CECL Models Methodologies and Implementation Training
1. Training
A two-day course discussing the credit-loss-forecasting methods needed for CECL provisioning
and the development of those methods in a way that takes advantage of existing internal PD, LGD, EAD
and stress- testing models.
CECL MODELS, METHODOLOGIES
AND IMPLEMENTATION
Your Expert Trainers Dr. Scott D. Aguais, Founder and MD, Aguais and Associates
Mr. Gaurav Chawla, Senior Consultant, Aguais and Associates
Key Benefits Include • Pre-course questionnaire to establish your individual and business concerns.
• Sessions are supported by the use of practical case studies
• Comprehensive take-away course documentation
The Course CECL calls for a loss allowance on each unimpaired, banking-book, credit exposure in the amount of the present
value of expected credit losses (ECLs) over the exposure’s remaining life. The loss-forecasting requirement adds a
new dimension to provisioning and so many accounting and finance divisions will need to get familiar with techniques
formerly known only to risk professions.
This two-day course will review the CECL provisioning rules and describe ways of Current Expected Credit Losses,
building upon an institution’s existing set of models. We provide insights into challenges of developing compliant
solutions. We discuss techniques for satisfying novel requirements like “An entity should consider relevant qualitative
and quantitative factors that relate to both the environment in which the entity operates and those that are specific to
the borrower, which may be based on internal information or external information” and “including information about past
events, current conditions, and reasonable and supportable forecasts”
At the end of the session, participants would have seen and discussed various tools and techniques which will help
them design CECL solutions that work for their own institutions. We provide in depth view of models and methodologies
for global wholesale/corporate/commercial credit spanning assets like large and mid-corporates, SME, banks,
sovereigns, property, specialised lending, etc. However, the learnings are equally applicable to retail assets like
mortgages, credit cards, etc.
How Will you Benefit? • Understand the regulatory evolution of credit risk modelling requirements from internal / Basel II PD, LGD, EAD to
Stress Testing / CCAR to CECL
• Learn and discuss various methods and techniques for developing CECL compliant models using an institution’s
existing PD, LGD, EAD model suite
• Learn from trainer’s experience in developing compliant and cost effective IFRS9 solutions globally which are to be
implemented ahead of CECL
• Understand implementation perspective including forecasting, batch processing, provisioning, Expert Credit
Judgement, etc.
The Solutions Your Problems
Understanding CECL requirements and building the
needed risk models on the basis of currently available
data and models with minimal re-work and disruption
Avoiding wasted effort by learning from other
institution’s experience in developing solutions
Getting an integrated perspective, both CECL end-to-
end from data – models - implementation and across
different regulatory model types: Internal / Basel II PD,
LGD, EAD models – CCAR / Stress Testing models –
CECL models
Our Solutions
We provide a broad review of CECL requirements and
structure the discussion in terms of design principles.
We help establish priorities for taking advantage
of existing data and models, with the objective of
minimising re-work.
We present case studies illustrating CECL solutions,
challenges and obstacles in creating those solutions
in a manner that accounts for each institution’s special
circumstances.
We provide an integrated perspective of CECL,
providing an end-to-end view from data – models -
implementation and discuss challenges which require
rework of the approach. We also discuss ways to
ensure consistency in capital requirements
“The seminar
was very good.
Very informative
discussion and
questions from
attendees”
Texas Capital Bank
“A great event for
practitioners”
Citigroup
“Very good event
bringing a very
impressive group
of experts”
Scotiabank
14TH-15TH JULY 2016 — NEW YORK CITY
a marcusevans company
2. Programme
DAY ONE
Regulatory Overview (1 hour)
• Review CECL provisioning rules and recent updates
• Identify key objectives to achieve in complying with
those rules
• Derive basic design principles and success criteria for
addressing requirements
Conceptual Foundation (1 hour)
• Systematic (environment in which the entity operates)
vs Idiosyncratic Risk (those that are specific to the
borrower)
• Point in Time (PIT) vs Through the Cycle (TTC) model
outputs
• Unconditional vs Conditional outcomes
• Including information about past events, current
conditions, and reasonable and supportable forecasts
• Use of internal and external information
Developing an CECL calculation framework for
wholesale / corporate / commercial credit
(1 hour)
• Formulating design criteria for assessment of models
such as Compliance, Accuracy, Simplicity and
Scalability
• Exploring various model development options e.g.
