Risk Insights Resource Center

IFRS 9 and Probability of Default: A Web of Confusion

April 11, 2025

The proper calculation of probability of default is crucial for European banks that need to comply with IRFS 9, the forward-looking financial ...

Commercial Real Estate Gloom Is Dissipating – in Some Places

March 14, 2025

Office vacancies continue to be a drag on the market; trophy properties are exceptions.

How to Integrate Climate into Credit Risk

February 27, 2025

In this webcast, we are joined by two senior credit risk managers as we take a deep dive into how credit risk methodologies are being adapted to ...

Credit Risk Measurement: Alternatives for PD-LGD-EAD on the Horizon?

February 7, 2025

Even after 40 years, the PD-LGD-EAD framework is still going strong – but models with more power and greater predictive accuracy are lurking. Though ...

Sovereign Exposures: Zero Reason for Zero Risk Weight

January 10, 2025

Despite rising geopolitical threats and evidence that sovereign debt in Europe is now volatile, banks are still allowed by regulators to treat ...

Rising Waters: Navigating the Future of Flood Risk and Insurance

December 6, 2024

Floods in the U.S. have increased in severity, frequency and volatility. How is this impacting homeowners, insurers, lenders and asset managers with ...

Statistical Hypothesis Skepticism: Implications for Credit Risk

November 27, 2024

Despite recent criticism of null hypothesis testing in the scientific community, credit risk modelers continue to use statistical measurement tools, ...

Debt Restructurings Ramp Up in Out-of-Court ‘LMEs’

November 15, 2024

Aggressive liability management exercises create conflict and can threaten lender priority.

Charting the Future of Consumer Credit Risk

November 8, 2024

Credit risk managers who want to get ahead of the curve must understand the areas of consumer credit that are of the greatest concern in 2025. What ...

The ECB’s Paper on Novel Risks and IFRS 9 Overlays: A Missed Opportunity

September 13, 2024

Forecasting loan loss provisions for emerging risks under the IFRS 9 accounting standard is an important and extremely challenging task. The European ...

How Would You Like Your Model-Based Financial Disclosures?

August 16, 2024

Disclosures from credit-loss models can divulge vital data about the key risks facing a financial institution. Today’s scenarios-heavy IFRS 9 and ...

Credit Modeling: How to Improve Discriminatory Power

August 2, 2024

Predicting defaults is a difficult challenge for risk managers, partly because credit risk models often lack adequate discriminatory power. Some ...

The Stress Testing Road Ahead: How to Prevent Future Bank Failures

July 19, 2024

Today’s stress tests rely on antiquated approaches that do not consider the full spectrum of banks’ specific exposures to different macroeconomic ...

The Fed’s 2024 Stress Test: Key Takeaways

July 3, 2024

The good news is that the commercial real estate market is not projected to crater and that that large U.S. banks have enough capital to survive ...

The Evolving Role of G-SIBs: Is Big Beautiful Again?

June 7, 2024

There is a growing appreciation for global systemically important banks. But G-SIBs still face tough risk management standards and high capital ...

Navigating the New Regulatory Landscape: How European Banks and Risk Managers Must Adapt

May 17, 2024

Credit risk managers are going to have to adjust to new standards that are on the horizon for models and for artificial intelligence. What specific ...

The Rise of Conjectural Risk Management

May 17, 2024

Today, stress testing forecasts and ECL calculations are heavily reliant on guesswork scenarios that largely forego empirical data. How has scenario ...

A Modest Suggestion to Improve Stress Testing

April 26, 2024

The current process for ensuring that banks have enough capital to cover their potential losses is too reliant on conditional scenario analysis. ...

The Budget Brain-Teaser: How to Optimize Capital

April 19, 2024

Markets can evolve rapidly, sometimes driven by unprecedented events, and financial institutions therefore cannot over-rely on historical data for ...

When Insurance Becomes a Risk Factor

April 5, 2024

Insurance products can help mitigate and properly distribute risks, but also often come with perverse incentives that can work against risk managers. ...

