GCD Newsletter - September 2020

 

Dear GCD members,

“Uncertainty” is a familiar word these days. “Data” seems an obvious answer. This bulletin brings to you some of GCD’s ongoing work and efforts to shed additional light on current credit risk challenges. Indeed, extensive data pooling and benchmarking activities appear to be needed now more than ever.

GCD has recently published a set of informative LGD and Recovery Rates Dashboards, now publicly available on GCD’s website. Please share your feedback, as this is critical to GCD’s plans to further enrich these Dashboards.

Other initiatives include the 2020 GCD survey on Ratings and COVID-19, and recent GCD webinars organised to debate the impact of the current crisis. Such projects are capturing views from peers and exploring common challenges based on industry-wide feedback.

The next scheduled event will be the North American Conference on September 9th–10th. This is set to take place online in GCD’s very own virtual venue. It is shaping up to be quite an occasion, and we are delighted with the quality and profile of speakers that have already been confirmed (more on this later). I am looking forward to it.

Finally, the quality of GCD’s data relies on you, the members, and I want to say thank you for your continued support and involvement.

Enjoy your reading, let us know your views!

Richard Crecel

Executive Director, GCD

GCD CITED IN REUTERS BREAKING VIEWS

A recent article from Reuters Breaking Views cites GCD data on recovery rates for large corporate borrowers. The article – titled Banks’ bad debt nightmare may have a happy ending/Triumph of pessimism – notes that banks typically recoup most of the value of bad loans, with an average recovery rate of 76% for large corporate borrowers, per GCD data.

Read the full article here (paywall). The column was also republished in Spanish newspaper Cinco Días.

 

ADDRESSING THE RESOLUTION BIAS: UNRESOLVED LGD REPORT OUT SOON

Establishing how to account for incomplete recovery processes or unresolved loans is a key question for credit risk modellers right now. GCD is therefore pleased to announce the addition of a special data release to its database this month. For the first time, GCD has calculated Loss Given Default (LGD) for unresolved loans across H1 2020.

GCD’s Unresolved LGD report, due to come out later this month, will describe the GCD methodology for calculating this and will show that including unresolved default cases when assessing LGD leads to a more conservative long-run average LGD – an impact that becomes even more significant when looking at the most recent years.

For more information on the forthcoming Unresolved LGD report, please contact Nunzia Rainone (nunzia.rainone@globalcreditdata.org).

 

REGISTER NOW FOR GCD’S NORTH AMERICAN CONFERENCE

GCD’s annual North American Conference will be held on 9th–10th September  – this time as an online event. The new, digital format means that, for the first time ever, members from across the globe can come together with their peers to join this key event in our annual calendar.

GCD is delighted to confirm Hal Schroeder, FASB Board member and an architect of CECL, as its headline speaker on the standard and how we can best plot a way forward. Register now to be a part of this exciting event.

 

CECL SURVEY

In partnership with Accenture, GCD is conducting a survey to assess the progress of member banks with CECL implementation and to gain insights into the challenges they are facing.

Topics and discussions include: CECL Implementation and Operation Challenges, CECL Scenarios under COVID, CECL Model Performance during COVID, Treatment of Forbearance Loans for CECL, CCAR Model Changes for 2021

The survey will run throughout October. To complete the survey, click here!

All members of the GCD CECL benchmarking study group are encouraged to take the survey and share their input

 

SUBMISSION PROCESS FOR NEW LGD & UNRESOLVED LGD CYCLE NOW OPEN!

GCD is currently accepting submissions for the new LGD Cycle. The submission cycles rely on member banks to provide transparent, high quality data. In turn, this helps to maintain and enhance the quality of its databases.

The submission portal opened 31st August, and submissions will be allowed until 18th October. In addition to the raw default data collection, GCD will also be collecting volumetrics for Unresolved Defaults in this cycle.

If you have any questions, please contact Erik Rustenburg (erik.rustenburg@globalcreditdata.org)

 

EBA ISSUES OPINION ON EUROPEAN COMMISSION’S INTENTION TO AMEND EBA’S FINAL DRAFT RTS ON ECONOMIC DOWNTURN

The European Banking Authority (EBA) has published an Opinion in response to the European Commission’s intention to amend the EBA’s final draft Regulatory Technical Standard (RTS) on the specification of the nature, severity and duration of an economic downturn. The EBA is of the view that the several changes introduced by the Commission would alter the agreed policy and, therefore, suggests changes with the aim of maintaining the agreed consensus of the originally submitted text.

Is this public dissensus between the European standard-setter and the European supervision arm happening because the regulation on defining downturns is over-specifying very complex criteria – thereby risking the blurring of guidelines and key principles?

 

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For more information on Global Credit Data, please contact: 
Izelle Kirsten - Methodology and Member Executive