understanding industry credit cycles is paramount
Unlocking credit cycles is a key objective of Z-Risk Engine and 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.
Providing the power you need
The Z-Risk Engine solution suite helps unlock credit cycles in detailed industries and regions, which are customised to a bank's own portfolio. Adjusting TTC credit models to start the ECL projection with term structures starting where current credit conditions is a major factor in ECL accuracy for wholesale portfolios.
Z-Risk Engine's detailed models of credit cycle mean reversion and momentum for up to 20 customisable industries and regions, provides the power to assess ECLs forward-in-time.
Below are two examples of industries: global mining and global technology, which exhibit very different risk levels as of Jan 2016.