The Data Conundrum for Risk Modelers

March 28, 2024

Understanding the Difference: Forecasts, scenario projections, and model outputs aren't raw data; they carry inherent errors and biases. Risk ...

Private Credit Moves In on Traditional Loan Channels, and Regulators Are Watching

March 22, 2024

The segment remains small relative to total debt and the economy, but the risks of contagion and banking instability cannot be ruled out.

The CRR3 Output Floor: A Strange Backstop for Credit Risk Measurement

March 22, 2024

Basel 3.1 has a so-called output floor that places strict limits on the amount of benefits a bank can gain from using internal models to meet ...

Stress Testing in 2024: Analyzing the Fed’s Newly Released Scenarios

March 1, 2024

The Federal Reserve this year requires banks to consider exploratory scenarios that factor in deposit runs and funding liquidity problems, among ...

Did CECL and IFRS 9 Fix the Procyclicality Problem?

February 23, 2024

Modern reporting standards for expected credit losses are, as anticipated, more volatile than the previous incurred-loss approach. But the key ...

EU Banks Enjoy Success, But Must Stay Vigilant About Emerging Risks

February 9, 2024

European banks have done a fine job of building capital while keeping their risk exposure in check in volatile times. How have they achieved this, ...

The Costs of Credit Scores and Data Privacy

January 19, 2024

EU courts have recently granted even more protection to consumers’ data, raising doubts about the future of credit scoring in Europe. While greater ...

The Risk-Reward of Buy Now, Pay Later

January 12, 2024

BNPL platforms have grown exponentially over the past five years, and may seem like a savior for cash-strapped consumers. However, proper financial ...

The FHFA's New Vision: A Wonderful Life for the Federal Home Loan Banks?

December 15, 2023

FHLBanks have moved away from their intended mission as community-oriented mortgage lenders and are therefore in need of a revamp. The Federal ...

Unveiling the Hidden Threat of Payment Fraud

December 15, 2023

Operational challenges and reputational damage can compound the financial costs.

Will Increased Complexity Save Scenario Analysis?

December 8, 2023

Banks are now under pressure to deploy more explanatory scenarios that expand the range of tail risks they consider. The hope is that this approach ...

Asset Exchange Connects a Network of Lenders to Customized Advice and Analytics

December 8, 2023

PNC Capital Markets seeks to stand out from the loan-platform crowd.

Corporates Awake to Bank-Counterparty Risk

December 1, 2023

Treasurers reacted to this year’s banking turmoil with more – and more sophisticated – metrics to keep watch on their banking relationships.

Real Estate Risk in Volatile Times

November 21, 2023

Hear veteran risk manager, advisor and professor Clifford Rossi’s viewpoints on trends, threats and opportunities in the commercial and residential ...

The 2023 Banking Turmoil: A Middle-of-the-Road Crisis

November 17, 2023

This year’s regional banking fiascoes in the U.S. offered valuable lessons for risk managers, but do they measure up with the 2008 global financial ...

Real Estate Risks Are Global, but Impacts and Perceptions Vary

November 10, 2023

China’s residential and commercial markets are top concerns in a GARP Benchmarking Initiative survey. In the U.S., multifamily and some office types ...

Can Banks Reliably Estimate Credit Losses?

November 10, 2023

Financial institutions have improved their ability to forecast losses thanks to better models, impactful regulations and voluminous, higher-quality ...

Responses Are Mixed to the SEC’s Treasury Central Clearing Proposal

October 27, 2023

Cost-benefit questions persist despite potential for significant risk reduction

How Regulatory Backstop Measures Can Lead to Worse Risk Management

October 6, 2023

Whenever supervisors do not feel sure about risk measurement, they add conservatism. But the probability of default backstop the ECB has added to ECL ...

Amid Controversy over Capital Requirements, Top-Rated Structured Bonds Offer Respite

September 29, 2023

The biggest U.S. banks are wary of proposed Basel III impacts, but securitization risk weights could drop

Should Internal Bank Models Be Used for Capital?