Top Down Allocation, Grade Transition Matrix, Macro
and Credit factor models
• Assessing model development options against
assessment criteria and choosing the right option for
each credit institution’s bespoke needs
Deep dive into for market leading wholesale
/ corporate / commercial credit CECL
methodologies (4 hours)
• Formulating, estimating, and validating PD, LGD, and
EAD models
– Choices and challenges in developing models e.g.
Direct calibration to default and losses, adapting
vendor models, Agency Direct and Agency
Replication style models, etc.
– Assessing Point in Time (PIT) vs Through the Cycle
(TTC) nature of models
– Correcting model output to make it fully Point in
Time (PIT)
– Creating term structure of Point in Time (PIT) PD,
LGD and EADs
• Projecting loss outcomes
– Credit-factor-driver models
– Macro-economic-driver models
– Translating factor forecasts to loss projections
– Conditional vs Unconditional loss outcomes
• Calculating CECLs from PD, LGD, and EAD
projections
DAY TWO
Connecting Internal / Basel II PD, LGD, EAD –
CCAR / Stress Testing – CECL models (3 hours)
• Adapting Internal / Basel II PD, LGD, EAD models for
CECL
• Integrating Stress Testing and CECL approaches
• Choices and techniques
• Worked Examples
End to End view (4 hours)
• Data and IT systems
• Risk – Finance data integration
• Implementation timelines and efficiency in producing
CECL provisions
• Batch processing vs Expert Input
• Involvement of economists and senior stakeholders in
approving final provisions numbers
• Volatility in Provisions
• Monitoring and Reviewing CECL models for change
• The road ahead – Quantitative Impact Studies, CECL
evolution
Who Should Attend? • CROs, CFOs
• CCAR Modelling Heads / Leads / Quants
• Credit Risk Modelling Heads / Leads (1st
LOD)
• Credit Risk Independent Validation Heads / Leads (2nd
LOD)
• Credit Risk Quants / Analysts
• Business Analysts
• Credit Risk Implementation Heads / Leads
• Internal Audit
• Risk Managers
• CECL, Stress Testing & Basel II / III Related
Professionals
About your Expert Trainers Dr. Scott D. Aguais is Founder and MD of Aguais and Associates (AAA). Dr. Aguais has 25 years’ experience
developing and delivering advanced credit analytics solutions to large banking institutions. He spent 10 years
delivering credit models and analytics through consulting at DRI/McGraw-Hill, AMS and KPMG. He then moved on
to Algorithmics and has spent the last 12 years developing advanced credit models and supporting the successful
Basel II waivers at Barclays Capital and Royal Bank of Scotland. During this time Dr. Aguais and his team pioneered the
design, development and implementation of the first advanced Dual Ratings approach using both Point-in-Time (PIT)
and Through-the-Cycle (TTC)risk measures to support a variety of financial business objectives.
Gaurav Chawla is Senior Consultant-Models and Methodologies at Aguais and Associates (AAA). Gaurav leads
the application of AAA built techniques at various client’s sites. Gaurav has 13+ years of experience building risk
models across large banks and academic institutions. In 2015, Gaurav delivered a customized version of AAA’s
flagship methodology in a leading UK commercial bank. This included rapid prototyping, methodology demonstration
and conducting Quantitative Impact Studies across all portfolios. In the past, Gaurav led the methodology and
model development team at GE Capital responsible for developing CCAR and IFRS9 focused credit risk models.
At Royal Bank of Scotland, Gaurav pioneered the development of Point-in-Time (PIT) and Through-the-Cycle (TTC)
methodologies, credit risk models (Basel II AIRB PD, LGD, EAD); loss and stress testing models and has published
extensively in this area. He has also developed and reviewed Market Risk, Economic Capital, PPNR, and natural hazard
models. He holds an eclectic mix of degrees in Engineering, Math, Business and Law.
http://www.aguaisandassociates.co.uk
BB-FT-PD-CMU459
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