Content

Typical challenges, which will be discussed during the course, are

• estimating PDs, cyclicality adjustments and MoC values where the number and rate of defaults is low or zero
• dealing with material sources of uncertainty and the estimation of a margin of conservatism
• demonstrating compliance where both in the rating assignment process and model design and estimation there is a dominating reliance on expert judgement
• identification of an economic downturn for globally distributed portfolios or exposures across industry sector

The term low-default portfolio typically denotes credit exposures to large corporates, financial institutions and sovereigns, but these issues can be relevant for other types of exposures as well, for example

• specialized lending and project finance
• low-risk niche lending activities
• smaller portfolio

Learning Goals

After completing the course, participants will

• the classification of exposures to defaulted and performing
• know how to find, understand and substantiate compliance with the specific regulatory requirements relevant for these rating systems, in particular for expert-based models, shadow rating models and models covering global portfolios
• be able to identify and challenge key decisions in the IRB modelling process for these portfolios
• understand the view of the regulator and supervisory expectations
• have a broad view of the impact of new regulation and Basel IV on these portfolios
• grasp the concepts of and requirements for specific modelling techniques (for example, use of external data, Bayesian inference, Pluto-Tasche) and know how to apply and challenge these

Target Audience

The course module is intended for

• IRB model developers and team leads with a specific interest in low-default portfolio IRB models
• Model validators and team leads with similar interests
• Supervisors and policy advisors wishing to gain insight in the challenges of applying regulation for LDP
• Credit risk managers wishing to enhance their understanding of IRB modelling for LDP

Prerequisites

The material will be taught in English. Participants are advised to come equipped with a broad understanding of credit risk modelling and IRB regulation.

Schedule

The module will be taught over3 sessions of each 4 hours. The track schedule will be planned in coordination with the client based on the selection of modules.

Example case studies

For this module, examples of case studies are

• Present arguments whether or not a proposed treatment of PD calibration for low-default portfolios is compliant with regulation
• Give a comprehensive list of potential deficiencies of a downturn LGD derivation based on shared documentation
• Identify the major policy decisions underlying a compliant EAD estimation for a low-default specialized lending portfolio
• Compare and understand the impact of different treatments of LGD estimation based on prepared code samples and realistic data sets

Please Contact us for details and options.

Online and offline

This course can be organised in an offline, an online, or a combined on- and offline version.

Offline

Offline sessions can be offered on-premise as well as organized off site (priced at cost) – contact us to discuss options. For all but the smallest groups (7 or more), we recommend to have the option to break out in separate groups of up to 4 participants. Offline sessions will be webcast, the main presentations recorded and shared for a limited time with participants for later review.

Online

For online participation we leverage the ikuvikyu Ⓡ platform which offers, besides the usual features for webconferencing, the options to

• opening breakout sessions for participants (for collaborative case studies)
• multiway sharing and presenting (for sharing and presenting case study results)
• interactive polling and surveys (for focused problem sets)

These features allow the trainers to engage with participants collectively as well as in smaller groups, or individually, for case studies. The main presentations will be recorded and shared for a limited time with participants for later review.