White Paper

IFRS 9, Stress Testing, ICAAP - A comprehensive framework for PD calculation

Company: Prometeia

Prometeia  case study

Category: Regulation

Published: 10 July 2017




In order to fulfil all the different requirements coming from competent authorities for different regulatory processes, financial institutions are asked to calculate probabilities of default (PD) in several ways.

Forward looking lifetime PDs are needed for IFRS 9 compliance while a stressed point in time PD is required to calculate impairment losses. This plurality gives rise to the need for synergisms among the different PD calculations methods in order to minimize costs related to the PD model development and maintenance.

This white paper explores a comprehensive framework for IFRS 9, Stress Testing and ICAAP probabilities of default (PD) calculation. It further addresses some of the main problems arising in developing PDs for regulatory purposes and how to overcome these challenges.

Categories related to Regulation