Unlocking Credit Cycles

Unlocking credit cycles is a key objective of Z-Risk Engine; understanding industry credit cycles is paramount to converting TTC credit models into PIT ones before assessing ECLs forward-in-time. As can be seen in the graphic below, over the last 30 years using various measures like Credit Edge EDFs, US Loan Charge-offs and Moody's Default rates, credit cycles are real. Accurately assessing them is a key capability of Z-Risk Engine that supports IFRS9/CECL and Stress Testing in a single solution suite.

Providing the power you need

The Z-Risk Engine solution suite helps unlock credit cycles in detailed industries and regions, which are customized to a bank's own portfolio. Adjusting TTC credit models to start the ECL projection with term structures starting where current credit conditions are a major factor in ECL accuracy for wholesale portfolios.

Below are two examples of industries: global mining and global technology, which exhibit very different risk levels as of Jan 2016.

Z-Risk Engine's details models of credit cycle mean reversion and momentum for up to 20 customisable industries and regions, providing the power you need to assess ECLs forward-in-time.

Credit Cycle Index and Forecasts for Global Mining

Credit Cycle Index and Forecasts for Global Technology Sector