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.
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
GCD held its latest General Meeting on 2 December. 2016 After 8 years on the Board and 4.5 as chairman, Richard Crecel of Société Générale, stepped down. Board members pointed to Richard’s record of growth in number of members and diversity of activities. Theo van Drunen, until now the Treasurer, steps into the Chairman’s seat and has promised continued growth, with focus on member’s needs.
At the same meeting, Simon Ross-Hansen was re-elected and Sanjay Gupta of PNC joined the Board.
GCD is proud to welcome Export Development Canada as a member. EDC becomes our seventh Canadian member and our first export credit agency member. To qualify for and benefit from GCD membership, financial institutions need to be active in the corporate or specialised lending financing market, which EDC certainly is.
Bank of Montreal's membership means that the cream of the Canadian banking industry are now members of GCD. Members receive detailed data for LGD/EAD and PD model support which is coded by country, so the addition of a sixth Canadian bank means a richer data return of Canadian, North American and global data.