Bank-wide New Definition of Default Recalibration Project
Due to a bank-wide new definition of default the credit risk model landscape at a major bank needed recalibration
Approach
RiskQuest's approach has led to a bank-wide database that contains default information and default trigger levels for all stakeholders (e.g. front office, risk management, restructuring, modelers, model validation, local entities, etc.). As such, there is one single source for default information containing both correct and incorrect defaults. A dedicated governance is in place to ensure that these default events entering the database have a formal status and are recognized by all stakeholders. The governance describes the process of regularly updating the default information, including assessing the data quality.
Since the database is the only source for default information, no separate default lists exist anymore within the organization. The full end-to-end evidence trail of each default is tracked in case manual remediation is applied, allowing for full transparency to the supervisor.
