COMPLIMENTARY CEFPRO WEBINAR
Pool Party – Modelling low default portfolios with a pooling approach
In this Complimentary CeFPro webinar, we have partnered with RSU to provide further insights on the idea of the Pool Approach and the mechanics of how this works for banks, supervisors and service providers.
Modelling low default IRB-portfolios by using internal credit risk models dates back to the implementation of Basel II in 2007. Since then, internal models had to deal with fairly challenging times. As regulatory expectations continuously increase, costs are set to rise and the trend towards convergence between banks seems to be unstoppable. The ECB guide to internal models (October 2019) is offering a way out of this dilemma, by taking the opportunity to use rating models developed from pooled data into consideration. Relatively unknown throughout Europe, this so called Pool Approach has existed in Germany for over 15 years and has been performing impeccably for several of the largest German IRB banks.
The Pool Approach clearly provides results of exceptional modelling quality, accompanied by economies of scale leading to a cost efficient alternative for outsourcing modelling activities for sub portfolios as well as for core businesses. Conclusively, modelling teams at institutions are relieved from having to implement new time consuming regulatory standards as previously mentioned and thus, are able to focus on their core business.
Key agenda points addressed include:
• Internal Models – Status quo and possible solutions for low default portfolios; Pool Models – Approach and advantages
• Challenges and Benchmark Solutions from the German market
• Supervisory Practice – impact the business case for Pool Models
• Implementation of Pool Models – Set up and split of workload
• Modelling low default IRB-portfolios is an expensive and time consuming business for IRB-banks
• The lack of data available for modelling purposes strikes as the most troubling issue
• The Pool Approach is taking advantage of the opportunity to use rating models developed from pooled data
• Exceptional modelling quality and economies of scale lead to an alternative for outsourcing modelling activities
Senior Relationship Manager Credit Risk Management