Credit Risk Models

Building and Validating Internal Credit Risk Models

Pillar I of the Basel III regulatory framework concerns itself with the assessment of a bank’s lending capacity. It allows banks to build their own models for critical obligor risk parameters such as probability of default (PD), loss given default (LGD) and exposure at default (EAD). These feed into regulatory capital calculations so that by properly tuning models to the portfolio, a bank can ensure that it carries the appropriate amount of capital.

Our Approach

Fintegral has vast experience of both credit risk model building and model validation.

We have a number of tools available for implementing various types of tests including software which performs a suite of diagnostic tests on a given model and generates a semi-automated in depth report on the results.

Our Experience

  • Development and implementation of a full-blown credit portfolio model for a major Swiss insurance firm.
  • Modelling mortgage portfolio risk for a leading Swiss bank.
  • Creating PD and shadow models for large corporates and sovereigns in Germany and Ireland.
  • Creating PD and LGD models to assess losses as part of government bailout of a failing European bank.