LGD modelling for regulatory capital
Reference data sets for LGD modelling
Validation of credit risk models
Specific portfolios in credit risk modelling
- This is the GCD annual Report on Loss Given Default (LGD) for Large Corporate, in which numerical evidence of recoveries and losses is presented. The data set covers Large Corporate (>€50m turnover) borrowers who are recorded as defaulted in bank loan books, using the Basel default definition.
- GCD’s data pools support the key parameters of banks’ credit risk modelling (PD, LGD, EAD). This report covers LGD and represents a unique resource for all types of credit risk modelling: regulatory capital; pricing; stress testing; or expected loss provisioning models.
- The GCD data is always growing, from new member banks, and more years of default included. As expected, the results are consistent over time, confirming data stability and reliability.
- The results in this study offer an overall insight into the data on a global level and confirm the drivers, their direction and their levels shown in the 2018 report. The main findings are: − Seniority and collateral are confirmed as LGD drivers (26% senior unsecured vs 38% subordinated unsecured at obligor level. The total secured LGD is 22%). − LGD varies over time, indicating that there is a relationship between the economic conditions and recoveries. − Because GCD data comprises bank initiated not traded loans, the data set differs from most other studies. Hence the outcome can be compared to, but should not be expected to be the same as, studies which focus on publicly recorded bond defaults, single country data or liquidation only data.
- The long term average LGD levels in this report can be compared to regulatory minima and standardised levels, allowing an industry wide discussion of prudent forward looking LGDs vs historical evidence. Note that the LGDs in this report are cash flow discounted observations of historical outcomes, not forward looking estimates.
gcd_lgd_report_large_corporates_2019.pdf (PDF, 2.35 MB)
gcd_lgd_report_large_corporates_2019-appendix.pdf (PDF, 3.15 MB)
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GCD annual Report on Loss Given Default (LGD) for Large Corporate