Case Study 21: Covid Impact Modeling

For a Large Bank in Qatar

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  • The Bank is one of the leading Private sector Islamic bank in Qatar.
  • They have a large Lending portfolio comprising retail and Corporate .
  • The Bank wanted to predict the impact of Covid on futuristic PIT Probabilities of Defaults (PDs) for their portfolio considering the current environment for this year and subsequent years.
  • Macroeconomic factors like GDP growth rate, Inflation, crude oil price and Government spending for the prediction.
  • Linked historic PDs (quarterly) for each risk segments through Principal Component Analysis and Multivariate Analysis.
  • We projected macro-factors using economist forecasts and statistical modeling.
  • We provided the projected quarterly PDs and annual PDs.
  • Using the model and macro-economic projections, we projected forward looking segment wise defaults and PIT PDs .
  • Project PDs product-wise and Rating/Bucket-wise.
  • PDs are being used by the bank for their analysis and IFRS accounting.
  • Factored U-shaped and V-shaped recovery over next five years.
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