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