Stress testing tool and IFRS 9 ECL calculator | KPMG | BE

Stress testing tool and IFRS 9 ECL calculator

Stress testing tool and IFRS 9 ECL calculator

The new financial instruments standard IFRS 9 becomes effective as of 1 January 2018, and estimating expected credit losses (ECL) is perhaps the single most significant change in banks’ financial reporting. On the other hand, the EBA stress test 2018 approaches and new challenges regarding the integration of IFRS 9 and capital requirements appear.


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Stress testing tool and IFRS 9 ECL calculator

KPMG has developed a kick starter credit stress testing tool and IFRS ECL calculator to help financial institutions cope with both the new IFRS 9 provisions and the upcoming regulatory stress testing exercises. Discover how the tool can be developed together with you.

Linking point-in-time models with regulatory capital requirements and IFRS 9 provisions

Benefits of KPMG’s stress testing tool

  • User-friendly tool that integrates point-in-time models with the key risk parameters evolution; regulatory RWA and expected losses, 1 year losses, lifetime losses, IFRS 9 provisions.
  • Supports industry models that are widely used (Vasicek, logistic, linear formulas). The customized formulas as well as expert scenarios are easy to implement. Core modules have been implemented and are the starting point for full integration with the bank’s existing models and architecture.
  • Models and expert parameters can be applied at any level of granularity. Tracking of line-by-line calculations and reporting.
  • Possible to run the software on local computers and develop it further under a co-creation framework.

Features: integration of regulatory and point-in-time view (IFRS 9 ECL)

User-friendly interface

Click-and-go interface with full integration of several scenarios, where the user can chose among different modelling approaches, time horizons and macroeconomic scenarios. The tool currently supports various PIT models for PD, migrations, LGD, cures and prepayments forecasting.

All models and experts approaches c be defined for different portfolios, or any combination of variables existing in the database. In the example below, different PIT migration models are implemented for both the corp and the bank’s portfolios. However, models can be applied at any level of granularity. 

Line-by-Line calculations, disclosure and reporting at global, sectorial, or individual level

While models and scenarios can be defined at any level (full portfolio vs. sectors, countries, etc.), calculations are completed line by line. The evolution of each parameter (exposure, PD, LGD, PR, Stage) is stored and transmitted. This provides a complete analysis of the results to understand the main drivers. This allows you to produce more transparent disclosures. Reporting completed at any level of granularity: portfolio vs. sub-portfolio/individual view. The tool can easily be integrated with your bank’s existing reporting architecture.

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