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.

 

Credit Cycle Index and Forecasts for global mining

Credit Cycle Index and Forecasts for global technology