September 22, 2023

Large U.S. banks may be forced to employ standardized, regulator-driven models to calculate capital in the future. But, for a variety of reasons, ...

How Generative AI Will Disrupt Credit Risk Modeling

September 1, 2023

Improved coding of PD, LGD and EAD models is one of the potential benefits of this innovative technology. How does this work, and what else can ...

Exhaustive Scenario Analysis: What Banks Can Learn From the Airline Industry’s Flight Simulations

August 25, 2023

Flying is hundreds of times safer than driving, thanks at least partly to comprehensive simulations performed by airline pilots. Banks that want to ...

Traditional vs. Fixed Analysis: Weighing the Pros and Cons of An Alternative Approach to Scenario Design

August 4, 2023

For decades, to better manage uncertainty and make more accurate forecasts of losses, financial institutions have relied on a multi-scenario strategy ...

CECL and IFRS 9: Superior Risk Management or Psychological Ploy?

July 21, 2023

Projecting expected credit losses is tricky, partly because scenario analysis is imprecise and partly because recessions do not necessarily yield ...

Collateral Management Technology Is Boosting Efficiency and Adding Strategic Value

July 21, 2023

Systems are rising to the post-Dodd-Frank challenges of operational and transactional complexity

The Commercial Real Estate Dilemma and Its Impact on Bank Risk Management

July 14, 2023

Banks that are heavily invested in the troubled CRE market now face a variety of complex risks, from the remote work trend to rising inflation to the ...

Foundation IRB: An Inferior Option for Credit Risk Modeling?

June 16, 2023

For certain asset classes, Basel III prohibits the use of the advanced IRB approach for credit risk measurement, favoring instead a foundation ...

Risk Modeling: What Can We Learn from the Rigor of Academics?

May 26, 2023

Financial risk models have repeatedly been found wanting over the past few years, partly because model developers are limited by regulations. But ...

How Unrealized Losses Weigh on Bank Balance Sheets

May 26, 2023

Mortgage-backed securities plus other credit exposure approach total bank equity capital, according to one estimate

Agile Approaches for Credit Risk Modeling: Curse or Blessing?

May 19, 2023

Today, agile model development methodologies are becoming increasingly popular. What are the advantages and pitfalls of these approaches when ...

Stress Testing and Scenario Analysis: The Customization Challenge

April 28, 2023

Recent bank defaults have proved that “one size fits all” regulatory stress tests do not work. Are there practical ways of individualizing prescribed ...

Credit Risk Measurement: Basel III’s External Ratings Dilemma

April 14, 2023

The rollout of Basel III in both Europe and the U.S. is on the horizon, but flaws remain in its requirements for calculating risk-weighted assets. ...

SVB and Signature Bank: Risk Management Revelations

April 6, 2023

Recent bank collapses can be traced to their narrow-minded approach to stress testing and scenario analysis. What exactly went wrong at these ...

When to Change IFRS 9 Scenario Weights for ECL: A Simple Rule

March 10, 2023

Financial institutions in Europe now employ a range of scenario-weighting approaches to estimate IFRS 9-compliant expected credit losses, with little ...

Measuring and Modeling Residential Real Estate Risk in Unprecedented Times

March 3, 2023

Risk modelers in the mortgage industry now face significant obstacles, thanks in part to rising interest rates, high inflation, stagnant growth and a ...

How to Model Forward-Looking Credit Risk

January 27, 2023

During uncertain times, the traditional approach for estimating expected credit losses simply doesn’t work. However, while forecasting ECL is a ...

Catastrophe Risk Protection: Hurricane Ian Dislocates an Already Challenged Market

December 2, 2022

A cyber cat bond is expected soon, but capital constraints may hinder market growth

Tail Risk: How to Incorporate Extreme Events into Financial Risk Modeling

October 28, 2022

Hear from Prof. Clifford Rossi as we examine some of today’s biggest financial risk modeling challenges. Risk modelers have recently been befuddled ...

