GCD December Newsletter: Let us move to 2021
December 2020
Dear GCD members,
Each bank’s portfolio is affected differently by the crisis, depending on their specific footprint. However, GCD has remained steadfast in its mission as a data consortium. Will this crisis be worse, just as bad, or milder than previous crises? We have verified that historical data can provide thoughtful answers, and that key risk drivers hold true even in past crises. We have also launched the first study to capture the impact of the current crisis on banks’ portfolio (see the section on COVID-19 Rating Transition below). These recent initiatives will form the basis for better informed scenarios.
This year has seen other critical GCD studies exploring the impact of the pandemic – including the LGD Report for Large Corporates, the Downturn LGD Study, and, most recently, the Unresolved Defaults LGD Study. The release of the Recovery Rate Dashboards and launch of the Interactive Dashboard saw the light in 2020. We hope that these resources help to guide our member banks as they navigate into a brighter future.
In addition, in line with GCD’s “by banks, for banks” motto, we have conducted several special surveys and data-collecting initiatives this year, the latest of which is the special COVID-19 run of the PD & Rating Platform. Participating in these platforms gives member banks exclusive access to timely, high-quality, granular, and aggregated data at a time when such insights are indispensable.
Finally, GCD continues in its commitment to providing valuable and timely content to its members. We seamlessly made the transition to digital conferences with the North American conference and look forward maintaining this momentum in 2021.
Enjoy your reading – and have a great festive season!
Richard Crecel | Executive Director, GCD | richard.crecel@globalcreditdata.org
Welcome: GCD’s newest members
We are delighted to announce the addition of Deutsche Bank and Mizuho Bank to our consortium and look forward to working with these banks in future.
The ever-growing nature of GCD is testament to the quality of GCD’s research and data, and the true power of collaboration.
What historical loss drivers still hold true in the 2020 crisis?
GCD’s much anticipated Downturn LGD Report has been published, and the findings reveal that historical loss drivers – chiefly, a lack of seniority and collateral – still hold true in a crisis.
Read the full report for key findings, including whether banks can weather the economic downturn by adapting their workout strategies for defaulted loans, and how seniority and collateral remain the keys to strong recovery rates.
Nunzia Rainone | Downturn LGD Study | nunzia.rainone@globalcreditdata.org
Rating transitions: gain insights on the impact of the pandemic
With the economic impact of the COVID-19 pandemic continually and rapidly evolving, banks’ credit risk teams must adjust their models in step. To do this, they need to have the most up-to-date and relevant data at hand.
To find out if and how the crisis is impacting banks’ portfolios, participate in the GCD Rating Transition Crisis Benchmarking initiative, which offers participants critical information on the economic impact of the pandemic. The initiative takes place in December – please participate!
Olivier Plaetevoet | Rating Benchmarking | olivier.plaetevoet@globalcreditdata.org
How to project LGDs for unresolved default cases: new report
Banks’ credit risk models are under pressure to adjust their credit risk and loss given default (LGD) models accordingly. This means factoring in the most recent defaults, which opens the prospect of a “resolution bias”, where only resolved cases (typically with very low LGD) are factored into the overall LGD calculation. This typically results in an underestimation of recent losses. To avoid this, it is important to estimate LGD for the full range of open defaults, as well as those already settled.
As such, establishing how to account for incomplete recoveries or unresolved loans is a key question for credit risk modellers right now. GCD’s latest Unresolved Defaults LGD Study provides a methodology for estimating LGD for unresolved loans across large corporates, helping generate more conservative and accurate overall LGD calculations.
Nunzia Rainone | Unresolved Defaults | nunzia.rainone@globalcreditdata.org
European Conference 2021: come together (virtually) with peers of the European banking industry
Following the success of GCD’s digital North American conference earlier this year, we are gearing up to host our European conference in February 2021. This is your chance to explore the most pressing credit risk issues that banks across Europe are facing – from the impact of COVID-19 to regulatory updates including Basel IV.
Featuring key speakers from GCD and across the banking industry, this promises to be an unmissable event for European banks’ credit risk teams.
Izelle Kirsten | Register here | izelle.kirsten@globalcreditdata.org
Data Quality Project in full swing
Data quality management has been a priority for GCD since its inception in 2004. This year, we set up a working group dedicated to data quality management, to provide crucial insight for GCD. Through a relentless specification and improvement of data quality management rules, the GCD database has improved to provide the most consistent and detailed data available for industry-wide appraisal of recoveries and losses.
The Data Quality Project, part of GCD’s Compliance Working Group, focuses on showcasing to member banks that GCD data is compliant with internal and external regulatory requirements.
It aims to do this through two main deliverables by 2021:
- Data Quality Management and Governance Policy: this document reflects the existing governance of the GCD Data Quality Process. It will describe the Data Quality Framework, Processes & Procedures, Roles & Responsibilities and Definition.
- Data Quality Dashboard: a reinforced dashboard illustrating the quality of GCD data. This will include additional metrics on stability, comparability and timeliness.
Erik Rustenburg | Data Quality | erik.rustenburg@globalcreditdata.org
Global Credit Data in The Banker
Following the launch of the Downturn LGD Study, Richard Crecel, GCD’s Executive Director was interviewed by The Banker on the position of banks in the current crisis compared to the previous one.
According to Crecel, banks have entered the current crisis much better capitalised than the last one, meaning they may have the luxury of timing when it comes to realising collateral on the coming surge in non-performing loans.
You can read the full interview here. The interview was featured in Global Risk Regulator.
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