Corporate Credit Rating Systems: Design, Development, Calibration and Validation

Wednesday, May 22

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Overview of the Credit Rating Systems

• Corporate Customers: definition and main characteristics
• The three main types of Credit Rating Systems
• Relationship with regulatory requirements
  • Basel III: Internal Rating-Based Approach
  • ICAAP: calculation of Economic Capital
  • IFRS 9: Expected Loss model
• Business process objectives
  • Using ratings for risk-adjusted pricing
  • Using ratings for operational decision-taking
• Exercises and Q&A: how to approach the IFRS 9 regulation

12.00 - 13.00 Lunch

13.00 - 16.30 The Master Scale Ratings

• What is a Master Scale?
• Defining the corporate entities to be rated
  • Groups of related customers
  • Corporate structures and customer account management over time
  • Default definitions
• The Balance Sheet KPIs
  • From Long List to Short List KPIs
  • Handling of incomplete data
  • Handling of outliers
  • Quantitative Model development
  • Model validation
• Integrated Rating Models
  • Quantification of qualitative assessments
  • Bringing in account behaviour variables: pros & cons
  • Low default portfolios
  • Small sample sizes
• Exercises and Q&A: Master-Scale ratings and their applications in IFRS 9

Thursday, May 23

09.00 - 09.15 Recap

09.15 - 12.00 Early Warning Systems

• How to assess imminent credit risk?
  • Corporate customer behaviour variables
  • Early risk identification as an organisational challenge
  • Integrating expert opinions and quantitative rating models
  • Expected Loss vs. Probability of Default metrics
• How to obtain forward-looking credit risk scores?
  • Generic framework for incorporation of additional observable variables
  • Case Study: improving an Early Warning system using market prices
  • Case Study: implementing the IFRS 9 Expected Loss model

12.00 - 13.00 Lunch

13.00 - 16.30 Long-term Corporate Ratings

• Understanding ordinal risk measurement
  • Case study: Mapping internal ratings to a Rating Agency scale
• Exercises and Q&A: Long-term corporate ratings and their applications in IFRS 9

Evaluation and Termination of the Seminar