Economic Misery and Bank Financial Performance

October 28, 2022

Current risk models don’t have sufficient data to account for today’s volatile markets. What’s the true impact of factors like unemployment and ...

The Expected Credit Losses Dilemma: Weighting IFRS 9’s “SICR”

October 21, 2022

Under IFRS 9, European banks today face a steep increase in their loan-loss provisions if it is determined at the time of financial reporting that ...

Buy-Now-Pay-Later and Alternative Data Bring Disruption to Retail Credit

October 14, 2022

Fast-growing fintechs contend with a credit cycle as CFPB eyes a rulemaking on consumer data rights

Are CECL and IFRS 9 Reasonable and Supportable?

September 23, 2022

Recent events, including the pandemic, have raised questions about whether the forward-looking accounting standards that are now in place for credit ...

Model Validation: Dissecting the Boundaries of a Rules-Based World

September 9, 2022

The European Banking Authority is seeking feedback from regional supervisors and banks about a handbook it has created for validation of IRB models ...

Understanding the Risks of Multiple Credit Scores in Mortgage Lending

August 17, 2022

Competition among credit score providers is heating up, with increased focus by regulators on expanding equitable access to credit for consumers with ...

Economic Capital: The Power of Diversification

August 12, 2022

As we speed toward the January 2023 deadline for Basel III implementation, the calculation of economic capital has become more important than ever. ...

Model Validation for Credit Risk: A Critical Deficiency in the Jeffreys Test

May 13, 2022

The Pandemic Will Improve Risk Modeling – If We Let It

May 6, 2022

Bayesian Backtesting for Counterparty Risk Models

March 3, 2022

Financial institutions need a conceptually sound and easy-to-implement approach for analyzing model performance. Matthias Arnsdorf and Mante Zelvyte ...

IFRS 9 and Probability of Default

January 14, 2022

Loss allowances for expected credit losses differ significantly across European banks. The University of Innsbruck’s Matthias Bank and Bernhard Eder ...

Credit Risks of Peer-to-Peer Lending: The Stock Market Effect

October 20, 2021

How does the performance of a stock exchange impact credit quality, loan defaults and delinquencies in the P2P space? Xin Liu, Xiaoran Ni, Zhigang ...

Credit Default Swaps and Credit Risk Reallocation

August 6, 2021

How can investors’ exposure to credit risk be reallocated through credit default swaps? Using granular data on both debt and CDS exposures by French ...

The Effects of the Adoption of IFRS 9

April 29, 2021

How does this accounting standard impact the predictability of credit losses across European banks? Christophe Lejard, Eric Paget-Blanc and ...

COVID-19 and the Commercial Real Estate Market

August 24, 2020

The pandemic has had a dramatic impact on commercial real estate, greatly dimming the short-term attractiveness of big cities while triggering ...

COVID-19: CECL, Stress Testing and Overall Credit Risk Impact

May 11, 2020

To help risk managers stay informed of the latest developments and address the challenges associated with COVID-19, GARP has launched a podcast ...

Calculating Credit Risk: The COVID – 19 Factor

May 4, 2020

COVID-19 is having a dramatic impact on the nature of market, credit, financial, and operational risks facing companies. Information about these ...

An Update on CECL

November 14, 2019

Today, we speak again with David Anderson, Advisory Director from KPMG, for an update on Current Expected Credit Losses, also known as CECL. For more ...

Credit Risk Modeling and Decisioning

September 3, 2019

Today we speak with Vikas Deep Sharma, Executive Director, EY and Ivy Tan, EY Senior Manager, specializing in IFRS 9 and Credit Risk for the ...

What IFRS17 Means for You

May 29, 2019

GARP's new podcast with SAS, The New Age of Risk Analytics, features an episode focusing on the new insurance accounting standard, IFRS 17, which may ...

What IFRS17 Means for You

April 9, 2019

The new insurance accounting standard, IFRS 17, has broader implications then might be realized. David Anderson, Advisory Director, Risk Consulting ...