Risk management and IFRS9: challenges, approaches and solutions
The solution adopted by the bank was not to develop specific models for IFRS 9, but rather to adapt, refine and calibrate the internal models already available, taking advantage of other components already within the bank.
- CLIENT: Banca Popolare dell’Emilia Romagna (BPER)
- NEEDS: to adapt to the new IFRS 9 accounting principles, taking advantage of what has already been developed by the bank in relation to its internal rating system
- SOLUTIONS: consultancy and methodological support for the adaptation and development of credit risk assessment components required by IFRS 9 accounting principles
- RESULTS: new risk models and ratings, not just for compliance purposes but also for the benefit of all the bank's key processes.
“Together with CRIF, we worked on the main action areas, starting from the forward-looking aspect since the identified methodology showed significant similarities to stress testing techniques. The ratings obtained helped us create an important internal synergy with the stress testing activities required by the ECB for 2016. For once we don't have to worry about producing ratings only for supervisory purposes, but also looking for the greatest accuracy possible, since that is what the principle requires. The issues to deal with in this case relate to the data, as is often the case, and in particular to the depth of the historical series for calculating default curves and the difficulties in correlating LGD with the macro scenarios”.
Valerio Rodilossi, Head of the Credit Risk Model Office at BPER.