In December 2017 the BCBS made their final decision on what they call the “Finalisation of Basel III” and what the industry has called “Basel IV”. 

The reforms tighten the rules, aiming to reduce variation in RWAs across banks and are aimed to be in force from 2022, although they do require governments (EU, US etc.) to write them into their own laws, which may see further changes made.



The package of changes includes:

GCD has returned the results of the IFRS 9 benchmarking study to 19 member banks. 

In December 2017, banks have received back their detailed data return on the IFRS 9 Benchmarking study. 

The IFRS 9 Benchmarking study has given participants a unique opportunity to benchmark their ECL for a specific set of hypothetical borrowers. As usual, GCD returns the full, anonymized dataset to allow member banks to make their own analysis and deep-dive into the results. 

HSBC is one of the world's largest banks by loan volume and certainly has a global coverage in its portfolios. After careful due diligence and evaluation of benefits, HSBC Group has decided to join GCD and has been accepted by the Board for membership.

As for most members the key benefits for HSBC will come in the pooling of low default data as well as the alignment to best practice by collecting historical default information in a structured way, with GCD's data quality stamp.

Does loss given default (LGD) depend on the economic cycle and if so how can it be measured? This question still concerns risk modellers and regulators as part of their comprehensive risk assessment.

In 2013 GCD published a first downturn LGD study based on the GCD large-scale LGD database. This report provides an update of the analyses presented back then on a now significantly enlarged data set provided by over 50 member banks and covering over 15 years of default history.

GCD member delegates and guests were hosted by member bank KFW in Frankfurt this week for our largest ever European conference.

In a mix of plenary and discussion sessions, banks, academics and executives shared methodology and results for using data to improve credit risk measurement and management.



Hot topics included:

Following our success with collecting PD and LGD estimates for names counterparties in the past, GCD has spent the last months investing in a full enhanced data collection process called GCD Benchmarking platform.

Member banks are able to directly benchmark their estimated PD, LGD and EaD parameters for named counterparties and specific clusters with peers.

The first submission cycle of the new GCD Benchmarking platform has now kicked off and will run till Mid June 2017. 

GCD is running a IFRS 9 benchmarking study in Summer 2017, following a special request of our members.  The study goes far beyond the typical impact studies out there in the market.

The idea entails the set-up of a hypothetical portfolio ("dummy portfolio") as well as a common scenario with specific risk drivers and portfolio characteristics to calculate the 1-year and the life-time expected loss.   

SEK is based in Stockholm and our 9th member in the Nordic Area. AIB is based in Dublin and is one of the big four Irish Banks by market capitalisation. This brings our membership to 53 banks globally.

This study provides a theoretical and empirical analysis of five alternative discount rate concepts for computing LGDs using GCD Data. Appropriate discount rates are based on a combination of the risk free rate and risk premium for systematic risk at the time of default. Approaches may be separated into contract specific, comparable and equilibrium approaches. Advantages and shortcomings are discussed in the paper.

GCD's First Canadian Conference in Toronto was a great success with over 80 attendees from Canada, US and Europe. Given the current focus of banks, it was no surprise that the wish of the members was to focus on IFRS 9 / CECL and how GCD data can be used for that.

Thanks to our host Bank of Nova Scotia, all the attendees and presenters for participating!

Presentations are now available on the member website