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Clients & Sectors

Retail

The majority of our Basel II work has been in the retail credit risk area, where we have worked on Pillar I and Pillar II solutions for leading banks and building societies. Our projects for clients have predominantly covered mortgages (prime, self-certified, buy-to-let and sub-prime lending) but we have recently completed several large projects in the unsecured lending area (credit-cards, loans and overdrafts).

 

One example is an ongoing project with a top 10 mortgage lender, working from their base individual account level data to produce a complete Pillar I solution. Elements of the project include a significant data screening exercise, selection of risk pools and estimation of PDs, including long run calibration and taking account of ratings migration.

 

A second example is a project for a large mortgage lender producing stress testing results that take into account ratings migration over the course of an economic recession. The methodology developed had the following features:

• Evidence based, statistical modelling approach

• Showed how a five year scenario rolled out over time

• Forecast ratings migration through time

By focussing on the risk pools together with an overarching book level stress test the methodology produced a framework which not only gave results based on the lenders' current book, but will also allow the lender to run different scenarios for how their portfolio will develop through time.