Advanced software and analytics

Z-Risk Engine is an advanced software solution designed to accurately project future ECLs for wholesale portfolios. ZRE’s primary advancement is to unlock complex industry and region credit cycles to accurately convert TTC PD, LGD and EAD models into PIT measures.

Accurately projecting wholesale credit losses requires PIT measures to be successful and to satisfy IFRS9/CECL and Stress Testing regulations.

Full PIT conversion of ‘hybrid’ internal credit models incorporating detailed credit cycles – substantially improves bank IFRS9 model accuracy by 2-3X.

Credit factors (Industry and Geographic) together with an array of Point-in-time (PIT) PD, LGD, EAD and grade transition models provide a rock-solid foundation for determining the probability-weighted ECL estimates called for IRS9 or CECL.

Whilst lowering implementation risk, the solution is also highly configurable and customisable to allow any recalibration.

The result is a cost saving single platform for IFRS9/CECL and Stress Testing.

The solution suite integrates three inter-connected modules:

ZRE - Point-in-Time (PIT) Module

Batch processing of a bank’s current credit models:

  • integrates with an institution's PD, LGD, EAD models and data

  • utilises customised credit cycles derived from CreditEdge, Kamakura, internal loss data, or other indicators

  • batch processes all portfolios by facility and borrower

  • provides unconditional lifetime Point-In-Time PDs, LGDs and EADs

ZRE - Expected Credit Loss (ECL) Module

Batch processing of correlated PD, LGD EADs on a forward-looking basis:

  • integrates with ZRE PIT module to calculate Expected Credit Loss (ECL) using an unconditional simulation approach
  • provides lifetime unconditional PIT PD, LGD and EAD term structures
  • provides lifetime unconditional ECL incorporating correlation in PD, LGD and EAD
  • enables Significant Deterioration
  • enables IFRS9/CECL ECL

ZRE - Scenario Forecasting Module (SFM)

Integrates with ZRE PIT module and batch processing of customised macro-factor scenarios:

  • leverages institution's existing macroeconomic forecasting models or ZRE's macroeconomic model
  • provides lifetime conditional PIT PD, LGD and EAD term structures, for range of scenarios
  • provides lifetime conditional ECL incorporating correlation in PD, LGD and EAD, for range of scenarios
  • enables Significant Deterioration
  • enables IFRS9/CECL ECL using limited scenarios and deterministic stress/base case credit losses

Please contact us to find out more