Case Study 25: ECl Methodology

For a Commercial Bank in Jordan

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  • A large Commercial Bank in Jordan.
  • The Portfolio comprises of Cards, Mortgage, Retail, Vehicle and SME.
  • The Company wanted to validate and create the ECL methodology using macroeconomic PD modelling, incremental PD modelling & LGD modelling for retail credit portfolio.
  • Macroeconomic factors like GDP Growth, Interest Rate, Inflation, Real Estate Index and Unemployment for the prediction of PD .
  • We performed moratorium scaling of the PDs for some segments, due to the Moratorium period in COVID the PDs were reducing after a specific period even though some of macro values were coming down which is affecting (reducing) the correlation between PD and Macroeconomic Variables.
  • We projected macro-factors using economist forecasts and statistical modeling .
  • We provided the projected quarterly PDs and annualized 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.
  • Factored U-shaped and V-shaped recovery over next five years .
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