending.  However, in addition, it describes how individual banks tend to converge with the most-risky becoming more secure as competition increases.

IFRS 9 IMPAIRMENT MODELS

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.